Strategy, Problems, and a Theory for the Firm

In this paper we develop the outlines of a theory for the firm-a theory that guides a firm's path to value creation, in response to the critique by von Hippel and von Krogh [von Hippel E, von Krogh G (2016) Identifying viable "need-solution pairs": Problem solving without problem formulation. Organ. Sci. 27:207-221; henceforth Hippel-Krogh] of the problem-solving perspective as a theory of value creation. Hippel-Krogh argue (a) that problems and solutions cannot always be separated because they often emerge as problem-solution or need-solution pairs that are discovered serendipitously, and (b) that deliberately formulating or choosing a single, fixed problem restricts the firm from accessing the vast array of external problem solvers and restricts the firm from valuable reformulations of the problem and "rich landscape search." Although Hippel-Krogh raise interesting and important arguments, we claim that they miss what is most central about the problem-solving approach: the comparative, organizational, and strategic aspects of the theory. However, their critique is also important because it draws attention to a critical void in the problem-solving perspective, namely, the need for firms to possess a theory to guide their efforts at value creation. We argue that this theory for the firm links problem solving with a broader theory of value creation, thus responding to the concerns raised by Hippel-Krogh. We discuss how firms theorize the process of value creation by articulating an overall architecture and bundle of problems around which each firm uniquely organizes and governs as a path to value creation. We provide two brief, informal examples (Starbucks and Apple) to illustrate our points, linking these examples to the need-solution landscape proposed by Hippel-Krogh. In all, we provide a broad sketch and outline of a theory of value creation as it relates to problem finding and problem solving while concurrently responding to points raised by Hippel-Krogh.