Jaana Sandström

Dynamic capability view in terms of real options

Abstract In this paper we will make an attempt to open up the black box of the modern basic theory of strategic management, i.e. the resource-based view. We will launch a dynamized version about it and interpret its usability in terms of real options applications. According to the dynamic capability view of the firm , the company consists of human, physical and financial resources and its knowledge base, which, in turn, consists of already existing and routinely exploited, i.e. static and not yet fully developed or exploited dynamic capabilities, which both can be produced either internally by the firm itself or externally through the open market or networks. It is widely recognized that in modern firms especially the development, creation and management of dynamic capabilities is of utmost strategic importance. Our paper focuses on the hard issue of managing and valuating dynamic capabilities when designing the strategic boundaries of the firm, let us say when making decisions about network relations. To be able to do this, we will take a broad look at the real options approach as a special method to shed some light on the very aspects of coping with technological and market uncertainty. Some empirical industry-related illustrations about real options applications are launched as well.

The problem of managing product development engineers: Can the balanced scorecard be an answer?

Abstract Traditionally, product development and design have been considered difficult areas to manage. Especially, connecting development and design engineers to the economic objectives of the company is a challenging task. This difficulty is partly caused by a lack of management tools. Product development and design have traditionally been managed only with project budgets and schedules. This has meant that the development and design engineers are not familiar with the overall profitability goals of the company, and they do not recognize the cause and effect relationships that their decisions have in the company. In addition to the issues above, development and design engineers do not receive enough structured and motivating feedback about their work. In this paper, product development and design are connected to the management system of the company. Special emphasis is put on helping the product designers do their work cost consciously and according to the company strategy. The performance analysis is based on the balanced scorecard (BSC) concept and advanced cost accounting techniques. The theoretical part developed in the paper has been applied in the case of a company which specializes in the manufacture of soapstone fireplaces and building stone. On the basis of our study, it can be concluded that if the implementation of BSC is done properly, the idea of BSC is helpful in managing design engineers.

The power of TQM: analysis of its effects on profitability, productivity and customer satisfaction

This article analyses the effects of total quality management (TQM) in an organisational context. In our analysis we study how the experience (or age or application time) of TQM and the depth (level of self-assessing scores of the business unit) of TQM affect the performance of the unit measured with customer satisfaction, profitability and productivity. Our unique research setting was based on longitudinal data from a global integrated process products company. The results of our analysis indicated that TQM does have an effect on all three types of performance measured. However, there was variation in whether the effects come from the experience of TQM or its implementation. As the results of this study are based on one Case Company, the utilisation of the results as such may be somewhat limited.

Strategic options‐based framework for management of dynamic capabilities in manufacturing firms

Purpose – The purpose of this paper is to launch a dynamic strategic framework for a manufacturing firm for the digital age. The papers dynamic capabilities‐ and strategic options‐based framework is comprised of the following key issues: how to sense the weak signals at the customer interface and how to formulate them as strategic options; how to exercise these options in the (often) intangible assets markets that are imperfect or even non‐existent; how to appropriate and/or share strategically relevant productive knowledge in order to obtain competitive advantage (CA) over the rivals, (iv) how to recognize the opportunities and threats of the underlying industrial structure, especially the economies of scale and scope and network externalities; and how to proactively reconfigure and reshape the existing knowledge base and capabilities in order to sustain the CA obtained.Design/methodology/approach – The paradigm of creating CA is opened up in the context of knowledge‐based engineering and digital manufa...

Manufacturing strategy and capital budgeting process

Abstract This paper integrates the concepts of manufacturing strategy theory with the ideas of capital budgeting process theory. This combination of concepts deepens capital budgeting process theory by giving a contents base to the strategic dimensions of manufacturing investments. The manufacturing strategy concept is an efficient tool when the investment process of a company should be studied and improved. The manufacturing strategy steers the numerous individual decisions connected to the development of the manufacturing system of the company. The integration of concepts complements also manufacturing strategy theory with ideas from capital budgeting theory.

