Strategic Management Dynamics

Chapter 3 - Resource Accumulation

This Chapter explains the principle that resources accumulate and deplete (fill and drain, over time) and the deeply fundamental role of this principle as core theory underlying organizations’ performance over time. It describes the ‘stock-and-flow’ structure that captures, numerically, the behaviour of accumulating resources, explains in detail the implications for numerical analysis of performance. The Chapter shows how this phenomenon relates to the problem of ‘causal ambiguity’, severely limiting the insights that can be obtained either by correlation analysis or by managerial judgment. It demonstrates how the mechanism operates in marketing (e.g. new-product adoption), human resources (staff hiring and retention) and product development. Connections are made to segmentation, value-chain and asset-stock accumulation concepts in Strategy, and to the criteria normally used to assess the strategic contribution of firm resources.

This chapter includes connections to the following strategy concepts: Value-Curve, Value Chain, asset-stock accumulation and causal ambiguity.

KEY ISSUES

• The inescapable and critical behaviour of resources - building up and draining away over time.
• Understanding the math of how resource flow-rates determine resource levels.
• Seeking explanations for what causes the rate at which resources are won and lost.
• 'Causal ambiguity' – understanding causes – and how accumulating resources devalue correlation analysis.
• Resource accumulation and constantly changing value-chain structures.
• Dealing with important details, including segmentation, and one-time changes in resource levels.