STRATEGY Strategy comes from a Greek word that originally referred to the art of military leaders. It was imported into the business context in the twentieth century as a way to talk about an organization’s overall approach to goals and methods. Strategy has been de!ned in many ways. Mintzberg (1987), for example, offers !ve of them, all beginning with the letter P:
1.� Plan: a conscious and intentional course of action.
2.� Perspective: an organization’s way of framing where it wants to go and how it intends to get there.
3.� Pattern: a consistent pattern of decisions.
4.� Position: the way an organization positions itself in relationship to its environment.
5.� Ploy: a plan or decision whose purpose is to provoke a reaction from competitors.
Some of Mintzberg’s Ps focus on thinking while others are more about action. All are elements of a coherent strategy. Roberts (2004) argues that the job of the general manager is to de!ne a strategy that includes objectives, a statement of scope, a speci!cation of the organization’s competitive advantage, and the logic for how the organization will succeed. Structural logic dictates that an organization’s success requires alignment of strategy, structure, and environment. But, as Chandler noted in 1962, “structure follows strategy.” A good strategy needs to be speci!c enough to provide direction but elastic enough to adapt to changing circumstances.
Eastman Kodak provides a classic case in point. Kodak developed a strategy that made it a dominant player in the !lm industry for many decades, but stayed with its approach too
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long and !nally ended in bankruptcy. In 1880, George Eastman developed a formula for gelatin-based dry plates, the basis for the then nascent !eld of photography. For the next 125 years the company’s strategy sought to capitalize on this technology by introducing products such as the Kodak Brownie camera, Kodachrome, the Kodak Instamatic camera, and gold standard motion picture !lm—as well as producing thousands of patents in related !elds. Pursuing this strategy the company’s performance soared. At its zenith, Kodak employed over 145,000 people and earned billions of dollars in sales (Brachmann, 2014). It was one of America’s best-known and most-admired companies.
Threats to Kodak’s !lm-based strategy surfaced as early as 1950 with the introduction of instant photography and the Polaroid camera. In the 1980s, Fuji!lm, an upstart Japanese competitor, was able to mass produce !lm and sell it at a cheaper price to discount retailers like Walmart. Kodak couldn’t compete and lost a large share of the !lmmarket (Brachmann, 2014).
The death knell for Kodak came in the midseventies with the invention of the digital camera. Ironically, it was invented in one of the company’s labs by one of its own engineers. Upper management’s reaction: “It’s cute but don’t tell anyone about it” (Chunka, 2012). Kodak’s protection of its !lm-based strategy and inability to see that digital would capture the market led to its decline and eventual bankruptcy !ling in January, 2012.
What kept Kodak from adapting to a changing world? The strategy led to an organizational structure that channeled the activities and thinking of top management in one primary direction: !lm! In that context, any effort to promote digital cameras required swimming upstream against a strong current.
A similar thing happened at Xerox. Xerox researchers had developed the concepts for the graphical user interface and mouse, but the company’s structure and business model were built around photocopying, not computers. Steve Jobs at Apple and Bill Gates at Microsoft immediately saw the market potential that Xerox executives missed. Kodak and Xerox, like many other companies, were never able to capitalize on their own inventions because they fell outside the corporate strategy. Christensen (1997) calls it “the innovator’s dilemma,” and notes that one reason !rms get stuck in the past is that standard cost-bene!t analysis usually tells them that they will get a better return by investing in the tried and true instead of something new and unproven. As at Kodak and Xerox, the game is usually lost before the numbers tell a different story.
STRUCTURAL FORMS AND FUNCTIONS Structure provides the architecture for pursuing an organization’s strategic goals. It is a blueprint for expectations and exchanges among internal players (executives, managers,
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employees) and external constituencies (such as customers, competitors, regulators, and clients). Like an animal’s skeleton or a building’s framework, structure both enhances and constrains what an organization can do. The alternative design possibilities are virtually in!nite, limited only by human preferences and capacities, technological limits, and constraints in the surroundings.
