Chapter 17 - The Design of New Organizational Forms

Chapter 17 discusses how the organizational forms of companies has been changing. These new forms are generally formed around 2 capabilities that are viewed as critical in "environments of discontinuous change." Those capabilities are: 1) an effective balancing of exploration and exploitation, and 2) a recombination of of established competencies. If a firm is very good at the exploitation of its goods and/or services it can appropriate gains based on that exploitation, but if it does not balance that exploitation with exploration, it could lose sight of the market and be quickly over taken by a new discontinuous technology. Similarly, if the firm only looks at the exploration of new technologies it will never recognize long term gains without exploiting those technologies. The author also mentions that different organizational forms are defined by the unique reconfiguration of 6 elements: 1) organizational goals, 2) strategies, 3) authority relations, 4) technologies, 5) markets and 6) processes.

Based on these 6 elements and the reconfigurations that firms can take with them, the author has come up with six relatively different and potentially enduring organizational models:


Virtual Organization - suppliers, employees, and customers are dispersed geographically but are all connected by technology. Dell's connection with customers can be categorized as a virtual organization. Virtual companies have boundless opportunities to connect with customers but the flexibility can also create a new set of challenges such as the lack of face to face time with customers.

Network Organization - set of relationships between autonomous or semi-autonomous work units for delivering products or services to customers. There are both internal and external - external: organization that creates ties among independent entities to combine skills (ie. partnerships, joint ventures). Internal: much like and external but ties together entities on the inside of the organization

Spin-Out - organizations that are developed inside and organization that are unique and different and are then spun out to external entities and are usually partially owned by the parent company.

Ambidextrous Organizations - organizations that continue with their established environment while creating and promoting emerging business environments (sustain and innovate). This gives structure to the new environment while sustaining the current business environment.

Front-Back Organizations - customers are served in the front with the backend of the organization supporting the front end. (Typically in service industries that are customer driven.)

Sense and respond organization - identifying the emerging needs of the customer and responding intensely to those needs. This is important to meet the ever changing demands of the customer which allows the customer to adapt to the changing conditions

The organizational forms given are not hard and fast, many more potentially exist, but these are assumed to be and will be in the future the major forms. Furthermore, organizations can move in and out of these structures based on their needs, business strategy or organizational maturity. for instance, a newer company may need to develop business relationships with customers, suppliers or the distribution channel, for this they may need to choose a Front-Back form. However, as they grow and mature they may need to grow those relationships by moving into a different organizational form, perhaps a sense and respond or even a virtual form to be able to better service their curretn relationships as a small company.

As managers we must watch our organizations and find where we are running into issues, where we are slowing down and adjust our business plans or forms accordingly. Gone are the days when we can chose a hierarchical organizational structure and sit back and watch it grow. Business today is ever changing, expanding, growing and developing and as managers we must maintain the flexibility to adjust to these changes in order to make our firms and or emerging technologies successful.