In this paper we want to review the article of Burgelman (2008): Strategic Consequences of Co-Evolutionary Lock-In: Insights from A Longitudinal Process Study. Starting by briefly stating the essential insights from this article, we will then continue with a critique on the main statements of Burgelman and his article in general. Finally, we will discuss possible implications of the concept of coevolutionary lock-in and introduce the case of General Motors as another example where the concept of coevolutionary lock-in might be suitable.
Intel and the phenomenon of coevolutionary lock-in
Burgelman describes the phenomenon of coevolutionary lock-in by the case of Intel during the leadership of Andy Grove. When Andy Grove became CEO in 1987 he started to transform Intel from a memory into a microprocessor company. Grove was able to align the members of the company and guide them into one direction. Intel became the industry driving force, highly successful but also very dependent on this market segment, as it followed a narrow business strategy which almost exclusively focused on microprocessors for the PC market segment. Intel’s great success in this business can be explained by the effect of increasing returns to adoption. In this sense Intel has a competitive advantage in the field of microprocessors and is constantly working on retaining this advantage, as this is extremely lucrative. However, such a narrow business strategy also means a high dependency on a very specific market, consequently Intel runs the risk of finding itself in a dead-end by focusing too much on exploiting the current product-market environment and neglecting new developments (the exploration of new product-market environments).
The core insights of the study
Burgelman mentions a number of factors that he identified as key drivers of the phenomenon of coevolutionary lock-in at Intel. As Burgelman refers to them as the main insights of his study, we are now going to explain them briefly.
- The paradox of power and autonomy: Intel intended to control its external environment by building a network of close cooperations within the computer industry. Intel’s success is closely linked to this network of partners (Microsoft, Original Equipment Manufacturer). However, despite being successful, this also created dependencies and therefore limited the freedom of action: The strategy of Intel was now restricted by these linkages, as they affected the available options to broaden the business focus, like, for example, by forward integration. Burgelman states that there is always a trade-off between power and autonomy.
- Due to Intel’s supremacy, the company was able to set the pace of strategic change in regard to their customers, competitors, suppliers and complementors. However, this pace-time strategy strengthens the coevolutionary lock-in, because the pace of strategy-making is limited by a natural adoption cycle on the PC market.
- Focusing on the core business which is the development and production of high performance microprocessors Intel failed to pay attention to the growing external demand for low-cost-microprocessors in the mid-nineties. Based on this, Burgelman states that the stronger a company’s competitive intensity is, the more specialized its strategy is to its product-market environment.
- According to Burgelman, a side effect of the success of Intel’s strategy was an escalation of self-confidence of Intel’s top management, indicated by an inappropriate transfer of the core businesses’ strategic logic to other businesses. This resulted in unwise investments and actions concerning new business developments. To prevent such a development Burgelman suggests a shared leadership concerning strategy by empowering middle and senior managers, which is intended to result in a more complete view of strategic leadership.
- Based upon the high growth rate and margins of the microprocessor business in the 1990s, new autonomous non-core businesses could barely gain the attention and resources they needed to unfold their potential, as they were considered as distractions rather than opportunities.
- The whole company was designed to support the core business: Strategic planning, resource allocation and the incentive system were attuned to the exploitation of the core business and on prevailing potential threats. This can be called structural inertia, as such an environment hinders new businesses from developing.
The internal ecology model
The classical ecological perspective on organizations suggests to view an industry (a sum of players that are alike) as a population that is exposed to external influences: dependent on the changes within the environment, members of the population cease to exist and new members that better fit to the prevailing circumstances enter the population. In comparison to this external ecological view, Burgelman states that one can also look at every individual organization from an ecological point of view: In this sense, an organization can be understood as a population of market-related projects - new promising businesses get started, existing but unsuccessful projects get cancelled - successful initiatives get selected. This internal selection process, however, is based on the strategic decisions within the company: Autonomous strategic actions may lead to new market-product environments, whereas induced strategic actions focus on exploiting the current product-market environment. Moreover, contrary to external changes in the environment, these are internal processes, meaning they are in control of the organization. Therefore, it is within the responsibility of the management of a company to balance decision-making processes, as this internal ecology, if functional, helps established companies to deal with its external environment, as it may serve as a substitute for external selection. Concerning Intel, Burgelman basically states that its internal ecology is not functional, due to the fact that Intel focuses so much on the core business and is neither willing nor able to set up new, unrelated businesses. However, the consequence of this is a reduction of the company’s long-term adaptive capability.
