Advanced Strategic Management Lecture Notes PDF

Advanced Strategic Management Lecture 1: Introduction  What will we talk about today? 1.Course Organization 2.Review of Fundamental Concepts 3.Trends in Strate...

Advanced Strategic Management Lecture 1: Introduction  What will we talk about today? 1.Course Organization 2.Review of Fundamental Concepts 3.Trends in Strategic Management © 2023 Universidade Católica Portuguesa  C HA PTE R 1 Course Organization © 2023 Universidade Católica Portuguesa  What are the goals for this course? 1. Understand how current trends are affecting strategy 2. Critically apply elementary and advanced strategic concepts 3. Sharpen analytical thinking and constructively discuss exemplary cases © 2023 Universidade Católica Portuguesa  Materials and readings: Book Grant, Robert M. CONTEMPORARY STRATEGY ANALYSIS 10th Edition Wiley © 2023 Universidade Católica Portuguesa  Exam Preparation 60% Final Exam: Covers what we talk about A typical lecture slide will serve as a discussion facilitator, not comprehensive exam preparation material © 2023 Universidade Católica Portuguesa References will be on Moodle and are important information sources!  C HA PTE R 2 Review of Fundamental Concepts © 2023 Universidade Católica Portuguesa  What do the gurus say strategy is? Win War Corporate Uncertainty, Competitive Turbulence, Planning empowerment Advantage adaptation “The determination of the long-run goals and “Competitive strategy “to enable an “A set of rules for objectives of an is about being organization to making decisions enterprise and the different. It means achieve its desired “a pattern in a about whatever adoption of courses of deliberately choosing results in an stream of decisions” situation might action and the a different set of unpredictable Henry Mintzberg arise” allocation of resources activities to deliver a environment” Sun Tzu for carrying out these unique mix of value” Peter Drucker goals” Michael Porter Alfred Chandler © 2023 Afuah, Allan. Strategic innovation: New game strategies for competitive advantage. Routledge, 2009; Grant, R. M. (2019) Universidade Católica Portuguesa Contemporary Strategy Analysis (10th Ed.), Wiley  Contents from previous strategy course Diagnose & Search & Commit & Frame Evolve Forecast Choose Monitor External Business Strategic analysis strategy and management business models process Internal context Corporate Strategic change, strategy culture and leadership styles © 2023 Universidade Católica Portuguesa  Analyzing the external context Porter’s 5+1 Forces Threats of New Entrants Bargaining Power of Rivalry among Existing Bargaining Power of Suppliers Competitors Buyers Threat of Complement Threat of Substitute Products or Services Products or Services © 2023 Universidade Católica Portuguesa Porter, M. (2008) The Five Competitive Forces that Shape Strategy, Harvard Business Review, January, 86(1), p.78-93  Analyzing the internal context Resource Based View of the Firm Resources What a firm has… Capabilities What a firm does… Core Competencies Above- average What a firm does particularly well… returns ($) © 2023 Universidade Católica Portuguesa  How does competitive advantage emerge? Anticipation (eg., IBM) Strategic innovation: product, Strategic agility (eg., Zara) service and business model © 2023 Blue ocean strategy Universidade Católica Portuguesa Grant, R. M. (2019) Contemporary Strategy Analysis (10 th Ed.), Wiley  Why is it so difficult to imitate? Causal Social Historical Ambiguity Complexity Conditions © 2023 Universidade Católica Portuguesa G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008.  Levels of strategy Where to compete? Corporate Scope: Vertical integration, geography, product diversity level Corporate parent role and business portfolio management How to compete? Business Competitive strategy: Key success factors, strategic level positioning, response to competitors’ moves Business models How to implement? Functional level © 2023 Universidade Católica Portuguesa G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008.  Corporate strategy Different types of scope Vertical scope Product scope Geographical scope Electric cars Entertainment Banking Batteries Video games US Consumer Drivetrain UK electronics Final assembly Movies Brazil © 2023 Universidade Católica Portuguesa Grant, R. M. (2019) Contemporary Strategy Analysis (10 th Ed.), Wiley  Competitive advantage and types of strategies © 2023 Universidade Católica Portuguesa  Value creation, configuration, and capture © 2023 Universidade Católica Portuguesa G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008.  