David and Goliath the story of the little guy who through some clever
little guy who through some clever
little guy who through some clever strategy managed to take down the big
strategy managed to take down the big
strategy managed to take down the big guy we’ve learned telling that story
guy we’ve learned telling that story
guy we’ve learned telling that story through the ages and in business we’ve
through the ages and in business we’ve
through the ages and in business we’ve been telling that story a lot lately
been telling that story a lot lately
been telling that story a lot lately we’ve seen our industrial giants of our
we’ve seen our industrial giants of our
we’ve seen our industrial giants of our last generation tech firms fall before
last generation tech firms fall before
last generation tech firms fall before startups and upstarts in the cellular
startups and upstarts in the cellular
startups and upstarts in the cellular industry which I study a lot we’ve seen
industry which I study a lot we’ve seen
industry which I study a lot we’ve seen Motorola Nokia rim blackberry they’ve
Motorola Nokia rim blackberry they’ve
Motorola Nokia rim blackberry they’ve all gone from completely dominant to bit
all gone from completely dominant to bit
all gone from completely dominant to bit player in a handful of years it’s pretty
player in a handful of years it’s pretty
player in a handful of years it’s pretty striking so it’s not surprising we’re
striking so it’s not surprising we’re
striking so it’s not surprising we’re fascinated by the theory of disruptive
fascinated by the theory of disruptive
fascinated by the theory of disruptive innovation it tries to tell us some of
innovation it tries to tell us some of
innovation it tries to tell us some of when and why these firms are vulnerable
when and why these firms are vulnerable
when and why these firms are vulnerable these dominant players might be
these dominant players might be
these dominant players might be vulnerable and in my own research on the
vulnerable and in my own research on the
vulnerable and in my own research on the wireless service industry I’ve found
wireless service industry I’ve found
wireless service industry I’ve found some suggestive evidence of this power
some suggestive evidence of this power
some suggestive evidence of this power of startups this effectiveness of
of startups this effectiveness of
of startups this effectiveness of startups when we compare how firms
startups when we compare how firms
startups when we compare how firms entering the wireless service industry
entering the wireless service industry
entering the wireless service industry grow we compare startups to entrants
grow we compare startups to entrants
grow we compare startups to entrants established players coming in from
established players coming in from
established players coming in from outside we see these startups grow
outside we see these startups grow
outside we see these startups grow faster initially whether the time their
faster initially whether the time their
faster initially whether the time their growth falls off they enter as
growth falls off they enter as
growth falls off they enter as triumphant David’s in terms of growth
triumphant David’s in terms of growth
triumphant David’s in terms of growth but little by little they fall back
but little by little they fall back
but little by little they fall back until they’re actually growing more
until they’re actually growing more
until they’re actually growing more slowly than these established players
slowly than these established players
slowly than these established players and when major change comes to the
and when major change comes to the
and when major change comes to the industry they fall even further behind
industry they fall even further behind
industry they fall even further behind so these established Polar’s actually
so these established Polar’s actually
so these established Polar’s actually seem to have some adaptive advantages we
seem to have some adaptive advantages we
seem to have some adaptive advantages we might be interested in and that’s why I
might be interested in and that’s why I
might be interested in and that’s why I want to talk today about about a piece
want to talk today about about a piece
want to talk today about about a piece of research that we think may shed some
of research that we think may shed some
of research that we think may shed some light on what sorts of advantages these
light on what sorts of advantages these
light on what sorts of advantages these established players have the to think
established players have the to think
established players have the to think about where those advanced
about where those advanced
about where those advanced has come from just think of these
has come from just think of these
has come from just think of these startups when they first come in to
startups when they first come in to
startups when they first come in to cellular cellular industry what
cellular cellular industry what
cellular cellular industry what advantages did they have that make them
advantages did they have that make them
advantages did they have that make them these fast growers well they’re starting
these fast growers well they’re starting
these fast growers well they’re starting from scratch they can put the pieces of
from scratch they can put the pieces of
from scratch they can put the pieces of their business together so that the the
their business together so that the the
their business together so that the the operations the marketing the pricing all
