ORGANIZATIONS AS POLITICAL AGENTS Organizations are lively arenas for internal politics. They are also active political agents in larger arenas, or “ecosystems” (Moore, 1993). Because organizations depend on their environment for resources they need to survive, they are inevitably enmeshed with external constituents whose expectations or demands must be heeded. These constituents often speak with loud but con!icting voices, adding to the challenge of managerial work (Hoskisson et al., 2002). As political actors, organizations need to master many of the basic skills of individual managers as politicians: develop an agenda, map the environment, manage relationships with both allies and enemies, and negotiate compacts, accords, and alliances.
An example is the “framing contests” (Gurses and Ozcan, 2015) that can arise between competing sides in a business battle. Uber, founded in 2009 by two young entrepreneurs in San Francisco, grew rapidly into an international powerhouse, with some estimates putting its value at more than $50 billion by 2015. Offering a new transportation option in cities around the globe, Uber found itself in pitched battles with regulators and incumbent taxi operators in almost every market it entered. Uber framed the issue as one of choice, innovation, customer service, and freedom from the grip of an antiquated industry. Opponents framed the contest very differently: a rogue operator was routinely breaking the law, ignoring public safety, and competing unfairly. Uber’s pattern—enter “rst and worry about legalities later—illustrates Funk and Hirschman’s (2017) argument that “rms use market as well nonmarket tactics to in!uence their policy and regulatory environment.
Uber’s most important allies were its customers, who saw the service as a big improvement over traditional cab companies. While writing this book, one of the authors phoned a local taxi company 2 hours in advance to arrange a ride to the airport. When the cab failed to arrive at the promised time, he called to learn that the company had lost track of the pickup but might be able to get him a cab in another 45 minutes. He switched to Uber. A genial driver in a late-model car arrived quickly and got him to the airport on time. Uber has leveraged similar customer experiences to build a powerful coalition that helps it win more battles than it loses and keep growing (Griswold, 2015).
Many of an organization’s key constituents are other enterprises. Just as frogs, !ies, and water lilies coevolve in a swamp, organizations develop in tandem in a shared environment. Moore (1993) illustrates this with two ecosystems in the personal computer business, one
Organizations as Political Arenas and Political Agents 223
enmeshcviniisiurisein constituents osnilo.nu
WEBC11 05/26/2017 2:21:31 Page 224
pioneered by Apple Computer and the other by IBM. Apple’s ecosystem dominated the PC industry before IBM’s entry. But IBM’s ecosystem rapidly surpassed Apple’s. IBM had a very powerful brand, and the open architecture of its PC induced new players to !ock to it. Some of these players competed head on (for example, Compaq and Dell in hardware, Microsoft and Lotus in software). Others were related much like bees and !owers, each performing an indispensable service to the other. One symbiotic pairing was particularly fateful. As Microsoft gained control of the operating system and Intel of the microprocessor in the IBM ecosystem, the two increasingly became mutually indispensable. More sophis- ticated software needed faster microprocessors and vice versa, so the two had every reason to cheer each other on. “Intel giveth, and Microsoft taketh away,” as some cynics put it. Two companies that began as servants to IBM eventually took over what became the “Wintel” ecosystem. IBM eventually dropped out of the business, and industry terminology changed to re!ect the shift in power—what were once called “IBM clones” and proudly advertised as “100 percent IBM compatible!” became simply “Windows PCs.”
Meanwhile, the Apple ecosystem, which nearly died in the 1990s, came back to life in stunning fashion early in the twenty-“rst century with the introduction of a series of highly successful mobile devices, including the iPod, iPhone, and iPad. Wintel continued to dominate the world of microcomputers, but most of the growth and excitement were in mobile. Microsoft was in the smartphone business before Apple or Google and invested billions of dollars in the business but fell to less than 1 percent market share by 2016.
