CH 17

Why are strategy and organizational learning
important and linked?

What is organizational design and how is it
linked to strategy?
How does technology influence
organizational design?
How does the environment influence
organizational design?
Copyright © 2010 John Wiley & Sons, Inc. 17-2
Strategy
 The process of positioning the organization in
the competitive environment and
implementing actions to compete
successfully.

Organizational learning
 Process of knowledge acquisition and adaptation
to changing circumstances through:
 Information distribution
 Information interpretation
 Information retention

Mimicry
Copying successful practices of others
Provides Establishes
Reduces the
Workable Legitimacy
Number of
Solutions to and
Decisions
Problems Acceptance

Experience
 A primary way to acquire knowledge.
 Besides learning by doing, managers can

also establish structured programs to learn
from successes as well as failures.

Scanning
 Involves looking outside
the firm and bringing
back useful solutions.
Grafting
The process of acquiring individuals, units, or
firms to bring in useful knowledge.

Avenues for knowledge retention:
 Individuals
 Transformation mechanisms
 Formal structures
 Physical structures (ecology)
 External archives
 IT systems
Organizational design
 The process of choosing and implementing a
structural configuration.

Operations
Environment
And I.T.
Size Strategy
Organizational
Design

The structural configuration:
 Allows the management to focus on skills
and abilities that their firms need to
compete, be flexible, and adaptive.
 Allows the individual members the ability to

experiment, grow, and develop
competencies that contribute to success.

Co-evolution of strategy and structure
 The firm can adjust to external changes even
as it shapes some of the challenges facing it.
 Shaping capabilities via the organization’s

design is a dynamic aspect of co-evolution.

Organizational size
 As the number of
employees increase, the
possible interconnections
among them increase
even more.
 The design of small firms is
directly influenced by
core operations
technology.

Simple design
 A configuration involving one or two ways of
specializing individuals and units.
 Vertical specialization and control

emphasize levels of supervision without
elaborate formal mechanisms.

Managerial scripts
 A series of well-known
routines for problem
identification and
alternative generation and
analysis that are common
to managers in a firm.

Overemphasis on Overemphasis on
vertical relations functions or product lines
Barriers to
Desired
Action
Isolating of firm from its Cultural, national,

partners geographic limits

Co-evolution of strategy and structure
can be hampered by:
 Organizational inertia
 Hubris
 Issue of detachment

Operations technology
 The combination of resources, knowledge, and
techniques that creates a product or service.
Information technology
 The combination of machines, artifacts,
procedures, and systems used to gather, store,
analyze, and disseminate information for
translating it into knowledge

Thompson’s view of technology
 Classification according to the degree of
specification and degree of
interdependence of work units.

Intensive technology
 Uncertainty as to how to produce desired outcomes.
 Requires assistance of specialists.
Mediating technology
 Links parties that want to become interdependent.
Long-linked technology
 Production method is known and broken down into a
number of sequential steps.

Woodward’s view of technology
 Small-batch production.
 Mass production.
 Continuous-process technology.

An adhocracy is characterized by:
 Few rules, policies, and procedures.
 Substantial decentralization.
 Shared decision making among members.
 Extreme horizontal specialization.
 Few levels of management.
 Virtually no formal controls.

An adhocracy is useful when:
 The tasks facing the firm vary considerably
and provide many exceptions.
 Problems are difficult to define and solve.

Why IT makes a difference
 IT provides a partial substitute
for:
 Operations
 Process controls
 Methods of coordination
 IT provides a strategic
capability
IT as a substitute
 Initial implementation of IT often displaced
routine, highly specified, and repetitious jobs.
 A second wave of substitution replaced

process controls and informal coordination
mechanisms with IT.

IT as a strategic capability
 Improves the efficiency, speed of
responsiveness, and effectiveness of operations.
 Provides all levels of the organization with the

knowledge required for immediate decision-
making.
 Enhances motivation through individual

empowerment.
Operations
Strategy
Information Management
Systems
Structure

IT and e-business
 Many dot-com firms adopted some variation
of adhocracy.
 As the dot-coms grew, the adhocracy

design became problematic.

