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Strama Module 9 PDF
Strama Module 9 PDF
Strama Module 9 PDF
Strategic Management
9
EHM
SAMCIS
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“The greatest strategy is
doomed if it’s implemented
badly.”
-Bernard Reimann- STRAMA
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“The opportunities and threats existing in any
situation always exceed the resources needed
to exploit the opportunities or avoid the
threats. Thus, strategy is essentially a
problem of allocating resources. If strategy is
to be successful, it must allocate superior
resources against a decisive opportunity,”
-William Cohen-
Discussion Outline
Module 9 is the take-off for the last step in the strama process. Once the first two
had been laid down as such strategy analysis (Modules 1-4, and strategy formulation
(modules 5-8), then strategy implementation follows suit (the last of the four modules.
Module 9 talks about organizational structures and integrating systems that are
necessary to manage the relationships between internal processes and external parties
such as suppliers, customers, and alliance partners. The challenge to managers is to create
systems that both maintain order and provide flexibility and permeability. The purpose of
this module is to describe the different types of organizational structures and how they
contribute to organizational performance. The module is divided into four sections.
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This discussion emphasizes the importance of flexibility and permeability in
environments of unpredictability and rapid change. Three different types of
boundaryless approaches are described—barrier-free, modular, and virtual.
4. The fourth section suggests the need for ambidextrous organizations. Here,
managers must address two opposing challenges: (1) being proactive in
taking advantage of new opportunities; and (2) ensuring the effective
coordination and integration of existing operations.
Discussion Question 2: What lessons does their experience with the 787 offer Boeing
for its next plane development effort?
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• Better appreciation of the final customers’ expectations
• Less cost of monitoring and controlling suppliers’ operations
• Less cost of transporting components and working to solve problems with suppliers
Benefits of outsourcing:
Possible that Boeing can opt for a mixed approach, where Boeing outsources the
production of “low-tech” components. For “high-tech” components, Boeing may want to
partner with firms in order to design the new components, but manufacture in-house.
This section emphasizes the relationship between strategy and structure and
addresses the importance of flexibility and permeability in the context of four traditional
forms of organizational structure—simple, functional, divisional, and matrix—as well as
structures for firms with international operation.
Poor organizational design and structure can result in a bewildering mess of contradictions:
confusion about roles, a lack of coordination among functions, failure to share ideas, and
slow decision making. This can lead to unnecessary complexity, stress, and conflict. Often
those at the top of an organization are oblivious to these problems or, worse, pass them off
as challenges to overcome or opportunities to develop. Structure dictates the relationship
of roles in an organization, and therefore, how people function. An outdated structure can
result in unnecessary ambiguity, confusion, and a lack of accountability. Gill Corkindale, an
executive coach, shared some business and leadership challenges of executives to
illustrate the importance of updated and appropriate organizational design:
1. The “unworkable” job: A Swiss engineer’s boss had modified so many parts to his
original role that it was becoming impossible to do his work since one part of his role
contradicted the other. Moreover, he was stretched beyond his limits by the scope of the
role and the fact that he had to operate across several time zones.
2. Politics: A Hong Kong retail executive said his role was “schizophrenic” because
he was required to influence a group of internal stakeholders who had been instructed by
their boss not to cooperate with him. The anomaly was the result of historical turf wars
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between his boss and his boss’s peer: the latter had used his influence to restructure the
department and bring it under his control.
Discussion Question 3: What are some lessons learned from the examples Corkindale
suggested?
In this section, we discuss how a firm’s strategy and structure change as it increases
in size, diversifies into new product-markets, and expands its geographic scope.
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FIGURE 1. Dominant Growth Patterns of Large Corporations
B. Simple Structure
Because most organizations are very small, they need only a simple structure. Simple
structures are usually highly centralized because the founder or a top executive makes
nearly all of the decisions. Emphasize that the simple structure is the oldest and most
common. It also tends to be the most informal with little specialization. This may enhance
creativity since employees are often not bound by many rules, but may lead to
management problems if employees do not understand their responsibilities. Simple
organizations often offer few chances for career advancement.
Discussion Question 5: What are some examples of companies that operate with a
simple structure? How were decisions made?
