Breakthrough Ideas (continued, with a few minor corrections to what was the introduction to Part II, most of which is already excerpted. My effort to invent an abstract theory will not be everyone’s cup of tea. A wag might say that it is the PhD’s proclivity to “Pile Higher and Deeper.” gg)
Dynamic Paths to a Winning Strategy
Atop a foundation of technology solutions, Qualcomm’s strategies stand as stepping-stones to success. A strategy is the way an agent responds to its surroundings and pursues its goals. Using strategies, agents seek to shape the future, but also agents adapt, changing ineffective strategies by comparing them to some measure of success.
Atop three-breakthrough ideas, each introducing a discontinuity in mobile wireless architecture, Qualcomm built a standards-based business design. Businesses strive to achieve, sustain, and renew excess returns on invested capital. To do so, a company must seek strong, sustainable, and extendible competitive advantage as a proven means to reach, remain, and renew a profit zone that shifts in time with customers’ needs and priorities.
A company’s business life unfolds through time within its business landscape. A business landscape is an economic environment of interest to a company precisely because its business strategies quest for value, seeking profits. Sustainable competitive success requires achieving strategic control. Strategic control is defined as the set of unique and differentiated competitive advantages in a business design that protects the company’s future stream of profits from the corrosive effects of competitor, supplier, or customer power.
A Précis of a Theory of Dynamic Paths.
The theory of dynamic paths abstracts the temporally unfolding and strategically significant stepping-stones, which are the key events in the life of a company, that identify, describe, and define success or failure for its strategic vision. Paths represent connections. Stepping-stones represent a network of significant or essential nodes. Dynamic movement along a path that contacts a node represents a happening, which can be variously described as an event, episode, incident, occurrence, phenomenon, or experience, that has strategic consequences. A business strategy is an intentional plan (or method of discovering) a series of tactics, maneuvers, or stratagems for obtaining a goal, including results like excess economic returns on investment.
Because businesses deploy resources in a market set in a business landscape, there is variously competition and cooperation which co-create immediate outcomes and co-evolve in time to influence future competitions. Strategy is met with counter-stratagems. Feedback of mutual anticipation, adaptation, and anticipation of adaptation characterizes the competitive struggle and its co-evolution. The dynamics of the competition and the discovery of means of achieving strong and sustainable competitive advantages are the foci of the theory.
Conceptual models of potential dynamic paths identify a set of essential milestone-accomplishments that can both guide and coordinate a company’s unfolding strategic process of achieving competitive and economic advantage. This is my nascent effort to identify and elucidate a model of the strategic dynamic paths that lead to a standards-based-architectural-platform. By gaining strategic control of a de facto architectural standard, a company gains strategic control of both its value web, which locks-in customers, suppliers, and complementors and its business landscape, where architectural competitors are increasingly locked-out.
This précis introduces the theory but does not fully specify the set of essential stepping-stones. The challenge here is inductive and conceptual, requiring the parsing of evidence to abstract the deep-rooted and fundamental by shearing away the dispensable and superfluous. If judged promising, the theory can be both deepened and extended to include other dynamic paths by specifying other essential sets of stepping-stones toward achieving substantial strategic control when following, say, a disruptive path. Such conceptual models of significant dynamic paths may be useful to managers who guide a company’s quest to become a world ruler or to investors who seek to identify next generation companies that shape the future.
It is a theory because it offers a conceptual model that specifies how to achieve strategic architectural control, and, it further specifies how to leverage setting a standard into becoming a standard-setter. Observing how well it satisfies conjoint criteria of correspondence, coherence, and invention can test the value of the theory. For now, if you understand something more when using it, then the theory has heuristic value.
