1.3 Theories of Organizational Adaptation
Globalization and environmental sustainability present real challenges to the strategic management of business corporations. How can any one company keep track of all the changing technological, economic, political–legal, and sociocultural trends around the world and make the necessaryadjustments?Thisisnotaneasytask.Varioustheorieshavebeenproposedtoaccount for how organizations obtain fit with their environment. The theory of population ecology, forexample, proposes that once an organization is successfully established in a particular environmentalniche,itisunabletoadapttochangingconditions.Inertiapreventstheorganization from changing. The company is thus replaced (is bought out or goes bankrupt) by other organizations more suited to the new environment. Although it is a popular theory in sociology, research fails to support the arguments of population ecology.44 Institution theory, in contrast, proposes that organizations can and do adapt to changing conditions by imitating other successful organizations. To its credit, many examples can be found of companies that have adapted to changing circumstances by imitating an admired firm’s strategies and managementtechniques.45 Thetheorydoesnot,however,explainhoworbywhomsuccessfulnew strategies are developed in the first place. The strategic choice perspective goes one step further by proposing that not only do organizations adapt to a changing environment, but they also have the opportunity and power to reshape their environment. This perspective is supported by research indicating that the decisions of a firm’s management have at least as great an impact on firm performance as overall industry factors.46 Because of its emphasis on managers making rational strategic decisions, the strategic choice perspective is the dominant onetakeninstrategicmanagement.Itsargumentthatadaptationisadynamicprocessfitswith the view of organizational learning theory, which says that an organization adjusts defensively to a changing environment and uses knowledge offensively to improve the fit between itselfanditsenvironment.Thisperspectiveexpandsthestrategicchoiceperspectivetoinclude people at all levels becoming involved in providing input into strategic decisions.47 In agreement with the concepts of organizational learning theory, an increasing number of companies are realizing that they must shift from a vertically organized, top-down type of organization to a more horizontally managed, interactive organization.They are attempting to adapt more quickly to changing conditions by becoming “learning organizations.”
1.4 Creating a Learning Organization
Strategic management has now evolved to the point that its primary value is in helping an organization operate successfully in a dynamic, complex environment. To be competitive in dynamic environments, corporations are becoming less bureaucratic and more flexible. In stable environments such as those that existed in years past, a competitive strategy simply involved defining a competitive position and then defending it. As it takes less and less time for one product or technology to replace another, companies are finding that there is no such thing as a permanent competitive advantage. Many agree with Richard D’Aveni, who says in his book Hypercompetition that any sustainable competitive advantage lies not in doggedly following a centrally managed five-year plan but in stringing together a series of strategic short-term thrusts (as Intel does by cutting into the sales of its own offerings with periodic introductions of new products).48 This means that corporations must develop strategic flexibility—the ability to shift from one dominant strategy to another.49 Strategic flexibility demands a long-term commitment to the development and nurturing ofcritical resources. It also demands that the company become a learning organization—an organization skilled at creating,acquiring,and transferring knowledge and at modifying its behavior to reflect new knowledge and insights. Organizational learning is a critical component of competitiveness in a dynamic environment. It is particularly important to innovation and new product development.50 For example, both Hewlett-Packard and British Petroleum (BP) use an extensive network of informal committees to transfer knowledge among their cross-functional teams and to help spread new sources of knowledge quickly.51 Siemens, a major electronics company, created a global knowledge-sharing network, called ShareNet, in order to quickly spread information technology throughout the firm. Based on its experience with ShareNet, Siemens established PeopleShareNet, a system that serves as a virtual expert marketplace for
example, proposes that once an organization is successfully established in a particular environmentalniche,itisunabletoadapttochangingconditions.Inertiapreventstheorganization from changing. The company is thus replaced (is bought out or goes bankrupt) by other organizations more suited to the new environment. Although it is a popular theory in sociology, research fails to support the arguments of population ecology.44 Institution theory, in contrast, proposes that organizations can and do adapt to changing conditions by imitating other successful organizations. To its credit, many examples can be found of companies that have adapted to changing circumstances by imitating an admired firm’s strategies and managementtechniques.45 Thetheorydoesnot,however,explainhoworbywhomsuccessfulnew strategies are developed in the first place. The strategic choice perspective goes one step further by proposing that not only do organizations adapt to a changing environment, but they also have the opportunity and power to reshape their environment. This perspective is supported by research indicating that the decisions of a firm’s management have at least as great an impact on firm performance as overall industry factors.46 Because of its emphasis on managers making rational strategic decisions, the strategic choice perspective is the dominant onetakeninstrategicmanagement.Itsargumentthatadaptationisadynamicprocessfitswith the view of organizational learning theory, which says that an organization adjusts defensively to a changing environment and uses knowledge offensively to improve the fit between itselfanditsenvironment.Thisperspectiveexpandsthestrategicchoiceperspectivetoinclude people at all levels becoming involved in providing input into strategic decisions.47 In agreement with the concepts of organizational learning theory, an increasing number of companies are realizing that they must shift from a vertically organized, top-down type of organization to a more horizontally managed, interactive organization.They are attempting to adapt more quickly to changing conditions by becoming “learning organizations.”