Free Essay

Integrating the Enterprise

In: Business and Management

Submitted By rajendrasx
Words 5979
Pages 24
Integrating the Enterprise
Vertical "command and control" sabotages organizations that need bottom-up innovation to be competitive. Yet organizational integration is increasingly essential. New research shows how technology is helping cutting-edge companies meet the challenge by integrating horizontally. Sumantra Ghoshal and Lynda Cratton

nc ofthe most fundamentiil Lind enduring tensions in all liiit very small companies is between siibunit aulononiy and empowermenl on ihc one hand and overall organizaliontil integnition and cohesion on Lhe other.' The tensions grow with increasing organizational complexity and assume tbe most intensity in large, diversified global companies.^ In our research with such organizations, we have seen ihal it is possible to balance those tensions successtijlly by implementing four kinds of horizontal integration for .ichieving cohesion witboul hierarchy. Over the lasL decade, many large companies around the world focused on creating relatively autonomous subunits and empowered managers by breaking up ihoir organizational behemoths into small, entrepreneurial units. Some, though nol all, achieved significant benefits from such restructnring.-' Freed from bureaucratic ccnlral controls, the empowered units improved both the speed and the quality of responsiveness to market demands — and fostered increased innovation. Companies were able to reduce tbeir corporate-level overbead and make internal-governance processes more disciplined and transparent. However, Lbe empowerment of subuniUs also led to fragmentation and to deficiencies in internal integration. The autonomous managers of subnnits saw few incentives to share knowledge or other resources, particularly wben evaluation ol their performance focused primarily on how their own unit was doing, rather than on how the unit contributed to tbe company's overall performance. But today, in company after company, we are finding that management attention has moved to tbe integration and cohesion side of tbe tension. (See "About the Researcb."J Having captured benefits from

Sumantra Ghoshal is a professor of strategic leadership at London Business School, where Lynda Gratton is an associate professor of organizational behavior. Contact them at and

strengthening the competitiveness of each unit, companies arc now improving integration in order to achieve the benefits of better sharing and coordination across those units.'* Altbougb many companies are moving toward integration, our research shows tbat tbe drivers forcing that change often differ. For some enterprises, the main impetus comes from the demands of customers whose needs cut across the company's internal boundaries. At global engineering company ABB, the 1,300 small companies tbat Percy Bartievik creiited in tbe late 1980s have been consolidated by current CEO lorgen Centerman into 400, primarily for serving global customers more effectively. Customer needs created similar pressures at OgilvyOne, tbe world's largest direct-marketing agency. That company had to roil out the American Express Rlue credit card worldwide across mullipie media in six montbs — a task that would have been impossible in the formerly fragmented and internally competitive OgilvyOne. For other companies, the effects of technological change on management of innovation are tbe primary integration drivers.

by that fundamental technological change, Sony entered the personal-computer business, the establisbed gateway to the Internet, and launched VAIO cornputers. Tbe company proceeded to develop an integrated innovation process so that its VAIOs could work seamlessly with all otber Sony offerings. At Oracle, Goldman Sachs and luxury-goods business LVMH, rapid growtb and globalization are what's driving consolidation and integration. Oracle grew at a phenomenal pace internationally, witb little time to develop its organizational systems and processes. Hach of its overseas units developed its own system to meet the needs of local customers. Over tbe last two years, tbe company has worked hard to standardize and integrate those systems and to achieve efficiency and better global coordination. At BP, the integration driver is different still. BP's mergers with Amoco, Arco and Castrol created a fragmented organization witb many different tnanagement styles and pbilosophies. So integration bas been vital for turning tbe focus of tbe 100,000 employees away from tbeir differences and toward their shared future. Confronting the same needs are Indian pharmaceuticals company Nicholas Piramai, which grew rapidly through acquisitions, and OgilvyOne, whicb keeps acquiring Internet marketing companies that differ from its traditional direct-marketing businesses.

About the Research
This article is based on our case research over the last five years in 15 large, global companies in North America (Oracle, Goldman Sachs, Sun Microsystems), Western Europe (ABB. BT. Lufthansa. SKF, BP. LVMH), Asia (Sony, the LG Group, Standard Chartered Bank) and emerging markets such as Brazil (Natura) and India (Indian Infosys, Nicholas Piramal). We interviewed numerous managers in each company, and we made use of documents from public sources and the companies themselves. For each company, we wrote up a separate case study. In some of the companies (Lufthansa, BT, the LG Group, Indian Infosys), we repeated the full process twice over the last five years, so as to document change over time. Our research focus was not on integration, per se, but on management of change and performance-improvement processes. The issue of horizontal integration emerged from our research as one of the important means many of these companies were adopting in order to improve their business performance.

A Need for Horizontal Integration
At one level, notbing is new bere. The need for integration to counterbalance internal differentiation is an old chestnut.^^ But today's circumstances create some new possibilities and eliminate some historical ones. Tbe most important change is tbe Web and the associated infortnation-tecbnology capabihties. Information sbaring has always been at the heart of integration, but now technology allows organizations to respond to integration needs in ways tbat were unavailable even five years ago.^ Meanwhile, sotne previous integration tools bave become less significant: staff relocation and structured career paths, for example. Formerly, in companies as diverse as Unilever, Matsushita and Hewlett-Packard, managers wbo had worked in different functions, businesses and geographic locations turned their collective personal networks into tbe glue tbat held the company together.^ Althougb sucb networks are still a powerful ttiol for socializing people and building organizational cohesion, tbey are less common — in part because lifetime careers and ondemand mobility of employees can no longer be assumed. Then, the drastic pruning of middle management tbat many companies undertook in the 1990s deprived them of an important but often unrecognized source of organizational integration.**

For example, witb home enteitainment shifting Irom standalone, analug-tccbnology-based consumer electronics to Webbased, digitized content delivery, Sony saw the need to integrate its historically autonomous product divisions. Sony bad to make all its audio and video products (plus its tnusic and movie software) compatible and accessible directly through a personal computer, video-game macbine, PDA or mobile phone. Driven

