Implementation

Chapter 10

Chapter Road Map

1. Differentiate between crafting and executing strategy 2. Barriers to Strategy implementation 3. Understand short term objectives and the qualities of short term objectives 4. Functional tactics and their application in strategy implementation 5. What policies are and their role in implementing business strategies 6. Use of financial reward in executive compensation 7. Different types of executive plans

A second rate strategy perfectly executed will beat a first-rate strategy poorly executed every time

Richard M. Kovacevich: chairman and CEO Wells Fargo

Crafting vs. Executing Strategy

Crafting the Strategy
Primarily a market-driven activity Successful strategy making depends on
Business vision Perceptive analysis of market conditions and company capabilities Attracting and pleasing customers Outcompeting rivals Using company capabilities to forge a competitive advantage

Executing the Strategy

Primarily an operations-driven activity Successful strategy execution depends on

Doing a good job of working through others Good organization-building Building competitive capabilities Creating a strategysupportive culture Getting things done and delivering good results

Barriers to Strategy Execution

Subordinates to immediately abandon old ways The needed actions and needed changes to occur in rapid fire fashion Skepticism of employees and managers regarding the merits of a new strategy Threatening to their departments and own careers May have different ideas about what internal changes are required to execute the strategy

Implementing a New Strategy Requires Adept Leadership Implementing a new strategy takes adept leadership to
Convincingly communicate reasons for the new strategy
Overcome pockets of doubt

Secure commitment of concerned parties

Build consensus and enthusiasm

Get all implementation pieces in place and coordinated

Implementing a New Strategy Requires Adept Leadership Implementing a new strategy takes adept leadership to
Convincingly communicate reasons for the new strategy
Overcome pockets of doubt

Secure commitment of concerned parties

Build consensus and enthusiasm

Get all implementation pieces in place and coordinated

Strategy execution requires every manager to think through the answer to What does my area have to do to implement its part of the strategic plan, and what should I do to get these things effectively and efficiently

What Top Executives Have to Do in Leading the Implementation Process

Communicate the case for change Build consensus on how to proceed Arouse enthusiasm for the strategy to turn implementation process into a companywide crusade Empower subordinates to keep process moving Establish measures of progress and deadlines Reward those who achieve implementation milestones Direct resources to the right places Personally lead strategic change process and the drive for operating excellence

Short-Term Objectives
Are measurable outcome achievable or intended to be achieved in one year or less They are specific, quantitative, results operating managers set out to achieve at-least in three ways 1. Short-term objectives operationalize long term objectives 2. Discussion about agreement on short-term objectives help raise issues and potential conflicts within organizations that usually require coordination to avoid dysfunctional consequences 3. Assist strategy implementation by identifying measurable outcomes of action plans or functional activities , which can be used to make feedback, correction, and evaluation more relevant and acceptable

Potential conflicting objectives and priorities

President Marketing Responsibilitie s Distribution Channels Customer Service Inventory obsolescence More inventory Frequent short runs Fast order processing Fast Delivery Field warehousing Less warehousing Finance and accounting Communications and data processing Carrying inventory Manufacturing Production and supply alternatives Ware housing

Objectives

Less inventory Lower production runs

Cheap order processing

Lowest cost routing Plant warehousing

Qualities of Effective Short-Term Objectives

1. Measurable: are more consistent when they clearly state: What is to be accomplished When it will be accomplished How its accomplishment will be measured Such objectives can be used to monitor both the effectiveness of each activity and the collective progress across several activities Measurable objectives make misunderstanding less likely among interdependent managers who must implement action plans It is more easy to quantify objectives of line units than of certain staff areas Difficulties in quantifying objectives can be overcome by initially focusing on measurable activity and then identifying measurable objectives

Qualities of Effective Short-Term Objectives

2. 1. 2. Priorities Short term objectives have to be prioritized because of timing consideration or their particular impact on strategy If such priorities are not established, conflicting assumptions about relative importance may inhibit progress towards strategic effectiveness Priorities are established in various ways A simple ranking may be based on discussion and negotiation during the planning process, This does not necessarily communicate the real difference in the importance of the objectives so such terms as primary, top, and secondary may be used Priorities may be set by assigning weights to establish and communicate the relative priority of objectives. What ever method, recognizing priorities is an important dimension in implementation value of short-term objectives

