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Why are strategy and organizational learning important and linked? What is organizational design and how is it linked to strategy? How does technology influence organizational design? How does the environment influence organizational design? Copyright © 2010 John Wiley & Sons, Inc. 17-2
Strategy The process of positioning the organization in the competitive environment and implementing actions to compete successfully. Copyright © 2010 John Wiley & Sons, Inc. 17-3
Organizational learning Process of knowledge acquisition and adaptation to changing circumstances through: Information distribution Information interpretation Information retention Copyright © 2010 John Wiley & Sons, Inc. 17-4
Copyright © 2010 John Wiley & Sons, Inc. 17-5
Experience A primary way to acquire knowledge. Besides learning by doing, managers can also establish structured programs to learn from successes as well as failures. Copyright © 2010 John Wiley & Sons, Inc. 17-6
Scanning Involves looking outside the firm and bringing back useful solutions. Copyright © 2010 John Wiley & Sons, Inc. Grafting The process of acquiring individuals, units, or firms to bring in useful knowledge. 17-7
Avenues for knowledge retention: Individuals Transformation mechanisms Formal structures Physical structures (ecology) External archives IT systems Copyright © 2010 John Wiley & Sons, Inc. 17-8
Organizational design The process of choosing and implementing a structural configuration. Copyright © 2010 John Wiley & Sons, Inc. 17-9
Copyright © 2010 John Wiley & Sons, Inc. Organizational Design Size Operations And I.T. EnvironmentStrategy 17-10
The structural configuration: Allows the management to focus on skills and abilities that their firms need to compete, be flexible, and adaptive. Allows the individual members the ability to experiment, grow, and develop competencies that contribute to success. Copyright © 2010 John Wiley & Sons, Inc
Co-evolution of strategy and structure The firm can adjust to external changes even as it shapes some of the challenges facing it. Shaping capabilities via the organizations design is a dynamic aspect of co-evolution. Copyright © 2010 John Wiley & Sons, Inc
Organizational size As the number of employees increase, the possible interconnections among them increase even more. The design of small firms is directly influenced by core operations technology. Copyright © 2010 John Wiley & Sons, Inc
Simple design A configuration involving one or two ways of specializing individuals and units. Vertical specialization and control emphasize levels of supervision without elaborate formal mechanisms. Copyright © 2010 John Wiley & Sons, Inc
Managerial scripts A series of well-known routines for problem identification and alternative generation and analysis that are common to managers in a firm. Copyright © 2010 John Wiley & Sons, Inc
Copyright © 2010 John Wiley & Sons, Inc. Overemphasis on vertical relations Overemphasis on functions or product lines Isolating of firm from its partners Cultural, national, geographic limits Barriers to Desired Action 17-16
Co-evolution of strategy and structure can be hampered by: Organizational inertia Hubris Issue of detachment Copyright © 2010 John Wiley & Sons, Inc
Operations technology The combination of resources, knowledge, and techniques that creates a product or service. Information technology The combination of machines, artifacts, procedures, and systems used to gather, store, analyze, and disseminate information for translating it into knowledge Copyright © 2010 John Wiley & Sons, Inc
Thompsons view of technology Classification according to the degree of specification and degree of interdependence of work units. Copyright © 2010 John Wiley & Sons, Inc
Intensive technology Uncertainty as to how to produce desired outcomes. Requires assistance of specialists. Mediating technology Links parties that want to become interdependent. Long-linked technology Production method is known and broken down into a number of sequential steps. Copyright © 2010 John Wiley & Sons, Inc
Woodwards view of technology Small-batch production. Mass production. Continuous-process technology. Copyright © 2010 John Wiley & Sons, Inc
An adhocracy is characterized by: Few rules, policies, and procedures. Substantial decentralization. Shared decision making among members. Extreme horizontal specialization. Few levels of management. Virtually no formal controls. Copyright © 2010 John Wiley & Sons, Inc
An adhocracy is useful when: The tasks facing the firm vary considerably and provide many exceptions. Problems are difficult to define and solve. Copyright © 2010 John Wiley & Sons, Inc
Why IT makes a difference IT provides a partial substitute for: Operations Process controls Methods of coordination IT provides a strategic capability Copyright © 2010 John Wiley & Sons, Inc
IT as a substitute Initial implementation of IT often displaced routine, highly specified, and repetitious jobs. A second wave of substitution replaced process controls and informal coordination mechanisms with IT. Copyright © 2010 John Wiley & Sons, Inc
IT as a strategic capability Improves the efficiency, speed of responsiveness, and effectiveness of operations. Provides all levels of the organization with the knowledge required for immediate decision- making. Enhances motivation through individual empowerment. Copyright © 2010 John Wiley & Sons, Inc
Copyright © 2010 John Wiley & Sons, Inc. Information Systems OperationsManagementStructureStrategy 17-27
IT and e-business Many dot-com firms adopted some variation of adhocracy. As the dot-coms grew, the adhocracy design became problematic. Copyright © 2010 John Wiley & Sons, Inc
Virtual organization An ever-shifting constellation of firms, with a lead corporation, that pool skills, resources, and experiences to thrive jointly. Partner firms are bound by mutual trust and need for collective survival. Copyright © 2010 John Wiley & Sons, Inc
General environment The set of cultural, economic, legal-political, and educational conditions found in the areas in which the organization operates Specific environment The owners, suppliers, distributors, government agencies, and competitors with which an organization must interact to grow and survive. Copyright © 2010 John Wiley & Sons, Inc
Copyright © 2010 John Wiley & Sons, Inc. Environmental Complexity Richness Inter- dependence Uncertainty 17-31
Environmental richness A condition where the economic climate is improving, customers are buying more products, and suppliers are willing to invest in the organizations future. Provides the best climate for opportunity and dynamic growth. Copyright © 2010 John Wiley & Sons, Inc
Environmental interdependence Linkage between environmental independence and organization design may be subtle and indirect. Organization may co-opt powerful outsiders by including them on governing board. Develop centralized staff teams to service an important client group. Copyright © 2010 John Wiley & Sons, Inc
Environmental uncertainty A more organic structure is the appropriate organizational design response to uncertainty and volatility. Copyright © 2010 John Wiley & Sons, Inc
In a complex global economy, firms must learn to co-evolve by adjusting their environment. Two important ways of co-evolution: Management of networks Development of alliances Copyright © 2010 John Wiley & Sons, Inc
Inter firm alliances Cooperative agreements or joint ventures between two independent firms. Often, firms are geographically and geopolitically separate, but have common interests. A structure that is often used in complex technology industries. Copyright © 2010 John Wiley & Sons, Inc
Chapter 18 Strategic Capabilities and Design How to compete in the 21 st century.
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