The midievel managers who once played boundary-spanning and coordinating roles are gone. But perhaps the most important change i.s in management philosophy. In the past, integration was managed primarily through vertical processes. The way to encourage different businesse.s, functions or geographical units to share resources and coordinate their activities was lo bring them under a conimon boss and a common planning and control system.** Although there has always been a recognition of the relevance of horizontalintegraLion mechanisms, in practice they have been seen as secondary, as reinforcement to the primary vertical processes.'" The most fundamental change we have observed in the ways companies are responding to integration is a move away from the traditional vertical mechanisms of hierarchy and formal systems to a primary reliance on horizontal processes that build integration on top of subunit autonomy and empowerment. The secondary has now become primary.

organization packaged, bundled and priced them differently in each market. And to fmd out how many people Oracle employed worldwide on any given day, someone had lo scout through 60 differently formatted databases and consolidate the number. By then, the answer would have changed. Then, in 1999, CEO Larry Ellison articulated Oracle's direction for the next phase of information technology. He envisioned the computer industry becoming a utility like electricity or water. The hardware, data and applications would reside in a central location and wt)uld be accessible over the Internet to any cu.stomer with a PC and a Web browser. Oracle would provide integrated services, including ERP, customer-relationship management, supply-chain management and hmnan-resource management. As Ellison explained, "If you want to buy a car, would you get an engine from BMW, a chassis from Jaguar, windshield wipers from Ford? No, of course not. Right now with the software out there, you need a glue gun — or hire all these consultants to put It together. They call it best-of-breed. I cail it a mess." To convince customers of the value of building an operating infrastructure throtigh standardized and integrated applications over the Internet, Ellison made Oracle its own beta-test site. His metaphor was, "Eat your own dog food," and be publicly announced a target of $1 billion in cost savings — 10% of revenues. By 2001 Oracle had met that goal. All e-mail is now consolidated into one standardized, global system nsing two servers at Oracle's California beadqnarters. Prices and discounts, once a local preserve, have been standardized globally and made accessible over tbe Internet. ERP customizations that differed in every coiinlry in Europe are standardized and are operated from a single central source. The different local Web sites have been replaced by a single global site,, which is run out of the United States in multiple languages. Observers may quibble over how much money Oracle has saved, but most estimates are close to that $1 billion target. Over tbe two years it took to implement the global platforms, Oracle's operating margin improved from 14% to 35%. Ellison has now upped the ante from Si billion in savings to $2 billion, and tbe company Is going tbrough the next round of rationalizing its operating infrastructure to meet the new goal. Having consolidated the technological infrastructure supporting internal operations, tbe company is now using the same philosophy in its relationships with suppliers and customers — and in its sales and marketing activities. VV'bat have such drastic standardization and centralization done to front-line entrepreneurship? According to CFO Jeff Henley, they have enhanced the kinds of entrepreneurial activity tbat Oracle values most. "It would be goofy to let people do as they

Four Critical Components of Horizontal Integration
How are companies putting it all together again without destroying the vitality of the parts? We have found four areas of action: operational integration through standardization of the technological infrastructure, intellectual integration through the development of a shared knowledge base, social integration through collective bonds tor performance and emotional integration through the creation of a common identity and purpose. (See "A Framework for Organizational Integration.") The four areas are simultaneously distinct and interrelated. The challenge is to manage the interrelatiojiships synergistically."
Operational Integration Through Standardized Technological Infra-

structure Intiuenced in part by reengineering, many companies in the 1990s made progress rationalizing their production and distribution infrastructures. Now the focus of operational integration has shifted to support functions such as finance, human resources, planning and service. The bottleneck in rationalizing and integrating those activities lies in IT systems. Although many companies have recognized that constraint and are making progress in updating their fragmented IT infrastructure, standardization of support functions is .still a distant ideal. Oracle — rapid international expansion resulted in autonomous national subsidiaries using different systems to manage operations— is illustrative. Even as late as 1997, Oracle had 97 e-mail servers running seven incompatible programs. Each country had its own enterprise-resource-planning (HRP) system and its own Web site in the local language. Some even changed the color of the Oracle logo because of the local manager's taste. Despite having the same products worldwide, the Oracle

A Framework for Organizational Integration
For effective horizontal integration, managers have to connect the company's knowledge bases, build social relationships among people and shape a shared sense of identity, all supported by a standardized technological infrastructure.

business Oracle is in allows it to do niorf standardizing than, say, a Unilever, but most companies could still wring more advantage from technological infrastructure than they have so hu".
Intellectual Integration Through Shared Knowledge Base


With the goal ot "knowledge management," many companies have developed (I'-based systems that are essentially databases for sharing information on an organizationwide basis. Such systems, however, are only the first step in establishing a shared knowledge base that truly integrates a company's intellectual capital. Because user pull must supplement the technological push.., effective integration of knowledge requires a clear strategic link and extensive communication.'^

OPERATIONAL INTEGRATION standardized Technological Infrastructure SOCIAL INTEGRATION Collective Bonds of Performance EMOTIONAL INTEGRATION Common Purpose and Identity

please in building and managing a local IT operation to support internal processes," says Henley. "By standardizing those, we have channelled thai entrepreneurship where it add.s value — in serving customers. We think it is a good idea if a salesperson spends time selling product benefits rather than negotiating prices and discounts." Oracle has been successful in standardizing its technological infrastructure while most companies have made only incremental progress. What makes Oracle different? The important factor has been the commitment of a powerful CEO who made the iniiiative his top priority. To overcome objections from country managers and to accommodate their needs and contributions, he had them participate in designing the standardi:^ed systems. Then he gave them a choice: They could either adopt the standardized and centrally operated systems completely lree of cost or continue with their local systems {accepting full costs and no adjustment in the returns they were expected to generate). Without exception, the local managers chose the first option. Standardizing operating processes has always heen a powerful integrating device, but it wasn't possible to create centrally managed, standard IT systems until now. The biggest benefits flow at the extreme, not with half-measures. It may be that the

