姝 Academy of Management Executive, 2005, Vol. 19, No. 1

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Strategic and organizational requirements for competitive advantage David Lei and John W. Slocum, Jr. Executive Overview

Formulating an effective business strategy for a firm is a complex task. How best to compete in an industry is one of the major determinants that influence managers’ choices of business strategy. The life cycle stages of the industry and the rate of technological change are two drivers that have significant impact on industry evolution. We develop a typology of four types of industry environments: Fast Growth; Wild, Wild West; Steady Evolution; and Creative Destruction. Each of these generates a different set of strategic imperatives for managers. To operate effectively in each type of industry environment, managers may select among four business strategies: Concept Drivers, Pioneers, Consolidators, and Concept Learners. We present the various strengths and challenges posed by each strategy and how managers can overcome these.

........................................................................................................................................................................ Drivers, Pioneers, Consolidators, and Concept Learners— can redefine their strategies and organization designs to respond to these different types of change. We consider the impact of industry change on how firms are likely to adapt to faster changing environments in the future.

Although successful organizations are less unified than living organisms, they too constitute configurations of mutually supporting parts that are organized around stable themes or strategies. These themes or strategies may be derived from leaders’ visions, the influence of powerful departments/divisions, or the state of the industry. Once a stable theme or strategy emerges, a whole infrastructure emerges to support it. The firm perpetuates and amplifies one type of design and suppresses all mutations. That is, senior managers choose a set of goals and values and champion these above all others. In this article, we will point out that managers need to understand the nature of their industry’s life cycle and the rate of technological change and their impact on the strategies and organization designs they craft to compete in their industry. In addressing the nature of changing environments, we examine the broad nature of industry transformation in the first part of our article. Industries are economic complex adaptive systems that evolve through states of birth, growth, maturity, and death at their own rates. These systems are also impacted by the rate of technological change that can redefine the nature of firms’ offerings to their respective markets. The second part of our article examines how four archetypes of firms – Concept

Industry Ecosystems and Change Industries can be viewed as economic examples of a complex adaptive system. This is a concept that has been used to describe the evolution that occurs in living ecosystems (e.g., forests, climates, creation of new species). Although firms in an industry ecosystem compete with one another for customers, they are also highly interdependent in the sense that they share the same changes that affect an industry over time. The parallel growth and decline of semiconductor, telecommunications, and even Internet-based “dot.com” firms during the late 1990s reveals to an amazing degree the shared fate that tied these firms together within their respective industry ecosystems. The slump in the demand for broadband communications technology used to power the Internet precipitated a massive decline in demand for personal computers and other related equipment. In turn, this cascaded into one of the roughest downturns ever for the 31

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semiconductor industry. Major changes in an industry ecosystem can dramatically reshape the industry’s structure, and define the context of the competitive strategies used by firms to build new sources of competitive advantage.1 In addressing changing environments, firms in some industries have engaged in proactive actions to help mold the structure of their industry and to render the underlying competitive setting more advantageous for them. However, as the competitive environment continues to evolve over time, it is often quite difficult for firms to manage every aspect of their industry ecosystem. For example, in the early 1990s, a consortium of firms (AT&T, RCA, Philips, Zenith, General Instrument, and NBC) worked together to develop the current standards of highdefinition television (HDTV) to help define an entirely new technology for consumer electronics. Although their efforts were highly successful in shaping today’s broadcasting standards, the ensuing development of the technologies used to make HDTV sets followed much of the same progression that defined the earlier generations of analog color television sets and other consumer electronics products. Likewise, the nature of competition among firms can influence the value received by customers, as well as how closely firms work in conjunction with their suppliers. For example, the symbiotic relationship between Wal-Mart and Procter & Gamble has redefined the role of the supplier in the massive retailing industry. The accumulation of their responses (and their subsequent effects) shaped the overall competitive structure of this industry. Two defining characteristics of an economic complex adaptive system are: (1) the existence of a life cycle that guides evolution within the system; and (2) the rate of technological change that can dramatically reshape the configuration of the system itself.2 We will use these two underlying tenets of complex adaptive systems to aid our understanding of industry change. If industries are viewed from this perspective, we need to be able to demonstrate how organizations respond to changing environments. First, it is important to delineate the nature of life cyclebased evolution within an industry. The early stage of the life cycle, characterized by rapid growth, proliferation of firms, and low barriers to entry, witnesses many firms attempting to get their innovative products accepted by customers. As the overall size of the market expands, it attracts a large number of competitors. This growth provides considerable economic ferment that enables different firms to craft strategies to compete in the industry, often by developing highly differentiated

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products that lead to a wide spectrum of value propositions for customers. Over time, however, customers become more knowledgeable and competing products become more similar to one another. Declining differences between products of competing firms generally leads to similar pricing, and also compressed margins. This results in much slower revenue growth, and potentially lower economic returns to many firms. As the industry becomes highly mature, a dominant industry-wide paradigm becomes established. At this time, firms become highly specialized and cost efficiency becomes important in determining profitability. The evolution of products and technologies in most industries tends to exhibit strong life cycle characteristics. Recent examples of industries that have undergone such a progression include cell phones, digital cameras, and managed health care plans. In adaptive systems, rate of technological change refers to the extent to which new products and technologies evolve in ways and patterns that are completely different from their predecessors. On the one hand, all industries undergo a constant, steady evolution in which technologies slowly improve over time. Change is often gradual and highly predictable as product and process technologies follow a well-defined progression. However, industries are subject to periods of “disruption,” when new technologies can redefine an industry’s structure in unpredictable ways. Disruptive technologies can “shake up” a dominant design (i.e., way of conceiving and commercializing a product/service offering) and established firms to such an extent that an entire industry can be transformed in a short time.3 For example, the latest advances in medical technology have raised considerable hope that entirely new forms of treatments and less-invasive surgical procedures will be developed shortly. These technologies would provide entirely new treatment regimens that represent bold opportunities for the rise of new firms. Similarly, the advent of wireless Internet capabilities and their impact on traditional telecommunications firms relying on land-line modes of transmission would represent another avenue to create entirely new service offerings as well. The creation of new core technologies to design products for a set of customers in one industry may serendipitously open up new avenues to exploit the technology in other markets. More often than not, a new technology destabilizes the industry’s pre-existing equilibrium and a transformed industry ecosystem replaces it. In recent years, for example, this pattern has emerged numerous times within several different industries, such as photog-