Qualities of Effective Short-Term Objectives

3. Linked to long term objectives Can add breadth and specificity in identifying what must be accomplished to achieve long-term objectives The link between short-term and long-term objective should resemble cascade in key operation areas The cascading effect has the added advantage of providing a reference for communication and negotiation, which may be necessary to integrate and coordinate objectives and activities at the operating level

The Value added benefits of short-term objectives and action plans

1. They give operating personnel a better understanding of their role in the firms mission. Achieve Rs. 2.8 million in 2008 sales in Karachi territory Reduce average age of accounts receivable to 31 days by the end of 2008 Such clarity of purpose can be a major force in helping the firms people asset, more effectively, which may add tangible value

The Value added benefits of short-term objectives and action plans

2. Process development: Provide a valid bases for addressing and accommodating conflicting concerns that might interfere with strategic effectiveness Meetings to set short-term objectives and action plans become the forum for raising and resolving conflicts between strategic intentions and operating realities 3. Provide a basis for strategic control Provide a clear, measurable basis for developing budgets, schedules, trigger points and other mechanisms for controlling the implementation of strategy 4. Motivational pay-off Short-term objectives and action plans that clarify personal and group roles in the firms strategies and are also measurable, realistic, and challenging can be powerful motivators of managerial performance particularly when these objectives are linked to the firms reward structure

Functional Tactics that implement business strategies

Are key, routine activities that must be undertaken in each functional area to provide business product and services In a sense, functional tactics translate thought into action designed to accomplish specific shortterm objectives Every value chain activity in a company executes functional tactics that support the business strategy and help accomplish strategic objectives

Differences Between Business Strategies and Functional Tactics

1. Time horizon Identify activities to be undertaken now or in the immediate future Business strategies focus on the firms posture three to five years out The shorter time horizon of functional tactics is critical to the successful implementation of a business strategy for two reasons. i. It focuses the attention of functional manager on what needs to be done now to make the strategy work ii. It allows functional managers to adjust to changing current conditions

Differences Between Business Strategies and Functional Tactics

2. Specificity More specific than business strategy Identify the specific activities that are to be undertaken in each functional area. Allows managers to work out how their unit is expected to pursue shortterm objectives Specificity in functional tactics contributes to successful implementation by Helping ensure that functional managers know what needs to be done and can focus on accomplishing results Clarifying for top management how functional managers intend to accomplish the business strategy, which increases top managements confidence in and sense control over business strategy Facilitating coordination among units within the firm by clarifying areas of interdependence and potential conflict

Differences Between Business Strategies and Functional Tactics

3. Participants Different people participates in strategy development at the functional levels Business strategy is the responsibility of general manager of business unit Development of functional tactics are delegated the head of functional department The general manager of business unit establish long-term objectives and a strategy that corporate managers feels contribute to corporate level goals Key operating managers must establish short-term objectives and operating strategies that contribute to business-level goals Short-term objectives and functional tactics are approved through negotiations between business managers and operating managers i. Involving operating managers in the development of functional tactics improves their understanding of what must be done to achieve longterm objectives and thus contributes to successful implementation ii. It helps ensure that functional tactics reflect the reality of the day-today operating situation iii. It can increase the commitment of operating managers to the strategies developed

Differences Between Business Strategies and Functional Tactics

3. Participants Different people participates in strategy development at the functional levels Business strategy is the responsibility of general manager of business unit Development of functional tactics are delegated the head of functional department The general manager of business unit establish long-term objectives and a strategy that corporate managers feels contribute to corporate level goals Key operating managers must establish short-term objectives and operating strategies that contribute to business-level goals Short-term objectives and functional tactics are approved through negotiations between business managers and operating managers i. Involving operating managers in the development of functional tactics improves their understanding of what must be done to achieve longterm objectives and thus contributes to successful implementation ii. It helps ensure that functional tactics reflect the reality of the day-today operating situation iii. It can increase the commitment of operating managers to the strategies developed