operations the marketing the pricing all
operations the marketing the pricing all the elements of the business model
the elements of the business model
the elements of the business model really work together effectively at this
really work together effectively at this
really work together effectively at this moment of entry they’re masters of
moment of entry they’re masters of
moment of entry they’re masters of strategic integration but over time
strategic integration but over time
strategic integration but over time changes happen the industry they require
changes happen the industry they require
changes happen the industry they require those parts to be put together in a new
those parts to be put together in a new
those parts to be put together in a new fashion and it appears that the
fashion and it appears that the
fashion and it appears that the established players the giant telcos the
established players the giant telcos the
established players the giant telcos the cable television companies they’re
cable television companies they’re
cable television companies they’re actually noticing and reacting to these
actually noticing and reacting to these
actually noticing and reacting to these changes they’re managing to adapt now
changes they’re managing to adapt now
changes they’re managing to adapt now this is mostly speculation theoretical
this is mostly speculation theoretical
this is mostly speculation theoretical speculation that we’re trying to
speculation that we’re trying to
speculation that we’re trying to interpret what we find in the growth
interpret what we find in the growth
interpret what we find in the growth data here strategic strategic
data here strategic strategic
data here strategic strategic integration is awfully difficult to see
integration is awfully difficult to see
integration is awfully difficult to see in practice it’s difficult to measure
in practice it’s difficult to measure
in practice it’s difficult to measure and even if we think we’ve observed it
and even if we think we’ve observed it
and even if we think we’ve observed it somewhere it is even harder to say with
somewhere it is even harder to say with
somewhere it is even harder to say with confidence that the performance of some
confidence that the performance of some
confidence that the performance of some firm is actually the result of this
firm is actually the result of this
firm is actually the result of this integration because these companies are
integration because these companies are
integration because these companies are run by smart people they’re doing the
run by smart people they’re doing the
run by smart people they’re doing the best they have with the elements of the
best they have with the elements of the
best they have with the elements of the company and they’re anticipating what
company and they’re anticipating what
company and they’re anticipating what might happen in this industry so in
might happen in this industry so in
might happen in this industry so in terms of research integration is a
terms of research integration is a
terms of research integration is a pretty tough nut to crack
pretty tough nut to crack
pretty tough nut to crack now around the time that was finishing
now around the time that was finishing
now around the time that was finishing this this study on the solar industry I
this this study on the solar industry I
this this study on the solar industry I was moving to Bocconi joining the
was moving to Bocconi joining the
was moving to Bocconi joining the department of management and technology
department of management and technology
department of management and technology and young boss walked into my office
and young boss walked into my office
and young boss walked into my office Young was a PhD student at Bocconi well
Young was a PhD student at Bocconi well
Young was a PhD student at Bocconi well trained in methods interested in
trained in methods interested in
trained in methods interested in strategy and organization and deeply
strategy and organization and deeply
strategy and organization and deeply passionate about cars and motorsports
passionate about cars and motorsports
passionate about cars and motorsports none was
none was
none was is a huge Formula one fan he knows the
is a huge Formula one fan he knows the
is a huge Formula one fan he knows the sport inside and out and is a
sport inside and out and is a
sport inside and out and is a fascinating sport I’m not an expert but
fascinating sport I’m not an expert but
fascinating sport I’m not an expert but I’ve learned something about it that the
I’ve learned something about it that the
I’ve learned something about it that the cars are miracles of modern engineering
cars are miracles of modern engineering
cars are miracles of modern engineering they do things that those of us in our
they do things that those of us in our
they do things that those of us in our everyday cars can’t quite imagine the
everyday cars can’t quite imagine the
everyday cars can’t quite imagine the kind of performance that teens eat out
kind of performance that teens eat out
kind of performance that teens eat out of them and they do it with up to 10,000
of them and they do it with up to 10,000
of them and they do it with up to 10,000 precision parts carefully integrated the
precision parts carefully integrated the
precision parts carefully integrated the teams are models of organization they
teams are models of organization they
teams are models of organization they run huge budgets they have as many as a