Al Ogilvy and Mather's OgilvyOne, an increased need for integration became apparent in the early 1990s because of two large clients — American Express and IBiVl. Both demanded integrated services and business solutions that combined interactive media with traditional direct marketing. In the 1980s, advertising agencies used costly mass-media campaigns to attract customers, but in the 1990s, they targeted the "anarchic" customer, who had a choice o\' inilnile channels. OgilvyOne's historically fragmented organization, with highly autonomous divisions such as Data Consult, Direct Mail and Ogih')'' Interactive, simply could not respond effectively. OgilvyOne decided to focus on CListomer ownership and 360-degree brand stewardship, building both strategies on proprietary tools designed to support trust and long-term relationships with clients and clients' end customers. Customer-ownership tools such as QuickScan fa sophisticated, proprietary data-mining tool) enabled Ogilvy's creative professionals to question clients" assumptions ahout end customers. QuickScan revealed, for example, that only 16% of Nestle Pet Foods' customers accounted for 90% of the customer value for Friskies, a major cat-food brand. So OgilvyOne helped Nestle target the more valuable segment. In addition, the firm employed a complex mathematical model for understanding, developing and enhancing the relationship between a customer and a brand in order to preserve and reinforce every aspect of brand strength. But to get the most from its tools, OgilvyOne first needed mechanisms for creating, sharing and exchanging knowledge across the company. It had to harness the brainpower of its marketing gtirtis, mathemalicians, statisticians, strategy consultants and individual creative talent. So OgilvyOne developed an integrated system called Truffles. Truffles provided not only a

database and a system for testing ideas and hypotheses, but also opportunities for people to generate new ideas together through a variety of chat rooms, bulletin boards and dedicated forums. Tbe Truffles name came from a statement of founder David Ogilvy: "I prefer the discipline of knowledge to tbe anarchy of ignorance, and we pursue knowledge tbe way a pig pursues truffles." Supported by 60 knowledge officers across the company, the Iruifles initiative was the product of years of documenting the accumulated intellectual capital ofthe company. It was also a living forum for creating and sharing new ideas. Wliat made Truffles work was not only the world-class IT infrastructure nor the tremendous effort and investment that kept its information current, but also the link betweeii the system and the company's strategy. Witb all tools, tecbjiiques and relevant data on Truffles, research and ideas were directly connected to action. Tbat link overcame initial resistance and motivated both senior managers and tbe creative staff to use Truffles. Also contributing to tbe system's success were company efforts to build interpersonal relationsbips, or "soft bonds," to promote knowledge sbaring. OgilvyOne created many conversation lorums — Friday morning breakfast meetings, top-level "Board Away" days and other functions. With the motto that "the most important role of managers is to create iViendsbips," tbe senior leaders invested considerable personal time to develop tbe internal trust that sustains intellectual integration. Nigel Hovvlett, tbe cbairman of OgilvyOne's London offlce, for example, spent montbs building a relationship with Tim Carrigan, the CEO of NoHo Digital, an interactive marketing company Howlett wanted to buy. The discussions were as mucb personal as they were strategic. Tbe results of the friendship they built were manifest immediately after the acquisition was fmalized. Within two weeks, NoHo's employees were not oniy using Truffles, but also were contributing new information and techniques to tbe database for use by all Ogilvy employees. Social Integration Through Collective Bonds of Performance Althougb learning and sbaring are usually acbieved horizontally in peerto-peer forums, performance management and resource allocation are still tbe preserve of boss-to-subordinate relationsbips. Our researcb revealed, however, that enormous advantages can result when peer-to-peer interactions are extended to traditionally vertical areas. As BP's CEO John Browne recounts, "One theme we observed was tbe very different interaction between people of equal standing, if you will, wben tbey reviewed each other's work than there was wben a superior reviewed tbe work of a subordinate. We concluded that tbe way to get the best answers would be to get peers to challenge and support eacb other ratber than to have a hierarcbical challenge process."

Peer assii^t, a BP process that uses peer groups of managers from similar businesses to drive learning and knowledge sharing, is already well documented.'' But over the last two years, BP's new peer challenge has extended tbat approach to address tbe traditionally vertical performance-management and resource-allocation processes. The managers of eacb autonomous business unit enter into an annual performance contract with top management and are tben free to acbieve tbe results however tbey wisb. Peer cballenge requires managers to get tbeir plans, including investment plans, approved by tbeir peers before Hnali/ing tbe performance contract with top management. "The peers must be satisfled tbat you are carrying your fair share ofthe beavy water buckets," siiys deputy chief executive Rodney Chase. "Tbe old issue of sandbagging management is gone. Tbe cballenge now comes from peers, not from management."'"* According to BP business-unii bead Polly Elinn, "'Hie peer challenge is about convincing people in similar positions to support your investment proposal knowing that tbey could invest the same capital elsewhere, and going eyeball to eyeball with tbem, and then having to reaftlrm wbetber you have made it or not over the coming montbs or quarters." Tbe process works because half of tbe unit manager's bonus depends on tbe performance of tbe unit, and the other half depends on tbe performance of tbe peer group. In an added twist, BP bas extended tbe peer process even furtber. Tbe three top-performing business units in a peer group have been made responsible for improving the performance of tbe bottom three. "We bad 'not invented bere' raised to an art form," says Chase. With peer assist and peer challenge, be says, "What we have raised to an art form is tbat if 1 bave a good idea, my Hrst responsibility i,s to share it with my peers, and if I am performing poorly, 1 will get the peer group to belp me." BP bas acbieved a powerful force in integration and knowledge sbaring. According to Browne, "People do not learn, at least in a corporate environment, witbout a target. You can implore people to learn, and they will to some extent. But if you say, 'Look, the learning is necessary in order to cut tbe cost of drilling a well by 10%,' tben they will learn with purpose." What is special about RP's peer groups is tbeir effectiveness in transferring, sharing and leveraging cumulative learning tbrougb a direct link with performance. Emotional Integration Through Shared Identity ond Meoning Ultimately, tbe acid test of organizational integration lies in collective action. A shared knowledge base must translate into coordinated and aligned action across tbe different parts of an organization, or it is only an expensive library. Unless peer relationsbips based on trust

