Firm Survival Rates - a Darwinian view
It is not about: being big (size), being strong (€€) and being smart (IQ).
It is about adaptation, being responsive to change.
Innovations:
Product life cycle / S-curve
1. Fluid phase
Strong emphasis on: frequent redefinition of tasks, limited hierarchy
and high lateral communication.
- organic structure = responsive, flexible, startups thrive.
- adaptability (high environmental uncertainty)
2. Specific phase
Strong emphasis on: stable tasks, more hierarchy: coordination
and control, and top-down communication.
- mechanistic structure
- it brings predictability (low environmental uncertainty)
From fluid to specific phase
• Structure: from informal to formal
• Organizational behavior: from flexible and responsive to rigid and predictable
• Power: from entrepreneurs to managers
• Orientation: from external to internal
Innovation discontinuities
The first transition (1 -2): competence enhancing
- Large improvements in price/performance
- Builds on existing knowledge
- New products or new processes
- Rich get richer, established players benefit
The second transition (2 -3): competence destroying
- Large improvements in price/performance
- Existing knowledge becomes obsolete
- Entirely different knowledge and competencies
- Rich get poor(er), new entrants benefit
,How can firms respond?
Dia 61 *
Which one is more important?
You need incremental to survive in the short term. But you also need renewal to guarantee long-
term success, it is essential for continuity on LT.
Sweet sport of optionality = there is a success, and most companies would stop. But for long-term
success you need to go further and put money towards renewal, disrupting yourself.
- doing left and right.
Why so difficult
Due to deeper organizational barriers (innovation killers):
1. Economic – sunk costs
- no motivation
2. Cognitive – no understanding
Makes firms become inward-looking, not-invented-here-syndrome (NIH)
Knowledge makes you wise in some ways, but can make you a blindfolded fool in others.
- Core capabilities ---> Core rigidities
- Competency traps = use of increasingly inferior resources
- Overvaluing of internal knowledge
- Dismissive attitude towards external resources / capabilities
- not open to new ways
- no ability
(note: non-interdisciplinary (divers) teams have a lack of knowledge, so cognitive).
3. Social / psychological
- fear, discomfort
- complacency (voldoening)
- no courage
, These barriers are very strong and always present, but we need them because they brings stability,
comfort, predictability, legitimacy in the eyes of investors etc.
Tutorial:
Why do companies use cashflows for innovations? It is (seems) easy, quick and comparable.
But it is not good… cashflows are more for the short-term. The radical innovation revenue is only
visible on the long-term and the expenses, in the beginning, are high.
What should you use?
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Isabelav. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.25. You're not tied to anything after your purchase.