11

Organizational Theory

This liability of newness—the dangers ofbeing the first in a new environment—is due to the following:

• Entrepreneurship is a risky process

• New organizations lack formal structure

• Resources may be scarce because of established organizations.

22

33

44

55

66

Organizational Theory

A population ecology model of organizational birth

Population ecology theory seeks to explainthe rate at which new organizations are born (and die) in a population of organizations.

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““When Being First Doesn’t Make You No. 1”When Being First Doesn’t Make You No. 1”

In Jan. 2000 – almost two years before Apple In Jan. 2000 – almost two years before Apple Computer’s iPod hit market – Singapore-based Creative Computer’s iPod hit market – Singapore-based Creative Technology unveiled similar productTechnology unveiled similar product Creative best known for Sound Blaster audio cards, product Creative best known for Sound Blaster audio cards, product

category it pioneered and still dominatescategory it pioneered and still dominates But Creative is niche player, w/ sales one-tenth of Apple’sBut Creative is niche player, w/ sales one-tenth of Apple’s More importantly, because its roots are in commodity world of PC More importantly, because its roots are in commodity world of PC

peripherals, Creative had little understanding of branding and peripherals, Creative had little understanding of branding and marketing tactics Apple usesmarketing tactics Apple uses

Problem for many Asian companies as they enter global consumer Problem for many Asian companies as they enter global consumer markets (Sony and Samsung are exceptions)markets (Sony and Samsung are exceptions)

Creative’s advertising had only run in computer trade magazines, were Creative’s advertising had only run in computer trade magazines, were designed in-house, pitched specific products rather than overall branddesigned in-house, pitched specific products rather than overall brand

Creative’s MP3 global market share was 31% in 2001, fell to 17% in Creative’s MP3 global market share was 31% in 2001, fell to 17% in 2003 (iPod has 54%)2003 (iPod has 54%)

CEO: “Marketing is important, I know that. But we’ve always CEO: “Marketing is important, I know that. But we’ve always had the best technology and we still do. That’s how we’ll fight had the best technology and we still do. That’s how we’ll fight back: innovation.”back: innovation.”

Source: Source: Wall Street JournalWall Street Journal, 8/12/04, 8/12/04

88

Organizational Theory

The r versus K issue addresses timingof entry into the population.

R-strategy involves entering a new environment early.

K-strategy involves entering an environmentlate, after other organizations have testedthe waters.

99

Organizational Theory

The specialist versus generalist issue addresses the set of resources for which an organization competes.

Specialists concentrate their skills to pursuea narrow range of resources in a single niche.

Generalists spread their skills thinly to competefor resources in many niches.

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FIGURE 11-3

Strategies for Competing in the Resource Environment

r–Strategy(early entry intoenvironment)

K–Strategy(late entry intoenvironment)

Specialist Strategy(operates in one niche)

r–Specialist r–Generalist

K–Specialist K–Generalist

Generalist Strategy(operates in several niches)

1111

FIGURE 11-4Greiner’s Model of Organizational Growth

Age of organization

Young Mature

Large

Small

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

1. Crisis of

leadership

2. Crisis of

autonomy

3. Crisis of

control

4. Crisis of

red tape

5. Crisis of ?

1. Growth through

creativity

2. Growth through

direction

3. Growth through

delegation

4. Growth through

coordination

5. Growth through

collaboration

Siz

e o

f o

rga

niz

atio

n

FIGURE 11-6Weitzel and Jonsson’s Model of Organizational Decline

TimeDecline begins Dissolution and

organizational death

Stage 1:Blinded

Stage 2:Inaction

Stage 3:Faulty action

Stage 4:Crisis

Stage 5:Dissolution

Good information

Prompt action

Corrective action

Acceptable performance

Effective reorganization

Actual performance

Acceptable organizational performance

Actual organizational performance

Pe

rfo

rma

nce

1313

Organizational Theory

IBM’s Gerstner indicates there are two critical IBM’s Gerstner indicates there are two critical ingredients for managing during crisis: ingredients for managing during crisis: communication and performancecommunication and performance Ees need to be treated like adults and not handed Ees need to be treated like adults and not handed

trite memos about costs being too hightrite memos about costs being too high Ees also need to understand entire picture of why Co Ees also need to understand entire picture of why Co

isn’t competitive; message needs to come from CEO, isn’t competitive; message needs to come from CEO, often face to faceoften face to face

Leaders need to provide clear sense of strategy Leaders need to provide clear sense of strategy quicklyquickly

Eliminating bureaucracy helped IBM refocus on Eliminating bureaucracy helped IBM refocus on customerscustomers

Source: Source: Wall Street JournalWall Street Journal, 7/13/04, 7/13/04