TYPES OF ORGANIZATIONAL ADAPTATION. Stăncuţ Anca, Drd. University of Craiova Borcoşi Corina Ana, Drd. University of Craiova

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1 Constantin Brâncuşi University of Târgu Jiu ENGINEERING FACULTY SCIENTIFIC CONFERENCE 13 th edition with international participation November 07-08, 2008 Târgu Jiu TYPES OF ORGANIZATIONAL ADAPTATION Stăncuţ Anca, Drd. University of Craiova Borcoşi Corina Ana, Drd. University of Craiova ABSTRACT. Every organization is embedded in a network of external influences and relationships, its environment. Since organizations enact their own environments, each one will choose its own target market and develop its own products or services, so they will be supported by appropriate technology, structure and process. Management can choose among alternative forms of these major organizational features. We can talk about four strategies of responding to the environment: the Defender, the Reactor, the Analyzer and the Prospector, each with its own unique configuration of technology, structure and process. The Defenders are organizations with a narrow product-market, in continuous search for improving the efficiency of their existing operations. The Prospectors are always looking for market opportunities, innovations, therefore, they are not completely efficient. The Analyzers operate in both a stable and unstable product-market s. In the stable areas they use formalized structures and process, unlike the turbulent areas where they adopt rapidly the most promising ideas. Finally, the Reactors are unable to respond to the environmental pressures, because the lack of a consistent strategy-structure relationship. 1. Entrepreneurial, engineering and administrative problems of the Defenders The most notable feature of the Defender s product-market is the narrowness and stability, directing their goods only to a limited segment of the total potential market, frequently one of the healthiest segments of the entire market. By offering the full range of products and services, they are able to build a satisfied clientele and stabilize relations with its market segment. The Defender enacts an environment of greater stability than do their counterparts within the same industry. Even in industries widely noted for their rapidly changing conditions, there are potential pockets of stability within which a Defender can thrive. A major risk for this strategy is about the continued viability of a single narrow, the organization receives a return on its heavy technological investment only if the major problems facing the organization continue to be of an engineering or technological nature, designed to serve its present but has little capacity for locating and exploiting new areas of opportunity. In other words, the Defender is perfectly capable of responding to today s world, and if the world of tomorrow is similar, it is ideally suited for its environment. To summarize, the Defender s entrepreneurial problem involves the creation of a narrow, stable and a limited mix of products and customers, aggressive efforts to protect the from competitors, a tendency to ignore developments outside the, minimal product development and growth through market penetration. We can see that there are both a major advantage and disadvantage. First, competitors often find difficult to dislodge this type of organization from its position, because of the familiarity with the. But, in the same time, the Defender runs the risk of fairly rapid extinction in the event of a major market shift, for it is gambling on the continued viability of its limited set of products and markets. 529

2 As shown before, the Defender s fundamental emphasis is on efficiency, doing things right, rather than on effectiveness, doing the right things. That s why its performance is evaluated by comparing it to similar organizations because of the belief that they can do what they do better than anybody. The Defender s leading or innovative activities are primarily focused internally. With few resources devoted to scanning the environment, the Defender is not capable to find new product or market opportunities. Moreover, he could not adjust rapidly to a new opportunity, because of its specialized and finely tuned expertise. For summarizing the major strengths and weaknesses of the Defender we can use the next table. Table 1 Characteristics of the Defender Entrepreneurial problem Engineering problem Administrative problem Problem: How to seal off a Problem: How to produce and Problem: How to maintain segment of market for creating distribute goods as efficiently strict control of the a stable set of products and as possible customers organization in order to ensure efficiency 1. Narrow and stable 2. Aggressive maintenance of 3. Tendency to ignore developments outside the 4. Cautions and incremental growth primarily through market penetration 5. Product development closely related to current products It is difficult for competitors to dislodge the organization from its small segment, but a major shift in the market threaten the survival 1. Cost-efficient technology 2. Single core technology 3. Tendency toward vertical integration 4. Continuous improvements in technology to maintain efficiency Technological efficiency is central to performance, but heavy investment requires technological problems to remain predictable for lengthy periods of time 1. Financial and production experts most powerful members in the dominant coalition; limited scanning of the environment 2. Intensive planning, costoriented and completed before action is taken 3. Tendency toward functional structure with extensive division of labor and high degree of formalization 4.Centralized control and long-looped vertical information systems 5. Simple coordination mechanism and conflicts resolved through hierarchical channels 6. Organizational performance measured against previous years Administrative system suited to maintain stability and efficiency but not well suited to locate and respond to new product or market opportunity 530

