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Creating 4th Gen Organizations

The Quest Towards an Effective Adaptation and Co-Evolution with the Business Environment

FEATURED PAPER

By David Tain, MSc., P.Eng., PMP

Alberta, Canada

 



Abstract

The increasing complexity in business environments makes strategic organization a paramount function to ensure sustainability and growth in corporations. However, organizational strategies, often defined with imperfect information, will normally follow economic drivers and managerial perceptions. As a result, architectures that are dissonant with the external context make organizations vulnerable to unanticipated factors emerging from changes in the external context. By adopting an evolutionary perspective, the antecedents of modern architectures are explained in this paper by building on the progressive advancement and incorporation of attributes, structures and coordination mechanisms in the different organizations’ “generations”, setting the stage to formally define 4th Gen organizations as entities that strategically intrude the business environment, with the capacity of absorbing and assimilating knowledge to effectively navigate uncertainty and generate readiness for external changes. As a result of this analysis, an organizational framework is proposed to design 4th Gen organizations that integrate three theoretical orientations: open strategy, structured networks and scenario planning. This framework ensures an effective interplay with the ecosystem and external forces that ultimately leads to a successful co-evolution with the overall business environment.

Business Environment and Strategy: Overview and Research Orientation

Global trends and market turbulences permanently test capabilities, resources and practices of organizations jeopardizing their value generation potential and sustainability. Business ecosystems and market forces emerge and influence the organization from different directions and at different speeds, driving strategic planning activities as mechanisms for growth and subsistence. Therefore, strategic organization has become a paramount function in today’s business environment, irrespective the industry or sector.

The business environment, as defined by Duncan (1972), includes all physical and social factors that that influence decision-making and behaviors in the organization and encompasses two broad domains: a- the general environment, formed by external forces (e.g.: social, political, economic and technological), and b- the task environment, or directly interactions with the organization’s activities (such as competitors, suppliers, regulatory bodies etc.). On the other hand, organizations will naturally react to what they perceive (Miles, Snow and Pfeffer, 1974). As a result, factors perceived in the general environment drive primary (corporate) strategies focused on markets selection and industries to allocate resources, while the elements in the task environment frame secondary (business) strategies that define the organization’s “unique” capabilities and competitive advantage (Bourgueois III, 1980).

By adopting an evolutionary perspective, the antecedents of modern organizations are explained in this paper, defining generations of organizations as a function of attributes, architectures and coordination mechanisms. This set the stage to formally define 4th Gen organizations as entities that strategically intrude the business environment and have the capacity to absorb and assimilate external information, adequately navigating uncertainty and reaching readiness for external changes. This analysis sets the stage to formally propose a design framework for 4th Gen organizations that amalgamates open strategy, structured networks and scenario planning as theoretical orientations. The central objective of this framework is to seek the effective interplay between the organization, the business ecosystem and external forces to ensure a successful co-evolution with the external environment.

Organizational Antecedents: From 1st to 3rd Generation

1st Gen Organizations: Maximizing Outputs through Vertical Integration

The most basic organizational architectures base organizational growth on the aggregation of the internal units’ outputs. As such, 1st Gen organizations were those designed on economic theories and capitalized on specialization, the division of labor (Smith, 1776) and the reduction of transaction costs (Coase, 1936). Vertical integration and robust hierarchical structures set how internal divisions should work and deliver results. Subsequent advances in the field of scientific management, notably the study of human motion in the industrial setting (Taylor, 1911), substantially helped increase operational efficiency and improved resource allocation, ultimately increasing outputs. There’s little doubt that these approaches were essential in the emergence of corporations in the 20th century.

With limited competition, 1st Gen organizations set linear growth expectations and established highly centralized control mechanisms and result-oriented performance indicators. Units were rewarded for the outputs they produced so inter-organizational cooperation became subordinated to individual output, incentivizing internal competition and silo-based behaviors. As a result, internal inefficiencies started to appear and the overall corporate value generation potential progressively eroded. Wen competition increased, excessive modularization in hierarchical structures impeded adequate reactions to threats and, in the most dramatic cases, differences in units’ performances generated asynchrony and cannibalism within the organization, progressively taking firms to obsolescence.

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About the Author


David Tain

Alberta, Canada

 

 

David Tain, MSc., P.Eng., PMP is the Principal Consultant for Project Management and Strategy Execution at Septentrion LTD. (http://www.septentrioncanada.com)/ . David has worked extensively in the development of industrial facilities in North and South America, holding diverse leadership positions in for international oil operators, engineering and construction organizations. His professional and academic expertise focuses on projects execution, strategic organization, decision analysis, leadership, negotiation and the study of human behavior in project environments

David received a MSc. in Management (Oil and Gas) from the University of Liverpool and completed the Strategic Decision and Risk Management Program at Stanford University. He obtained his Civil Engineering degree in 2001 from Santa Maria University in Venezuela and has progressively advanced his academic knowledge in Project Management, Project Development and Organizational Strategy through multiple programs at several institutions across the globe, remarkably Villanova University in USA and the Institut Français du Pétrole (IFP) in Paris. David is a Professional Engineer (P.Eng.) in Alberta, Canada. He can be contacted at [email protected]

Strategic consultants like Septentrion design and implement customized solutions to guide decisions, with well-defined and structured frameworks to analyze scenarios and ensuring all assumptions are adequately evaluated. This allows extracting the maximum possible value in the organization while progressing towards the strategic goals, embracing adaptation when required and ensuring right decisions are taken right. More at http://www.septentrioncanada.com/

To see more works by David Tain, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/david-tain/