A Framework for Detecting Macroeconomic Changes and Their Effect on a Bank's Business Model

• Cognizant 20-20 Insights

A Framework for Detecting Macroeconomic
Changes and Their Effect on a Bank’s
Business Model
Current banking models are ill equipped to meet the demands of
increased regulation, declining profitability and 24x7 accessibility.

Executive Summary The economic crisis of the past couple of years
seems set to continue for the near future.
This paper aims to elaborate on the emerging
Analysts, economists and political scientists
trends in the banking industry and their impact
hypothesize that the financial problems confront-
on the future of banking. It explains how firms
ing the world will not improve, but rather worsen.
can become sustainable even amid financial
crises. Lastly, it presents a framework with which The crisis can be seen as resulting from six forces:4
changes in the macroeconomic environment can
be detected and their effect on the internal logic • The bottoming out of interest rates.
of a firm can be interpreted. This framework is • Consumer deleveraging.
intended to set the ground for a new banking
business model that can cope with the changing • Increasing regulation.
landscape. • Aging populations.
Introduction
• The retreat of credit risk-free sovereign
borrowers.
Notwithstanding the ideas and concepts proposed
about the future of banking,1,2,3 the ongoing debate
• Diverging growth rates between developed and
emerging markets.
about how to deal with the credit and liquidity
crisis and the various endeavors underway, no These trends are expected to result in the
model has evolved yet to replace the current following major changes in the banking industry:5
paradigm.
• Consolidation, especially in developed markets,
A sound analysis of the banking business model to remove excess capacity.
requires looking at investment banking, private • Innovation in offerings and service models to
banking, retail banking, asset management and restore margins.
other business areas. However, as this paper seeks
to elaborate on a generic framework to under-
• Migrationof relative profitability from mass-
market to wealthy customers.
stand the effects of macroeconomic changes
on the internal logic of a bank’s business model, • Growth shifting from developed economies to
we have only considered the generic banking emerging economies.
business model.

cognizant 20-20 insights | january 2013

Impact of Crisis on the significant customer relationships requires a high
Banking Industry connectivity between the bank’s staff and the
customer base. Identifying the appropriate tech-
Because of the current crisis, banks in developed
nologies and incorporating them into the bank’s
economies have been finding it difficult to grow
system as well as incorporating appropriate
revenues. As a result of political intervention and
business processes supports a bank in building
special programs such as quantitative easing,
successful customer relationships.
banks in Europe and the U.S. have returned to
moderate profitability. However, the accompany- Overall, increasing revenue strongly depends
ing changes have led to a more volatile and chal- on the customer. However, customers’ growing
lenging environment — one that is transaction- demands and their decreasing loyalty is a
and trading-based. challenge for the banking industry today.
In order to achieve sustainability, banks need to New Demands on Banks
incorporate superior earnings, lower risks and
Banks Are Expected to Be Accessible Anywhere
access to high-growth markets. Superior earnings
and Everywhere
can be achieved when a banking model is able to
generate higher assets turnover or higher margin Having a Web site is no longer enough for a bank.
earnings. The key to generating sustainable Customers want to be able to reach their bank
profits is a bank’s ability to grow revenues over from everywhere at any time through their mobile
the long term. devices. However, banks’ flash-loaded Web sites
do not allow customers the kind of mobile access
Banks that outperform their competitors tend to and mobile-enabled services that customers seek.
exhibit the following characteristics:
Another factor is the continuing growth of
• Employee productivity in generating sales, mobile wallets or m-wallets. These are electronic
acquiring deposits and generating revenue. accounts that are linked to a customer’s mobile
• Strong customer relationships, high-quality phone. Money can be electronically deposited
B2C relationships and high-quality products and used as cash through these accounts. Inter-
and services. nationally, m-wallets are used at stores, to pay
for public transportation, to make donations and
• A cost-to-serve approach: capturing the total to pay bills. Businesses such as Dwolla, Square
overall cost in the provision of products and
(Pay with Square) and Google (Google Wallet) are
services to customers.
early birds in this area and m-wallets are being
• Risk management: capturing the rate of non- developed for various other providers. Banks
performing credit and the ability to recover need to hop on to this bandwagon if they want to
outstanding loans. remain competitive. Other potential technologi-
• Innovation in the use of technology and the cal implications are mobile payment, or mobile
generation of new business models to create banking coupled with push services, direct fund
and extend customer relationships. transfer without banks being intermediaries and
direct credit and loans facilities.
Demand for Increasing Customer Value
Tighter Regulations Are Under Way
Growth through attracting new customers
continues to be expensive and therefore limited Globally, tighter regulations are being imposed on
in the banking industry. However, even opportu- banks. These regulations are intended to prevent
nities for growing existing relationships are not the current financial crisis from worsening and
completely exploited. For example, customers to protect businesses and customers. These have
for whom banks provide transactional account resulted in various challenges for banks such as
services tend to have low levels of savings. forcing them to increase their reserves relative to
their assets. On one hand, this allows loans to be
In order to increase customer value, banks can backed up better, but on the other hand it forces
either increase the customer’s needs or increase banks to give out fewer loans, especially for large
their share of the customer’s portfolio and expand amounts. As another example, Basel III standards
the customer’s utilization of their products and have had a major impact on the business and
services. Assuring high service levels, product operational model of banks. Also, the introduc-
and service quality and providing accessibility to tion of oversight rules and bodies has significant
customers require banks to be innovative. Building implications for the banking industry.

