Competing on the Edge: Redesigning organizations through patching v The case of Microsoft Multimedia v The changing role of executives in today’s organizations v Patching: Re-stitching business portfolios in dynamic markets

Changing roles of executives? v Senior executives: 3Focus on organizational context rather than strategic content 3Protect and reinforce organizational norms and values v Middle level executives 3Coaching, supporting, and developing business units 3Delegate responsibility v First-line Executives 3Developing/motivating teams and building unit’s capabilities 3Developing unit level strategies

Patching: Restitching business portfolios in dynamic markets v Patching is the organizational process by which corporate executives routinely re-map business units to take advantage of the changing markets. v Patching can take the form of adding, splitting, transferring, exiting, or combining modules of businesses. v Patching focuses on the organizational processes more than strategic market positioning

Reorganization Versus Patching Regularly track fine- grained metrics on modular businesses Fine grained metrics only for infrequent reorganization Metrics Roughly right realignments over time Optimal restructuring at a specific point in time Precision Get business focus and size right Get business focus right Driver of change Change process is routine and follows patching moves Every change is unique Formalization OngoingRare Frequency Mostly small, and a few are large Major Scale of change Proactive weaponDefensive reaction Role of change Company wide parityNot relevant Compensation Reorganization Patching

Is it time to repatch? v Are your businesses ignoring significant opportunities? Or, are they converging onto the same new market opportunities? v Has growth stalled in your current patching arrangement? (average selling price, market share, gross margin, or the rate of new customer acquisition are falling) v Are you imposing one management structure on your businesses that evolve at different rates? v Are your customers segmenting your products or services differently than your organization is currently structured? v Are better performing competitors patched differently?

What is your organizational risk exposure? Pressure for performance Rewards for entrepreneurial risk taking Transaction complexity and velocity Rate of expansion Inexperience of key employees Executive resistance for bad news Level of internal competition Gaps in diagnostic performance measurements Degree of decentralized decision making ++= + += Growth Culture Information Management Scale: 1 through 5 ++= Score

The risk exposure score: It is used to gauge a company’s likelihood of being surprised by organizational breakdowns that can threaten its performance v 9-20: Too much safety? The firm can be safe from unexpected errors or events but the management should question whether or not they are risk averse. v 21-34: The caution zone The management should be alert for high scores in any two of the three risk dimensions. v 35-45: The danger zone It is now time to develop strategies for managing risk through organizational processes. Source: “How risky is your company?” by Robert Simons. Harvard Business Review, May-June 1999, pp:

The levers of risk management v Belief systems: Have senior managers communicated the core values and ideals of the business in a way that people understand and embrace? v Managerial discipline: Have the middle managers clearly set the standards and provide discipline? v Diagnostic control systems: Are diagnostic measures adequate at monitoring critical performance variables? v Interactive control systems: Are control systems designed to stimulate learning?