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Graduate School of Business and Law

Strategy

Topic 10 – Design, Organisational Architecture, Networks

and Ambidexterity

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August 2016

Topic 10 – Design, Organisational Architecture, Network and Ambidexterity

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Contents

Introduction 1
Learning objectives 1

Student activities 4

Summary 5

References 5

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Introduction
The challenge to industry created by the evolution of technology and design
is having a huge impact on firms and networks of firms (Porter and
Heppleman, 2015). In Unit 10 here we look at the related areas of design,
organisational architecture and network alliances. Design principles have a
wide influence over the matters discussed in this unit.
Fitzroy, Hulbert and O’Shannassy (2016: 364) define design thinking as:
…a human centred innovation approach that uses observation
and discovery of sometimes highly nuanced and not easily
understood human needs as the focus of the innovation
process…Design thinking gives consideration to technological
capabilities and constraints, and also the socio-cultural setting.
Four phases of the design approach are identified and explained including
discovery, define, the ideation phase and delivery.
The principles and considerations that underlie design of organizational
structure are explained. O’Reilly and Tushman (2004) explain the challenges of
change and innovation and the benefits of the ambidextrous organisation. A
highlight of their article is the explanation of technology circles; there are different
moments in technology circles requiring different innovation skills for the firm at
different times (Christensen, 1997).
There is also a real connection in this unit between Chapter 11 of the text and
the reading from Porter and Heppleman (2015) in relation to processes and
process management. The chapter provides a detailed insight into the
workings of process and process management. Porter and Heppleman
(2015) explain the impact of the design of smart, connected products on firm
functions and industry.
The case study for this session is Tesla Motors (in 2013). Tesla are attracting
a lot of technology and design interest with their innovative motor vehicle
design. Tesla are an entrepreneurial style of organisation with the potential to
disrupt the motor vehicle industry (Hamel, 2000).
The importance of human resources and knowledge management in strategic
management are discussed.

Learning objectives
By the end of this topic you should be able to:
1. Understand the importance and principles of managing by design
2. Identify the design decisions strategic managers have to make regarding
firm architecture – structure, processes and human resources
3. Be aware of the need for innovation in the design of organisational
architecture and why new forms have been developed
4. Apply the principles underlying the design of structure of an organisation
5. Contrast the major forms of organisational structure, and understand when
each should be adopted
6. Appraise the importance of process management and the nature of the
possible conflict between process management and line management
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7. Understand the importance of network partners to the firm

8. Evaluate the importance of human resources in strategic management

To assist in achieving these learning objectives the following readings are set:

Reading 1

Fitzroy, P., Hulbert, J. and O’Shannassy, T. 2016. Strategic

Management: The Challenge of Creating Value, 3rd Edition,
(Chapter 11) Routledge Publishing, London, UK.

In this chapter Fitzroy et al. (2016) define design and consider the importance of
managing design for the firm. Design has been recognised by business and
government as an important way of facilitating innovation. Design initiatives and
innovations are all around us in our daily life (e.g. mobile phone, motor vehicle)
and work (e.g. allocation of office space, docking station and laptop computer)
often transforming our human experience(s).
In this chapter we also spend time building understanding of organisational
architecture including its elements - structure, processes and human resources.
The principles and considerations that underlie design of organizational
structure are explained. These include whether the firm is operating in dynamic or static
environments, centralisation or decentralisation of decision-making authority,
differentiation and/or integration of task, functional or process management – there is a
range of trade-offs to consider. Organisational structure forms including functional
structure, the multidivisional structure, group structure, global structure and matrix
structure are explained.
The value of networks and alliances, as well as managing organisational processes is
explained.
Cross-functional processes can be key-capabilities for the firm must be managed
in an integrated way. Important human resource decisions for firm success such as
managing the skills, knowledge and attitudes of employees, succession
planning, performance appraisal systems and the design of appropriate
incentives are explained.

Reading 2
O’Reilly, C. and Tushman, M. 2004. ‘The ambidextrous
organization’, Harvard Business Review, April, 74-81.

Tushman and O’Reilly (1997) have studied the difference between success
and failure in business and developed several observations. First they
acknowledge the pattern of evolutionary and revolutionary change through
which firms evolve. They note that organisational discontinuities are driven by
a performance crisis for the business, competitive pressure or a change in
regulation.
Tushman and O’Reilly (2004) argue that the most successful businesses
proactively seek to explore new products and/or services to shape and
reshape their market:

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… some companies have been have actually been quite successful

at both exploiting the present and exploring the future … they
separate their new, exploratory units from their traditional,
exploitative ones, allowing for different processes, structures, and
cultures; at the same time they maintain tight links across units at
the senior executive level.
Firms are able to do this by managing ambidextrously, with a tightly
integrated senior executive team. Tushman and O’Reilly (1997) explain
technology circles and distinguish between a range of innovation efforts by
the firm – notably incremental innovations, architectural innovations, and
discontinuous innovations. They also discuss the case of USAToday, the
popular American newspaper. Examine the window in the reading titled The
Scope of the Ambidextrous Organisation (O’Reilly and Tushman, 2004: 80)
and ensure you are familiar with the alignments of the exploitative business
and the exploratory business.

