Strategy as ecology

Microsoft's and Wal-Mart's preeminence in modern business has been attributed to any number of factors--from the vision and drive of their founders to the companies' aggressive competitive practices. But the authors maintain that the success realized by these two very different companies is due only partly to the organizations themselves; a bigger factor is the success of the networks of companies with which Microsoft and Wal-Mart do business. Most companies today inhabit ecosystems--loose networks of suppliers, distributors, and outsourcers; makers of related products or services; providers of relevant technology; and other organizations that affect, and are affected by, the creation and delivery of a company's own offering. Despite being increasingly central to modern business, ecosystems are still poorly understood and even more poorly managed. The analogy between business networks and biological ecosystems can aid this understanding by vividly highlighting certain pivotal concepts. The moves that a company makes will, to varying degrees, affect the health of its business network, which in turn will ultimately affect the organization's performance--for ill as well as for good. Because a company, like an individual species in a biological ecosystem, ultimately shares its fate with the network as a whole, smart firms pursue strategies that will benefit everyone. So how can you promote the health and the stability of your own ecosystem, determine your place in it, and develop a strategy to match your role, thereby helping to ensure your company's well-being? It depends on your role--current and potential--within the network. Is your company a niche player, a keystone, or a dominator? The answer to this question may be different for different parts of your business. It may also change as your ecosystem changes. Knowing what to do requires understanding the ecosystem and your organization's role in it.     

Organisational design choices in response to public sector reforms: A case study of mandated hospital networks

In this study we investigate the design and control of public sector networks formed by government mandate. Specifically, we analyse how a range of antecedent factors influence the extent to which organisations within such networks effectively collaborate to unify their efforts. We examine the role of both formal and informal controls in promoting and co-ordinating activity and managing appropriation concerns among organisations of the network. We address these issues in the context of health sector reforms in Victoria, Australia, that resulted in the amalgamation of metropolitan hospitals into a number of hospital networks. While the reforms determined the particular aggregation of hospitals, management retained discretion as to the organisation and control of activity among hospitals of the network. We draw on Oliver's (1991) predictive model of strategic responses to institutional mandates to analyse how efficiency and legitimacy concerns, the influence of external constituents, and consistency between institutional and organisational goals influence resultant structural and control choices in three of these hospital networks. Specifically, we examine the extent to which structural and control attributes promote the integration of activity within networks by analysing the delegation and partitioning of decision rights, and the design and use of performance measurement systems, integrative liaison devices, and standard operating procedures. We also consider the implications of integration for network performance. In our empirical analysis of three hospital networks we observe tension in network design relating to the achievement of efficiency and legitimacy imperatives that underpin the mandate to form hospital networks. The networks differ in their potential to generate efficiency and legitimacy gains from collaboration, their commitment to the ideals underlying the institutional mandate, and their willingness to pursue effective collaboration in light of the influence of other external constituents. In turn they adopt structural and control system designs that reflect different levels of clinical activity integration, and different degrees of substantive acquiescence to the institutional mandate to collaborate.     

Are you a collaborative leader?

Social media and technologies have put connectivity on steroids and made collaboration more integral to business than ever. But without the right leadership, collaboration can go astray. Employees who try to collaborate on everything may wind up stuck in endless meetings, struggling to reach agreement. On the other side of the coin, executives who came of age during the heyday of "command and control" management can have trouble adjusting their style to fit the new realities. In their research on top-performing CEOs, Insead professors Ibarra and Hansen have examined what it takes to be a collaborative leader. They've found that it requires connecting people and ideas outside an organization to those inside it, leveraging diverse talent, modeling collaborative behavior at the top, and showing a strong hand to keep teams from getting mired in debate. In this article, they describe tactics that executives from Akamai, GE, Reckitt Benckiser, and other firms use in those four areas and how they foster high-performance collaborative cultures in their organizations.     

Informal networks: the company behind the chart

A glance at an organizational chart can show who's the boss and who reports to whom. But this formal chart won't reveal which people confer on technical matters or discuss office politics over lunch. Much of the real work in any company gets done through this informal organization with its complex networks of relationships that cross functions and divisions. According to consultants David Krackhardt and Jeffrey Hanson, managers can harness the true power in their companies by diagramming three types of networks: the advice network, which reveals the people to whom others turn to get work done; the trust network, which uncovers who shares delicate information; and the communication network, which shows who talks about work-related matters. Using employee questionnaires, managers can generate network maps that will get to the root of many organizational problems. When a task force in a computer company, for example, was not achieving its goals, the CEO turned to network maps to find out why. He discovered that the task force leader was central in the advice network but marginal in the trust network. Task force members did not believe he would look out for their interests, so the CEO used the trust map to find someone to share responsibility for the group. And when a bank manager saw in the network map that there was little communication between tellers and supervisors, he looked for ways to foster interaction among employees of all levels. As companies continue to flatten and rely on teams, managers must rely less on their authority and more on understanding these informal networks. Managers who can use maps to identify, leverage, and revamp informal networks will have the key to success.     

