Strategy and ICT

ICTacceptance

ICT and Strategy

Competition and strategy

Competitive advantage

Companies as drivers of change

Transaction costs, value chain

The Information Society

The New Capitalism

So far

Developments in society Developments in economy Companies as drivers of change The existence/size/limits of companies:

- Transaction costs- Value chain

To do

Explain the form of companies Explain the conduct of companies

Company structure (Morgan and Mintzberg)

Basic Concepts

Organizational StructureOrganizational Structure: The formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authorities within organizations.

Organizational ChartOrganizational Chart: A diagram representing the connections between the various departments within an organization: a graphic representation of organizational design.

Sample Organizational Chart

Structure Concepts I

Hierarchy of AuthorityHierarchy of Authority: A configuration of the reporting relationships within organizations; that is, who reports to whom.Division of LaborDivision of Labor: The process of dividing the many tasks performed within an organization into specialized jobs.Span of ControlSpan of Control: The number of subordinates in an organization who are supervised by an individual manager.

Modern Trends: Delayering

As today’s organizations restructure, the middle layers of organizational hierarchies tend to get removed. The result is a flatter organizational structure, which puts managers closer to

the issues about which they have to make decisions.

Division of Labor

Tall vs. Flat Organizations

Structure Concepts II

Line PositionsLine Positions: Positions in organizations in which people can make decisions related to doing its basic work.Staff PositionsStaff Positions: Positions in organizations in which people make recommendations to others but who are not themselves involved in making decisions concerning the organization’s day-to-day operations.DecentralizationDecentralization: The extent to which authority and decision making are spread throughout all levels of an organization rather than being reserved exclusively for top management (centralization).

Decentralization

Departmentalization

The process of breaking up organizations into coherent units.Functional OrganizationFunctional Organization: The type of departmentalization based on the activities or functions performed (e.g., sales, finance).Product OrganizationProduct Organization: The type of departmentalization based on the products (or product lines) produced.Matrix OrganizationMatrix Organization: The type of departmentalization in which a product or project form is superimposed on a functional form.

Functional Organization

Product Organization

Matrix Organization

Organizational Design

The process of coordinating the structural elements of an organization in the most appropriate manner.

Approaches include• Classical and Neoclassical Approaches

• The Contingency Approach

• Mintzberg’s Framework

• The Boundaryless Organization

Classical vs. Neoclassical Theory

Classical Organizational TheoryClassical Organizational Theory: The approach that assumes that there is a single best way to design organizations.• This approach assumes that managers need to have close

control over their subordinates and calls for designing organizations with tall hierarchies and a narrow span of control.

Neoclassical Organizational TheoryNeoclassical Organizational Theory: An attempt to improve on the classical organizational theory that argues that not only economic effectiveness, but also employee satisfaction, should be goals of an industrial organization.• This approach assumes that managers do not have to

carefully monitor their subordinates and calls for designing organizations with flat hierarchies and a wide span of control.

Classical vs. Neoclassical Theory

Typology (Morgan)

Machines Organism Brains Culture Political systems Psychic prisons Flux & transformation Instruments of domination

The machine

Bureaucracy Functional specialisation Scientific management (Taylor)

The organism

Adjust to environment Organisation as an open system Mintzberg

Henry Mintzberg

Mintzberg’s Framework

Mintzberg claims that organizations are composed of five basic elements, or groups of individuals, any of which may predominate in an organization.

The element that predominates will determine the most effective design in that situation.

Mintzberg: Five Basic Elements

Operating CoreOperating Core: Employees who perform the basic work related to an organization’s product or service.Strategic ApexStrategic Apex: Top-level executives responsible for running an entire organization.Middle LineMiddle Line: Managers who transfer information between higher and lower levels of the organizational hierarchy.TechnostructureTechnostructure: Organizational specialists responsible for standardizing various aspects of an organization’s activities.Support StaffSupport Staff: Individuals who provide indirect support services to an organization.

