This Chapter adds to the ideas that performance depends on resources and that these accumulate and
deplete the further observation that resource-building depends on existing resources – a rigorous,
quantified perspective on the principle of 'complementary resources'. It shows how combining these
three basic causal principles enables the laying out of an integrated core business system for any
kind of organisation. The basic math behind these principles is explained, and how this relates to a
simple spreadsheet-perspective on modelling business performance. The Chapter shows how to use the
resulting 'strategic architecture' to both understand and anticipate organizations' performance.
It explains how interdependence creates feedback mechanisms that give rise to common phenomena of
performance dynamics - escalation, collapse and limits-to-growth. Investigation of how strategic
architectures behave shows that minimum resource levels are required for an enterprise to function
at all, and that there is a maximum performance limit that can be extracted from a finite set of
resources.
Includes connections to the following frameworks and concepts: The Bass Diffusion model,
Tipping Points, Issue Tree Analysis, Value Drivers, Balanced Scorecard, Strategy Maps.
Key issues addressed
- Complementary resources: why growth depends on existing and potential resources
- How interdependence causes feedback that can both drive growth and constrain it
- Mapping the interactions amongst resources to complete the ’strategic architecture’ that drives organisations’ performance over time
- How different organisations in related industries exhibit common core architectures
- The causes of discontinuities and tipping points
- Using strategic architectures with issue-tree analysis and value-drivers
- Using strategic architectures to support balanced scorecards and strategy maps
Lecture segments associated with this chapter are:
Class 4.0 - Welcome and class overview - (9 min)
Class 4.1 - Self dependence and potential resources -
Class 4.2 - Example, simple consumer brand architecture - (14 min)
Class 4.3 - Standard industry architectures - (11 min
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 are provided.
This small model, using mystrategy, shows how a cellphone company
wins subscribers due to marketing and word-of-mouth, and loses them at a rate that
varies depending on any shortage of network capacity to handle their calls. Decide on marketing
spend and capacity changes to try and balance call volume with capacity, and build positive
profits and cash flow
The Bass Diffusion model was originated by Frank M. Bass - 'A New Product Growth Model for Consumer
Durables', 1969, Management Science, 15 , 215-227). This exercise, based on figure 4.10 from chapter 4 of SMD, shows how customers in a
market develop through what is known as 'S-shaped growth',
because the chart of active customers looks like an elongated 'S'
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