PowerPoint Presentation

INDUSTRY DYNAMICS:RETHINKING THE EFFECTS OF VELOCITY ON PRODUCT INNOVATIONIan P. McCarthyBeedie School of BusinessIan_mccarthy@sfu.ca

Based on the following research:

McCarthy I. P., Lawrence T. B., Wixted B., & Gordon B. R. 2010. A multidimensional conceptualization of environmental velocity. Academy of Management Review, 35(4): 604-626

Access the full paper here.1INTRODUCTION

Speed Demons How smart companies are creating new products -- and whole new businesses -- almost overnightBusiness week - MARCH 27, 2006

Fast Company a magazine dedicated to reporting about activities of "fast companies

Thus, the advice seems to be focused on how companies can speed things up. Cut that process step! Shorten that product development cycle! There's tremendous pressure to get products out fast, in start-ups and large corporations alike2INTRODUCTION

speed kills innovation and "slow is the new fastHolman W. Jenkins JR 26th Jan 2011, WSJ"Apple Goes Slow to Win FastPaul Nunes & Tim Breene 2nd March 2011, HBRNunes and Breene

is Steve Jobs the consummate foot-dragger?

Patience Really Is a Virtue3INDUSTRY DYNAMICS: VELOCITYSpeed is central to industry change (dynamism) and performance.High velocity industries (environments):those in which there is a rapid and discontinuous change in demand, competitors, technology and/or regulation (Bourgeois and Eisenhardt 1988: 816)market boundaries are blurred, successful business models are unclear, and market players (i.e. buyers, suppliers, competitors, complementers) are ambiguous and shifting. (Eisenhardt and Martin 2000: 1111)Velocity is the rate (speed) and direction of change

4SOME IMPLICATIONS OF HIGH VELOCITYYou need to be fast.

This is achieved by:rational and formal strategic decision-making (Bourgeois & Eisenhardt 1988, Eisenhardt 1989, Judge & Miller 1991)rapid product development (Eisenhardt & Tabrizi, 1995)simple rules (Eisenhardt & Sull, 2001)heuristic reasoning (Oliver & Roos, 2005)team based decision-making (Nadkarni & Barr 2008)

5HOWEVER, STUDIES SUGGEST THAT BIOTECH IS A HIGH VELOCITY INDUSTRY6

Is this really the case?13-Jul-13Page 6Environmental VelocityLowHighINDUSTRIES DESCRIBED USING VELOCITYComputerindustryBourgeois & Eisenhardt (1988)Stepanovic & Uhrig (1999)HealthcareFinance, utilities & healthcareBaum & Wally (2003)Judge & Miller (1991)BiotechnologyHealthcareTextilesit is obvious that the industry is a high-velocity environment7

By Nadkarni & Narayanan 20078SOME OBSERVATIONSIt seems that most industries have high-velocity environmentsFew industry specific definitions and substantiationsAn assumption that high technology = high-velocityAn assumption that velocity = speedSimple, aggregated, erroneous and inconsistent conceptualizations.

We argue that the above occurs because studies have:treated velocity as single, latent descriptor i.e., a unidimensional conceptIgnored that velocity is a vector i.e., it has a rate and a direction of change

9ENVIRONMENTAL VELOCITY:A MULTIDIMENSIONAL VECTORConsider what is changing?Their rate of change (speed at which they move).Their direction of change?

10OUR FRAMEWORKWe conceptualize velocity in terms of:Multiple dimensions (demand, competitors, technology, regulatory, and products)Each dimension has a rate and direction of changeThe degree to which different dimensions might have different velocities (homology)The degree to which the velocities of different dimensions might affect one another over time (coupling)

11PRODUCT VELOCITY12

2005

2010Continuous and 6 new modelsDiscontinuous13-Jul-13Page 12PRODUCT VELOCITY13

2000 Xbox

2005 Xbox 360Continuous and 1 new model

2006 WiiDiscontinuous13-Jul-13Page 13VELOCITY DIMENSIONS AND HOMOLOGY14Direction of ChangeDiscontinuousContinuousRate of ChangeLowHighD = demandP = productsC =competitiveT = technologicalR = regulatoryPRTDCHigh homologyTPDCRLow homologyPRTDCHigh homology13-Jul-13Page 14VELOCITY COUPLING15Direction of ChangeDiscontinuousContinuousRate of ChangeLowHighD = demandP = productsC =competitiveT = technologicalR = regulatoryTDCRP= tight coupling= loose coupling13-Jul-13Page 15CouplingHomologyTightLooseHighLowRate of changeDirection of changeIntegrated RegimeCPTRDRate of changeDirection of changeConflicted RegimeCPTRDCPTRDDivergent RegimeDirection of changeRate of changeSimple RegimeCPTRDRate of changeDirection of changeVELOCITY REGIMES16IMPLICATIONS OF VELOCITY HOMOLOGYAffects how we think about the relationship between an organization and the temporal characteristics of its environment.Keeping in time with the environment (external entrainment) is still important, but .synchronizing organizational activities (internal entrainment) to be uniformly fast/slow might not be.Effective management is more about rhythm and synchronization, rather than being simply fast or slow.

