In any year, the vast majority of value is created by companies exploiting business models they have had for years or decades, rather than ones they just invented. On a longer view, though, all value ever created comes from business models that were new at some point in time. The article seems to be taking the first meaning – implying that most value is created by recently-new business models – and urges business schools to focus MBAs on innovation. This may be useful in some cases, but should not take precedence over strategy delivery. If this comment leads to MBAs learning less about how to deliver strategy as a result of focusing on innovation, it will be a great example of how an entirely false premise can lead to fundamentally wrong strategic choices [and this from a business school that is supposed to be teaching the rest of us how to do strategy well!]

So … when reading an article that seems persuasive, do put on your ‘skeptical’ hat and just check that it’s built on accurate foundations.

Under the hyped language, the article makes a great case for how the latest developments in the online world offer to transform product development and marketing and make possible truly spectacular outcomes – if you know how, and the article offers useful pointers.

 Strategy dynamics frameworks capture, quantitatively, the interactions between improved functionality, pricing, marketing, as wellas those amongst different groups of customers. Much of this integrates long-established principles, such as experience-curve-driven falls in unit cost, technology-diffusion models, and the complementary effect of multiple competitors driving the industry dynamic.

One key feature of this is that word-of-mouth effects may well be way less important than threshold effects in driving the take-off tipping point. [Note that a continued percentage growth rate does not constitute a tipping point, even if they mean sales growth goes from 10 to 100 to 1000 to 10,000 units in successive periods].

Does this distinction actually matter to strategic business management? Well, if you think your market’s dynamic is driven by one mechanism when it’s actually driven by something quite different, you will likely do entirely the wrong things to encourage and exploit it, so I guess it does.

This is explained in Chapter 6 of Strategic Management Dynamics. The following figure shows the kind of dynamic that results from this kind of analysis – note the specifics re scale and timing of the development. Right-click and ‘save target as’ to get the image out so you can see it full-scale.

Thorsten Huebschen of Microsoft admits we are still not at the point people can instantly find what they want – even inside M’soft! Also, they are working to find ways of capturing information from the ‘long tail’ of people who know small but potentially very valuable information. ['long tail' as originally used refers to very low-volume products in an extensive product range, but I get what he means]

A bit of a disagreement, though – Philip Evans snr VP with BCG offered that customers can tell you what they want, so it’s important to be close to them … but this morning’s speaker, head of Innovation at Deutsche Telecom emphasised that customers often have no idea what they want or what they would do with it until it is actually available. A big, big issue in info-coms of course, but also true at a less intense level in slower-moving markets.

To summarise the idea [if I get it right?] – if ‘capabilities’ are our abilities to run things and build things as we are in the business and competitive environment we face today, then dynamic capabilities are the ability to detect the need for change, interpret that need in terms of new technologies or market opportunities, then implement the new strategy. These 3 are shown as a perpetual cycle that firms, especially in fast-moving hi-tech sectors need to be good at.

I did try – really I did – to understand the ‘framework’ he offered, but all I saw was a checklist of things to think about. I’m sure David is just outstanding at what he does, and he’s certainly spawned a vast number of papers by others citing hiw work, but can anyone else replicate and really use these ideas in the real world. We’d love to hear from you if you have been able to make usable sense of the concepts.