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This paper seeks to shed light on the management complexity of technology advance projects from an organizational point of view. It focuses on innovating organizations that develop products based on disruptive new technologies. The paper examines different organizational configurations, for the purpose of finding an optimal organization which fits to its business environment. It identifies factors of the business environment that particularly influence the organizational variables of structure, culture, processes and resources of such an organization. The paper selects an organizational configuration that is considered optimal for the innovating organization as described. The paper also looks into the management style and key competencies of the successful leader of such an organization and emphasizes the significance of these.
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Organizing for Innovation
A Theoretical Approach
Moatasem Chehaiber
Course in project leadership,
Niels Brock institute in
Copenhagen -Denmark
Supervised By: Tomas Nordlund
08-12-2009
Project management has to deal with the continuous development of general trends in worldwide
economics. In the past decade, project management was confronted with the globalization trend, and
the complexity it introduces to the macro environment of projects. By the start of this decade, project
management was greatly concerned with velocity, and towards the end of the decade, facing an
economic recession, eyes are attracted to projects that can return the world economy to speed. In
Denmark there is an immediate need for projects in this category, as a means to achieve the objective
set by the prime minister to restore the country to its position between the ten richest countries in the
world by the year 2020. An objective proving hard to reach in light of the latest prognosis recently
published by the EU commission. The prognosis sends Denmark back to a 27th
place with an annual
growth rate (BNP) of only 1.6 % throughout the next decade. Technology advance projects help
speeding up economics and hence they are increasingly gaining attention. However these projects and
their organizations are generally surrounded by a highly dynamic and volatile business environment
to which they need to adapt in continuous struggle to survive and succeed.
Contents SYNOPSIS .................................................................................................................................................................................... 3
THE INNOVATING ORGANIZATION........................................................................................................................................... 4
ORGANIZATION DESIGN STRATEGIES ...................................................................................................................................... 4
SELECTION OF STRATEGIC CONFIGURATIONS .................................................................................................................... 5
STRUCTURAL AND ENVIRONMENTAL CO-REQUISITES ................................................................................................. 7
CONFIGURATION OF STRATEGY AND STRUCTURE ..................................................................................................... 10
LEADING THE INNOVATING ADHOCRACY ............................................................................................................................ 11
ANNEX A; THE MINTZBERG FRAMEWORK ........................................................................................................................... 16
THE ADHOCRACY CONFIGURATION (ORGANIC STRUCTURE) .................................................................................. 17
ANNEX B COOPING WITH TASK UNCERTAINTY ................................................................................................................... 18
LITERATURE LIST ................................................................................................................................................................. 20
Organizing For Innovation; Moatasem Chehaiber
page 3
Synopsis
Technology advance projects are viewed as vehicles for creating better business value for
their companies and stakeholders. Hence they bear significance to the strategic
positioning of companies. They are often used to create product platforms upon which
companies build product lines and variations of products for a long time. Technology
advance projects are also most often treated as foundations for startup companies that
usually have plans to survive, succeed and grow up.
Mainly due to increased uncertainty in market response to the products of such projects,
and uncertainty in the technology, technology advance project organizations face a
higher level of complexity in their business environments than established organizations
in terms of markets and technology. This added complexity presents a higher challenge
to the managers of these projects in their effort to make sense of an uncertain world and
build viable project organizations to carry out the work to develop and implement the
project idea in the business world.
Project management and organization theory text books; prescribe a number of different
organization types, ranging from organized anarchy and simple organizations to highly
bureaucratic ones. Theorists argue the suitability and effectiveness of the different
organizational configurations to specific business environmental situations.
This paper seeks to shed light on the management complexity of technology advance
projects from an organizational point of view. It focuses on innovating organizations that
develop products based on disruptive new technologies. The paper examines different
organizational configurations, for the purpose of finding an optimal organization which
fits to its business environment. It identifies factors of the business environment that
particularly influence the organizational variables of structure, culture, processes and
resources of such an organization. The paper selects an organizational configuration that
is considered optimal for the innovating organization as described. The paper also looks
into the management style and key competencies of the successful leader of such an
organization and emphasizes the significance of these.
