Evolution of Organizational Strategies it

Evolution of Organizational Strategies

It is a fact that the world has become increasingly complex over the last century, with technology and electronics changing rapidly almost overnight. Complex social issues have joined the wave of change as globalization brought to light issues of human and worker's rights concomitantly with economics and profits issues. Functioning within a social and political customer base, business paradigms have also changed and evolved towards increasing complexity. In the industrial age, for example, cost leadership and product differentiation served to create a competitive edge on the local market scale. These fairly simple strategies served a customer base that was built upon the simple technologies of the time.

However, with the industrial age, technologies began to advance rapidly, with businesses experiencing a concomitant paradigm of growth. Large corporations began to engage in activities such as vertical integration, product diversification rather than differentiation, mergers and acquisitions, soon to be followed by globalization. The economic scale of these businesses rapidly expanded, and rules and regulations were created to regulate a company's entry into foreign countries. This further contributed to the complexity of the business and economic world and concomitantly necessitated further complex business strategies in order to remain competitive within this environment.

With the advance of communications technology, social changes also began to occur more rapidly. The social consciousness began to extend to violations of human rights on a global rather than only a local scale. As such, businesses began to be obliged towards global citizenship and responsibility, rather than only towards the profit margin in order to remain competitive. As such, a "friendlier" business paradigm began to emerge, with strategic alliances, cooperative or open source strategies, flexibility-adaptability-agility, and high-reliability strategies becoming the norm of the competitive global business.

At the basis of these more complex business paradigms then lie the fact that the world within which business functions has changed and become more complex. Communication technology, financial and social values have changed. In order to remain competitive, the business is therefore obliged to change accordingly. This has made possible the newest of the business paradigm: the network strategy, by which business work together to create customer-focused value, rather than against each other. Although now able to compete on a friendlier and more customer-focused level, businesses however face complex challenges in terms of maintaining an acceptable profit margin in the face of extreme social and financial change.

Technological Change

C.M. Christensen (2006, p. xii) ascribes the failure even of good businesses to rapid technological change and the unforeseen market changes that these would bring about. He mentions many notable companies in this regard, including Xerox, Sears, and Digital Equipment Corporation. Paradoxically, the author notes that it is precisely because these companies followed sound business leadership strategies, that they failed. The main reason for this is that such strategies and investments rely on stability within the market. Stability is no longer a trait of the business market today. The successful company will not remain so by maintaining the strategies that had brought it to its fortuitous status, according to the author.

In order to remedy this, Christensen (2006, p. xiii) proposes his principles of disruptive innovation. According to these, stability is never assumed. Rather, the market is continually scrutinized for change, for new trends, or for disruption. When these are identified, the business should rapidly respond with innovative and appropriate approaches. This, according to the author, is the only viable way for the modern business to function in the current market climate - by itself being a force that accommodates disruption.

Specifically, Christensen notes three reasons why traditionally "good" management techniques tend to fail in the current business environment. The fist is the importance of the distinction between sustaining and disruptive technologies. The second is the pace of technological change, and the third is the often artificially inflated importance of certain attractive investments, so indicated by successful companies.

One important element of the current business world is disruptive technological change. In his introduction, Christensen defines this as technologies that, in contrast to sustaining technological change, creates a product that performs worse than its predecessor. What attracts the market to it is elements such as size, convenience of use, and lower price. Hence this could be a significant threat, as shown in the rest of the book as well.

Christensen basically suggests that companies should be aware of the market forces around them, and potential disruptive innovations. The company should also be fully aware of itself in terms of its own capabilities, strengths and weaknesses in dealing with these disruptions. Knowledge and innovation will then provide a company with the tools to mitigate not only disruptive market forces, but also the unstable climate that is the reality of business today.

Business Strategies for the Global World

Indeed, it appears that many business people are following Mr. Christensen's advice, as the very structure of businesses and their decisions are changing almost as rapidly as computer technology today. No business strategy can be simple in the face of the challenges mentioned above. The business world is becoming increasingly complex, and businesses must respond in kind, or fail.

Mark L. Frigo (2002) mentions the Return Driven Strategy model as a financial model that is applicable to global businesses today. The tenets of this model indicate both the complexity with which the business world is now obliged to engage, as well as the necessity of targeted strategies for profit creation and measurement. Within the model, there are eleven tenets forming a hierarchy of activities as a guide for companies on their way to the top of the visualized pyramid: financial stardom. The model not only provides a suggested pathway of strategies, but can also be applied to identify financial weaknesses in the company, and ways in which to remedy them. In this way, a company can identify its specific weaknesses and identify ways in which to remedy them.

Specifically, the model operates on the basis of three goal tenets, the first and highest being to maximize financial value creation. In order to establish this, management must align its financial goals with shareholders through customers. By focusing on customer needs, according to Frigo, a company can increase its cash flow by an awareness of unmet customer needs, and how the company can best remedy this situation. In this way, a company can work towards dominating high-growth markets.

