Page 48 - Managing Change in Organizations

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Leadership and ‘excellence’
Over and above all of this, companies outsource, engage in joint ventures and
strategic alliances in order that each element of the ‘value chain’ (see Porter,
1985) is delivered in a high value-added way. This development is having a pow-
erful impact, creating what some call the ‘networked’ organization and others are
now calling the ‘virtual’ organization.
Let us look at this trend in rather more detail (the discussion here derives from
various sources, including Hastings (1993) and recent work by a colleague,
Professor Bill Weinstein of Henley). Basically there has been a shift from a belief
in the advantages of size to the advantages of adaptability. Thirty years ago many
organizations set out to achieve integration from raw materials to final customer
service, owning and controlling all functions in the value chain with only mar-
ginal subcontracting. That way one could control costs, create certainty of deliv-
ery, project innovation and limit transaction costs (here we refer to the avoidance
of the costs associated with, for example, having to purchase supplies in the open
market as opposed to simply ordering from one’s own wholly owned supplier).
Increasingly some top managers are asking whether these larger groups are
‘manageable’. The risks and problems of inertia are greater. Product development
becomes a major problem. ‘Time to market’ grows with size. I well remember
hearing an IBM Europe senior executive (in the late 1980s) complain that any
new product proposal had to have seven different senior executives sign it off
before it could proceed, including people located locally at the Paris headquarters
and elsewhere. The possibility for delay is all too obvious. There is a growing lit-
erature on this time-to-market issue (see, for example, Clark and Fujimoto, 1991;
Stalk and Hout, 1990) and no one is suggesting that size is the only problem, but
the latter study shows that time to market can be reduced significantly by mov-
ing from a hierarchical to an ‘entrepreneurial’ structure, and even further if a
‘time-based management’ approach is adopted.
Thus we can see countless organizations focusing on their core competencies
(Prahalad and Hamel, 1990), dealing with ‘preferred’ suppliers with whom they
develop strong links, delayering, downsizing and focusing on ‘invisible assets’
like product market knowledge, competitor intelligence and the like as a source
of added value (see Itami, 1987). The practical consequences of these trends are

that organizations are now much more likely to be engaged in strategic alliances,
joint ventures, outsourcing, networking, joint development projects and so on.
This implies a new context for managers.
In the new organization the manager is much more concerned with managing
across boundaries (often as well as across borders). There is more dependence on
‘outsiders’ and less reliance on ‘insiders’. Any part of the organization can be
‘outsourced’. In the public sector the process is ‘market testing’. It creates new
pressures. It also means that achieving added value is more a matter of external
networking and possessing relevant knowledge about the outside world than it
used to be. Increasingly managers find that rather than utilizing hierarchy and
command and control they are managing exchange relations. Cooperation and
negotiation are more relevant. Effective communication becomes vital, but this
places greater emphasis on the need to develop internal managerial and techno-
logical skills. Without doing so the organization risks being excluded because it
brings no added value.

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