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C. Functional Structure
Functional structures are generally found in organizations in which there are single or
closely related products or services, high production volume, and some vertical
integration. In these areas, which correspond to the dominant pattern of growth (i.e., into
new markets, new product lines, or via vertical integration), centralized decision making is
still needed to coordinate activities.
Discussion Question 6: What are some examples of companies that operate with a
functional structure? How were decisions made?
D. Divisional Structure
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divisions, conflicting goals, and uneven performance comparisons that inhibit resource
sharing. Another potential disadvantage is that with many divisions providing different
products and services, there is the chance that differences in image and quality may
occur across divisions. Finally, since financial success is valued so highly, there may be too
much focus on short-term performance.
Discussion Question 7: What are some examples of companies that operate with a
divisional structure? How were decisions made?
The 3M Corporation once had over 1,200 distinct brands but its market research indicated
that most consumers did not really understand what 3M did or what it stood for. Although
divisional autonomy and an entrepreneurial spirit had contributed to 3M’s success, it had
also created a diffuse corporate image.
The process of developing a uniform and positive worldwide image began by defining 3M
as a corporation. Ultimately, research in this area led to the development of a list of
descriptors of 3M that was pared from 13 adjectives to a critical two: innovative and
reliable. With these in hand, three communication objectives were established:
1. Use the 3M corporate personality as the foundation for an effective, active identity
strategy.
2. Make 3M the master brand, link it to all the company’s values and products, and
leverage it in all markets.
The result of this campaign was the emergence of a single, unified 3M image. The number
of 3M brand names shrank from 1,200 to fewer than 600. Advertising in more than 40
countries now focuses on reinforcing the innovation theme. And most important,
awareness of 3M has jumped by 10 percent or more in Japan, Australia, Europe, and even
the United States.
Source: Olson, E. M., Cooper, R. & Slater, S. F. 1998. Design strategy and competitive
advantage. Business Horizons, March–April: 57.
Discussion Question 8: What are some examples of other companies that use brand
image and corporate messages to coordinate the activities of its various divisions?
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Highly diversified corporations often combine similar divisions into strategic business
units (SBUs). This helps coordinate activities and attain synergies. ConAgra is presented as
an example of a company with dozens of divisions grouped into three SBUs—food service,
retail, and agricultural products. SBUs are typically run as profit centers.
The primary advantage of the SBU structure is that it makes planning and control
more manageable. The disadvantages include it may be difficult to realize synergies even
among similar divisions and the additional hierarchical level of an SBU adds personnel and
overhead expenses.
Discussion Question 9: What are some examples of companies that operate with an
SBU structure? How were decisions made?
Discussion Question 10: What factors might prevent companies from attaining
synergies among divisions within an SBU?
An advantage of the holding company structure is the cost savings from having a
small corporate office. Additionally, autonomy at the division level enhances motivation.
The disadvantage relates to the dependence that corporate executives have on divisional
executives to achieve financial goals.
Discussion Question 11: What are some examples of companies that operate with a
holding company structure? How were decisions made?
Discussion Question 12: What factors might contribute to poor performance by the
divisions of a holding company?
E. Matrix Structure
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professionals with greater responsibilities and enhances the use of their skills.
The matrix organization has many potential benefits (e.g., flexibility, quick
adaptation to change) that may be very difficult to realize in practice (e.g., the
structure can become very cumbersome, lead to turf wars, etc.). Reflect on what
managers should do to effectively implement matrix structures.
Discussion Question 13: What are some examples of companies that operate with a
matrix structure? How were decisions made?
Extra Example: Structure Can Inhibit Bad News Reaching the Top
Top executives at major firms can often be isolated from key information on strategic issues
and problems. Workers and managers are taught to “go along to get along.” Deborah
Cornwell, a management consultant, commented on it this way, “There’s a tendency for
people in large organizations to tell the boss what he wants to hear.” As a result, managers
are reluctant to share information about problems with their bosses. In large organizations
with several layers of management, problems can get watered down at each level,
making it unlikely that top executives get a sense of the emerging problems. Instead, top
managers may only hear about a problem when it gets to a crisis point and can no longer
be ignored or covered up at lower levels of the firm. As Martin Zimmerman, a former group
Vice President at Ford Motor Company commented, “You get blindsided when things
deteriorate.”