Organizing for innovation
Page 4
The Innovating organization
Jay R. Galbraith, an internationally recognized expert on organization design, defines
innovation as the process of applying and developing a new idea to create a new product,
process or business. It is not simply having an idea. It is the work to develop and
implement that idea in the business world (Galbraith 1994). Galbraith finds that, there
are different degrees of “newness” and therefore different kinds of innovations, and he
states that different kinds of innovations will need different kinds of organizations. fig. 1
shows the different types of innovations as seen by Galbraith. The types of innovations at
the left side of the figure are radical innovations and require correspondingly “radical
innovating” organizations. Technology advance project organizations are per definition
innovating organizations, and the innovating organizations working with radical
innovations are defined as radical innovating ones in this paper.
fig. 1 TYPES OF INNOVATION -Galbraith (1994)
Organization Design strategies
A considerable amount of research in the subject of determining the best organizational
configuration, led to the contingency theory on the organization. The theory holds the
following suggestions:
1. There is no universal way or one best way to manage an organization
2. The design of an organization and its subsystems must fit with the environment.
3. Effective organizations not only have a proper fit with the environment, but also
between its subsystems
4. The needs of an organization are better satisfied when it is properly designed and
the management style is appropriate both to the tasks undertaken and the nature
of the working group.
The Contingency theory is guided by the general orienting hypothesis that organizations
whose internal features best match the demands of their environments, will achieve the
best adaptation (Scott p. 89). Lawrence and Lorsch in 1967 argued that the amount of
Organizing For Innovation; Moatasem Chehaiber
page 5
uncertainty and rate of change in an environment, impacts the development of internal
features in organizations.
Radical organizations tend to develop towards relatively stable rational ones in an
incremental and adaptive manner, the innovating organization needs on a rough scale, to
adapt to changing business environments, following the life cycle of its innovation from
radical childhood in disruptive new technology, to complete maturity in becoming a style,
through incremental phases of developing new business models, new products, next
generations, line extensions and product improvements. These are the different types of
innovations identified by Galbraith (1994) and depicted in fig. 1 as a continuum. On a
finer scale, a technology advance organization wants to adapt to business environmental
changes at each individual phase or level of radicalism and/or incremental level of
innovation. In other words, an innovating organization which sees its innovation as a
continuum, needs to adopt both long term and short term organizational adaptation
strategies, that lead to an optimal organization at all times. These strategies assume that
organizations are open systems that are affected by business environments and influence
them. The strategies therefore take into account the current and anticipated business
environment of the organization. The business environment includes micro environmental
factors which have direct impact on the organization strategy such as customers,
employees, suppliers, shareholders, media and competitors as indicated in fig. 2. The
adaptation strategies need naturally also to take into account, the macro environmental
factors that in turn, have impact on the organization’s micro environment and the
organization itself. These factors are socio-cultural, technological, economical, legal
and political as shown in fig. 2. These Macro environmental factors were identified by the
PESTEL framework as environmental influences on organizations.
Selection of strategic configurations
In a manner to achieve internal harmony among the elements of strategy, structure
and context of the organization, theorists have been trying to make science out of how
to design and configure an organization according to the environmental variables in fig. 2.
Henry Mintzberg is a situational theorist in the sense that he concentrates on how environmental
variables influence the configuration of an organization. He defines a number of six organizational
configurations depending on external and internal situational factors. In his research, Mintzberg finds
four main variables of significant impact on the organization form. The first variable is stability as
function of other variables such as change in customer preferences, swift technology development and
political interference. The second main variable is complexity, which is concerned with the
requirements put on the organizations expertise and technology. Referring to the PESTEL framework
and fig. 2, the complexity factor belongs to the macro environment layer. The third main variable is
Market Heterogeneity, with respect to customers, products and geographical regions. The fourth
main variable is Hostility, measured in presence of competition and other types of conflicts. Hostility
is a variable found in the industry/sector layer of the business environment as in fig. 2. Mintzberg
concludes for example that hostility creates uncertainty for organizations and puts requirements to the
“speed of response” design variable of an organization.