C HA PTE R 3 Trends in Strategic Management © 2023 Universidade Católica Portuguesa  XXI century: It’s been a turbulent ride 9 Sept. 2001:Terrorism Attacks 2000: Collapse of “New September 11, 2001 Economy” Invasion of Afghanistan & Iraq Dot.com bubble bursts March 2000 NASDAQ 2008-9: Nov. 2001:Corporate scandals hits all-time peak Financial crisis Enron, WorldCom, Parmalat Volatile Markets 2011: Euro crisis 2011: E.g. Brent crude June ‘09 Arab Spring $148; Dec. ‘09 $38 The Third Industrial Demands of society Revolution: Social & environmental responsibility Digital technologies Natural Disasters Intelligent systems Indian Ocean tsunami ‘04 Ethics & fairness: Occupy Wall St Disintermediation of human Hurricane Katrina ‘05 Quest for meaning Earthquakes in beings Haiti ‘10, Japan ‘11 Covid-19 Ukraine war and Decline of US galloping inflation world influence and emergence of a multi-polar world © 2023 Universidade Católica Portuguesa  Trends in strategic thinking: Course guide Current Trends in Strategic Management Revisiting Strategy in a Digital Managing Growth Social Forces Organizational World and Innovation Design Digital Strategy Managing Sustainability and Functional Digital Business Innovation CSR Hierarchies Models External Growth Creating Shared Open Strategy Strategies Value Entrepreneurial Measuring Impact Strategy © 2023 Universidade Católica Portuguesa 28  I. Strategy in a Digital World E-commerce boomed Retail e-commerce sales US 2000-2020 % of total retail sales © 2023 Universidade Católica Portuguesa Source: US Census Bureau  I. Strategy in a Digital World The pandemic accelerated the shift to online SAP commerce cloud customer order volumes 2019-20 © 2023 Universidade Católica Portuguesa https://www.the-future-of-commerce.com/2021/03/23/e-commerce-growth/  I. Strategy in a Digital World FAANG Stock performance vs. S&P500… attracts attention. Source: https://finspireme.com/dont-get-faanged/ © 2023 Universidade Católica Portuguesa  I. Strategy in a Digital World AI is becoming practical and accessible © 2023 Universidade Católica Portuguesa https://www.sequoiacap.com/article/generative-ai-a-creative-new-world/  II. Managing growth and innovation Hypercompetition © 2023 Universidade Católica Portuguesa  II. Managing growth and innovation © 2023 Universidade Católica Portuguesa Source: https://www.linkedin.com/pulse/hypercompetition-part-1-changing-competitive-era-aashish/  III. Social forces How to measure impact and sustainability? © 2023 Universidade Católica Portuguesa https://corpgov.law.harvard.edu/2022/06/17/esg-global-study-2022/  III. Social forces What are the stakeholder management implications? © 2023 Universidade Católica Portuguesa https://www.nnit.com/our-solutions/data-and-ai/getting-started-with-ai-ethics-compliance/  IV. Revisiting Organizational Design © 2023 Universidade Católica Portuguesa  IV. Revisiting Organizational Design The Past The Future Emphasis on control Emphasis on co-ordination Single performance goal Multiple performance goals Decisions located centrally ? Decisions located where relevant knowledge exists Simple structures, unified line of Multidimensional structures, diffused command authority, but clear responsibilities Organization by design Self-organization by design How should organizations be structured? © 2023 Universidade Católica Portuguesa Grant, R. M. (2019) Contemporary Strategy Analysis (10 th Ed.), Wiley  IV. Revisiting Organizational Design © 2023 What does it mean to work from home or anywhere? Universidade Católica Portuguesa Advanced Strategic Management Lecture 2: Digital Business Models  Trends in Strategic Thinking: Course guide Current Trends in Strategic Management Revisiting Strategy in a Digital Managing Growth Social Forces Organizational World Options Design Digital Business Managing Sustainability and Functional Models Innovation CSR Hierarchies Digital Strategy External Growth Creating Shared Open Strategy Strategies Value Entrepreneurial Strategy and Strategy Business Models in © 2023 Social Enterprises Universidade Católica Portuguesa  Strategy in a Digital World: Main Points What’s special about digital? Transition from place to space Transition from pipeline to platform Emergence of digital ecosystems and multi-sided platforms What are the four strategic decisions in designing multi-sided platforms? Number of sides Design Pricing Governance © 2023 Universidade Católica Portuguesa  C HA PTE R 1 Digital Business Models © 2023 Universidade Católica Portuguesa  What is a business model? Value Creation Value Configuration Value Capture © 2023 Universidade Católica Portuguesa  Digital: Journey from “place” to “space” Place Space Tangible products, More intangible physical stores products, digital stores Product based Service based Oriented towards Oriented towards customer transactions customer experience © 2023 Weill, P. and Woerner, S.L. (2014). “Optimizing your business model: What does it take to create the strongest Universidade Católica Portuguesa possible online presence?”, MIT Sloan Management Review.  Digital: Business model components Content Experience Platform What is consumed What is it like to be a Digitized business consumer? processes Produces its own Printed media, Custom build news, stories, newspaper with production and Place photos etc. own style and delivery design Not strictly Offering on Combining internal proprietary; different devices and external Space obtains content (mobile, PC, TV) platforms (some from other sources anywhere not controlled by WSJ) © 2023 Weill, P. and Woerner, S.L. (2014). “Optimizing your business model: What does it take to create the strongest Universidade Católica Portuguesa possible online presence?”, MIT Sloan Management Review.  