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The Case Centre’s top 40 bestselling cases

Sixteenth place  - Canon: Competing on Capabilities
The case
Case: Canon: Competing on Capabilities Shouldice Hospital Ltd.
Authors: Sumantra Ghoshal and Mary Ackenhusen
Institution: INSEAD
Ref: 392-031-1
Date published: 1992

By 1970, with a 93% market share worldwide and a brand name that was synonymous with copying, Xerox appeared invincible. So when Canon, ‘the camera company from Japan’, jumped into the business in the late 1960s, most observers were sceptical. Yet over the next two years, Canon re-wrote the rule book on how copiers were supposed to be produced and sold and built up $5 billion in revenues, emerging as the second largest global player in terms of sales, and overtaking Xerox in the number of units sold. This case can be used to analyse and understand a number of issues, including the resource or core competency-based approach to strategy and how this differs from a focus on industry structure.

The authors

Sumantra Ghoshal died in March 2004. At the time of his death he was Professor of Strategy and International Management at the London Business School. Before that, he was a Full Professor at INSEAD and Visiting Professor at MIT Sloan School of Management.

Mary Ackenhusen is now Interim Chief Financial Officer and Vice President, Systems Development and Performance, at Vancouver Coastal Health.

The teacher

Brian Leavy Brian Leavy is AIB Professor of Strategic Management at DCU Business School. The Canon case is the oldest one on Brian’s current syllabus but, as he explains here, it is a classic with enduring appeal.

In general, students have a strong, and understandable, preference for recent cases, and the Canon case is now more than 20 years old. However, it does not pivot on a particular decision challenge, so foreknowledge of subsequent outcomes is less likely to undermine its ongoing appeal. The main insights that we are able to draw from it, and the connections that we can make to other cases, are still valued by students.

Significant development

The case was first published in 1992 when the Resource-Based View (RBV) was starting to make an impact on the strategy field. Just two years earlier, C.K.Prahalad and Gary Hamel had published their classic article, The core competence of the corporation in Harvard Business Review, introducing what was later to become the most widely used of the RBV concepts. Strategy teachers at the time were on the lookout for a good case that could be used to help students understand this new ‘competency’ perspective on strategy and Canon: Competing on Capabilities turned out to be the perfect answer.

In addition to its timeliness, the case was written by the late Sumantra Ghoshal, one of the best case writers that the strategy field has ever produced, and his associate Mary Ackenhusen, so it is no surprise that it quickly established itself on The Case Centre’s bestseller list. What has kept it there over the years is that it is still one of the best cases for teaching the ‘competency’ perspective.

Inside-out versus outside-in

Canon was one of the companies that helped inspire Prahalad and Hamel’s development of the core competency perspective on corporate strategy and development, and the case shows why. The traditional approach to corporate growth and development is an ‘outside-in’ approach, focusing on market positioning and selection. When you look closely at Canon’s diversification pattern over the period covered by the case, a different ‘inside-out’ approach is seen to be at work.

The Canon case helps us to understand why this ‘inside-out' rather than ‘outside-in’ difference matters, and how the two approaches ultimately tend to lead to very different corporate growth patterns.

Further insights

The Canon case also helps us to explore in concrete terms two further key insights offered in the core competency perspective: the importance of understanding competitive power and economic influence not only at the end product market share level, but also at the core product and core competency levels; and when and why it might make sense to license your proprietary technology to competitors (as Canon does in the case with HP and others) rather than using it to wrest market share away from them.

New relevance

In 1998, Clayton Christensen developed the theory of disruptive innovation to explain why mature markets can often be disrupted by late entrants that rise to market leadership based on an innovative business model. Canon’s introduction of the personal copier in a market long dominated by Xerox is a classic example, and the story of Canon’s success in competing with Xerox where larger, more resource-rich companies like IBM and Kodak had failed, is covered in the case. Even though the case was written before the theory of disruptive innovation was developed, it provides an excellent vehicle for exploring the nature of this process and the power of this perspective.

Executive MBA programme

I teach this case on the capstone module ‘Strategy, Leadership and Renewal’ in the final semester of our Executive MBA programme as part of a two-case set preceded by another of The Case Centre’s bestsellers, GE’s Two-Decade Transformation: Jack Welch’s Leadership, written by Chris Bartlett, again a top case writer, and his associate Meg Wozny. For me, the two cases work very well together in exploring a range of strategic and organisational challenges associated with corporate growth and development in the multi-business firm and the various ways in which these might be approached.

A thematic approach

Part of the Canon case’s lasting appeal for me also relates to the potential ways it can be used in conjunction with other cases within a thematic approach to the teaching of strategy. For example, since the early 1980s, leading global multi-business firms have been trying to move away from the traditional impersonal command-and-control corporate management model towards one that is much more empowering and engaging. The central organisational challenge is how to give as much autonomy to the individual businesses as possible while still retaining the advantages of corporate scale, consistency and cohesion. In 1998, Chris Bartlett and Sumantra Ghoshal set out to address this very issue in their highly influential book, The Individualised Corporation and to develop a blueprint for what they called the ‘post-transformation’ organisation.

The GE and Canon cases, when taken in conjunction, provide a great opportunity to explore what is different about this new corporate management model and the primary challenges involved in trying to bring it to fruition. Again, this is not surprising, given that the GE case was co-written by Bartlett and the Canon case by Ghoshal. Both examples feature prominently in their book and clearly influenced its main ideas.  

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