and friendship allow excellent collective execution, they create no value other than the comforts of an exclusive country club.'-'' It was the coordin;iting and aligning of actions that historically made hierarchy appear necessary. A common btiss could align the activities of different company parts hoth through direct orders and through formal planning and control."' Yet for most companies, hierarchy is no longer as effective — not only because it destroys front-line initiative and entrepreneursliip, but also because of its inability to cope with uncertainty and rapid change.^^ As they say at OgilvyOne, "While classical orchestras follow a conductor and a musical score in a rigid and formal manner, ja/,/ hands — like Weh marketeers — must be lluid, llexible, improvised and should always Irust the requests and applause of their audience." Fluid and llexible collective action requires not only standardized infrastructure, shared knowledge and mutual trust, but also emotional integration through a common purpose and identity. Emotional integration has been the primary driver of success for companies such as Goldman Sachs. Teamwork has always been a core value of the premier investment bank because, in the words of Goldman Sachs CEO Hank Paulson, "Quite simply, none of us is assmiirt as all ot u.s." The entrenched tradition of teamwork underlies the firm's reputation for excellence in execution. "Everywhere and in every country around the world, when a Goldman Sachs hanker walks into the room, all of Goldman Sachs comes with him or her," says Robin Neustein, head of the firm's Private Equity Group. "That, in turn, is the outcome of constant work on maintaining the one-firm identity and the internal challenge to be the best and help each other be the best." This emotional alignment among individuals — and between them and the firm — is the product of three distinct Goldman Sachs characteristics. Eirst, the culture of success is built on a relentless focus on client relationships. Anyone who steps inside the firm can palpably feel this obsession with building and maintaining close and trusting relationships with clients. According to Neustein, "At Goldman Sachs, honor comes in the form of client service. ... That is why if you try to make a lot of money without putting your client first, it is not a mark of success, it is ii mark of shame." Stories of how the firm's legendary leaders — Sidney Weinherg, Gus Levy, |ohn Whitehead and others — went to extreme lengths, such as having six client dinners in one night, are told and retold. There is pride in being seen as a trusted adviser by the most influential politicians, industrialists and wealthy individuals around the world. However, rather than protecting individuals' ownership of clients, client focus promotes integration because it explicitly emphasizes long-term

retention. "Clients are simply in your custody," John Weinberg, ii second-generation leader of the firm, consistently reminded employees. "Someone before you established the relationship, and someone after you will carry it on." Although client focus provides a force for emotional integration with outsiders, pride in the quality of colleagues is an equally powerful force for emotional integration with insiders. As an internal survey conducted in 2000 revealed, 99% of Goldman Sachs employees were proud to work for the firm. Extraordinary levels of investment in recruiting only the most talented people around the glohe —- and then in continuous training and development for excellence — has, over decades, created the mystique about the firm as a magnet for talent, a mystique that reinforces the pride of belonging. Second, it is not just the salary that has allowed the firm to become a magnet for talent. Inherently linked to the identityshaping pride of belonging is a broader sense of purpose that emotionally connects each individual to the ethos of the firm. Says Coldman Sachs president and co-chief coordinating officer John Thornton, "Anyone with any depth and talent has to ask the question,'What am I doing with my life?'The purpose of my life is to use my talent for some hirger and better purpose." In Coldman Sachs, a broader purpose has historically been at the heart of that positive cycie of huilding emotional integration by linkinjj purpose, talent and the pride of belonging. The third contributor to emotional integration in Goldman Sachs is the one-firm mentality that is supported by, for example, doing the evaluation and selection of partners on a firmwide, rather than a divisional or product hasis — and by a compensation system that until recently relied on the overall profit and loss to determine each partner's fortunes. Each partner was allotted a fixed proportion of whatever the income for the year might be, with no discretionary payment based on any aspect of the partner's or the unit's performance. ''We all had a piece of the action," .says Phil Murphy, co-head of investment management. "We didn't care where the action came from. There was no disincentive to take that call from Hong Kong to help me out. ... You and I didn't care who got the credit for it; we knew we would both share the benefits." After Goldman Sachs became a public company, the link between overall firm performance and each partner's compensation was still important, although 60% rather than lOO'K. of the rewards are now based on the common pool.

Entrepreneurial Activity and Horizontal Integration Co-Evolve
Our research demonstrates that individual and subunit autonomy co-evolve with horizontal integration in a dynamic process. Tt is in this dynamic evolulion that horizontal integration differs

The Co-Evolution of Autonomy and Horizontal Integration
Managers need to trust that autonomy and horizontal integration wili iead to a symbiotic process tiirougb wiiich tbeir joint outcomes — superior business performance and the deepening of a culture of collaboration — will reinforce each other over time.

Crowing Self-Confidence al Managers


fop Management's Willingness To Delegate and Empower

Entrepreneunat Spirit and Initiative


Support Through Peers and Infrastructure Mutual Trustand Friendship

from vertical integration. Instead of smothering bottom-up initiatives, horizontal integration creates a reinforcing process through which both autonomy and integration can flourish. (See "The Co-Evolution of Autonomy and Horizontal Integration,") BP is typical of how the dynamic worked at all the companies we studied. When lohn Browne was CEO of BP's North American stibsidiary, Sobio, he conducted a careful experiment to test his growing belief that a spirit of entrepreneurship was possible in a big company if the organization were broken up into relatively small, empowered units. He created a separate unit out of one operation that chronically lost money. To prevent any positive outcome from appearing purely a result ol" outstanding local leadership, he appointed managers of normal ahilities. Allowed complete autonomy and freedom from the company's central controls, the unit dramatically improved performance, confirming Browne's theory. When he became CEO in 1996, Browne acted on tbat lesson by restructuring BP into 150 business units and giving unit managers considerable freedom. The only conditions were that they respect certain "botmdaries"— essentially, the core values

