Bryan Fenech – Founder and Director

Building the Organisation of Tomorrowwww.oot.org

Toward an enterprise logic for the 21st century

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Contents

Introduction

Definitions

Key Principles

Enterprise Logic – A Unified Model

The Logic of Industrial Era Organisations

Building a Knowledge Era Enterprise Logic

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INTRODUCTION

Introduction

• This presentation introduces the concept of enterprise logic as a way of explaining the evolution of organisational form and as a unified theoretical framework that integrates the many different perspectives on organising for the 21st century

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Introduction

• It highlights the need for a new enterprise logic for the knowledge era and explores some of the emerging ideas in this area

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DEFINITIONS

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Enterprise logic

• Organisations have an enterprise logic that ‘represents the deep structure (or ideological underpinning) shaping strategy, structure, and management processes into an effective whole’1, 2, 3

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A structure of the mind

• This enterprise logic “is based upon a set of shared assumptions, values and attitudes that are manifested in the taken-for-granted everyday practices of the organisation” and in “patterns of behaviour that reflect the hegemony of this logic”4

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Dominant logic and organisational DNA

• Similar concepts include ‘dominant logic’ and ‘organisational DNA’

• Dominant logic refers to how firms “conceptualize and make critical resource allocation decisions – be it in technologies, product development, distribution, advertising, or in human resource management”. It is “in essence, the DNA of the organization”5

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Deep structure

• The DNA metaphor is a powerful one since it allows for individual differences between organisations while emphasising shared inherited characteristics

• The key difference between these concepts and enterprise logic is that in the latter there is a more developed sense of historical context to this deep structure.

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KEY PRINCIPLES

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Organisational form is dynamic

• Organisational form is an artefact of the particular socio-economic conditions and politico-technical processes of the era in which it emerged

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Historical eras and organisational form

• In each historical era, market forces pull forth new organisational forms as managers seek new ways of arranging assets and resources to produce the products and services that customers want and expect6

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Historical eras and organisational form

• Capitalism has avoided devastating crises, not because it is permanent, but because it changes. Such change has meant that specific expressions of capitalism during a particular historical period have given way to newer, more comprehensive forms and social and technological conditions changed, leading to new strategic imperatives7

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Organisational adaptation – 4 factors

• In particular, these forces determine strategic imperatives which necessitate development of a particular set of key capabilities and resources to be able to meet those imperatives, which in turn require new forms of governance and leadership practices to build and sustain them, that are best enabled and facilitated by certain organisational structural forms

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Selection pressures and survival of the “fittest”

• Particular combinations of these 4 interrelated factors better enable firms to adjust to the challenges, and leverage the opportunities, inherent in a particular historical era, providing a competitive advantage

• Successes are copied and context-specific adaptations become internalised as part of the accepted wisdom of organising human endeavour

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Internalisation and ideology

• Over time, a range of institutional, organisational and individual (socio-psychological) practices, that sustain shared assumptions about the 'reality' of these ideological arrangements, become formalised8

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Dominant institutional form

• This recursive process of organisational adaptation to changing politico-technical and socio-economic pressures leads to the emergence and dominance of particular institutional forms in different eras

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Dominant institutional form

• Each era has its own enterprise logic which provides the archetype or template for all organisations

• The possibility of alternative ways of organising becomes obscured

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Enterprise logic as a memetic structure

• Enterprise logic an be characterised as a memetic structure

• A meme acts as a unit for carrying cultural ideas, symbols, or practices that can be transmitted from one mind to another through writing, speech, gestures, rituals, or other imitable phenomena with a mimicked theme9

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Enterprise logic as a memetic structure

• “Memes” are cultural analogues to genes in that they self-replicate, mutate, and respond to selective pressures – e.g., architecture10

• The standard enterprise logic has become so deeply taken for granted that it is no longer visible …[and] is organized to reproduce itself at all costs, even when it is commercially irrational to do so11

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Enterprise logic as a memetic structure

• Bettis and Prahalad (1995) comment on the role of dominant logic in inhibiting organisational adaptation to environmental changes and suggest that it explains why organisations are increasingly “information rich, interpretation poor”12

• Neilson, Pasternack and Mendez (2003) explore the role of organisational DNA in inhibiting the execution of strategy13

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ENTERPRISE LOGIC – A UNIFIED MODEL

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Enterprise logic – a unified model14

Structural Arrangements

Internalisation of assumptions

, new paradigms – “enterprise

logic”

OrganisationalAdaptat

ion

Politico-technical,

socio-economic

forces

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Intent of enterprise logic model

• An organising tool that makes explicit the relationships between different categories of theory

• Enables the different approaches to understanding OOTs to shed light upon each other

• Provides a holistic theoretical basis to inform organisational design – concept of organisational form extended beyond structure

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THE LOGIC OF INDUSTRIAL ERA ORGANISATIONS

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From mercantile to industrial era

• Adam Smith’s critique, articulated in The Wealth of Nations (1774), of the system of guilds and his advocacy for a new bureaucratic organisational form built upon the division of labour reflects a more fundamental transition from a mercantilist era enterprise logic to an industrial era enterprise logic15

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The challenges of era of mass consumption

• This industrial era enterprise logic emerged “because it could better address the transaction economics of mass consumerism through new [industrial] technologies, organisational forms and practices that delivered low-cost products and services”16

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Development of managerial hierarchy

• The emerging industrial era organisation required “a new managerial hierarchy with a relentless internal focus on the control and measurement of production and distribution. Managers and engineers inherited the task of planning and overseeing a minute division of labour to accomplish the standardization, increased throughput, and reduced unit costs necessary to meet the new demands of mass consumption”17

