Business Economics Final Review

Front 1

The market is an institution that provides....

Back 1

options for future contracts

Front 2

The firm is an institution that consists of.....

Back 2

contracts for future options

Front 3

Markets and Firms, Purpose:

Back 3

Firms are institutions that help resolve uncertainty about why, what, how, and who

Front 4

Christensen & Overdorf:
what does he mean by resources?

Back 4

Tangible: People, equipment, and cash
Intangible: Intellectual property, brands, relationships
"Access to abundant, high-quality resources increases an organization's chances of coping with change."

Front 5

Christensen & Overdorf:
What does he mean by processes?

Back 5

How things get done (How "we" do things)
Written and unwritten processes and rules of conduct
Codifications of (past) success. i.e. routines
"we mean the patterns of interaction, coordination, communication, and decision making employees use to transform resources into products and services."

Front 6

Christensen & Overdorf:
What does he mean by values?

Back 6

Two distinct values: Gross margins and size
"values as the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, where a customer is more important or less important, whether an idea for a new product is attractive or marginal, and so on.”

Front 7

Christensen:
How does a firms capabilities define its disabilities?

Back 7

Capabilities=Comparative advantage
When a firm defines its “capabilities” it inherently defines what it cannot do. One process may be useful in completing a task, while concurrently, is no useful in completing another task. Organization cap. are independent of individual cap.

Front 8

Describe the process of the "migration of capabilities"

Back 8

Core capabilities are rooted in processes and values rather than resources. Defining factors of org. cap/disabilities evolve over time. They start in resources--move to process and values--and migrate finally to culture.

Front 9

Christensen: describe the difference between "sustaining innovation" and "disruptive innovation"

Back 9

Sustaining innovation=Continuous improvement
Disruptive innovation=an entirely new market, a new kind of product/service, one thats actually worse initially. Lower margins, smaller deals;smaller markets. Process and values that support sustaining innovation become disabilities when a company needs to understand and confront new markets.

Front 10

Christensen:
define Heavyweight Teams.

Back 10

Create new organizational structures within corporate boundaries in which new processes can be developed. The new structure is "protected" from the larger business's established processes and values

Front 11

Christensen:
Define spinout organizations.

Back 11

Spin out an independent organization from the existing organization and develop within it new processes and values required to solve the new problem.
No competition for resources with larger corporation
CEO attention/protection

Front 12

Christensen:
Define strategic acquisitions.

Back 12

Acquire a different organization whose processes and values closely math the requirements of the new task.
If acquiring for processes and values, don't try to integrate.
If acquiring for resources, integrate

Front 13

Copeland- Intel article

Creating a spinout organization.

Back 13

in 1990 Apple and Acorn partnered up to spin out ARM as an independent company, which focused on low power, lean chips.

Front 14

Copeland- Intel article

Creating a Heavyweight Team.

Back 14

Intel brought in Mike Bell to make low powered chips to compete with ARM. Given whatever resources he needed to succeed. Bell moved his team to a separate location to insulate his team from the process and values of the parent company

Front 15

Copeland- Intel article

Coping with Disruptive innovation.

Back 15

intels processes and values were suited for sustaining innovation by releasing powerful chips consecutively. Smartphones represent disruptive innovation. The new market with small margins was not aligned with Intels best customers.

Front 16

Copeland- Intel article

Acquiring strategy.

Back 16

Intel paid 1.4 Billion to acquire German chipmaker Infineon Technologies' wireless division. This exemplifies the acquisition of a different org. whose processes and values closely match the requirements of the new task.

Front 17

Copeland- Intel article

"adjusting business tactics..."

Back 17

Intel has run on a traditional model-- build pricey chips, then sell them at high margins. As they move to mobile they will have to accept smaller margins and focus on volume. The company will also have to convince app developers to optimize their software for Intel's new smartphone chip

Front 18

Collins & Porras: Building company vision

Key Characteristics of Core Ideology.

Back 18

It is the enduring glue that holds a company together. a consistent identity that transcends product or market life cycles, technology breakthroughs, management fads, and individual leaders.
Two components: Core value and Core Purpose

Front 19

Collins & Porras: Building company vision

Core Values-- component of core ideology

Back 19

Core values: a system of 3-5 guiding principles and tenets, if circumstances change and we are penalized for it, would you still keep it? if no, then it should be dropped from consideration

Front 20

Collins & Porras: Building company vision

Core Purpose-- component of core ideology

Back 20

the organizations most fundamental reason for existence. It doesn't just describe the organization's output or target customers; it captures the soul of the organization.

Front 21

Collins & Porras: Building company vision

Big, Hairy, Audacious Goals (BHAG)

BHAG is NOT! Core Purpose

Back 21

A clear and compelling goal, set 10 to 30 years in the future, with a clear finish line. It engages people, forces executives to be visionary, and is not a sure bet. 4 broad categories: Target, common-enemy, role-model, and internal-transformation BHAGs.

Front 22

Collins & Porras: Building company vision

argue that the explicit goals of "maximize shareholder wealth" or "maximize profits" actually work against themselves....

Back 22

"Maximize profits" does not inspire people at all levels of an organization, it provides very little guidance. the best employees are volunteers, they have the opportunity to do something else. Companies need to have a clear understanding of their purpose to make work meaningful and thereby attract, motivate, and retain outstanding people.

Front 23

Collins & Porras: Building company vision

"Building a visionary company requires 1% vision and 99% alignment" what do they mean?

