Product Success Is Not A Reliable Indicator Business Essay

1705 word (7 pages) essay in Business

5/12/16 Business Reference this

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The report highlights the importance of different factors that contribute to the success of a company and strengthens its foundation. It draws insight on product success that is given an important consideration in terms of company’s future growth and revenue generation. It is an essential pre-requisite for a company’s strength. It contribution is vital towards the success of a company but it is not considered as a reliable indicator as various other factors play a greater and crucial role in determining company’s strength. The strength of a company lies in those indicators which have the power to govern change and sustain its competitive advantage in the long run.

There are various indicators which have been changing with the course of time and changing needs of business environment. These indicators are viewed different by various scholars. Thus, enriching there interaction in a company. The term “reliability” is the measure of consistency of different indicators that are devised in a company structure to overcome competitive threats and have a grab on opportunities. It can be correlated to business acumen and its knowledge. “A great deal of business success depends on generating new knowledge and on having the capabilities to react quickly and intelligently to this new knowledge . . . (Richard Rumelt, 1996)”.

The products of a company play a significant role in generation of revenue but the essential indicators are the factors leading to the creation of the product in accordance with the market demand and consumer needs. The firm specific knowledge plays a crucial role in exploiting the available resources to have a competitive advantage and contribute to company’s strength. An essential feature of strategy or more specifically innovation strategy should be directed towards accumulation of such firm specific knowledge. Ives et al. (1998), for instance, trace the history of knowledge management back to the ancient Sumerian civilization where cuneiform archives served to record knowledge for future generations.

Modern management tends to focus on controlling, centralising and standardising knowledge which reduces the marginal cost of knowledge by economies of scale. It is argued whether knowledge management represents an extension or departure from these tendencies. The conversion of tacit into explicit knowledge and storing it is lined up with such tendencies. The new technology integrates knowledge in the organisation. It opens up new opportunities for knowledge creation and transfer beyond the more traditional means of face-to-face interaction, mentoring, job rotation and staff development (Alavi and Leidner, 1997). IBM’s Larry Prusak says, knowledge is both an asset and a process of acting knowledgeable. ‘Knowledge management is the process of continually managing knowledge of all kinds to meet existing and emerging needs, to identify and exploit existing and acquired knowledge assets and to develop new opportunities’ (Quintas et al., 1997). The knowledge management programmes have ‘coherence across a number of dimensions, including organisational structure and culture, people aspects, process and technology’ (Quintas et al., 1997 p387). Harry Scarbrough (1998) points that managing knowledge is not easy as it are often sticky and tacit. It can’t be extracted from its context. He raises human relation issues such as staff will resist being treated as a ‘moveable asset’. It is further argued that knowledge itself appears in a number of different guises according to context: ‘intellectual capital’ (e.g. Bontis, 1998; Roos et al, 1998); ‘knowledge assets’ (Boisot, 1998; Teece, 1998); ‘workplace and organisational capital’ (Adler and Cole, 1993; Argyris, 1992).

The formulation of an innovation strategy having the ability to cope up with an external environment that is considered to be complex and ever changing, with consequent uncertainty about present and future advancements in technology, competition challenges and market demands may prove to strengthen company’s business tactics in the long run. It is argued that the distinction between approaches i.e. ‘choice’ and ‘implementation’ breaks down when firms decision are made in complex and fast changing environments. The rational approach to innovative strategies dominance is believed to be less effective than the incremental approach which lays emphasis on changing needs in the light of new information, learning and understanding that is consciously obtained. ‘The nature of the competitive threats and opportunities that emerge from advances in technology rightly stress the importance of developing and protecting firm-specific technology in order to enable firms to enable themselves against the competition’ (Porter, 1980). It is argued that Porter’s approach underestimates the power of technology to change the course of the competion by transforming industrial structures and overestimates the organisational competencies to exploit them. It is very difficult (but not impossible e.g. the case of Nokia) for a manufacturing traditional textiles to have an innovation strategy to develop and make computers (Patel, P. and Pavitt, K., 1998).