Coevolutionary lock-in, as described by Burgelman, can be seen as a vicious circle, as it is a lock-in situation which is constantly enhanced due to the interaction of company decisions and market developments, reinforcing each other driven by increasing returns to adoption. This insight suggests a path dependency of the market and the company, making it even more difficult for a firm to break with this path. In the case of Intel, one may actually speak of an obsession of the firm, or at least of the top management. Coevolutionary lock-in affects the balance between induced and autonomous strategy processes and a company's ability to develop new businesses, consequently strategic inertia is caused.
The conclusion that Burgelman draws from the case of Intel is that an induced strategy which leads to a narrow but very successful business strategy may cause coevolutionary lock-in. Furthermore, Burgelman considers it as crucial for a company’s long-term success to install and maintain a balance between the two contrary processes of strategy-making (induced vs. autonomous), as this determines the organization’s capability to adapt to changes within the environment. According to Burgelman, companies that are successful over long periods keep to the approach of inducing strategies from the top while simultaneously fostering a bottom-up driven renewal. In this sense, there is a close connection to the concept of the ambidextrous organization (Tushman & O’Reilly, 1997).
In addition, one should be aware that there is always a trade-off between processes that compete for limited resources, meaning that they can not be realized at the same time, as one process harms the effectiveness of the other one. Consequently, the trade-offs involved in balancing autonomous and induced strategic processes and exploitation and exploration should be observed closely to prevent lock-in situations.
Discussion and Critique
All in all, the article and the concepts presented are very sophisticated and quite profound concerning their insights. Nevertheless, there are aspects of this paper that need to be discussed and have to be questioned.
First of all, concerning his methodology, Burgelman states that he conducted his research following a narrative approach, which implicates the understanding that every situation is unique and will never reoccur. However, although this understanding fits the conceptualization of the theory of path-dependency very well, this would basically mean that learning from the past is misleading and therefore inappropriate. The question that arises with that, however, is what would be the sense of research when every phenomenon has to be considered as totally unique? Maybe a more appropriate understanding concerning this matter would be that there are patterns of behaviours and phenomena that are never exactly the same due to the situational context and unique developments, but that there are detectable similarities that can be labelled (e.g. as coevolutionary lock-in). Besides explaining his methodological approach, Burgelman states little about how he actually conducted his research, meaning the methods he used, if he interviewed any of the personnel of Intel for example, and if he did, whom he talked to. So, from a scientific point of view it is rather difficult to judge the underlying data of his study.
Another point is the internal ecology model that Burgelman articulates. Burgelman’s critique concerning the external ecology model seems reasonable and justified, as this model ascribes a passive character to companies which leaves little room for adaptation (internal change). In this sense, the concept of the internal ecology can be seen as a valuable further development of the organizational ecology theory, adding another dimension to this model, as the internal ecology model of strategy-making can be seen as a sub-system of every organization within a population. However, what Burgelman does not mention - or at least not directly - are the forces that actually influence the process of strategy-making; as this internal ecological system is based on decisions that are determined by the organization itself, the selection process is not directly shaped by the external environment. Nevertheless, as a sub- system there is an indirect dependency, as it is the responsiveness of these strategic decisions with the external environment that decides whether they turn out to be wrong (unsuccessful) or right (successful) in the long run. In this sense, the selection process of the internal ecology may be biased, for example by individuals in charge or, indirectly, by the organizational culture. Concerning such details of the internal ecological model, Burgelman remains rather vague only stating that one should be aware of this internal ecology and keep it functional.
- Arbeit zitieren
- Jannes Kraft (Autor), 2011, Strategic Consequences of Co-Evolutionary Lock-In: Insights from A Longitudinal Process Study, München, GRIN Verlag, https://www.grin.com/document/191497