Strategy and ICT

ICT acceptance ICT and Strategy Competition and strategy Competitive advantage Companies as drivers of change Transaction costs, value chain The Information Society The New Capitalism

So far Developments in society Developments in economy Companies as drivers of change The existence/size/limits of companies: - Transaction costs - Value chain

To do Explain the form of companies Explain the conduct of companies

Company structure ( Morgan and Mintzberg )

Basic Concepts Organizational Structure Organizational Structure: The formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authorities within organizations. Organizational Chart Organizational Chart: A diagram representing the connections between the various departments within an organization: a graphic representation of organizational design.

Sample Organizational Chart

Structure Concepts I Hierarchy of Authority Hierarchy of Authority: A configuration of the reporting relationships within organizations; that is, who reports to whom. Division of Labor Division of Labor: The process of dividing the many tasks performed within an organization into specialized jobs. Span of Control Span of Control: The number of subordinates in an organization who are supervised by an individual manager.

Modern Trends: Delayering As today’s organizations restructure, the middle layers of organizational hierarchies tend to get removed. The result is a flatter organizational structure, which puts managers closer to the issues about which they have to make decisions.

Division of Labor

Tall vs. Flat Organizations

Structure Concepts II Line Positions Line Positions: Positions in organizations in which people can make decisions related to doing its basic work. Staff Positions Staff Positions: Positions in organizations in which people make recommendations to others but who are not themselves involved in making decisions concerning the organization’s day-to-day operations. Decentralization Decentralization: The extent to which authority and decision making are spread throughout all levels of an organization rather than being reserved exclusively for top management (centralization).

Decentralization

Departmentalization The process of breaking up organizations into coherent units. Functional Organization Functional Organization: The type of departmentalization based on the activities or functions performed (e.g., sales, finance). Product Organization Product Organization: The type of departmentalization based on the products (or product lines) produced. Matrix Organization Matrix Organization: The type of departmentalization in which a product or project form is superimposed on a functional form.

Functional Organization

Product Organization

Matrix Organization

Organizational Design  The process of coordinating the structural elements of an organization in the most appropriate manner.  Approaches include Classical and Neoclassical Approaches The Contingency Approach Mintzberg’s Framework The Boundaryless Organization

Classical vs. Neoclassical Theory Classical Organizational Theory Classical Organizational Theory : The approach that assumes that there is a single best way to design organizations. This approach assumes that managers need to have close control over their subordinates and calls for designing organizations with tall hierarchies and a narrow span of control. Neoclassical Organizational Theory Neoclassical Organizational Theory : An attempt to improve on the classical organizational theory that argues that not only economic effectiveness, but also employee satisfaction, should be goals of an industrial organization. This approach assumes that managers do not have to carefully monitor their subordinates and calls for designing organizations with flat hierarchies and a wide span of control.

Classical vs. Neoclassical Theory

Typology ( Morgan ) Machines Organism Brains Culture Political systems Psychic prisons Flux & transformation Instruments of domination

The machine Bureaucracy Functional specialisation Scientific management (Taylor)

The organism Adjust to environment Organisation as an open system Mintzberg

Henry Mintzberg

Mintzberg’s Framework  Mintzberg claims that organizations are composed of five basic elements, or groups of individuals, any of which may predominate in an organization.  The element that predominates will determine the most effective design in that situation.

Mintzberg: Five Basic Elements Operating Core Operating Core: Employees who perform the basic work related to an organization’s product or service. Strategic Apex Strategic Apex: Top-level executives responsible for running an entire organization. Middle Line Middle Line: Managers who transfer information between higher and lower levels of the organizational hierarchy. Technostructure Technostructure: Organizational specialists responsible for standardizing various aspects of an organization’s activities. Support Staff Support Staff: Individuals who provide indirect support services to an organization.