We often assume that people prefer structures with more choices and latitude (Leavitt, 1978), but this is not always the case. A study by Moeller (1968), for example, explored the effects of structure on teacher morale in two school systems. One was loosely structured and encouraged wide participation in decision making. Centralized authority and a clear chain of command characterized the other. Moeller was surprised to !nd the opposite of what he expected: Faculty morale was higher in the district with a tighter structure. Teachers seemed to prefer clarity of expectations, roles, and lines of authority.
United Parcel Service, “Big Brown,” provides a contemporary example of the bene!ts of structural certainty and clarity. In the company’s early days, UPS delivery employees were “scampering messenger boys” (Niemann, 2007). Since then, computer technology has curtailed employee discretion, and every step from pickup to delivery is highly pro- grammed. Detailed instructions specify placement of packages on delivery trucks. Drivers follow computer-generated routes (which minimize mileage and left turns to save time and gas). Newly scheduled pickups automatically download into the nearest driver’s route plan.
UPS calculates in advance the numbers of steps to your door. If a driver sees you while walking briskly to your door, you’ll receive a friendly greeting. Look carefully and you’ll probably notice the automated van lock the driver carries. Given such a tight leash, youmight expect demoralized employees. But, the technologymakes the job easier and enables drivers to be more productive. As one driver remarked to us with a smile, “We’re happy robots.”
Do these examples prove that a tighter structure is better? Sometimes the opposite is true. Adler and Borys (1996) argue that the type of structure is as important as the amount or rigidity. There are good rules and bad ones. Formal structure enhances morale if it helps us get our work done. It has a negative impact if it gets in our way, buries us in red tape, or makes it too easy for management to control us. Equating structure to rigid bureaucracy confuses “two very different kinds of machines, those designed to de-skill work and those designed to leverage users’ skills” (p. 69).
Structure, then, need not be machinelike or in”exible. Structures in stable environments are often hierarchical and rules oriented. But recent years have witnessed remarkable inventiveness in designing structures emphasizing “exibility, participation, and quality. A prime example is BMW, the luxury automaker whose success formula relies on a combination of stellar quality and rapid innovation. “Just about everyone working for
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the Bavarian automaker—from the factory “oor to the design studios to the marketing department—is encouraged to speak out. Ideas bubble up freely and there is never a penalty for proposing a new way of doing things, no matter how outlandish. The company has become an industry benchmark for high-performance premium cars, customized produc- tion, and savvy brand management” (Edmondson, 2006, p. 72. Copyright! 2006 McGraw- Hill Companies, Inc.).
Dramatic changes in technology and the business environment have rendered old structures obsolete at an unprecedented rate, spawning a new interest in organizational design (Nadler, Gerstein, and Shaw, 1992; Bryan and Joyce, 2007; Roberts, 2004). Pressures of globalization, competition, technology, customer expectations, and workforce dynamics have prompted organizations worldwide to rethink and redesign structural prototypes. A swarm of items compete for managers’ attention—money, markets, people, and techno- logical competencies, to name a few. But a signi!cant amount of time and attention must be devoted to social architecture—designing structures that allow people to do their best:
CEOs often opt for the ad hoc structural change, the big acquisition, or a focus on� where and how to compete. They would be better off focusing on organizational� design. Our research convinces us that in the digital age, there is no better use of a� CEO’s time and energy than making organizations work better. Most companies� were designed for the industrial age of the past century,when capitalwas the scarce� resource, interaction costs were high and hierarchical authority and vertically� integrated structures were the keys to ef!cient operation. Today superior per- formance “ows from the ability to !t these structures into the present century’s� very different sources of wealth creation (Bryan and Joyce, 2007, p. 1).�
BASIC STRUCTURAL TENSIONS Two issues are central to structural design: how to allocate work (differentiation) and how to coordinate diverse efforts after parceling out responsibilities (integration). Even in a group as small and intimate as a family, it is important to settle issues concerning who does what, when the “what” gets done, and how individual efforts mesh to ensure harmony. Every family will !nd an arrangement of roles and synchronization that works—or suffer the fallout.