1713-Jul-13Page 17FUNDAMENTAL IMPLICATION OF VELOCITY COUPLINGAffects how we think about the stability of velocity conditions and the impacts on how organizations coordinate changes in the pace and direction of their internal activitiesScanning, coordination mechanisms, and boundary spanningModularity of products, processes and organizationsTemporal orientations: monochronic versus polychronicManagement frameworks: linear vs. recursive

1813-Jul-13Page 18TEMPORAL ORIENTATIONSA temporal orientation is a cognitive concept that describes how individuals and teams conceive of time

TEMPORAL ORIENTATIONSMONOCHRONIC TEAMSPOLYCHRONIC TEAMS

Focus on one job at a time Focus on many jobs at onceView time as linear and fixedView time as tangible and malleableStrictly adhere to plans and hate missing deadlinesFrequently change plans and dont worry about deadlinesGuided by clock timeGuided by event timeTime is money Time is informationSimple and divergent velocity regimesConflicted and integrated velocity regimes (Ancona, Okhuysen & Perlow, 2001; Bluedorn & Denhardt, 1988; Hall, 1959). The way people view time differs from culture to culture, as observed and described by researcher Edward Hall. Monochronic time cultures emphasize schedules, a precise reckoning of time, and promptness. Time is viewed as a discrete commodity. People with this cultural orientation tend to do one thing after another, finishing each activity before starting the next. On the other hand, in polychronic cultures, people tend to handle multiple things concurrently (or intermittently during a time period) and to emphasize the number of completed transactions and the number of people involved, rather than the adherence to time schedule. Being on time is less important in polychronic cultures than in monochronic cultures.

The way people view time differs from culture to culture, as observed and described by researcher Edward Hall. Monochronic time cultures emphasize schedules, a precise reckoning of time, and promptness. Time is viewed as a discrete commodity. People with this cultural orientation tend to do one thing after another, finishing each activity before starting the next. On the other hand, in polychronic cultures, people tend to handle multiple things concurrently (or intermittently during a time period) and to emphasize the number of completed transactions and the number of people involved, rather than the adherence to time schedule. Being on time is less important in polychronic cultures than in monochronic cultures. Monochronic people (Hall terms as M- people) tend to view activities and time in discreet segment or compartments, which are to be dealt with one at a time. It is not logical to have two activities going on at the same time. M-people can become frustrated with Polychronic people (P-people) who view time as something fluid, and who easily alter schedules to shifting priorities. In P time cultures, meetings may start late, run overtime, and allow outside issues to interrupt team meetings. In addition, multiple activities may be scheduled at the same time, and adherence to deadlines may depend on the strength of the relationship. (International Business; A basic Guide for Women, Wilen, 2001)

Monochronic people (Hall terms as M- people) tend to view activities and time in discreet segment or compartments, which are to be dealt with one at a time. It is not logical to have two activities going on at the same time. M-people can become frustrated with Polychronic people (P-people) who view time as something fluid, and who easily alter schedules to shifting priorities. In P time cultures, meetings may start late, run overtime, and allow outside issues to interrupt team meetings. In addition, multiple activities may be scheduled at the same time, and adherence to deadlines may depend on the strength of the relationship. (International Business; A basic Guide for Women, Wilen, 2001)20SYNCHRONY Research on environmental velocity highlights "the importance of organizations operating in time with their environments and in synchrony across their subunits and activities (McCarthy et al. 2010: 618)

THE CASE FOR POLYCHRONICITYThe polychronic teams proved to be superior information brokers, absorbing and disseminating more-insightful information than their average and monochronic counterparts (Soutiaris and Maestro. 2012)

Under some circumstances, top management teams perform better when they accepteven relishinterruptions. (Soutiaris and Maestro. 2012)

SO, IN SUMMost industries do not have classic high velocity conditionsThus, being fast has it benefits, but it is rare that all business functions need to be uniformly fastIndustry dynamics are complexMultiple velocity dimensions, each with a rate and direction of changeHomology and coupling velocity regimes

Performance is linked to appropriate rhythms, synchronization, and temporal orientations

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