Five parts of an organisation

1. Strategic apex

2. Middle line

3. Support staff

4. Technostructure

5. Operating core

Illustrations borrowed from presentations of Bolman and Deal (Wiley Interscience)

Coordination

Mutual adjustment Direct supervision Standardisation of work processes Standardisation of work outputs Standardisation of skills Standardisation of norms

Mintzberg: Organizational Designs I

Simple StructureSimple Structure: An organization characterized as being small and informal, with a single powerful individual, often the founding entrepreneur, who is in charge of everything.Machine BureaucracyMachine Bureaucracy: An organizational form in which work is highly specialized, decision making is concentrated at the top, and the work environment is not prone to change (e.g., a government office).Professional BureaucracyProfessional Bureaucracy: Organizations (e.g., hospitals and universities) in which there are lots of rules to follow, but employees are highly skilled and free to make decisions on their own.

Mintzberg: Organizational Designs II

Divisional StructureDivisional Structure: The form used by many large organizations, in which separate autonomous units are created to deal with entire product lines, freeing top management to focus on large-scale, strategic decisions.

AdhocracyAdhocracy: A highly informal, organic organization in which specialists work in teams, coordinating with each other on various projects (e.g., many software development companies).

Simple structure

Machine bureaucracy

Professional bureaucracy

Divisional form

Adhocracy

Mintzberg: A Summary

Boundaryless Organization

An organization in which chains of command are eliminated, spans of control are unlimited, and rigid departments give way to empowered teams.Modular OrganizationModular Organization: An organization that surrounds itself by a network of other organizations to which it regularly outsources noncore functions.Virtual OrganizationVirtual Organization: A highly flexible, temporary organization formed by a group of companies that join forces to exploit a specific opportunity.Affiliate NetworksAffiliate Networks: Satellite organizations affiliated with core companies that have helped them develop.

Boundaryless Organization

Modular Organization

Virtual Organization

Strategic Alliances

Mutual Service ConsortiaMutual Service Consortia: A type of strategic alliance in which two similar companies from the same or similar industries pool their resources to receive a benefit that would be too difficult or expensive for either to obtain alone.

Value-Chain PartnershipsValue-Chain Partnerships: Strategic alliances between companies in different industries that have complementary capabilities.

Joint VenturesJoint Ventures: Strategic alliances in which several companies work together to fulfill opportunities that require the capabilities of one another.

Back to Morgan: Brains

Self learning system Cybernetics Negative feed back

Culture

Shared values and norms Institutionalisation

Political systems

Interest groups Power/influence

Instruments of domination

The multinational

Strategy

2007 © Wolters-NoordhoffOrganisation and Management

SWOT

Structure Conduct Performance Resource Based View

The strategy perspective

Structure-Conduct-Performance model (Porter, 1980, 1985)

Porter’s five forces model

2007 © Wolters-Noordhoff Organisation and Management

Question

Are there industry characteristics (based on the five forces model) which explain the use of the Internet as a channel?

Disappearance of barriers of entry

Economies of scale Product differentiation Switching costs Access to distribution channels

(Shin, 2001; Lucas, 2002)

Existing rivalry

Winner takes all First mover advantage

(Source: Coltman, 2001)

Strategies

? + +

- 0 +

- - ?

Relative resource-produced value

Lower Parity Higher

Relativeresourcecosts

Lower

Parity

Higher

Strategies to realize competitive advantage (Porter, Treacy and Wiersema)

Cost leadership/operational excellence Differentiation/product leadership Focus/customer intimacy

Question

Mention examples of companies that use the Internet to create a competitive advantage

Boston Consultancy Group Portfolio Matrix

2007 © Wolters-Noordhoff Organisation and Management

2007 © Wolters-NoordhoffOrganisation and Management

2007 © Wolters-NoordhoffOrganisation and Management

Growth according to Ansoff (1965)

PRODUCT

Existing New

MARKET

Existing

New

Penetration

Market development

Product development

Diversification

Strategy (2)

Horizontal integration

Forward vertical integration

Backward vertical integration

The role of ICT in companies

Business Strategy

Organizational infrastructure

Infrastructure andprocesses

ICT Strategy

Alignment

Impact

Business ICT

Strategic Alignment Model

Alignmentmodel Venkatraman & HendersonStrategic Alignment: levering Information Technology for Transforming Organisations

IBM Systems journal, 32 (1) 1993, p 4-16

Strategic Alignment Model

Four dominant alignment perspectives

1. Strategy execution 2. Technology transformation 3. Competitive potential 4. Service level