Legitimizing opportunities.
External stakeholders are, if anything, even more reluctant to accept a new conceptualization of a company’s identity or of the strategic possibilities inherent in an industry. Their reluctance often feeds back into the company and can cause managers to abandon promising new directions prematurely.
For instance, in the early days of internet portals, at least two business models competed for legitimacy. Some firms, including Lycos and Infoseek, saw themselves as high-tech competitors in a technology industry. Others, including Yahoo, viewed themselves as media companies; this group was especially proactive about communicating with industry stakeholders. The alternative representations competed for attention and resources. Ultimately, external stakeholders—financial analysts, specialized press, potential customers, and so on—endorsed the media representation. As a result, most companies in the business started to compete as media companies. The arguably better strategy remained untapped, not because companies failed to spot it and act on it but because they failed to legitimize it in the eyes of external stakeholders. When Google entered the business a few years later, it made a resounding case for the technology strategy, and we know how that story unfolded.
Legitimizing opportunities.
External stakeholders are, if anything, even more reluctant to accept a new conceptualization of a company’s identity or of the strategic possibilities inherent in an industry. Their reluctance often feeds back into the company and can cause managers to abandon promising new directions prematurely.
For instance, in the early days of internet portals, at least two business models competed for legitimacy. Some firms, including Lycos and Infoseek, saw themselves as high-tech competitors in a technology industry. Others, including Yahoo, viewed themselves as media companies; this group was especially proactive about communicating with industry stakeholders. The alternative representations competed for attention and resources. Ultimately, external stakeholders—financial analysts, specialized press, potential customers, and so on—endorsed the media representation. As a result, most companies in the business started to compete as media companies. The arguably better strategy remained untapped, not because companies failed to spot it and act on it but because they failed to legitimize it in the eyes of external stakeholders. When Google entered the business a few years later, it made a resounding case for the technology strategy, and we know how that story unfolded.
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