renewal processes in family firms fernando alberti, phd leveraging resources and capabilities for...

RENEWAL PROCESSES IN FAMILY FIRMS

Fernando Alberti, PhD

LEVERAGING RESOURCES AND CAPABILITIES FOR STRATEGIC RENEWAL



The resource-based view of the firm

Assumptionsfirms can be conceptualized as bundles of resourcesthose resources are heterogeneously distributed across firmsresource differences persist over time

Definitions• Resources are those specific physical, human, and

organizational assets that can be used to implement value-creating strategies.

• They include the local abilities or ‘competencies’ that are fundamental to the competitive advantage of a firm




Resources

Tangible:• financial• physical

Intangible:• technology• reputation• culture

Human:• competences and

specialized knowledge• interaction and

communication abilities• motivation

CapabilitiesCompetencies

Strategy Industry’s criticalsuccess factors

Competitive advantage

Organizational routinesNorms and directives

FIT




Basic tenets

When firms have resources that are valuable, rare, inimitable, and non-substitutable (i.e., so-called VRIN attributes), they can achieve sustainable competitive advantage by implementing new value-creating strategies that cannot be easily duplicated by competitors.

‘Resources form the basis of unique value-creating strategies and their related activity systems that address specific markets and customers in distinctive ways, and so lead to competitive advantage’

When these resources and their related activity systems have complementarities, their potential to create sustainable competitive advantage is enhanced



Resources at the basis of SMEs renewal

By deploying new combinations of skills and competencies,

innovators can develop new approaches to resolving industry

problems.

The advantage of these firms is not their limited resource endowment

(“being more flexible; being more nimble…”).

What distinguishes these firms from others is:

a greater gap between resources and aspirations



Resources at the basis of SMEs renewal

These firms act differently, as a consequence:

from fit to stretch (fit between resources and opportunities)

from resource allocation to resource leverage



There are 5 basic ways in which management can leverage resources:

• concentrating them more effectively on key strategic goals

• accumulating them more efficiently

• complementing one kind of resource with another to create higher order value

• conserving resources wherever possible

• recovering resources from the marketplace in the shortest possible time

The leveraging of resources



1ST SOURCE OF RESOURCE LEVERAGE: CONCENTRATING RESOURCES.

Convergence: have we created a chasm between resources and

aspirations that will compel creative resource leverage? Have we been loyal

to our strategic goals and consistent in their pursuit?

Focus: have we clearly identified the next competitive advantage that we

must build? Is top management’s attention focused firmly on the task until it

is accomplished?





2ND SOURCE OF RESOURCE LEVERAGE: ACCUMULATING RESOURCES.

Extraction: are we willing to apply lessons learned on the front line,

even when they conflict with long-held orthodoxies? Have we

found a way to tap the best ideas of every employee?

Borrowing: are we willing to learn from outsiders as well as from

insiders? Have we established borrowing processes and learning

goals for employees working with alliances and joint ventures?




3RD SOURCE OF RESOURCE LEVERAGE:

COMPLEMENTING RESOURCES.

Blending: have we created a class of technology generalists who can

multiply our resources? Have we created an environment in which

employees explore new skill combinations?

Balancing: have we pursued high standards across the board so that

our ability to exploit excellence in one area is never imperiled by

mediocrity in another? Can we correct our imbalances?




4TH SOURCE OF RESOURCE LEVERAGE: CONSERVING RESOURCES.

Recycling: do we view core competencies as corporate resources rather than the property of individual businesses? Have we created lateral communication to ensure that ideas aren’t trapped?

Co-option: have we identified the industry players who are dependent on us for some critical skill or for their very livelihood? Do we understand how to enroll others in the pursuit of our goals?

Shielding: do we understand competitors’ blind spots and orthodoxies? Can we attack without risking retaliation? Do we know how to explore markets through low-cost, low-risk incursions?




5TH SOURCE OF RESOURCE LEVERAGE: RECOVERING

RESOURCES.

Recovery: have we shortened product-development, order-

processing, and product-launch times? Have we built global

brands and distribution positions that allow us to preempt

slower rivals?



Critiques to the resource-based perspective

Excessive focus on the exploitation of existing resources, rather than continuous development of new ones to address changing markets: ‘It is evident that the resource-based perspective focuses on strategies for exploiting existing firm-specific assets’

How to address high-velocity markets, just leveraging existing resources?



High velocity markets

1. Rapid and unpredictable change in the industry

2. Hypercompetition

3. Growing complexity

4. Sudden and dramatic change in markets



High velocity markets

Winners in the global marketplace have been firms that can demostrate timely responsiveness and rapid and flexible product innovation, coupled with the management capability of effectively coordinate and redeploy internal and external competencies.

Not surprisingly, scholars have remarked that companies can accumulate even a large stock of resources and still not have many useful capabilities.



High velocity markets and dynamic capabilities

In high velocity markets it is necessary to introduce the concept of ‘dynamic capabilities’, emphasizing two key aspects which were not the main focus of attention in previous strategy perspectives. The term dynamic refers to the shifting character of the environment; certain strategic responses are required when time-to-market and timing is critical, the pace of innovation is accelerating, and the nature of future competition and markets is difficult to determine. The term capabilities emphasises the key role of strategic management in appropriately adapting, integrating, and re-configuring internal and external organizational skills, resources, and functional competences toward changing environment.