Organizing for innovation
Page 6
fig. 2 Layers of the business environment
In table 1, a summary of Mintzbeg’s six standard configurations and the situational environmental
factors that justify them and their design parameters. Mintzberg combines his main variables to
characterize different types of business environments and recommends organizational to specific
environment types as shown in an example in fig. 3
Using Mintzbeg’s six standard configurations, and by assuming that there are only a rather limited
number of possible strategies and structures feasible in any type of environment, it then should be
straightforward to select an organizational configuration at a given moment of an organizations life
cycle that best fits the business environment of the organization at that moment. An analytical
approach is used where the business environment at the given moment can be determined by analysis
of Mintzberg’s four variables. When this is done the basic dimensions of the selected configuration can
be determined using table 1 which shows these dimensions for each of the six configurations. So by
finding the environmental and structural co-requisites of the innovating organization we would be
able to select one of Mintzberg’s organizational configurations as an optimal match. Tables
summarizing structures, environments and strategies of the different organizational configurations are
provided in Annex A. The annex also includes summary tables of matching strategy and structures for
five of the organizational configurations. These tables are used to aid selection of the optimal
configuration.
The Organization
Markets, Competitors, customers,
shareholders, employees, media, suppliers
Industry or sector
The Macro-environmet:
Socio-cultural, Technological, Economical, Political
Organizing For Innovation; Moatasem Chehaiber
page 7
Situational factors Design parameters
Configuration Environment Complexity
Hostility
internal Typical structure
Key processes
Typical relations
Simple Simple/dynamic Hostile
Small. Young.
Simple tasks
CEO control Direct supervision
Centralized
Machine bureaucracy
Simple/static Old. Large.
Regulated tasks.
Technocrat control.
Functional Planning systems
Centralized strategic planning
Professional bureaucracy
Complex/static Simple systems.
Professional control.
Functional Cultural processes.
Self control.
Devolved
Division
organization
Simple/static
Diversity
Old.
Very large. Divisible tasks.
Middle-line
control. Often young
Multidivisional Performance.
Targets. Markets.
Devolved.
Financial or strategic control
Adhocracy (innovative
organization)
Complex/Dynamic Complex tasks.
Expert control
Projects Cultural processes.
Self-control
Networks and alliances.
Devolved
table 1 Mintzberg’s six configurations
Structural and environmental co-requisites
Some of the important contingency theories of organizational structure involve the three
contingencies of the environment, organizational size and strategy to determine the
optimal organization. We could adapt and extend Mintzberg’s frame work to make it easy to relate
it to these three contingencies in order to determine the optimal organizational
configuration for a radical innovating organization. An adapted and extended frame work
is presented in Annex A. In the annex the professional Bureaucracy configuration is discarded as
it is usually not suitable for business firms.
Complex
Environment
Static Environment Dynamic Environment
Professional
bureaucracy
Adhocracy
Simple
Environment
Machine bureaucracy Simple
fig. 3 Organizational configurations and environments by Mintzberg (Example)
Organizing for innovation
Page 8
table 2 Basic dimensions of mintzberg's six configurations
Simple
Structure
Machine
Bureaucracy
Professional
Bureaucracy
Divisionalize
Form
Adhocracy Missionary
Key
Coordinating
Mechanism
Direct
Supervision
Standardization
of work
Standardization of
skills
Standardization
of outputs
Mutual
adjustment
Standardizatio
n of norms
Key part of
organization
Strategic Apex Techno structure Operating Core Middle Line Support Staff Ideology
Design Parameters
Specialization
of jobs
Little
specialization
Much Horizontal
and vertical specialization
Much Horizontal
specialization
Some horizontal
and Vertical Specialization
(between
divisions and
HQ)
Much
Horizontal specialization
Little
specialization
Training Little Little Much Little much Little
Indoctrination Little Little Much Some of
divisional
managers
Some much
Formalization
of behavior
Little Much
formalization
formalization Formalization
Little
Formalization
Little formal
Bureaucratic
/Organic
Organic Bureaucratic Bureaucratic Bureaucratic
(within
divisions)
Organic Bureaucratic
Grouping Usually
functional
Usually
functional
Functional and
Market
Market Functional and
Market
Market
Unit Size wide Wide at bottom
Narrow
elsewhere
Wide at bottom
Narrow elsewhere
Wide at top Narrow
Throughout
Wide in
enclaves of
limited size
Planning and
control
systems
Little planning
and control
Action planning Little planning and
control
Much perf.