Virtual organization
 An ever-shifting constellation of firms, with a
lead corporation, that pool skills, resources,
and experiences to thrive jointly.
 Partner firms are bound by mutual trust and

need for collective survival.

General environment
 The set of cultural, economic, legal-political, and
educational conditions found in the areas in
which the organization operates
Specific environment
 The owners, suppliers, distributors, government
agencies, and competitors with which an
organization must interact to grow and survive.

Inter- Uncertainty
dependence
Richness
Environmental
Complexity
Environmental richness
 A condition where the economic climate is
improving, customers are buying more
products, and suppliers are willing to invest in
the organization’s future.
 Provides the best climate for opportunity and

dynamic growth.

Environmental interdependence
 Linkage between environmental
independence and organization design may
be subtle and indirect.
 Organization may co-opt powerful outsiders
by including them on governing board.
 Develop centralized staff teams to service an

important client group.
Environmental uncertainty
 A more organic structure is the appropriate
organizational design response to
uncertainty and volatility.

In a complex global economy, firms must
learn to co-evolve by adjusting their
environment.
Two important ways of co-evolution:

 Management of networks
 Development of alliances

Inter firm alliances
 Cooperative agreements or joint ventures between
two independent firms.
 Often, firms are geographically and geopolitically
separate, but have common interests.
 A structure that is often used in complex technology
industries.

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CH 17

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Why are strategy and organizational learning

important and linked?

Copyright © 2010 John Wiley & Sons, Inc. 17-3

Copyright © 2010 John Wiley & Sons, Inc. 17-4

Copyright © 2010 John Wiley & Sons, Inc. 17-5

 Besides learning by doing, managers can

Copyright © 2010 John Wiley & Sons, Inc. 17-6

Copyright © 2010 John Wiley & Sons, Inc. 17-7

 Physical structures (ecology)

Copyright © 2010 John Wiley & Sons, Inc. 17-9

Copyright © 2010 John Wiley & Sons, Inc. 17-10

 Allows the individual members the ability to

Copyright © 2010 John Wiley & Sons, Inc. 17-11

 Shaping capabilities via the organization’s

Copyright © 2010 John Wiley & Sons, Inc. 17-12

Copyright © 2010 John Wiley & Sons, Inc. 17-13

 Vertical specialization and control

Copyright © 2010 John Wiley & Sons, Inc. 17-14

Copyright © 2010 John Wiley & Sons, Inc. 17-15

Isolating of firm from its Cultural, national,

Copyright © 2010 John Wiley & Sons, Inc. 17-16

Copyright © 2010 John Wiley & Sons, Inc. 17-17

Copyright © 2010 John Wiley & Sons, Inc. 17-18

Copyright © 2010 John Wiley & Sons, Inc. 17-19

 Requires assistance of specialists.

Copyright © 2010 John Wiley & Sons, Inc. 17-20

Copyright © 2010 John Wiley & Sons, Inc. 17-21

 Shared decision making among members.

 Extreme horizontal specialization.

 Few levels of management.

 Virtually no formal controls.

 Problems are difficult to define and solve.

Copyright © 2010 John Wiley & Sons, Inc. 17-23

 A second wave of substitution replaced

Copyright © 2010 John Wiley & Sons, Inc. 17-25

 Provides all levels of the organization with the

 Enhances motivation through individual

Copyright © 2010 John Wiley & Sons, Inc. 17-27

 As the dot-coms grew, the adhocracy

Copyright © 2010 John Wiley & Sons, Inc. 17-28

 Partner firms are bound by mutual trust and

Copyright © 2010 John Wiley & Sons, Inc. 17-29

Copyright © 2010 John Wiley & Sons, Inc. 17-30

 Provides the best climate for opportunity and

Copyright © 2010 John Wiley & Sons, Inc. 17-32

 Develop centralized staff teams to service an

Copyright © 2010 John Wiley & Sons, Inc. 17-34

Two important ways of co-evolution:

Copyright © 2010 John Wiley & Sons, Inc. 17-35

Copyright © 2010 John Wiley & Sons, Inc. 17-36

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