Entrepreneurial problem

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• Lecture 24

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• Entrepreneurial problem
• How to locate and exploit new products and market
  opportunities while simultaneously maintaining a
  firm.

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• Base of traditional products and customers
• Solution has to operate in hybrid domain that is
  both stable and changing.
• The analyzer move towards new markets or products
  only after their viability has been demonstrated.
• This may be accomplished though imitation of the
  prospector once success is demonstrated by the
  prominent prospector.
• At the same time majority of the Analyzers
  revenue is generated by a fairly set of
  traditional products or markets(a defenders
  attribute). Operational efficiency of defender to
  pursue and effectiveness of Prospector in looking
  for new markets and products.

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• Therefore Analyzer can grow through both market
  penetration and market development strategies.
• ENGINEERING PROBLEM
• The duality of Analyzers domain is reflected in
  its engineering problem and solution.
• Problem How to be efficient in its technology
  which a stable portion and a flexible in changing
  portion?
• The organization must learn how to achieve and
  protect an equilibrium between conflicting
  demands for technological flexibility and for
  technological stability.
• This equilibrium is accomplished by partitioning
  production activities to form a dual
  technological core. Stable component resembles
  Defenders technology functionally organized,
  routinized, standardized and mechanized.
• While flexible technological component resemble
  the prospectors technological orientation.

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• Administrative Problem
• How to differentiate the organization structure
  and processes to accommodate both stable and
  dynamic areas of operation
• Solves this problem through some version of
  matrix organization.
• Head of key functional units, most notably
  engineering and production unite with Product
  managers (usually housed in marketing department)
  to form a balanced dominant coalition.
• The product managers influence is usually
  greater than the functional manager since his
  task is to.

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• Identify promising product market innovations and
  to supervise their movement through applied
  engineering and into production in a smooth and
  timely manner.
• The presence of engineering and production in the
  dominant coalition is to represent the more
  stable domain and technology which are the
  foundations of the Analyzers overall operations.
• Fourth type of Organizations Reactors
• Exhibits a pattern of adjustment to its
  environment that is both inconsistent and
  unstable. This type lacks a set of response
  mechanism which it can consistently apply to a
  changing environment.

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• The reactors adaptive cycle usually consists of
  responding inappropriately to environmental
  change and uncertainty, performing poorly as a
  result, and then reluctant to act aggressively in
  the future.
• Why Organization become reactors?
• Three reasons cited by the author (Miles Snow
  et al).
• i) Top management may not have clearly
  articulated the organizations strategy e.g.
  company founded by one-man (prospector immense
  personal skills) successfully established firm
  but upon his death strategic void.

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• ii) Management does not fully shape the
  organization structure and processes to fit to a
  chosen strategy.
• -Strategy is mere statement not a guide to
  behavior.
• -Functional strategies are not aligned
• e.g. this is a typical case with organizations in
  LDCs to come forth quick with beautiful written
  vision and mission statements and other strategy
  documents.
• iii) Ultimate cause of instability and failure -
  tendency for management to maintain the
  organizations current strategy-structure
  relationship despite overwhelming changes in
  environmental conditions.

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• The process of continuously adapting to the
  changes in a firms environment is called
  strategic management.
• Strategic management is not only needed to cope
  with changes in firms external environment but
  also to cope with changes caused by processes
  internal to the firm (Scott, Greiner).
• According to Ansoff the question is How do we
  configure the resources of the firm for effective
  response to unanticipated surprises?
• According Cyert and March, The successful
  strategy itself would be a destabilizing
  influence (effect) on that strategy because of
  the surplus or slack.

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• A Skeletal Model of Adaptation

State of Adaptation
Storage of Slack
Process of Adaptation
Dotted line denotes firms transition from one
state to another
Adaptive Ability
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• A state of adaptation, in a biological sense
  describes a sate of survival for an organism.
• A business organizations has to survive
  conditions of its environment. There may be
  several niches available for a firm for surviving
  the conditions of environment.
• Simon gives us a three modes that are open to a
  system
• 1. Passive insulation (Defender)
• 2. Reactive negative feed back( Analyzer)
• 3. Predictive or Proactive adaptation
  (Prospector)
• One author has termed it unstable state, stable
  state and neutral state.

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• All three states of adaptation are viable.
• Defender, Prospector and Analyzer are stable form
  of organizations, and manager chooses to pursue
  either of these strategies to cope effectively
  with its competitors.
• All state of adaptation do not have the same
  immunity from environmental changes.
• The neutral state has the highest immunity ,
  followed by the stable and unstable ones.
• But then the fundamental question arises
• -

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• 1. The state of adaptation depend on the firms
  resources that it commands (adaptive ability).
• 2. The nature of management processes within
  these firms (process of adaptation) influences
  the state of adaptation sought.
• Determinants of Adaptive ability
• How can adaptability be improved?
• Lawrence Lorsch - as differentiation and
  integration.
• Christenson called this level of organization
  which again composed of differentiation and
  integration. Also relabeled as Organizational
  Capacity.