control
Limited action
planning
Little Planning
and Control
Strategy contingency
Galbraith states that organizations have always been created in order to execute
business strategies. Different strategies, he says, have lead to different organizations. He
stated a model for linking different strategies to different organizations. This model is
known as the starr model and is shown in fig. 4. The figure depicts an organization as
consisting of four dimensions that must be consistent with the strategy. The first of these
dimensions is the Structural dimension which determines the location of the decision-
making power. The strategy contingency affects the divisional structure; undiversified
strategy is best served by a functional structure, because all activities are focused on a
single product. In contrast, divisional structure fits diversified strategies. The second
dimension is the Information and decision making process which in turn is formed
following the organization structure, whether functional or divisional. The third dimension
is the reward system that influences the motivation of people to perform and address
organizational goals. Reward systems in innovating organizations gain an added
significance. Innovation is viewed as requiring extra effort and extra risk and therefore
merits extra rewards. The last but not least of the four dimensions is the people dimension
which focuses on the human resources policies. These influence the employees’ mindsets
and skill sets. A product centric organization for example, requires different competencies
in people than a solution-centric organization.
Organizing For Innovation; Moatasem Chehaiber
page 9
fig. 4 The Starr model (Galbraith 1995)
Competitive strategy
Analyzing the competitive strategy of Innovating organizations we find that they adopt a
focus strategy. Focus has been used by Porter (1980) to designate a niche strategy
that concentrates the firm’s attention on a specific type of customer, product or
geographic location. They use a differentiation strategy and build their competitive
advantage on innovating differentiators. They differentiate by coming out with new
products and new technologies. In innovating organizations there is a strong emphasis
on R&D and pioneering. Therefore a Cost leadership strategy is not relevant, because
innovative organizations lead their competitors in innovation and can charge fairly high
prices. Innovating organizations adopt asset parsimony strategy because they want to
keep the organization flexible.
Environment stability
The environmental stability contingency affects mechanistic structure. The rate of
technological and market change affects whether its structure is mechanistic (i.e.
hierarchal) or organic (i.e. participatory). Refer to Burns and Stalker (1966) for
differences between organic and mechanistic organization structures. The mechanistic
structure fits a stable environment. The organic structure fits an unstable environment
because the participatory approach is required for innovation. An organic organization
appears to be more suitable for radical innovating organizations such as technology
advance organizations, as knowledge and information required for innovation are
distributed among lower hierarchical levels and so decentralized decision making fosters
innovation. Besides, the organic structures also accord better with humanistic values.
The organic theory sees the trend as being for task uncertainty to increase, because of
increase in scientific knowledge and innovation rates. The organic theory foresees
decreasing specialization and formalization which is needed for radical innovating
organizations when new knowledge have to be acquired and new methods have to be
developed. Increasing task uncertainty renders the innovating organizations’ business
environment highly dynamic. A main contributor to the volatility of the business
Organizing for innovation
Page 10
environment is the uncertainty about market acceptance and degree of penetration of
innovative products. However, of particular interest in studying macro environmental
factors that affect a technology advance project organization from an environmental
stability point of view is the technology. Joan Woodward (1958), argued that
technologies directly determine differences in organizational attributes such as span of
control, centralization of authority and the formalization of rules and authority. These
attributes constitute an essential part of the organization design strategy as suggested
by Galbraith. See annex B for more on this. Innovating organizations depend greatly on
new ideas and disruptive new technologies in innovation. Such organizations are
designed to do some activity for the first time. They are designed to test a new product
idea with a customer or a proof of principle for a new technology. Technological decisions
have to be made on the basis of incomplete market and technical information. Hence the
innovating organization is structured to cope with a high level of task uncertainty. The
organization allows for variations in the organizational forms and variations in the
strategy in order to either increase ability to preplan, increase flexibility to adapt to
inability to preplan, decrease the level of performance required for continued viability or
increase information processing capabilities of the organization. Annex B illustrates
organization design strategies proposed by Galbraith for the purpose of mitigating task
uncertainty.
Size contingency
The size contingency affects the degree to which its structure is bureaucratic. The
bureaucratic structure fits a large organization, while an un-bureaucratic structure fits
small organizations. The size contingency directly affects the resources variable of the
organization. Human Resources, in small organic organizations have to be highly
qualified, as the central issue is high experience and knowledge of subject matter. Again
as organizations grow in size they increase specialization-formailization, structural
differentiation and decentralization and a more bureaucratic organization will fit. The size
contingency also affects the organizations culture variable as well as processes variable.
The culture in small organizations is based on democratic and non-bureaucratic work as
well as effectiveness and participation.