It is a theory of paths because strategic business trajectories toward a goal include alternative routes as a company variously adapts, progresses, retrogresses, inflects, deflects, detours, and searches for new ways to reach a goal whenever one path appears blocked. A dynamic path model contains a set of significant stepping-stones that define a theme of, say, gaining strategic architectural control, but also the theory posits a network of potentially successful paths as variations on the theme of how to achieve a company’s strategic vision. Each enacted path, with its actual unfolding dynamic pattern along any subset of stepping-stones, develops as a variation on a dynamic path’s fundamental theme, one enacted route that adaptively emerges from a set of potential paths, a set that is harmoniously integrated by sharing a single strategic thesis, like gaining architectural control. Including the significant stepping-stones within unfolding paths matters more than strictly sequencing them. Thus, a company can continue addressing a set of sub goals whenever direct progress toward the strategic goal is hindered.
The actual trajectory of progress through space/time along possible paths has multiple dynamic determinants, best characterized as forces in conflict, some facilitating, others opposing, some immalleable, and others malleable but hindering, representing temporary barriers that must be overcome. The conception of forces subsumes both strategic necessity and turbulent chance. Thus, the theory is dynamic in four specific senses of the term dynamism, which denotes a set of theories seeking to explain natural phenomena by the action of force.
In general, the term force refers to power, strength, intensity, or energy. Here, we are expressly interested in force as efficacious power that derives from factors of productivity--labor, capital, physical resources, and ideas, particularly innovative breakthrough ideas--including innovations in technology, strategy, and business design--that come to affect, change, or control connections in business landscapes containing multiple competing value webs. But also, the theory admits the full scope of counterbalancing competitive forces, macro political and economic forces, and chance.
Specifically, the concept of force, like in, say, Michael Porter’s Five-Forces model, derives from the root concept of power manifested as competitive advantage, whose proximate measure of success is strategic advantage/control and whose ultimate measure is economic advantage/control. However, admitting that forces can be either autonomous--self-governing as strategic freedom to affect, change or control--or heteronomous--subject to different laws not under strategic control--complicates this view of force. That is, force can be a child of chance and macro-powers as well as necessity, simply outside of the laws that an agent governs. Strategize we humans must, but sometimes we bend the world and sometimes the world bends us.
What aspects of dynamism are featured? From the respective perspectives of conception and action, both the model of dynamic paths and the actual paths taken are simultaneously time-dynamic, force-dynamic, offscale-dynamic, and context-dynamic.
First, a dynamic path is time-dynamic because it unfolds temporally through organic processes like development, challenge, growth, and emergence that define the strategically essential transformations within the life of a successful business. Temporal dynamism is the rule, stasis the exception; continuous dynamic change is common; stable equilibrium among forces remains the rare exception. However, fields of forces that are in flux can be organized by strategic action. Thus, strategic paths dynamically unfold in time as the company moves through its force field and is moved by it.
Second, a dynamic path is force-dynamic because a company’s actual path-trajectory--the direction, rate, timing, and pattern of force-influenced movement toward its strategic goals--unfolds as multiply and conjointly determined by a set of three distinguishable forces: (a) its autonomous actions as a strategic agent, (b) co-opetitive (variously cooperative, competitive, or complementary) actions within sets of value webs (a value web is a set of interacting enterprises, which, from the perspective of a hub-company, are variously customers or suppliers and complementors or competitors within a time- and web-dynamic of perpetually changing roles, but are temporarily committed to fostering or thwarting a particular value proposition centered on an information system) as that dynamic network of hubs and value webs shapes or adapts to a possible future within its business landscape, and (c) heteronomous events that are either random or generated by macro-force-fields of turbulence--often emergent, but not under any single agent’s control--existing within a geopolitical economy that has national interests.
Third, a dynamic path can become offscale-dynamic because the impact of events singly or in combination can be non-linear as well as linear, where outcomes reflect a non-linear dynamic more powerful than any mere sum of effects by suddenly and explosively inflecting to announce new accelerations in velocity, to display meta-level patterns of continuing exponential increase, or to reverse the direction of a previous trajectory. Identifying the offscale-dynamic forces that underlie these critical points or lever-points for changes-in-scale is a goal of the theory. Phase-shift-concepts, like inflection or tipping points, acceleration, runaways, tornados, or bandwagon effects, and laws of exponential growth, like those named for Moore, Metcalfe, Reed, Kurzweil, and Gilder describe either patterns of non-linear effects or a change-in-scale from a new regularity manifested by exponential growth, where the change is off the scale associated with the normal curve.