 Providing service quality, customer satisfaction is not possible without empowering employees Empowerment is the act of allowing an individual or team the right and flexibility to make decisions and initiate action Training, self-managed teams, eliminating whole levels of management in organizations, and aggressive use of automation are some of the ways and ramifications of this fundamental change in the way organization functions Empowerment, however creates the need for decision making consistent with the business strategy and functional tactics One way to do this through the use of policies Policies are directives designed to guide the thinking, and actions of managers and their subordinates in implementing a firms strategy Standard operating procedures or policies increases managerial effectiveness by standardizing many routine decisions and clarifying the discretion managers and subordinates can exercise in implementing functional tactics Logically policies should be derived from functional tactics with key purpose of aiding strategy execution

Empowering Operating Personnel: The Role of Policies

Creating Policies That Empower

Policies communicate guidelines to decisions They are designed to control decisions while defining discretion within which operational personnel can execute business activities. They do so in several ways: 1. Policies establish indirect control over independent action 2. Policies promote uniform handling of similar activities 3. Policies ensure quicker decisions by standardizing answers to previously answered questions that otherwise would recur and be pushed by management hierarchy again and again 4. Policies institutionalize basic aspects of organization behavior 5. Policies reduce uncertainty in repetitive and day to day decision making, thereby providing a necessary foundation for coordinated, efficient efforts and freeing operating personnel to act 6. Policies counteract resistance to or rejection of chosen strategies by organization members 7. Policies offer predetermined answers to routine problems 8. Policies afford managers a mechanism for avoiding hasty and illconceived decisions in changing operations

 Formal written policies have at-least seven advantages 1. They require managers in think through the policys meaning, content, and intended use 2. They reduce misunderstanding 3. They make equitable and consistent treatment of problem more likely 4. They ensure unalterable transmission of policies 5. They communicate the authorization or sanction of policies more clearly 6. They supply a convenient and authoritative reference 7. They systematically enhance indirect control and organization wide coordination of the key purpose of policies

Creating Policies That Empower

Executive Bonus Compensation Plans

The goal is to motivate executives to achieve maximization of shareholder wealth As per Agency theory the goal of shareholder wealth maximization is not the only goal executive may pursue Executives may choose actions that may increase their personal compensation, power, and control An executive compensation plan that contains that contains a bonus component can be used to orient managements decision making towards the owners goals The success of bonus compensation as an incentive hinges on a proper match between an executive bonus plan and a firms strategic objectives Five types of executive bonus plans that are most commonly used are: 1. Stock Options 2. Restricted Stock Options 3. Golden handcuffs 4. Golden Parachute 5. Cash based on internal business performance using financial measures

Stock Options
A common measure of shareholder wealth creation is appreciation of stock price Stock options provide executives with the right to purchase company stock at a fixed price in future The precise amount of compensation is based on the difference between the options initial price and its selling or exercised price As a result the executive receives bonus only if firms share price appreciates The reason for using options as compensation was the notion that they were essentially free. Although they diluted the shareholders equity when they were exercised, taking the cost of stock options as an expense against earnings was not required

Stock Options
Kept the earnings higher than he actual cost to the company and its shareholders Recent changes have encouraged expensing stock options Research suggest that stock option plans lack the benefit of plans that include true stock ownership Provide unlimited upside potential for executive , but limited downside risk because executive incur only opportunity cost Because of the tremendous advantages to the executive stock price appreciation there is an incentive for executive to take undue risk Supporters of stock ownership plans argue that direct ownership instills a much stronger behavioral commitment , even when the stock price falls, because it binds executives more than do options Executive options may be an efficient means to reduce management to undertake more risky projects