Back 23

Preserving the core and stimulating progress is the dynamic that is the primary engine of enduring companies. When a company has reached superb alignment, anyone could infer its vision from its operations and activities without ever reading it on paper. Implementing activities and processes that are aligned with the vision is 99% of the work

Front 24

Collins&Porras: Try lots of things and keep what works

How is evolutionary progress different from BHAG progress?

Back 24

BHAG involves clear, unambiguous goals. Evolution involves ambiguity
BHAG involves bold discontinuous leaps. Evolution begins with small incremental steps

Front 25

Collins&Porras: Try lots of things and keep what works

Describe limitations of the biology evolution analogy

Back 25

Companies have the ability to set goals
Human organizations can make conscious selections.
Companies use BHAGs to define a mountain to climb, and evolution to invent the way to the top.

Front 26

Collins&Porras: Try lots of things and keep what works

3M and "purposeful evolution"

Back 26

3M started as a failure, but through experimentation and looking for new opportunities, it succeeded. Created a continually self-mutating machine propelled by employees exercising their individual initiative. by encouraging this, 3M would produce undirected variation, the fruit of progress. try alot of things and keep the ones that work and throw out the rest.

Front 27

Collins&Porras: Try lots of things and keep what works

3M and 99% alignment

Back 27

The company became a ticking, whirring, clicking, clattering clock with a myriad of tangible mechanisms well aligned to stimulate continual evolutionary progress. 3M provided incentives for those who stimulate or created new business ventures.

Front 28

Collins&Porras: Try lots of things and keep what works

The Decline of Norton

Back 28

Norton was a highly centralized bureaucratic machine characterized by routines and stagnation. No mechanisms to stimulate experimentation and unplanned evolution. it was "derived from military planning"

Front 29

Goddard-

7 characteristics of Core Competence

Back 29

They are imbued with experimental or tacit knowledge that competitors find impossible to replicate.
Defines what the company does better, or differently from any other company.
Wired to operate better than the sum of its people.
They are rare, limited to 2-3 activities in the value chain.
Source of the company's ability to deliver unique value to its customers.
They are flexible, straddle variety of business functions, product families, and technologies.
They define the unique opportunity set available to the firm

Front 30

Goddard-

Traits of core competence

Back 30

those that help us recognize properties of core comp.
Epistemic Domain: the belief system. its capacity to create knowledge--to think differently
Idiomatic: the behavioral style, ability to act differently
Logistic: its capacity to make things happen

Front 31

Goddard-

Functions of core competence

Back 31

Those that show how economic value can be extracted from properties of core comp.
Differentiating from competitors
Creating utility for customers
Acting as a platform for growth
Providing strategic focus and direction

Front 32

LaBarre- Your boss has an attitude

indirectly about the power of tacit knowledge

Back 32

No such thing as corp. culture, made up of many different cultures, strengths and weaknesses are a result of local conditions. challenge to get people to be more productive, focused, and fulfilled. Revel in peoples strengths and this allows them to bring their unique tacit knowledge to work and disperse it as an asset.

Front 33

LaBarre- Your boss has an attitude

indirectly about comparative advantage..

Back 33

Allowing people to be individuals and do what they do best. They will become more productive, focus, dedicated, and fulfilled. this can become a comparative advantage.

Front 34

LaBarre- Your boss has an attitude

12 questions have a link to productivity and profitability....

Back 34

When people are more engaged at work, they will perform at a higher level. Clearly, better employee performance leads to increased productivity and profitability.

Front 35

Kay- Architecture

Good passing game

Back 35

If everyone passes then the team will score more points. They created an intangible asset (organization knowledge). Cooperative ethic relies on the underlying structure of relational contracts- the unwritten rules, tacit understandings, and common purpose of continuing relationships

Front 36

Kay- Architecture

Architecture and corporate culture

Back 36

Arch. depends ont eh ability of the firm to build and sustain long term relationships and to establish an environment that penalizes opportunistic behavior(like rent seeking). The objective of Arch. is to stimulate collective rather than individualistic behavior

Front 37

Collins- good to great

flywheel effect and doom loop

Back 37

momentum will generate superior economic results over time. Getting the wheel started is difficult, but once its spinning it flys

Front 38

Collins- good to great

Doom loop

Back 38

companies fall into the doom loop when they genuinely want to effect change but lack the quiet discipline that produces the flywheel effect. instead, they launch change programs with great fanfare. they start down one path only to change directs. they fail to build momentum. disappointing results lead to reaction wtihout understanding, which leads to a new direction, loops around

Front 39

Collins- good to great

who before what..

Back 39

get the right people on board and wrong people off. right people in right seats. first people then direction no matter circumstances. with the right people, you can adapt to changing environment, you wont have to motivate them. Great vision with mediocre people still produces mediocre results.

Front 40

Collins- good to great

Fox and Hedgehog

Back 40

foxes know many small things, while hedgehogs know on big thing.They know how to simplify a complex world into a single, organized idea: basic principle that unifies, organizes, and guides all decisions.

Front 41

Collins- good to great

Stop doing list

Back 41

unyielding discipline to stop doing anything and everything that doesnt fit tightly within their hedgehog concept. By deciding what no to do, you can give the flywheel a big push. full transformation may require thousands of pushes accumulated one after the other. avoid becoming a fox stuck in a doom loop

Front 42

Kay-

architecture as a distinctive capability

Back 42

types of arch: internal, external, and networks
adds value to individual contributions: through creation of organizational knowledge, through the establishment of cooperative knowledge, by the implementation of organizational routines.