run huge budgets they have as many as a
run huge budgets they have as many as a thousand workers in their system and
thousand workers in their system and
thousand workers in their system and they manage broad supply chains as Adam
they manage broad supply chains as Adam
they manage broad supply chains as Adam power puts it who is the former leader
power puts it who is the former leader
power puts it who is the former leader of Williams racing no relation we need
of Williams racing no relation we need
of Williams racing no relation we need in Formula one requires mastery not just
in Formula one requires mastery not just
in Formula one requires mastery not just of multiple technical disciplines but
of multiple technical disciplines but
of multiple technical disciplines but also the economics and the politics that
also the economics and the politics that
also the economics and the politics that are essential to the competitive
are essential to the competitive
are essential to the competitive position of each team so
position of each team so
position of each team so multi-dimensional sport a lot going on
multi-dimensional sport a lot going on
multi-dimensional sport a lot going on and a lot of these dimensions line up
and a lot of these dimensions line up
and a lot of these dimensions line up with what we know are very important in
with what we know are very important in
with what we know are very important in business and young boss is aware of
business and young boss is aware of
business and young boss is aware of where the official observers of this
where the official observers of this
where the official observers of this industry and the obsessive fans track
industry and the obsessive fans track
industry and the obsessive fans track every aspect of the sport so we can see
every aspect of the sport so we can see
every aspect of the sport so we can see not just how the teams and their drivers
not just how the teams and their drivers
not just how the teams and their drivers are performing in races we can observe
are performing in races we can observe
are performing in races we can observe changes to the car to different
changes to the car to different
changes to the car to different components of the system and when
components of the system and when
components of the system and when they’re reported to have problems below
they’re reported to have problems below
they’re reported to have problems below cuts in engines difficulties with
cuts in engines difficulties with
cuts in engines difficulties with aerodynamics problems with with brakes
aerodynamics problems with with brakes
aerodynamics problems with with brakes so we want to use this to study if some
so we want to use this to study if some
so we want to use this to study if some of these teams are actually better at
of these teams are actually better at
of these teams are actually better at the strategic integration than others
the strategic integration than others
the strategic integration than others then we start by looking at changes to
then we start by looking at changes to
then we start by looking at changes to the car the engineering of the car and
the car the engineering of the car and
the car the engineering of the car and whether that results in better
whether that results in better
whether that results in better performance fewer problems in the car
performance fewer problems in the car
performance fewer problems in the car and and faster racing but at this broad
and and faster racing but at this broad
and and faster racing but at this broad level of the data actually don’t find
level of the data actually don’t find
level of the data actually don’t find much in the way of state
much in the way of state
much in the way of state patterns now
patterns now
patterns now there’s another aspect of the sport I
there’s another aspect of the sport I
there’s another aspect of the sport I need to tell you about and that’s the
need to tell you about and that’s the
need to tell you about and that’s the rules the governing body of further one
rules the governing body of further one
rules the governing body of further one sets wide-ranging rules they cover and
sets wide-ranging rules they cover and
sets wide-ranging rules they cover and restrict aspects of the car the
restrict aspects of the car the
restrict aspects of the car the operations of the team and from season
operations of the team and from season
operations of the team and from season to season they frequently change these
to season they frequently change these
to season they frequently change these rules they may change them to improve
rules they may change them to improve
rules they may change them to improve the power knee between teams they
the power knee between teams they
the power knee between teams they sometimes change them for the financial
sometimes change them for the financial
sometimes change them for the financial benefit of the sport and sometimes for
benefit of the sport and sometimes for
benefit of the sport and sometimes for other reasons
other reasons
other reasons but what we discover is that sometimes
but what we discover is that sometimes
but what we discover is that sometimes these rule changes require a team to
these rule changes require a team to
these rule changes require a team to change the supplier for an individual
change the supplier for an individual
change the supplier for an individual component and this looks like a classic
component and this looks like a classic
component and this looks like a classic integration challenge these teams need