The peer-assist process became effective in about two years as much of BP's business-performance improvement began to flow from combining tbe business units' entrepreneurial spirit with the peer groups' knowledge sharing and mutual support. For Investment in Infrastructure and example, when Polly Flinn — then a Communication young manager from Amoco with no experience working outside the United States —• became the managing director of BP's retail business in Poland, she drew on active help from tbe marketing peer group and turned her business from a $20 million-per-year loss to a $6 million profit within 18 months. The comhination of empowerment and support improved husiness performance, producing two main results. First, toplevel managers developed growing confidence in their strategy of delegating authority to the business-unit leaders. Second, the company had more resources to invest in developing tbe integration infrastructure, including IT systems, and in building conversation and communication mechanisms. Those investments lurther strengthened the mechanisms and the processes of horizontal integration. As the symbiotic effects of autonoihy and horizontal integration evolved, a culture of collaboration gradually emerged. Rodney Chase described tbe culture cbange thus: "In our personal lives — as fatbers, motbers, brothers or sisters — we know how much we like to help someone close to us to succeed. Why didn't we believe tbat the same can happen in our husiness lives? That is the breakthrough, and you get there when people take enormous pride in helping tbeir colleagues lo succeed."


of the company — and deliver on their performance contracts. Simultaneously, Browne downsized or completely eliminated much of the staff-supported, vertical, comniandand-control infraslrucUire, abolishing the offices of country presidents and several functional departments in London. To support the empowered and fully accountable business-unit leaders, be created tbe BP peer groups. Thus managers wbo ran similar businesses were assigned to help one another to improve both individual and collective performance.

And as the culture evolved, managers' self-confidence grew. They set themselves increasingly tough targets and achieved them through their own initiative.s and the support of their peers.'^ Their success strengthened their sense of autonuiny and their spiril of entrepreneurship. Moreover, the culture led to the reinforcement of mutual trust and friendship - and the peer— group processes of horizontal integration. A cautionary note: The symhiotic co-cvolution of autonomy and horizontal integration takes time to mature. Vertical integration — bringing different units under a common hoss and a common plannhig and control system — can he implemented relatively quickly. But to develop people's self-confidence and to huild trust and friendship can be achieved only through persistent action and reinforcement over time. For senior executives, that is the greatest challenge in huilding horizontal integration: Although they have to he relentless in driving the process, they also have to he patient about results. For those who respond well to that challenge, the ultimate benefits are durahle enhancement of organizational capability and sustainable improvement of husiness performance.

C Hardy and W.R. Nord (London: Sage, 1996), 357-374. 7. See A. Edstrom and J.R. Gaibraith, "Transfer of Managers as a Coordination and Control Strategy in Multinational Organizations," Administrative Science Ouarterly 22 (June 1977): 248-263, 8. The important but often ignored role of middle managers in organizational integration has been described in R.M. Kanter, 'The Change Masters: Innovation and Entrepreneurship in the American Corporation" (New York: Simon & Schuster, 1983). 9. Such vertical processes of organizational integration lay at the heart of the divisional organizational model. For one of the richest and bestknown expositions, see A.D. Chandler, "Strategy and Structure: Chapters in the History of American Industrial Enterprise" (Cambridge, Massachusetts: MIT Press, 1962). 10. See J. Gaibraith, "Designing Complex Organizations" (Reading, Massachusetts: Addison-Wesley. 1973): and for a discussion of horizontal mechanisms in large, global companies, see CA. Bartiett and S. Ghoshal, "Managing Across Borders: The Transnational Solution" (Boston: Harvard Business School Press, 1988). 11. We focus on the challenges of internal integration across existing and established units within large, complex organizations. Clearly, there are other important integration contexts — such as integrating strategic alliances, joint ventures, upstream and downstream partners on the value chain and so on. We do not address those contexts here, but interested readers can find comprehensive discussions elsewhere: for example, in Y Doz and G. Hamel. "Alliance Advantage: The Art of Creating Value Through Partnering" (Boston: Harvard Business School Press, 1998). Within the organization, integration ot new ventures poses unique challenges. An outstanding analysis of the topic appears in CM. Christensen, "The Innovator's Dilemma" (New York: HarperBusiness, 1997). 12. Several authors have highlighted the need of a social structure to support IT-based systems tor effective knowledge management in distributed organizations. See, for example, the discussion on social ecology in V. Govindarajan and A. Gupta, "The Ouest for Global Dominance: Transforming Global Presence Into Global Competitive Advantage" (San Francisco: Jossey-Bass. 2001). 13. See. for example, M.T. Hansen and B. Von Oetinger, "Introducing T-Shaped Managers: Knowledge Management's Next Generation," Harvard Business Review 79 (March 2001): 106-116, 14. This is essentially a sophisticated use of social control. See W.G. Ouohi, "A Conceptual Framework for the Design of Organizational Control Mechanisms," Management Science 25 (September 1979): 833-848. 15. See J. Pfeffer and R.I. Sutton, "The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action" (Boston: Harvard Business School Press. 2000). 16. The benefits ot hierarchy provide the theoretical basis for influential economic analysis ot why companies exist, one of the most well-known being O.E. Williamson. "Markets and Hierarchies: Analysis and Antitrust Implications" (New York: Free Press. 1975). 17. For a discussion on the limitations of a hierarchical system in coping with uncertainty and rapid change, see S.L. Brown and K.M. Eisenhardt, Competing on the Edge: Strategy as Structured Chaos" (Boston: Harvard Business School Press, 1998). 18. See A. Bandura. "Self-Efficacy: The Exercise of Control" (New York: Freeman, 1997).

