Organisational Design and Development - Assignment Example

DRIVING THE ORGANISATION - ORGANISATIONAL DESIGN AND DEVELOPMENT Question Sony is a transnational media corporation that has achieved my accomplishments, and has overcome a number of obstacles throughout its life cycle. Initially, Sony’s strategic direction was a reflection of its owners, IbukaamdMurito; however their strategic direction soon changed when Sony was launched internationally, and was exposed to the macro environment. One of the most common arguments about organization design centers surround the issue of whether the adaptation of an organization to its environment is purposely managed, or is it environmentally derived- as studied by Astley and Van de Ven (1983). The point of debate is that whether the organizational strategy is purposely changed to adapt to the external environment or the strategy is automatically determined due to external forces, as noted by Hannan and Freeman (1977). Wieck, (1979) agrees with this stance and argues that developing mutually exclusive theories; relying one single causation, focusing on the origins and elimination of elements such as “choice” are problematic. This theory can be put to test in Sony’s case - we see that Sony’s strategic direction was determined by external and internal factors, and as a result, the external and internal environment was influenced by its direction. Some strategic choices were made due to adaptation, while the others were determined by external forces- both these forces conglomerated to create Sony’s’ strategic direction. This can be better portrayed using a Venn Diagram Given Sony’s position in the market, it can be said that it had a number of strategic choices; although most of these choices were somewhat influenced by the external environment and company decisions, but due to its size and complexity, it was able to achieve its desired outcome with the availability of multiple choices. According to the work of Porter (1980), such Companies are able to follow “differentiation and focus strategies, choose market niches or segments within the constraints laid down by the environment or alternatively pursue different strategies despite external forces”, as stated by Berle and Means (1932). Upon using Porter’s (1983) analysis of the external environment on Sony, we can understand how the external environment shaped the Sony’s strategic direction and how Sony’s decision in turn shaped the external environment. The five elements of Porter’s design include: Threat of New Entrants: For Sony, this was a major external force that based their strategic direction, and this is evident when they developed their CD product while working with Philips corporation. Initially Sony had intended to develop the CD product alone, however because of the complexities involved in producing such a product Sony’s engineers could not come up with a suitable design on their own; hence they required the help of other experts. Such a conglomerate is often seen in technology based companies, who seek the help of others in developing new technology. Therefore, the threat of new entrants forced Sony in a way to work with Philips to develop a product quickly before another rival company developed it Bargaining Power of Suppliers: The power of suppliers also molded the Sony’s strategic direction and it was one of the reasons it launched the Sony Computer Entertainment, since it was facing a hard time convincing software developers to make innovative games to support the new platform devised by Sony PlayStation. Therefore, the power of suppliers- not necessarily their bargaining power- but their technological advancement power forced Sony into rethinking its strategic direction and developing a Computer Entertainment Company. Bargaining Power of Customers: The power of customers was a deciding forced of the purchase of CBS station, because CBS was one of Sony’s first main customers, it needed CBS to market its technologically advanced products, and by acquiring CBS it could use the equipment and show other networks what it has to offer. This proved as a very profitable strategy and launched the Sony Corporation in the Media broadcasting industry. Therefore it can be said that Sony’s decision to purchase CBS records in turn influenced external forces to purchase Sony’s products. Threat of Substitutes: This elemental shapes Sony’s strategic direction, even today. Due to the advancement of technology and the development of innovative methods, Sony is constantly seeking to develop new products that complement its older versions, to avoid being replaced by substitutes. It has to be at the forefront of technological advancements and produce innovative products; this is one reason why it invests so much into its R&D, because it is the lifeline for the company as a whole. Sony’s organization and design also changed over the years as it advanced to newer levels, for example its management structure changed from a more close-knit, centralized decision making environment to an open ended decentralized decision making environment. This was due to the large size of the Company and the inability of the key decision makers to make informed local decisions, therefore it gave the autonomy of decision making to the country managers. The decision making power is dispersed in the company, with individual units given the autonomy to carry out decisions as they see fit, hence control has also been dispersed, which is essential in order to cultivate innovation. Due to the different strategy adopted by each industry, it is incorrect to stay that the whole Sony corporation follows one Strategic Direction, because as said earlier a Company’s direction is greatly influenced by its external environment and its choice, the external environment in each of the industries differ, thereby so does their choice. However, after analyzing Sony Corporation’s decision making process and its individual’s industrial direction, it is safe to assume that it has kept a balance between environmental determinism and choice, and that the Company continually seeks