How leaders create and use networks

Most people acknowledge that networking-creating a fabric of personal contacts to provide support, feedback, insight, and resources--is an essential activity for an ambitious manager. Indeed, it's a requirement even for those focused simply on doing their current jobs well. For some, this is a distasteful reality. Working through networks, they believe,means relying on "who you know" rather than "what you know"--a hypocritical, possibly unethical, way to get things done. But even people who understand that networking is a legitimate and necessary part of their jobs can be discouraged by the payoff--because they are doing it in too limited a fashion. On the basis of a close study of 30 emerging leaders, the authors outline three distinct forms of networking. Operational networking is geared toward doing one's assigned tasks more effectively. It involves cultivating stronger relationships with colleagues whose membership in the network is clear; their roles define them as stakeholders. Personal networking engages kindred spirits from outside an organization in an individual's efforts to learn and find opportunities for personal advancement. Strategic networking puts the tools of networking in the service of business goals. At this level, a manager creates the kind of network that will help uncover and capitalize on new opportunities for the company. The ability to move to this level of networking turns out to be a key test of leadership. Companies often recognize that networks are valuable, andthey create explicit programs to support them. But typically these programs facilitate only operational networking. Likewise, industry associations provide formal contexts for personal networking. The unfortunate effect is to give managers the impression that they know how to network and are doing so sufficiently. A sidebar notes the implication for companies' leadership development initiatives: that teaching strategic networking skills will serve their aspiring leaders and their business goals well.     

Aligning incentives in supply chains

Most companies don't worry about the behavior of their supply chain partners. Instead, they expect the supply chain to work efficiently without interference, as if guided by Adam Smith's famed invisible hand. In their study of more than 50 supply networks, V.G. Narayanan and Ananth Raman found that companies often looked out for their own interests and ignored those of their network partners. Consequently, supply chains performed poorly. Those results aren't shocking when you consider that supply chains extend across several functions and many companies, each with its own priorities and goals. Yet all those functions and firms must pull in the same direction for a chain to deliver goods and services to consumers quickly and cost-effectively. According to the authors, a supply chain works well only if the risks, costs, and rewards of doing business are distributed fairly across the network. In fact, misaligned incentives are often the cause of excess inventory, stock-outs, incorrect forecasts, inadequate sales efforts, and even poor customer service. The fates of all supply chain partners are interlinked: If the firms work together to serve consumers, they will all win. However, they can do that only if incentives are aligned. Companies must acknowledge that the problem of incentive misalignment exists and then determine its root cause and align or redesign incentives. They can improve alignment by, for instance, adopting revenue-sharing contracts, using technology to track previously hidden information, or working with intermediaries to build trust among network partners. It's also important to periodically reassess incentives, because even top-performing networks find that changes in technology or business conditions alter the alignment of incentives.     

A smarter way to network

The adage "It's not what you know, it's who you know" is true. The right social network can have a huge impact on your success. But many people have misguided ideas about what makes a network strong: They believe the key is having a large circle filled with high-powered contacts. That's not the right approach, say Cross, of UVA's McIntire School of Commerce, and Thomas, of the Accenture Institute for High Performance. The authors, who have spent years researching how organizations can capitalize on employees' social networks, have seen that the happiest, highest-performing executives have a different kind of network: select but diverse, made up of high-quality relationships with people who come from varying spheres and from up and down the corporate ladder. Effective networks typically range in size from 12 to 18 people. They help managers learn, make decisions with less bias, and grow personally. Cross and Thomas have found that they include six critical kinds of connections: people who provide information, ideas, or expertise; formally and informally powerful people, who offer mentoring and political support; people who give developmental feedback; people who lend personal support; people who increase your sense of purpose or worth; and people who promote work/life balance. Moreover, the best kind of connections are "energizers"--positive, trustworthy individuals who enjoy other people and always see opportunities, even in challenging situations. If your network doesn't look like this, you can follow a four-step process to improve it. You'll need to identify who your connections are and what they offer you, back away from redundant and energy-draining connections, fill holes in your network with the right kind of people, and work to make the most of your contacts. Do this, and in due course, you'll have a network that steers the best opportunities, ideas, and talent your way.     