POLITICAL DYNAMICS OF ECOSYSTEMS The same factors that spawn politics inside organizations also create political dynamics within and between ecosystems. Organizations have parochial interests and compete for scarce resources. Ross Johnson again provides an example. After he became CEO of RJR Nabisco, Johnson made a fateful decision to engage in a management craze of the time—a leveraged buyout (LBO). The basic idea of an LBO is to “nd an undervalued company, buy up shares with someone else’s money, “x it up or break it up, and sell it at a pro”t. It’s a high- risk venture.
Johnson’s plan was to use a leveraged buyout to take RJR Nabisco private. But once he had announced the LBO, the company was in play; it was open season for anyone to enter the bidding. Anyone in this case meant Henry Kravis and his secretive “rm, KKR, with some $45 billion in buying power. Johnson gave Kravis a cold shoulder, expecting Kravis to stay out because the deal was too big. He underestimated a dangerous adversary. What followed was one of business history’s biggest six-week poker games. Huge coalitions formed around
224 Reframing Organizations
WEBC11 05/26/2017 2:21:31 Page 225
both players. Millions of dollars in fees gushed into the laps of bankers, lawyers, and brokers. When the dust cleared, Henry Kravis and KKR had won by a nose. RJR Nabisco was theirs for a cool $25 billion.
The bidding war created a !uid, temporary ecosystem illustrating many of the complexities of such arrangements. Dozens of individuals, groups, and organizations were involved, but the big prize in the contest, RJR Nabisco, was largely a bystander; its board was on the sidelines for most of the game. Johnson and his allies pursued their private interests more than the corporation’s. Financial stakes were enormous, yet the game was often driven by issues of power, reputation, and personal animosity. Everyone wanted the prize, but you could win by losing and lose by winning. In the competitive frenzy, both sides bid too much, and the winner was stuck with an overpriced albatross.
The RJR Nabisco LBO ecosystem lasted only until the brutal bidding war was over. But many ecosystems, like Wintel’s and Walmart’s, are durable, lasting for decades. In such cases, an organization’s role in an ecosystem affects how it can balance pursuit of its own interests with the overall well being of the ecosystem. This may not be amajor issue for small players with only marginal in!uence, but is vital for “keystone” “rms likeWalmart that sit at the hub of an ecosystem:
Walmart is successful because it “gured out how to create, manage, and evolve� an incredibly powerful business ecosystem. Over the years Walmart took� advantage of its ability to gather consumer information to coordinate the� distributed assets of its vast network of suppliers. Walmart made a point of� tracking demand information in real time. The key was that it decided to share� this information with its supplier network. It introduced Retail Link, the� system that still delivers the most accurate, real-time sales information in� the industry to Walmart partners. Walmart was unique in the retail space in� offering this kind of service, turning Retail Link into a critical supply chain hub� (Iansiti and Levien, 2004, pp. 1–2).�
Fishman agrees aboutWalmart’s dominant role in its ecosystem, but sees less rosy results:
The ecosystem isn’t a metaphor; it is a real place in the global economy where� the very metabolism of business is set by Walmart. The fear of Walmart isn’t� just the fear of losing a big account. It’s the fear that the more business you do� with Walmart, the deeper you end up inside the Walmart ecosystem, and the� less you are actually running your own business. Walmart’s leadership virtually�
Organizations as Political Arenas and Political Agents 225
WEBC11 05/26/2017 2:21:31 Page 226
never acknowledges this control, but the company clearly understands it, and even takes a sly pride in it (2006, p. 16).
But Walmart’s ecosystem is not a gated community. Much as it might like to, Walmart has limited ability to exclude other players—including the “rm’s many competitors and critics—who choose to spend time in its neighborhood, even if uninvited. Walmart initiatives to build new stores are routinely countered by opponents who decry the economic and environmental costs that they claim the new outlet would create. Walmart’s low wages and bene”ts create a tempting target for union organizers, though the company’s antiunion stance has mostly been successful so far in keeping unions out.