Pipeline versus Multi-Sided Platform (MSP) MULTISIDED Manufacturing and/or Distribution © 2023 Van Alstyne, M., Parker, G., Choudary, S.P. (2016) Pipelines, Platforms, and the New Rules of Strategy, Harvard Universidade Católica Portuguesa business review, 94(4), p.54-62.  Pipeline vs MSP business model MULTISIDED Manufacturing & Distribution Resource orchestration (manage Resources Control Resources the community of producers) External interaction & Optimization Internal Optimization coordination Ecosystem value, value exchanges Focus Customer Value & Sales between users and providers From supply side to demand side economies © 2023 Van Alstyne, M., Parker, G., Choudary, S.P. (2016) Pipelines, Platforms, and the New Rules of Strategy, Harvard Universidade Católica Portuguesa business review, 94(4), p.54-62.  Multi-sided Platforms (MSPs) enable direct interactions between different groups Creators of the platform offering (eg., apps on Buyers or users of the Android) offerings Hardware Controller of platform IP manufacturers (mobile and arbiter of who may devices are providers participate and in what on Android) ways (Google own Android) © 2023 Van Alstyne, M., Parker, G., Choudary, S.P. (2016) Pipelines, Platforms, and the New Rules of Strategy, Harvard Universidade Católica Portuguesa business review, 94(4), p.54-62.  Multi-sided Platforms (MSPs) enable direct interactions between different groups © 2023 Universidade Católica Portuguesa  Challenge and Benefit: MSP’s cross-side network effects Number of Users (-) Chicken and t (+) Higher egg problem barriers to entry Number of complementary goods (App developers) Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review; Van Alstyne, M., Parker, G., Choudary, S.P. (2016) Pipelines, Platforms, and the New Rules of Strategy, Harvard business review, 94(4), p.54- © 2023 Universidade Católica Portuguesa 62; Eisenmann, T., Parker, G., & Van Alstyne, M. W. (2006). Strategies for two-sided markets. Harvard business review, 84(10), 92.  (-) Chicken and egg problem https://www.business-humanrights.org/en/latest-news/uber-drew-in-drivers-with-investor-funding-subsidies-to- © 2023 Universidade Católica Portuguesa make-app-successful-before-cutting-payments/  (+) Higher barriers to entry – Scale advantage © 2023 Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review Universidade Católica Portuguesa https://www.similarweb.com/website/xing.com/vs/linkedin.com/#ranking  Dominance of few MSPs* (-) Chicken and (+) Higher egg problem barriers to entry Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review; Van Alstyne, M., Parker, G., Choudary, S.P. (2016) Pipelines, Platforms, and the New Rules of Strategy, Harvard business review, 94(4), p.54- © 2023 Universidade Católica Portuguesa 62; Eisenmann, T., Parker, G., & Van Alstyne, M. W. (2006). Strategies for two-sided markets. Harvard business review, 84(10), 92.  Competition Threat: MSPs are everywhere © 2023 Universidade Católica Portuguesa Van Alstyne et al., 2016, Platform Revolution, WW Norton.  MSP Strategic Decisions Strategic Decision I Strategic Decision II How many sides? How do they interact? Users Tech Strategic Decision III Strategic Decision IV What do they pay for what? What are the rules of the MSP? Prices Rules © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy I: How many sides? 2-sided iOS Users Third-party app developers 3-sided Android Users Third-party app developers Third-party hardware manufacturers © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy I: The more the merrier? Individual users Recruiters Advertisers 20% premium 50% recruiting 30% advertising subscriptions solutions solutions App Corporate users? developers? interactions with employees © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy I: Increasing number of sides Larger cross network effects One of the sides may not be Larger scale economically viable Diversified sources of revenue Complexity Conflicts of interest among groups More difficult to solve chicken- and-egg problem © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy II: Design Which side should features favor? Information Collection Advertiser vs. User Rating Systems Drivers vs. Passengers Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review; Van Alstyne, M., Parker, G., Choudary, S.P. (2016) Pipelines, Platforms, and the New Rules of Strategy, Harvard business review, 94(4), p.54- © 2023 Universidade Católica Portuguesa 62; Eisenmann, T., Parker, G., & Van Alstyne, M. W. (2006). Strategies for two-sided markets. Harvard business review, 84(10), 92.  