cognizant 20-20 insights 2

Even while confronting strategic and regulatory Also, technology-based structural change results
challenges, banks have to ensure efficient and in lower costs for generating, processing, and
faultless operations. This calls for continued coordinating information as well as greater avail-
efficiency improvement of the operational model. ability of risk management tools.
Business and operational model adjustments in
response to the macroeconomic environment The emerging financial landscape is becoming
(e.g., mobility, regulations and the “future of standardized in terms of distribution activities,
work”) as well as process optimizations, reorgani- while a high degree of flexibility, cost efficiency
zations and cost structure optimizations have to and superior quality are assumed.12 The main
be done on a regular basis. concern for banks now is how to deploy contem-
porary technologies for developing and selling
This calls for identifying opportunities to align IT cutting-edge, high-margin services and products
systems across business units and geographies, to demanding customers in a highly competitive
focusing on core competencies and outsourcing market. Bankers need to transform themselves
noncore activities. into competitive lifecycle engineers and “masters
of the information and knowledge universe.”
Challenges for Established Banking Banking firms need to be able to follow technolog-
Business Models ical developments and identify and absorb appro-
A business model describes an organization’s priate technologies into their systems landscape.
core logic for generating value. Akin to patterns They need to have sufficient and efficient access
in architecture and software engineering,6, 7 i.e. to information about borrowers from third-party
successful solutions through which firms create databases.
value, business models come before strategy.8
These capabilities require a new business archi-
Hence, various combinations of business models
tecture, which in turn is influenced by a revised
can be used for designing strategy and generating
up-to-date business model that consolidates
new strategies for existing and new businesses.
information and transaction capabilities so as to
Technology is not only important for new product create exceptional value.
and service development, but also for risk
management, effective life cycle planning and Framework Explicating Change and Its
meeting the risk control needs of firms. Hence, Effect on a Firm’s Internal Logic
a new banking business model that accounts for Banks have to consider appropriate measures for
macroeconomic changes should meld information handling global macroeconomic changes. A step
with transaction capabilities for creating value. towards this is a framework that guides banks
toward structures and themes to be analyzed,
Technology Is Key Driver of Changes in and provides a collection of interrelated concepts
Architecture and Revisions of Business for confronting the current upheaval within the
Models banking industry. This framework explores how
Banking business models need to incorporate the fit influences the link between macroeconomic
ability to adjust to environmental changes. They changes and subsequent changes in the firm.
should thus be able to respond to less loyal and The common focus would be on performance
more demanding and advanced consumers, as and choices of activities, policies, organizational
well as to increased competition from nonbanking structures, capabilities and resources. Internal
firms.9 Technology is fundamental to both the fit among these choices can lead to sustainable
bank’s ability to adapt its architecture and competitive advantage because it makes imitation
affiliated business model as well as to implement difficult. However, a tight fit and sustainable com-
the underlying strategy. Advances in technology petitive advantage are ambivalent because mac-
enable banks to10 respond to competitive market roeconomic changes negate the value of organi-
situations by making better credit decisions, by zational capabilities and complementary assets. A
using modern risk management systems and by firm with tight activities must basically modify all
creating and using new instruments. Therefore, of its choices simultaneously to confront environ-
technology allows banks to change from tradition- mental change successfully. The marginal payoff
al banking business models based on selling their to adjusting each choice in response to some
own mainstream banking products to a broker-like external change is increased by a tighter fit.
approach with banks coordinating and integrat-
Thus, each choice influences the payoff to adjust
ing a range of products and services from outside
all of its choices. A tight fit makes the firm
suppliers and providing these at a low(er) cost.11