integration challenge these teams need
integration challenge these teams need to learn to work with a new part build a
to learn to work with a new part build a
to learn to work with a new part build a new relationship with a supplier all
new relationship with a supplier all
new relationship with a supplier all while designing and improving and racing
while designing and improving and racing
while designing and improving and racing their car so we want to see we want to
their car so we want to see we want to
their car so we want to see we want to see what happens with this integration
see what happens with this integration
see what happens with this integration challenge we choose a real change from
challenge we choose a real change from
challenge we choose a real change from 2007 for the first time the sport
2007 for the first time the sport
2007 for the first time the sport announces a single tire supplier for the
announces a single tire supplier for the
announces a single tire supplier for the entire sport before that some teams had
entire sport before that some teams had
entire sport before that some teams had work with Bridgestone others with
work with Bridgestone others with
work with Bridgestone others with Michelin as a researcher this looks a
Michelin as a researcher this looks a
Michelin as a researcher this looks a lot like a naturally occurring
lot like a naturally occurring
lot like a naturally occurring experiment we have a control group genes
experiment we have a control group genes
experiment we have a control group genes that had worked with Bridgestone in the
that had worked with Bridgestone in the
that had worked with Bridgestone in the past after the rule change can continue
past after the rule change can continue
past after the rule change can continue to work with Bridgestone we are the
to work with Bridgestone we are the
to work with Bridgestone we are the treatment a set of teams who are subject
treatment a set of teams who are subject
treatment a set of teams who are subject to this new integration challenge those
to this new integration challenge those
to this new integration challenge those that have been working with Michelin now
that have been working with Michelin now
that have been working with Michelin now they have to work with with Bridgestone
they have to work with with Bridgestone
they have to work with with Bridgestone and we can compare the performance of
and we can compare the performance of
and we can compare the performance of these two different groups and see how
these two different groups and see how
these two different groups and see how they react with the system of the car
they react with the system of the car
they react with the system of the car and how that impacts their performance
and how that impacts their performance
and how that impacts their performance so what do we see in the data well not
so what do we see in the data well not
so what do we see in the data well not surprisingly the teams that are forced
surprisingly the teams that are forced
surprisingly the teams that are forced to change supplier they see their
to change supplier they see their
to change supplier they see their performance fall and when we look more
performance fall and when we look more
performance fall and when we look more deeply and what we can observe in the
deeply and what we can observe in the
deeply and what we can observe in the car they have more problems with their
car they have more problems with their
car they have more problems with their car
car
car more problems with the tires sure but
more problems with the tires sure but
more problems with the tires sure but also with other components of the car so
also with other components of the car so
also with other components of the car so this change entire supplier is cascading
this change entire supplier is cascading
this change entire supplier is cascading through the system is creating changes
through the system is creating changes
through the system is creating changes and potential problems in other
and potential problems in other
and potential problems in other components and not all teams are
components and not all teams are
components and not all teams are reacting to those problems the same now
reacting to those problems the same now
reacting to those problems the same now we’re strategy researchers this is just
we’re strategy researchers this is just
we’re strategy researchers this is just what we’re interested in are some teams
what we’re interested in are some teams
what we’re interested in are some teams actually better at adapting to this
actually better at adapting to this
actually better at adapting to this change than others and we do find that
change than others and we do find that
change than others and we do find that there are some differences across the
there are some differences across the
there are some differences across the successful adapters and the others they
successful adapters and the others they
successful adapters and the others they they make more changes to the car they
they make more changes to the car they
they make more changes to the car they have fewer problems and they perform
have fewer problems and they perform
have fewer problems and they perform better in the races but to understand
better in the races but to understand
better in the races but to understand what kind of changes are really making a
what kind of changes are really making a
what kind of changes are really making a difference I need to tell you about one
difference I need to tell you about one
