The External Business Environment 1

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• The External Business Environment (1)
• MGT 5371
• Dr. Macy

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Inputs
Outputs
TRANSFORMATION (Execution)
Environmental Drivers
Outcomes/Results From High Performance / Exemplar
Organizations
1. External/ Global Business
Environment (15)

THE ORGANIZATION DESIGN PUZZLE (9)
1. Macro Organizational Structures (5)
Organizational Effectiveness (5) The Balanced
Scoreboard (KPIs)
2. Internal Businesses Environment
Corporate Business (8)
8. Shared Leadership Decision Making
FIT
2. The Job/Work
A. Core Capabilities Competencies
7. Recognition and Financial Reward Systems
1. Customers 2. Employees 3. Organizational
Innovation 4. Societal

3. Technologies
B. Culture(s)
6. People and Human Resource Systems
C. Vision Direction (12) (VDSP)
5. Financial/ Business
4. Information and Knowledge Systems

D. Organizational Strategies
5. Micro Team Design
E. Goals/ Objectives (for the 5 KPIs)
9. Organizational Processes (Individual, Group,
Organizational and Business Processes (Total
Quality, Business Processes, etc.)
F. Business Models
G. Mutuality Sup- pliers,Customers
Employees (Union if present)
(Feedback)
Figure 1. Overall open systems theory (OST) model
for Organizational Analysis and Diagnosis
F. Transformation/ Change Processes
________________ Source Modified from Macy, et
al., (1995). Presented to the National Academy
of Management, Vancouver, Canada, August.
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Four Box Model for Analysis/Diagnosis
Input
Transformation/ Execution
Outcomes/ Results/ (Symptoms)
Input

• Customer
• Business/
• Financial
• Employee
• Engagement
• Innovation
• - Societal

5 factors of the Internal Business
Environment
- External Business Environment
9 factors
(Feedback)
Source B.A. Macy, Successful Strategic Chance,
San Francisco, CA Berrett-Koehler Publishers
(forthcoming).
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Globalization . . . . . . . . . . . . . . .
(Only last ten years)
Change . . . . . . . . . . . . .
(Economic, Political, Societal, Organizational
and Individual)
Organizational Design Options . . . .
(Inputs and/or Transformation OST)
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WIF Example 1

• Wages/Benefits and Rents in India are less than
  20 of Western capitals.

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WIF Example 2

• Hire a remote Executive Assistant (for 15K per
  year works 2,000 hours/220 days per year)
• Does the work you assign (him or her) while you
  are asleep delivered the next day when you need
  it!!

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WIF Example 3

• Establish a U.S. Call Center in India!!
• Establish a Japanese Call Center in China!!

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WIF Example 4

• Jet Blues home sourcing (letting majority of
  employees work from home)

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WIF Example 5

• Military Hierarchy is being flattened by
  pilotless drones operated from Nevada sending
  T.V. pictures to combat troops around the world.

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WIF Example 6 Fries with Outsourcing

• Order McDonalds french-fries in Missouri and
  talk into their speaker to someone in Colorado
  Springs (900 miles away) that relays the order in
  one second back to Missouri for them to cook and
  deliver the fries to you.
• Result Cut by 50 the typical McDonalds
  ordering time.

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The World is Flat Outcome

• Basic Bread and Butter financial analysis NOW
  done overseas versus being star analysts in
  New York or London!!
• Financial analysts beginning (India) 15,000
• Financial analysts beginning (New York) 80,000

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WIF Result 2

• In the year 2016, much of the work/jobs done in
  the United States will be done elsewhere
  (overseas) especially
• Logistics
• H.R.
• Acct.
• Fin.
• IS/IT
• Product/Supply
• Other Staff Functions

• Some RD
• Legal
• Customer Service
• Other Staff Functions
• Secondary Medical Care
• Secondary Medical opinions

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(No Transcript)
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WIF Result 3

• Long-term future for Staff Jobs is terrible!!
• Only Line Jobs will survive!!!