In the middle of the hierarchy lie the three competency tenets, which refer to the competitive bases from which a company operates. Here product branding and perceived quality are important aspects. Customers must believe that they are receiving value for money to maintain interest in both current and future products.

At the bottom of the hierarchy lie the five suggested ways in which to improve competencies towards the specific market a company may choose. Here also, one notes the echo of Christensen's work: business strategy requires continual and heightened attention on the forces of change within a market; whether these be disruptive or not. In addition to technological breakthrough, Frigo mentions demographic shifts and regulatory change as aspects that might challenge a company towards targeted change tactics. Schwab is mentioned as exemplary in this regard, responding to every change in information technology or consumer preference as an opportunity rather as a threat. As such, the model provides the business entity with a strategic decision-making tool towards a future that is financial stable in an unstable world. In a practical sense, Frigo notes that the model is useful in strategic decision making in terms of activities such as brainstorming, business plan development, and evaluation activities.

Of course no financial strategy or model can work without a suitable workforce behind it. In this regard, Alden Cuddihey (2003) considers the challenge of employees in the current business climate. Elements that all too often plague business, particularly in the current economic crisis, include tight budges, slow growth, and layoffs. In addition, ineffective retention programs correlate with mass retirements, resulting in companies losing years of collective and valuable experience. Finding quality employees to mitigate these forces is often a challenge.

Nevertheless, Cuddihey notes that the workforce, particularly in the current business climate, is becoming the most important element not only in financial performance, but also in corporate competitiveness. Cuddihey suggests that businesses should address this problem and its mitigation particularly in order to create an effective strategy for future success. As such, the Human Resources department plays a vital role. If human resources are aligned with business goals, a high-performance workforce is maintained. It is therefore necessary to take specific steps to hire only the most suitable employees for specific jobs on the workforce. This will ensure not only a high level of skill in each performance, but also job satisfaction, which is highly important in terms of employee retention.

In order to further ensure employee retention and satisfaction, Cuddihey notes that companies are also increasingly providing employees with a supportive HR department. Such an HR capability then focuses on an improvement of firstly human and then organizational performance. The workforce is addressed on a personal level to ensure that each individual not only understands what the expectations are of him or her, but also to ensure that they will give only their best effort towards the organizational goal. In order to motivate employees in this way, it is necessary for each individual to understand the organizational goals and to care sufficiently about these. Employees therefore have to find meaning in their work. This can best be done by communication.

It is one fortunate feature of the current technological world that communication can occur both regularly and instantly. Instead of having to print out thousands of circulars, managers can write a single email and send it to thousands of employees simultaneously with a single click. This greatly facilitates the communication paradigm between management and employees, or indeed between the HR department and employees.

Various forms of communication are possible - an electronic notice board can for example contain important documentation such as terms of service, procedures for leave taking, and also the company's mission and goal can be displayed for all employees on their desktops. Email can then be used for important notifications or newsletters, and the company Web site is a further possible outlet for company information. In the current business world, no employee can really claim that they know nothing about their company or its management; such information is only as far a computer screen.

The HR department in business also frequently simplifies and eliminates administration by means of automation and outsourcing. This then provides a strong platform from which the business can direct its energy towards its own strategic initiatives. Cuddihey indicates that the workforce is not only instrumental, but also vital to achieving these initiatives. As such, recruiting and retention programs are of vital importance, as these provide the workforce with the motivation to remain with the company and deliver their best.

In this, Cuddihey notes that HR processes need to be aligned with the business objectives of the company in order to demonstrate to the workforce their necessity in the company. Cuddihey goes further in examining the reasons why employees would remain with a company rather than retiring or seeking employment elsewhere.

The business world has not only changed in terms of financial and market structures, but also in terms of employee expectations. Employees now use more than monetary compensation to make their choices for a workplace. Factors such as a stimulating, rewarding work environment and flexible work hours tend to be high on the priority list when making such choices. Many employees already have families when entering the workforce, and will expect to be accommodated regarding their family demands. The social structure has also changed such that family men are no longer appreciated in his absence from the home. Instead, with both parents working, it is expected that both spend as much quality time as they can at their homes. At the same time, employees expect to enjoy their work on a level that is deeper than only monthly compensations.

Employers need to keep in mind that employees are human beings, and expect to be treated as such. Once again, an open communication policy is best in this regard. In addition to family and workplace requirements, employees also generally require the opportunity to engage in continuous learning. Cuddihey sites research indicating that young recruits consider such opportunities a top priority when choosing their future workplace.

Significantly, the author notes that most executives believe that their companies incorporated a lack of critical workforce skills, a lack of understanding the business and organization strategy, and a lack of connection of employee functions with the overall strategic priorities of the company. This needs to be remedied by means of targeted education programs towards both greater employee satisfaction, and better performance within the structure of the company as whole. Current business paradigms recognize the workforce as more than a collection of automatons to perform a simple function towards the success of the company. Instead, the workforce is also an intellectual asset that can contribute significantly to the overall growth of the company when provided with the opportunity to do so.

