Tracking a Moving Arrow Core

1 November 2009 at 1:53 pm Nicolai Foss Leave a comment

| Nicolai Foss |

As argued by Nelson and Winter in their 1982 book, An Evolutionary Theory of Economic Change, and more explicitly by Winter and Gabriel Szulanski in their 2001 paper, “Replication as Strategy,” many firms leverage their competitive advantages by means of replication. Franchise chains come immediately to mind (the “McDonalds Approach”) but also firms like The Body Shop. In the Winter and Szulanski approach, replication is essentially a two-stage process: In the first stage, the replicator defines a template that approximates the “Arrow Core,” that is, essentially the full and correct specification of the fundamental replicable features of a business model as well as its ideal target applications. Unfortunately, no one can determine in advance the exact contents of the Arrow Core, and knowledge about it must be acquired through experiential learning. Learning about the Arrow Core may lead to one outlet being identified as a concrete “template” for further replication, or the template may be understood more abstractly in terms of a specification of preferred location choices, standard operating procedures, the products that shall be offered, etc., that is, a “formula.” In the second phase, the replicator replicates the template, trying to “copy exactly.” In this phase, the template or formula for replication is “frozen.”

In a recent paper, “Tracking a Moving Arrow Core: Replication-as-Strategy in IKEA,” Anna Jonsson, a Lund University expert on IKEA, and I argue that IKEA has not followed the rigid two-phase replication strategy described (and recommended) in Winter and Szulanski and other contributions to the replication literature, but has adopted and organized an approach that may be characterized as an ambidextrous one: Exploration and exploitation in IKEA are more like simultaneously ongoing processes than sequential ones. We also describe the organizational mechanisms that IKEA has implemented to steer this process, such as internal units that are responsible for intra-firm knowledge sharing, and we discuss how it is supported by organizational principles, such as corporate values that stress the importance of employees questioning proven solutions while continuously engaging in knowledge sharing. In other words, IKEA organization is geared towards the tracking of a constantly changing Arrow Core. Drop me a mail at njf.smg@cbs.dk if you want a copy of the paper.