difference I need to tell you about one other concept from the study and that is
other concept from the study and that is
other concept from the study and that is an engineering dependence matrix it’s a
an engineering dependence matrix it’s a
an engineering dependence matrix it’s a mouthful what it means basically is it’s
mouthful what it means basically is it’s
mouthful what it means basically is it’s a map of how the different elements of a
a map of how the different elements of a
a map of how the different elements of a system relate to one another which ones
system relate to one another which ones
system relate to one another which ones are tied more closely and which are more
are tied more closely and which are more
are tied more closely and which are more distant imagine if your car the
distant imagine if your car the
distant imagine if your car the components of your car are several
components of your car are several
components of your car are several islands your engine your chassis the
islands your engine your chassis the
islands your engine your chassis the steering and some of those islands are
steering and some of those islands are
steering and some of those islands are closer together and they have a bridge
closer together and they have a bridge
closer together and they have a bridge between them whereas others are further
between them whereas others are further
between them whereas others are further apart and there’s no bridge the
apart and there’s no bridge the
apart and there’s no bridge the dependence matrix is basically a map of
dependence matrix is basically a map of
dependence matrix is basically a map of those bridges so we take this to the
those bridges so we take this to the
those bridges so we take this to the data and start to build one for a
data and start to build one for a
data and start to build one for a Formula One car Yann talks to and
Formula One car Yann talks to and
Formula One car Yann talks to and surveys a number of retired Formula One
surveys a number of retired Formula One
surveys a number of retired Formula One engineers some industry experts and and
engineers some industry experts and and
engineers some industry experts and and this is what this is an example of what
this is what this is an example of what
this is what this is an example of what we get back take just a simple component
we get back take just a simple component
we get back take just a simple component the second column there that’s a spark
the second column there that’s a spark
the second column there that’s a spark plug there’s one connection from that to
plug there’s one connection from that to
plug there’s one connection from that to the rest of the car it’s linked to the
the rest of the car it’s linked to the
the rest of the car it’s linked to the engine the more typical component will
engine the more typical component will
engine the more typical component will be connected to several other systems in
be connected to several other systems in
be connected to several other systems in the car and we find we bring this to the
the car and we find we bring this to the
the car and we find we bring this to the data that not all changes are having the
data that not all changes are having the
data that not all changes are having the same effect this matrix allows us to
same effect this matrix allows us to
same effect this matrix allows us to separate changes the systems that are
separate changes the systems that are
separate changes the systems that are very
very
very not closely connected to tires from
not closely connected to tires from
not closely connected to tires from those that are much more closely linked
those that are much more closely linked
those that are much more closely linked and what we find is it is only changes
and what we find is it is only changes
and what we find is it is only changes to tie or elected related components
to tie or elected related components
to tie or elected related components that are affecting the performance of a
that are affecting the performance of a
that are affecting the performance of a team not changes to other systems and
team not changes to other systems and
team not changes to other systems and it’s not having them the same effect in
it’s not having them the same effect in
it’s not having them the same effect in the treatment group it’s only these
the treatment group it’s only these
the treatment group it’s only these these teams that were forced to do this
these teams that were forced to do this
these teams that were forced to do this change that are seeing a difference and
change that are seeing a difference and
change that are seeing a difference and they are finding the more changes they
they are finding the more changes they
they are finding the more changes they make to other components connected to
make to other components connected to
make to other components connected to tires the fewer problems they’re having
tires the fewer problems they’re having
tires the fewer problems they’re having with their car and the faster they are
with their car and the faster they are
with their car and the faster they are in races so it really looks like when
in races so it really looks like when
in races so it really looks like when this tire changed happens some teams are
this tire changed happens some teams are
this tire changed happens some teams are perceiving how it flows through the
perceiving how it flows through the
perceiving how it flows through the system they’re noticing the potential
system they’re noticing the potential