Organizational ecosystems come in many forms and sizes. Some, like Walmart’s, are huge and global. Others are small and local (like the ecosystem of laundries in Oslo or policing in Omaha). Next, we examine how ecosystem dynamics vary across sectors.
Public Policy Ecosystems In the public sector, policy arenas form around virtually every government activity. One example is the commercial aviation ecosystem, in which air carriers, airplane manufactur- ers, travelers, legislators, and regulators are all active participants. In the United States, the Federal Aviation Administration has been a troubled key player for decades. Charged with divergent goals of defending safety, promoting the economic health of the industry, and keeping its own costs down, the FAA has perennially come under heavy “re from virtually every direction. Feeble oversight sometimes permitted marginal carriers to shortcut safety but continue !ying. An air traf”c modernization plan rang up billions of dollars in bills but 20 years later had yielded few results:
When Marion C. Blakey took over at the Federal Aviation Administration in 2002, she was determined to “x an air travel system battered by terrorism, antiquated technology, and the ever-turbulent “nances of the airline industry. Five years later, as she prepares to step down on Sept. 13, 2007, it’s clear she failed. Almost everything about !ying is worse than when she arrived. Greater are the risks, the passenger headaches, and the costs in lost productivity. Almost everyone has a horror story about missed connections, lost baggage, and wasted hours on the tarmac (Palmeri and Epstein, 2007, p. 1).
Fast forward to 2016, and the story was little changed: “The Federal Aviation Adminis- tration has little to show for a decade of work on modernizing air traf”c control, and faces
226 Reframing Organizations
WEBC11 05/26/2017 2:21:31 Page 227
barriers and billions more in spending to realize its full bene”ts, says a report released Tuesday by a government watchdog” (Lowy, 2016).
Some of the FAA’s troubles were internal. An earlier report from what was then called the General Accounting Of”ce had faulted the agency’s lack of a “performance-oriented culture essential to establishing a culture of accountability and coordination” (Dillingham, 2001). But almost every move it made to solve one constituency’s problem created trouble for others. Much of the fault lay in its ecosystem: “Nobody is in charge. The various players in the system, including big airlines, small aircraft owners, labor unions, politicians, airplane manufacturers, and executives with their corporate jets, are locked in permanent warfare as they “ght to protect their own interests. And the FAA, a weak agency that needs Congressional approval for how it raises and spends money, seems incapable of breaking the gridlock” (Palmeri and Epstein, 2007).
In recent years, drones presented a new test of the FAA’s ability to balance con!icting interests and pressures. In August 2016, the FAA issued long-awaited drone regulations that sought to balance considerations of safety and commerce. At the time, there were about 20,000 commercial drones in operation in the United States, but the FAAwas expecting that number to increase to approximately 600,000 in another year.
Education is another illustration of a complex policy ecosystem. Everyone thinks good schools are important. Families want their children to acquire the ingredients for success. Businesses need well-trained, literate graduates. Economists and policy analysts stress the importance of human capital. Teachers want better pay and working conditions. Taxpayers want to cut frills and keep costs down. Almost no one believes that American schools are as good as they should be, but there is little agreement about how to make them better.
One popular remedy, enshrined in the federal “No Child Left Behind” Act, emphasizes tests and incentives: measure how well schools are doing, reward the winners, and penalize the losers. But high-stakes testing may have generated more political heat than educational light. Some research suggests that the testing emphasis has improved learning outcomes (Wang, Beckett, and Brown, 2006), while others see “distortion, corruption, and collateral damage” (Nichols and Berliner, 2007) as the primary impact. The strenuous opposition to No Child Left Behind led the federal Department of Education into state-by-state negotiations to modify the requirements, making it even harder to assess how well the program is working (Sunderman, 2006).
Another popular cure for educational ills is giving parents more choice about which schools their children attend. One version of school choice is vouchers, grants that families can use to send their children to private schools. Another is charter schools—publicly
Organizations as Political Arenas and Political Agents 227
-solve problem ~