This book offers a fresh approach to strategy by examining the idea of Optionality. Optionality is the right, but not the obligation, to take an action. Built on historic military tactics, static engineering principles, and equilibrium-seeking economics, conventional strategic-thinking suffers some weaknesses, principal of which is its inability to deal with conditions of high uncertainty. This book begins by dividing the business landscape into three distinct domains; (1) Fragile, (2) Robust, and (3) Long-shot (FRL), which alert us to the context-specificity of strategy tools, before suggesting that theoretical lenses are required to understand and implement strategy in VUCA (Volatile, Uncertain, Complex, and Ambiguous) domains. The authors explore the concept and methodology of Optionality in order to demonstrate how it can be used in conjunction with existing strategy tools in order to achieve competitive success. It will be of great interest to academics and students of strategy and innovation.
Author(s): Surja Datta, Tobias Kutzewski
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 196
City: Cham
Acknowledgement
Contents
List of Figures
1: Introduction
A Note on the Theories Covered in the Book
A Note on the Writing Style
Reference
2: The Business Landscape: Unpacking the Idea of ‘Domain Specificity’
Globalisation
Digitisation
Pure Digital
Pure Physical
Physi-Digi Reality
Metamorphosis of Business Realities
FRL Domains
Integrating the Physi-Digi with FRL Domains
References
3: The Conventional Wisdom in Strategy
An Overview of Popular Strategy Frameworks
The PEST/PESTEL/PESTLE Framework
What Is It?
How It Works in Strategy-Making
The Political Domain
The Economic Domain
The Social Domain
The Technological Domain
Some Other Domains
Strengths and Weaknesses of the PEST Framework
Porter’s Diamond
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of Porter’s Diamond
The Triple Helix
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the Triple Helix Model of Innovation
Scenario Planning
What Is It?
How It Works in Strategy-Making
Step 1: Asking the ‘What’ Question
Step 2: Identify the Factors
Step 3: Define the Forces
Step 4: Rank for Importance and Uncertainty
Step 5: Understand the Logic
Step 6: Write Down Scenarios
Step 7: Identify the Indicators
Step 8: Evaluate your Options
Strengths and Weaknesses of Scenario Planning
Some Concluding Remarks on Strategy Frameworks at the Macro-level
Strategy on the Industry Level
The Five Forces
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the Five Forces
The Industry Life Cycle
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the Industry Life Cycle
The Industry Architecture
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the Industry Architecture
Strategy on the Firm Level
The Generic Strategies
What Is It?
How It Works in Strategy-Making
Differentiation
Cost Leadership
Focus
Strengths and Weaknesses of the Generic StrategyFramework
The Balanced Scorecard Model
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the Balanced Scorecard Model
SWOT: Strength-Weaknesses-Opportunities-Threats
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the SWOT Analysis
The Resource-Based View of the Firm
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the Resource-Based View (RBV) of the Firm
Dynamic Capabilities
What Is It?
How It Works in Strategy-Making
Strengths and Weaknesses of the Dynamic Capabilities Framework
Strategy on the Corporate Level
The Boston Consulting Group Growth Matrix
What It Is?
How It Works in Strategy-Making
Strengths and Weaknesses of the Boston Consulting Group Growth Matrix
Ansoff Matrix
What Is It?
How It Works in Strategy-Making
Diversification: New Products for New Markets
Product Development: New Products for Existing Markets
Market Development: Existing Products for New Markets
Market Penetration: Existing Products for Existing Markets
Strengths and Weaknesses of the Ansoff Matrix
Conclusion
References
4: Strategic Optionality: Introducing the Idea
The Two Faces of Uncertainty: Luck and Misfortune
Hyper-Rationality and Strategic Management
The Problem of Hyper-Rationality
Bounded Rationality: A Dose of Realism
Optionality
Real Options and Corporate Strategy
Strategic Optionality and FRL Domains
References and Further Readings
5: Optionality and Innovation: Two Sides of the Same Coin?
Macro and Micro Perspectives on Innovation
Macro Perspectives on Innovation
System View on Innovation
National Innovation System and the Triple Helix Model
Competitive Advantage of Nations
Industry- and Firm-Level Innovation Dynamics
Architectural Innovation
Diffusion of Innovation (S Curve)
The (Industry) Life Cycle
Dominant Design
4Ps of Innovation Space Model
Innovation at the Individual Level
The Genius Myth
Errors and Accidents
Bisociation
Lateral Thinking
Integrating the Macro and Micro Perspectives on Innovation
The Early Adopters/Lead Users
Mass Adoption
Rejecting the Myth of the Genius Inventor
Optionality and Innovation
References
6: Competitive Success: Competing Across FRL Domains
The 4Rs of Success
Resources
Problems with RBV
Static Analysis
Dynamic Capabilities
Recombination
Reach
Roots
Competing Across FRL Domains
Strategic Imperative of the Fragile Domain
Strategic Imperative of the Robust Domain
Strategic Imperative of the Long-Shot Domain
Competing Across FRL Domains
References and Further Reading
7: Optionality: The Method
Step 1. Domain Identification
Know Thyself: Where Are You? What Brought You There? And Where Do You Want to Be?
Fragile
Key Attributes
Robust
Key Attributes
Long-Shot
Key Attributes
Step 2: Evaluating the Strategic Imperative
Where Do You Go Next?
Step 3: Identifying Your Free Options
Are There ‘Free’ Options Out There?
Free Options Out of Roots
Free Options Out of Resources
Free Options Out of Reach
Free Options Out of Recombination
Step 4: Developing Options Through Scenarios
How to Develop Optionality?
Phase 1: What Future Changes Might Affect Our Firm the Most?
Phase 2: What Elements Would These Changes Have?
Phase 3: What Forces Might Play a Role?
Phase 4: Determine Relevance and Unpredictability
Phase 5: What Reasoning Do You Follow?
Phase 6: Create Coherent Options
Phase 7: Find Suitable Indicators
Step 5: Evaluate Options
8: Conclusion
Index
