Course Meeting Times
Lectures: 2 sessions / week, 1.5 hours / session
This course draws on a wide range of perspectives to explore the roots of long term competitive advantage in unusually successful firms. Using a combination of cases, simulations, readings and, most importantly, lively discussion, the course will explore the ways in which long term advantage is built from first mover advantage, increasing returns, and unique organizational competencies. We will focus particularly on the ways in which the actions of senior management build competitive advantage over time, and on the strategic implications of understanding the roots of a firm's success.
A central hypothesis of the class is that the ability to build and maintain relational contracts — relationships deeply rooted in mutual trust and shared understanding — is central to long term advantage since it enables firms to grapple successfully with the challenges of worse before better — the unfortunate fact that many important investments do not pay off immediately — indeed that in the short term they often appear to reduce performance. We will thus be grappling with many of the "soft" issues of management — leadership, culture, competence, trust — but from a relatively "hard" perspective.
A central activity for the semester will be the detailed study of a single high performing firm and a plausible rival/laggard to it. Working in teams of 2-3 people, during the first half of the semester I will ask you to write a sequence of "two pagers" — short papers that apply the concepts we will be exploring in class to the firm that you find interesting. During the second half of the semester I will ask you to write a final paper that both analyzes the historical performance of your chosen firm and its rival and that recommends a strategy for both going forward. Grades will be determined by class participation, by the short papers and by the final paper, with roughly equal weight given to all three activities.
There are two books that are required reading for the class:
The Modern Firm is available in the campus bookstore. My assumption is that most people will have a copy of Good To Great, but if you don't have one please buy yourself a copy.
There is also required reading for (almost every) class. This is often a case, but it is sometimes an article or two. Doing this reading is a "non negotiable requirement" for participation in the class, and I've highlighted it clearly in the syllabus below. If for some reason you come to class without having had a chance to do the reading, please let me know — that way we'll both avoid embarrassment should I call on you.
Beyond these two books, there are two kinds of additional reading I shall ask you to consider doing for the class. The first is related to the company that you choose to focus on. You should choose a company that you can explore in depth — either because you have worked there for many years, or because there is considerable literature about the firm.
My hope is that you may also become quite intrigued by the ideas that we will explore in class and will want to explore them further. I've given "recommended readings" for nearly every session — these are there for you if you're intrigued by a particular topic and want to dive a little deeper into it. I'd also recommend — again, only if you're curious — that you consider learning a little more about Toyota, Southwest and Wal-Mart, three companies that we will explore in some depth, by reading more about them. Good sources include:
Overlap with Other Classes
There are several other classes which are complementary to this one. Professor Wernerfelt's course on strategy (15.834 Marketing Strategy), for example, also focuses on the sources of long run competitive advantage. Professor Diane Burton's course on entrepreneurial organizations (15.394 Designing and Leading the Entrepreneurial Organization) and Emilio Castilla's course (15.660 Strategic Human Resource Management) both explore ideas that we'll also be exploring, albeit from a different perspective. If you're interested in long term advantage and the role of organizational competence in sustaining it, I strongly recommend that you take as many of these complementary courses as you can. You'll find that we use a few of the same cases — where that is the case I've provided alternative readings for those who may be already familiar with the case. I think that you will find the overlap fruitful. It's very difficult to understand the Toyota production system in any depth, for example, during a single class session, so that taking a little more time to think through its origins and its strength and weaknesses will prove to be, I believe, extremely useful.
I have designed this class as an integrated whole. My hope is to invite you to join me in an extended conversation — about what makes a firm successful, and about the strategic implications of the answer to that question. If you miss class it makes it very difficult to maintain a coherent conversation. You'll miss ideas and concepts — many of them raised by your colleagues — that are not in the reading and you'll have a more difficult time contributing to the discussion. So if for some reason you are forced to miss class — and I hope that this will be a very rare occurrence — please let me know in advance. I'll ask you to write up a "two pager" — a brief response to the discussion questions for the day that you will miss — and we'll also talk about how to keep you current with the conversation.
There will be two kinds of assignments: a final paper and a sequence of "two pagers". Both should be written in a team of 2-3 people, and both should be focused upon a company that you believe to have demonstrated sustained competitive advantage and about which you would like to know more. You should pick a company that you know very well or about which you can become deeply informed. Be aware that for much of the course we will be focusing upon a company's "culture" and "leadership" — its incentive systems, organizational structure, norms, values, myths and tacit understandings — so that you need to pick a company for which it's possible to learn something about what it's been like "inside".
A one paragraph description of your chosen company, explaining why you think it will make a good focus for your semester's work and including the name of everyone on your team, is due in class in Ses #3.
More detailed information is available in the assignments section.