Valuing technological capabilities ? the strategic options perspective

Achieving the best performance presupposes the continuous upgrading of tools for performance analyses. The traditional tools that have their roots in accounting calculations and process engineering reactively emphasise ex post analyses, whereas obtaining and sustaining business excellence proactively needs an ex ante orientation. A recent method enabling future orientation in the strategic performance analysis toolkit is the Real Options Approach (ROA), which has its roots in finance. In the paper, we look at the pros and cons of using this approach when dealing with strategic management issues that, in turn, are the bases for successful performance in a turbulent environment. By means of technology management illustrations, we emphasise the strategic advantages of the real/strategic options. As a theoretical focal point, we use the dynamic capability view of the firm that is suitable when coping with tangible and, more importantly, intangible resources and capabilities. In addition, a numerical example is introduced to demonstrate how a new capability can be valuated.

Who achieves continuous improvement? TQM implementation in a global organisation

This study aims at clarifying how organisational and environmental characteristics affect the timing of adoption and especially the depth of the implementation of the innovation that improves operations management (TQM). While organisational applications of the theory of innovation diffusion usually concentrate on explaining variations in adoption across organisations, this study explains the implementation phase within one organisation. The developed model for measuring depth of implementation adds value to the paper. A model is built based on the theory of innovation diffusion, and subsequently tested on the following dataset collected from a global process-industry company: 1) a longitudinal data of the continual improvement process; 2) a survey data from 493 respondents. According to our results, timing of adoption has an effect on the depth of the organisational innovation and the developed model for studying the depth worked well. The organisational characteristics had varying effects on the adoption and on the depth of the implementation. Formalisation assists the innovation implementation while interconnectedness, empowering leadership or position in the value chain did not have an effect.

Boundary choices in the pulp and paper industry

Purpose – The purpose of this paper is to shed light on the boundary choices of firms operating in the pulp and paper industry.Design/methodology/approach – Explorative interviews were conducted with senior managers of pulp and paper companies, and comparative data on other industries were collected. The theoretical approach was based on extended transaction‐cost economics (TCE).Findings – The results demonstrate that when company decision makers consider the governance choice for different activities, i.e. make or buy, the determinants implied in traditional TCE are not the only relevant factors. Transaction or management benefits are also important, and managers also take into account the long‐term effects of boundary choices. The determinants of governance choices depend on the nature and strategic importance of the activity in question: when it is a question of outsourcing marginal activities, for example, management costs and dynamic transaction benefits seem to be of most significance. On the other ...

Mapping the evolution of corporate social responsibility – insights from the Finnish forest industry

The number of companies engaging in corporate social responsibility (CSR) has increased significantly. However, the ways in which CSR is understood and practised are strongly dependent on contextual characteristics, such as the industry. The objective of this study is to map the evolution of CSR in the Finnish forest industry. Drawing from thematic interviews with selected participants and from environmental and CSR reports, the underlying factors and stakeholders that have influenced the development of CSR at different times are identified. The findings indicate that there are four main areas in the evolution of CSR, during which the emphasis of different elements of CSR has varied. The stakeholder groups driving CSR have turned from authorities and trade unions to local communities, non-governmental organisations and customers. Managers may find the results useful when analysing the development of CSR practices and the role of stakeholders in this development.

Managing uncertainty in long life cycle investments: unifying investment planning, management, and post-audit with a fuzzy DSS

Capital investments with long life cycles are commonly planned and analysed carefully before the investment decision is taken. However, it is often the case after the investment decision, during the operational management of the investment and throughout the economic life of investments that the monitoring of the overall profitability is more or less random. Post-audits are commonly used, ex-post to find out how the investment profitability actually played out. Planning, operational management, and post-audits are separate processes and there are commonly discontinuities between them that create remarkable inefficiencies both in management and corporate learning for future investments. This article considers unifying the separate processes of planning, management, and post-audit into one dynamic investment profitability management process. Use of information systems as a tool to achieve the task is discussed and an example of a fuzzy number-based dynamic profitability analysis system is used for illustration.