以“合”为贵？合作文化与企业创新

本文以2006-2015年沪深A股非金融上市公司为样本,基于上市公司网站对于企业文化的叙述和年报董事会报告两份本文,采用文本分析方法,构建两个度量企业合作文化强弱的指标,并研究企业合作文化对企业创新产出和创新效率的影响。研究发现,企业文化越强调合作,企业的创新产出越多,创新效率越高。这一结论在采用增加控制变量、利用水稻播种面积作为工具变量以及以董事长的非正常离职事件为冲击进行PSM-DID等多种方法后仍然稳健。渠道检验的结果显示,合作文化是通过提高企业内部员工的凝聚力和促进企业的“产学研”合作这两种渠道来促进企业创新。进一步的研究表明,合作文化的促进作用在竞争性行业以及地区信任程度和产业集群程度较高的地区中尤为显著。本文不仅从微观层面揭示企业文化对公司财务行为的影响机理,丰富和补充了当前方兴未艾的“文化与金融”研究,而且为国家制定建设社会主义文化强国的方针战略提供理论基础和实证支持。     

Influencing the influencers: a theory of strategic diffusion

The growth of the Internet and assorted technologies has made it possible to collect and process detailed information on social networks. This article investigates how firms (and governments) can harness the power of social networks to promote their goals. We show that the optimal use of social networks leads to higher sales and greater profits. However, an increase in the level and dispersion of social interaction can increase or decrease the optimal influence strategy and profits of the player, depending on the content of the interaction. Optimal influence strategies will target individuals with low or high connections, depending on the content of interaction. Finally, the returns to investing in market research on social networks are greater in more unequal networks.     

Blockchain architecture: A design that helps CPA firms leverage the technology

Blockchain technology has garnered the interest of the accounting profession in recent years. However, when considering whether to adopt this technology, many business professionals have voiced a lack of a compelling use case as a major challenge. To utilize the technology effectively, first, we need to establish how organizations will connect to the blockchain that will also provide a compelling use-case for CPA firms. In this paper, we design a blockchain architecture for organizations that will facilitate effective connectivity to a blockchain while enabling auditors to leverage this technology to provide audit and assurance services. To design the architecture, we consider two broad questions: first, how do CPA firms gain access to reliable audit evidence and, second, how can client firms maintain confidentiality and security of their data given a decentralized and distributed immutable ledger (i.e., a blockchain). Consequently, the proposed architecture will help auditors gain access to reliable digital audit evidence while incentivizing client firms to adopt blockchain technology by substantially reducing the costs of replacing existing information systems. Given this architecture, auditors could also design continuous audit procedures for their respective clients without having to incur substantial investments in software integration. Further, the architecture can be expanded to include various use cases and supply chain participants, other CPA firms, customers, and regulators.     

How Corporate Diversity and Size Influence Spinoffs and Other Breakups

In recent months, the list of large diversified companies that have decided they would be worth more as several smaller, focused companies has grown sharply. In many of these cases, it has been outside pressure from activist investors that has motivated these actions by management—and with some pretty favorable results. But what is driving these strategic actions and what is most important in determining whether breakups create value? To answer this fundamental questions, it is critical to decide whether large, diversified companies have a value recognition problem or a value creation problem. In this article, the authors present and try to integrate the findings of two separate but related research studies on business diversity and size with the aim of identifying their implications for corporate strategy and helping company executives create more value for their investors. The specific reasons for underperformance by large diverse companies vary greatly, but there are a number of potential problems discussed in this article, including organizational “distance,” capital allocation, human capital allocation, cross subsidies, and ineffective governance. Instead of waiting for activist investors to demand a breakup, executives of large diverse companies should be proactive in addressing the potential weaknesses of their organizations. Private equity firms understand how to make diversification work and many of today's executives could learn some valuable lessons from these firms. Large diverse businesses should embrace “Internal Capitalism,” a corporate culture and set of practices that emphasizes the importance of strategic decision‐making that is linked through continuous performance assessment to the corporate goals of boosting efficiency and sustainable growth.     

JOINING THE NEW ECONOMY

The decline in the costs of communicating, coordinating, and collaborating across firms in the value chain has led to the emergence of new business models—virtually integrated companies, retail "bricks and clicks" organizations, and networks like AOL and eBay—that can be used by all kinds of companies to exploit new opportunities. With these new organizations comes a need for new governance practices—practices that permit swifter decisions, best practice sharing, and more focused operations.
The author argues that improvements in governance should focus on achieving the following:

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   Organization structures that leverage external alliances while improving internal collaboration. This involves gaining acceptance of and support for a common aspiration across the company—the goal of deploying financial and human resources, complemented by technology, to build shareholder wealth.