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Characteristics of Change

• Accelerated Pace
• Increased Complexity
• Increased Competition
• Speed
• Electronic Communication (B to B,
• B to C, S.B.U. To S.B.U., Team to Team,
• Individual to Individual)

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The Global Changing Business Environment

• Historical
• Growing Markets
• Excess Resources
• Slow Change
• Domestic Competition

• Today
• Stable/NA Market/Expanding Asia Europe
• Scarce Resources
• Rapid Changes
• Global Competition

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FACTOIDS FOR PERSPECTIVE
THE WORLD IS 10 YEARS OLD in terms of
globalization
ENGLISH IS THE LANGUAGE OF BUSINESS
INDUSTRIAL SUPPLIERS AND CONSUMER RETAILERS ARE
RAPIDLY MOVING TO E-COMMERCE/B to B / B to C
THE MIDDLE CLASS IS A GLOBAL COMMODITY
THE ECONOMIC ELITE OF THE PRC IS OVER 50 MILLION
PEOPLE -- 1/5 OF THE ENTIRE US POPULATION
EU IS THE NEXT WEALTHIEST MARKET AFTER US AND
GROWS TO 500 MILLION
MUCH OF THE GRAIN CORN CROPS IN THE UNITED
STATES WERE GROWN WITH GENE MODIFICATION
67 OF FORTUNE 500 IN LAST 10 YEARS ARE NO LONGER
THERE!
CURRENT GLOBAL POPULATION IS 6 BILLION
MARKET GROWTH IS ASIA
Barry A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
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What is labors share of national income?

• Group of Seven major industrialized nations
• Workers share of national income shrank to a
  record low of 54 in 2006
• Profits as a percent of national income rose to
  16 (from 10 in 2001)

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GLOBALIZATION DYNAMICS

• Advancing Technology in Information Systems,
  Telephony Communication, Multi-Media,
  Genetics and Robotics/ Automation
• More People, More Demand
• More Knowledge and Innovation
• Demand for Uniqueness, Customization
  and Value-Added for the Global Market Place

-

• Growth is Primarily Non-US
• and External Marketplace
• More Competition with New
• Capital/Equipment
• Others are advancing their
• Technologies faster than
• you are
• Political Conflict Disrupts
• the Global Economy Daisy
• Chain (e.g., Iraq War)

Barry A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
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GLOBALIZATION DYNAMICS - 1
The Players

• U.S. as the Superpower economics, security,
  democracy
• NYSE-NASDAQ-LSE, Nikkei Super Markets for the
  HERD
• Super-Empowered Individuals are Celebrities,
  Innovators,
• Media Charismatics, Terrorists

Wire Wireless/IP Protocol/Cable Broadband
Convergence New Business Model DeReg-based
The Drivers
Telephony Multimedia Computerization

• Technology

Entertainment Communication Links Learning Intelli
gence
Data Base Data Mining Precision Accuracy
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GLOBALIZATION DYNAMICS - 2 Continued
The Drivers

• Communication
• Mobility
• New Wealth - New Market Opportunities
• Population

Volume Multimedia
Face-to-Face Telephone Teleco/Video
Conferencing E-mail Virtual Conferences
Transportation Limited Trade Political
Barriers Capital Flow
Global Customers Global Sourcing Global Pricing
Density Ex-Urbanization in Sophisticated
Societies Migration to Urban Centers in
Developing Worlds Disease
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GLOBALIZATION DYNAMICS
FACTOIDS FOR PERSPECTIVE
The Players
THE WORLD IS 10 YEARS OLD in terms of
globalization

• U.S. as the Superpower economics, security,
  democracy
• NYSE-NASDAQ-LSE, Nikkei Super Markets for the
  HERD
• Super-Empowered Individuals are Celebrities,
  Innovators,
• Media Charismatics, Terrorists

ENGLISH IS THE LANGUAGE OF BUSINESS
CURRENT GLOBAL POPULATION IS OVER 5 BILLION
The Drivers
Telephony Multimedia Computerization

• Technology
• Communication
• Mobility
• New Wealth - New Market Opportunities
• Population

