Strategic Thinking in Complex Adaptive System: A Case Study of the Passive Component Industry <ul><li>Tsai, Stephen D. </l...
Outlines <ul><li>1.Introduction  </li></ul><ul><li>2.CAS and Strategic Management  </li></ul><ul><li>3.Research Methods  <...
1a.Introduction <ul><li>‘ outside-in’ paradigm  </li></ul><ul><li>Porter's (1980) enduring contribution is industrial orga...
1b.Introduction <ul><li>Motivation </li></ul><ul><li>In Taiwan, formerly there were many small and medium passive componen...
2.CAS and Strategy <ul><li>Schemata  and Strategic Choices   </li></ul><ul><li>Self-Organization  and The Impetus of Indus...
2.1.Schemata and Strategic Choices <ul><li>Schemata determine the rules of interaction concerning how information and reso...
2.2.Self-Organization and The Impetus of Industry <ul><li>Self-organization is a bottom-up process in which detailed input...
2.3.Co-Evolution and  Far From Equilibrium of Industry   <ul><li>Continual interaction among complex systems  </li></ul><u...
2.4.Emergence and  The Innovation of Industry   <ul><li>Macro-level patterns arising in CAS systems of interacting agents ...
2.5.Fitness Landscape  and Ecology of Industry   <ul><li>An image of evolution moving across a landscape consisting of pea...
3.Research Methods  <ul><li>Grounded theory (Strauss and Corbin 1990)  </li></ul><ul><li>To generate novel and accurate in...
4.Case Study  <ul><li>4.1.Industrial Phase Transition </li></ul><ul><li>4.2.Evolution of Industry As a CAS </li></ul>
  4.1a.Industrial Phase Transition <ul><li>Traditional Small and Medium Enterprises Phase </li></ul><ul><li>Began in 1950s...
4.1b.Industrial Phase Transition <ul><li>Clustered Information Industry Phase </li></ul><ul><li>A 10-year developing plan ...
4.1c.Industrial Phase Transition <ul><li>Emergent Telecommunications Industry Phase </li></ul><ul><li>In 1999, an emerging...
4.1d.Industrial Phase Transition <ul><li>Digital Convergence Phase </li></ul><ul><li>Current dominating market is in porta...
4.2a.Evolution of Industry As a CAS <ul><li>Increasing Diversity and Complexity   </li></ul><ul><li>Volatility and quick c...
4.2b.Evolution of Industry As a CAS <ul><li>Risk Consciousness and Self-Transcendence </li></ul><ul><li>The concepts of “r...
4.2c.Evolution of Industry As a CAS <ul><li>Customer-Orientation and Co-Evolution </li></ul><ul><li>To access customers qu...
4.2d.Evolution of Industry As a CAS <ul><li>Punctuated Equilibrium and International Co-Competition </li></ul><ul><li>Cont...
4.2e.Evolution of Industry As a CAS <ul><li>Unpredictability of The Future </li></ul><ul><li>The feedback information  of ...
5.Implications and Discussions
5.1.Real Options  As Long-Term Strategy  <ul><li>Technically defined by an investment decision characterized by uncertaint...
5.2.Time Pacing  As Short-Term Guideline   <ul><li>Change is triggered by the passage of time, rather than by the occurren...
5.3.Strategic Coherence   <ul><li>Coherent connection between long-term options and short-term guidelines  </li></ul><ul><...
6.Conclusion  <ul><li>We are at a crossroads ,   which compel us to develop newer and more powerful strategic thinking  </...
