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Chapter 3 ■ The transformation perspective
added value. This, he argues, derives from the architecture of the firm (basically the
structure of relationships referred to above) and the application of distinctive capa-
bilities in particular markets. Continuity and stability provide for the development
of organizational knowledge (of its identity, vision, distinctive capabilities and invis-
ible assets (Itami, 1987)), the free exchange of information and a readiness to
respond quickly and flexibly to changes in the world.
In turn the distinctive capabilities which provide the basis of competitive
advantage are architecture, innovation, reputation and strategic assets.
Architecture is both internal (the corporate structure and management processes)
and external (networks of relationships with suppliers and other organizations –
joint ventures, strategic alliances, etc.). Strategic assets are the inherent advan-
tages a corporation may possess (e.g. licences, access to scarce factors) which
cannot easily be copied.
‘Strategic benchmarking’ has taken up a vital role in organizational diagnosis
for change. This adds an important idea to the concept of diagnosis. The vital
point is to compare your own organization with the world’s best. Thus we iden-
tify where we are, the causes of our present situation and (through benchmarking)
we identify the potential for improvement and ideas for change. Benchmarking as
a technique has evolved (at least in principle and concept) from first-generation
benchmarking in which the focus would be on benchmarking a particular prod-
uct or system, through competitive benchmarking, process benchmarking and
strategic benchmarking to ‘global benchmarking’. Thus the ambitions of its pro-
ponents are nothing short of being world class.
Most importantly, benchmarking represents a learning technique. Essentially
cognitive in orientation, it applies rational analysis based on comparisons to the
process of diagnosis. It is also (like all diagnosis) an intervention in the system
and must be understood as such.
Similarly, business process re-engineering has attracted wide attention and
many adherents (and cynics). Admittedly more than a technique for diagnosing
what needs to be changed, it nevertheless incorporates techniques for diagnosis.
Most importantly, proponents of this approach conceive it as a technology for
breakthrough or ‘discontinuous leaps in performance’. The focus is on the ‘busi-

ness architecture’ – locations, structure, technology and skills. Alongside the
analysis of the business architecture conceived in terms of value added is risk
assessment looking at change and organizational issues. Our contention is that
in techniques such as benchmarking and business process re-engineering we see
a combination of the soft organizational development approaches of the 1970s
and the socio-technical systems school, but now operationalized because of the
opportunities provided by new information infrastructures. Thus diagnosis has
become more thorough and broader in scope.

Transforming the organization

Managing major changes successfully requires us to take an organization-wide
approach. Change creates stress and strain both for those who support change

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