MSP Strategy III: Pricing No transaction price between sides: Charge more to side that benefits more Start-up Speed-Dating Festivals Social Media © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy III: Pricing Each side independently: higher price for less price sensitive; bargaining power of MSP over each group Amazon Christmas Market © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy III: Pricing Existing transaction price: Charge more to the side that can extract more value from the other side (Subsidization) © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy IV: Governance GOVERNANCE RULES → TRADE-OFF QUANTITY VS QUALITY QUALITY Decentralized/ Centralized Open Source QUANTITY Who is allowed to join? What are the various sides allowed to do? © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy IV: Costs of tighter rules Centralized MSP costs Technological: eg., designing and including security chips for video consoles Operational: eg., analyzing profiles of individual applicants © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  MSP Strategy IV: Costs of looser rules Lemon’s problem: insufficient transparency, information regarding quality (ratings of users?) Too much competition: low incentive to invest in high quality products Lack of complementarities: making sure there is enough offers among sides (eg., diverse geopgraphies in Airbnb) © 2023 Universidade Católica Portuguesa Hagiu, 2014, “Strategic Decisions for Multisided Platforms”, MIT Sloan Management Review  Pipeline or platform? a) Pipeline b) Multisided platform c) Both © 2023 Universidade Católica Portuguesa  Pipeline or platform? a) Pipeline b) Multisided platform c) Both © 2023 Universidade Católica Portuguesa  Pipeline or platform? a) Pipeline b) Multisided platform c) Both © 2023 Universidade Católica Portuguesa  Pipeline or platform? a) Pipeline b) Multisided platform c) Both © 2023 Universidade Católica Portuguesa  Pipeline or platform? a) Pipeline b) Multisided platform c) Both © 2023 Universidade Católica Portuguesa Advanced Strategic Management Lecture 3: Digital Strategy  Trends in Strategic Thinking: Course guide Current Trends in Strategic Management Revisiting Strategy in a Digital Managing Growth Social Forces Organizational World Options Design Digital Business Managing Sustainability and Functional Models Innovation CSR Hierarchies Digital Strategy External Growth Creating Shared Open Strategy Strategies Value Entrepreneurial Strategy and Strategy Business Models in © 2023 Social Enterprises Universidade Católica Portuguesa  Last Session: Strategy in a Digital World What’s special about digital? Transition from place to space Transition from pipeline to platform Emergence of digital ecosystems and multi-sided platforms What are the four strategic decisions in designing multi-sided platforms? Number of sides Design Pricing Governance © 2023 Universidade Católica Portuguesa  Today: Digitalization of Strategy Digital Strategy Resource and Need Matching on Platforms From Value Chain to Digital Ecosystem Digital Scope in Corporate Strategy AI in Organizations AI changes tasks and job descriptions Generation tasks are more exposed than analysis tasks AI use has to be moderated AI in Strategy: Diagnose, Search, Choose, and Monitor © 2023 Universidade Católica Portuguesa  C HA PTE R 1 Generate, Analyze & Criticize © 2023 Universidade Católica Portuguesa  Discussion – Generate, Analyze & Criticize © 2023 Universidade Católica Portuguesa  C HA PTE R 2 Digital Value Creation & Capture © 2023 Universidade Católica Portuguesa  Digital strategy across levels Corporate Where to compete? level Business How do we create, configure, capture value? level Functional level How are things done? © 2023 Universidade Católica Portuguesa G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008.  Digital Value Creation – Enhanced Figure 3 Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a © 2023 Universidade Católica Portuguesa digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  Digital Value Creation – Four Configurations Traditional Ecosystems business Complementor Users Ads Multi-sided G Platforms e.g. Uber e.g. Google Users-Ads © 2023 Universidade Católica Portuguesa Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  Digital Value Creation – Enhanced Figure 3 Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a © 2023 Universidade Católica Portuguesa digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  Digital Value Creation – Enhanced Figure 3 Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a © 2023 Universidade Católica Portuguesa digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  Digital Value Creation – Scale Identifying and matching new needs and resources Identifying the owners of Observing and synthesizing resources and selecting customer’s needs Resource crowd-sourcing Iterative testing (multiple channels, A/B testing) © 2023 Universidade Católica Portuguesa Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  Digital Value Creation – Scope Bridging needs with resources Experimenting with Streamlining unfamiliar connections unfamiliar connections Retail Store → Institutional investors Fashion-chasing users → Fashion brands → Business service providers Starts with existing resources, looks for needs Trending/Changing Image Data preference data Analytics Reduces incompatibilities and uncertainties © 2023 Universidade Católica Portuguesa Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  Digital Value Creation – Enhanced Figure 3 Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a © 2023 Universidade Católica Portuguesa digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  Value Creation in Value Chains F1 F2 F3 F4 F5 Bottleneck Innovation F1 F2 F3 F4 F5 Bargaining Power → Higher Margins © 2023 Universidade Católica Portuguesa Bohnsack, R., Rennings, M., Block, C., & Bröring, S. (2024). Profiting from innovation when digital business ecosystems emerge: A control point perspective. Research Policy, 53(3), 104961.  