Change in the presence of fit: The rise, the fall, and the renaissance of Liz Claiborne

Citation: Siggelkow, Nicolaj (2001) Change in the presence of fit: The rise, the fall, and the renaissance of Liz Claiborne. Academy of Management Journal 44: 838-857 (RSS)
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Tagged: Business (RSS) performance landscape (RSS), Liz Claiborne (RSS), organizational change (RSS), fit (RSS), inertia (RSS)

Summary

Siggelkow presents new theory on the relationship between the “tightness” of “fit” in an organization and its ability to adapt to changing market conditions. In order to achieve this, Siggelkow also offers a new taxonomy of market-based change. Previous approaches focused on whether environments were stable or turbulent. In proposing his theory, Siggelkow bridges the “fit” and “inertia” literatures.

Punchline: very tight internal fit implies a firmly-embedded mental model in individual managers. This makes the organization much less able to adapt to market changes that challenge external but not internal fit (that is, “the environmental change has left the internal logic of the firm's system of choices intact while decreasing the appropriateness of the system as a whole.” )

Key Terms:

Firm: “a system of interconnected choices: choices with respect to activities, policies and organizational structures, capabilities, and resources.” p838

Internal fit: “…whether a firm has a coherent configuration of [internal] activities.” (“Tight” in relation to this term simply means a great degree) p839

External fit: “…the appropriateness of the configuration [of internal activities] given the environmental conditions facing the firm.” (“Tight” in relation to this term simply means a great degree) This is essentially Porter’s alignment-of-strategy-with-the-market question. p839   Performance Landscape: a three-dimensional plot of organizational performance (z) and any other two variables that bear causal/correlational relationships with performance. Siggelkow uses “variety” and “flexibility” as the (x) and (y) variables to explain the concept. Siggelkow borrows this construct from a number of scholars (e.g. Leventhal, Rivkin).

Structure: Introduction: Standard fare

Part 1: Literature review and Change Framework Siggelkow proceeds here by defining new concepts. Each time he does this he cites relevant literature.

He begins by defining internal and external fit (to account for useful and different conceptions of fit from disparate literatures).

He then moves to organizational “inertia” (that which limits adaptive organizational behavior in turbulent times) and defines this in terms of managers’ mental models.

Key point here: the more previous success, the more deeply embedded a mental model, the more challenging it is to change.

Siggelkow then introduces performance landscapes as a way of visualizing internal and external fit. He says that external fit is represented by the height of a given point on the landscape. Internal fit is whether the firm occupies a given peak (so, as an aside, Porter’s “focused” firm would seek a high point on its performance landscape and try to occupy it).

Then Siggelkow defines four kinds of change, in terms of internal and external fit:

“In sum, with fit-destroying change the firm no longer occupies a peak [on its performance landscape]; with fit-conserving change, the firm still occupies a peak, the height of which has declined, however.”

Siggelkow claims that in fit-conserving change, firms can respond in one of three (self-evident) ways: 1- Playing the old game (graphically: firm stays on its sinking peak - BAD) 2- Playing an incomplete game (graphically: firm moves incrementally off its peak - BAD) 3- Playing a new game (graphically: firm relocates to a new and higher peak - GOOD)

Part 2: Liz Claiborne case study Key sections, with summaries:

History of the firm: Story of its founding, really. The firm was incredibly successful very quickly; it occupied a very tall peak in its performance landscape by 1989, never having performed poorly (it was founded in 1976).

The Rise of Liz Claiborne: Siggelkow lays out key choices the firm made in the early days – choices that led to very tight internal and external fit well into the late 80s. He examines these choices and content codes them, ending with six categories (e.g. Marketing). These correspond with “flexibility” and “variety” variables on the sample performance landscapes, above.

Liz Claiborne’s fall: “during the late 1980s and early 1990s, changes in customer demand, retailers' economic health, and technological advances reduced the external fit of this coherent system: the height of Liz Claiborne's peak started to decrease when a new peak arose in the performance landscape.” Firm leaders and managers essentially adopted the “play an incomplete game” strategy.

Liz Claiborne’s renaissance: In 1994 a new CEO was hired. He and his management team successfully adopted the “play a new game” strategy. Siggelkow returns to his content-coded map of strategic choice in the firm, making modifications to reflect the new tactics associated with the “new game” strategy.

Part 3: Discussion and Conclusion Other than summarizing his paper and views, Siggelkow proposes some (as yet untested) hypotheses, implied by his theoretical contribution: 1- In the face of benign, fit-destroying change, firms that have tight internal fit will react quicker because the organization is highly interdependent 2- “fit-conserving change can be observed if technological change allows rival firms to compete with new systems of activities.” 3- “moderate fit-destroying change is associated with environmental developments (such as technological improvements) that affect only individual activities.”