Restricted Stock
Designed to provide benefits of direct executive stock ownership The executive is given a specific number of company stock shares The executive is prohibited from selling the shares for a specified time period Should the executive leave the firm voluntary before restricted period ends , the shares are forfeited Therefore, restricted stock option plans are form of deferred compensation that promotes longer executive tenure than other types of plans In addition to being contingent on a vesting period, restricted stock options may also require achievement of predetermined performance goals Price-vesting restricted stock plans tie vesting to the firms stock price in comparison to an index or to reaching a predetermined goal or annual growth rate If the executive falls short on some of the restrictions, a certain amount of shares are forfeited The design of these plans motivates the executive to increase the shareholder wealth while promoting a long-term commitment to stay with the firm Like stock options, restricted stock plans offer no downside risk to he executive because shares were initially gifted to the executive Unlike options, the stock retains value once ownership is fully vested. Shareholders , on the other hand, do suffer a loss in personal wealth resulting from a share price drop

 Refer to either a restricted stock option plan, where stock compensation is deferred until vesting time provisions are met, or to bonus income deferred in a series of annual installments This type may also involve compensating an executive a significant amount on retirement or at some predetermined age In most cases, payment is forfeited if the executive voluntary resigns or is discharged before certain time restrictions The golden handcuff approach is more congruent with long-term strategies than short-term performance plans, which offer little staying power Firms turn to golden handcuffs if they believe stability of management is critical to sustained growth Golden handcuffs may promote risk averseness in executive decision making due to huge downside risk to the executive This risk averseness may lead o mediocre performance results from executives decision

Golden Handcuffs

Golden Parachutes
Are form of bonus compensation that is designed to retain talented executive A golden parachute is an executive perquisite that calls for a substantial cash payment if the executive quits, is fired, or simply retires The golden parachute may also contain covenants that allow the executive to cash in on non-invested stock compensation In cases of hostile takeovers where executives are often ousted these plans encouraged executives to take an objective look at take over offers by personally protecting themselves in he event of merger The parachute helps soften the fall of the ousted executive By design golden parachute benefit top executives whether or not there is evidence that value is created for shareholders In fact research has suggested that since high performing firms are rarely taken over, golden parachutes often compensate top executive for abysmal performance

Cash
Executive bonus compensation plans that focus on accounting measures of performance This type of plan is mostly associated with the payment of periodic cash bonuses Market factors beyond the control of management, such as pending legislation, can keep a firms share price repressed even though top executive is exceeding the performance expectation of the board. In this situation, a high performing executive losses bonus compensation due to under valued stock Accounting measures of performance correct for this problem by tying executive bonuses to improvements in internally measured performance Traditional accounting measures such as net income, earning per share, return on equity, and return on assets are used because they are easily understood, are familiar to senior management Critics argue that because of inherent flaws in accounting systems, basing compensation on these figures may not result in an accrate gauge of managerial performance Firms performance scheme, critics believe need o be based on financial measures that has true link to share holder value creation This issue led to Balanced Score Card which emphasizes not only financial measures , but also such measures as new product development, market share, and safety

Matching Bonus Plans and Corporate Goals

1. Stock options i. Achieve corporate turnaround: executive profits only if turnaround is successful in returning wealth to share holders ii. Create and support growth opportunities : risk associated with growth strategies warrants he use of the high-reward incentive iii. Globalize operations: risk of expanding overseas requires a plan that compensates only for achieved success iv. Restructure organization: risk associated with major change in firms assets warrant the use of high reward incentive

Matching Bonus Plans and Corporate Goals

2. Restricted stock options i. Increase assets under management: executive proportionally as asset growth leads to longterm growth in share price ii. Stream line operations: rewards long-term focus on efficiency and cost control 3. Golden Parachute: i. Defend against unfriendly takeover: parachute helps takeover remove temptation for executive to evaluate takeover based on personal benefits ii. Evaluate suitors objectively: parachute compensates executives if job is lost due to a merger favorable to the firm

Matching Bonus Plans and Corporate Goals 5. Golden handcuffs: i. Reduce executive turnover: handcuffs provide executive tenure incentive 6. Cash i. Grow share price incrementally: accounting measures can identify periodic performance benchmarks ii. Improve operational efficiency: accounting measures represent observable and agreed upon resources of performance