to eliminate obstacles given by the environment and internal factors in order to achieve its desired goals. Question 2 In order for Companies to sustain a competitive advantage and to survive in the market, their needs to adopt, implement and seek out change. According to Caetano (1999), organizational change is “a demand of time to remain successful in business”. This is particularly true for large organizations in the technology based industry, such as Sony, whose survival depends on innovation. As Van de Van et al (1999) state, “Organizational creation is fundamental to the process of innovation, innovation constitutes part of the system that produces it”. The ability of an organization to innovate is necessary for the successful utilization of creative resources and new technologies, Schumpeter (1950) suggests that organizational changes along with new products and procedures, as well as new markets are feature of inventive destruction. In case of Sony, a number of factors have influenced innovation and change, namely, its organization structure, its leadership potential and its external environment. These factors will be examined in detail, in the coming pages. Several studies have shown how certain features of organizational design assist the development of new products and processes, particularly in relation to prompt environment changes.. In earlier times, organizational design was emphasized on “one best way”, as stated by Weber (1947), however this notion was challenged in 1960’s and 1970’s when the contingency theory was introduced that focused on variety of different organizational forms and their distinctions with reference to the demands of the context. Contingency theories are responsible for diversity in firms in different technological and task environments. They state that as technology and invention markets become more intricate, tasks become more indeterminate, and when task actions become more varied and erratic, organizations will accept more adaptive and stretchy structures. Sony’s organization structure can be described as a cross between “Divisionalized Form” and “Adhocracy” as stated by (Mintzberg 1979) Divisionalized: A decentralized natural form in which quasi-autonomous firms are heavily joined together by a central organizational structure. Adhocracy: A highly stretchy project based companies to deal with volatility and difficulty, where difficulty solving conditions can be quickly reconfigured in response to external changes and market demands. The reason Sony exhibits both characteristics is because its individual divisions have been treated as external entities, and they have been given the authority and autonomy to carry out their own decisions as long as they are in line with Sony’s overall global strategy. At the same time, in order to encourage innovation, Sony’s departments has been made highly flexible and are well equipped to be rapidly configured according to market demands. Having a flexible structure contributes towards encouraging innovation and creating an inherent trait of continuous change. According to Chandler (1962), “Multi-divisional firms of organizations have emerged in response to increasing scale and complexity of enterprises and are associated with a strategy of diversification into related product and technological areas”. Teece (1998) explains the link between firm strategy, structure, and nature of innovation, he explains that both governance modes and informal structures influence the rate and direction of innovative activities. He argues that different types of models are suited to different types of competitive environments and different types of innovation, he goes on to explain his theory by differentiating between two types of innovation, autonomous and systematic innovation. Autonomous innovation refers to the type of innovation that can be launched into the market without immense adjustment to the product and its manufacturing process. Systematic innovation involves complex coordination amongst various subsystems and the innovation process is accomplished under one roof. Sony can be said to have both these innovative capabilities. It, usually, designs and introduces products through autonomous innovation, and seeks to sustain the competitive advantage in the market by engaging in systematic innovation. The firm’s organizational structure and exclusivity of its divisions enables it to achieve the innovative capabilities mentioned. An organization’s ability to innovate also depends on its knowledge creation and learning processes. Some theorists such as Simon(1991) and Grant (1996), state that organizational learning is essentially an individual activity, however most theorists center around the significance of shared facts as a source of organizational ability. Collective knowledge can be described as the accumulated knowledge of the organization that is embedded in its rules, procedures, routines, and shared norms that guide the problem solving process. Similarly Sony must have recognized some governing rules or habits that it uses when making decisions or solving problems, this is usually transferred from managers to their subordinates. The transfer of knowledge involves social interaction, hence, as Nonaka’s (1995) theory states that shared cognition and collective learning constitutes the foundation of organizational knowledge creation. Such knowledge creation can be encouraged through sharing work experiences, as stated by Lave and Wenger (1991). Sony is a learning corporation because it divides its R&D department into teams, that include someone with an idea, someone who knows how to put the idea onto paper and another person who knows the technical aspect of the idea. When all these people work together, not only do they develop the idea into something tangible, but they also develop something innovative which is 10 times better than the original idea. Encouraging team work and setting up project teams’ increases innovation as it encourages knowledge sharing and also creates healthy competition within the Company. Sony’s management and strategic