Dynamic Response Model By Mustafa Burak Guclu 1

Quest to Resilience In “The Quest of Resilience”, Hamel (2003) defines the goal of today’s resilient firm as: a strategy that is forever morphing and forever matching itself to emerging opportunities and early threats an organization that is continuously defining its future rather than defending its past a company that is reacting to change in rapid, evolutionary steps with no sudden surprises or whole new reorganizations. 2

Overall Hypothesis In order to be a resilient firm, a firm should recognize the signals when they are weak, and arrange its organizational and strategic planning activities flexibly and dynamically until the signals turn out to be strong. 3

Assumptions The firm operates in a turbulent (dynamic) environment meaning, Change in the environment is: Discontinuous Unpredictable Surpriseful 4

Dynamic Response Model 5

Weak & Strong Signals According to Ansoff; weak signals: imprecise early indications about impending impactful events. strong signals: issues that are sufficiently visible, and concrete to permit the firm to compute their impact and device specific plans. 6

Managerial Mental Filter The manager filters the novel signals that are not relevant to his historical experience, and therefore ignores the shape of the new environment. Ansoff refers this as ‘mentality filter’. 7

Managerial Mental Challenges The Cognitive Challenge: The manager should be free of refusal, nostalgia and arrogance. The Creative Challenge: The manager should look for alternatives as well as awareness. Power Challenge: The manager should not feel threatened with a discontinuity, try to minimize or refuse to recognize the impact of discontinuity to the firm. Entrepreneurial Challenge: The manager should be tolerant to failure and experiment a portfolio of new strategies. 8

Environmental Scanning Choo (1999) defines environmental scanning as “the acquisition and use of information about events, trends, and relationships in an organization's external environment, the knowledge of which would assist management in planning the organization's future course of action”. The process assumes that potential impacts on the organization may come from unpredictable and uncontrollable sources. Thus, environmental scanning is closely linked to strategic planning (Albright 2004). 9

Internal Scanning It is vital for the firms to analyze their internal strengths and weaknesses during the strategy-making process (Barney 1991). A firm will have a better chance of developing new resource configurations and market positions that capitalizes on its unique strengths, if it can identify and evaluate its knowledge bases and unique capabilities (Kor, Mahoney and Pettus 2007). 10

Knowledge Gap What a firm must do What a firm can do What a firm must know What a firm knows Strategic Gap Knowledge Gap Source: Michael H Zack 11

Flexibility Koornhof (1998) describes flexibility as “the ability and capacity to reposition resources and functions of the organization in a manner consistent with the evolving strategy of management as they respond, proactively or reactively, to change in the environment”. According to Ansoff (1965), flexibility can be measured by two alternative objectives: external flexibility achieved through a diversified pattern of product- market investments, and internal flexibility achieved by liquidity of resources. 12

Flexibility Hierarchy of the flexibility objective Source: Ansoff, H. I. (1998) The New Corporate Strategy, New York: John Wiley, p.44 13

Flexibility Volberda (1998) comes up with a different perspective in which internal flexibility is viewed as capacity of organizations to quickly adapt to the demands of the environment, while external flexibility is viewed as the capacity of the organization to actively influence the environment, thereby reducing the vulnerability of the organization. 14

Strategic Planning Strategic programming: Extrapolation of trends without changing the organization. Strategic issue management: Besides programs, also focusing on relevant issues and initiating activities in line with these issues. Strategic contingency planning: Developing plans for every possible change and transforming the organization in order to anticipate possible developments. Preparedness strategies: Decreasing planning activities, and increasing organizational activities in order to get more strategic mileage out of the organization in case of strategic surprises. Source: Volberda, H.W Building the flexible firm: How to remain competitive. New York: Oxford University Press. 15

Dynamic Capabilities Dynamic capabilities involve the organizational processes by which resources are utilized to create growth and adaptation within changing environments (Eisenhardt and Martin 2000, Lado, Boyd, Wright and Kroll 2006; Teece, Pisano and Shuen 1997). Dynamic capabilities relate to the organization’s competencies to integrate, build, and reconfigure resource positions in rapidly changing environments. 16

Planning vs. Organizational Activities 17

Structural Equation Modeling Structural equation modeling (SEM) is a statistical technique for testing and estimating causal relationships using a combination of statistical data and qualitative causal assumptions. SEM encourages confirmatory rather than exploratory modeling; thus, it is suited to theory testing rather than theory development. It usually starts with a hypothesis, represents it as a model, operationalizes the constructs of interest with a measurement instrument, and tests the model. The causal assumptions embedded in the model often have falsifiable implications which can be tested against the data. Source: Wikipedia 18