Organizational Design for Small Businesses

¶ … Organizational Design for Small Businesses New venture creation in emerging economies is being driven by product, process and paradigm forms of innovation at a macro level (Bessant, Tidd, 2007) and the ability to quickly and economically translate knowledge into value at the micro one (Eshun Jr., 2009).

The organizational structures created because of new venture creation vary depending on how the initial business model is created, the value chain of the industry the start-up competes in, and the relative velocity of innovation necessary to keep the start-up growing to the point of establishing a customer base. The intent of this paper is to analyze the factors that define a new venture's organizational structure, including an assessment that lead to the greatest long-term viability of the company.

Factors That Influence organizational Structures of Start-Ups The catalyst of how one start-up will choose to define its organizational structure relative to another is most often based on its source of differentiation and even more fundamental than that, its' source of innovation. Start-ups that seek to completely redefine the business models of industries, as Google has done with online advertising and how Facebook is in the process of doing by capitalizing on the intersection of personal relationships and online buying, illustrate this point.

Their counterparts through China, India, Brazil and Russia (BRIC nations) are also concentrating on how to change the business model of online advertising, and in so doing, completely disrupt the buying process in the Business-to-Consumer (B2C) and Business-to-Business (B2B) markets.

This disruption of business models forces these start-ups, the most successful of which are mentioned here (Google, Facebook) to concentrate on an organizational structure that allows for rapid expansion based on availability of networking-based knowledge, combined with the ability to pervasively get their business model to millions of customers globally. The organizational structure of firms that choose to innovate and creatively disrupt business models first centers on virtual teams of experts with deep expertise in each area of the business model (Manolova, Manev, Gyoshev, 2010).

As knowledge capture and its translation into a business model advantage as a disruptive force increases as a business matures and the new venture attracts competitors, the speed of communication within the start-up is also critical. The start-ups who are the most successful in disrupting business models have the ability to take internal lessons learned and quickly propagate them across their entire company quickly (Lin, Peng, Kao, 2008).

As the majority of start-ups that concentrate on business model disruption have a virtual workforce as part of their research and development teams or engineering teams, the accuracy and speed of internal knowledge capture and transfer is a critical success factor in their growth (Eshun Jr., 2009). For the start-ups in the emerging economies of the BRIC nations, the orientation in many successful start-ups is on translating knowledge into solutions through business process management (BPM) and specialization in complex, often-costly processes for organizations globally.

Examples of these start-ups include the literally hundreds of process outsourcing companies throughout the BRIC nations that have specialized in Sarbanes-Oxley (SOX) compliance initiatives. These start-ups are taking a very process-centric view to innovation. Their ability to tailor financial systems in companies to be in compliance to government requirements is their greatest strength. The resources necessary to accomplish this require a centralized workforce of well-educated solution architectures and process improvement expertise, most often with Six Sigma quality management experience.

This type of skill set is prevalent in the manufacturing-centric regions of China and India, albeit expensive compared to the typical wage levels in these nations. Because of the value of process-centric knowledge, start-ups who concentrate on process-centric innovation often build practices or teams of experts with deep expertise, and often create career paths for junior associates that put them onsite at customers.

An example of this would be the growth of business process Indian outsourcers including Infosys, HCL and others who have their Sarbanes-Oxley practice located in India, and send their analysts to the U.S., Europe or Asia to work on-site with clients for weeks or months to get the process re-engineering complete. This is a resource-based strategy to creating a practice-based organization that can assist in creating more immediate value at the customer site (Morris, Kuratko, Allen, Ireland, Schindehutte, 2010).

When product-based innovation is the basis of a new venture, the organizational structure is more oriented towards the sales function, less to a highly structured production organization (Wonglimpiyarat, 2010). Product-driven new ventures are created; sales, senior management and engineering often are all the same role, which makes social skills and acclimation.