Configuration of strategy and structure
In innovative organizations, knowledge and information required for innovation are
distributed among lower hierarchical levels, and so decentralized decision making fosters
innovation. Scientists and technocrats are allowed to make vital decisions and they are
usually highly qualified and motivated to a degree where they can work autonomously
and adjust mutually. Authority is thus situational and based on expertise (Burns and
Stalker, 1961). There are few bureaucratic rules or standard procedures since they are
too confining and would rapidly become obsolete. Sensitive information gathering
systems are developed for analyzing the environment, and vertical and horizontal
communication are open and frequent. Effective innovating project organizations are
small in terms of number of employees. These organizations build their competitive
advantage strategies on focus, asset parsimony, innovating differentiators and non-cost
Organizing For Innovation; Moatasem Chehaiber
page 11
leadership. Moreover, innovating organizations live in a highly complex, dynamic and
volatile business environment mainly because of increase in scientific knowledge and
innovation rates as well as market and technology uncertainty. Production technology
varies in both degree of automation and complexity. The main barrier to entry for these
organizations is knowledge; As a result, competitive rivalry is less sensitive for these
organizations. The business environment can therefore be defined as complex, uncertain
and moderately competitive.
As a result of the preceding analysis, an organic organization appears to be more suitable
for radical innovating organizations such as technology advance project organizations.
Taking all of these characteristics into consideration, and studying matches and conflicts
between these characteristics and the characteristics of the different Mintzberg’s
organizational configurations as illustrated in Annex A, we tend to conclude that the
Adhocracy configuration provides the best structural match to the strategies of the
innovative organization.
Leading The Innovating Adhocracy
It was previously concluded that the optimal organizational match for the innovating
organization is the adhocracy. Taking the main traits of the adhocracy organization and
culture into consideration, a leader of such an organization has the challenge to manage
in the situation where there is a little formalization of behavior, Job specialization is
based on formal training, there is a reliance on liaison devices to encourage mutual
adjustment, there is Low standardization of procedures, because they stifle innovation. It
is a situation, where Roles are not clearly defined and power-shifts to specialized teams,
where culture is based on democratic and non-bureaucratic work. It is a situation where
ultimately all members of the organization have the authority to make decisions and to
take actions affecting the future of the organization, and there is an absence of
hierarchy. Mangers in these organizations are functional members of project teams with
special responsibility to effect coordination between them. To the extent that direct
supervision and formal authority diminish in importance. Obviously, leading such an
organization is not as easy as leading in a bureaucracy where hierarchies, roles, process
and -not the least- authorities are well defined. However, In short terms, managing an
innovating adhocracy, requires flexibility and discretion in management style, as much
as it requires external focus and differentiation in business strategy as suggested
by Quinn (1999). Managing adhocracy is in fact managing innovation, and continuous
improvement. It is about managing the future.
In Quinn’s competing value frame work (1999) diagram shown in fig. 5, each quadrant
represents basic assumptions, orientations, and values. These are the same elements
that comprise an organizational culture. The leadership type, effectiveness criteria and
management theory underpinning each of these cultural types provide an understanding
of the organizational behavior expected in each cultural type.
The leadership type in the clan culture is one of a facilitator, mentor or parent role.
Managers assess their effectiveness in terms of staff cohesion, the level of morale and
Organizing for innovation
Page 12
the focus is on the development of people in the organization. The managerial
assumptions are that participation and involvement fosters commitment.
In the hierarchy culture the leadership type is coordinator, monitor and organizer.
Effectiveness criteria are efficiency, timeliness and smooth functioning of the
organization. The managerial assumptions are that control fosters efficiency in the
organization.
fig. 5 The competing values Framework (Cameron and Quinn 1999, p. 32)
In the market culture the leadership type is that of the hard-driving, competitive and
productive manager. They judge their effectiveness on market share, goal achievement
and beating their competitors. The managerial assumptions they hold are that
competition fosters productivity. (Cameron & Quinn 1999, p. 41)
Leadership type in the adhocracy culture is that of the innovator, entrepreneur and the
visionary. Managers in this culture base their effectiveness on the organization’s cutting-
edge output. It is about new products, creative solutions, cutting-edge ideas and growth
in new markets. They value adaptability, innovation, responsiveness to external threats
and opportunities. They value resource acquisition and external support. The managerial
assumptions are based on the belief that innovativeness fosters new resources. So
besides mastering situational leadership, Leaders of innovating adhocracies need
visionary leadership characteristics to be able to motivate and inspire people. In his book
Organizing For Innovation; Moatasem Chehaiber
page 13
primal leadership (2002), Daniel Goleman prescribes situations where different
leadership styles can be efficient as summarized in table 3. He however, states that
Effective leaders create resonance, “they are attuned to other people’s feelings and move
them in a positive emotional direction”, he says.