A classic example of this occurred in General Motors. Firm engineers knew there was a
design problem with ignition switches, but the faulty switches with this very design were
used in a wide range of GM’s cars for several years. When asked about when executives
knew there was a serious problem with the ignition switches in millions of cars produced by
GM, CEO Mary Barra stated, “I cannot tell you why it took years for a safety defect to be
announced in that program, but I can tell you that we will find out.”
A key challenge for corporate leaders is to construct a structure and a culture that
increases information flow upward. Some firms do it by flattening the organization’s
structure so that top managers are closer to front line employees. Others create corporate
leader jobs that are designed to get key information to the top. This is what GM did when it
created a new VP of global vehicle safety, a position that works with engineering teams to
ensure design safety problems get the attention they need. Others strive to create a
culture that praises those who bring up problems or challenges the firm faces. Ford
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historically had a culture where bad news was not shared. When he was an Executive VP
of Ford, Mark Fields raised a serious technical issue with a new auto the firm was working to
launch; the room fell silent until Alan Mulally, the newly appointed CEO of Ford, clapped his
hands and praised him for openly raising the issue. From that point forward, problems were
more openly shared at Ford, and Mr. Fields rose in prominence in the leadership team,
ultimately becoming Mr. Mulally’s successor as CEO of Ford.
Source: Auriemma, A. 2014. Chiefs at Big Firms Are Often Last to Get Bad News.
wsj.com. April 3: np.
Firms that pursue multidomestic strategies (as discussed in Module 7) would most
likely use international division or geographic-area division structures. With these, local
managers have high autonomy to manage within the demands and constraints of the
local market. If product diversity becomes large, firms may benefit from a worldwide matrix
structure.
Discussion Question 14: What are some examples of international companies that
use worldwide, international, and geographic-area structures? How were decisions
made?
There is no reason for all start-ups to be global; global start-ups require a higher level
of communication, coordination, and transportation costs. Some of the circumstances
under which going global from the beginning is advantageous are
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• the required human resources are globally dispersed, going global may be
the best way to access those resources
• foreign financing may be easier to obtain and more suitable for the project
• the target customers in many specialized industries are located in other
parts of the world
• there is a gradual move from domestic markets to foreign markets, and if a
product (or service) is successful, it may be immediately imitated by firms in
other countries
• high up-front development costs; a global market is necessary to recover
the costs.
Organizations that become boundaryless become more open and permeable, not
“chaotic.”
Discussion Question 15: What are some examples of other companies that have
implemented more flexible and permeable organizational structures? Have they
been successful? Why? Why not?
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Teams are an important part of barrier free structures because they 1) substitute
peer-based for hierarchical control; 2) often develop more creative solutions via
brainstorming and other group problem solving techniques; and 3) absorb administrative
tasks previously handled by specialists.
Lynda Gratton, of the London Business School, led a study of 52 global teams in 15
multinationals. She asserts that, “Complex teams really struggle to be productive.” Not
surprisingly, she found that some multinationals were very successful in overcoming
coordination challenges. Below, we discuss Nokia and Accenture:
• Nokia’s global marketing and product development teams were very effective—even
though they involved scores of people working in several countries. Why? Nokia
carefully selects people who have a “collaborative mindset” and carefully includes in
task forces a range of nationalities, ages, and, educational levels. Teams are also made
up of people who have worked together in the past and others who have never met.
Members are encouraged to network online and share their photographs and personal
biographies.
• Accenture, which spent $700 million on education in 2006, says its 38,000 consultants
and most of its service workers take courses on collaborating with offshore colleagues.
And each year, Accenture puts up to 400 of its most promising managers through a
special leadership development program. They are assigned to groups that can
include Irish, Chinese, Belgians, and Filipinos, and specialist in fields such as finance,
marketing, and technology. Over 10 months, teams meet in different international
locations. As part of the program, they
pick a project—developing a new web page, say—and learn how to tap the firm’s
worldwide talent pool to complete it.
Source: Engardio, P. 2007. Managing in the new workforce. BusinessWeek, August 20–27:
48–51.