system they’re noticing the potential problems that it introduces into the
problems that it introduces into the
problems that it introduces into the system and then reacting they’re solving
system and then reacting they’re solving
system and then reacting they’re solving those problems more quickly than their
those problems more quickly than their
those problems more quickly than their competitors can so these are the
competitors can so these are the
competitors can so these are the strategic integrators of Formula One and
strategic integrators of Formula One and
strategic integrators of Formula One and in terms of race day performance its
in terms of race day performance its
in terms of race day performance its decisive now we’ve looked at other
decisive now we’ve looked at other
decisive now we’ve looked at other aspects and this is part of the study we
aspects and this is part of the study we
aspects and this is part of the study we looked at other aspects of integration
looked at other aspects of integration
looked at other aspects of integration and adaptation we find for instance that
and adaptation we find for instance that
and adaptation we find for instance that Mis ability to integrate appears to end
Mis ability to integrate appears to end
Mis ability to integrate appears to end at the edge of the organization when we
at the edge of the organization when we
at the edge of the organization when we look at changes by suppliers to
look at changes by suppliers to
look at changes by suppliers to components that suppliers change that
components that suppliers change that
components that suppliers change that suppliers control it doesn’t have the
suppliers control it doesn’t have the
suppliers control it doesn’t have the same effect on performance and we look
same effect on performance and we look
same effect on performance and we look for where disability arises it’s not
for where disability arises it’s not
for where disability arises it’s not teams with more human capital it’s not
teams with more human capital it’s not
teams with more human capital it’s not teams where the leaders had more
teams where the leaders had more
teams where the leaders had more experience in the industry it’s the more
experience in the industry it’s the more
experience in the industry it’s the more mature teams those who had worked
mature teams those who had worked
mature teams those who had worked together longer who are figuring out
together longer who are figuring out
together longer who are figuring out this adaptation but I’ll have time to
this adaptation but I’ll have time to
this adaptation but I’ll have time to delve into those other other results
delve into those other other results
delve into those other other results more more today what I want to leave you
more more today what I want to leave you
more more today what I want to leave you with is just this notion of strategic
with is just this notion of strategic
with is just this notion of strategic integration it really appears that some
integration it really appears that some
integration it really appears that some teams some organizations some companies
teams some organizations some companies
teams some organizations some companies have a better idea of how the parts of
have a better idea of how the parts of
have a better idea of how the parts of their business go together
their business go together
their business go together and when some change requires that they
and when some change requires that they
and when some change requires that they adapt that they figure it out more
adapt that they figure it out more
adapt that they figure it out more quickly counting this back to the
quickly counting this back to the
quickly counting this back to the cellular study I mentioned the beginning
cellular study I mentioned the beginning
cellular study I mentioned the beginning this looks like concrete evidence for
this looks like concrete evidence for
this looks like concrete evidence for what we thought we saw in that original
what we thought we saw in that original
what we thought we saw in that original study that some that these established
study that some that these established
study that some that these established players are more able to understand how
players are more able to understand how
players are more able to understand how changes affect the system and take the
changes affect the system and take the
changes affect the system and take the system apart and put it back together to
system apart and put it back together to
system apart and put it back together to adapt and be more successful now as far
adapt and be more successful now as far
adapt and be more successful now as far as yon he’s graduated from the the
as yon he’s graduated from the the
as yon he’s graduated from the the Bacardi ph.d program with flying colors
Bacardi ph.d program with flying colors
Bacardi ph.d program with flying colors excellent and he’s fallen his heart went
excellent and he’s fallen his heart went
excellent and he’s fallen his heart went into our study so he now is a manager in
into our study so he now is a manager in
into our study so he now is a manager in North America for a Ferrari one of the
North America for a Ferrari one of the
North America for a Ferrari one of the Giants of Formula One and one of the
Giants of Formula One and one of the
Giants of Formula One and one of the subject teams in our study thank you
subject teams in our study thank you
subject teams in our study thank you [Applause]
”
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