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 addressed
- 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
Lecture segments associated with this chapter are:
Class 3.0 - Summary overview - (9 min)
Class 3.1 - Impact on strategy and performance - (8 min)
Class 3.2 - Doing it right - (5 min)
Class 3.3 - Spreadsheet accounting for resources
Notes:
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If you are subscribed to one or more segments associated with this chapter suggestions for learning more,
and making use of the ideas and frameworks in class 3/chapter 3 are provided.
Associated with segment 3.0, are three mystrategy exercises. They look at flow in three situations:
how winning and losing customers affects total customer numbers, illustrative sales of BMW minis, and staff fows in a law firm .
Associated with segment 3.1, this exercise looks at the growth in routes and customers at Ryanair.
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