Discussion Question 16: What are some other means of ensuring coordination across
geographically dispersed team members? (e.g., leadership, culture, trust, reward
systems, rules/regulations)
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resource sharing, firms often use interdivisional task forces and common training programs,
and create reward and incentive systems that foster cooperation. Boundaries between
organizations and external constituencies such as customers also need to be more flexible
and porous.
Discussion Question 17: How were relationships among participants in barrier free
transactions and/or projects managed?
In 2008, the Irvine Medical Center, a unit of Kaiser Permanente, wanted to streamline its
costliest, most time-intensive surgeries: total hip and knee replacements. The task was
daunting, because the solution required collaboration among specialists who normally
fight for resources.
Kaiser created a collaborative community, the Labor Management Partnership (LMP), that
included Kaiser managers, surgeons, and most of the hospital’s employee unions. The LMP
worked cooperatively to find efficiency gain opportunities. The benefit was that all
members felt engaged. As one nurse stated about operating room procedures, “Usually
when we are in the room, we wish it would be done differently, but this time we actually
got a voice in how it’s done differently.” They identified ways to streamline sequential
operations, such as by bringing housekeeping in to begin clean-up as soon as a surgeon
begins suturing the patient closed. They also set up an alert system to ensure that staff
knew when they were needed. For example, they trigger the post-op and transportation
staff to prepare fifteen minutes before the end of a surgery. Finally, they found ways in
which the hospital could be more efficient by adding staff. For example, they added a
“floater” nurse who could move between operating rooms to provide extra help or relieve
staff on breaks.
These steps all reduced surgery cycle-times and also improved employee morale. They
increased the number of total joint replacement surgeries from two to four per day and
freed up 188 hours of operating time room per year. A survey of the operating room staff
showed an 85% increase in job satisfaction.
Seeing the benefits, Kaiser implemented similar LMP teams in general surgery, head and
neck surgery, urology, heart, and other surgery specialties in Irvine as well as in other Kaiser
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hospitals.
Source: Adler, P., Heckscher, C., & Prusak, L. 2011. Building a collaborative enterprise.
Harvard Business Review. 89(7/8); 94–101.
Discussion Question 18: How might approaches such as the Irvine Medical Center’s
LMP be used in other organizations?
Some organizations have even benefited from breaking down barriers with
competitors by creating cooperative relationships that benefit groups of competitors in an
industry.
Point out that barrier-free approaches can be difficult to implement and maintain.
The type of democratic processes that emerge in a boundaryless approach often need to
be carefully managed. The entire organization—goals and strategies—must support the
effort. One way to enhance a barrier-free approach is to utilize well-designed and
effectively implemented information technology systems that support knowledge
gathering and sharing.
Discussion Question 20: What other types of organizational systems might be utilized
to ensure the success of a barrier-free approach?
Not all efforts to create barrier-free structures have been successful. Examples are
given of companies whose process times increased rather than decreased or broke down
because rewards and incentives were not aligned with the objectives of the boundaryless
system. An example of team failure by Challenger Electrical Distribution in Jackson,
Mississippi identified 5 reasons for failure: 1) limited personal credibility; 2) lack of
commitment to the team; 3) poor communications; 4) limited autonomy; and 5)
misaligned incentives.
TABLE 1 below outlines the pros and cons of the barrier-free type of organization.
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B. The Modular Organization
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Porsche makes some of the most technologically advanced cars in the world, but the
company does not have a large in-house R&D staff. It has to find another way of sourcing
innovative ideas and expertise. One highly successful method is to outsource the work to
universities and doctoral students doing basic R&D. Another method is to bring students
into the company with internships. Every year, Porsche welcomes some 600 Masters
students to work with its engineers for four to six months. Porsche budgets for both
outsourced research and internships and has found that it has resulted in cheaper and
faster results than most equivalent in-house research efforts. A critical factor in making this
work is that the engineers at Porsche must respect their colleagues; whether they are full
time colleagues, university researchers or graduate students doing internships; and value
what comes out of their research efforts. This allows Porsche to draw on much of this
research and rapidly integrate it into their product line.
Source: Lorange, P. 2010. Leading in turbulent times. Lessons learnt and implications for the
future. Bingley, UK: Emerald Group.
Discussion Question 22: Are you familiar with any other organizations that have
similar programs?
Table 2 addresses the pros and cons of the modular form of organizational structure.
