Most business strategy research has focused on the search for strategic advantage within a defined environment, as if business were a game of chess.
A player can employ any number of strategies, but the object is always to capture the opposing player’s king, and the rules and playing board don’t change. Few researchers have studied what happens when players change the rules of the game itself, an approach known in the strategy field as shaping.
A new paper from Giovanni Gavetti, associate professor of business administration, and Constance Helfat, the J. Brian Quinn Professor in Technology and Strategy, introduces for the first time a technique to visualize strategic shaping using mathematical models. Often called “performance landscapes” because they depict the business environment in graphs resembling topographic maps of the Rocky Mountains, these models show areas of strategic advantage as peaks and weak positions as valleys. Like a map, they help leaders in their search for the figurative high ground on which to build and fortify their businesses. But until now the models have been unable to project what happens when a leader invents a metaphorical earthmover and shapes the landscape to his advantage.
One such disruptive innovation was Apple’s introduction of the iPhone in 2007. “Steve Jobs creates something new that completely changes the way people view cell phones,” Gavetti says. “That creates big problems for Nokia, BlackBerry and Motorola because they were focusing on functionalities that all of a sudden became obsolete.” In other words, Jobs’ bulldozer had flattened the competitive peaks of his competitors and brought their castles tumbling down.
Prior research had not clearly defined what it means to shape the business context, but the introduction of the iPhone is a textbook example of the more precise definition Gavetti, Helfat, and Luigi Marengo of LUISS University in Rome offer in their paper “Searching, Shaping, and the Quest for Superior Performance,” in the current issue of Strategy Science. When Jobs introduced the iPhone, he changed the payoff structure for Apple and every other company in the cellular phone business.
That lesson is clear to anyone who traded a BlackBerry for an iPhone in 2007, but only in hindsight. Few outside the C-suite at Apple saw it coming and the tools for modeling its effect on the strategic landscape didn’t exist.
That’s not to say business leaders aren’t searching for the next disruptive innovation. Shaping has become something of a Holy Grail in some industries, but Gavetti and Helfat’s research suggests that sometimes patience is the better strategy.
“One of the cool things that comes out of the analysis of the model is that there are conditions under which in the short run you might get a benefit from shaping but in the long run you don’t,” says Helfat. Such is the case when too many business leaders are careening around the landscape in their bulldozers, determined to shape it to their advantage. In other words, shaping may be least effective as a strategy in the industries where it is most often employed.
Take, for example, the early days of Internet portals, when a host of firms were racing to shape the landscape of online search. One by one they failed. Among the few companies that refused to participate in this shaping melee was Lycos, which instead sought to remain flexible and nimble. When Yahoo! finally emerged atop a stable peak, Lycos jumped on it and prospered.
“The common view is that shaping is a good thing but you might be just as well off, in our model, not doing it,” Helfat says. The researchers call this unexpected insight the “Paradox of Shaping,” and its discovery illustrates a valuable application of their model: It allows researchers to study the ways in which search and shaping interact.
Gavetti and Helfat are hopeful that their model will unlock a new line of inquiry in the field. Starting with the foundational work of Herbert Simon in the 1950s, most strategy research has focused on the bounds of rationality, or what Gavetti describes as “the limits of people’s ability to interpret the world around them.” Shaping almost by definition breaks that mold. It requires the ability to visualize a strategy that does not yet exist.
Developing a deeper understanding of that process is an exciting prospect for Gavetti and Helfat, both of whom have researched innovation and the way leaders think.
“I think the immediate effect of this paper will be to change the conversation and make it much easier to do research on shaping,” Gavetti says. “We introduce a formal language that wasn’t there before, and our hope is that others will build on that.”