       
  
  

Building collaborative enterprise

Can large companies be both innovative and efficient? Yes, argue Adler, of the University of Southern California; Heckscher, of Rutgers; and Prusak, an independent consultant. But they must develop new organizational capabilities that will create the atmosphere of trust that knowledge work requires--and the coordinating mechanisms to make it scalable. Specifically, such organizations must learn to: Define a shared purpose that guides what people at all levels of the organization are trying to achieve together; Cultivate an ethic of contribution in which the highest value is accorded to people who look beyond their specific roles and advance the common purpose; Develop scalable procedures for coordinating people's efforts so that process-management activities become truly interdependent; and Create an infrastructure in which individuals' spheres of influence overlap and collaboration is both valued and rewarded. These four goals may sound idealized, but the imperative to achieve them is practical, say the authors. Only the truly collaborative enterprises that can tap into everyone's ideas---in an organized way--will compete imaginatively, quickly, and cost-effectively enough to become the household names of this century.     

Match your sales force structure to your business life cycle

Although companies devote considerable time and money to managing their sales forces, few focus much thought on how the structure of the sales force needs to change over the life cycle of a product or a business. However, the organization and goals of a sales operation have to evolve as businesses start up, grow, mature, and decline if a company wants to keep winning the race for customers. Specifically, firms must consider and alter four factors over time: the differing roles that internal salespeople and external selling partners should play, the size of the sales force, its degree of specialization, and how salespeople apportion their efforts among different customers, products, and activities. These variables are critical because they determine how quickly sales forces respond to market opportunities, they influence sales reps' performance, and they affect companies' revenues, costs, and profitability. In this article, the authors use timeseries data and cases to explain how, at each stage, firms can best tackle the relevant issues and get the most out of their sales forces. During start-up, smart companies focus on how big their sales staff should be and on whether they can depend upon selling partners. In the growth phase, they concentrate on getting the sales force's degree of specialization and size right. When businesses hit maturity, companies should better allocate existing resources and hire more general-purpose salespeople. Finally, as organizations go into decline, wise sales leaders reduce sales force size and use partners to keep the business afloat for as long as possible.     

How to implement a new strategy without disrupting your organization

Throughout most of modern busi ness history, corporations have attempted to unlock value by matching their structures to their strategies: Centralization by function. Decentralization by product category or geographic region. Matrix organizations that attempt both at once. Virtual organizations. Networked organizations. Velcro organizations. But none of these approaches has worked very well. Restructuring churn is expensive, and new structures often create new organizational problems that are as troublesome as the ones they try to solve. It takes time for employees to adapt to them, they create legacy systems that refuse to die, and a great deal of tacit knowledge gets lost in the process. Given the costs and difficulties involved in finding structural ways to unlock value, it's fair to raise the question: Is structural change the right tool for the job? The answer is usually no, Kaplan and Norton contend. It's far less disruptive to choose an organizational design that works without major conflicts and then design a customized strategic system to align that structure to the strategy. A management system based on the balanced scorecard framework is the best way to align strategy and structure, the authors suggest. Managers can use the tools of the framework to drive their unit's performance: strategy maps to define and communicate the company's value proposition and the scorecard to implement and monitor the strategy. In this article, the originators of the balanced scorecard describe how two hugely different organizations--DuPont and the Royal Canadian Mounted Police-used corporate scorecards and strategy maps organized around strategic themes to realize the enormous value that their portfolios of assets, people, and skills represented. As a result, they did not have to endure a painful series of changes that simply replaced one rigid structure with another.     

Introducing T-shaped managers. Knowledge management's next generation

Most companies do a poor job of capitalizing on the wealth of expertise scattered across their organizations. That's because they tend to rely on centralized knowledge-management systems and technologies. But such systems are really only good at distributing explicit knowledge, the kind that can be captured and codified for general use. They're not very good at transferring implicit knowledge, the kind needed to generate new insights and creative ways of tackling business problems or opportunities. The authors suggest another approach, something they call T-shaped management, which requires executives to share knowledge freely across their organization (the horizontal part of the "T"), while remaining fiercely committed to their individual business unit's performance (the vertical part). A few companies are starting to use this approach, and one--BP Amoco--has been especially successful. From BP's experience, the authors have gleaned five ways that T-shaped managers help companies capitalize on their inherent knowledge. They increase efficiency by transferring best practices. They improve the quality of decision making companywide. They grow revenues through shared expertise. They develop new business opportunities through the cross-pollination of ideas. And they make bold strategic moves possible by delivering well-coordinated implementation. All that takes time, and BP's managers have had to learn how to balance that time against the attention they must pay to their own units. The authors suggest, however, that it's worth the effort to find such a balance to more fully realize the immense value of the knowledge lying idle within so many companies.     