It is not only what a firm chooses to outsource but also how they manage
relationships with the firms they use as suppliers that will determine their long-term
prospects. The SUPPLEMENT/EXTRA EXAMPLE discusses how firms need to be very conscious
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of how they control and manage relationships with suppliers of key components
Thomas Choi and Tom Linton argue that manufacturers have delegated too much power
to their top-tier suppliers. By pushing the design of key components and the management
of lower-tier suppliers onto top-tier suppliers, manufacturers are undermining their ability to
control key technologies, innovate, cut costs, and manage risk.
Their prescription is for firms to retain or reassert control for items that have the most
significant impact on the cost of goods sold. They use the old 80/20 rule and note that
typically 20% of the components of a product account for 80% of the product’s total
component cost. For example, in a typical smartphone, two or three semiconductors and
the LCD screen account for over 50% of the total component cost of the phone. Rather
than delegate the design, manufacturing, and sourcing of these components to top-tier
suppliers, manufacturers should be more involved in managing the design process and
maintain direct contact with lower tier suppliers of key components. If they don’t, they
delegate key decisions to firms that may not always be working in the firm’s best interests.
For example, one risk that arises if a phone manufacturer outsources the purchasing of the
semiconductors to a top-tier supplier is that the supplier may choose to use a chip that
benefits the supplier firm at the expense of the phone manufacturer. If the supplier works
with several phone manufacturers, it may choose to use a supplier and a specific
semiconductor that it is also using in a competing company’s phone rather than the
optimal chip for this phone design. If the phone firm, instead, works directly with the chip
supplier, they are more likely to get the best chip for their phone.
Manufacturers who retain control over their key components develop deep knowledge of
the technical aspects of the parts, have stronger knowledge of the critical costs in their
supply chains, and can react more quickly to market dynamics since they have direct ties
with the suppliers of these key components. The experience of LG Electronics bears this out.
In 2009, when recession hit the electronics industry, LG worked directly with about 300 top-
and lower-tier suppliers to reduce components costs and found savings of more than $6
billion. It would have been unlikely to find similar savings potential if it delegated the cost
savings efforts to top-tier suppliers. Having direct ties with lower-tier suppliers also gives the
manufacturers direct insight on new technology development and new product
introductions in these supplier industries, enhancing their ability to design and launch
innovative products using these leading technologies.
Sources: Choi, T. & Linton, T. 2011. Don’t let your supply chain control your business. Harvard
Business Review. 89(11); 112–116.
Discussion Question 23: Why do firms often choose to delegate responsibilities to top
tier suppliers even though it leaves them less responsive and less able to manage
costs in their supply chain?
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The virtual type of organization is an evolving network of independent companies—
suppliers, customers, even competitors—linked together to share skills, costs, and access to
one another’s markets. By pooling and sharing resources and working together in a
cooperative effort, each gain in the long run.
Unlike the modular type, virtual organization firms give up part of their control and
participate in a collective strategy that enhances their own capacity, makes them better
able to cope with uncertainty, and enhances their competitive advantages.
To achieve this, it made infrastructure changes that allowed it to be more agile and
operate more virtually. First, it introduced Voice over IP (VoIP) at all its U.S. sites. This alone
led to efficiencies that saved the company thousands of dollars per month, in part
because it allowed engineers on both sides of the Atlantic to collaborate in real time
without interruption. Secondly, it increased the capacity of its network such that engineers
could share information from very large databases using “any-to-any” conversion
processes, that is, a uniform method of converting all message structures into easy-to-
understand formats regardless of the message syntax. In other words, it allows for
exchanging information that previously might have been incompatible with drag and drop
ease. According to David Coughlan, Analog Devices’ Network Planning and Design
Manager, “The [new] network has allowed our total throughput to triple. . . . That was a
twofold win: dollar savings with huge service improvements.”
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Discussion Question 24: What are some other ways that virtual organizing—either
with the help of technology or not—might contribute to costs savings and service
improvements?
The SUPPLEMENT/EXTRA EXAMPLE below points out that effective leadership is the
number one factor that influences success in a virtual organization. Moreover, it discusses
the importance of collaboration tools, goal definition, and coaching where HR can help a
manager enable a virtual team.