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Strategic Thinking In Complex Adaptive System A Case Study

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Strategic Thinking In Complex Adaptive System A Case Study

  1. 1. Strategic Thinking in Complex Adaptive System: A Case Study of the Passive Component Industry <ul><li>Tsai, Stephen D. </li></ul><ul><li>Professor </li></ul><ul><li>Chiang, Hong-Quei </li></ul><ul><li>PhD Candidate </li></ul><ul><li>Department of Business Management </li></ul><ul><li>National Sun Yat-Sen University, Taiwan </li></ul><ul><li>12/08/2002 </li></ul>
  2. 2. Outlines <ul><li>1.Introduction </li></ul><ul><li>2.CAS and Strategic Management </li></ul><ul><li>3.Research Methods </li></ul><ul><li>4.Case Study </li></ul><ul><li>5.Implications and Discussions </li></ul><ul><li>6.Conclusion </li></ul>
  3. 3. 1a.Introduction <ul><li>‘ outside-in’ paradigm </li></ul><ul><li>Porter's (1980) enduring contribution is industrial organization (IO) economics in the field of strategic management . </li></ul><ul><li>‘ inside-out’ paradigm </li></ul><ul><li>The resource-based view scholars: Penrose's (1959), Wenerfelt (1984) , Barney (1991) , Grant (1991) , Prahalad and Hamel (1990 ) </li></ul>
  4. 4. 1b.Introduction <ul><li>Motivation </li></ul><ul><li>In Taiwan, formerly there were many small and medium passive component firms, but today have manifested their worldwide influence on the industry. </li></ul><ul><li>Explore how these firms continuously change in a endemic context </li></ul><ul><li>Explore the strategic thinking in the context of continuous change </li></ul>
  5. 5. 2.CAS and Strategy <ul><li>Schemata and Strategic Choices </li></ul><ul><li>Self-Organization and The Impetus of Industry </li></ul><ul><li>Co-Evolution and Far From Equilibrium of Industry </li></ul><ul><li>Emergence and The Innovation of Industry </li></ul><ul><li>Fitness Landscape and Ecology of Industry </li></ul>
  6. 6. 2.1.Schemata and Strategic Choices <ul><li>Schemata determine the rules of interaction concerning how information and resources flow internally and externally </li></ul><ul><li>Strategic choice theory --- top managers choose new strategic directions </li></ul><ul><li>Learning organization theory --- top managers identify leverage points </li></ul><ul><li>CAS theory --- new directions emerge from both choices and the patterns in self-organizing way </li></ul>
  7. 7. 2.2.Self-Organization and The Impetus of Industry <ul><li>Self-organization is a bottom-up process in which detailed input of the system itself determines what happens subsequently </li></ul><ul><li>Internal self-organization capability and the external selection status </li></ul><ul><li>At the industry level, CAS can spontaneously self-organize into more complex structure. </li></ul><ul><li>A firm's decision alter the very structure of the industry, which in turn influences it's future behavior. </li></ul>
  8. 8. 2.3.Co-Evolution and Far From Equilibrium of Industry <ul><li>Continual interaction among complex systems </li></ul><ul><li>The actions of one firm trigger actions and reactions in other firms, whose actions trigger responsive actions in the first. </li></ul><ul><li>All CAS evolve to the edge of chaos </li></ul><ul><li>The payoffs of individual agents depend on the choices that other agents make. </li></ul>
  9. 9. 2.4.Emergence and The Innovation of Industry <ul><li>Macro-level patterns arising in CAS systems of interacting agents </li></ul><ul><li>Internal, spontaneous self-organization among the agents of a system </li></ul><ul><li>Provoked by instability, and potentially leading to emergent order. </li></ul><ul><li>The generation of novelty through recombination have been generated at several different levels of analysis. </li></ul>
  10. 10. 2.5.Fitness Landscape and Ecology of Industry <ul><li>An image of evolution moving across a landscape consisting of peaks and valleys </li></ul><ul><li>A hill-climbing process---a journey across a heaving landscape </li></ul><ul><li>CAS and their agents are always locked into interactive games </li></ul><ul><li>The success of one strategy always depends upon the strategies of others </li></ul>
  11. 11. 3.Research Methods <ul><li>Grounded theory (Strauss and Corbin 1990) </li></ul><ul><li>To generate novel and accurate insights into the phenomenon </li></ul><ul><li>A longitudinal study conducted from September 1998 to July 2001 </li></ul><ul><li>Analyzed the data of in-depth interview with senior officers of 10 different firms </li></ul>
  12. 12. 4.Case Study <ul><li>4.1.Industrial Phase Transition </li></ul><ul><li>4.2.Evolution of Industry As a CAS </li></ul>
  13. 13. 4.1a.Industrial Phase Transition <ul><li>Traditional Small and Medium Enterprises Phase </li></ul><ul><li>Began in 1950s </li></ul><ul><li>By 1987, more than 70% of makers with the capital investments less than NT$10 millions, produced traditional plug-in products. </li></ul><ul><li>Neither large amount of capital nor a high degree of technology </li></ul><ul><li>Based on the control of production cost </li></ul>