The product success is not a reliable indicator because when the product enters the market its reliability and validity depends on the market forces and competition and both of them are based on uncertainties. A firm’s technological innovation requires complementary assets to produce and deliver new products and services. Prior commercialisation activities require and enable firms to build such complementarities (Teece, 1986b). New products and processes can either enhance or destroy the value of such assets (Tushman et al., 1986). For example: IBM’s direct sales increased with the development of computers, while disk brakes were rendered useless as auto industries invested in drum brakes. Further ample evidences are available for a given type of competence (e.g. quality) which can be supported or manufactured by different routines and combination of skills. Garvin (1998) and Clark and Fujimoto (1991) studies both indicate that there was no ‘one’ formula for achieving either high quality or high product development process. There is a firm competition between firms on the basis of product design, quality, process efficiency and other attributes.

It is pointed that firms are constantly seeking to create ‘new combination’, and rivals are continuously attempting to improve their competencies or to imitate the competence of their most qualified competitors (Schumpeter, 1934). Such processes drive the destruction of product creativity.

The focus is on the ‘dynamic capabilities’ of firms which provides a coherent framework to integrate existing and empirical knowledge, and facilitate prescription (Teece, D. and Pisano,G., 1994). What depicts the strength of a company in global market is not its products success but demonstration of firm’s timely responsiveness and rapid and flexible product innovation, integration of management capabilities to effectively coordinate and redeploy internal and external competences. It is offered as an emerging paradigm of a business firm. It tries to facilitate a prescription by integration of existing conceptual and empirical knowledge. It is an indicator which provides competitive advantage to firm rooted in their high performance routines, processes and continued by history. They are built as they can’t be brought from a market place. The very essence of capabilities/competencies is that they can’t be readily assembled through markets (Teece, 1982, 1986a; Kogut and Zander, 1992). Researchers (Doz and Shuen, 1989; Mody, 1990) have pointed that ‘collaboration and partnership can be vehicles for new organisational learning, helping firms to recognize dysfunctional routines, and preventing strategic blind spots’. This concept of dynamic capabilities opens the door to inter-organisational learning. Leonard Barton (1992) finds that the organisational core capabilities can easily create ‘core rigidities’. That is, opportunity for learning will be ‘close in’ to previous activities and thus will be transaction and production specific (Teece, 1988).

Porter (1980) describes two market strategies: ‘innovation leadership’ and ‘innovation followership’. The initial one is concerned with those firms which attempt to introduce a new product to gain a technological lead and temporary monopoly profits whereas the latter tries to initiate the market pioneer by reverse engineering. It is argued that the survival and growth in the firms succeed or fail in their innovations, whether ‘offensive’ or ‘defensive’.

For a firm to survive and grow in competition, it must be capable of adapting its technologically based strategy to this competition. The introduction of a new product in any industry poses a threat to older products and processes by turning them obsolete or uneconomic.

It has been inferred that core competencies play a vital role in company’s strength. Managers will “…be judged on their ability to identify, cultivate and exploit the core competencies that make growth possible” (Hamel and Prahalad, 1994).”In the long run competitiveness derives from an ability to build at lower cost and more speedily than competitors, the core competencies that spawn unanticipated products. The real sources of competitive advantage are to be found in management’s ability to consolidate corporate wide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities”(Hamel and Prahalad, 1994). The validity of this statement still holds its firm position in the mainstay thinking of today’s firms. Core competence leads to the harmonisation of a number of related skills which starts building up an intelligent organisation. The competence base should be strong and should be managed properly. It should not be overlooked. The core product of a company is the crux of an end product.For example: Cannon has 84% share in laser printer engines but miniscule laser printer share.It has built its core competence in engines rather than printers through continuous feedback from customers. It has been able to manage low risk, low cost and reduction in lead time by focusing on its competencies.

In conclusion, a well-crafted strategy can lead a company to be a pioneer firm in the market if it possesses the ability to convert intellectual leadership into market leadership and be ahead of their rivals. The foresight of the rising opportunities plays a vital role in gaining a competitive advantage. Core competence and dynamic capabilities holds the key to exploit opportunities and are intriguing assets which are built with time. By getting hold of such opportunities a company can capture royalties, market reputation, customer lock-in, vast distribution network and set or define rules for other companies to compete, as Sony did in portable audio products and Intel has done in microprocessors. The key to innovation is “stability”.The focus of a company should be on organisational stewardship and stability rather than short-term profit fixation which can be gained from the success of one product.

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