1. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-1 Cooperation and Autonomy: Managing Interrelationships by Robert Pitts & David Lei Slides prepared by John P. Orr Cameron University Chapter 12

2. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-2 What you will learn… The importance of interrelationships in sustaining competitive advantage The need to balance cooperation and autonomy in supporting interrelationships Factors that promote the need for greater cooperation Slide 1 of 2

3. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-3 What you will learn… Factors that promote the need for greater autonomy The concept of “technology fusion” Sources of internal resistance to organizational change Slide 2 of 2

4. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-4 Interrelationships at 3M Translating Innovation –“Unintentionally discovering…” –Early product-division strategizing –Rewards, legends and myths Sustaining Growth –Divisions and sectors –Reorganization of the sales force –Rewards for teamwork

5. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-5 Ex. 12-1. Spectrum of Cooperation versus Autonomy Slide 1 of 2 CooperationAutonomy Distinctive Competence Shared and developed among SBUs Competence specific to each division or SBU Structure Sizable corporate staff; large divisions, SBUs, sectors “Lean” corporate staffs; small divisions, holding company format, or geographic structures Staffing Use of off-line coordinates and task forces Lean or nonexistent use of coordinates; little corporate staff

6. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-6 Ex. 12-1. Spectrum of Cooperation versus Autonomy Slide 2 of 2 CooperationAutonomy Reward and Performance Measurement Systems Performance measured somewhat subjectively; rewards based in part on subjective measures and on overall performance of the enterprise (hierarchy- based) Performance measured objectively; rewards based entirely on performance of own division (performance- based) Shared Values and Corporate Culture Subunits are members of a team; strong values emphasize belonging and cooperating among subunits Subunits are rivals competing for top performance; strong divisional identity and emphasis on individual performers

7. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-7 Achieving Strategic Alignment Off-Line Coordinators – Individuals and groups, often experienced managers and staff personnel, outside the formal hierarchy who coordinate activities among subunits Informal Integrators – People who act as internal “referees” to resolve disputes and conflicts between divisional managers

8. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-8 Ex. 12-2. Developments Promoting Need for Greater Coordination Customers begin using formerly discrete products together in systems Technologies of different products converge Multipoint competition is on the rise Acquisitions play a less important role in diversification Global expansion increases

9. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-9 Ex. 12-3. Developments Promoting Need for Greater Subunit Autonomy Acquisition activity increases Creeping bureaucratization endangers firm’s ability to respond to market and industry changes Environmental turbulence requires faster response time Corporate SBU

10. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-10 Responding to Environmental Turbulence Texas Instruments sells Micron Technology Frito-Lay managers experiment with snack food variations IBM embraces greater autonomy Microsoft restructures into five business divisions

11. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-11 Technological Convergence Industry convergence Design and engineering Manufacturing capability

12. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-12 Multipoint Competition Competition between business lines Commitment of entire product line versus rivals Examples: –Heinz vs. Stouffer’s –EMI and CAT scanner

13. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-13 Ex. 12-4. Technology Fusion and the Balance Between Cooperation and Autonomy Economies of scale Shared R&D costs Joint production efforts Tight management of interrelationships Search for internal synergy Sharing of ideas Creative product ideas Experimentation Customization of products Understanding needs of local end markets Search for new market opportunities Free thinking “Fusion” occurs as the company develops and blends new technologies with existing ones to create higher-order products. Need for Cooperation Need for Autonomy

14. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-14 Ex. 12-5. Reactions to Shifts in Cooperation Versus Autonomy ReactionOppositionSupport Shift to cooperation Shift to autonomy Subunit managers Corporate managers Subunit managers

15. Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved. Slide 12-15 Ethics & Interrelationships Major shifts from cooperation to autonomy can shake core values IBM reconsiders lifetime employment tradition Openness seen as key to shifting core values ?