1. Office: BA1015 Office Phone: (806) 742-1514 Email: tyge.payne@ttu.edu Managing Innovation and Change Goals, Strategy & the Environment (3) Dr. Tyge Payne (with Dr. Keith Brigham)

2. T. Payne2 Organizational Goals  Organizations are generally purposive entities; goals are a part of the definition and culture of organizations.  Multiple goals generally exist for any organization.  Goals may be conflicting.  Priorities are established by dominant coalitions within organizations.  The term “goals” is often used to refer generally to missions and objectives.  Efficiency and Effectiveness are fundamental goals of an organization – this establishes its basic purpose.

3. T. Payne3 Efficiency vs Effectiveness  Efficiency – primary focus on inputs, use of resources, and costs.  Effectiveness – primary focus on outputs, products and services and revenues.  All organizations value both efficiency and effectiveness – but which dominates?  Sequential or Simultaneous? High Efficiency Low Efficiency Low Effectiveness High Effectiveness

4. T. Payne4 Who Sets Goals?  Organizations are viewed as composed of coalitions— groups of individuals pursuing similar interests. Each group tries to impose its interests on the whole.  Negotiation leads to agreements that provide guidance to and places constraints on the organization. This composes the dominant coalition . Factors affecting the dominant coalition:  Owners and manager power  Labor  Boundary roles (centrality to work flow, no substitutes, etc)  External actors  Modes of capital (e.g., financial, human, social)  Size

5. T. Payne5 Scoring Efficiency & Effectiveness  How does your organization score on efficiency? (very low) 12345 (very high)  How does your organization score on effectiveness? (very low) 12345 (very high) Does the actual efficiency and effectiveness scores differ from where the organization (i.e., leaders) would like it to be? Who is the organization’s dominant coalition?

6. T. Payne6 Strategy  Strategy: The unifying theme that gives coherence and direction to the decisions of an organization.  From an organizational design perspective, it is the operationalization of the organization’s goals of efficiency and effectiveness (Burton et al., 2006).  “Achieving high performance in a business results from establishing and maintaining a fit among the elements: the strategy of the firm, its organizational design, and the environment in which it operates.” (Roberts, 2004).

7. M&S: Key Problems

8. M&S Examples

9. T. Payne9 Environment  Organizational Environment: All elements that exist outside of the organizational boundary and have the potential to affect the organization.  Domain or Task Environment: Sectors with which the organization interacts directly.

10. T. Payne10 (a) Competitors, industry size and competitiveness, related issues (b) Suppliers, manufacturers, real estate, services (c) Labor market, employment agencies, universities, training schools, employees in other companies, unionization (d) Stock markets, banks, savings and loans, private investors (e) Customers, clients, potential users of products and services (f) Techniques of production, science, computers, information technology (g) Recession, unemployment rate, inflation rate, rate of investment, economics, growth (h) City, state, federal laws and regulations, taxes, services, court system, political processes (i) Age, values, beliefs, education, religion, work ethic, consumer and green movements (j) Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rates (j) International Sector (d) Financial Resources Sector (e) Market Sector (f) Technology Sector (g) Economic Conditions Sector (a) Industry Sector (h) Government Sector (c) Human Resources Sector (b) Raw Materials Sector (i) Sociocultural Sector ORGANIZATION DOMAIN Environment & Domain

11. Environmental Analysis Levels Connect Firm Industry Level Macro Level Competitors Suppliers Substitutes Customers Demographic TechnologicalPolitical/Legal Social Economic Global MACRO or GENERAL ENVIRONMENT INDUSTRY ENVIRONMENT

12. Five Forces Model of Competition Substitute Products (of firms in other industries) Rivalry Intensity Among Competing Sellers Potential New Entrants Suppliers of Key Inputs Buyers Threat of New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes

13. T. Payne13 Forces Driving the Need for Major Organizational Change More Large-Scale Changes in Organizations Structure change Mergers, joint ventures, consortia Strategic change Horizontal organizing, teams, networks Culture change New technologies, products Knowledge management, enterprise New business processes resource planning E-business Quality programs Learning organizations More Threats More domestic competition Increased Speed International competition Global Changes, Competition and Markets T echnological Change International Economic Integration Maturation of Markets in Developed Countries Fall of Communist and Socialist Regimes More Opportunities Bigger markets Fewer barriers More international markets

14. T. Payne14 Market Sub-environment Customers Advertising Competitors agencies Distribution system Manufacturing Sub-environment Labor Raw Suppliers materials Production equipment Scientific Sub-environment Scientific Research journals centers Professional associations President R & D Division Sales Division Manufacturing Division Varying Environments Concerns for Divisions

15. T. Payne15 Low Uncertainty 1. Mechanistic structure; formal, centralized 2. Few departments 3. No integrating roles 4. Current operations orientation; low speed response High-Moderate Uncertainty 1. Organic structure, teamwork; participative, decentralized 2. Few departments, much boundary spanning 3. Few integrating roles 4. Planning orientation; fast response High Uncertainty 1. Organic structure, teamwork; participative, decentralized 2. Many departments differentiated, extensive boundary spanning 3. Many integrating roles 4. Extensive planning, forecasting; high speed response Low-Moderate Uncertainty 1. Mechanistic structure; formal, centralized 2. Many departments, some boundary spanning 3. Few integrating roles 4. Some planning; moderate speed response Uncertainty ENVIRONMENTAL CHANGE STABLE ENVIRONMENTAL COMPLEXITY UNSTABLE SIMPLECOMPLEX Turbulence + Complexity = Uncertainty