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A Tour of Block Five: Objectives and

Introduction
After working through Block Five of this course, you should be able to:
1. Explain the function and composition of the Organisation Equation and its
associated Key Analysis
2. Distinguish between the terms employed by the equation
3. Explain the function and composition of Value Chain Analysis and its variant the
Process Chain Analysis model
4. Distinguish between the terms employed by these two models
5. Explain the function and use of Output and Outcome Analysis and its relationship
with the Process Chain Analysis Model
6. Distinguish between the terms employed by this model.

1.1 Introduction
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Although the 'Strengths and Weaknesses' side of the SWOT analysis can give a good
basic description of the state or condition of the organisation, there are a number of
additional models and techniques that assist managers to deepen their understanding of
the nature and behaviours of their own organisation and most specially, to integrate that
understanding with the organisation's place and fit within its environmental landscapes.
These models include the ‘Inside to Outside' perspective, the Organisational Equation,
and the Process Value Chain. In addition, there is the ‘Outputs and Outcomes' model,
which offers the user of the Process Value Chain a way to best manage the chain so as to
optimise all processes and productive resources to its strategic advantage.

2 The ‘Inside to Outside, Outside to Inside’

Perspective
When analysing the organisation, it helps to keep in mind that the organisation always
occupies a ‘space' - physical, economic, and social. This creates a constant interaction
between the ‘inside' of the organisation (defined in terms of its strengths and
weaknesses) and the ‘outside,' environmental landscapes (defined in terms of its
opportunities and threats) across the boundary line (sometimes clear and at other times
ambiguous) that separates the two. This boundary which both unites and divides the
internal from.the external is represented in Figure 5-l. (See Block 4 for a more detailed
look at such boundaries.)

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The organisation itself may display a bias or preference towards one perspective over the
other: towards an ‘inside looking out on the world’ view where it bets its strategic future
on its R&D and production skills (in other words, what it can create from its own
resources and expertise). The Output that results from such a strategy induces a need in
the minds of prospective customers, at which point the developers’ vision or ‘dream’
becomes the customers’ ‘must-have.’ The final Outcome of the R&D exercise exposes
benefits that they apparently have been seeking to acquire, without knowing that the need
(or desire) lay within. In this instance, the focus of the organisation is on establishing a
FIT between themselves, their products, and the customer in the environmental landscape
finding or creating the lock to fit their key.

Alternatively, an organisation may opt for an ‘outside looking in’ view of the relationship
between the environment and themselves. Here, the focus of the strategist is on
identifying the existing and prospective needs of current and potential customer
segments, and by working back from the outside to the inside, reshape and if necessary
STRETCH the organisation to create the outputs required to meet these customer needs
and wants - developing the key to fit the existing lock.

Figure 5-1 suggests that both of these processes are at work simultaneously, but the
organisation may choose to emphasis one side of the equation more than the other, from
time to time. Over the long term, it is most likely that each side of the cycle will stimulate
and contribute to the other. It also suggests that the SWOT provides a means of
‘zippering’ the two sides together (inside to outside, outside to inside) within its own
analytical framework and, that the SWOT itself is best developed and employed as a
relational database tool and template to serve an additional and very useful purpose
beyond its traditional - and restricted - uses (see Block 4 for a more detailed look at the
composition and usage of SWOT).

Figure 5-1 The Inside to Outside Strategy Cycle

Organisation
 Opportunities

Environment

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Weaknesses

Threats

169
Keep this inside-outside perspective in mind when considering the following two models.
In the case of the ‘key’ analysis, the organisation is pictured as interacting with its
environment along three specific dimensions: its structural, its cultural, and its process
activities, all of which are shaped by the influences of the industry and societal
landscapes in which the organisation chooses to participate. In the case of the Process
Value Chain, the organisation is analysed along the Process by Resource dimension to
create a detailed matrix with patterns of strengths and weaknesses that combine to create
a specific set of Outputs and Outcomes that in turn interact with the Opportunity and
Threats represented in the landscapes.