sensitive in multiple areas, and able to respond A’s marketing activities reinforce one another,
quickly to environmental changes. Hence, the lowering total marketing costs.
classification between fit-conserving change and
fit-destroying change is useful, because managers
• Third-order fit, or optimization effort: For
example, a retailer of casual clothes focuses on
must react differently to these changes. Without product availability by restocking basic clothing
the knowledge of this particular framework, (a collection with few colors) more frequently
managers would react arbitrarily. (daily), and thus avoids large in-store invento-
ries and lowers the cost of implementing the
Choice, Uniqueness, Fit of Activities
short model cycle.
Are Crucial for Sustainability
Strategic decisions involve consciously doing Overall, the exchange of coordinated informa-
something differently,13 ultimately resulting tion across activities eliminates redundancy and
in a sustainable advantage (or disadvantage). lowers inefficient efforts. In every type of fit, the
Hence, competitive strategy calls for a different whole matters more than the individual activities.
approach based on a different choice and set Consequently, the strategic fit of activities is fun-
of activities,14 being able to deliver a unique damental for sustainable competitive advantage.
mix of value that is desired by the market. An Market positioning based on systems of activities
important factor is the impossibility of imitation is more sustainable compared to individual activi-
by competitors. Uniqueness is reached through ties. It is harder for competitors to copy interlocked
complex interactions between various activities activities compared to imitating particular activi-
in a firm that are not reducible to the sum of the ties — e.g., marketing approach, process technol-
individual activities. It is the synergies between ogy or replicating a set of product features. Porter
the activities that result in value, and not the provides an excellent mathematical example
activities themselves. Choice means determin- — the probability a competitor can match any
ing which activities a firm will perform and how activity is often less than one. Hence, probabilities
individual activities are configured. Fit locks out compound quickly to a level in which matching the
imitators by creating a chain that is as strong as entire system becomes highly unlikely.
its strongest link.15
Therefore, established firms that would like to re-
Recently, managers have turned to core competen- position themselves are forced to either reconfig-
cies, critical resources and key success factors. In ure some, many or all activities.
this respect, fit is a crucial component of competi-
tive advantage — e.g., production lines with high Performance Landscape Framework
degrees of model variety, combined with inventory for Understanding and Interpreting
and order processing for minimizing stock, a sales Change
process explaining and promoting customization When explicitly looking at a specific stage
coupled with advertisements that accentuate the of change, particularly upstream, Siggelkow
benefits of product variations meeting customer identifies signals coming from environmental
needs. It is these complementarities that provide change and affecting the fit of activities within
sustainability and comprehensiveness in strategy. the firm through the concept of a performance
Though fit of activities can be generic, applicable landscape. It is important to understand that “one
to most firms, the most valuable fit is strategy-spe- must analyze the firm as a system of intercon-
cific, creating a firm’s unique position. In Porter’s nected choices: choice with respect to activities,
view, three types of fit exist: policies and organizational structures, capabili-
• First-order fit: The consistency between each ties, and resources.”
activity (function) and the overall strategy, the
Furthermore, “the implication of a tight fit for
firm aligning activities with low-cost strategy,
the sustainability of a competitive advantage is
distributing funds directly to avoid commis-
ambiguous.” In order to realize a tight fit of activi-
sions to brokers.
ties, managers have to understand this concept
• Second-order fit: This involves reinforcing and how it relates to the concept of performance
activities, in which firm A uses on one hand landscape developed by Sewell Wright.16 “The
industry specialists to augment its product framework thus offers an alternative and comple-
quality and on the other hand uses firm B’s mentary classification.” With this classification,
platform for introducing its products. Hence, the effect of environmental change on firms can
in using a specialist and firm B’s platform, firm be described as fit-destroying or fit-conserving.