Fourth, a dynamic path is context-dynamic because it also unfolds in the milieu of its field of forces, a complex force field composed of many interacting agents organized as a value web nested in a business landscape, which is further nested in the social, economic, and political institutions of a specific nation, which, in turn, are nested in a geo-political global economy, and, taken together, define a set of facts and circumstances that give meaning to actions, situations, or events. Just as a description of an event is incomplete, even uninterpretable, without specifying the point-of-view from which it was undertaken, just as a picture is not fully specified unless its frame is also specified, just as the meaning of an expression cannot be fully understood without understanding the context in which the expression is used, so too are the dynamics of change nested in context. A specific change is made meaningful by understanding how relationships are affected, even transformed, within its value web that exists in a specific business landscape.
The autonomy-heteronomy distinction implies that some forces are within and some beyond an agent’s power to master or control. Imagine this complex force field as a three-layered and nested sphere consisting of: (a) a central agent, whether human or corporate, who is the protagonist, (b) competing hubs and their value webs within a business landscape, and (c) a periphery of turbulent macro forces. Strategic control diminishes as we move from center to periphery, but the focus of convenience in the theory is on how an agent uses, say, architectural-standards-based strategies to influence the value web and shape the business landscape. Thus, the theory’s analysis of forces focuses on strategic analysis of a set of agents’ autonomous actions, given, say, the larger context of heteronomous chance or macroeconomic turbulence in a field of forces that also influence agent, value web, and business landscape of interest.
Future potentialities variously become significant or insignificant actualities as a function not only of what has happened in the intermediate past and what has just happened, but also by the dynamic pattern of anticipated probabilities influencing what is about to happen that will, in turn, affect expectations about the probability of what will happen in the intermediate future. Thus, strategically significant events become so, not just because something happened at T1, but also because the Time-1-event propels it force into the future, not only as human expectations, but also as yet unrealized multiple-potentialities-with-probabilities that may either shape future events or be shaped by them.
An event is defined as a happening, with a beginning and an end. Strategic events are happenings that include means-end actions either initiated by a protagonist or in response to means-end actions of customers, suppliers, complementors, or competitors. Significant strategic events entail sharp and meaningful changes in either the degree or form of competitive advantage that characterize the set of paths to strategic goals. Some of the various forms of competitive advantage were identified and ranked in relative power by Slywotzky and Morrison. Within any form of competitive advantage, there may be degrees of strength. However, strategic architectural control is a confluence of specified forms of competitive advantages. For example, recall the criteria used by Moore in The Gorilla Game or by Ferguson and Morris in Computer Wars as they discussed forms like, say, a proprietary, but open, architecture with high switching costs or the stabilizing, but evolving, platform.
A strategic event is conceptualized as a stepping-stone along a dynamic path toward increasing strategic control by, say, increasing differentiation or decreasing costs. Any fundamental pattern of strategic movement is both characterized and given significance by repetitions of significant outcomes. The achievement of consequential outcomes may require many repetitions of a pattern of incremental processes that dynamically drive an unfolding trend. Achieving a stepping-stone marks the achievement of a significant and meaningful outcome, like, say, becoming the leader in market share.
A milestone event culminates a successful series of proximate events by demonstrating ultimate success in establishing an essential ingredient in path’s recipe for success. For example, a company secures an essential form of competitive advantage when a key event in a set of significant events demonstrates that its patents protect its intellectual property rights. Control of IPR is an essential form of power in a standards-based architectural business design, and cumulative success in securing licenses and withstanding legal challenges confirm it. Thus, some strategic events are culminative, creating especially significant and enduring outcomes, a degree or form of strategic control that is termed consequential.
