KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, Talking Management for the The Globe and Mail. Today I am delighted to speak to David Teece who is a senior professor at the Haas Business School University of California, Berkeley.
Good afternoon, David.
DAVID TEECE – Good afternoon, Karl.
KARL MOORE – David, you are really lucky to be in the Silicon Valley – the centre of the universe, in some ways, for innovation. We see new things happening with business models; what are some of the things you are seeing out there these days?
DAVID TEECE – What I am seeing is that managers have a lot more choice variables to worry about when designing a business – which is great in many ways because it it is not just a matter of producing a widget. You can choose whether you just innovate and maybe license your technology or perhaps you do produce a product that embodies the technology. Perhaps you give the product away and sell a service associated with the product.
The Internet has really given us many more opportunities, particularly in respect to selling things, so business models which have a structured format maybe 100 or 50 years ago – now that's up for grabs. That means a lot more cognitive skill has to go into designing the business. It's nothing more. Designing a business model is, in fact, fundamentally designing a business so it really shows there is a creative element to business right from the get-go.
KM – So, David, are you arguing that it's purely analytical when we put together a business model these days?
DT – Well, one part of it is definitely analytical but one should not get into analysis paralysis. There are so many choices that you just have to do some rudimentary shaping up of the opportunity, make some decisions, and move ahead. The new word in Silicon Valley is "pivot" – recognition that you are never going to get it right as you come out the gate and you are going to have to change, modify, and rejiggle your business model until you get it right. So being flexible, being adaptable, has a premium on it that's even greater than it used to be.
KM – What you are arguing is that the deliberate strategy approach is more passé and the emergent approach, that Henry Mintzberg talks about, is more of what is happening in the Valley and that's the way forward these days?
DT – Karl, that is fundamentally correct but it is because of uncertainty that you cannot figure it out up front. The good news is there are a lot of choices. The bad news is there are a lot of choices. You have to make the best assessment of the situation – that means your competition, as well as your customers, as well as your suppliers, and you move forward and the thing evolves. It has to evolve in an adaptive way as you learn more.