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Optimal Strategy and Business Models: A Control Theory Approach
Author(s) -
Johnson Peter,
Foss Nicolai J.
Publication year - 2016
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2738
Subject(s) - control (management) , realization (probability) , path (computing) , software deployment , resource (disambiguation) , strategic management , computer science , competitive advantage , theory of the firm , business model , operations research , economics , mathematical economics , microeconomics , mathematics , management , computer network , statistics , programming language , operating system
This study picks up on earlier suggestions that control theory may further the study of strategy. Strategy can be formally interpreted as an idealized path optimizing heterogeneous resource deployment to produce maximum financial gain. Using standard matrix methods to describe the firm Hamiltonian, it is possible to formalize useful notions of a business model, resources, and competitive advantage. The business model that underpins strategy may be seen as a set of constraints on resources that can be interpreted as controls in optimal control theory. Strategy then might be considered to be the control variable of firm path, suggesting in turn that the firm's business model is the codification of the application of investment resources used to control the strategic path of value realization. Copyright © 2015 John Wiley & Sons, Ltd.