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raphy, telecommunications, and financial services. Indeed, most industries periodically face the prospect of substantial technological change, when an entirely new method, product design, or value proposition dramatically redefines the strategies and market positions of competing firms. The competitive environment in these industries will become significantly more intense.4 The presence of life cycle dynamics, combined with the prospect for technological change provides the basis for understanding how firms can rapidly adapt to a variety of contexts. Our characterization of industries enables us to develop a framework that captures the strategic and organizational imperatives that are likely to guide firm behavior. Figure 1 presents an overlay of life cycle dynamics with the levels of industry technological change to highlight the different sets of ecosystems. Quadrant One: Fast Growth In quadrant one, a new product concept or idea becomes the basis for fast industry growth. Firms will try to stake out and expand key portions of the market by offering their own distinctive value proposition for customers. Often, firms compete with highly differentiated product offerings that not only seek to capture market share, but also to create a product concept or design that cannot easily be replicated throughout the industry.5 The underlying technology or method used to create new products and service concepts evolves in a predictable manner. Eventually, an industry “shakeout” displaces weaker rivals and industry

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growth abates as buyers become more knowledgeable about how the product/service adds value for them. However, there is still room for a number of strong rivals to continue offering their own unique value propositions, since the underlying product or service concept has either attracted a loyal following, or created high switching costs that lock in the buyer. Many product and service concepts fit this industry setting. For example, the rapid growth in chain restaurants, specialty retailing, laboratory diagnostics, auto service centers, hair-styling salons, and video games have followed well-defined trajectories in which a core product concept was successfully tested and replicated throughout the industry. In the restaurant industry, a highly innovative product concept (e.g., Corner Bakery) or service approach (e.g., Sonic Drive-Ins) has enabled a variety of competing firms to thrive, even when they serve a similar menu line. This has enabled firms in many different technology and service-based industries to grow rapidly by following a highly replicable and distinctive business model. Even certain high-technology products, such as software and specialized chemical agents, have followed a similar development path, where leading companies have built a strong lock-in with their buyers. Quadrant Two: Wild, Wild West In quadrant number two, a combination of fast growth and technological ferment attracts numerous upstarts who bring novel ideas and new technologies to a highly dynamic setting. As the num-

FIGURE 1 Industry Ecosystems

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ber of new firms increases, so does the potential range of technologies and concepts that firms will use to stake out their market positions. Rivals face a highly dynamic, fluid industry environment that is not only fast-growing, but also ripe for numerous competing, emerging, and breakthrough technologies. Market boundaries are unstable, since customer expectations and value propositions are changing so quickly that firms choose not to commit to a standard technology or product platform.6 Customers may flock to a given product or service in one time period, and then embrace a completely new version later. It is difficult for any firm to “command the high ground” in the industry, since there are so many different types of technologies that could be used to create new products and services. The technologies themselves are highly unstable and subject to rapid change or substitution from newer innovations, mostly from within the industry. This industry segment witnesses a high rate of firm entry and exit as new product and technology concepts are developed and tested. Moreover, these technologies are often so new or different that it is impossible for any given firm to define an industry-wide standard early on. Industries that fit this characterization include many aspects of biotechnology, medical devices and instrumentation, fuel cells, and even digital home electronics. Consider, for example, some of the recent developments that firms have pioneered to create alternative sources of fuels for automobiles.7 A wide range of battery technologies based on nickel-metal hydrides, lithium derivatives, and hydrogen cells compete for attention and investment funds by large automotive firms for the development of advanced systems to power new generations of cars. These technologies are themselves subject to fast-changing innovations that promise even more reliable sources of power and ease of manufacture. In the biotechnology field, dozens of new entrants compete with one another to create treatment regimens for a variety of ailments and diseases. They employ a broad range of techniques from molecular biology, genetic engineering, and even nanotechnology-based electronic devices that can regulate body functions. More recently, a number of firms have begun to offer a fully digital home entertainment system (e.g., Samsung, Sony, Intel) in which a central computer or networking device controls everything from the television to washing machines and even Internet access.8 Quadrant Three: Steady Evolution In quadrant number three, industry maturity is characterized by a stable industry structure, where

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large firms enjoy significant market shares. Market share for competitors has become well-established, making it essential for firms to capture and sustain cost-driven efficiencies. Opportunities for product differentiation may still exist, but they are more difficult to pursue because buyers are knowledgeable about competing firms’ products (e.g., the airline industry). As a result, products from competing firms often exhibit a marked tendency to utilize standardized technologies, platforms, and operating systems.9 Consequently, the pursuit of substantial economies of scale — large size, integrated supply chains, and continuous improvements in process technologies — drives firms in this environment. As the industry continues to mature, many firms will seek to lower their cost structures even further, often by working more closely with key suppliers to outsource some of their high fixed-cost activities. In order to further stabilize industry-wide pricing and to gain even greater economies of scale, some firms will seek to acquire their rivals in order to gain even stronger bargaining power over their suppliers and buyers. Industries such as personal computers, memory chips, automobiles, chemicals and even managed health care populate quadrant three. The automotive and memory chip industries have begun to consolidate in recent years as firms needed to become larger in order not only to gain additional scale, but also to amortize the costs of capitalintensive product and process development. Even in such high-technology fields as information technology and consulting, numerous firms (e.g., Deloitte Consulting, EDS, IBM) have begun to outsource some of their data processing operations to India and China. This trend has occurred throughout the globe, as established firms seek ways to further lower their operational costs. Quadrant Four: Creative Destruction In quadrant four, firms in highly mature industries face the onslaught of new technologies and other technological changes from outside their industry that promise to transform the very essence of their survival. Although a single technology or external event may provide the trigger for industry-wide change, over time the cumulative effect results in an ecosystem-wide phenomenon.10 Creative destruction is the hallmark of quadrant four, as new technologies or ways of serving a customer dramatically redefine the nature of the product or service offered to customers. The previous ways of creating value crumble under the weight of a new technology that dramatically changes the performance and/or pricing of previous offerings. In