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Enterprise logic of the industrial era

• Hierarchy• Division of labour

Structural Arrangements

Logic: The mass

production mindset

OrganisationalAdaptat

ion

Forces: Industrial Revolutio

n

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BUILDING A KNOWLEDGE ERA ENTERPRISE LOGIC

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The persistence of outmoded forms

• The concept of enterprise logic provides a critical insight why outmoded organisational forms persist in spite of leadership efforts to transform them– Low female representation rates at senior

management18

– White collar crime and high risk behaviour, and consumer and environmental protection19, 20

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The need for a new enterprise logic

• The implication of these ideas is the recognition that the formulation of a new enterprise logic is a precondition to the fundamental organisational renewal required in the 21st century, one that integrates new values at its core

• We need to become conscious of the deep structure in order to change it

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Emergent enterprise logic of the knowledge era

• Networked, cellular• Fluid federations

Structural Arrangements

Logic: The innovation mindset

OrganisationalAdaptat

ion

Forces: Information Technology Revolution

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The need for a new logic

• A number of authors have begun the process of constructing such a logic – see for example– Dovey and Fenech (2007) – “covenantal

culture” and – Zuboff and Maxim (2003) – 11

metaprinciples of “distributed capitalism”

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Covenantal culture21

• 6 characteristics of covenantal culture1. A strong sense of ownership among all

stakeholders of the organization underpinned by passionate commitment to the mission, shared values and creative participation in everyday activities

2. ‘Non-authoritarian’ distributed power bases

3. Risk managed through the socialization of all members to cultural norms that dictate the framing of all decision-making by the mission and values of the collective

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Covenantal culture

• 6 characteristics of covenantal culture (continued)4. The destiny of each is viewed as being

bound up with the destiny of the others5. Learning viewed as an obligation to the

collective6. A 'negotiated order' in which power

relations are governed democratically through a set of mutually-endorsed and personally-binding core values

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Distributed capitalism22

• 11 metaprinciples of distributed capitalism1. All value resides in individuals2. Distributed value necessitates distributed

structures among all aspects of the enterprise

3. Relationship economics is the framework for wealth creation

4. Markets are self authoring5. Deep support is the new “meta product”

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Distributed capitalism

• 11 metaprinciples of distributed capitalism (continued)6. Federated support networks are the new

competitors7. All commercial practices are aligned with

the individual8. Infrastructure convergence redefines

costs and frees resources

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Distributed capitalism

• 11 metaprinciples of distributed capitalism (continued)9. Federations are infinitely configurable10.New valuation methods reflect the

primacy of individual space11.A new consumption means a new

employment

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Visit www.oot.org

Bryan FenechFounder and Director About www.oot.org

• www.oot.org is the website of Building the Organisation of Tomorrow, a networked community and set of resources to assist leaders to meet the imperative for organisational renewal

• All institutions are under increasing pressure to adapt to 21st century technological and socio-economic forces. Successful leaders need appropriate frames of reference to manage these processes of transformation; however, such frames of reference are rare

• Find articles, presentations, book reviews, and other resources

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References

1. Dovey, K. and Fenech, B. (2007), ‘The Role of Enterpise Logic in the Failure of Organisations to Learn and Transform’, Management Learning, Vol 38, No 5, pp 573-590.

2. Zuboff, S. and Maxmin, J. (2002) The Support Economy: Why Corporations are Failing Individuals and the Next Episode of Capitalism. New York: Allen Lane.

3. Miles, R. E., Snow, C. C., Mathews, J. A., Miles, G. and Coleman Jnr, H. J. (1997) ‘Organising in the Knowledge Age: Anticipating the Cellular Form’, Academy of Management Executive, Vol 11, No 4, pp 7-24.

4. Dovey, K. and Fenech, B op cit.5. Obloj, T., Obloj, K., and Pratt, M. G. (2010) ‘Dominant Logic and

Entrepreneurial Firms’ Performance in a Transition Economy’, Entrepreneurship: Theory and Practice, January, pp 151-170

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References

6. Miles , R. E, et al op cit.7. Zuboff, S. and Maxmin, J. op cit.8. Dovey, K. and Fenech, B op cit.9. Gordon, G. (2002) Genes: A Philosophical Inquiry, New York:

Routledge10. Salingaros, N. (2006) Theory of Architecture, Umbau-Verlag.11. Zuboff, S. and Maxmin, J. op cit.12. Bettis, R. A. and Prahalad, C. K. (2006) The dominant logic:

Retrospective and extension, Strategic Management Journal, 16(1).

13. Neilson, Gary; Pasternack, Bruce A.; Mendes, Decio (Winter 2003). "The Four Bases of Organizational DNA". Strategy+Business (Booz & Company)

14. Fenech, B. (2013) ‘Emerging Organisational Forms: Leadership Frames and Power’, Proceedings of the 9th European Conference on Management, Leadership and Governance, ACPI: Reading

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References

15. Fenech, B. (2013) op cit.16. Dovey, K. and Fenech, B (2007) op cit.17. Zuboff, S. and Maxmin, J. (2003) op cit.18. Dezső, C. E. and Ross, D. G. (2008) ‘Girl Power: Female

Participation in Top Management and Firm Performance’, University of Maryland Robert H Smith School of Business, Working Paper No. RHS-06-104.

19. Lee, I. B. (2005) Is There a Cure for Corporate ‘‘Psychopathy’’? American Business Law Journal, 42(1).

20. Bakan, J. (2004) The Corporation: The Pathological Pursuit of Profit and Power, Free Press: New York.