Value Creation to Capture – Foundations Threats of New Entrants Bargaining Power of Rivalry among Existing Bargaining Power of Suppliers Competitors Buyers Threat of Complement Threat of Substitute Products or Services Products or Services © 2023 Universidade Católica Portuguesa Porter, M. (2008) The Five Competitive Forces that Shape Strategy, Harvard Business Review, January, 86(1), p.78-93  Digital Value Capture – Larger Space Digital World Digital Services F Analytics F F F F Connectivity F Data Sampling F F1 F2 F3 F4 F5 © 2023 Physical World Universidade Católica Portuguesa Bohnsack, R., Rennings, M., Block, C., & Bröring, S. (2024). Profiting from innovation when digital business ecosystems emerge: A control point perspective. Research Policy, 53(3), 104961.  Digital Value Capture – Smart Home Digital World Google / Apple Home: Offer digital services (sustainable home etc.) Bargaining power at all levels! Digital Services E-On Smart Home: Data analytics company Analytics IFTTT / Vodafone: Connectivity with other devices (bulbs) Connectivity Hue Philips: Data sampling devices Data Sampling Signify / Philips: Connectable light bulbs F1 F2 F3 F4 F5 © 2023 Physical World Universidade Católica Portuguesa Bohnsack, R., Rennings, M., Block, C., & Bröring, S. (2024). Profiting from innovation when digital business ecosystems emerge: A control point perspective. Research Policy, 53(3), 104961.  Digital Value Capture – Digital Twins Digital World Connectivity Data Sampling Emirates NZ AB InBev SoFi Stadium Space Force F1 F2 F3 SpaceX © 2023 Physical World Universidade Católica Portuguesa https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-digital-twin-technology#  Corporate strategy Different types of scope Vertical scope Product scope Geographical scope Digital Scope? Electric cars Entertainment Banking Airlines/Smart Home Batteries Video games US Consumer UK Drivetrain electronics Emirates NZ Final assembly Movies Brazil Signify Philips © 2023 Universidade Católica Portuguesa Grant, R. M. (2019) Contemporary Strategy Analysis (10 th Ed.), Wiley  Digital Value Creation and Capture Bohnsack, R., Rennings, M., Block, C., & Bröring, S. (2024). Profiting from innovation when digital business ecosystems emerge: A control point perspective. Research Policy, 53(3), 104961. Figure 3 Amit, Raphael, and Xu Han. "Value creation through novel resource configurations in a © 2023 Universidade Católica Portuguesa digitally enabled world." Strategic Entrepreneurship Journal 11.3 (2017): 228-242.  C HA PTE R 3 AI in Organizations © 2023 Universidade Católica Portuguesa  The AI Uncertainty AI Domination? AI Collaboration? © 2023 Universidade Católica Portuguesa Images produced by Dall-E3  Organizational Adoption of AI Corporate Where to compete? level Business How do we create, configure, capture value? level Functional level How are things implemented? Where does organizational change come from? © 2023 Universidade Católica Portuguesa G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008.  Organizations execute a collection of tasks Person 1 Coordinatin T1 T6 g Person 4 Negotiatin g T3 Researchin T5 Presentin T8 g Planning T2 g Analyzin g T4 Networking Hiring T7 Person 2 Person 3 © 2023 Universidade Católica Portuguesa Organization as a collection of tasks and people assigned to them  Organizations are collections of tasks Person 1 “Analyst” Coordinatin T1 T6 g Person 4 Negotiatin g “Manager” T3 Person 1: T1, T2, T3 Person 2: T4 Researchin g T5 Presentin T8 Planning Person 3: T5, T7 T2 g Analyzin Person 4: T6, T8 g T4 Networking Hiring T7 Person 2 Person 3 “HR” “Sales” © 2023 Universidade Católica Portuguesa Organization as a collection of tasks and people assigned to them  Human AI Collaboration Person 1: T1, T2, T3, Person 2: T4, Person 3: T5, T7, Person 4: T6, T8 T2, T3, T8 T4, T6 T1, T5, T7 ? © 2023 Puranam, Phanish. "Human–AI collaborative decision-making as an organization Universidade Católica Portuguesa design problem." Journal of Organization Design 10.2 (2021): 75-80  AI is sometimes superior Person 1: T1, T2, T3, Person 2: T4, Person 3: T5, T7, Person 4: T6, T8 T2, T3, T8 Most likely replace by AI algorithms © 2023 Universidade Católica Portuguesa  An Exposure Analysis Person 1: T1, T2, T3, Person 2: T4, Person 3: T5, T7, Person 4: T6, T8 T2, T3, T8 O: Acute Care Nurse DWA: Operate diagnostic or therapeutic medical 1,016 Occupations Occupation instruments or equipment. 2,087 Detailed Prepare medical supplies or Work Activities 19,265 Tasks equipment for use. T1 DWA Task: Set up, operate, or monitor invasive equipment and devices, such as T2 colostomy or tracheotomy equipment, mechanical ventilators, catheters, Most likely replace by gastrointestinal tubes, and central lines. AI Algorithms O*NET 27.2 Dataset © 2023 Universidade Católica Portuguesa Eloundou, Tyna, et al. "Gpts are gpts: An early look at the labor market impact potential of large language models." arXiv preprint arXiv:2303.10130 (2023).  