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many situations, the new entrant will set a new standard for customers’ expectations regarding product/service design, price, convenience, and speed; newly designed products that build on a superior value proposition accelerate the displacement and substitution of older products. Established firms face enormous tradeoffs as they attempt to adapt to the new paradigm, since they must respond in ways that denigrate the value of their current business models and invested assets.11 Industries such as entertainment, photography, financial services, travel agencies, telecommunications, semiconductor capital equipment, and even certain medical devices and procedures have recently faced significant forces of creative destruction that have completely transformed how firms create value for their customers. For example, the rapid creation and dissemination of MP3 and other formats in the entertainment industry reveal the extent to which new products (and strategic requirements) are completely different from the capabilities of established firms. They have also served to create the basis for an entirely new method of reaching customers, as music and eventually video offerings are distributed through the Internet and other mobile technology platforms. Strategic Requirements for Competing in Different Ecosystems As the industry ecosystem changes, firms must be able to learn, develop, and adjust their core competencies in ways that respond quickly to external developments. Strategies and organization designs that seem well-suited for a particular stage of an industry’s life cycle may not translate into competitive advantage or success in another stage. Competitive advantage depends upon a firm’s ability to craft a coherent strategy that integrates several core pillars of delivering a successful value proposition. Using a unified strategic framework developed by Hambrick and Fredrickson, we build upon their set of core strategic pillars, which include: (1) arenas, (2) vehicles, (3) distinguishing features, (4) economic logic, and (5) staging of actions to highlight some possible combination of strategies that enable firms to compete effectively.12 Arenas focus on what businesses the firm will be in, product categories, geographic areas, core technologies, as well as the value-adding stages (e.g., product design, manufacturing, or logistics). Besides specifying these arenas, strategists need to determine the relative importance that will be placed on each arena. Vehicles are the ways that

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strategists need to choose among to enter the arena(s). That is, how is the firm going to accomplish entry into an arena: licensing agreements, joint ventures, acquisitions, and/or internal development are all vehicles for entering an arena. A strategy should not only specify what arenas the firm will be active in and how it will get there, but how the firm will distinguish itself in the marketplace. That is, how will the firm compete—through styling, price, product features, and quality. Economic logic refers to how firms will capture returns that exceed their cost of capital. That is, will these be achieved through low costs and scale advantages, scope, replication, or will it charge premium prices because it will offer superior service or develop proprietary product features? While these choices have been referred to as the pillars of a firm’s business strategy, there is some judgment needed about the staging or sequencing of these choices. Staging of actions refers to the sequencing of choices related to the first four strategic pillars, since the actions taken by any given firm will depend on its unique circumstances. Archetypes and Industry Ecosystems The four types of ecosystems we illustrated in Figure 1 place different demands on the organization to respond. We present four different archetypes that correspond to the four different ecosystems. Consolidators, Concept Learners, Concept Drivers, and Pioneers are each viable to operate in different ecosystems, albeit at different levels of effectiveness. These strategic archetypes focus at the line of business level within the firm. Unlike other strategic typologies that have been developed, we focus on industry life cycle and technological change as the major drivers of industry ecosystem evolution.13 For example, firms facing an ecosystem characterized by steady evolution are driven towards crafting business strategies that align with our consolidators in Figure 2. They have developed a broad line of standard products for customers and focus primarily on cost reduction and scale. Conversely, pioneers that aggressively pursue new technologies and strive to be first-movers in the marketplace tend to dominate the Wild, Wild West quadrant of Figure 1. For example, Ampex (a pioneer) developed the first video recorder, but JVC and Sony (both consolidators) eventually mass produced it. Similarly, Bowmar (a pioneer) created the first pocket calculator, but Texas Instruments (consolidator) captured the mass market because of its distinctive manufacturing competency. While each archetype tends to be focused on doing one thing extremely well, each firm positions itself to exploit

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an ecosystem. That is, they create competencies and complementary assets to take advantage of their strategy. While it is impossible to specify a universally superior set of pillars that will apply to each firm, there are some compelling patterns and differences that exist across the four ecosystems. Even though these strategic pillars will vary in their importance across the ecosystems, each firm must build upon its own internally consistent set to produce firm-specific competitive advantage. Figure 2 presents four strategic archetypes that overlay the general properties that shape these five core pillars across the four environmental states. Quadrant One: Concept Drivers Concept drivers are firms competing in fast-growth industries that create a value proposition which is highly differentiated from those of its rivals to sustain high profitability. Brinker International and Discount Tire are examples of concept drivers that

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have created and shaped a core product concept that enables them to achieve a competitive advantage. These firms invest heavily in market research and product R & D to craft a product or service design that is highly replicable or “scalable” across markets. As a result, the arenas of concept drivers are typically new markets they can enter easily with a well-developed and easily replicable business model. Core value-adding activities (e.g., human resources, merchandising, accounting, logistics) are often centralized to achieve uniformity and consistency of operations. Brinker’s acquisition of The Corner Bakery was synergistic because it had operations, such as Chili’s, On The Border, and Romano’s Macaroni Grill. Brinker was able to replicate its supply chain, logistics systems, hiring practices, market research capabilities, and other competencies to service this new arena.14 To sustain this strategy, concept drivers frequently experiment and innovate new product offerings that borrow upon and expand their core

FIGURE 2 Archetypes and Strategies

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product/service. They often acquire rivals that enable them to enter new product or geographic markets quickly. Thus, their primary vehicles for building and extending their competitive advantage are through internal development and related acquisitions to complement their existing product lines. A concept driver must continue to focus its new product development initiatives that reinforce and build upon its core product expertise and knowledge, and test new markets to ensure a workable fit. As a result, these firms are likely to evaluate new market opportunities through a carefully staged process. Many concept drivers invest heavily in new process technologies that enable them to engage in product customization and provide customer intimacy. These skills enable them to build strong barriers to imitation from their rivals. Concept drivers seek to build strong customer loyalty or customer lock-in by virtue of a highly desirable offering or a proprietary technology. This effort to secure a strong customer lock-in serves as the foundation for an economic logic predicated on either the possession of proprietary technology or the delivery of superior product or service features. Branding is a vital tool to help fast shapers reduce buyers’ perceived risk when introducing new products. Concept drivers rely on organization designs that support fast innovation, creativity, and flexibility within a division.15 This places a high premium on fast communication and information flow across functions within a division. Concept drivers must also cultivate and develop their own talent internally, since these firms rely heavily on experience and tacit knowledge that are further refined with each subsequent product innovation. Discount Tire appears to be setting the industry standard for providing replacement tires.16 Unlike other auto repair firms that offer a wide range of other services, Discount Tire relies on a simple formula of only providing ultra-courteous fast tire repair, rotation, and installation at all of its stores. Discount Tire also offers a generous mileagebased warranty program that enables the customer to lower the lifetime cost and risk of tire ownership by allowing for free tire replacement in case of road hazard or other circumstances at any Discount store. By focusing exclusively on providing fast turnaround and lower-risk tire ownership, Discount Tire has created a distinctive value proposition. This $1.4 billion privately held firm has expanded rapidly from its Arizona roots to serve customers in 20 states across the country. Everyone from managers to technicians are trained to examine customers’ tires, assess the need for repair or replacement, write up the purchase, and install the