Cuddihey cites research indicating that employees also feel a need to understand and feel that they are a part of the organization as a whole in addition to being an individual performing a specific function. In the current workforce, employees also wish to know how they contribute to the success of the company as a whole. In this way, their work would carry greater meaning in terms of the collective, and also be more satisfying on the individual level.

In addition, retention strategies should also focus on recognition. This can manifest itself in a variety of ways. Employees can for example be rewarded by positive feedback, formal recognition programs, time off, job title changes, or more responsibility in addition to competitive salaries.

Another important factor in this is employee feedback. This is a significant component of the above-mentioned element of communication. In addition to maintaining an open communication structure, employers should allow employees to provide feedback regarding their experiences within the company, and solicit possible improvements to these.

Communication technology offer valuable opportunities for companies to help their workforce experience their work hours in an optimally satisfying way. Employee and manager self-serve portals, information management, and performance measurement are some it tools that Cuddihey mentions in this regard.

Cuddihey also notes that the success of a company as it relates to its workforce can be quantified by means of measurement. Metrics can for example be implemented as a measurement tool in this regard. The author suggests that such measurements should be implemented at a minimum, as a large amount of company success is dependent upon an accurate measurement of employee performance. Specific HR and training initiatives should also be continually scrutinized for their success and possible room for improvement. Taking proper care of the workforce will provide the company with a workforce that is happy to give as much as they can towards the satisfaction of customers and the ultimate success of the company.

In addition to a company's financial structure, customer base, and human resources, the business environment has also seen significant changes over the last decades. Michael Carney notes that organizations and their environments experience co-evolutionary changes in response to social, economic, and technological changes. Carney notes that his perspective is somewhat broader than general research in this regard, which tends to focus on narrow environmental elements and their influence on business. Instead, Carney attempts to address a broader range of changes in terms of both society and business.

In order to provide a platform for his considerations, Carney distinguishes between endogenous and exogenous influences on business. The former emerge from within local societies, including institutional and market forces in these societies, as well as how firms in these societies influence each other, and how these firms respond to elements within the local environment. Exogenous influences relate to non-local social, economic, political and technological forces that are nonetheless important for the local firm and its environment. In the globalized environment, it is common practice to draw inspiration from companies around the world in order to gain a competitive local edge or to enter the global market. Indeed, Carney notes that once a business enters the global economy, it becomes even more subject to exogenous influences than before.

Using Japan after the end of the Cold War as an example, Carney then goes on to demonstrate via a co-evolutionary framework how business systems are open, evolving in concomitance with both external and internal forces. The fact that these forces are often global in scale is one of the main factors that contribute to the complexity of the business environment today. By nature, local agents are able to significantly influence endogenous, but not exogenous forces.

One of the key characteristics of the emergence of Japan as significant economic power on a global scale is the commercialization of information and knowledge products. This is a paradigm that has influenced the whole world of business, and continues to do so on a global scale. The rapid development of information technology is another exogenous factor that has influenced this trend.

In this regard, Carney suggests that organizations will adapt to changes in the environment in three broad ways. The first step is that already established firms adapt and calibrate their existing models and paradigms to fit the changed environment - this is an endogenous action; where the business uses its internal resources to adapt to its environment, and can in this way also shape it. Secondly, new organizational forms can emerge in response to environmental change, which are closer to the new environment than the existing ones. Again, these new organizations can provide feedback and in turn shape the new environment concomitantly with its own structures. The third possibility for responsiveness to change is reciprocal adjustment: both existing and new firms make adjustments to fit better with the new environment. In this regard, new firms adapt to changes made by established firms in order to maintain a favorable competitive environment for new firms. New organizational forms and business practices also alters the competitive environment for existing firms, and once again, adaptation is obliged. This maintains a dynamic business environment, encouraged by the emergence of new firms, and a high level of competition.

It has been seen above that one of the characteristics of today's business environment is the networking paradigm. Interdependence has become fundamental to the co-evolutionary process described by Carney. In addition to using the same environments to optimally shape their own business structures, businesses are also cooperating, mutually adjusting, reciprocating, and accommodating amongst themselves in order to reap optimal collective benefits that are perceived as more desirable or greater than what could be done individually. An organizational community is created, in which members both actively and passively share their ideas and resources. Such cooperation practices are perceived as beneficial for all companies involved.

Another significantly influencing factor in Carney's coevolutionary approach is path dependence. This refers to the relative dependence of firms and environments upon historical firm-environment interdependence. In other words, history tends to repeat itself. Almost like a child, a firm experiences its greatest influences during its first growing years, and is then to some degree always dependent upon the first environmental factors that influenced this initial growth. This is also something that the community of companies can help to mitigate or absorb, if necessary.