An Exposure Analysis High paying occupations are exposed. © 2023 Universidade Católica Portuguesa Eloundou, Tyna, et al. "Gpts are gpts: An early look at the labor market Figure 4 impact potential of large language models." arXiv preprint arXiv:2303.10130 (2023).  An Exposure Analysis Difficult to learn occupations are exposed. More tasks are exposed. 4 or more years of experience 3 months of experience © 2023 Universidade Católica Portuguesa Eloundou, Tyna, et al. "Gpts are gpts: An early look at the labor market Figure 5 impact potential of large language models." arXiv preprint arXiv:2303.10130 (2023).  An Exposure Analysis Skills for critical thinking and learning are not exposed. Exposed Skills Non-exposed Skills Active Listening Science Mathematics Active Learning Speaking Critical Thinking Writing Learning Strategies Programming Monitoring Generate Analyze & Criticize © 2023 Universidade Católica Portuguesa Eloundou, Tyna, et al. "Gpts are gpts: An early look at the labor market Table 5 impact potential of large language models." arXiv preprint arXiv:2303.10130 (2023).  Re-allocating tasks… T2, T3, T8 Person 1 T1 T6 Person 4 T3 T5 T8 T2 T4 T7 Person 2 Person 3 © 2023 Universidade Católica Portuguesa  Integrating AI into the Organization T2, T3, T8 Person 1 T1 T6 Person 4 T3 T5 T8 T2 T4 T7 Person 2 Person 3 © 2023 Universidade Católica Portuguesa Persons 1 and 4 need to be ready to reskill, assisted in the process.  AI is sometimes helpful Person 1: T1, T2, T3, Person 2: T4, Person 3: T5, T7, Person 4: T6, T8 T1, T5, T7 Most likely collaborate with AI algorithms © 2023 Universidade Católica Portuguesa  An Exposure Analysis Person 1: T1, T2, T3, Person 2: T4, Person 3: T5, T7, Person 4: T6, T8 T1, T5, T7 Half of consultants… A series of tasks where they were prompted to conceptualize and develop new product ideas, focusing on aspects such as creativity, analytical 7% of BCG skills, persuasiveness and writing skills. consultants were Other half… experimented. Final sample 758. engaged in business problem-solving tasks using quantitative data, customer and company interviews, and including a Most likely collaborate persuasive writing component. with AI Algorithms Dell'Acqua, Fabrizio, et al. "Navigating the Jagged Technological Frontier: Field Experimental © 2023 Evidence of the Effects of AI on Knowledge Worker Productivity and Quality." Harvard Universidade Católica Portuguesa Business School Technology & Operations Mgt. Unit Working Paper 24-013 (2023).  An Exposure Analysis For task 1 Below average skilled gain more. Dell'Acqua, Fabrizio, et al. "Navigating the Jagged Technological Frontier: Field Experimental © 2023 Evidence of the Effects of AI on Knowledge Worker Productivity and Quality." Harvard Universidade Católica Portuguesa Figure 5 Business School Technology & Operations Mgt. Unit Working Paper 24-013 (2023).  An Exposure Analysis For task 2 AI use lead to less performance. Dell'Acqua, Fabrizio, et al. "Navigating the Jagged Technological Frontier: Field Experimental © 2023 Evidence of the Effects of AI on Knowledge Worker Productivity and Quality." Harvard Universidade Católica Portuguesa Figure 7 Business School Technology & Operations Mgt. Unit Working Paper 24-013 (2023).  Integrating AI to Work ? ? ? TASK 2 ? TASK 1 ? © 2023 Universidade Católica Portuguesa  Redefining tasks… T1, T5, T7 Person 1 T1 T6 Person 4 T3 T5 T8 T2 T4 T7 Person 2 Person 3 © 2023 Universidade Católica Portuguesa  Integrating AI into the Organization T1, T5, T7 Person 1 T1 T6 Person 4 T3 T5 T8 T2 T4 T7 Person 2 Person 3 © 2023 Universidade Católica Portuguesa Persons 1 and 3 need to be ready to collaborate with AI.  Organizational Adoption of AI Corporate How to lead the change? level Business How do we create, configure, capture value? level Functional level How are things implemented? Where does organizational change come from? © 2023 Universidade Católica Portuguesa G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008.  AI Transformation – How easy? Pre-transformation Post-transformation © 2023 Universidade Católica Portuguesa  AI & Social Acceptability A Task Typology AI Explainability High Stakes Contexts Uncertainty, Risk, and Loss Identity Threats Need high distributional and procedural fairness for high trust. Involve stakeholders in algorithm design Make sure algorithm is easier to understand Help people go from manager to system architect Include respected peers Tasks that are non-routine and require high cognitive complexity are likely to attract resistance. © 2023 Universidade Católica Portuguesa Tinguely, Patrick Nicolas, Junghyun Lee, and Vivianna Fang He. "Designing human resource management systems in the age of AI." Journal of Organization Design (2023): 1-7.  