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new tires within a very short time. This cross-functional approach to customer service enables Discount Tire to slice the waiting time that customers face in their tire maintenance needs. Quadrant Two: Pioneers Pioneers are risk-takers that thrive in highly uncertain, dynamic environments where barriers to entry and exit are often quite low.17 In addition, pioneers face a high degree of uncertainty regarding customer expectations. These firms are often small and possess a deep knowledge about leadingedge technologies. Typically, they possess the seeds of a breakthrough technology that can transform or even create entirely new products. Pioneers rely on agility and speed of product development to create bold new product ideas that keep competitors from copying their initiative. They cannot count on the presence of a large customer base to amortize their investment costs. Customers who buy pioneers’ products tend to be technology enthusiasts who want the “new toy.” It is the functionality of the product that attracts customers. Unlike consolidators, they often confine their arenas to very specialized technological niches that could lead to breakthrough products. The only way to innovate successfully is to be intimately familiar with specific technologies and with exact needs of a particular set of customers. Too broad a range of product offerings works against the sharp focus so necessary for pioneers to survive. If a pioneer develops an end product, it likely meets the needs of a specialized niche, rather than a mass market. More often, pioneers seek to aggressively develop and license their technologies to other firms that may be better positioned to assume the risks of full-fledged market development. For example, Chicopee Mills first introduced the disposable diaper in 1932. By 1956 only one percent of the market was buying them. The main reason was cost – around $.09 per diaper In 1962, Procter & Gamble acquired the company. Through their efficient marketing and manufacturing capabilities, P & G drastically reduced the cost to less than $.03 per diaper. Today, Pampers commands a 15 percent market share of this $19 billion market. A combination of internal technology development and external licensing represent important strategic vehicles for pioneers. Pioneers need to keep their R & D wellsprings full with a continuous flow of new ideas and emerging technologies to create opportunities for application in numerous product markets by other firms. Pioneers seek to distinguish themselves from other rivals through faster innovation, better designs, or advanced

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technologies. Overall, pioneers can survive only to the extent they are effective in developing new technologies and protecting them from rapid competitor imitation. The combination of developing new technology with a marked tendency to rely on licensing it to other partners means that the economic logic of pioneers rests on securing a steady stream of profits generated by strong proprietary features.18 Pioneers often gain the needed financial support from private financiers. Unless the product has the necessary technical features, financiers will not back it. Pioneers depend on organizational routines that promote fast learning, experimentation, and encouragement of internal debate. Because they license their technologies to other firms, they must also be able to use these strategic alliances as a vehicle to better understand market developments and customer evolution, since they are unlikely to possess these capabilities on their own. Pioneers are particularly attractive acquisition candidates for established firms seeking to learn and to build entirely new core competencies, like P & G did with Chicopee Mills. However, they often represent a difficult cultural and organizational fit with the management practices and routines that are embedded in an established firm’s organization. Pioneers tend to populate those fast-moving industries driven by high levels of R&D spending and fast product innovation. In recent years, pioneer-type firms have charted new techniques and methods to dramatically lower the cost of telecommunications, despite this industry’s massive downturn. Companies such as Vonage, 8x8, and others have begun offering Voice-over-InternetProtocol (VoIP) technology that enables savvy users to place long-distance calls over the Internet through personal computers and other access devices.19 Although many large corporate buyers are already heavy users of VoIP technology, Vonage and 8x8 are directly challenging established long-distance firms, such as AT&T and MCI, with their dramatically lower costs and ease of network installation. While it is unlikely that these small firms will become telecom giants in their own right because of current industry over-capacity, they have started discussions to form marketing and technology development alliances with Regional Bell Operating Companies to learn more about users’ needs. Other pioneertype firms active in the Internet and telecommunications industries have focused on new applications such as data encryption and audio/video streaming.

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Quadrant Three: Consolidators Consolidators are firms competing in mature life cycles that seek to capture the benefits of consolidating their industries in the midst of slow growth.20 Consolidators are those firms that seek to maximize the benefits of cost and process efficiencies in their attempt to garner industry-wide economies of scale. Wal-Mart and CVS in the retailing industry, and Lenovo in electronics and PC manufacturing in China are examples of consolidators.21 As a result, their typical choice of arenas is to focus on gaining access to a wide scope of markets that enables them to leverage their fixed costs. Consolidators move into pioneers’ markets by shifting the basis of competition from technical performance to such attributes as quality and price (e.g., in microwave ovens, from Litton to Samsung; in 35 mm cameras, from Leica to Canon). This makes the product attractive to the mass market and facilitates a change in the product’s life cycle from growth to maturity. Carefully honed marketing campaigns, distribution networks, and customer service are essential to capture value by consolidators. Consolidators that are cost leaders are not known for major technological innovations in their product lines. Even though consolidators often introduce incremental technological improvements to extend the range and longevity of a product, their motto, “Do not be first, be the best” captures the zeitgeist of these firms. Consolidators actively search for ways to reduce their high capital intensity. They frequently attempt to work closely with their core suppliers to share the risks of future product development and new market entry. At the same time that consolidators narrow the scope of their activities through outsourcing, many also seek to become larger by merging and acquiring competitors in order to attain even greater benefits of scale and size. Hence, they primarily rely on such vehicles as long-term supply and co-production/sourcing arrangements, as well as selective mergers to help reinforce their scale-based advantages and negate rivals’ moves to gain market share. In particular, consolidators in many cases look to their suppliers not only as a provider of necessary inputs, but also as an outsourcing platform in which the supplier takes on a greater role (and cost) in the firm’s overall value creation process (e.g., Wal-Mart and Procter & Gamble). Consequently, as consolidators over time become more specialized in their activities, they also must become adept at an important staging skill – that of sequentially orchestrating and managing an expansive web of suppliers that are becoming important sources of process technologies

