Organization Development and Change

1. Organization Development and Change Chapter Nineteen: Competitive and Collaborative Strategies Thomas G. Cummings Christopher G. Worley

2. Learning Objectivesfor Chapter Nineteen • To compare and contrast two different classes of strategic interventions: competitive and collaborative • To describe two competitive strategy interventions: integrated strategic change and merger and acquisition integration • To describe two collaborative interventions: forming alliances and developing networks Cummings & Worley, 8e (c)2005 Thomson/South-Western

3. Organizational Environments • General Environment • Social, Technological, Economic, Ecological, and political forces • Task Environment • Customer and buyer power, rivalry among competitors, substitute products/services, and potential new entrants • Enacted Environment • Managerial perceptions and representations of the environment Cummings & Worley, 8e (c)2005 Thomson/South-Western

4. Environmental Dimensions • Dynamism - the extent to which the environment changes unpredictably • Complexity - the number of significant elements the organization must monitor • Information Uncertainty - the extent to which environmental information is ambiguous • Resource Dependence - the degree to which an organization relies on other organizations for resources Cummings & Worley, 8e (c)2005 Thomson/South-Western

5. Environmental Dimensions and Organizational Transactions Resource Dependence Low High Low Minimal environmental constraint and need to be responsive to environment Moderate constraint and responsiveness to environment Information Uncertainty Maximal environmental constraint and need to be responsive to environment Moderate constraint and responsiveness to environment High Cummings & Worley, 8e (c)2005 Thomson/South-Western

6. Competitive Strategies • Uniqueness • All organizations possess unique bundles of resources and processes that represent the source of competitive advantage • Value • Organizations that arrange their unique resources and processes to produce products or services that have value (low cost, desirable features) • Difficult to Imitate • Competitive advantage is sustainable when it is difficult to duplicate Cummings & Worley, 8e (c)2005 Thomson/South-Western

7. Integrated Strategic Change(ISC) • Strategic Analysis • Strategic Choice • Designing the Strategic Change Plan • Implementing the Strategic Change Plan Cummings & Worley, 8e (c)2005 Thomson/South-Western

8. The Integrated Strategic Change Process Strategy S1 Strategy S2 Strategic Change Plan Organization O1 Organization O2 Implementation Strategic Analysis Strategic Choice Cummings & Worley, 8e (c)2005 Thomson/South-Western

9. ISC Application Stages • Strategic Analysis • Assess the readiness for change and top management’s ability to carry out change • Diagnose the Current Strategic Orientation • Strategic Choice • Top management determines the content of the strategic change • Designing the Strategic Change Plan • Development of a comprehensive agenda to achieve the change • Implementing the Strategic Change Plan Cummings & Worley, 8e (c)2005 Thomson/South-Western

10. Mergers and Acquisitions • Merger - the integration of two previously independent organizations into a completely new organization • Acquisition - the purchase of one organization by another for integration into the acquiring organization. • Distinct from strategies for collaboration, such as alliances and networks, because at least one of the organizations ceases to exist. Cummings & Worley, 8e (c)2005 Thomson/South-Western

11. Merger and Acquisition Rationale • Diversification • Vertical integration • Gaining access to global markets, technology, or other resources • Achieving operational efficiencies, improved innovation, or resource sharing Cummings & Worley, 8e (c)2005 Thomson/South-Western

12. Merger and Acquisition Application Stages • Pre-combination Phase • The organization must identify a candidate organization, work with it to gather information about each other, and plan the implementation and integration activities • Legal Combination Phase • The two organizations settle on the terms of the deal, gain approval from regulatory agencies and shareholders, and file appropriate legal documents • Operational Combination Phase • Implementing the operational, technical and cultural integration activities Cummings & Worley, 8e (c)2005 Thomson/South-Western

13. Collaborative Strategies • Involve two or more organizations who agree to work together to achieve their objectives • Align and coordinate organization strategies, goals, structures, and processes as they become interdependent • Allow organizations to perform tasks that are too costly and complicated for single organizations to perform • Also known as transorganizational systems, including alliances and networks Cummings & Worley, 8e (c)2005 Thomson/South-Western

14. Alliance Interventions • When two organizations formally agree to pursue a set of goals • There is sharing of resources, intellectual property, people, capital, technology, capabilities or physical assets • Common alliances are licensing agreements, franchises, long-term contracts, and joint ventures Cummings & Worley, 8e (c)2005 Thomson/South-Western

15. Alliance Intervention Application Stages • Alliance Strategy Formulation • Clarify the business strategy and why an alliance is needed • Partner Selection • Leverage similarities and differences to create competitive advantage • Alliance Structuring and Start-up • Build and leverage trust in the relationship • Alliance Operation and Adjustment Cummings & Worley, 8e (c)2005 Thomson/South-Western

16. Network Interventions • Involves three or more companies joined together for a common purpose • Each organization in the network has goals related to the network as well as those focused on self-interest • Characterized by two types of change: creating the initial network (transorganizational development) and managing change within an established network Cummings & Worley, 8e (c)2005 Thomson/South-Western

17. Application Stages for Transorganizational Development Identification Convention Organization Evaluation • How to organize • for task • performance? • Communication • Leadership • Policies and • procedures • Who should • belong to the • transorganizational • System (TS)? • Relevant skills, • knowledge, • and resources • Key stakeholders • Should a TS • be created? • Costs and • benefits • Task • perceptions • How is the TS • performing? • Performance • outcomes • Quality of • interaction • Member • satisfaction Cummings & Worley, 8e (c)2005 Thomson/South-Western

18. Managing Network Change • Create instability in the network • Manage the tipping point • The Law of the Few • Stickiness • The Power of Context • Rely on self-organization Cummings & Worley, 8e (c)2005 Thomson/South-Western