The virtual workspace can be defined as an environment where employees work away
from company locations and communicate with their respective workplaces via telephone
or digital devices. The virtual organization has different and/or greater challenges than the
traditional face-to-face workplace environment, with lines of work crossing over
geographies, markets, cultures, alliances, partnerships, and supplier networks.
The very nature of virtual work requires planning and thoughtful design. The development
and evaluation of virtual teams present a unique opportunity for HR to partner with many
different elements of the business. Further, with increasing dependence on technology for
communication in the workplace, the role of leadership is changing. Leaders of virtual
workplaces require certain essential skills including a strong focus on relationships,
emotional intelligence, a track record of results and innovation, a focus on process and
outcome, and the ability to give positive and constructive feedback. HR should be part of
any pilot program to help leaders understand, anticipate and mitigate management
problems. Elain Orler, president of talent Function Group LLC, summarizes, “Leaders need
to be more flexible in how and when they communicate. Some people connect on instant
messenger while others prefer text messages…the more flexibility I have, the more I can
connect with my diverse team.” Flexibility of leadership seems to be the paramount to
ensure success in virtual workplace.
Discussion Question 25: The supplement above discusses the role of leadership in a
virtual workplace. Can you think of an example of how a leader bridges and
understands cultural differences in a virtual workplace?
Discussion Question 26: Can such virtual organizations be successful in the long run?
How can leaders motivate employees whom they rarely see in person? Can
relationships develop in such an environment? Are they relevant for productivity?
Despite their many advantages, alliances often fail to meet expectations. One
reason is that unique managerial skills are required—managers who can find good
partners, build win-win relationships, and achieve the right balance of freedom and
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control. Point out that some alliances are short-term only and may be dissolved once the
objective is fulfilled. Others may have long-term objectives. The key to managing both is to
be clear about the overall strategic objectives at the time the alliance is being formed.
The virtual organization is the culmination of joint venture strategies of the past. To
form effective virtual organizations, strategic planning is needed to determine what
synergies exist and how to capitalize on them by combining core competencies. As such,
the virtual form may work better for some types of organizations than others.
Discussion Question 27: What types of contingencies are likely to influence whether
a virtual organizational type will be a successful form for pursuing a venture or
strategic goal?
TABLE 3 summarizes the pros and cons of the virtual form of organizational structure.
Often, when firms face external pressures, resource scarcity, and declining
performance, they tend to become more internally focused. Point out that this may
actually be the best time to reexamine value-chain activities and determine how to better
manage relationships both internally and externally. By so doing, organizations may find
that they can solve some of their problems by turning to boundaryless forms of organizing.
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3. Horizontal Systems and Processes
Novartis, the Swiss pharmaceutical giant, sees the need to be more effective at
developing new drugs. Joerg Reinhardt, the firm’s CEO, has committed to invest more in
R&D, but he is also making changes in the organization’s structure to enhance its
effectiveness in drug development.
Novartis is consolidating its R&D staff and housing them in four geographic locations:
Shanghai, Basel (Switzerland), Boston, and San Diego. In combining researchers from
different scientific disciplines and product areas in these locations, the firm is trying to
create an environment where researchers can bounce questions and ideas off of each
other. They have also based these operations in cities with major research universities so
the firm can better tap the knowledge emerging from academic communities in each of
these cities. In the words of Mr. Reinhardt, “A larger group of people benefiting from the
infrastructure that been created at a research place is a better approach than having
small groups with limited infrastructure spread around the world.”
Source: Falconi, M. 2014. Novartis Chairman Stresses Need for R&D Investment. wsj.com.
March 22: np.
Managers need to also be aware of the benefits and costs of developing strong
and long-term relationships with both internal and external stakeholders. We discuss three
primary benefits that organizations accrue when building and relying on long-term
relationships.
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• The social capital of individuals and firms drives their opportunities rather than
their competencies
In this section we address the challenge that organizations face in rapidly changing
and complex competitive environments: exploring for new opportunities (adaptability) and
effectively exploiting the value of their existing assets and competencies (alignment). Firms
that achieve both adaptability and alignment are considered ambidextrous
organizations—aligned and efficient in how they manage today’s business but flexible
enough to changes in the environment so that they will prosper tomorrow.