Daniel Goleman introduces six leadership styles as stated in table 3. In the table,
Goleman finds the visionary leadership style as having the most positive impact on
business climate. A visionary leader is not just a manager; he or she is a
transformational leader who does the right thing in contrast with a transactional leader
who does things right as illustrated in fig. 6. The visionary leader is future oriented in
thinking, focuses on where the organization is going and emphasizes possibilities and
probabilities. Strategic direction and continuous improvement of current activities is the
hallmark of the visionary leadership style.
fig. 6 Managers and Leaders
A visionary leader affects the group performance by his psychological orientation and
positive attitude. Fred Fielder one of the leading theorists in industrial and organizational
psychology, who helped his field move from the research of traits and personal characteristics of
leaders to leadership styles and behaviors. He asserts that group performance is contingent on
the leader’s psychological orientation and on three contextual variables: Group
atmosphere, task structure, and leaders power position. The theory explains that
group performance is a result of interaction of 2 factors. These factors are known as
•Transactional Leadership•Administer
•Maintain
•Focus on system and controls
•Ask how and when
•Keep an eye on the bottom line
Managers:
Do things right
•Transformational Leadership
•Innovate
•Develop
•Focus on people
•Inspire
•Create trust
•Ask why and what
•Long term view and eye on horizon
Leaders:
Do right things
Organizing for innovation
Page 14
leadership style and situational favorableness. A recent study conducted at the Capella
university in Minneapolis in the united states, concludes that transformational leadership
is significantly and positively related with subordinates’ self-reported perception of their
leaders’ effectiveness. The study confirms that transformational leadership traits
increased subordinates’ job satisfaction with their leader, more than both transactional
and laissez-fare leadership traits in the project management environment. The study also
concludes that, Subordinates’ Willingness to exert extra effort is significantly and
positively correlated with transformational leadership and transactional (active) traits,
while negatively and significantly associated with transactive (passive) and laissez-faire.
table 3The six leadership style From Daniel Goleman, Richard Boyatziz, Annie McKee; Promal leadership (2002)
In order to improve the leadership effectiveness, Fiedler suggests the leader may
increase or decrease task structure and position power. He or she may also enhance
leader-member relations through training and group development. fig. 7, exhibits a set of
managerial skills that can be gained by education to provide success factors that can help
a leader improving her or his leadership effectiveness.
Visionary leadership
Coaching style
Affiliative Leadership
Democratic Leadership
Pacesetting Leadership
Commanding Leadership
Leader
Characteristics
Inspires.
Believes in
own vision.
Empathic.
Explains how
and why
peoples
efforts
contribute to
the “dream”
Listens. Helps
people
identifying
their own
strengths and
weaknesses.
Counselor.
Encourages.
Delegates
Promotes
harmony.
Friendly.
Empathic.
Boosts moral.
Solves
conflicts
Superb
listener, team
worker,
Collaborator,
influencer
Strong urge to
achieve. High
own standards,
initiative, low
on empathy
and
collaboration.,
Impatience,
numbers driven
Commanding
Threatening
Tight control
Create
dissonance,
contaminates
everyones
mood
Drives away
talent
How Style
Builds
Resonance
Moves people
towards
shared
dreams
Connects
what a
person wants
with the
organization’s
goals
Create
harmony by
connecting
people to
each other
Appreciate
peoples input
and gets
commitment
through
participation
Realizes
challenges and
exciting goals
Decreases fear
by giving clear
direction in an
emergency
Impact of style
on (business)
climate
+++ ++ + + Often --
when used too
exclusively or
poorly
Often - -
When style is
appropriate
When
changes
require a new
vision or
when a clear
direction is
needed.
Radical
change
To help
competent,
motivated
employees to
improve
performance
by building
long term
capabilities
To heal rifts in
a team and
motivate
during
stressful times
or to
strengthen
connections
To build
support or
consensus or
to get valuable
input from
employees
To get high
quality results
from motivated
and competent
team. Sales
In a grave crisis
or with problem
employees. To
start an urgent
organizational
turnaround.
