Changing a mature business
Module 1: Scoping: Organizational change
Scoping = how organizations view their environment and determine need to change
Environment: anything outside boundary of the focal organization
Visualizing the organizations “environment”:
- SWOT
- industry analysis
- inter organizational network analysis
- Stakeholder analysis
- Macro/ Sector analysis (PEST)
Organization: coordinated entity functioning to achieve a common set of goals
Macro-level explanations for Change:
1. Contingency theory: environment determines the structure of the organization.
Environment is uncertain, complex and changeable within this context.
Organizational reaction: build organizational structure that matches with environment
(turbulent environment = organic structure)
2. Resource dependence theory: Environment will influence the organizations’
attempt to obtain critical resources. Environment in this context is a network of
organizations that control resources which the focal organization needs. Mutual
dependence relationship: network ties with actors. Organizations will try to integrate
other organizations that control critical resources (through M&As, Joint ventures)
, 3. Population ecology: environment determines organizational survival. Environment:
common resource pool which is competed for. Organizational reaction: innovation,
finding new and better ways to produce output, or to flee/ find another niche.
4. Institutional theory: Environment will determine social legitimacy (perception of
important actors of the organization). A social license to operate is needed.
Environment conceptualized: task environment (previous theories) and also
institutional environment: the social, legal, cultural and political demands.
Organizational reaction: change in the way that leads other actors to believe that the
organization is legitimate.
The focus of these theories is at Macro-level. However, Organizations will not always change
in this way. This is subject to the interpretation of how the environment influences them.
Why do organizations not change in response to environmental pressures?
- Threat rigidity
- Forces for stability
- Buffering strategies
- Organizational power and politics
- “Erroneous” understanding of the environmental pressure. Interpretation of the
external environment is key!
, Frame: collectively held lens through which an outside pressure and its meaning for the
organization is viewed -> makes some aspects of reality more salient. Framing really
determines how organizations respond to the external environment.
Threat framing is more likely to lead to investments than opportunity framing. Because it
creates a sense of urgency for the decision makers.
Organizations as interpretation systems - Enactment theory: to survive, organizations must
have mechanisms to interpret ambiguous events and to provide meaning and direction for
participants.
Assumptions: environment contains uncertainty, requiring information processing.
Organizations can interpret as a whole through convergence of individual interpretations (ie.,
shared information of top management) -> it is the job of top management.
Different stages of interpreting:
1. Scanning of the environment - data collection, market research
2. Interpretation - Translating data into shared understanding
3. Learning - action is taken
Interpretation as job of top management:
- There is a need in organizations to make sense of things, to be aware of external
events and to translate cues into meaning for organizational participants -> however,
all interpretations are biased, they are viewed through a lens (not a frame)
Enactment theory: Typical response of organizations towards the environment is to engage
in interpretation efforts (Scanning, interpretation, learning). This response translates into
concrete change projects.
Organizational environments are constructed by organizations itself:
- Organizations develop internal complexity to match external complexity. Different
units map the outside complexity of the environment (mirror dimension). Internal
organizational complexity is thus a representation of the environment
- Organizations construct internal representations of the environment as they perceive
it -> through information gathering and interpretation
- These representations are the environment for the purposes of decision making.
- Organizations then act on their internal representations as if they were real, enacting
the environment that they constructed → this explains why there is big variation in
organizational responses to external change pressures
Module 1: Scoping: Organizational change
Scoping = how organizations view their environment and determine need to change
Environment: anything outside boundary of the focal organization
Visualizing the organizations “environment”:
- SWOT
- industry analysis
- inter organizational network analysis
- Stakeholder analysis
- Macro/ Sector analysis (PEST)
Organization: coordinated entity functioning to achieve a common set of goals
Macro-level explanations for Change:
1. Contingency theory: environment determines the structure of the organization.
Environment is uncertain, complex and changeable within this context.
Organizational reaction: build organizational structure that matches with environment
(turbulent environment = organic structure)
2. Resource dependence theory: Environment will influence the organizations’
attempt to obtain critical resources. Environment in this context is a network of
organizations that control resources which the focal organization needs. Mutual
dependence relationship: network ties with actors. Organizations will try to integrate
other organizations that control critical resources (through M&As, Joint ventures)
, 3. Population ecology: environment determines organizational survival. Environment:
common resource pool which is competed for. Organizational reaction: innovation,
finding new and better ways to produce output, or to flee/ find another niche.
4. Institutional theory: Environment will determine social legitimacy (perception of
important actors of the organization). A social license to operate is needed.
Environment conceptualized: task environment (previous theories) and also
institutional environment: the social, legal, cultural and political demands.
Organizational reaction: change in the way that leads other actors to believe that the
organization is legitimate.
The focus of these theories is at Macro-level. However, Organizations will not always change
in this way. This is subject to the interpretation of how the environment influences them.
Why do organizations not change in response to environmental pressures?
- Threat rigidity
- Forces for stability
- Buffering strategies
- Organizational power and politics
- “Erroneous” understanding of the environmental pressure. Interpretation of the
external environment is key!
, Frame: collectively held lens through which an outside pressure and its meaning for the
organization is viewed -> makes some aspects of reality more salient. Framing really
determines how organizations respond to the external environment.
Threat framing is more likely to lead to investments than opportunity framing. Because it
creates a sense of urgency for the decision makers.
Organizations as interpretation systems - Enactment theory: to survive, organizations must
have mechanisms to interpret ambiguous events and to provide meaning and direction for
participants.
Assumptions: environment contains uncertainty, requiring information processing.
Organizations can interpret as a whole through convergence of individual interpretations (ie.,
shared information of top management) -> it is the job of top management.
Different stages of interpreting:
1. Scanning of the environment - data collection, market research
2. Interpretation - Translating data into shared understanding
3. Learning - action is taken
Interpretation as job of top management:
- There is a need in organizations to make sense of things, to be aware of external
events and to translate cues into meaning for organizational participants -> however,
all interpretations are biased, they are viewed through a lens (not a frame)
Enactment theory: Typical response of organizations towards the environment is to engage
in interpretation efforts (Scanning, interpretation, learning). This response translates into
concrete change projects.
Organizational environments are constructed by organizations itself:
- Organizations develop internal complexity to match external complexity. Different
units map the outside complexity of the environment (mirror dimension). Internal
organizational complexity is thus a representation of the environment
- Organizations construct internal representations of the environment as they perceive
it -> through information gathering and interpretation
- These representations are the environment for the purposes of decision making.
- Organizations then act on their internal representations as if they were real, enacting
the environment that they constructed → this explains why there is big variation in
organizational responses to external change pressures