Organizational Structure
Chapter 11

Chapter Roadmap
Five traditional organizational structures Product team structure Improvements sought in traditional organizational structure Agile, organizations Boundary-less organization Ambidextrous learning organization

Traditional Organization structure

1. Simple organization structure Entrepreneurial stage : Small business, few employees, informal arrangements of tasks, responsibility, and communication, accomplished through direct supervision All strategic and operational decisions are made by the owner Strategic concern primarily survival Maximizes owners control Rapidly respond to market/ market shift and the ability to accommodate unique customer demands without major coordination difficulties Encourages employees to multitask They are efficacious in business that serve simple, local product/ market or narrow niche The simple structure can be very demanding on the owner manager If successful and starts to grow, this can cause the owner manager to give increased attention to day to day concerns at the expense of time invested in stepping back and examining strategic questions about companys future Companys reliance on the owner as central point for all decisions can limit the development of future managers capable of assuming duties that allow owner to be strategist The structure usually requires a multitalented resourceful owner, good at producing and selling a product or service and at controlling funds

Traditional Organization structure

2. Functional structure Tasks, people, and technologies necessary to do the work of the business are divided into separate functional groups Formal procedures for coordinating and integrating their activities to provide products and services Predominant in firms with a single or narrow product focus Requires well defined skills and areas of specialization to build competitive advantages in providing their products or services Dividing task into functional specialties enables the firm to concentrate on only one aspect necessary work This allows use of latest technical skills and develops a high level of efficiency The strategic challenge presented by the functional structure is the effective coordination of functional units The narrow technical expertise achieved through specialization lead to limited perspectives and to differences in priorities of functional units Specialists may see the firms strategic issues primarily related to their functional areas The potential conflict between units makes the coordinating role of CEO critical. The integrating devices such as project teams or planning committees are frequently used in functionally organized firms to enhance coordination and to enhance communication and understanding across functional units

Functional Structure

Copyright 2004 Prentice Hall

50

Functional structure
Strategic Advantages
1. Achieves efficiency through specialization 2. Develops functional expertise

Strategic Disadvantages
1. Promotes narrow specialization and functional rivalry or conflict 2. Creates difficulties in functional coordination and inter-functional decision making 3. Limits development of general managers 4. Has strong potential for interfunctional conflict- priority placed on functional areas, not the entire business 5. May cost more to do a function than it does outside the company unless outsourced

3. Differentiates and delegates day to day operating decisions 4. Retains centralized control of strategic decisions

5. Tightly links structure to strategy by designing key activities as separate units

Divisional Structure
When a firm diversifies its products or service lines, covers broad geographic areas, utilizes unrelated market channels , or begins to serve heterogeneous customer group, a functional structure becomes inadequate This structure is necessary to meet the increased coordination and decision making requirements Set of relatively autonomous units or divisions, are governed by a central corporate office but each operating division has its own functional specialists who provide products or services different from those of other divisions Allows corporate management to delegate authority for the strategic management of distinct business entities This expedite decision making in response to varied competitive environments and enables corporate management to concentrate on corporate level strategic decisions The division is usually given profit responsibility

Multidivisional Structure

Copyright 2004 Prentice Hall

53

Geographic Structure

Copyright 2004 Prentice Hall

54

Market Structure

Copyright 2004 Prentice Hall

55

Geographical Structure for Apple Computer

CEO Steve Jobs

Apple Products

Apple Americas Canada Latin America/ Caribbean Sales Service and Marketing to Regions

Apple Europe France

Apple Pacific Australia

Japan

Asia

Source: www.apple.com

Global Geographic Division Structure

CEO

Pacific Division

Latin European Canadian Corporate American Division Division Staff Division Long-term Planning Product Coordinators

Partial Global Product Structure Used by Eaton Corporation

Chairman

President Law & Corporate Relations Engine ering Finance & Administration Internati onal