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in their own right. The move to outsource a broader range of value-creating activities to key suppliers enables the consolidator to become more focused on what it considers to be its future core competencies. Accordingly, these firms generally avoid products that require a high degree of customization in favor of mass production and distribution of more standardized products that facilitate low cost operations. Managing distribution channels to buyers is also an important skill. Many companies in recent years have already surfaced to play important consolidator roles in their respective industries. For example, in the automobile industry, new car designs are based increasingly on shared platforms and components that are found across a manufacturer’s entire line of product offerings. Core components, such as safety glass, fuel tanks, braking systems, engine sealants, automotive seats, and dashboards made of advanced composites are designed for similar manufacture and use for cars at the upper, middle and entry price points. As a result, automotive companies need to maximize the potential scale economies and cost efficiencies that accompany the development of shared technologies and components across all product lines. Quadrant Four: Concept Learners Concept learners are firms that successfully acquire new knowledge and competencies as well as harness change to create new value propositions. In a mature industry that faces a high rate of technological change, firms must adapt quickly to create new products and services based on a rapidly evolving technology or new means of serving a customer.22 In many cases, established firms have not been able to adjust their strategies and organization designs rapidly enough to learn the new requirements to revitalize themselves successfully. However, a growing number of firms in a wide range of industries will face the challenge of meeting and adapting to the imperatives that accompanies technological change. Concept learners actively seek knowledge about emerging technologies and developments in other industries to redefine their core products. Successful concept learners not only have the capability to rapidly absorb new technologies, but are also willing to “unlearn” pre-existing core competencies that can become core rigidities in the creative destruction of their ecosystem. Change will compel concept learners to reconfigure themselves in any number of different arenas, but the primary realignment occurs in the firm’s core technology base. This base is confronted with rapid obsoles-

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cence from a more vibrant or more cost-effective substitute.23 As a result, a change in the core technology will certainly make itself felt in the type of new products introduced in subsequent periods. Many concept learners approach product development by attempting to “incubate” a variety of technological “seeds” that lay the foundation for different product designs. By fostering an internal corporate race to assess which product design is ultimately accepted, this “parallel” approach builds on a vehicle that promotes risk-taking and knowledge-sharing which is valuable for future idea generation. Joint ventures and strategic alliances represent important complementary vehicles for concept learners, especially with partners that are likely to possess important related technologies. These learning-based alliances enable the firm not only to reduce some the internal costs and risks of going-it-alone, but also to gain important insight into a potential competitor’s market direction. Concept learners need to regain the initiative by introducing bold new products quickly into the marketplace, but face a critical tradeoff when they start cannibalizing their older product offerings. Thus, these firms are faced with significant difficulties concerning the speed of staging of their product introductions. Long-term, their economic viability will depend on how well they can learn and assimilate sources of change as part of their renewal. The medical devices industry confronts the challenge of harnessing new forms of technology with increasing frequency.24 For example, the development of next-generation pacemakers, telemedicine products, minimally invasive surgical tools, and self-regulating pumps has incorporated many technology developments, processes, and ideas that were originally conceived outside the industry by other firms. The need to carefully monitor chronic disease conditions has provided the innovative ferment that now makes possible proactive disease management programs and products through the Internet and even wireless technologies. Medtronic, a leading medical device firm, has incorporated telecommunications-based technologies to create a wireless pacemaker that automatically and quietly dials for assistance in advance of a cardiac event. Previous pacemakers designed by Medtronic and other firms did not offer this instantaneous, immediate response capability, and the patient had to be aware of his/her imminent condition to seek help on his/her own. Medtronic also began to investigate and learn how to develop wireless applications for other bodymonitoring products. To create new types of ad-

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vanced self-regulating pumps that help diabetic patients manage their disease, Medtronic has also invested heavily in new types of servomechanicsbased competencies that mimic the human body’s endocrine regulatory feedback system. In late 2001, Medtronic bought Mini-Med, a small leading-edge developer of miniaturized insulin pumps. This acquisition complements Medtronic’s growing core competencies in working with advanced microelectronics, as well as enables the firm to learn even newer drug-delivery methodologies that will likely reshape other disease treatment regimens in the future.25

Potential Organizational Issues and Challenges Each of the strategic archetypes represents a way of competing, creating value, and adjusting to its environment. Yet, as a firm adapts to the economic and strategic requirements necessary to build competitive advantage, it also faces a series of important tradeoffs – many of which are embedded in the design of the firm’s organizational structure. Figure 3 captures some of the more salient strengths and weaknesses that confront firms in each strategic archetype.

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Quadrant One: Concept Drivers Concept drivers face a number of important organizational challenges as they pursue high-growth market opportunities. To remain innovative and agile, they are organized by product, with each line of business formulating a product- or marketspecific strategy. Although this provides the benefit of fast response to meeting customers’ needs, this design also delimits the firm’s ability to promote internal resource sharing and cooperation among business units.26 Centralization of key processes, such as merchandising, logistics, inventory management, purchasing, and human resources is important to achieve consistency of operations. As a result, a strong product focus may sometimes reward managers for becoming overly focused on their individual units’ performance at the expense of that of the overall firm. In turn, concept drivers are likely to have high cost structures, particularly as business units duplicate important functional activities as they expand into new products or markets. If growth and expansion are not carefully managed, there is a high risk of excessive product proliferation that may actually confuse the customer, cannibalize the unit’s offerings, and bring out products that are not needed. For example, many financial services firms (e.g.,

FIGURE 3 Strengths and Weaknesses of Strategic Archetypes

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Citigroup, Fidelity Investments) that offer one-stop shopping, such as brokerage, banking, and insurance offerings to their customers have recently confronted some important organizational challenges. In the early 1990s, different divisions within Merrill Lynch attempted to sell high-return funds, fixed-income securities, annuities, and insurance to their customers. Although Merrill encouraged each division to promote its offerings aggressively (and rewarded its managers for doing so), many customers were often confused by the message they received. Clients wanting the benefits of more stable, secure investments received a very different message from account representatives who wanted to steer them towards higher-risk products, such as stocks and growthoriented funds.27 In a similar vein, the specialty retailer Gap now faces the challenge of sustaining high growth without diluting the core message, marketing strategy, and retailing approach of each of its three divisions. Composed of three different divisions — The Gap, Banana Republic, and Old Navy — this company has thrived by providing highly fashionable clothing to young adults and children looking for the right blend of design elegance, comfort, and versatility. In particular, the Banana Republic focuses on trendy but elegant clothing, The Gap is oriented more towards active wear, while Old Navy offers a full array of fashionable clothing at slightly lower prices targeted towards teenagers and college students. Even though the company has begun to share some ordering and logistics functions across its three divisions, the company still faces the potential risk of cannibalizing its own revenues if expansion is not carefully managed. Quadrant Two: Pioneers Pioneers thrive by engaging in fast innovation of breakthrough technologies and products. With organic structures, R&D-driven cultures, and few manufacturing capabilities, these firms can accelerate the pace and scope of their product innovations. These firms by their very nature are risk takers and have been founded by entrepreneurs whose technical and engineering competencies allow them to translate a certain technology into a new product. Yet, they are also potentially vulnerable to a series of organizational issues. First, because pioneers tend to focus on leading-edge technologies whose ultimate market applications are unknown, they face the risk of “technological overkill.” Consequently, these firms often have few marketing competencies. In some cases, pioneers can find themselves refining a technology beyond