REFERENCES 1. For a theory-grounded analysis of the tension, see R.P. Rumelt, "Inertia and Transformation," in "Resource-Based and Evolutionary Theories of the Firm," ed. CM. Montgomery (Boston: Kluwer Academic Publishers. 1995), 10M32. 2. For a rich description and analysis of that tension in the context of large, diversified globai companies, see C.K. Prahalad and Y. Doz, "The Muitinational Mission: Balancing Local Demands and Global Vision" (New York: Free Press, 1987). 3. For a description of companies that followed the strategy of creating small units to rekindle front-line entrepreneurship, see S. Ghoshal and CA. Bartiett, "The Individualized Corporation: A Fundamentally New Approach to Management" (New York: HarperCollins. 1997). 4. That sequential process of performance improvement — first building the strength of the units and then building integration mechanisms across them — was described in S, Ghoshal and CA. Bartiett. "Rebuilding Behavioral Context: A Blueprint for Corporate Renewal," Sloan Management Review 37 (winter 1996): 23-36. 5. For a classic analysis of that need, see PR. Lawrence and J.W. Lorsch. "Organization and Environment' (Cambridge, Massachusetts: Harvard University Press, 1967). 6. The impact of the Web on integration opportunities can be inferred from the analysis of R.L. Daft and R.H. Lengel, "Information Richness: A New Approach to Managerial Information Frocessing and Organizational Design," in vol. 6, "Research in Organizational Behavior," eds. L.L. Cummings and B.M. Staw (Greenwich. Connecticut: JAI Press, 1984). 191-234. For a focused discussion on the role of IT in facilitating communication, see A.D. Shulman, "Putting Group Information Technology in Its Place: Communication and Good Work Group Performance," in "Handbook ot Organization Studies," eds. S.R. Clegg,

Reprint 4413
Copyright -O Miissi}chnsclls liiflilutc of Tcclinohgy. 2002. AH rights n-fir



FALL 2002

Similar Documents

Premium Essay

Sonnet 116:Shakespeare

...Training Course on Integrating a Value Chain Perspective in Small Scale Enterprise Development TRAINING SCHEDULE November 19-30, 2012 Rural development generally includes supporting local people’s livelihoods through income-generating activities and small-scale enterprises. Previous program experiences point to the importance of building local entrepreneurship capacity, establishing business organizations, and enabling access to key institutional support services. New challenges have emerged that influence success of these development efforts such as: 1) managing the impact of emerging markets on rural producers and consumers, 2) improving competitiveness and efficiency of small-scale enterprises, and 3) promoting equitable gender sensitive contributions and benefits among stakeholders including private sector. More recently, value chain approaches have been explored to bring more benefits to rural producers through better market links. Course Description The course focuses on integrating a value chain perspective in rural development, and how this conceptual and methodological framework can enhance program strategies for sustainable livelihoods, profitable small scale enterprises and socially responsive private sector. Learning content includes: basic principles and concepts of value chain development, practical methods and tools in integrating value chain perspective in rural development programming, and lessons learned from case studies on linking rural enterprises to......

Words: 1222 - Pages: 5

Premium Essay

International Business

...division of the organization into subunits * the location of decision-making responsibilities within that structure - centralized versus decentralized * the establishment of integrating mechanisms to coordinate the activities of subunits including cross-functional teams or pan-regional committees 2. Control systems and incentives * control systems - the metrics used to measure performance of subunits * incentives - the devices used to reward managerial behavior 3. Processes, organizational culture, and people * Processes - the manner in which decisions are made and work is performed within the organization * Organizational culture - the norms and value systems that are shared among the employees of an organization * People - the employees and the strategy used to recruit, compensate, and retain those individuals and the type of people they are in terms of their skills, values, and orientation Figure of Organization Architecture What Are The Dimensions Of Organizational Structure? * Organizational structure has three dimensions: 1. Vertical differentiation - the location of decision-making responsibilities within a structure 2. Horizontal differentiation - the formal division of the organization into sub-units 3. Integrating mechanisms - the mechanisms for coordinating sub-units Why Is Vertical Differentiation Important? * Vertical differentiation determines where decision-making......

Words: 1392 - Pages: 6

Free Essay

Gilette and P&G

...Arvind Krishnan Ramesh Saahil Khanna Shriram Jayaraman Sneha Bhandarkar Arvind Krishnan Ramesh Saahil Khanna Shriram Jayaraman Sneha Bhandarkar Service Oriented Architecture New Models of Enterprise Architecture (Group 2) Service Oriented Architecture New Models of Enterprise Architecture (Group 2) Service Oriented Architecture Building an enterprise-scale software system is a complex undertaking. Despite decades of technological advances, the demands imposed by today’s information systems frequently stretch to breaking point a company’s ability to design, construct, and evolve its mission-critical software solutions. In particular, few new systems are designed from the ground up. Rather, a software architect’s task is commonly that of extending the life of an existing solution by describing new business logic that manipulates an existing repository of data, presenting existing data and transactions through new channels such as an Internet browser or handheld devices, integrating previously disconnected systems supporting overlapping business activities, and so on. Service Oriented Architecture (SOA) SOA is a way of designing a software system to provide services to either end-user applications or other services through published and discoverable interfaces. In many cases, services provide a better way to expose discrete business functions and therefore an excellent way to develop applications that support business processes. SOA architecture......

Words: 1541 - Pages: 7

Premium Essay

Sap Research Paper

...Research Paper Enterprise Resource Planning Enterprise Resource Planning began with early attempts in the 1940’s but was not mastered until the early 1960’s by J.I. Case, the manufacturer of tractors and other construction machinery, and partner IBM. It also has its relationship with Material Requirement planning (MRP), which serves as the method for planning and scheduling materials for complex manufactured products in the 1980. But it was too big clumsy and expensive and eventually lead to the focus of MRP II by JD Edwards. Enterprise Resource Planning help provides corporate platform for information technology and include financial and manufacturing applications. Its attempt to integrate all areas of the company function into a single system that can serve different department needs throughout the company. By integrating all business function it helps the company to function more efficiently in the business processes. With the integration of business processes ERP helps to reduce operation cost, such as production and inventory costs, it helps with budgeting, generating more accurate demand forecasts, bill of material, speed production cycles and enhance customer service. ERP system has been growing tremendously since it first introduction, according to a Gartner research in 2005, the total ERP application grew 5.2 percent annually as the market deal with mergers, on demand and technology advances with Europe having the largest segment of the market at 42......

