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Sack Balicki Lejeune EIASM Paper March 09

Sack Balicki Lejeune EIASM Paper March 09

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Published by Albert Lejeune
A paper presented to the
by Ira Sack, Stevens Institute of Technology, isack@stevens.edu, Richard J. Balicki, Johnson & Johnson, rbalick@its.jnj.com Albert Lejeune, ESG-UQAM, lejeune.albert@uqam.ca
Brussels, April 20-21,2009
A paper presented to the
by Ira Sack, Stevens Institute of Technology, isack@stevens.edu, Richard J. Balicki, Johnson & Johnson, rbalick@its.jnj.com Albert Lejeune, ESG-UQAM, lejeune.albert@uqam.ca
Brussels, April 20-21,2009

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Published by: Albert Lejeune on Jun 03, 2009
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EIASM 2009
A Balanced Architectural Approach toDevelop Dynamic Capabilities
A paper presented to theEIASM
byIra Sack, Stevens Institute of Technology, isack@stevens.eduRichard J. Balicki, Johnson & Johnson, rbalick@its.jnj.comAlbert Lejeune, ESG-UQAM, lejeune.albert@uqam.ca
Brussels, April 20-21
In the field of strategic management the hard-soft distinction is a tradition since 1981[PA1981]. The first three of the 7 S's (Strategy, Structure, Systems) defined by Pascaleand Athos - called hard factors - were the hallmark of American management. They
 became in the 90‘s a departure point for a transformational journey towards Purpose,
Process, and People [BG1994, 1995a, 1995b]. The remaining four factors (Skills, Staff,Style, and Shared Values) were called soft factors and still characterize an organizationalculture of learning and sharing. The goal of this paper is to actualize this hard-softdistinction in the new architectural context that sometimes makes enterprise architecturea substitute for strategy, enabling the development of new competences and dynamiccapabilities [RWR2006].
Dynamic capabilities are defined as ‗
the ability to integrate, build, and reconfigureinternal and external competencies to address rapidly-changing environments
[TPS1997]. This paper shows how a balanced hard/soft architecture is key to reconfigureboth internal and external competencies through dynamic capabilities. This was the casewhen the large Canadian traditional banks had to compete with the Internet banks.Quickly, the bank became available where the customer business was. As the number of branches quickly diminished, the integration level of the traditional, automated branches,and ATMs was completed. The precision of the market data made the manned orelectronic «doors» adequately positioned. The network was rationalized and each entrypoint contributed to the profits by building transactions volume. To the contrary, the new
Internet banks didn‘t experience the same degree of success.
 This paper is organized this way: We first propose our definition of a balanced hard/softarchitecture and expose the Hierarchical Layered Approach to Organizational Design. Wethen go further in explaining the balanced hard/soft architecture and finally illustrate thatbalanced architecture as an organizational pattern of dynamic capabilities enabling thereconfiguration of both internal and external competencies.
Hard and Soft Contracts and Architectures
Routine workflows as well as routine job skills, roles, and behaviors of people andstructure in processes may and should be specified as
as possible
otherwise,we may not know how to implement them (i.e., their semantics) or exactly what theirimplementations are supposed to do (i.e., their functionality). Such precise specificationsmay take the form of 
hard (aka traditional) contracts
: precise formal contracts as, for
3example, defined in approaches to business and organization modeling [MSSB2008,MSB1999, K2003, and KR1994, SB2002]
. The collection of these contracts and the way
they are ―connected‖ constitutes the
hard architecture
of an organization [MSSB2008,MSB1999].Hard (traditional) architecture is the focus of 
classical theory
: the rational-technical
―school of thought‖ about organizational design. The core premis
e of this school is thatthe organization and decision-making should be treated as a machine. Components of hard architecture always have explicit properties. Hard architecture and hard contracts areprevalent within the realm of information technology in software and hardwaredevelopment, database design, network design, business applications, IT infrastructure,and elsewhere. They are also commonplace within economics in dealing with so-calleddiscrete transactions and the discrete aspects of ongoing contractual relations [MG2001].Numerous other excellent examples of hard architecture are presented and elaboratedupon in
 Business Models
[K2003].External relationships between an organization and its customers as well as the so-called modern
employment contract 
between an employer and employee (which is not a
traditional contract written in ―black and white‖ but rather an unwritten (type of)
 psychological contract 
) have semantic associations that cannot be precisely stated orcompletely identified [R2000, R1995]. Although they may have explicit properties, they
are principally ―understood‖ in terms of tacit knowledge, implicit understanding, andhidden behaviors. Their ―specifications‖ take the form of 
relational contracts
as definedin noted economist J
ohn Kay‘s approach to organizational architecture presented in
[K1995] as well as in economic exchanges based on ongoing contractual relationships(e.g., franchising) presented in [MG2001] or the form of 
knowledge contracts
as definedin Morabito, Sack, &
Bhate‘s approach to the modeling of knowledge work [MSB1999].
Such contracts are not entirely written, or not written at all, but understood in terms of beliefs, expectations, justifications, and other human dispositions. Within the realm of IT,soft contr
acts are prevalent in ―soft high tech.‖
Henceforth, we shall use the term softcontract to refer to either a psychological, relational, or knowledge contract. Thecollection of soft contracts and their interrelationships constitutes the
soft architecture
of an organization [MSB1999]. For a more thorough description of the various types of softcontracts (as well as hard contracts), refer to [MSSB2008, MSB1999, and SB2002].Soft architecture is the focus of various modern theories of the organization that derive
from the ―school of thought‖ stemming from ―neo
classical theory‖ (which emphasizes
motivation and employee involvement) as well as more recent approaches to informationtheory (which adopts the core premise that the organization and decision-making should
 be seen in terms of ―information flows‖ [SB2001].) In fact, many different models of the

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