Organizational adaptation to changing contingencies

Old, mechanistic firms need to change their technology and organizational forms to adapt to new market conditions. However, contingency theories of organization link the capacity for this kind of innovation with organic organizational forms, hence the firms seemingly have to change before they can start changing. The article develops a basis for an extension of these theories which looks in more detail at adaptation processes. A perspective on organizational functioning is introduced that sees continuity as fundamental to change, instead of treating innovation and stagnation as two unconnected phenomena. This perspective, called RTK for short, rests on an investigation of three aspects of organizations: their networks of routines for all activities, the local theories held and developed, and the contextual knowledge at the points of operation. It is then argued that change processes with which firms can successfully cope should be anchored in virtuous circles in existing routine networks.     

Antecedents and Consequences of Eco‐Control Deployment: Evidence from Canadian Manufacturing Firms

Environmental issues have become an important consideration for a growing number of organizations. Eco‐control may represent a valuable tool to help organizations address such issues. The aim of this study is to provide an overview of the eco‐control practices adopted by Canadian organizations and to understand the antecedents and consequences of their adoption. More specifically, this study examines (i) the extent to which eco‐control practices are deployed within organizations, (ii) the factors and motivations that lead organizations to implement eco‐control practices, and (iii) the impact of adoption on firms’ managerial and operational environmental actions as well as on environmental and economic performance. Using survey data from a sample of 249 Canadian manufacturing firms, this article shows that environmental missions, environmental policies, environmental strategic planning, environmental budgets and environmental performance indicators are the most frequently adopted eco‐control practices among the investigated firms, while environmental incentives seem to be less frequently adopted. The results of this study also suggest that competitive and ethical motivations as well as size, environmental exposure and stakeholder pressure are all important factors in explaining eco‐control practice adoption by Canadian manufacturing firms. Moreover, the results of this study show that organizations that have undertaken more intensive managerial and operational environmental actions have also adopted more intensive eco‐control practices. Organizations adopting more intensive eco‐control practices perform better both environmentally and economically performance than firms adopting less intensive eco‐control practices.     

How likely is contagion in financial networks?

Interconnections among financial institutions create potential channels for contagion and amplification of shocks to the financial system. We estimate the extent to which interconnections increase expected losses and defaults under a wide range of shock distributions. In contrast to most work on financial networks, we assume only minimal information about network structure and rely instead on information about the individual institutions that are the nodes of the network. The key node-level quantities are asset size, leverage, and a financial connectivity measure given by the fraction of a financial institution’s liabilities held by other financial institutions. We combine these measures to derive explicit bounds on the potential magnitude of network effects on contagion and loss amplification. Spillover effects are most significant when node sizes are heterogeneous and the originating node is highly leveraged and has high financial connectivity. Our results also highlight the importance of mechanisms that go beyond simple spillover effects to magnify shocks; these include bankruptcy costs, and mark-to-market losses resulting from credit quality deterioration or a loss of confidence. We illustrate the results with data on the European banking system.     

Effects of common factors on stock correlation networks and portfolio diversification

This study empirically investigates the effects of common factors on the connectivity of the network among stocks and on the distribution of the investment weights for stocks. The network is defined as a stock correlation network from the minimal spanning tree (MST), and portfolio is defined as an efficient portfolio from the Markowitz mean-variance (MV) optimization function (MVOF). For these research goals, we devise a method using the comparative correlation matrix (C-CM), which does not have the property of a single common factor included in the sample correlation matrix (S-CM). The results reveal that common factors clearly affect the changes of connectivity among stocks in the networks, and that their influence is much greater on stocks with many links to other stocks in the network. Further, common factors significantly affect the determination of the investment weight's distribution for stocks from the MVOF. In particular, among the common factors, a market factor plays a dominant role in both structuring the network among stocks and in constructing the well-diversified portfolio. In addition, the devised method of the C-CM without the property of the market factor in the S-CM plays a crucial role in constructing a more diversified portfolio with better out-of-sample performance in the future period. These results are robust in both the Korean and the U.S. stocks markets.