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the point (and cost) that would meet the needs of customers or firms. Because most pioneers are young and small, they are also unable to dedicate the resources to monitor highly intricate accounting, human resources, and other “infrastructure” related tasks. Many pioneer firms are highly dependent on venture capital or external funding from established firms that are their alliance partners to sustain their growth. Leadership in pioneer firms is highly dependent on a singular-focused CEO who may become overly “wedded” to a particular technology or product design at the risk of ignoring other developments or trends in the industry. Steve Jobs’ promotion of Lisa at Apple Computer, Edwin Land’s vision for Polaroid cameras, and Fred Smith’s zap mail at Federal Express (now FedEx) were all major technological projects that customers eventually rejected. Quadrant Three: Consolidators In their continuing search for greater economies of scale, consolidators strive to achieve a high degree of product and process standardization. Known for their low cost operations, consolidators stay ahead of their competition by devising ever more economical means of service or manufacturing to lead the race down the cost curve. Consolidators are run by strong leaders who crafted tightly knit cultures. These cultures ensure that the company’s values are inextricably linked to its goals. Sam Walton at Wal-Mart Stores, Meg Whitman at eBay, and Liu Chuanzhi at Lenovo all fostered cultures that infused employees with day-today behaviors consistent with the firms’ goals. They face very high fixed costs that make it difficult to change quickly. Likewise, consolidators must have the organizational capability to manage vast webs of suppliers and distributors to serve mass markets. Consolidators face a number of important issues within their respective industries. First, they are highly dependent on their suppliers because of the increased reliance on outsourcing. If a consolidator’s set of suppliers were to merge and consolidate among themselves, they would yield considerable supplier power. Their margins will erode as suppliers charge higher prices. Second, the large size of consolidators means they are likely to become highly riskaverse, bureaucratic, and smother innovation. The cumbersome reporting relationships and growing bureaucracy can breed decision-making that is slow, cautious, and inflexible. Hence even those consolidators who invest heavily in product innovation are likely to be slower than a concept driver or pioneer in racing to market. Finally, the stan-

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dardization of products, components, and technologies strongly suggests that consolidators will have difficulty appealing to many different market segments with a compelling value proposition for each. Quadrant Four: Concept Learners Concept learners face a vast array of organizational challenges as they attempt to adapt to change in their creative destruction ecosystem. Concept learners compete in highly mature markets that are ripe for change, but they must be able to learn new technologies or ways of serving their customers quickly. One of the biggest organizational challenges for concept learners is how best to reposition themselves to learn about new customers and developments beyond their immediate focal market or industry. Thus, concept learners face a much more complex set of organizational challenges than pioneers, consolidators, or concept drivers. Concept learners must investigate and invest in new technologies because they are often very different from their existing core technology. Concept learners in turn must manage two different mindsets and possibly two or more different perspectives that shape how managers view their customers. Concept learners also face numerous internal resource allocation issues as they try to find ways to invest in new customers and technologies. In particular, they must be able to reinvest the cash generated by mature businesses into promising new opportunities. Managerial Implications When competing in their industry ecosystems, firms need to develop important sources of competitive advantage that build upon their own unique strengths, core competencies, and complementary assets. As firms jockey for stronger market position, they will seek to develop strategies that best match their vision of the industry with the resources at hand. Yet, some general strategic patterns of behavior are exhibited across the four cells. For concept drivers, they need to focus their strategies on defining a unique product or service concept that enables them to expand the range of markets they serve. Concept drivers need to engage in a high degree of marketing and innovation to sustain the cutting-edge feel to their products or services. Developing a replicable business model that erects strong barriers to imitation (especially by way of branding, service delivery, or product design) from rivals is central to the concept driver’s

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future prosperity. Centralization of decision-making in key value-adding activities is needed to achieve consistency of operations, as well as to capture important sources of scale economies. For retailing firms such as Gap Stores, Tiffany & Co., and Chico’s FAS, distinctive product offerings allow these companies to define the leading edge of fashion in clothing, exquisite jewelry and specialty women’s clothing respectively. Similarly, Starbucks has been able to redefine the notion of what customers should expect from their morning coffee. By creating exciting new flavors in both hot and cold formats, Starbucks has been able to greatly expand the number of outlets in the United States and increasingly abroad over the past ten years. Careful experimentation and market testing of new product ideas can help the concept driver stake out an attractive position in its industry’s ecosystem to sustain profitable growth. To do this, the concept driver should focus on creating or acquiring small, highly autonomous units whose purpose is to test market boundaries to capture new customers. For example, in 2002 Tiffany & Co. acquired Little Switzerland, a jewelry retailer that serves tourists in the Caribbean, Alaska, the Florida Keys, and sells to customers mostly through duty-free stores that are near cruise-ship destinations. Little Switzerland will operate under its own trade name and will offer jewelry and renowned brand-name watches and other items. At the same time, Tiffany has also taken a major investment position in Temple St. Clair, a leading gem designer that has debuted new boutiques in high-end shopping malls such as southern California’s South Coast Plaza. Little Switzerland helps Tiffany expand its reach into new tourist markets, while Temple St. Clair enables the firm to reach upscale female customers who prefer to purchase jewelry for themselves. In 2004, Tiffany & Co. will begin selling a new line of pearls that complement its diamond and traditional jewel-based offerings. Can you name the company that created online book retailing? If your answer is Amazon.com, you’re wrong. The idea originated with Charles Stack, an Ohio-based bookseller in 1991. Amazon, under CEO Jeff Bezos, did not enter the market until 1995. Who created the first safety shaving razor? The natural answer would be Gillette, but in reality, the first safety razor was created by Henry Gaisman, founder of the AutoStrop Safety Razor Corporation in 1928. In 1930, Gillette bought AutoStrop and its safety razor patent. These examples highlight a key point. Oftentimes, the companies that create radically new products are not necessarily those that succeed in the mass market. Pio-