The firms organized their breakthrough projects into one of four primary ways:
Discussion Question 28: Do organizations that you are familiar with share the
structural attributes of ambidextrous organizations? Why? Why not?
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Extra Example: The Behaviors of “Ambidextrous Individuals”
Based on a study by Julian Birkinshaw and Cristina Gibson (that was published in the
Summer 2004 issue of the MIT Sloan Management Review), ambidextrous individuals:
• take the initiative and are alert to opportunities beyond the confines of their own jobs
• are cooperative and seek out opportunities to combine their efforts with others
• are brokers, always looking to build internal linkages
• are multitaskers who are comfortable wearing more than one hat
Source: Birkinshaw, J. & Gibson, C. 2004. Building ambidexterity into an organization. MIT
Sloan Management Review, 45 (4): 47–55.
Discussion Question 29: Think about times in your own life when you were expected
to both cooperate and take initiative. How easy or difficult is it to be an
ambidextrous individual?
IV. Summary
Successful organizations must ensure that they have the proper type of
organizational structure. Furthermore, they must ensure that their firms incorporate the
necessary integrating and processes so that the internal and external boundaries of the
firm are flexible and permeable. Such a need is increasingly important, as the environments
of firms become more complex, rapidly changing, and unpredictable.
In the first section of the module, we discussed the growth patterns of large
corporations. Although most organizations remain small or die, some firms continue to grow
in terms of revenues, vertical integration, and diversity of products and services. In addition,
their geographical scope may increase to include international operations. We traced the
dominant pattern of growth, which evolves from a simple structure to a functional structure
as a firm grows in terms of size and increases its level of vertical integration.
After a firm expands into related products and services its structure changes from a
functional to a divisional form of organization. Finally, when the firm enters international
markets its structure again changes to accommodate the change in strategy.
The second section of the module introduced the concept of the boundaryless
organization. We did not suggest that the concept of the boundaryless organization
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replace the traditional forms of organization structure. Rather, it should complement them.
This is necessary to cope with the increasing complexity and change in the competitive
environment. We addressed three types of boundaryless organizations. The barrier-free
type focuses on the need for the internal and external boundaries of a firm to be more
flexible and permeable. The modular type emphasizes the strategic outsourcing of
noncore activities. The virtual type centers on the strategic benefits of alliances and the
forming of network organizations. We discussed both the advantages and disadvantages
of each type of boundaryless organization, as well as suggested some techniques and
processes that are necessary to successfully implement them. These are common culture
and values, horizontal organization structures, horizontal systems and processes,
communications and information technologies, and human resource practices.
The final section addresses the need for managers to recognize two opposing
challenges. These include (1) being proactive in taking advantage of new opportunities,
and (2) ensuring the effective coordination and integration of existing operations. Such
challenges suggest the need for ambidextrous organizations. Such organizations are both
efficient in how they manage existing assets and competencies, as well as take
advantage of opportunities in rapidly changing and unpredictable environments. We
discussed several attributes of effective ambidextrous organizations.
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Application Questions and Exercises
1. Select an organization with which you are familiar—preferably one that you have
worked in. To what extent is this organization “boundaryless,” that is, are the boundaries
across departments and hierarchical levels rather permeable or are they fixed and
rigid? How is this aspect of organizational design affecting its performance? How could
it be improved?
3. Briefly trace the dominant growth pattern of major corporations from simple structure to
functional structure to divisional structure. Discuss the relationship between a firm’s
strategy and its structure.
4. When a firm expands its operations into foreign markets, what are the three most
important factors to take into account in deciding what type of structure is most
appropriate? What are the types of international structures discussed in the text and
what are the relationships between strategy and structure?
5. Choose an article from BusinessWeek, Fortune, Forbes, Fast Company, or any other well-
known publication that deals with a corporation that has undergone a significant
change in its strategic direction. What are the implications for the structure of this
organization?
6. Look up a recent article in the publications listed in question 5 above that addresses a
firm’s involvement in outsourcing (modular organization) or in strategic alliance or
network organizations (virtual organization). Was the firm successful or unsuccessful in
this endeavor? Why? Why not?
7. If a firm has a divisional structure and places extreme pressures on its divisional
executives to meet short-term profitability goals (e.g., quarterly income), could this raise
some ethical considerations? Why? Why not?
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