Looking Inside for Competitive Advantage

1. Looking Inside for Competitive Advantage Jay B. Barney Academy of Management Executive

2. Looking Inside for Competitive AdvantageAcademy of Management ExecutiveVol. 9, No.4, 1995 • Jay B. Barney • Fischer College of Business Ohio State University

3. Parameters of Strategy

4. Organizational Attributes • Resources • Assets (in the general sense, not in the accounting sense) which are at least in theory transferable • Capabilities • Abilities to perform certain processes

5. Categories of Resources • Financial • Available cash, access to financing • Physical • Property, Plant & Equipment • Human • Skills, knowledge, experience, judgment • Organizational • Formal systems & intangibles attributes

6. The Question of Value • Are these resources useful? • Depends on the environmental context and the opportunities to which they are applied • Implications? • Keep your resources up to date! • Apply them to appropriate challenges!

7. The Question of Rareness • If all or most competing firms also have the same valuable resources, they won’t create an advantage for any one firm. • Common resources are still important as “table stakes” – necessary in order to participate successfully in an industry

8. The Question of Imitability • If a valuable resource can be easily copied it won’t remain rare for long. • Resources that arise from • Idiosyncracies of history • Numerous small decisions • Social interactions are often difficult to imitate.

9. A connection to Porter • Resources that are rare and difficult to imitate can be a basis for competitive advantage. • Jay B. Barney • “A company can outperform rivals only if it can establish a difference that it can preserve.” • Michael Porter, What is Strategy?

10. A connection to Mintzberg • Resources that arise from historical idiosyncracies and numerous small decisions can be difficult to imitate • Jay B. Barney • Strategies are both patterns from the past (and plans for the future). • Henry Mintzberg

11. The Question of Organization • Can the firm coordinate and apply these resources effectively? • A collection of exceptional hockey players does not necessarily make for an exceptional hockey team. • Team Canada in the 2006 Winter Olympics

12. The Resource-basedview of the firm • Start by looking within for distinctive attributes and then find ways to leverage them to best advantage.

13. Strategy asSimple Rules Kathleen Eisenhardt, Donald Sull Harvard Business Review

14. Strategy as Simple RulesKathleen M. Eisenhardt, Donald SullHarvard Business Review, 2001 • Strategies are encouraged to emerge within deliberately designed rules which “define without confining” direction • Environment is made up of opportunities, (rather than products, markets, channels) • Strategy is opportunism (not position) • Strategy is built on processes

15. A connection to Mintzberg • “Define without confining direction” • Strategy as Simple Rules • Too much of a strategy’s benefits can lead to missed opportunities and an inability to adapt. • Mintzberg, The Strategy Concept II Why Organizations Need Strategies

16. Types of “Simple Rules” • How-to rules • Boundary rules • Priority rules • Timing rules • Exit rules

17. How to Rules • How do we go about pursuing opportunities? • What is distinctive about these processes?

18. A connection to Porter • How to rules: How we go about pursuing opportunities • What is distinctive about these processes? • “Strategy rests on unique activities.” • Michael Porter, What is Strategy?

19. Boundary Rules • What kind of opportunities will we even consider pursuing? • What kind of opportunities will we ignore!

20. A connection to Porter • Boundary rules determine what kind of opportunities we will even consider … and by implication, those that we will ignore! • “Strategy is also about what not to do.” • Michael Porter, What is Strategy?

21. Priority Rules • How will we establish (possibly shifting) priorities among the opportunities within our boundaries? • These priorities will probably not be static

22. Timing Rules • What is the “pace” of our strategic initiatives? • How often do we initiate something new? • Within what time frame do we expect an initiative to come to fruition?

23. Exit Rules • How do we know when it is time to quit and move on to other opportunities?

24. Issues with Simple Rules • How many is the right number? • How specific should they be? • How should they be established? • Often this is based on experience • A connection to Mintzberg • When should they be changed?

25. Strategy as Simple RulesKathleen M. Eisenhardt, Donald SullHarvard Business Review, 2001 • “Strategy-space” is made up of opportunities; strategy is opportunism • Simple rules “define without confining” direction • A very fluid approach to strategy for a dynamic fast-paced environment

26. Reflection and Reconciliation • Emergent Strategy as Process (Mintzberg) • Deliberate Strategy as Position (Porter) • Resource-based view of the firm (Barney) • Strategy as Simple Rules (Eisenhardt, Sull) • Which concept of strategy, or hybrid of conceptions, is most convincing to you?