Change is a chameleon, colored by its context, imbued with meaning by a kaleidoscopic pattern of shifting relationships. Much change is mere flux, unrest that fluctuates at random in the business landscape. Change is given significance by its recognizable strategic import, as advancing or hindering progress along a dynamic path. Significant change is measured in degrees of strength against a standard of success. Consequential change creates both strong and enduring change. Finally, momentous change, which is a meta-level change in scale or direction, either reverses strategic trajectories or explodes the scale of change into the realm of the exponential and offscale. Thus, a few significant and enduring strategic events are not only consequential but also seemingly decisive, given our present point-of-view, so conclusively framing and shaping the future as to appear to be momentous.
We monitor the events in a company’s life to discover underlying dynamic patterns of fundamental movement. These significant outcomes vary in degree and kind: (a) degrees of competitive advantage increase or decrease, sometimes significantly but without much consequence, but also sometimes they increase through either slow aggregation or by sudden large phase shifts until they become consequential; (b) an inflection point marks the consequential moment of acceleration in an agent’s increasing returns; (c) in a standards war, an agent’s inflection point that signifies the beginning of increasing returns also serves as a sign of a deflection point that marks the onset of a competitor’s diminishing returns; and (d) turning points identify consequential events that reverse the run of good and bad fortunes; if momentous, they also shape the future; and (e) tipping points identify a fortuitous, momentous, and decisive stage within a monopolistic contest for increasing returns.
Certain recurring events, like a consumer joining a network, must achieve critical mass to serve as inflection point in increasing returns. Increasing popularity accumulates repetitions of members entering a network until that aggregation becomes consequential. According to Everett Rogers (1995, p. 313, his emphasis), “The critical mass occurs at the point at which enough individuals have adopted an innovation so that the innovation’s further rate of adoption becomes self-sustaining.” Thus, achieving critical mass marks a consequential event, whereas “critical mass minus one” did not.
Lock-in refers either to a process of accumulation and aggregation of competitive advantage or to a competitive advantage derived from a state of commitment that reduces the subsequent freedom other occupants to leave the value web. The concepts of lock-in and critical mass serve as operators that close the openness of meaning in past events, transforming what was once a future potential into a realized actuality. Achieving consequential milestones defines competitive success.
A strategy plots the dynamic means to succeed in shaping the key events that serve as a business’s stepping-stones to success. Forever poised in the present moment on the threshold of a potential future, a company can cognize a strategic dynamic path that anticipates an ideal pattern of key strategic events still to unfold that would lead the company toward its strategic goals, its ideal possible future. A strategic goal defines what a company wants to happen; a strategic plan describes how to get there. Progress along its stepping-stones maps its present strategic position. Thus, a dynamic path model traces what has happened, portrays the company in its present position, and thrusts forward into the future by anticipating strategic paths that lead to its desired goals and, within the limits of a future potential’s residual uncertainty, maps a probable future.
Strategies are the human being’s means of simplifying complex problems in situations of uncertainty as we seek to predict, understand, and control them. By sharing and embracing a mental model of a strategic dynamic path, a company can organize and coordinate the effort of its knowledge workers to actualize a shared vision of what we want and how we can achieve this best possible future. Only by daring to dream and strive for excellence can our future kiss our heart’s desire.
A knowledge company like Qualcomm not only must transform its breakthrough ideas into innovative RF ASIC designs, but also it must yoke its strategy to its technology’s competitive advantages. Moreover, the architecture of its strategy must be coherent not only with the architecture of its technology’s competitive advantages but also with the architecture of its business design. Given this structural coherence, and if its architectural advance proves to be sufficiently inventive and economically crucial to its value web, the inherent power of a successful architectural strategy can shape the future of its business landscape and enlarge its own global position.
What’s more, in a network market like mobile wireless, a latecomer like Qualcomm, with a standards-based strategy that seeks architectural control of the crucial air interface in mobile telecommunications, must expect to engage in a standards war--a struggle between two or more incompatible airlink specifications to become the de facto standard in the marketplace. As that struggle unfolds, certain events are significant, even crucial, to reaching a company’s desired outcomes. An already in place field of forces required a strategy that positioned the standards war at the contextual heart of Qualcomm’s potential future: requiring a counterstrategy that was informed by the past, committed to excellence in the present, and designed to shape the future. |