In general, “for a firm that occupies a peak, envi- Fit Between Firm’s Choice and
ronmental change can affect both external and Business Model
internal fit.” Siggelkow distinguishes four cases:
A rugged fitness landscape reflects the process
of how a vague idea turns into an innovation and
• No change: If either external or internal fit is ultimately into a new product or service. The
affected, (but) the environmental change has
no impact on the firm in question. performance landscape,17, 18 originally devised to
explore how organisms and proteins evolve, is
• Detrimental fit-destroying change: If both adapted 19 for examining managerial search in the
external and internal fit are affected, the firm context of organizational studies20 regarding the
finds itself at a lower elevation (lower external adaptation of organizational attributes.
fit) and located away from a peak (lower
internal fit). The functional aspects21 of business models
are evaluated on the value proposition, market
• Beginning fit-destroying change: In this case, segments are identified, the structure of value
the firm’s performance has not decreased, yet
internal fit has been compromised by the envi- chains are defined, cost structure and profit
ronmental change. are estimated, a firm’s position within a value
network is described and the competitive
• Fit-conserving change: Although internal strategy is formulated. Business attributes22 such
fit has not been affected, external fit has as product and service offerings, prices, advertis-
decreased. Thus, the environmental change ing and sales strategy, target audience, location,
has affected the internal logic of the firm’s customer service levels, financial structure,
system while decreasing the appropriateness production/service delivery methods and distri-
of the system — the activities — as a whole. bution channels foster a climate for adaptation.
Overall, the framework explores how fit influences A study 23 of the process of entrepreneurial
the link between environmental changes and adaptation of new ventures in terms of the
subsequent changes in the firm. The classification exact relationship between uncertainty and
between fit-conserving change and fit-destroying ambiguity and the entrepreneurial search for a
change is useful, because managers must react viable business model is based on Kaufmann’s
differently to these changes. At the point when and Levithal’s modeling. The results indicate the
a firm does not react to customer demands to importance of differentiating between various
cut prices and provide reordering, technological types of adaptation. Clearly, “new ventures can
changes create a new performance landscape, adapt their business model following a local
and hence a strategic infliction point exists — what search strategy or search through long jumps.”
happens to a business when a major change takes
place in its competitive environment. Though The first form “implies that [entrepreneurs]
strategic inflection points are caused by tech- gradually refine and adapt their business model
nological change, they are more than just tech- by changing only one (or, in real life, only a couple
nological change. They can be caused by com- of) aspects of the business model at a time.” The
petitors, but are also more than just competition. second, trying out unrelated business models,
They are full-scale changes in the way business motivates for a discerning “between these two
is conducted. Hence merely adopting new types of adaptation since they yield different
technology or battling the competition, as firms results under different circumstances.” The
are used to doing, may be insufficient. strategy of local search is superior regarding
“performance and survival under situations of
Explaining a business model solely based on moderate ambiguity,” whereas “search through
phenomena — i.e., crises with concomitant new long jumps becomes more interesting as
demands imposed on banks — is vague. Rather, ambiguity increases.”
what is needed is to apply a framework that
explains how fit influences the link between envi- Hence, situations of moderate ambiguity require
ronmental changes and subsequent firm changes. that “new ventures should adapt their initial
A mechanism that focuses on generating a business model through experimentation with
business model in response to the environmental closely related alternatives,” whereas highly
demands is preferable. ambiguous situations demand “opportunities
that are far removed from the initial business


