Strategic Renewal of Organizatio

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Organization Science
Vol. 20, No. 2, March–April 2009, pp. 281–293 issn 1047-7039 eissn 1526-5455 09 2002 0281

informs

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doi 10.1287/orsc.1090.0423 © 2009 INFORMS

Strategic Renewal of Organizations
Rajshree Agarwal
College of Business, University of Illinois, Champaign, Illinois 61822, agarwalr@illinois.edu

Constance E. Helfat
Tuck School of Business, Dartmouth College, Hanover, New Hampshire 03755, constance.helfat@dartmouth.edu

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trategic renewal, although critical for the sustained success of organizations, has received relatively little attention as distinct from the more general phenomenon of strategic change. Like all strategic issues, strategic renewal presents both opportunities and challenges for organizations. In this article, we first define the term “strategic renewal” and elaborate on important characteristics of this phenomenon. We also bring to bear evidence that suggests that strategic renewal has a critical impact not only on individual firms and industries but also on entire economies. We then provide an in-depth example of a company that has successfully renewed itself more than once, namely, IBM. Finally, we examine several different avenues for strategic renewal, involving both content and process, and identify common themes among them. Key words: strategic renewal; dynamic capability; innovation; cognition; market entry History: Published online in Articles in Advance March 6, 2009.

Introduction
“Strategic renewal” has a nice ring to it. But what does it really mean? Strategic renewal is often discussed but rarely defined. Research that refers to “strategic renewal” frequently uses the term to motivate examples of strategic change more generally, with most examples highlighting the process of change. Although some research has focused squarely on strategic renewal (e.g., Huff et al. 1992, Floyd and Lane 2000), this research also has tended to focus on organizational processes. Like all strategic issues, however, strategic renewal has important content aspects as well. The need to incorporate both content and process aspects of strategic renewal, along with a lack of clarity regarding the term itself, suggests that we first need a working definition of strategic renewal. Then, we need to better understand what strategic renewal consists of and how firms cope with the challenges and opportunities that strategic renewal presents. In what follows, we first define what we mean by strategic renewal and elaborate on important characteristics of this phenomenon. We also bring to bear evidence that suggests that strategic renewal has a critical impact not only on individual firms and industries, but also on entire economies. Then we provide an example of a company that has successfully renewed itself more than once, namely, IBM, and show how IBM’s experience can help us to understand strategic renewal more generally. Finally, we examine several different avenues for strategic renewal, exemplified by the articles in this special issue, and identify common themes among them.

Defining Strategic Renewal
To define the term “strategic renewal,” we first define what we mean by “strategic” and then define “renewal.” 281

There are numerous definitions of “strategy,” along with numerous conceptions of what it means to be “strategic,” and we do not propose to arbitrate among them here. Instead, for purposes of our analysis, we define “strategic” as “that which relates to the long-term prospects of the company and has a critical influence on its success or failure.”1 In this definition, something is strategic if it relates to a firm’s future prospects in a substantial way. Some factors that are critical to a company’s long-term prospects may be relatively unimportant to its current well-being, and vice versa. In addition, because a firm and its managers cannot predict with certainty what factors will turn out to be critical for success in the future, factors that have the potential to affect an organization’s...
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