Dynamic Capabilities Perspective

Firms compete on the basis of product design, product quality, process efficiency, and other attributes. However, in a Shumpeterian world (entrepreneurship=creative destruction), firms are constantly attempting to improve their competencies or to imitate the competence of their most qualified competitors. Rivalry to develop new competences or to improve existing ones is critical in a Schumpeterian world.

The dynamic capabilities approach places emphasis on the firm’s internal processes, assets and market positions, the path along which it has traveled, and

the paths that lie ahead.



Dynamic Capabilities/Some definitions

‘Dynamic capabilities are the antecedent organizational and strategic routines by which managers alter their resource base–acquire and shed resources, integrate them together, and recombine them–to generate new value-creating strategies. As such, they are the drivers behind the creation, evolution, and recombination of other resources into new sources of competitive advantage’

(Eisenhardt and Martin, 2000)




“A dynamic capability is a learned pattern of collective activity through which the organization systematically generates and modifies its operational routines in pursuit of improved effectiveness”

(Zollo and Winter, 2002).




‘We define dynamic capabilities as the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments’. They reflect an organization’s ability to achieve new forms of competitive advantage (Teece, Pisano and Shuen, 1997)



Dynamic Capabilities

The dynamic capabilities perspective sees strategic initiatives as resulting from the multi-layered recombination of firm-specific resources and competences.

Such recombination could be either intentional or unintentional; can occur either at the environmental level or within the organization; can be the result of managerial choice or of blind external forces.



Dynamic capabilities and strategic evolution processes

According to this perspective, strategic evolution processes are described as resulting from a continuous recombination of routines and resources, based on a limited repertoire of clearly traceable recursive recombination patterns.

This relative stable set of routines and resources which are recombined through time can be defined as core micro-strategies.



The Alessi example

Giovanni Alessi

Carlo Alessi Ettore Alessi

Alberto Alessi Michele Alessi Alessio Alessi Stefano Alessi

Alessio Alessi

Ettore Alessi

Alberto Alessi

Carlo Alessi

Michele Alessi

Stefano Alessi



The Alessi example

• 1921. Alessi was established; producing metal household objects commissioned by external clients

• 1924. Alessi started to produce trays and coffee-makers designed in-house

• 1930s. The company started to develop a design style with Carlo Alessi

• 1930s. Alessi started to export in few European countries and to experiment the use of steel

• 1940-50s. Alessi converted almost entirely to military production

• 1955. Alessi started its first collaborations with external designers (first partecipation to design exhibitions)



The Alessi example

• 1960s. Investments in production and exports

• 1970. Alberto Alessi joined the company. ‘Alessi d’après’ and ‘Programma 8’ were started

• 1983. The Officina Alessi trademark was created

• 1989. The first catalogue of wooden objects was published with the Twergi brand name

• 1990. Alessi acquired Tendentse (porcelain and ceramics household objects)

• 1992. Alessi started collaboration with Philips

• 1993. Alessi stimulated a group of designers to explore the creative potential of plastics (Family follows Fiction program)


The Alessi example

Traditional stainless steel tableware and household objects

Since 1921

Since 1993

Since 1985

1991

2002 2002 2003

Cordless telephone w/Siemens

Electric kitchen appliances w/Philips

Historical reproductions

Plastic objects

Watches w/SII Marketing Int. Inc. Alessi bathroom w/Inda, Laufen, Oras

Since 1989

Traditional wooden household objects

Since 1985

Porcelain tableware objects



The Alessi example

0

20

40

60

80

100

120

140

160

180

200

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Year

Tu

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r (b

illio

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alia

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ire

)

“a definition of success for business firms … their ability to survive and grow” (Nelson and Winter, 1982, p.9)

Alessi was founded in 1921



The Alessi example

M ETAPROJECT

Brief Evaluation Desiderata Engineering

The nucleus of new strategic initiatives at Alessi has been recognized as the homogeneous set of organizational routines through which each new project is conceived, evaluated and its essential ‘design philosophy’ maintained throughout the production phase.

The basic elements of this nucleus of organizational routines and resources, thus the Alessi core micro-strategies, are represented above.



The Alessi example

Results are business projects (e.g., the new family of plastics objects resulting from the Family Follows Fiction metaproject) which apparently depart from previous strategic initiative.

Every new strategic initiative in Alessi follows the same rationale: the core micro-strategy is recombined with new designers’ idea and projects, skills and experiences, with new design, lines, materials or technologies.

The core micro-strategy emerged from the routinization of micro-activities carried out by people at all levels of the organization.

Alessi top management gradually learned to select and refine the organizational routines which were providing most effective, thus contributing to the construction of

the core micro-strategy.



The Alessi example

System of Core Organizational

Routines

Entrepreneur and managerial team

Recursive recombinatio

n patterns

Existing resources and competencies

Strategic intent or purpose

Evolution-engineering knowledge

Alessi factory.Network of existing

designers and suppliers.

Network of new designers and

suppliers

Newly accessed resources and competencies

Previous strategic initiatives

Strategic renewal.New strategic initiative.

Alessi

Dynamic Capability

renewal processes in family firms fernando alberti, phd leveraging resources and capabilities for...

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