Words: 1676 - Pages: 7

Premium Essay

Kudler Accounting System

...incorporate and build onto the existing system. The accounting information system is used to gather financial data and provide information for internal and external decision making. These decisions include marketing, purchasing, payroll, investments, sales, and accounts payable and receivable. The purpose of implementing a new accounting system is to take advantage of these key new features and core technologies that will help keep the company agile in its decision making. It will also make the company better prepared to compete in today’s economy and market. Key Features The key features for the proposed accounting system include integrating the accounting system with the enterprise system, auditing software, budgeting software, integrated accounting and finance software. The use of XBRL programming language for filing reports, ERP (Enterprise Resource Planning), SCM (Supply Chain Management), CPFR (Collaborative Planning, Forecasting and Replenishment), CRM (Customer Relationship Management), and KM (Knowledge Management) are also key elements of this system (Turban & Volonino, 2011) . Financial planning and budgeting, financial and economic forecasting, as well as integrated accounting and business software will also be included in this system. IT systems will be used for auditing to help track fraud and other harmful expenditures. The financial ratio analysis will be more accurate since it can be completed faster and contain more information. The profitability......

Words: 1031 - Pages: 5

Free Essay

Computer Information System Brief

...adding a fourth store in Carlsbad (Kudler Fine Foods Virtual Organization, 2011). Currently the organization uses Microsoft Retail Enterprise Management System (REMS), Quick Books, and Microsoft Excel for their software needs and has a system of microcomputers and server at each store. This brief will discuss an analysis of the company’s business and accounting information needs, the strengths, weaknesses, opportunities, and threats of the current computer system and technology use. Business and Accounting Information Uses The organization needs to record sales, transactions, human resources, and inventory data correctly and assist store managers in placing purchases order and efficiently using resources. The inventory system needs to be easily accessible and provide reports that would assist managers in minimizing inventory costs. Kudler needs to “…develop competitive strategies to counter the actions of the competitive forces they confront in the marketplace” (O’Brien & Marakas, 2008, p. 49). For future growth the business needs to explore the information system requirements to start the website for e-commerce, frequent shopper program, and catering (Kudler Fine Foods Virtual Organization, 2011). Further business needs are in sales and marketing, communications, and customer relations. Accounting needs for Kudler Fine Foods include integrating and updating payroll and human resources functions, accounts payable, posting inventory transactions to the general......

Words: 1150 - Pages: 5

Premium Essay

Strategic Marketing Management Group Assignment 1

...Hello Message Center – Advantages of message center over classical secure e-Mail are that confidential and authenticated exchanges can be started immediately by any internet user worldwide since there is no requirement to install any software nor to obtain or to distribute cryptographic keys beforehand. 4. The 'Tabletization' of Banking and the User Experience - The "tabletization" of online banking gives rich user experience than mobile banking 5. Security increasingly is A Moving Target – As consumers increasingly spend their time on their smartphones and tablets, including for their banking needs, these devices also will become the growing focus of hackers and fraudsters, who are always on the hunt for ripe targets. 6. Integrating toward a Brave, New Post-Channel World - The days when a customer would walk into a branch to fulfill all of his or her banking needs are long gone. If a customer starts a loan application online and doesn't have time to complete it, that customer then expects to be able to come into a branch on the way home from work to finish it. However, in too many cases the same customer often will be asked...

Words: 530 - Pages: 3

Premium Essay

Enterprise Systems

...ENTERPRISE SYSTEMS MIS, 2015 Learning Objectives  How do enterprise systems help businesses achieve operational excellence?  How do supply chain management systems coordinate planning, production, and logistics with suppliers?  How do customer relationship management systems help firms achieve customer intimacy? Traditional View 3 MIS, 2015 Enterprise Systems 4 MIS, 2015 Cross-functional process 5    Many business processes are cross-functional, transcending the boundaries between sales, marketing, manufacturing, and research and development. These cross-functional processes cut across the traditional organizational structure, grouping employees from different functional specialties to complete a piece of work. E.g.:   Order Fulfillment Process Procure to Pay. MIS, 2015 Order Fulfillment Process 6 For example, the order fulfillment process at many companies requires cooperation among •the sales function (receiving the order, entering the order), •the accounting function (credit checking and billing for the order), and •the manufacturing function (assembling and shipping the order). MIS, 2015 Enterprise Application 7  Enterprise Application automate processes that span multiple business functions and organizational levels and may extend outside the organization. MIS, 2015 How Enterprise Systems work 8     based on a suite of integrated software...

Words: 1318 - Pages: 6

Premium Essay

Crm and Erp Life Cycle

...the company that integrates the business technology, strategy, and processes to accomplish the goals for companies that want to operate in a customer-driven environment (Motiwalla, 2012). “Customer relationship management (CRM) systems enable a firm to provide specific services to each individual customer (Lawton, 2000). For example an organization may design a Web page that shows the pricing based on the user’s location and preference. The CRM is design to support the customer’s requirement and meet their business needs to improve customer experience and increase revenue within their organization. The Enterprise resource planning (ERP) systems integrate data across and be comprehensive in supporting all the major functions of the organization (Motiwalla, 2012). The CRM system focuses on the customer relationship within the organization. The ERP system focuses on integrating the organization’s data in real time to all across the organization to the internal and external users. The customer relationship management system life cycle involves focus on people, procedures, company philosophy, and culture, rather than just information technology (Motiwalla, 2012). The first step in the life cycle is to outline the corporate CRM goals and practical process changes that have to occur before focusing on possible technology solutions (Motiwalla, 2012). Next the key people need to be identified who can explain all of the core processes of the organization. Functional......

Words: 605 - Pages: 3

Premium Essay

Case Study 9

...ITECH 5005 Business Information Systems Tutorial Week 9 Enterprise Resource Planning and Collaboration Systems Case Study 1: Campus ERP 1. Was the move from 20-year-old legacy systems at Stanford necessarily a good idea? Why or why not? It is a good idea because all the data throughout the new Enterprise Resource Planning (ERP) will be integrate in all departments and functions throughout the staff and students in Stanford, into a single IT system (or integrated set of IT systems) so that employees and students can make decisions based on the view of the enterprise-wide information in all business operations, semesters subjects, marks, human resources payments and many more. Here in this case all have to make changes according to the system the employees and the students too. 2. In your opinion, did Stanford spend too much time consulting the ERP vendors (Oracle and PeopleSoft) and not enough time consulting their own staff? I think Stanford did spend too much time for vendors, the management paid attention to installing the new ERP administration systems as PeopleSoft HR, Oracle and others but they did not involve the users (employees and students) in selecting the software changing requirements. They have not got the sufficient resources, they do not provide enough training and proper training for their staff, and they have poor quality of communication and cultural differences. Stanford does not implement all of this because of its tight budget and of the......