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neers are rarely able to explore new technologies quickly enough and to create an organization design that can serve the mass market. There are several implications for pioneers. First, new products do not automatically translate into a successful business model. Initial products frequently do not satisfy a well-articulated need, and therefore adoption rates are often slow. To survive in this ecosystem, pioneers must have a deep knowledge of technology, strong financial backing, and be interested in pushing the envelope. These firms are serial risk takers because they are willing to bet on the results of new products that extend beyond the current state of knowledge. Second, pioneers need to create organic management systems so they can quickly respond to the developments of new technologies. Learning new technological skills and information is prized and rewarded. Their competitive advantage stems from their ability to remain flexible and to hit a moving target. Customers of pioneers often share an enthusiasm for technology and value a pioneer’s performance much like investors do.28 Third, effective pioneers must be ready to leap into a new market when a dominant technology is about to become standardized because they rarely have the capabilities to craft an organization design that can distribute and serve a large customer base. Since pioneers do not have the cultures necessary to compete in mature markets, they should spend their time developing new markets for their cutting-edge technologies. For consolidators, these firms need to focus on refining key value-creating activities such as manufacturing, logistics, and reaching a large customer base. Although Procter & Gamble has attained dominance in the disposable diaper market by dramatically improving both product quality and cost, there are instances where consolidators have captured large market share gains even with a product whose features do not match those offered by a pioneer. Particularly in high-technology markets, consolidators can often seize large market share by creating a product that is good enough for the vast majority of users. When they are able to do this at a much lower price, consolidators can transform the ecosystem to make it much more advantageous for them to compete. For example, Apple Computer created the Newton hand-held communication device in 1993. Palm followed three months later with the Zoomer. Both products flopped a short time later. In 1995, Palm was acquired by U.S. Robotics, a leading manufacturer of modems and other communication devices. Palm’s product was technologically less sophisticated than Apple’s Newton, but U.S. Robotics’

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stronger financial position and distribution-based competencies enabled it to capture more than 70 percent of the market by producing a product for less than $300, compared to the Apple’s $700 Newton line. Consolidators can also change distribution channels to better complement their low-cost, operational competencies. In the 1960s, most potato chips in the United Kingdom were sold in pubs. All major competitors established distributors to supply pubs around the country. Golden Wonder, a Scotland-based division of Imperial Tobacco, changed the target market and began marketing chips as a snack for women. The company developed competencies in distribution channels most appropriate for its target customers – supermarkets and other retail outlets – by training sales people to sell products to retailers, arrange shop displays, and provide point-of-sale promotional materials. Golden Wonder also invested in new technology to improve the product’s quality and to reduce manufacturing costs. In a ten-year period, its percentage of sales of chips in pubs went from 75 percent to 25 percent, while sales at supermarkets surged from 25 percent to 65 percent. Selling at convenience outlets made up the other 10 percent of sales. Concept learners face a difficult balancing act. The advent of rapid technological change in mature markets means that concept learner firms are compelled to develop entirely new competencies and even mindsets in order to adapt. Creative destruction in an industry means that winning products quickly become dinosaurs as new technologies lay the groundwork for next-generation innovations. Concept learners must continue to scan the environment to learn about new technologies and other developments that could trigger massive disruption in their industry. On the other hand, they must simultaneously wean themselves from excessively depending on highly mature products for their long-term profitability. Once the period of creative destruction in an industry ends, concept learners will need to develop new sets of core competencies that will enable them to recast themselves as either concept drivers or consolidators to compete in a later time period. This is because the industry has evolved to a more steady state (thus requiring a consolidator strategy), or to fast growth (thus requiring a concept driver strategy). Creating an entirely new business unit to learn and to experiment with emerging technologies is essential for concept learners. Ideally, managers and technical personnel in these units should not report to existing lines of businesses, but directly

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to the CEO so that they can develop their own innovative cultures. When managers charged with learning about a new technology must report to senior management through the pre-existing organizational arrangement (usually a large, well-established unit), they will be unable to “break free” from the constraints and core rigidities that will likely be imposed on them by managers who are still thinking about today’s current line of products. Instead, they should be thinking about designing new products for tomorrow’s potential customers. For example, only now after a dozen restructurings do managers at Eastman Kodak have greater freedom to pursue a full-blown digital imaging strategy. In the past, managers who wanted to develop next-generation filmless cameras and other technologies still had to report to superiors who viewed these products from the perspective of chemicalbased imaging and not through the lens of more advanced technologies. Also, concept learners need to build a web of strategic alliances to learn about new technologies from multiple partners, particularly before committing to an emerging product or technical standard, since forecasting market demand will likely remain uncertain for an extended period. Managers operating in highly diversified firms need to formulate business unit strategies that best match the industry in which each small business unit (SBU) resides. As a practical matter, highly diversified firms will likely have a mix of businesses that will transcend all four cells of Figure 2. To provide overall coherence of a corporate strategy, senior management should evaluate each SBU’s strategy within the context of its particular industry. Even though the SBU is part of a larger corporation, it needs to develop the competencies and resources that will enable it to perform most effectively in its competitive setting.29 Acknowledgments This research was sponsored by the Division of Research, Edwin L. Cox School of Business, Southern Methodist University, Dallas, Texas and the OxyChem Corporation of Dallas, TX. Portions of this paper were presented at the 21st Pan-Pacific Conference, Anchorage, Alaska, May 26, 2004. The authors would like to thank Anita Bhappu, Mel Fugate, Don Hellriegel, Peter Heslin, Roger Kerin, Bharath Rajagopolan, and Don VandeWalle for their constructive comments on an earlier draft of this manuscript.

Endnotes 1

D’Aveni, R. 1994. Hypercompetition. New York: Free Press; Iansiti, M., & Levien, R. 2004. Strategy as ecology. Harvard Business Review, 82(3): 68 – 81. 2 Zimmerman, B., Plsek, P., & Lindberg, C. 1998. Edgeware:

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Insights from complexity science for health care leaders. Dallas: VHA, Inc. 3 Christensen, C. M. 1997. The innovator’s dilemma. Boston, MA: Harvard Business School Press. Also see Adner, R. 2002. When are technologies disruptive: A demand-based view of the emergence of competition. Strategic Management Journal, 23(8): 667– 688. 4 See Anderson, P., & Tushman, M. L. 1990. Technological discontinuities and dominant designs: A cyclical model of organizational change. Administrative Science Quarterly, 35: 606 – 633. Also see Christensen, op. cit. and Dosi, G. 1992. Technological paradigms and technological trajectories. Research Policy, 11: 147–162. Also see Porter, M. E. 2001. Industry transformation. Case Number 9 –701-008. 5 Tushman, M., & Murmann, J. P. 1998. Dominant designs, technology cycles, and organizational outcomes. Research in organizational behavior. Greenwich, CT: JAI Press, 20. 6 Evans, P. B., & Wurster, T. S. 1997. Strategy and the new economics of information. Harvard Business Review, 75(6): 71– 82. Also see Cheng, Y. T. and Van de Ven, A. H. 1996. Learning the innovation journey: Order out of chaos. Organization Science, 7(6): 593– 614; Markides, C., & Geroski, P. 2003. Colonizers and consolidators: The two cultures of corporate strategy. Strategy ⫹ Business, 32: 46 –55. 7 See, for example, Ball, J. 2004. Car makers split over timing of hydrogen-powered vehicles. The Wall Street Journal, 26 February 2004. 8 Lei, D. 2003. Competitive strategy and the rise of new organizational forms in the semiconductor industry. Review of the Electronic and Industrial Distribution Industries, 2: 116 –142. 9 Christensen, op. cit. Also see Morris, C. R., & Ferguson, C. H. 1993. How architecture wins technology wars. Harvard Business Review, 71(2): 86 –97. 10 The original landmark work that pioneered the notion of creative destruction is Schumpeter, J. A. 1939. Business cycles: A theoretical, historical and statistical analysis of the capitalist process. New York and London: McGraw-Hill. More recent works that further develop the creative destruction concept include Foster, R., & Kaplan, S. 2001. Creative destruction. New York: Currency and Doubleday. Also see Kodama, F. 1995. Emerging patterns of innovation. Boston: Harvard Business School Press. 11 Jones, N. 2003. Competing after radical technological change: The significance of product line management strategy. Strategic Management Journal, 24: 1265–1288. A classic leading work in this area is Leonard-Barton, D. 1992. Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13: 111–25. Also see Tripsas, M. 1997. Surviving radical technological change through dynamic capability: Evidence from the typesetter industry. Industrial and Corporate Change, 3: 341–377; Henderson, R. M., & Clark, K. B. 1990. Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms. Administrative Science Quarterly, 35: 9 –30. 12 Hambrick D. C., & Fredrickson, J. W. 2001. Are you sure you have a strategy. Academy of Management Executive, 15(4): 48 – 59. 13 Some of the more prominent strategic typologies developed in the strategic management field include those of Miles, R. E., & Snow, C. C. 1978. Organizational strategy, structure and process. New York: McGraw-Hill; Miller, D. 1990. The Icarus Paradox: How exceptional companies bring about their own downfall. New York: Harper Business; Treacy, M., & Wiersema, F. 1995. The discipline of market leaders. Reading, MA: AddisonWesley. 14 Conversation with Jean Birch, President, Corner Bakery, Dallas, Texas, February 10, 2004. 15 See, for example, Galbraith, J. R. 2002. Designing organi-

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zations. San Francisco: Joseey-Bass; Grant, R. M. 1996. Prospering in dynamically competitive environments: Organizational capability as knowledge integration. Organization Science, 7: 375–387; Slocum, J. W., McGill, M. E., & Lei, D. 1994. The new learning strategy: Anytime, anything, anywhere. Organizational Dynamics, 23(2): 33– 48. 16 A discussion of Discount Tire’s strategy is found in a strategic typology presented in Lei, D., & Greer, C. R. 2003. The empathetic organization. Organizational Dynamics, 32: 142–164. 17 Markides, C., & Geroski, P. 2004. The art of scale. Strategy ⫹ Business, 35, Summer, 50 –59. 18 Ibid. 19 Latour, A., & Grant, P. 2004. PC users an now make longdistance calls free. The Wall Street Journal, 9 October 2003. Also see Drucker, J. 2004. Vonage, TI plan a web-phone deal. The Wall Street Journal, 9 January 2004; Drucker, J. 2004. Big-name mergers won’t ease crowding in cellphone industry. The Wall Street Journal, 13 February 2004. 20 Porter, M. E. 1985. Competitive advantage: Creating and sustaining superior performance. New York: Free Press; Scherer, F. M., & Ross, D. 1990. Industrial market structure and economic performance. Boston: Houghton-Mifflin. Also see Dobrev, S. D., & Carroll, G. R. 2003. Size (and competition) among organizations: Modeling scale-based selection among automobile producers in four major countries. Strategic Management Journal, 24: 541– 558. At the business unit level, see Anderson, C. R., & Zeithaml, C. P. 1984. Stages of the product life cycle, business strategy, and business performance. Academy of Management Journal, 27(4): 5–24. 21 Biediger, J., DeCicco, T., Green, T., Hoffman, G., Lei, D., Mahadevan, K., Ojeda, J., Slocum, J. W. Jr., & Ward, K. 2005. Strategic action at Lenovo. Organizational Dynamics, in press. 22 Christensen, op. cit. 23 See Lei, D. 2000. Industry evolution and competence development: The imperatives of technological convergence. International Journal of Technology Management, 19(7): 699 –738.

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See, for example, Wysocki, B. 2004. Robots in the OR. The Wall Street Journal, 26 February 2004. 25 Medtronic to buy MiniMed and Medical Research. 2001. The Wall Street Journal, 31 May 2001. 26 Govindarajan, V., & Fisher, J. 1990. Strategy, control systems and resource sharing. Academy of Management Journal, 33(2): 259 –285. 27 See Retail financial services in 1998. 1998. Harvard Business School Case 9 –799-051. 28 Markides & Geroski, op. cit. 29 See, for example, Chandler, A. D. 1990. Scale and scope: The dynamics of industrial capitalism. Cambridge, MA: Harvard University Press. David Lei is an Associate Professor of Strategy and Entrepreneurship at the Cox School of Business, SMU. His research examines topics related to knowledge-based competition and competitive strategy. He has consulted with numerous organizations regarding strategy development, strategic planning and scenario analysis, technology-based investments, and strategic alliances. Professor Lei is a co-author of a textbook entitled Strategic Management: Building and Sustaining Competitive Advantage (with R.A. Pitts; published by Thomson Learning, 4th edition forthcoming) His background includes a Ph.D. from the Graduate School of Business at Columbia University. Contact: [email protected]. John W. Slocum, Jr. is the O. Paul Corley of Organizational Behavior at the Cox School of Business, SMU. He was the 34th President of the Academy of Management and former editor of the Academy of Management Journal. Author of more than 25 books and 127 articles, his research spans domains ranging from corporate culture to individual differences. He currently serves as co-editor of Organizational Dynamics and Journal of World Business. Contact: [email protected].