Regional Coordinators

Global Automotive Components Group

Global Global Industrial Instruments Product Group Group

Global Materials Handling Group

Global Truck Components Group

Divisional structure
Strategic Advantages
1. Forces coordination and necessary authority down to the appropriate level for rapid response 2. Places strategy development and implementation in closer proximity to the unique environments of the division 3. Frees CEO for broader strategic decision making 4. Sharply focuses accountability for performance 5. Retains functional specialization within each division 6. Provides good training ground for strategic managers 7. Increases focus on products, markets, and quick response to change

Strategic Disadvantages
1. Fosters potentially dysfunctional competition for corporate level resources 2. Presents problems of determining how much authority should be given to division managers 3. Creates a potential for policy inconsistencies among divisions 4. Presents the problem of distributing corporate overhead costs in a way that is acceptable to division managers with profit responsibility 5. Increases costs invurred through duplication functions 6. Creates difficulty maintaining overall corporate image

Strategic Business Unit (SBU)

The SBU structure is an adaptation of the of the divisional structure whereby various divisions or parts of division are grouped together based on common strategic elements, usually linked to distinct product/ market differences The advantages and disadvantages of SBU form is very similar to divisional structures

Matrix Structure
Matrix structure is one in which functional and staff personnel are assigned to both a basic functional area and to a project It provides dual channels of authority, performance, responsibility, evaluation, and control The matrix structure is intended to make the best use of talented people within a firm by combining the advantages of functional specialization and product specialization The matrix structure also increases the number of middle managers who exercise general manager responsibilities ( through the project manager role) and thus broaden their exposure to organization wide strategic concerns Matrix structure overcomes a key deficiency of functional organization while retaining the advantage of functional specialization It is difficult to implement Dual chain of command challenges fundamental organizational orientation Negotiating shared responsibilities, the use of resources, priorities can create misunderstanding or confusion among subordinates

Matrix Structure

Copyright 2004 Prentice Hall

62

Global Matrix Structure

International Executive Committee

Country Managers

Business Germany Areas Power Transformers Transportation Industry

Norway

Argentina/ Spain/ Brazil Portugal

Local Companies

Matrix Structure
Strategic Advantages
1.

Strategic Disadvantages 1. May result in confusion and contradictory policies 2. Necessitates tremendous horizontal and vertical coordination 3. Can proliferate information logjams and excess reporting 4. Can trigger turf battles and loss of accountability

Accommodates a wide variety of project oriented business activities 2. Provide good training ground for strategic managers 3. Maximizes efficient use of functional managers 4. Fosters creativity and multiple sources of diversity 5. Give middle managers broader exposure to strategic issues

 Emphasize lateral rather vertical relationships All functions necessary to produce a product or services are placed in a common unit usually managed by some one called process owner Few hierarchical levels, and senior executive team is relatively small Eliminate many hierarchical and departmental boundaries that can impede coordination, decision making and task performance Teams are key organizing feature in the process Manage everything from task execution to strategic management Primary goal is customer satisfaction

Product Team Structure

The Process-Based Structure

Senior Management Team Chair and Key Support Process Owners

Developing New Products Process Process Owner Cross Functional Team Members Acquiring and Filling Customer Orders Process Process Owner Cross Functional Team Members Supporting Customer Usage Process Process Owner Cross Functional Team Members

A Horizontal Structure
Top Management Team
Process Owner
Market Analysis

Team 1
Research

Team 2
Product Planning

Team 3
Testing

Customer

New Product Development Process

Process Owner
Analysis
Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, The Horizontal Corporation, Business Week, December 20, 1993, 76-81; and Thomas A. Stewart, The Search for the Organization of Tomorrow, Fortune, May 19, 1992, 92-98.

Team 1
Purchasing

Team 2
Material Flow

Team 3
Distrib.