Words: 1645 - Pages: 7

Premium Essay

Business Intelligence in Banks

...are independent to each other. They have separate systems for ticketing, airline operations, baggage handling vendor management and loyalty programs. Alaska airlines implemented BI systems with Siebel analytics to increase revenues by marketing personalized promotions to customers. In implementing BI system their first step was to integrate data from all disparate transactional systems into one enterprise data warehouse. Secondly Alaska airlines worked on integrating metadata information from all their transactional systems, so that data could be related. It used Siebel metadata layer to implement all the business rules, aggregation rules and drills rule in their data warehouse so that business users could easily find pattern using BI systems. Alaska airlines also used BI systems to analyze flight routes which are profitable and those having concerns finding customers.BI systems also helped them forecast occupancy levels and according plan their flight staff, vendors and ground staff needs . Continental airlines implemented BI system with Teradata as backend database integrating all the airline data in one place and reporting tool MicroStrategy that helped it in finding patterns when canceling flights. Using this data Continental wouldn’t cancel flights if there was high percentage of frequent fliers on the flight there by keeping good relations with high fliers. Continental airlines uses real time BI...

Words: 559 - Pages: 3

Free Essay

Case Analysis: Delux Tool Case

...thorough organizational structure. A company can have a great mission/product, great people, and great leadership and still not perform well because of poor organizational design. All three companies have a different approach to organizational structure and I think at this point, standards must be developed and instituted. A standard is the level of expected performance for a given goal. A standard can be set for any activity—financial activities, operating activities, legal compliance, and so on (Brasfield, 2013). Based on the current organizational charts of all three companies, I think that there needs to be some standardization for the organization’s structure. My recommendation for restructuring is to rename the company (Tycoon Enterprises or similar) to serve as an umbrella of all three companies. Then, define each company as a separate division within the company. Each division has a different mission and will continue to operate differently. Each division will be broken down into the appropriate branches (activities) underneath, based on their individual missions, however with standard titles and functions. I’ve included a proposed Organizational Chart as an attachment. With the implementation of a well-defined structure, Mr. Tycoon would be able to set performance standards, measure them, compare them against the...

Words: 610 - Pages: 3

Premium Essay

Putting the Enterprise Into the Enterprise System

...18, 2014 Putting the Enterprise into the Enterprise System Article Summary Jason Simonds Enterprise systems can be an effective tool for a business; they can enable a company to integrate data puled from several different functions in an organization and allow for more efficient communication between separate systems. Business enterprises can connect shipping to sales and sales to accounting and accounting to finance all under one digital roof. The article Putting the Enterprise into the Enterprise System elaborates on the benefits such systems can have on a company, but highlights some of the problems a poorly fitting system can cause and how these problems can be avoided. While enterprise systems can greatly help a business, a poorly designed system can be costly and timely to fix. A company with multiple departments and different functions can have hundreds of different tasks that are maintained in a system. Between shipping, receiving, design, accounting, etc. each function has a separate design and multiple tasks to complete. These tasks and designs are often performed on separate systems within an organization. The shipping department may have a program designed for commercial shipping which may not integrate with the accounting software used by the accounting department or the inventory software kept within the warehouse. These “legacy” systems can often be tedious and expensive to work with and can slow a business down. Enterprise systems can fully......

Words: 596 - Pages: 3

Premium Essay

Enterprise Resource Planning (Erp)

...An Enterprise Resource Planning (ERP) system is a multi-module transaction-based application software that helps organisations to manage the vital parts of the business. Today, ERP systems are often preferred over the legacy systems, despite the fact that the Legacy systems offered a great deal of value from their unique, customized features (Fosser, E, Leister, O H, Moe, C E & Newman, M., 2008). It’s important to note that the Legacy system has had many drawbacks, such as, rigid development & delivery methodologies; lengthy reaction time to address business changes; overly-complicated & difficult-to-manage programs; functionality gaps & user dissatisfaction; costly and/or painful version release upgrades; business applications written at different times with different tools, languages, to name a few (Simparel, 2010). Alternatively, the ERP system has asserted to create value through integrating activities across organization; implementation of best practices; standardization of processes; one-source data; and on-line access to information (Olson, 2007). According to Fosser, Leister, Moe & Newman (2008) in their idealised form, Enterprise Resource Planning (ERP) systems integrate all business processes into one enterprise-wide solution; accomplished by having a centralised database that all business functional areas have access to. While it is possible to customise the ERP system to fit the original business processes, the current understanding is that customisation is not...

Words: 900 - Pages: 4

Premium Essay


...competition, globalization, growing customer demand and exposure to higher credit risks are forcing the banks to find new ways of providing better customer service so as to improve profitability. The strategic management of human resources is one of the ways companies may use to increase their competitiveness in the new organizational landscapes, since managing in a global marketplace, introducing new technology, developing organizational knowledge, improving customer service or product quality, requires considering the “human equation” (Pfeffer, 1998). The management of organization human resources is an integral part of how an organization is going to achieve its mission goals. Without people, there is no one to do the work. Therefore, integrating HRM into the organization strategic plan is important step in Establishing an HR Strategy. The function of building human resources management strategy requires analyzing the current strategies of the organization and its goals which means Because of the globalization, the competition is very intense to get competitive advantage. Globalization represents the structural making of the world that is characterized by the free flow of Information technology and human resources across national boundaries as well as the spread of Technology and mass media presenting an ever-changing and competitive business environment. Global business is characterized by the free flow of human and financial resources especially in the developed......

Words: 1667 - Pages: 7