DEEP Insight

Changing the Rules of the Game Premium

Sometimes the best way to get a jump on rivals is to rewrite the norms. When your turn comes, be ready to go!

This executive dossier includes the following articles:

Get on Top of Your Game Premium

Choices, Consequences and Change

Ricart, Joan Enric

Industries come into being and are transformed under the influence of changes in technology, demography, regulation and so on. But there can be no actual transformation unless companies or entrepreneurs discover new models that allow them to exploit those changes and turn them into business opportunities. The history of the home video-game industry is a perfect example of how the interaction between competitors gives birth to an industry and determines its future development. Since the industry came into existence, companies such as Atari and Nintendo have made strategic decisions and adopted business models that have shaped the industry as we know it today. Against this background, the author considers what makes a business model, the different types of industry change and the strategic levers that companies can use to ensure that industry change works in their favor.

The High Stakes of Low-Cost Competition Premium

When Good Enough Is Great

Ryans, Adrian

Low-cost competitors are on the offensive in many industries, from airlines to B2B capital equipment markets, eating away at the market share traditionally enjoyed by premium companies. Dealing with low-cost competition first requires understanding how radically the business model has changed: fewer companies are doing it all, but rather specializing in either product development or delivery or customer relationships. While there may be good reasons for adopting a more focused business strategy, companies need to realize how the interplay between premium and low-cost rivals is, in fact, fuelling the threat, which needs to be craftily managed. Using a multitude of real business examples, the author insists that companies today must learn how to take on low-cost competitors in the good-enough segment, develop hard-to-copy performance leadership products, and build deep and lasting relationships with their customers. A dual-pronged strategy – one that both challenges low-cost competitors in the good-enough segment, while also competing as a premium player using either performance leadership or relational value options – can serve to beat low-cost competitors at their own game.

Shaping an Industry in Your Favor Premium

Lessons of a Hollywood Mogul

Ferraro, Fabrizio

In 1939, at the age of 26, Lew Wasserman arrived in Los Angeles with the talent agency MCA. Over the next three decades, he took MCA from a peripheral player to becoming the dominant studio in Hollywood. How did an outsider manage to change the competitive landscape of the entire moviemaking industry so completely? A study of this fascinating historical account reveals the process by which a firm can achieve “architectural advantage.” Managers may be familiar with the idea that “shocks” brought on by technological and regulatory changes can trigger the emergence of novel industry structures. The Wasserman case shows there is more to it than that. An innovative business model, by itself, is not sufficient. Rather, the acquisition of mispriced resources by newcomers and the incumbents’ (in)action are also critical for newcomers to enter the industry, redraw its boundaries and achieve architectural advantage. Are there opportunities for your company to position itself in segments that would put it in the dominant position? Wasserman’s experience in the movie and television business, as well as other timely examples drawn from music and publishing, provide useful insights for managers operating in industries with unstable, contested architectures; entrepreneurial firms trying to develop architectural advantage in an emerging industry; and venture capitalists trying to identify investment opportunities.

Decentralization Is the New Center of Command Premium

The New Order of Business

Malone, Thomas W.

For almost three decades, MIT Professor Thomas W. Malone has been researching the enormous impact of information technology on organizations. Against the backdrop of the global economic downturn, Malone discusses how new forms of communication are increasingly empowering workers, and consequently, loosening the structures of corporate hierarchies. This situation will eventually lead to the widespread use of what he calls the coordinate-and-cultivate approach to management. With this approach, coordination focuses on the activities that need to be done within the firm and the relationships among these activities. Cultivation, meanwhile, focuses on the people doing the activities: what they want, what they’re good at, how they can realize their potential. While top-down control is needed at certain times, the author argues that it will also become increasingly imperative to help people find and develop their own natural strengths. Looking at the sweep of human history, the author unearths signs that the business world may be returning to our smaller, loosely constructed, hunter-gatherer roots of yore. This organizational evolution opens up a whole new range of business possibilities, which companies would do well to exploit and embrace before they find themselves the dinosaurs in a new age.

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