choice also influence the organization’s innovative capabilities. Some theories of organizational adaptation view the evolution of organizations as a product of an actor’s decisions and learning . “Organizational actors through their acting and enactment , are capable of redefining and altering structures in ways that will open future opportunities” as stated by Weick (1979). Organizational change is viewed as a continuous process encompassing the forces of continuity and change. Burgerlman (1983), argues that “successful organizations use a combination of induced and autonomous processes in strategy making to bring about organizational” change. Induced processes built on the already developed initiatives that are within the scope of the organization’s current strategy and build on organizational learning, whereas “autonomous processes concern initiatives that emerge outside the organization and also provide opportunities for new organization learning.” (Burgerlman, 1983). Sony Corporation’s leadership strategy directly encourages organizational learning, innovation and change. This is evident when Murita hired Ohga after reading his comments about the recorder, and also when Kutragi was hired to build on his concept of the PlayStation. This culture of encouraging innovation is embedded into Sony’s organizational culture and through the stories of Sony’s heroes, this culture is communicated to the rest of the Sony corporation. This acts as a motivation force for those who have ideas and want to develop the company further. Question 3 According to theorists such as Schien(2004), Organizational culture is the environment and that firm build up around their handling of people. Watson (2006) emphasizes that an important change in management thinking is to “encourage managers to try to create a strong organizational culture.” Theorists such as Schien (2004) suggest that culture and leadership are intertwined. “Leaders have a major impact on the formation of organizational culture,their beliefs, values and assumptions form the core values of the organization and are embedded into its culture”. These values then guide the firm’s future policies, problem solving methods and decision making processes. In case of Sony, its underlying culture is one of change and innovation. The Company’s managers and employees are well aware of this culture and have developed the organization in such a way as to keep innovation and change at its forefront. This is evident in the Company’s organization structure and strategy. The organization is designed to enable innovation, through giving different locations the autonomy to make their own decisions according to their local knowledge. Had the Company insisted on centralized decision making, the culture of innovation would have eroded very soon, because in order to encourage innovation there must be autonomous. Since its inception Sony’s culture as developed by its founders Ibuka and Morita, was innovation and change. The founders were transformational leaders who were future oriented, open-minded and dynamic and were concerned with planning; they encouraged and renewed employee loyalty by redefining company’s mission and vision, as stated by Bass (1985). They used individual reflection, inspiration and intellectual stimulation to inspire creativeness and encouraged employees to make the firm’s vision a reality. According to Kouzes and Posner (1987), transformational leadership is comprised of a set of five observable, and learn-ed practices: Challenge familiar organizational Processes Inspire a shared vision among employees Enable employees to act according to their vision Model the way for employees to perform Encourage employees through recognition and celebration of success. It can be said that Ibukaand Murita embedded the transformational leadership elements not only within themselves but also within the Company’s culture. Thus it can be seen that Sony followed the five elements mentioned above during its development and growth stage. Since these elements have become part of its inherent culture, Sony corporations throughout the world are applying these elements on a broader level. The Company’s strategy is also influenced by the elements mentioned above, since the Company continually challenges familiar organizational processes, its short term strategies continually change, as the Company continually searches new opportunities, experiments and takes risks. Even the employees are encouraged to be more innovative, as they have to accomplish their tasks or achieve their objectives in light of changing company strategies. Sony’s company culture is well known amongst the employees and the managers, individual managers are encouraged to incorporate their own beliefs into its divisions as long as they are in line with the broader company culture. Therefore, Sony’s organizational structure is designed in such a way where on one hand, the entire company follows a set of values, beliefs and decision making processes, and on the other hand, each of the Company’s subdivisions has a set of their own beliefs, problem solving tactics and values. As mentioned in the case study, given the Company’s shared culture, employees throughout the organization have a sense of connectivity to each other. This is encouraged by making deliberate attempts at connecting the various departments together, by assigning a common element to them. It can be said that there is a circular relationship between Sony’s culture, its structure and its strategy; as all these three elements influence and reinforce one another. These three elements work in sync partially because they have been well developed in the organization to an extent that they can be maintained flexibly. References 1. Hannan, Michael, and Freeman. ,(1977) The population ecology of organizations American Journal of Sociology, 82(2),p929-964. 2. Bain, Joe S.(1957)Industrial Organization.New York: Wiley. 3. Katz, D., and R. L. Kahn., (1966), The Social Psychology of Organizations. New York:Wiley. 4. Berglund. 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