Traditional
military
Organizing For Innovation; Moatasem Chehaiber
page 15
fig. 7 Managerial Education success factors
Leadership
Project planning
Customerrelations
Performance measurement
Communicating
Organizationaleffectiveness
Team buildingStaff
development
Perspective
Negotiating
Riskmanagement
Problem solving
Decision making
Organizing for innovation
Page 16
Annex A; The Mintzberg framework
Simple Structure
Machine Bureaucracy
Adhocracy (organic)
Divisionalized
Power Centralization Top
management
CEO and designers
of workflow
Scientists,
technocrats and
middle managers
Divisional executives
Bureaucratization Low-informal Many formal rules,
policies and
procedures
organic Bureaucratic
Specialization Low Extensive Extensive Extensive
Differentiation Minimal Moderate Very High High
Integration and co-
ordination of effort
By CEO via
direct
supervision
By technocrats via
formal procedures
By integrating
personnel, task
forces via mutual adjustment
By formal committees via plan
and budgets
Information systems Crude, informal Cost controls and
budgets
Informal scanning,
open
communications
Management information
systems and profit centers
Environmental Dimensions
Technology Simple, custom Mass production,
large batch/Line
Sophisticated
product,
Automated or custom
Varies
Competition Extreme High Moderate Varies
Dynamism/
Uncertainty
Moderate Very low Very High Varies
Growth Varies Slow Rapid Varies
Concentration ratio Very Low High Varies Varies
Barriers to Entry None Scales barriers
Business level
strategies
Knowledge
Barriers
Varies
Corporate-level strategy
Favored strategy Niche
differentiation
Cost leadership Innovative
differentiation
Conglomeration
Marketing emphasis Quality
services,
convenience
Low price New products
High quality
image
Production emphasis Economy Efficiency Flexibility Vertical integration
Asset management Parsimony Intensity Parsimony Varies
Innovation and R&D Little Almost none Very High Low to moderate
Product-market scope Very narrow Average Average Very Broad
Table A. 1 Structures, environments and strategies
Organizing For Innovation; Moatasem Chehaiber
page 17
Rationale Match/ Conflict
Strategy
Can offer quality, convenience , and better service M Marketing differentiation
Avoids some competition in hostile environments; reduces liability of being small
M Niche differentiation
Complex Innovation impossible in centralized monolithic structure
C Innovative differentiation
Insufficient scale; Overly primitive structure C Conglomeration
Insufficient scale C Cost leadership Table A. 2 Matching strategy and structure in the Simple configuration
Rationale Match/ Conflict
Strategy
Substantial scale economies possible; emphasis on efficiency good in stable setting
M Cost leadership
Suitable only if differentiation does not upset production regularity and efficiency (e.g. advertising, good services)
M Marketing differentiation
Structure too inflexible C Innovative differentiation
Functional- departmental structure inappropriate C Conglomeration Inflexibility, capital intensity C Niche differentiation Table A. 3 Matching strategy and structure in the Machine Bureaucracy configuration
Rationale Match/ Conflict
Strategy
Flexible, innovative structure M Innovative differentiation
May be suitable if niche wide enough to make use of innovation potential; need for caution
M Niche differentiation
Should not squander resources on selling since state-of-the art is already highly desirable to customers
C Marketing differentiation
Structure is too inefficient C Cost leadership Would spread innovative efforts too thinly; also structure is not divisionalized
C Conglomeration
Table A. 4 Matching strategy and structure in the Adhocracy (organic) configuration
Rationale Match/ Conflict
Strategy
Divisions, profit centers, formal plans; head office control etc. suitable for diversification
M Cost leadership
Consistent with bureaucratic tendency; scale economies and vertical integration if divisions use related inputs
M Cost leadership
Where cost leadership contraindicated marketing differentiation may be suitable for intermediate level of bureaucracy
M Marketing differentiation
Generally, divisions are forced by head office to be too bureaucratic to be innovative
C Innovative differentiation
Table A. 5 Matching strategy and structure in the Divisionalized structure configuration
The Adhocracy configuration (Organic structure)
Adhocracy provides a good fit to radical innovating organizations. It has a highly organic structure,
with little formalization of behavior. Job specialization in adhocracy is based on formal training. There
is a tendency to group the specialists in functional units for housekeeping purposes but to deploy
them in small, market based project teams to do their work.