THE MIDDLE CLASS IS A GLOBAL COMMODITY
(Billionaires, too)
Entertainment Communication Links Learning Intelli
gence
IN THE 80S WE WERE AMAZED TO LEARN SINGAPORE IS
A MODERN CITY DUBAI IS A MODERN CITY SHANGHAI,
BEIJING CARIO ARE MODERN ANCIENT AT THE SAME
TIME
Data Base Data Mining Precision Accuracy
Volume Multimedia
Face-to-Face Telephone Teleco/Video
Conferencing E-mail Virtual Conferences
THE ECONOMIC ELITE OF THE PRC IS OVER 50 MILLION
PEOPLE -- 1/5 OF THE ENTIRE US POPULATION
Transportation Limited Trade Political
Barriers Capital Flow
EU IS THE NEXT WEALTHIEST MARKET AFTER US AND
GROWS TO 500 MILLION
Global Customers Global Sourcing Global Pricing
Density Ex-Urbanization in Sophisticated
Societies Migration to Urban Centers in
Developing Worlds Disease
ASIA IS REBOUNDING
67 of Fortune 500 in last 10 years are No Longer
there!
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The Top Ten Forces in the WIF

• When the Walls came down-the Windows went up!
• When Netscape Went Public
• Workflow Software My application to your
  application
• Open-Sourcing (open source chat room-free)
• Outsourcing -Y2K

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Top Ten Forces in the WIF (cont)

• 6. Off Shoring Running with the Gazelles,
  Eating with the Lions
• 7. Supply and Demand Chains - NOT just supply
  chains
• 8. In-Sourcing Toshiba Computers being
  packaged, repaired, and sent back by UPS
• 9. In-forming the world Google, Yahoo!, MSN
• 10. The Wireless Steroids Digital, Mobile,
  Personal, Virtual

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Globalization Its about-

• Governments
• Businesses
• People
• Work/Jobs
• Changes in work roles
• ? New Social, Political, and Business Models and
  org. designs!! The way we conduct business and
  Communication is forever changed!

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Where to Look
Make Change the Opportunity (Not the Problem)

• Demographic Changes
• Technological Changes
• Political Changes
• Competitive Changes
• Value/Taste Changes
• Cultural Changes

____________________________ Source B.A. Macy,
Successful Strategic Change, Berrett-Koehler
Publishers, San Francisco, CA (forthcoming)
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Globalization . . . . . . . . . . . . . . .
(Only last ten years)
Change . . . . . . . . . . . . .
(Economic, Political, Societal, Organizational
and Individual)
Organizational Design Options . . . .
(Inputs and/or Transformation OST)
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Competitors, unborn and unknown, will render
your present Business Models obsolete!
____________ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
29
Change is like Risk in Business -- its
NOT Optional!
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The need for constant innovation and rapid
responses to Market/ Customer and Technological
changes virtually requires an organization and
its workforce to deliver higher performance
than their competitors.
B.A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
31
An Approach to These Dramatic Environment Changes

• Future External Business
• Environment Trends
• Globalization
• Technological Changes
• Environmental Changes
• Labor Support/Talent
• Societal, Political and
• Economic Changes
• Demographics/Population
• Customers/Markets
• E-Marketplace

• Excellent
• Performance
• - - - - - - - - - - -
• Customer
• Financial/
• Business
• People
• Innovation
• Community

Organizational Responses and HPS Puzzle Design
32
____________ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
33
Concepts for Breakthrough
? Theres plenty of evidence that if you
dont find dramatically new ways of doing
business, you are not going to be in
business. And if you dont intrude by
design into whats going on, you probably
wont come up with radical out-of-the-box
ideas. So clearly some intervention is
needed.
____________________________ Source B.A. Macy,
Successful Strategic Change, Berrett-Koehler
Publishers, San Francisco, CA (forthcoming)
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Successful Organizational Transformation is a
Matter of Beliefs
Do you believe the Future is a BRICK WALL or an
OPEN DOOR?
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Lets admit it. Corporation around the world
are reaching the limits of incrementalism.
Squeezing another penny out of costs,getting a
product to market a few weeks earlier,
responding to customers inquiries a little bit
faster, ratcheting quality up one more notch,
capturing another point of market share - those
are the obsessions of managers today. But
pursuing incremental improvements, while rivals
reinvent the industry, is like fiddling while
Rome burns. Gary Hamel, Strategy as Revolution
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IMPLICATIONS

• Structural Changes
• Joint Decision-Making
• Higher Involvement/Empowerment/
• Direct Participation
• Better Communication
• New Leadership Roles - For All!!