3 Defining the Organisational Equation -

using ‘Key Analysis’
Organisational analysis can also be condensed down to four ‘key’ components or
attributes that largely define the strategic conditions, possibilities, and options available.
They consist of the organisation’s Structure, its Culture, the Processes (including
systems) that it employs and the application and use it makes of its Resources to strategic
positioning and long term ends. This is shown in Figure 5-2.

Figure 5-2 ‘Key Analysis’

Each of these components is highly interactive with the others, and each can be linked to
an important strategic question:

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Change is most likely to occur at and along the following interfaces:
· where the organisation interacts with its industry environment. Specifically, its
input and output sources, its competitors, its industrial environment and their
cultural, attitudinal, and behavioural patterns. For example, within the
organisation, this is found in the boundary units such as sales, purchasing,
personnel, research, and development. In our Organisational Equation however,
this will be around the points of contact - structural, cultural, and processing; see
Figures 5-6 and 5-7 below
· where major echelons or coalitions of interest, authority, and power within the
organisation meet and interact (e.g., where first-line supervision meets middle
management; where senior management interacts with the rest of the management
group). Where various stakeholder authorities and their respective interests meet
and mix - such as with shareholders, investors, trade union representatives)
· where functionally different lines merge (e.g., at the interface between functional
and activity splits that create different ‘cultures' as with production and
marketing)
· where scalar effects, such as change in size and complexity, lead to organisational
departmentalization, such as across functional, product, SBU, or project lines.
This increases the heterogeneity of the organisation and raises the stimulus for
change.

Thus, intersections, inter-linkages, and boundaries between different activities and

functions are the meeting points, channels, and shear-lines along which organisational
movement and change occurs. Like river channels, competitive resource energies flow
towards these points. It is also within these areas that the organisation's political
processes embed themselves.

As organisations grow in size and scale, the number of these intersections proliferate.
Any response to the scale factor in turn affects the qualitative nature of organisational
processes, especially with regard to issues of leadership, control, and communications.
Managing such effects is a key aspect of change since the changes in themselves often
trigger unforeseen consequences. Moreover, partitioning the organisation in different
ways leads to different types of change. Open, loose structures raise the potential for this
to occur; similarly, authoritarian and bureaucratic structures of all kinds limit
independence of thought and decision making and hence the potential for sudden,
unagreed upon change that may also be revolutionary in nature and effect.
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 Figure 5-6 Figure 5-7

3.1 From the Structural Perspective

External pressure may cause an organisation to restructure itself to better accommodate
or resist external forces. In this way, trees have adapted to the forces of nature by
developing flexible structures that allow each part of the tree (a branch, a twig or a single
leaf) a measure of independence of movement while the tree as a whole bends with the
force of the wind's blow. This is what the organisational design expert has in mind when
they seek to build flexibility into an organisation’s structural components. By
comparison, brute strength and rigidity may be employed to achieve the same end - as in
the case of a lighthouse standing against the force of the winter’s storm. Both structural
strategies work and neither one is innately better than the other. Each, however, is
configured to fit its own environmental landscape and conditions.

A good example of structural adaptation is the growth of the matrix organisation and the
development and use of the Strategic Business Unit (SBU). This type of organisation
started to make its appearance during and immediately after WWII as large and in
particular multinational organisations sought answers to the question of how to best strike
a balance between the benefits of corporate centralisation (rationalisation of costs,
standardisation of systems and procedures) and the equally important need for an increase
in the degree of autonomy at the level of the business unit. The solution found was the
Matrix form of organisational structure, combined with the use of the SBU. The
icommonly used criteria for distinguishing SBUs arc as follows:
· The unit has a distinct business concept sensibly independent of any other
· It has its own competitors
· It is a competitor in its market and is not predominantly an internal corporate
supplier
SC3, Strategic Management. Block 5