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There is a reliance on liaison devices to encourage mutual adjustment. This is the key coordinating
mechanism between these teams. To innovate, we must break away from established patterns.
Therefore the innovative organization cannot rely on any form of standardization for coordination.
Of all the configurations, the adhocracy shows the least respect for classical principles of management,
especially unity of command. The adhocracy must hire experts and give them power. The adhocracy
treats existing knowledge and skills merely as bases on which to build new ones, which can be hardly
needed when dealing with disruptive new technologies. In adhocracies the different specialists must
join their forces in multi-disciplinary teams, each formed around a specific project of innovation which
is the main trait of radical innovating organizations. Project teams must be small to encourage mutual
adjustment among their members. Mangers are functional members of project teams with special
responsibility to effect coordination between them. To the extent that direct supervision and formal
authority diminish in importance.
The adhocracy can take two forms, the operating and the administrative adhocracy. The operating
adhocracy serves its clients and solves problems on their behalf in project teams, while the
administrative adhocracy undertakes projects to serve itself. Te operating adhocracy is suitable for
consultancy firms and outsourcing partners. While the administrative adhocracy is suitable for
organizations that want to develop their own products.
Annex B Cooping with Task uncertainty
Of particular interest in studying macro environmental factors that affect a technology
advance project organization from an environmental stability point of view is the
technology. The behavioral contingency theory associated formal organization structures
with the best fit to technology. This was originally started by Joan Woodward (1958),
who argued that technologies directly determine differences in organizational attributes
such as span of control, centralization of authority and the formalization of rules and
authority. Referring to Fig. B. 1, these attributes constitute an essential part of the
organization design strategy as suggested by JAY R. GALBRAITH. Innovating
organizations depend greatly on new ideas and disruptive new technologies in innovation.
Such organizations are designed to do some activity for the first time. They are designed
to test a new product idea with a customer or a proof of principle for a new technology.
Technological decisions have to be made on the basis of incomplete market and technical
information. Hence the innovating organization is designed for trial and error in a manner
to cope with a high level of task uncertainty. The organization allows for variations in the
organizational forms and variations in the strategy in order to either increase ability to
preplan, increase flexibility to adapt to inability to preplan, Decrease the level of
performance required for continued viability or increase information processing
capabilities of the organization.
Organizing For Innovation; Moatasem Chehaiber
page 19
Fig. B. 1 Organization design Strategies
Fig. B. 1 shows organization design strategies proposed by Galbraith for the purpose of
mitigating task uncertainty. The three strategies to the left of the figure are adopted to
reduce the need for information processing while the remaining two strategies are
adopted to increase the organization’s capacity to process information. A short
description of some of these strategies is presented here.
Creation of slack resources
In this strategy, planning targets are increased so that fewer exceptions occur. For example,
completion dates can be extended until the number of exceptions that occur are within the
information processing capacity of the organization. The strategy clearly has it costs in the form of
relaxing budget targets and increasing time to market and thus reducing competitive advantage.
Creation of self-contained Tasks
This strategy aims at changing the subtask groupings from resource (input) based to output based
categories (product groups) and give each group the resources it needs to supply the output.
(Galbraith 1974). The cost of the self-contained task strategy is the loss of resource specialization.
Investment in vertical information systems
This strategy is about finding mechanisms of formalized data vertically through the organization. It is
usually operationalized by creating redundant communication channels which transmit data from the
originating point upwards in the hierarchy to the decision makers.
Creating Lateral Relationships
This strategy is about moving the level of decision down in the organization to where the information
exist.
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Literature list
1. Gerry Johnson; Kevin Scholes; Richard Whittington; Exploring Corporate strategy 7th edition;
prentice Hall
2. Olaf Passenheim; Project Management; BOOK BOON..
3. 2008 NEIL RITSON . & Ventus Publishing ApS; Strategic Management;
2008 Benson V., Tribe K. & Ventus Publishi
4. JAY R. GalBRAITH; ORGANIZATION DESIGN: AN INFORMATION PROCESSING
View; INETERFASE; Vol. 4, No.3, May 1974.
5. Daniel Goleman et al.; Primal leadership; Realizing the power of emotional
intelligence.