Competing in the New Economy
by leveraging their strengths in optics and imaging garnered from their camera business.
§ Two, prevaling product-market positions in the focal industry did not pose significant barriers to them as they could leverage their strengths gained from other industries to create new (and more effective) product-market positions. Again, Canon bypassed the entry barriers Xerox had erected for its large copiers sold to big corporations by choosing to compete with small copiers for copy-service franchisers (such as Copy Cop).
§ Three, they could generate a stream of products that were difficult to foresee and plan counter-attacks for ,as they were not necessarily based upon the conventional wisdom accumulated in the focal industry. Xerox, hence, could not anticipate Canon’s entry into their industry with small copiers and for years could not retaliate with equivalent products because their business model was designed only to reinforce their existing product market position (Henderson and Clark, 1990).
The core logic that competitors such as Canon competed with was rooted in developing a portfolio of capabilities. These capabilities were embedded in their internal processes and routines that cut across several organisational functions and levels. These processes and routines constituted activities that systematically absorbed learning from different businesses, shared and integrated this learning across the organisation, and then leveraged this shared learning through a stream of new products (Galunic and Rodan, 1998; Teece and Pisano, 1997). Hence, the competitive advantage for this company did not stem from any specific product-market position in any single industry, but from the way it organised its activities – or its processes and routines- that enabled it to execute cross-functional learning across multiple businesses and effectively harness it in its new products.
Over and above physical assets in any one business, the organising skills that enabled companies to achieve the transfer and deployment of learning across industries through their processes and routines become vital for competitive advantage. These processes and related organising skills constitute the intangible assets of organisations that critically supplemented the benefits of physical assets for competitive advantage (Hall 1992; Itami 1987).
Limitations of this framework include the measurement of processes and routines that typically span across different organisational levels, and the development of valid metrics of these routines.
Era 3: Strategy as a Portfolio of Relationships
Era 1 and 2’s framework premised strategic success was based on the strength of the organisation’s ability to craft a strong position in its market, or, its own superior processes and routines giving it the necessary capabilities to out compete its rival. The evolving view is that firms now need to generate a wiser range of capabilities that are difficult to generate internally, and can be developed only through a portfolio of relationships. In this view, companies complement their internal capabilities with a wide array of relationships with external entities (Baum et al 2000). These may include standard outsourcing but more importantly involve co-creation of capabilities with partners [next page]