model.” Further, the identification of an alterna- and suppliers provide for an “understanding
tive business model should also be based on the [of] wealth creation and performance.” With a
degree of ambiguity. Although rugged landscapes business model being the source of competitive
do influence the performance level of firms, they advantage, “competitive advantage can emerge
do not affect the “appropriateness of different from superior product-market positioning, as
search strategies.” well as from the firm’s business model” both
enhancing the firm’s performance, either inde-
Ambiguity is the trigger for divergent behavior — pendently or collaboratively.
search through long jumps. Hence, a reduction “of
ambiguity can then trigger convergent behavior As a consequence, for a firm to remain competi-
and the discovery of a possibly viable business tive it needs to investigate competition among
model.” Even when facing “zero ambiguity, search various business models within an industry27
through long jumps becomes superior to local and consider product market competition. This
search in the long run.” competition on business model questions a
firm’s wealth-creation potential based on a given
Novelty-centered business models are another business model. Defining business models and
option for evaluating the implications of business the concomitant choice, product market strategy
model and market strategy on a firm’s per- design can be done when defining and redefining
formance design themes. These involve three business models. Entrepreneurs, at the same
product market strategy choices: cost leadership, time, can identify customer needs and map them
differentiation and timing of entry into a market.24 against the choice offered by competitors.28
Like business model design themes, product
market strategy choices are not exclusive and Overall, when environmental changes impose a
exhaustive. For example, managers peruse simul- change on the landscape of a firm, the framework
taneously a strategy of product differentiation, of performance landscape provides hope for
cost leadership and early market entry. situations of varying landscapes in terms of
choice (activities a firm performs), search for an
Now the question arises, which business model fits appropriate business model (organization’s core
the firm’s choice, the activities a firm will perform logic for generating value) and the set of activities
and how individual activities are configured. What with its internal and external fit.
makes a good fit between these constructs?
Siggelkow’s performance landscape indicates25 Requirements, Key Drivers and Diverse Fit
“coherent configurations of design elements as Competitive strategy requires uniqueness — a firm
good fit” relative to the environment, justifying a adopts a differentiated choice and set of activities
firm’s choice and the appropriate fit of activities. to deliver a unique mix of value. To achieve this,
Consequently, design elements X and Y fit well, if a crucial factor is the impossibility of imitation by
complementarity between them exists — i.e., the competitors. Such uniqueness can be achieved
marginal benefit of X increases with the level of Y, through complex interactions between various
and if the levels of X and Y adjust optimally to the activities within a firm that are not reducible to
local performance optimum.26 the sum of the individual activities. Therefore,
choice determines the activities a firm performs,
Zott and Amit in their study investigate “which
and determines how individual activities are
combinations of business model design themes
configured. In this respect, operational effective-
and product market strategies fit well.” The
ness means achieving excellence in individual
findings indicate that a “firm’s product-market
activities, whereas strategy means the combi-
strategy and its business model” are “distinct
nation of these activities. Hence, fit locks out
constructs that affect the firm’s market value.”
imitators by creating a chain that is as strong
They reflect the “significant effects of its inter-
as its strongest link. Managers are therefore
action with product market strategy on the
focusing on core competencies, critical resources
perceived performance of firms, as measured
and key success factors. In this respect, fit is a
by market capitalization.” Concretely, “empirical
crucial component of competitive advantage.
support for the theoretical predictions about
the positive and significant interactions between The key drivers shaping the contemporary
novelty-centered business models and various banking business model are accessibility for
product market strategies” exists. Further, the customers, the increasing demand for m-wallet,
“boundary-spanning transactions” between a (beginning fit-destroying change) with a lower
firm and its environment of partners, customers internal fit, as shown in Figure 1, tighter regula-


tions (detrimental fit-destroying change) with The triggers for these challenges are the period
a lower external and internal fit and assurance of declining interest rates (lower external fit)
of increased operations efficiency because of and the accompanying decline in banking profits
decreased performance/profit with a lower (lower external and internal fit) with the end of
internal and external fit. With banks required to be the savings and loan crisis and the bottoming out
accessible anywhere and everywhere (beginning of interest rates in 2003 — hence, for declining
fit-destroying change) a lower internal fit exists, interest rates indicating a fit-conserving change
and to continuously adjust to regulations and and decreasing profits a detrimental fit-destroy-
to decreasing performance and profitability, a ing change.
lower external fit and internal fit is indicated.
Investment and asset management institutions Conclusion
need to adjust to changes in infrastructure, regu- The key issue for the banking industry currently
lations and markets. is how to activate contemporary technologies for
developing and selling cutting-edge, high-margin
Ultimately, financial institutions need to services and products to demanding customers in
understand their customer base and reassess a highly competitive market. We have presented
a framework for visualizing the relationship
Change Framework between macroeconomic changes and fit, in
the performance landscape. According to this
External Fit
concept, certain combinations of flexibility and
No Change Change product variety illustrate the effect of change.
Thus, environmental changes can be seen as the
Change

Fit-conserving driving force for changes in the landscape. For
No

No change
Internal Fit

change
example, in 1900 with the available technological
and production potential, a firm’s choice of low
Beginning Detrimental
Change

variety and low flexibility could be very efficient,
fit-destroying fit-destroying whereas in 1980 choices with high variety and high
change change
flexibility introduced a high-volume production
that could be realized through technology.
Source: Siggelkow, 2001
Figure 1
This paper provides an outline of the possible
effects of the demands and key challenges that
their value proposition of products and services. the current era imposes on the current banking
Further, constant efficiency improvement of the model. It further elaborates their effects on
operational model, hence, business and opera- external and internal fit.
tional model adjustments in response to the mac-
roeconomic environment and its demands (e.g., The triggers for these challenges are the period
mobility, regulations and future of work) as well of declining interest rates (lower external fit)
as process optimizations, reorganizations and and the accompanying decline in banking profits
cost structure optimizations are indications of (lower external and internal fit) with the end of
lower internal fit. Banks in developed economies, the savings and loan crisis and the bottoming out
challenged in growing revenues, are confronted of interest rates in 2003 — hence, for declining
by detrimental fit-destroying change. Both interest rates indicating a fit-conserving change
external and internal fit are affected, and the and decreasing profits a detrimental fit-destroy-
firms find themselves at a lower elevation (lower ing change.
external fit) and located away from a peak (lower
internal fit).