Reading 3
Porter, M. and Heppelman, J. 2015. ‘How smart connected
products are transforming companies’ Harvard Business Review,
October: 96-114

Porter and Heppleman (2015) explain that smart connected products influence
industry structure, industry rivalry, industry boundaries, and firm strategy. Smart
connected products also have implications for the internal aspects of running the
organisation – impacting functions including finance, marketing, operations,
human resources and more; the intensity of work between functions is also
increasing. In addition new functions are emerging managing the substantial
quantities of data that are now available to firms.
Smart connected products have three core elements. First are the physical
components including the electrical and mechanical parts. Second are the smart
components including microprocessors, sensors, controls, software, operating
system, data storage and digital user interface. Third are the connectivity
components including antennae, protocols, ports, and networks that allow the
product and the product cloud to communicate and facilitate the external
operating system.
Smart connected products require a technology stack to provide a gateway for
data exchange between the product and user, and work as a platform for data
storage and analytics. The gateway allows integration of the data from external
sources, business systems and related products, as well as safeguarding access
to products and the data flow.
The outcome is that new forms of cross-functional collaboration and new
functions are being created including data organisations, units to do continuous
improvement of products after-sale, and units with the task of improving customer
relationships. For instance making full use of available data can be a source of
competitive advantage bringing together governance, management, analysis and
data security into a new business function.
This has implications for the firm with smart, connected products influencing
design practices and creating need to interdisciplinary systems engineering.
Firms are evolving with the challenge.
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Websites
Dell Inc.

Please visit the following link to the Dell Inc. web site:

http://www1.ap.dell.com/content/default.aspx?c=au&l=en&s=&s=gen&~ck=cr
Many of you will be current or future customers of Dell. Browse the Dell web site.
Dell provide solutions for customers at home and for businesses, as well as
warranty and support services. The Dell system requires no human intervention
from customer order to delivery to customer. It is a remarkable example of
process design. Dell make use of a network of alliance partners.
Is this the way of the future in this type of online retail setting?

Student activities

Reflection on Creating Business Strategies

Unit 10 Design, Organisational Architecture and Networks

Expert opinion is that the healthcare industry will be transformed by the availability and
use of data for patient care, patient outcomes and overall healthcare management. The
healthcare sector will need the ability to gather, combine, read, interpret and take
action based on the trends in the data. Historically the healthcare industry has not been
strong in this area.
What impact do you foresee on population health outcomes from the availability
and interrogation of the healthcare data?
Is there a prospect public health can be improved?

Class Discussion and Assessment Activity

Creating Business Strategies Harvard Business School Case Studies
Tesla Motors (in 2013)

In this case study for Unit 10 we look at the ambitions of Tesla Motors in the highly
competitive motor vehicle industry. Tesla Motors strategy involves some fascinating
design challenges and technology development.

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Great Companies, Great Products and/or Services, and Great

Strategists
PerkinElmer, Inc.
Discussion Board Activity

Chapter 11 opens connecting theory to practice discussing the ‘state-of-play’ at

PerkinElmer. PerkinElmer is a leading global corporation specialising in imaging,
detection, informatics and service capabilities. They are an example of Porter and
Heppleman’s (2015) corporation developing and using smart, connected products.
Please view the PerkinElmer web site at:
http://www.perkinelmer.com/company/about-us/
PerkinElmer has technical capabilities in algorithms, automation, optics,
chemistry, software and service and functional strengths in marketing, logistics,
finance, and human resources.
With this range of strengths and smart, connected products what difference(s)
can PerkinElmer make to the provision of healthcare globally?

Summary
In this topic we consider the inter-related areas of design, organisational
architecture and the network level. Design is defined and the four steps of
design thinking explained. The principles underlying the structure of the firm
are explained, as are the major forms of organisational structure. The
importance of networks alliances, processes and process management are
explained. In the readings from Harvard Business Review O’Reilly and
Tushman (2004) explain innovation streams and how to manage the
ambidextrous organisation. Porter and Heppleman (2015) discuss the impact
of smart, connected products on firms and industry. The Tesla Motors (in
20130 case study provides a deep insight into smart, connected products and
their impact on the firm and industry. Dell Inc. and PerkinsElmer Inc are the
focus of class discussion.

References and Bibliography

Christensen, C 1997. The Innovator’s Dilemma, Harvard Business School Press,
Boston.

Fitzroy, P., Hulbert, J. and O’Shannassy, T. 2016. Strategic Management: The

Challenge of Creating Value, 3rd Edition, Routledge Publishing, London, UK.
Hamel, G 2000. Leading the Revolution, Harvard Business School Press, Boston.
Mintzberg, H 1994, ‘The fall and rise of strategic planning’, Harvard Business
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Review, 72 (1): 107-114.

Mintzberg, H and Lampel, J 1999, ‘Reflecting on the strategy process’, Sloan
Management Review, 20 (3): 2-30.

O’Reilly, C Tushman, M. 2004. ‘The ambidextrous organization’, Harvard

Business Review, April: 74-81.

Porter, M. and Heppelman, J. 2015 ‘How smart connected products are

transforming companies’, Harvard Business Review, October: 96-114.
Silverman, B. 2016. ‘The big data evolution in healthcare’, Interbrand,
http://interbrand.com/best-brands/best-global-brands/2016/articles/the-big-data-
evolution-in-healthcare/, viewed 29 August 2017.

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