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Delphi Study of Key International Organizational
Issues
Respondents were - Multi-international
Corporate Executives (33) -
International Government Officials (33) -
Multi-Country Academics (33)
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KEY ORGANIZATIONAL ADJUSTMENT STRATEGIES
Adjustment Type Rankings
Scale Values

• 1. Decision making more decentralized
• strategic control remains global 58
• Technology ( IT/Telecom, etc.) also as an
  internal driver of
• globalization through real-time
  interaction 51
• 3. Organization structures are flattening focus
  on
• entrepreneurship 49
• 4. Regional integration necessitates corporate
  presence
• in all major markets 43
• 5. Economic liberalization fuels offshore
  investment 43

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KEY ORGANIZATIONAL ADJUSTMENT STRATEGIES (continue
d)
Adjustment Type Rankings
Scale Values
6. Focus on core competencies and niche markets
39 (customers) 7. Ethnic and cultural
diversity increase their impact on
strategy 35 8. Needs of global customers
lead to new systems (Structures Processes)
such as global customer account management
(e.g., Enterprise Teams) 35 9. Creativity and
flexibility in recruiting and
employment 34 10. Use of less expatriates
more need for corporate acculturation
programs 24 11. Cultural training gains
renewed significance due to
diversity 22
Scale values were determined by multiplying the
likelihood of an event or issue with its impact
on international business, based on individual
responses. The result was then standardized on a
scale ranging from 1-100
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Culture

• The Way We Do Things Around Here!
• Past Norms, Events, Questions, Etc.
• Past History of the Firm
• Past Core Values, Rituals
• Past Decision/Decision Making
• Implied Goals!
• Shared meanings held by key members/leaders
• Intangible, implicit
• Based upon assumptions about people and the
  organization
• I only tell my boss the good news!! If I tell
  him the

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The Right People or the Right Organization?
Conventional View of Strategy

• What business are we in?
• How will be compete?

Strategy

• Marketing, manufacturing, finance,
• HR, etc.

Functional Strategies

• What critical tasks must get done to
• execute the strategy?

Key Success Factors

• Design practices and systems
• (recruitment and selection, performance
• management, training and development,
• etc.)

Organizational Alignment

• Monitor alignment and compliance

Senior Management Role
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The Right People or the Right Organization?
A Values-Based View of Strategy
Fundamental Values or Beliefs

• What are our basic Principles, Philosophies
• and Core Values?
• What do we believe in?

• What policies and practices are consistent
• with these Values and Philosophies?

Design Management Practices That Reflect and
Embody These Values

• What can we do for the customer better
• than our competitors?

Use These to Build Core Capabilities

• Given our capabilities, how can we deliver
• value (EVA) to customers in a way our
• competitors cannot easily imitate?

Invent a Strategy That is Consistent with the
Values and Uses the Talents Capabilities of
People/ Organization to Compete in New and
Unusual Ways

• Senior management manages the values
• and culture of the firm.

Senior Managements Role
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Core Values
Fundamental and deeply held beliefs with which
the organization manages, practices, and
follows with relentless honesty
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FORCES CAUSING ORGANIZATIONS TO TRANSFORM
Major Forces Causing Change
Result
Required Changes
Workforce Changes
Changes in Inputs and/or Execution Side Of OST
Model
Societal Changes
Innovation and Speed to the Marketplace
Technological Changes

• Customer
• Business Financial
• People
• Societal

Global Competition
The Organizational Design Puzzle Designing
a High Performance Organization
B.A. Macy, Successful Strategic Change. San
Fransisco, California Berrett-Koehler Publishers
(forthcoming)
45
Star Model How Organizational Design Affects
Behavior -2

• Major Drivers of High Performance
• 1. Commercial/Customer Changes
• 2. Technological Changes
• Organizational Changes
• Work Force and Societal Trends

Strategies
Culture
Abilities, Skills and mind-sets
Structures
People
Vision Direction
Systems
Work/ Tasks
Processes (Business People)
Rewards
Information
Motivation
Behaviors
Organization Effectiveness