3 2. The Prospector s particular mode of adaptation Prospectors are organizations which almost continually search for market opportunities, experimenting with potential responses to emerging trends. So, they are often the creators of change and uncertainty to which their competitors must respond. For them, maintaining a reputation as an innovator in product and market development may be even more important than high profitability. The Prospector s is usually broad and in a continuous state of development, by investing heavily in individuals and groups who can scan the environment for new opportunities. In fact, they can be named the creators of change in their industries. Growth in a Prospector first results from the location of new markets and the development of new products, as a definer. A true Prospector is almost immune from the pressures of a changing environment, searching for new entrepreneurial ventures for manipulating the competitive arena in its favor. Because of the need for flexibility the Prospector attains the efficiency to obtain maximum economic benefits from any market. Unlike the Defender, the Prospector s choice of products and markets are unlimited entrepreneurial activities always has primacy, and appropriate technologies are not selected or develop until late in the process of product development. The main question is What products should we make? not What products can we make? Therefore, a considerable portion of the technological core is frequently engaged in production of prototypes, the technologies are embedded in people, not in routine or mechanical operations. As a conclusion, the Prospector enacts an environment that is more dynamic than those of other types of organizations within the same industry, by continually modifying its productmarket to take advantage of perceive opportunities and by emphasizing flexibility in its technology and administrative system in order to facilitate rapid adjustment. But, don t forget that several risks are associated with this strategy: the organization may overextend itself in terms of products and markets, it may be technologically inefficient and its administrative system may underutilize and misutilize resources. The next table summarizes this pattern of adaptation Table 2 Characteristics of the Prospector Entrepreneurial problem Engineering problem Administrative problem Problem: How to locate and Problem: How to avoid longterm commitments to a single coordinate numerous and Problem: How to facilitate and exploit new products and market opportunities technological process diverse operations 1. Broad and continuously developing 2. Monitors wide range of environmental conditions and events 3. Creates change in the industry 4. Growth through product and market development 1. Flexible, prototypical technologies 2. Multiple technologies 3. Low degree of routinization and mechanization; technology embedded in people Marketing and research and development experts most powerful members of the dominant coalition 2.Dominant coalition is large, diverse, and transitory; may include an inner circle 3.Planning is broad rather than intensive, problem oriented and cannot be finalized before action is taken

4 Product and market innovation protects the organization from a changing environment, but the organization runs the risk of low profitability and overextension of its resources Technological flexibility permits a rapid response to a changing, but the organization cannot develop maximum efficiency in its production and distribution system because multiple technologies 4. Tendency toward product structure with low division of labor and low degree of formalization 5. Complex coordination mechanism and conflict resolved through integrators 6. Organizational performance measured against important competitors Administrative system is ideally suited to maintain flexibility and effectiveness but may be underutilize and misutilize resources 3. The Analyzer a unique combination of the Defender and the Prospector Balance is the common characteristic of the Analyzer s solutions to the organizational adaptation. Although the particular configuration of, technology, structure and process of the Prospector and the Defender, the Analyzer strategy consists in minimizing the risks while maximizing the opportunity for profits. The Analyzer entrepreneurial problem is how to locate and exploit new product and market opportunities while simultaneously maintaining a strong base of traditional products and customers. The organization operates on a hybrid of stable and emerging products, being able to serve its mixed by creating a dual technological core. The stable component is a production system developed on a standardized basis, while the flexible component adapts new product designs to fit existing technology. The administrative system is built around some version of a matrix organization. Planning, control and coordination reflect an intermediate position between the Prospector and Defender, suited to balance stability and flexibility. The duality of forces the management to be continually vigilant in maintaining the delicate balance among the organization s, technology and structure. The technological dual core means that the organization can never be completely efficient nor completely effective. The matrix organization structure, limits the organizations ability to kove fully in either direction should the shift dramatically. Table 3 Characteristics of the Analyzer Entrepreneurial problem Engineering problem Administrative problem Problem: How to locate and Problem: How to be efficient Problem: How to differentiate exploit new product and in stable portions of the the structure and process to market opportunities while and flexible in accommodate both areas of 532