Strategy Making - Previously Diagnose & Search & Commit & Frame Evolve Forecast Choose Monitor External Business Strategic analysis strategy and management business models process Internal context Corporate Strategic change, strategy culture and leadership styles © 2023 Universidade Católica Portuguesa  Strategy Making AI Diagnose & Search & Commit & Strategy? Evolve Forecast Choose Monitor Exposure Redesign and Fair and Analysis reallocate tasks transparent adoption © 2023 Universidade Católica Portuguesa Advanced Strategic Management Lecture 4: Managing Innovation  Trends in strategic thinking: Course guide Current Trends in Strategic Management Revisiting Strategy in a Digital Managing Growth Social Forces Organizational World and Innovation Design Digital Strategy Managing Sustainability and Functional Digital Business Innovation CSR Hierarchies Models External Growth Creating Shared Open Strategy Strategies Value Measuring Impact © 2023 Universidade Católica Portuguesa 1  Trends in strategic thinking: Course guide Current Trends in Strategic Management Revisiting Strategy in a Digital Managing Growth Social Forces Organizational World and Innovation Design Digital Strategy Managing Sustainability and Functional Digital Business Innovation CSR Hierarchies Models External Growth Creating Shared Open Strategy Strategies Value Measuring Impact © 2023 Universidade Católica Portuguesa 2  Managing Innovation - Today Tesla Case Discussion Invention vs Innovation Protecting Invention: Intellectual Property Disruptive Innovation: Threat of an Entrant to the Established Risks of Opening up Innovation Appropriation Misalignment Miscoordination Closed vs Open Innovation: Differences and Trade-offs © 2023 Universidade Católica Portuguesa  C HA PTE R 2 Managing Innovation © 2022 Universidade Católica Portuguesa  Invention vs. Innovation: What’s the difference? Invention Innovation Creation of new products and processes Conversion of new knowledge into a through the development of new knowledge or new product, process or service and from new combinations of existing knowledge launching it to the market © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  From Knowledge Creation to Diffusion Competitors imitating the product: Less Value Capture Customers purchasing the product: More Value Creation © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  Why is it so difficult to imitate? Causal Social Historical Ambiguity Complexity Conditions © 2023 Universidade Católica Portuguesa G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008.  Appropriation of value Regime of appropriability Conditions that influence the distribution of the value created by innovation 1. Property rights in Protect the returns to inventors – intellectual property innovation (patents, copyrights, trademarks, and trade secrets) 2. Tacitness and Ease with which the technology can be comprehended and complexity of tech replicated Window of opportunity for the innovator to build on initial 3. Lead time advantage (capabilities and market position) 4. Complementary Resources and capabilities required to finance, produce, resources and market the innovation © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  Property Rights in Innovation Patents: exclusive rights to a new product process, substance or design Copyrights: exclusive rights to artistic, dramatic and musical works Trademarks: exclusive rights to words, symbols or other marks to distinguish goods and services; trademarks are registered with the Patent Office Trade Secrets: protection of chemical formulae, recipes and industrial processes © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  Property Rights in AI? Copyrights: exclusive rights to artistic, dramatic and musical works August, 2023 © 2023 https://www.artnews.com/art-news/news/us-judge-rules-ai-generated-art-is-not- Universidade Católica Portuguesa protected-by-copyright-law-1234677410/  When is it advantageous to give access to intellectual rights? Winning standards wars Growing the market Counteracting the power of suppliers © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  From Knowledge Creation to Diffusion Competitors imitating the product: Less Value Capture Customers purchasing the product: More Value Creation © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  Innovation Diffusion: The S-curve © 2023 Source: G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 11th edn, Pearson Education 2008. Universidade Católica Portuguesa  Disruptive Innovation: Origins © 2023 Universidade Católica Portuguesa Christensen, C.M. and Bower, J.L., 1996. Customer power, strategic investment, and the failure of leading firms. Strategic management journal, 17(3), pp.197-218.  Disruptive Innovation: Origins Who innovates for trajectory-sustaining or disruption? © 2023 Universidade Católica Portuguesa  Opening up Innovation © 2022 Universidade Católica Portuguesa  Open Innovation: Managing the Risks 1. Risk of Appropriation 2. Risk of Misalignment 3. Risk of Miscoordination © 2023 Universidade Católica Portuguesa  Risk of Appropriation Partners walking away with IP: Less Value Capture Customers purchasing the product: More Value Creation © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  Risk of Appropriation Partners walking away with IP: Less Value Capture Customers purchasing the product: More Value Creation © 2023 Universidade Católica Portuguesa https://www.reuters.com/legal/litigation/dolby-sues-roku-over-technology- streaming-software-2024-08-01/?utm_source=chatgpt.com  Which kind of investment? Trade-off: Resource Intensity vs Risk of Appropriation Limited investment → limited