Footnotes
1
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2
D. Ellis, “The New New Banking Model,” CNNMoney, Feb. 2, 2009.
3
C. McKlean, “Europe’s Banking Centres Forge New Business Model,” The Globe and Mail, Sept. 3, 2012.
4
“Why U.S. Banks Need a New Business Model: Investors Want Radical Plans to Boost ROE Above the Cost
of Capital. McKinsey Quarterly, January 2011.
5
O. Wyman, “The Future of Banking. Six Trends that Will Shape the Industry,“ Financial Services, Report,
2010.
6
C. Alexander, S. Ishikawa, M. Silverstein, with M. Jacobson, I. Fiksdahl-King and S. Angel, A Pattern
Language: Towns, Buildings, Construction, New York: Oxford University Press, 1977.
7
A. Van de Ven, D. Polley, R. Garud and S. Venkataraman, The Innovation Journey, New York: Oxford
University Press, 1999.
8
P.B. Seddona, P.L. Geoffrey “Strategy and Business Models: What’s the Difference.” Working paper.
Department of Information Systems, The University of Melbourne, 2003.
9
Economist Intelligence Unit, Business 2010: Financial Services – Embracing the Challenge of Change,
London, 2005.
10
H.J. Blommestein, “Visions About the Future of Banking, Vienna: SUERF – The European Money and
Finance Forum, 2006.
11
“The Loan Factory,” The Economist, April 16 2005.
12
D. O’Leary, Technology Address (The Answers Are All Different), FRBNY Economic Policy Review,
October 2000, pp. 61–65.
13
M.E. Porter, “What is Strategy?,” Harvard Business Review, Nov-Dec. 1996: pp. 61-78.
14
M. Siggelkow, “Change in the Presence of Fit: The Rise, the Fall, and the Renaissance of Liz Claiborne,”
Academy of Management Journal, 2001, vol. 44: pp. 838-857.
15
T. Reid, Essays on the Active Powers of Man. London: John Bell, and G. G. J. & J. Robinson, 1788.
16
S. Wright, “The Roles of Mutation, Inbreeding, Crossbreeding, and Selection in Evolution, Proceedings of
the Sixth International Congress on Genetics, 1932, pp. 355–366.
17
S.A. Kauffman, “Adaptation on Rugged Fitness Landscapes,” in D. Stein, ed., Lectures in the Sciences of
Complexity, 1989, Reading, MA: Addison-Wesley.
18
S.A. Kauffman, The Origins of Order: Self-Organization and Selection in Evolution, Oxford University
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19
D.A. Levinthal, “Adaptation on Rugged Landscapes,” Management Science, 1997, vol. 43: pp. 934-950.
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Change, 2002, vol. 11: p. 529-555.
22
Ibid.
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P. Andries, K. Debackere, D. Verbeeck, “New Ventures on the Search for Viable Business Models: Taking
into Account Levels of Uncertainty/Ambiguity, Research report, 2004, Katholieke Universiteit. Leuven,
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M. Lieberman, D. Montgomery, “First-Mover Advantages,” Strategic Management Journal, 1988
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25
C. Zott, R. Amit, “Exploring the Fit Between Business Strategy and Business Model: Implications for Firm
Performance,” Working paper, 2005, France, Fontainebleau: INSEAD.
26
P. Milgrom, J. Roberts, “Complementarities and Fit: Strategy, Structure, and Organizational Change in
Manufacturing,” Journal of Accounting and Economics, 1995, vol. 19: pp. 179-208.
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of Management Executive, 2004, vol. 18: pp. 22-36.
28
R. McGrath, I. MacMillan, The Entrepreneurial Mindset, 2000, Boston: Harvard Business School Press.


About the Author
Stefan Lettig is a Manager within Cognizant Business Consulting Strategic Services Switzerland. He
is also researching at Strathclyde University Business School in the area of management looking at
innovation and economic dynamics. Particularly, he is investigating the nonlinearity of innovation,
encapsulating the customer-supplier (innovator) interaction, as well as the interactive micro-mac-
ro feedback loop mechanism with its concrete characteristics of activities. He can be reached at
Stefan.Lettig@cognizant.com.

Acknowledgments
This work was partially supported by Cognizant Business Consulting DACH. The author would like to
thank Frederik Arns for peer-reviewing and refereeing the generation of this paper.

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