Do Business Well

Since the pioneering work of Burns and Stalker (1961), it has been accepted that unpredictable market and technological environments may require ‘organic‘ organizational structures rather than the more traditional ‘mechanistic’ forms best suited to more stable conditions.

• An example of a ‘mechanistic’ structure would be the hierarchical and functionally divided arrangements still common in long-established organizations such as banks.
• An example of an ‘organic‘ structure would be the creation of flexible cross-functional project teams within a firm to develop specific new products as the occasion demands.

The assumption is that organic structures can generate a high degree of ‘fit’ between the external environment and the internal organizational form. However, the scenario of organic structures enabling ‘matching’ to take place with changing external conditions is increasingly problematic for several reasons:

• The capacity to ‘read’ the requirements of the external environment is seen as relatively straightforward.
• The boundary between the external environment and the organization is assumed to be clear and distinct.
• The achievement of optimum ‘fit’ is regarded as a stable and sustainable configuration.

Miles and Snow (1986) criticized this model by noting how the external environment is becoming an increasingly dynamic, complex and ‘difficult to read’ phenomenon. Even in the 1980s, boundaries between the organization and its environment were becoming increasingly blurred, and further change has taken place since then!

Organizational structure was once the way in which companies could control the flow of information within the firm. Clear hierarchies of responsibility meant that information flowed up and down functional areas (if slowly), but was often not made available to other parts of the organization, or could be excluded from certain individuals. An individual’s position in the management hierarchy could be ascertained by the degree of access they held to important information about company strategy, for example. Powerful fiefdoms could be established by individuals who controlled access to such information. With the recent development of the Internet and internal company intranets, such barriers to information access can now be transcended. Real-time access to information may be available to any employee with Internet access, and the activities of diverse functional areas become transparent to employees at all hierarchical levels. On the other hand, the sheer volume of information now available to organizations creates problems of its own. These developments have major implications for marketers seeking opportunities to generate competitive advantage.

Internet developments therefore provide a powerful incentive for established firms to experiment with new ways of structuring their operations, in order to compete with more flexible new market players such as dotcoms that are not burdened by legacy computer systems and entrenched operational routines. For example, Kalakota and Robinson put consideration of new forms of organizational structure at the heart of Internet strategy:

Maintaining the status quo is not a viable option. Unfortunately too many companies develop a pathology of reasoning, learning and attempting to innovate only in their comfort zones. The first step to seeing differently is to understand that eBusiness is about structural transformation.

(1999: 5)

Day (1998) notes that many firms try to maintain traditional structures when developing their online strategies, and hence become victims of new firms with better alignments of structure and strategy. Effective Internet strategy, however, calls for a re-engineering of processes and structures in order to focus on key customer groups, rather than product or service divisions. It is essential that firms understand how to manage change effectively in order to sustain competitive advantage.

Virtual organizations

Information technology is the catalyst for many recent changes in the structure of organizations. When this critical feature is taken together with general business trends towards reduced management hierarchies, debureaucratization, team-based working and inter-organizational collaboration, then opportunities for entirely new ways of working across both time and space are created. One such innovation is the ‘virtual’ organization.

For example, some software development companies have considerably enhanced their productivity by creating new product development teams with representatives in the Far East, the Middle East, Europe and North America. Development tasks can thus be passed electronically around the world on a twenty-four-hour basis; as the working day comes to an end in one particular centre, it will still be lunchtime in the next! Taking the degree of ‘virtuality’ to new extremes, some organizations now outsource all non-core activities and may require no physical presence at all. Amazon.com revolutionized the bookselling market by linking directly with customers through an extensive and interactive Web site, with no physical store presence.

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