Dominant management logic:
This is the way in which the top management of a firm conceptualizes its business. The DML influences critical operating and strategic decisions. The sources of this are listed below
- Operant Conditioning: This is likened to the behavioral conditioning of the managers. An action that results in market success is reinforced positively. The sum-total of such positive reinforcements constitute a set of ideas that influence DML
- Power of Paradigm: The most seminal work of that time period, the buzzwords of the era, the most fashionable jargon etc…These existing models and streams of thought have a profound effect on the DML.
- Pattern recognition: Managers remember patterns. Typically a set of stages that result in an outcome is a pattern. Most managers accumulate a large vocabulary of patterns. They draw on this experience to get an insight into the future. These patterns again influence DML
- Cognitive bias: I would rather call this the bounded rationality problem.
Strategic variety:
The strategic variety of a firm is decided by the mix of business that they choose to dabble in. The sources are listed below
- Adding new businesses lines (organic or inorganic)
- Change in industry structure
The Link:
The amount of strategic variety that a firm can have is limited by the DML or more aptly by the how fast the firm can add a new DML.