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From Transactional Markets to Relational Networks: Amplifying the Innovation Potential of High-Tech Regions

Occasional Paper

Authors
John Hagel, III - Co-Chairman at Deloitte LLP Center for Edge Innovation
John Seely Brown - Co-Chairman at Deloitte LLP Center for Edge Innovation

Published by
The Walter H. Shorenstein Asia-Pacific Research Center, December 2008


This paper seeks to reintegrate business strategy analysis in a way that better reflects the way that global business has evolved. Over the past thirty years, a variety of promising efforts have been made to reconceive business strategy (as summarized in Figure 1). Each of these initiatives captures important elements of the evolving business landscape, and yet, in the end, they each seem to address only fragments of the challenges and opportunities confronted by business executives today.


Figure 1

Business strategy in the 1970s and early 1980s was dominated by the strategy-as-structure school, as exemplified by academics like Michael Porter in his classic work Competitive Advantage, and practitioners like Bruce Henderson, the founder and leader of Boston Consulting Group. This school held that strategic advantage was structural in nature; sustainable profits could be earned by occupying privileged positions on the business landscape that were protected by such structural factors as economies of scale or scope or geographic economics or regulatory barriers.

In the 1990s, this view of business strategy came under increasing attack, reflecting growing instabilities in markets around the world. If industry structures and markets were undergoing increasing change, structural advantages suddenly seemed less promising as a basis of sustainable profitability. Perhaps the most promising of these new perspectives was popularized by Gary Hamel and C. K. Prahalad in their well-known book, Competing for the Future. With its emphasis on core competencies as a source of strategic advantage, this book in return drew on the emerging resource-based view (RBV) of the firm that had begun to emerge in the academic literature at least since the late 1950s. As presented by Hamel and Prahalad, this perspective remained very enterprise-centric: strategic advantage lay in clearly identifying and strengthening core competencies within the firm.