Garbage Cans and Advancing Hypercompetition: The Creation and Exploitation of New Capabilities and Strategic Flexibility in Two Regional Bell Operating Companies

Anne D. Smith and Carl Zeithaml
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Anne D. Smith: McGill University, Faculty of Management, 1001 Sherbrooke Street W, Montreal, PQ Canada H3A 1G5
Carl Zeithaml: Kenan-Flagler Business School, University of North Carolina at Chapel Hill, Carroll Hall CB№ 3490, Chapel Hill, North Carolina 27599-3490

Organization Science, 1996, vol. 7, issue 4, 388-399

Abstract: How does an organization functioning in a regulated, monopoly environment transform itself to prepare for hypercompetitive conditions? Two of the regional Bell operating companies (RBOCs) found one answer to that question: create self-contained areas of chaotic activities with the potential to spawn new managerial capabilities and flexibility.After divestiture from AT&T, the RBOCs maintained their local telephone service monopolies, but they all became involved in numerous unregulated activities, such as international expansion. For two of the seven RBOCs, the international activities led to new skills; learning and capabilities developed inside their stodgy bureaucracies. By the early 1990s, the RBOCs' local telephone service was facing dramatic change. Powerful potential entrants such as long-distance, wireless, and cable companies were surrounding and converging on the local telephone service industry through their new wireless licenses, collaborations crossing traditional industry borders, and new network development. The RBOCs saw clear signs of impending hypercompetitive conditions.How the two RBOCs changed over an eight-year period and prepared for hypercompetition illustrates several aspects of Volberda's model of organizational transformation. The two RBOCs proceeded through two parallel trajectories of change, which after several years converged and necessitated reorganization. Only through a major organizational change were the two RBOCs able to redeploy the capabilities acquired from international activities into their regulated core business, thereby creating the flexibility they needed to prepare for advancing hypercompetition. With the imminent removal of regulatory barriers and legal roadblocks to competition in local telephone service in the United States, the RBOCs' flexibility and ability to manage hypercompetition may soon be tested.

Keywords: capability development; telecommunications service industry; international expansion; hypercompetition (search for similar items in EconPapers)
Date: 1996
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