Customer

Procurement and Logistics Process

Organizational Structure for 21st Century

Successful organizations once required: internal focus Structural interaction Self efficiency A top down approach 21st century organizational structure reflects an: An external focus Flexible interaction Interdependency Bottom up approach Three fundamental trends are driving decisions about effective organizational structures in the 21st century 1. Globalization 2. Internet 3. Speed of decision making

Creating Agile, Virtual organizations

21st century corporations will increasingly see their structures become an elaborate network of external and internal relationship. This organizational phenomenon has been termed the Virtual organization Virtual organization is a temporary network of independent companies suppliers, customers, subcontractors, even competition linked primarily by information technology to share skills, access to markets, and costs An Agile organization is one that identifies a set of business capabilities central to high profitability operations and then builds a virtual organization around those capabilities, allowing agile firm to build its business around the core, high profitability information, services, and products Creating an agile virtual organization structure involves outsourcing, strategic alliances, a boundaryless structure, an ambidextrous learning approach , and Web based organizations

Creating Agile, Virtual organizations

21st century corporations will increasingly see their structures become an elaborate network of external and internal relationship. This organizational phenomenon has been termed the Virtual organization Virtual organization is a temporary network of independent companies suppliers, customers, subcontractors, even competition linked primarily by information technology to share skills, access to markets, and costs An Agile organization is one that identifies a set of business capabilities central to high profitability operations and then builds a virtual organization around those capabilities, allowing agile firm to build its business around the core, high profitability information, services, and products Creating an agile virtual organization structure involves outsourcing, strategic alliances, a boundaryless structure, an ambidextrous learning approach , and Web based organizations

Outsourcing: creating Modular Organization

Choosing to outsource activities has been linked to creating modular organization A modular organization provides products or services using different self contained specialists or companies brought together outsourced to contribute their primary or support activity to result in a successful outcome These outsourced providers are independent companies, many of which offer similar services to other companies including competitors

The Network Organization

Designer Organizations Producer Organizations

Broker Organization

Supplier Organizations

Distributor Organizations

Business Process Outsourcing (BPO) BPO is most rapidly growing segment of the outsourcing industry world wide BPO includes a broad array of administrative functions HR, supply procurement, finance and accounting, customer care, supply chain logistics, engineering, research and development, sales and marketing, facilities management, and training and development

Towards Boundaryless Structures

Jack Welch coined the word boundaryless organization to characterize his vision of what he wanted GE to be able to generate knowledge, share knowledge , and get knowledge where it could be best used to provide superior value A key component of this concept was erasing internal divisions so the people in GE could work across functional, business, and geographic boundaries to achieve integrated diversity The ability to transfer the best ideas, the most developed knowledge, and the most valuable people quickly, and freely throughout GE

Towards Boundaryless Structures

Boundaries or borders arise in four directions, based on the ways we traditionally structure and run organizations 1. Horizontal Boundaries: Between different departments 2. Vertical Boundaries: between operations and management 3. Geographic Boundaries: between different physical locations 4. External interface boundaries between a company and its environment Outsourcing, strategic alliances, product team structures, reengineering, restructuring are all ways to move towards organization Culture and shared values across all organizations that value boundaryless behavior and cooperation help enable these efforts to work

Towards Boundaryless Structures

Globalization and Technology particularly driven by internet have been and will be major driver of the boundaryless organization The Webs contribution electronically has simultaneously become the best analogy in explaining future boundaryless organization It is not the Web as in internet but weblike shape of successful organization structure If there are a pair of images hat symbolize the vast changes a work , they are pyramid and web The 21st century corporation is far more likely to look like a web: a flat, intricately woven form that links partners, employees, external contractors, suppliers, and customers in various collaborative networks Players will grow more and more interdependent Fewer companies will ry to master all disciplines to produce and market their goods Managing this intricate network of partners, will be as important as managing internal operations

Ambidextrous Learning Organization

Learning organization: organizations structured around the idea that it should be set up to enable learning, to share knowledge, to seek knowledge, and to create opportunities to create new knowledge. It would move into new markets to learn about those markets rather than simply to bring a brand to it, or find resources to exploit in it Ambidextrous organizations : Organization structure most notable for its lack of structure wherein knowledge and getting it to the right place quickly is the key reason for organization. Managers become knowledgeable nodes through which intricate networks of personal relationships inside and outside the formal organization are constantly and often informally coordinated to bring together relevant know-how and successful action