  14. 14. 4.1b.Industrial Phase Transition <ul><li>Clustered Information Industry Phase </li></ul><ul><li>A 10-year developing plan by Economic Planning and Development Council </li></ul><ul><li>Infrastructure of electronics industry settled and grew rapidly </li></ul><ul><li>Moved to Asian countries to maintain profitability , and offered &quot;One-stop-shopping” </li></ul><ul><li>To reposition the products externally and accumulate and differentiate their capabilities internally </li></ul>
  15. 15. 4.1c.Industrial Phase Transition <ul><li>Emergent Telecommunications Industry Phase </li></ul><ul><li>In 1999, an emerging handset demand unforeseeable by firms </li></ul><ul><li>The strategic timing for investing was hard to effectively forecast and control in advance. </li></ul><ul><li>Began to develop global channels </li></ul><ul><li>Enter the era of network competition </li></ul>
  16. 16. 4.1d.Industrial Phase Transition <ul><li>Digital Convergence Phase </li></ul><ul><li>Current dominating market is in portable products </li></ul><ul><li>Two market trends : component integration and high frequency applications </li></ul><ul><li>Digital convergence and nano-technology </li></ul><ul><li>Competitive advantages should be evolved effectively </li></ul>
  17. 17. 4.2a.Evolution of Industry As a CAS <ul><li>Increasing Diversity and Complexity </li></ul><ul><li>Volatility and quick changes in 3C industries </li></ul><ul><li>Different firms have different strategic choice </li></ul><ul><li>A diversified combination of small and medium, regional and international enterprises </li></ul><ul><li>The entire industry grow steadily, but individual firms need their own bottom-up self-organized driving forces. </li></ul>
  18. 18. 4.2b.Evolution of Industry As a CAS <ul><li>Risk Consciousness and Self-Transcendence </li></ul><ul><li>The concepts of “risk consciousness”, “self-transcendence”, and “pursue the first” </li></ul><ul><li>Bottom-up creativity inside the firms </li></ul><ul><li>Creativity is not only an attribute of an individual but a property of a hierarchy of interlocking systems </li></ul>
  19. 19. 4.2c.Evolution of Industry As a CAS <ul><li>Customer-Orientation and Co-Evolution </li></ul><ul><li>To access customers quickly, firms moved overseas to build channels for operations </li></ul><ul><li>To provide customers “one-stop-shopping” services </li></ul><ul><li>Bring the market to “the edge of chaos” </li></ul>
  20. 20. 4.2d.Evolution of Industry As a CAS <ul><li>Punctuated Equilibrium and International Co-Competition </li></ul><ul><li>Continuously develop new products and process technologies </li></ul><ul><li>If invest early, incur higher cost and run the risk of no market. </li></ul><ul><li>If invest late, lose market shares. </li></ul><ul><li>Vertical cooperative relationship might become horizontal competition </li></ul><ul><li>J nternational coopetition are always locked into an interactive game </li></ul>
  21. 21. 4.2e.Evolution of Industry As a CAS <ul><li>Unpredictability of The Future </li></ul><ul><li>The feedback information of the supply chain was non-linear, and unexpected fluctuation occurred quite frequently </li></ul><ul><li>In 1998, the Asian economic depression ; in 1999, the telecommunications industry emerged; In late 2000, market demand declined hastily again. </li></ul><ul><li>The volatility and uncertainty of resultant products and technology standard </li></ul>
  22. 22. 5.Implications and Discussions
  23. 23. 5.1.Real Options As Long-Term Strategy <ul><li>Technically defined by an investment decision characterized by uncertainty </li></ul><ul><li>The provision of future managerial discretion to exercise at the appropriate time </li></ul><ul><li>In the next decade, what will be influences of the digital convergence and nano-technology? </li></ul><ul><li>Competitive advantages can evolved effectively over time </li></ul>
  24. 24. 5.2.Time Pacing As Short-Term Guideline <ul><li>Change is triggered by the passage of time, rather than by the occurrence of events </li></ul><ul><li>Best opportunity and consequence is always embedded in a successful time pacing process </li></ul><ul><li>One of the least understood facets of strategy in unpredictable and high volatility industries </li></ul>
  25. 25. 5.3.Strategic Coherence <ul><li>Coherent connection between long-term options and short-term guidelines </li></ul><ul><li>A self-organized corporation : a high degree of spontaneity; generated from the bottom up; new goods and services are developed; respond to a rapidly changing market </li></ul><ul><li>Organized around core competencies </li></ul>
  26. 26. 6.Conclusion <ul><li>We are at a crossroads , which compel us to develop newer and more powerful strategic thinking </li></ul><ul><li>CAS theory will offer valuable metaphors and methods </li></ul><ul><li>Influences the way managers see the world and the way they manage their companies </li></ul><ul><li>To understand the fundamental nature of non-linear, self-organized structures </li></ul>
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