returns Licensing Risk of licensee lacks motivation or steals innovation Outsourcing certain Limited capital investment functions Potential dependence on supplier or partner Flexibility vs collaborative capability Strategic alliances Pool of resources and capabilities of multiple firms Shared investment and risk, requiring collaborative capability Joint venture Pool of resources and capabilities of multiple firms Internal Large investment → larger risk commercialization Benefits of control in required resources and capabilities © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  Risk of Misalignment © 2023 Biahmou, Alain & Majic, Tomislava & Stjepandic, Josip & Wognum, Nel. (2019). A Platform-Based OEM-Supplier Universidade Católica Portuguesa Collaboration Ecosystem Development. 10.3233/ATDE190150.  Complementary Resources Outsource Outsource Outsource Outsource © 2023 Universidade Católica Portuguesa Source: Grant, R. M. (2019) Contemporary Strategy Analysis (10th Ed.), Wiley  Innovation in Ecosystems – Manage Expectations OEM’s Innovation 1992 1997 Run-flat tires Garages’ Innovation 2006 with partial adoption © 2023 Adner, R., 2006. Match your innovation strategy to your Universidade Católica Portuguesa innovation ecosystem. Harvard business review, 84(4), p.98.  Risk of Miscoordination Apple’s Innovation History © 2023 Universidade Católica Portuguesa https://en.wikipedia.org/wiki/History_of_Apple_Inc.  Risk of Miscoordination https://en.wikipedia.org/wiki/History_of_Apple_Inc https://news.google.com/newspapers?id=Tm1XAAAAIBAJ&sjid=TPEDAAAAIBAJ&pg=6737%2C6192649 © 2023 Universidade Católica Portuguesa  The Tale of Two Drones “Innovation is at the heart of why some firms succeed in nascent markets and others do not” (p.1) Closed Innovation Open Innovation © 2023 Universidade Católica Portuguesa Organizing Form, Experimentation, and Performance: Innovation in the Nascent Civilian Drone Industry. (Bremner and Eisenhardt , 2021)  The Tale of Two Drones Serial Coordinated “What is the drone good for?” Internal Competitions Co-located Parallel search for killer app Experimentation on the markets 2008 Late-2012 Late-2013 2011 2012 Hiring experts Parallel search for killer app Modular development in the community 2007 2009 2013 2014 2015 Switch to Quadrotor Identify Low Video Gimbal developed Ready-to-fly Drone Quality Problem developed © 2023 Universidade Católica Portuguesa Organizing Form, Experimentation, and Performance: Innovation in the Nascent Civilian Drone Industry. (Bremner and Eisenhardt , 2021)  The Tale of Two Drones © 2023 Universidade Católica Portuguesa Organizing Form, Experimentation, and Performance: Innovation in the Nascent Civilian Drone Industry. (Bremner and Eisenhardt , 2021)  The Tale of Two Drones Difficult to DIVERSIFY* Difficult to FOCUS *DJI engaged in frequent agile experimentation: [DJI] knows that their first prototypes are going to be terrible and the 15th prototype is going to be terrible, but by the 20th prototype, it’s going to work pretty well. They never stop iterating. © 2023 Universidade Católica Portuguesa Organizing Form, Experimentation, and Performance: Innovation in the Nascent Civilian Drone Industry. (Bremner and Eisenhardt , 2021)  Closed vs. Open Innovation © 2023 Source: Chesbrough, Henry. "Open innovation: a new paradigm for understanding industrial innovation." Open innovation: Universidade Católica Portuguesa Researching a new paradigm 400 (2006): 0-19.  Open Innovation: Knowledge Outflows Inside-out or Knowledge Outflows Leverages internal knowledge through external commercialization processes (selling or revealing) Knowledge outflow Out-licensing IP and technology Donating IP and technology Spin-outs Corporate venture capital Corporate incubators Joint ventures and alliances © 2023 Source: Chesbrough, Henry. "Open innovation: a new paradigm for understanding industrial innovation." Open innovation: Universidade Católica Portuguesa Researching a new paradigm 400 (2006): 0-19.  Open innovation: Knowledge inflows Outside-in or Knowledge Inflows Leverages external knowledge sources through internal processes Knowledge inflows Research consortia Venture capital Collaboration with intermediates, suppliers and customers Acquisition Outsourcing Crowdsourcing (crowds and user communities) © 2023 Source: Chesbrough, Henry. "Open innovation: a new paradigm for understanding industrial innovation." Open innovation: Universidade Católica Portuguesa Researching a new paradigm 400 (2006): 0-19.  Closed vs Open Innovation Closed innovation Open Innovation External knowledge has a Equal role external and internal supplemental role knowledge Focus on securing “best and brightest” Centrality of the business model Lack of process to manage “false Opportunity to market projects not negative” projects → Outbound flows fitting firm’s business model → as spin-outs/spill-overs innovation markets as real options Knowledge is scarce, hard to find Knowledge is widely distributed IP as defensive IP facilitates innovation markets Innovation intermediates not relevant Intermediates as a significant trend Metrics: R&D % sales, # new products Metrics: % internal innovation, time to market © 2023