Master in Business Administration

Organizational Development & Behavior

prof. Diego Campagnolo

On the relationship between

strategy and organization
CH 1

a.y. 2019-2020
 Let’s start with some questions
n Zoom polling

Organizational Development & Behavior a.y. 2019-2020

 Where does value come from?
n What is a firm intended for?

ü A firm is intended for creating value

n What do we mean by value?

n How do firms create value? What is essential to create value?

n Strategy? Why and how does strategy affect value creation?

n Organization? What relationship does exist between organizational design and value
creation?

Organizational Development & Behavior a.y. 2019-2020

 Organizational capabilities and value creation

n What relationship does exist between organizational

capabilities and value creation processes?

n What are the sources of sustainabile competitive advantages?

Organizational Development & Behavior a.y. 2019-2020

 What do we mean by strategy? Porter, 1996
n Competitive strategy is "about being different”. "It means deliberately choosing a
different set of activities to deliver a unique mix of value.

n In short, Porter (1996) argues that strategy is about competitive position, about
differentiating yourself in the eyes of the customer, about adding value
through a mix of activities different from those used by competitors.

n Strategy involves trade-offs, choosing what to do and what not to do.

n Strategy is aimed at pursuing a sustainable competitive advantage

ü What is a competitive advantage?

Organizational Development & Behavior a.y. 2019-2020

 Competitive Advantage
n A competitive advantage exists when the firm is able to
deliver the same benefits of competitors, but at a lower cost, or
deliver benefits that exceed those of competing products

n A competitive advantage enables the firm to create superior

value for its customers and superior profits for itself

Organizational Development & Behavior a.y. 2019-2020

 Strategy and the quest for competitive advantage
n Competitive Advantage
ü Require meeting customer needs either more effectively (with
products or services that customers value more highly) or more
efficiently (by providing products or services at lower cost).

n Sustainable Competitive Advantage

ü Requires giving buyers lasting reasons to prefer a firm s products
or services over those of its competitors.

Organizational Development & Behavior a.y. 2019-2020

 From one stustainable competitive advantage to a variety of transient
advantages
“(…) I’m not arguing that it’s a bad idea—obviously, it’s marvelous to compete in a way that others can’t
imitate. And even today there are companies that create a strong position and defend it for
extended periods of time—firms such as GE, IKEA, Unilever, Tsingtao Brewery, and Swiss Re. But it’s
now rare for a company to maintain a truly lasting advantage. Competitors and customers have
become too unpredictable, and industries too amorphous. The forces at work here are familiar:
the digital revolution, a “flat” world, fewer barriers to entry, globalization.
(McGrath, R.G., 2013, HBR)

Moving from one

sustainable competitive
advantage to a variety of
transient advantages,
does it affect
organization?

Organizational Development & Behavior a.y. 2019-2020

 How does strategy affect value creation?
n Positioning school
ü Structure-Conduct-Perfomance
ü Competitive position gives market power

Organizational Development & Behavior a.y. 2019-2020

 Positioning school
n Building a competitive advantage by:

ü Striving to become the industry’s low-cost provider (efficiency).

ü Outcompeting rivals on differentiating features (effectiveness).
ü Offering the lowest (best) prices for differentiated goods (best-cost
provider).
ü Focusing on better serving a niche market’s needs (efficiency and\or
effectiveness).

Organizational Development & Behavior a.y. 2019-2020

 How does strategy affect value creation?
n Resouce Based View
ü VRIN resources and capabilities

Organizational Development & Behavior a.y. 2019-2020

 Organizational capabilities... a means for strategy
execution
“…a firm’s distinctive competence needs to be understood as a reflection of distinctive organizational capabilities to
coordinate and learn. By “organizational capabilities" we mean the capabilities of an enterprise to organize,
manage, coordinate or govern sets of activities …Posed differently, a distinctive competence is a
differentiated set of skills, complementary assets, and organization routines which together allow a firm to
coordinate a particular set of activities in a way that provides the basis for competitive advantage in a
particular market or markets”. (Dosi & Teece, 1994).

“organizational capability is a business’ ability to establish internal structures and processes that influence its members
to create organization-specific competencies and thus enable the business to adapt to changing customer and
strategic needs. Organizational capability includes, besides the management of people, the means through
which the organization implements policies and procedures to develop and sustain employee commitment.
Organizational capability, […] depends on teamwork.” (Ulrich e Lake, 1990).

Organizational Development & Behavior a.y. 2019-2020

 Organizational capabilities are related to strategy
execution

n “Strategy alone does

not differentiate top vs
bottom quartile firms,
execution does!” (Scott Snell,

University of Virginia)

Organizational Development & Behavior a.y. 2019-2020

 Organizational Architectures, Oarch
Galbraith on Oarch
q Star Model (Galbraith, 1995)

Organizational Development & Behavior a.y. 2019-2020

 Organizational Architectures, Oarch

OArch

Organizational Development & Behavior a.y. 2019-2020

 Value approach to Organization Design: The Star Model
(Galbraith, 1994)

Strategy
üIs the company’s formula for winning!
üGoals, mission, objectives, values
üDelineates products, markets, value proposition, competitive advantage
üEstablishes criteria for choosing among different organizational forms
üDrives resource allocation

Structure
- Specialization (type and number of job specialties)
- Shape (span of control – flat vs. tall structures)
- Distribution of power (centralization vs. decentralization)
- Departmentalization (function, product, process, market or geography)

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Organizational Development & Behavior a.y. 2019-2020
 Value approach to Organization Design: The Star Model
(Galbraith, 1994)

Process
ü Vertical processes
ü Horizontal (or lateral) processes

Rewards
ü Purpose (to align the goals of the employees with the goals of the organization)
ü Some Issues (individual vs. team, function vs. cross function, monetary vs. non-monetary rewards)
ü Rewards must be congruent with other parts of organization design

People
ü Systematic approach (recruiting, selection, rotation, training, development)
ü Focus on developing organizational capabilities (flexibility, ability to work with others, knowledge
management)

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Organizational Development & Behavior a.y. 2019-2020
 Organizational architectures

Burton and Obel’s view:

q A theory of the firm which integrates the human activities and capital
resource utilization within a structure of task allocation and
coordination to achieve desired outcomes and performance for both the
short run and the strategic long run" (Burton and Obel, 2011a, 2011b).

Organizational Development & Behavior a.y. 2019-2020

 Does organizational architecture really matter?

q Architectures influence performance by

q Leading and constraining individual and team behaviors;
q Shaping firms’ operative models (how we do)
q Executing good ideas and activate business models

q Organizational capabilities are firm-specific competencies that generate

long-term competitive advantages

Organizational Development & Behavior a.y. 2019-2020