Five parts of an organisation 1. Strategic apex 2. Middle line 3. Support staff 4. Technostructure 5. Operating core Illustrations borrowed from presentations of Bolman and Deal (Wiley Interscience)

Coordination Mutual adjustment Direct supervision Standardisation of work processes Standardisation of work outputs Standardisation of skills Standardisation of norms

Mintzberg: Organizational Designs I Simple Structure Simple Structure: An organization characterized as being small and informal, with a single powerful individual, often the founding entrepreneur, who is in charge of everything. Machine Bureaucracy Machine Bureaucracy: An organizational form in which work is highly specialized, decision making is concentrated at the top, and the work environment is not prone to change (e.g., a government office). Professional Bureaucracy Professional Bureaucracy: Organizations (e.g., hospitals and universities) in which there are lots of rules to follow, but employees are highly skilled and free to make decisions on their own.

Mintzberg: Organizational Designs II Divisional Structure Divisional Structure: The form used by many large organizations, in which separate autonomous units are created to deal with entire product lines, freeing top management to focus on large-scale, strategic decisions. Adhocracy Adhocracy: A highly informal, organic organization in which specialists work in teams, coordinating with each other on various projects (e.g., many software development companies).

Simple structure

Machine bureaucracy

Professional bureaucracy

Divisional form

Adhocracy

Mintzberg: A Summary

Boundaryless Organization An organization in which chains of command are eliminated, spans of control are unlimited, and rigid departments give way to empowered teams. Modular Organization Modular Organization: An organization that surrounds itself by a network of other organizations to which it regularly outsources noncore functions. Virtual Organization Virtual Organization: A highly flexible, temporary organization formed by a group of companies that join forces to exploit a specific opportunity. Affiliate Networks Affiliate Networks: Satellite organizations affiliated with core companies that have helped them develop.

Boundaryless Organization

Modular Organization

Virtual Organization

Strategic Alliances  Mutual Service Consortia  Mutual Service Consortia: A type of strategic alliance in which two similar companies from the same or similar industries pool their resources to receive a benefit that would be too difficult or expensive for either to obtain alone.  Value-Chain Partnerships  Value-Chain Partnerships: Strategic alliances between companies in different industries that have complementary capabilities.  Joint Ventures  Joint Ventures: Strategic alliances in which several companies work together to fulfill opportunities that require the capabilities of one another.

Back to Morgan: Brains Self learning system Cybernetics Negative feed back

Culture Shared values and norms Institutionalisation

Political systems Interest groups Power/influence

Instruments of domination The multinational

Strategy

2007 © Wolters-Noordhoff Organisation and Management

SWOT Structure Conduct Performance Resource Based View

The strategy perspective Structure-Conduct-Performance model (Porter, 1980, 1985)

Porter’s five forces model 2007 © Wolters-Noordhoff Organisation and Management

Question Are there industry characteristics (based on the five forces model) which explain the use of the Internet as a channel?

Disappearance of barriers of entry Economies of scale Product differentiation Switching costs Access to distribution channels (Shin, 2001; Lucas, 2002)

Existing rivalry Winner takes all First mover advantage (Source: Coltman, 2001)

Strategies ? ? Relative resource-produced value LowerParityHigher Relative resource costs Lower Parity Higher

Strategies to realize competitive advantage ( Porter, Treacy and Wiersema ) Cost leadership/operational excellence Differentiation/product leadership Focus/customer intimacy

Question Mention examples of companies that use the Internet to create a competitive advantage

Boston Consultancy Group Portfolio Matrix 2007 © Wolters-Noordhoff Organisation and Management

2007 © Wolters-Noordhoff Organisation and Management

2007 © Wolters-Noordhoff Organisation and Management

Growth according to Ansoff (1965) PRODUCT ExistingNew MARKET Existing New Penetration Market development Product development Diversification

Strategy (2) Horizontal integration Forward vertical integration Backward vertical integration

The role of ICT in companies

Business Strategy Organizational infrastructure Infrastructure and processes ICT Strategy Alignment Impact BusinessICT Strategic Alignment Model Alignmentmodel Venkatraman & Henderson Strategic Alignment: levering Information Technology for Transforming Organisations IBM Systems journal, 32 (1) 1993, p 4-16

Strategic Alignment Model

Four dominant alignment perspectives 1.Strategy execution 2.Technology transformation 3.Competitive potential 4.Service level