14.7 Conclusions: inquisitive children and mature losers

This chapter has addressed the issue of dominant logic as a cognitive, strategic, operational and evolutionary concept to study how winners and losers built their strategies in the turbulent Polish markets between 1989 and 1999. By studying the constituent elements and consequences of the dominant logic of pairs of competing firms with almost the same chance of growing in the newly established markets we have identified two types of dominant logic that determine performance. High performers “ firms that attain leading positions in the market “ do not have coherent strategies and rigid plans. They follow simple rules that enable them to create and exploit opportunities, influence events, establish standards and brand names and attract publicity. Their dominant logic is developed in a piecemeal fashion in response to the outcome of strategic choices, and they learn from their experiences.

Low performers that attain only a peripheral position in the market develop their dominant logic at a very early stage of the firms life and strengthen it over time. The result is a more coherent and consistent strategy than that of high performers, but it is also more limited and rigid. Peripheral companies do not pursue opportunities but concentrate on problem solving. They develop their strategies early and follow them rigidly. They are centralized and formalized , and eventually become slaves of their dominant logic, rationalizing failures and failing to learn from experience.

Both winners and peripheral firms have a dominant logic that has both cognitive and operational components , and most of the time they stick to their cognitive paradigm and managerial decisions. However the dominant logic of winners enables them to exploit opportunities and grow rapidly , while that of peripheral firms is governed by their early strategic choices (Child, 1997), which limits their options and renders them unable to change. Leading firms learn from their difficult or traumatic experiences (such as strictly ruling out further diversification after engaging in a disastrous diversification that at first looked like a sure winner), while peripheral companies simply dismiss them as ˜bad memories .

In a way, from their inception leading firms operated like inquisitive children, using simple rules to experiment in the market place. Conversely peripheral firms adhere to their early strategies and operate like mature and experienced companies from the start. This dominant logic strengthens over time, despite difficult experiences and the obvious limitations it places on growth. Limited environmental investigation leads to erroneous evaluation of the firm s position, lack of cultural change and inertia. Managers in peripheral companies learn to live with their limited options, and tend to blame their problems on the business environment or the unfair strategies of winners.

Notes

This set of conditions was agreed upon by a panel of eight entrepreneurs, managers and consultants as creating in the early 1990s the best conditions for the growth of new ventures and as not favouring any particular player at the starting point.
A cosmetics industry did exist under the communist regime , but after 1989 many companies were so dependent on exports to the Soviet Union that they either went bankrupt or had such a poor reputation and limited product range that they could not set up significant barriers to entry.

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