Lecture # 24

Entrepreneurial problem How to locate and exploit new products and market opportunities while simultaneously maintaining a firm.

Base of traditional products and customers: Solution: has to operate in hybrid domain that is both stable and changing. -The analyzer move towards new markets or products only after their viability has been demonstrated. -This may be accomplished though imitation of the prospector once success is demonstrated by the prominent prospector. -At the same time majority of the Analyzer’s revenue is generated by a fairly set of traditional products or markets(a defenders’ attribute). Operational efficiency of defender to pursue and effectiveness of Prospector in looking for new markets and products.

Therefore Analyzer can grow through both market penetration and market development strategies. ENGINEERING PROBLEM The duality of Analyzer’s domain is reflected in its engineering problem and solution. Problem: How to be efficient in its technology which a stable portion and a flexible in changing portion? The organization must learn how to achieve and protect an equilibrium between conflicting demands for technological flexibility and for technological stability. This equilibrium is accomplished by partitioning production activities to form a dual technological core. Stable component resembles Defender’s technology – functionally organized, routinized, standardized and mechanized. While flexible technological component resemble the prospector’s technological orientation.

Administrative Problem: -How to differentiate the organization structure and processes to accommodate both stable and dynamic areas of operation -Solves this problem through some version of matrix organization. -Head of key functional units, most notably engineering and production unite with Product managers (usually housed in marketing department) to form a balanced dominant coalition. -The product managers’ influence is usually greater than the functional manager since his task is to.

-Identify promising product market innovations and to supervise their movement through applied engineering and into production in a smooth and timely manner. -The presence of engineering and production in the dominant coalition is to represent the more stable domain and technology which are the foundations of the Analyzer’s overall operations. Fourth type of Organizations Reactors -Exhibits a pattern of adjustment to its environment that is both inconsistent and unstable. This type lacks a set of response mechanism which it can consistently apply to a changing environment.

The reactors adaptive cycle usually consists of responding inappropriately to environmental change and uncertainty, performing poorly as a result, and then reluctant to act aggressively in the future. -Why Organization become reactors? -Three reasons cited by the author (Miles & Snow et al). i) Top management may not have clearly articulated the organization’s strategy e.g. company founded by one-man (prospector immense personal skills) successfully established firm but upon his death strategic void.

ii) Management does not fully shape the organization structure and processes to fit to a chosen strategy. -Strategy is mere statement not a guide to behavior. -Functional strategies are not aligned e.g. this is a typical case with organizations in LDCs to come forth quick with beautiful written vision and mission statements and other strategy documents. iii) Ultimate cause of instability and failure - tendency for management to maintain the organizations current strategy-structure relationship despite overwhelming changes in environmental conditions.

The process of continuously adapting to the changes in a firm’s environment is called strategic management. Strategic management is not only needed to cope with changes in firm’s external environment but also to cope with changes caused by processes internal to the firm (Scott, Greiner). According to Ansoff the question is How do we configure the resources of the firm for effective response to unanticipated surprises? According Cyert and March, “The successful strategy itself would be a destabilizing influence (effect) on that strategy because of the surplus or slack”.

A Skeletal Model of Adaptation State of Adaptation Process of Adaptation Adaptive Ability Storage of Slack Dotted line denotes firm’s transition from one state to another

A state of adaptation, in a biological sense describes a sate of survival for an organism. A business organizations has to survive conditions of its environment. There may be several niches available for a firm for surviving the conditions of environment. Simon gives us a three modes that are open to a system 1. Passive insulation (Defender) 2. Reactive negative feed back( Analyzer) 3. Predictive or Proactive adaptation (Prospector) One author has termed it unstable state, stable state and neutral state.

All three states of adaptation are viable. Defender, Prospector and Analyzer are stable form of organizations, and manager chooses to pursue either of these strategies to cope effectively with its competitors. All state of adaptation do not have the same immunity from environmental changes. The neutral state has the highest immunity, followed by the stable and unstable ones. But then the fundamental question arises -

1. The state of adaptation depend on the firm’s resources that it commands (adaptive ability). 2. The nature of management processes within these firms (process of adaptation) influences the state of adaptation sought. Determinants of Adaptive ability How can adaptability be improved? -Lawrence & Lorsch - as differentiation and integration. -Christenson called this level of organization which again composed of differentiation and integration. Also relabeled as Organizational Capacity.