5 maintaining a firm base of traditional products and customers 1. Hybrid both stable and changing 2. Surveillance mechanisms mostly limited to marketing; some research and development 3. Steady growth through market penetration and product-market development Low investment and development, combined with imitation of demonstrability successful products, minimizes risk, but must be optimally balanced at all times between stability and flexibility changing segments 1. Dual technological core (stable and flexible component) 2. Large and influential applied research group 3. Moderate degree of technical efficiency Dual technological core is able to serve a hybrid stablechanging, but the technology can never be completely effective or efficient operation 1. Intensive planning between marketing and production concerning stable portion of 2. Matrix structure combining both functional divisions and product groups 3. Moderately centralized control system with vertical and horizontal loops 4. Extremely complex and expensive coordination mechanism 5. Performance appraisal based on both effectiveness and efficiency measures, most rewards to marketing and applied research Administrative system is ideally suited to balance stability and flexibility, but if this balance is lost, it may be difficult to restore equilibrium 4. Adherence to a outmoded strategy and structure the Reactors Reactors represent a residual type of behavior in that organizations are forced into a response mode when they are unable to pursue one of the three stable strategies of Defender, Analyzer or Prospector. They are unstable organizations because they don t possess mechanisms to allow responding consistently to the environment over time. Frequently, such organizations fall into an unpleasant cycle of responding inappropriately to environmental change and uncertainty, performing poorly as a result, and then being reluctant to act aggressively in the future. Although there are numerous reasons for an organization to become reactors we present here the most important three of them. First, top management may not have clearly articulated the organization s strategy. The second and perhaps more common cause of instability is that management does not fully shape the organization s structure and process to fit a chosen strategy. Unless all of the, engineering and administrative decisions required to have an operational strategy are properly aligned, strategy is a statement, not a guide for behavior. 533

6 The third reason for instability and perhaps ultimate failure is the tendency for management to maintain the relationship between strategy and structure despite overwhelming changes in environmental conditions. This is the way Reactor must come squarely to grips with its behavior. Will management be able to tolerate its own indecisiveness further, or will it move the organization toward one of three viable strategies? Conclusions In most successful organizations management consciously develops and articulates an internal organization image just as it does a product-market image. That is, management attempts to demonstrate how and why the organization s structure and process reflect previous decisions about the market and, further, how these pave the way for future organizational development. Successful administrative solutions may be prized as product or technological innovations and often are genuinely marketable; executives are hired away to bring their system to other organizations. This combination of internal and external images constitutes the strategy-structure relationship. Since organizations enact their own environment, it is very possible that there are not two organizational strategies that are the same, because every organization will choose its own market and develop its own set of products and services, and these decisions will be supported by appropriate decisions concerning the organization s structure, technology and process. The pure form of the four types of organization shown before, described a particular pattern of movement through the adaptive process. The researches indicate that organizations can be typed according to their response pattern and that the actions of a given type of organization are internally consistent and self-sustaining. So these models can be used for diagnostic purposes under ideal conditions of managerial objectivity and information availability, and then discuss applications under normal or less than ideal circumstances. Bibliography 1. Burns, T., Stalker, G.M., Theory of Mechanistic and Organic Systems, Cremadez, M, Organisation et Strategie, Dunod, Hammer, M., Champy, J., Reengineering the Corporation: A Manifesto for Business Revolution, Harper Business Books, New York, Mintzberg, H, Structure et Dynamique des Organisations, Les Ed. d Organisation, Paris, Miles, R, Snow, C, Organizational Strategy, Structure, and Process, Stanford University Press, California, Porter, M., Competitive Strategy: Techniques for Analizing Industries and Competitors, The Free Press, Stacey, R., Managing the Unknowable: Strategic Boundaries Between Order and Chaos in Organizations, Watiez, J.C., Flexibilité et adaptation de l organisation à l environment: la flexibilité en tant que réponse à l asymétrie inter et intra enterprises,