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Toward an enterprise logic for the 21st century - oot.org lecture series 3

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This presentation introduces the concept of enterprise logic as a way of explaining the evolution of organisational form over different historical periods. It provides a unified theoretical framework …

This presentation introduces the concept of enterprise logic as a way of explaining the evolution of organisational form over different historical periods. It provides a unified theoretical framework that integrates the many different perspectives on organising for the 21st century.

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  • 1. Bryan Fenech – Founder and Director Building the Organisation of Tomorrow www.oot.org Toward an enterprise logic for the 21st century
  • 2. Contents Introduction Definitions Key Principles Enterprise Logic – A Unified Model The Logic of Industrial Era Organisations Building a Knowledge Era Enterprise Logic 9/25/2014 www.oot.org 2
  • 3. INTRODUCTION 9/25/2014 www.oot.org 3
  • 4. Introduction • This presentation introduces the concept of enterprise logic as a way of explaining the evolution of organisational form and as a unified theoretical framework that integrates the many different perspectives on organising for the 21st century 9/25/2014 www.oot.org 4
  • 5. Introduction • It highlights the need for a new enterprise logic for the knowledge era and explores some of the emerging ideas in this area 9/25/2014 www.oot.org 5
  • 6. DEFINITIONS 9/25/2014 www.oot.org 6
  • 7. Enterprise logic • Organisations have an enterprise logic that ‘represents the deep structure (or ideological underpinning) shaping strategy, structure, and management processes into an effective whole’1, 2, 3 9/25/2014 www.oot.org 7
  • 8. A structure of the mind • This enterprise logic “is based upon a set of shared assumptions, values and attitudes that are manifested in the taken-for-granted everyday practices of the organisation” and in “patterns of behaviour that reflect the hegemony of this logic”4 9/25/2014 www.oot.org 8
  • 9. Dominant logic and organisational DNA • Similar concepts include ‘dominant logic’ and ‘organisational DNA’ • Dominant logic refers to how firms “conceptualize and make critical resource allocation decisions – be it in technologies, product development, distribution, advertising, or in human resource management”. It is “in essence, the DNA of the organization”5 9/25/2014 www.oot.org 9
  • 10. Deep structure • The DNA metaphor is a powerful one since it allows for individual differences between organisations while emphasising shared inherited characteristics • The key difference between these concepts and enterprise logic is that in the latter there is a more developed sense of historical context to this deep structure. 9/25/2014 www.oot.org 10
  • 11. KEY PRINCIPLES 9/25/2014 www.oot.org 11
  • 12. Organisational form is dynamic • Organisational form is an artefact of the particular socio-economic conditions and politico-technical processes of the era in which it emerged 9/25/2014 www.oot.org 12
  • 13. Historical eras and organisational form • In each historical era, market forces pull forth new organisational forms as managers seek new ways of arranging assets and resources to produce the products and services that customers want and expect6 9/25/2014 www.oot.org 13
  • 14. Historical eras and organisational form • Capitalism has avoided devastating crises, not because it is permanent, but because it changes. Such change has meant that specific expressions of capitalism during a particular historical period have given way to newer, more comprehensive forms and social and technological conditions changed, leading to new strategic imperatives7 9/25/2014 www.oot.org 14
  • 15. Organisational adaptation – 4 factors • In particular, these forces determine strategic imperatives which necessitate development of a particular set of key capabilities and resources to be able to meet those imperatives, which in turn require new forms of governance and leadership practices to build and sustain them, that are best enabled and facilitated by certain organisational structural forms 9/25/2014 www.oot.org 15
  • 16. Selection pressures and survival of the “fittest” • Particular combinations of these 4 interrelated factors better enable firms to adjust to the challenges, and leverage the opportunities, inherent in a particular historical era, providing a competitive advantage • Successes are copied and context-specific adaptations become internalised as part of the accepted wisdom of organising human endeavour 9/25/2014 www.oot.org 16
  • 17. Internalisation and ideology • Over time, a range of institutional, organisational and individual (socio-psychological) practices, that sustain shared assumptions about the 'reality' of these ideological arrangements, become formalised8 9/25/2014 www.oot.org 17
  • 18. Dominant institutional form • This recursive process of organisational adaptation to changing politico-technical and socio-economic pressures leads to the emergence and dominance of particular institutional forms in different eras 9/25/2014 www.oot.org 18
  • 19. Dominant institutional form • Each era has its own enterprise logic which provides the archetype or template for all organisations • The possibility of alternative ways of organising becomes obscured 9/25/2014 www.oot.org 19
  • 20. Enterprise logic as a memetic structure • Enterprise logic an be characterised as a memetic structure • A meme acts as a unit for carrying cultural ideas, symbols, or practices that can be transmitted from one mind to another through writing, speech, gestures, rituals, or other imitable phenomena with a mimicked theme9 9/25/2014 www.oot.org 20
  • 21. Enterprise logic as a memetic structure • “Memes” are cultural analogues to genes in that they self-replicate, mutate, and respond to selective pressures – e.g., architecture10 • The standard enterprise logic has become so deeply taken for granted that it is no longer visible …[and] is organized to reproduce itself at all costs, even when it is commercially irrational to do so11 9/25/2014 www.oot.org 21
  • 22. Enterprise logic as a memetic structure • Bettis and Prahalad (1995) comment on the role of dominant logic in inhibiting organisational adaptation to environmental changes and suggest that it explains why organisations are increasingly “information rich, interpretation poor”12 • Neilson, Pasternack and Mendez (2003) explore the role of organisational DNA in inhibiting the execution of strategy13 9/25/2014 www.oot.org 22
  • 23. ENTERPRISE LOGIC – A UNIFIED MODEL 9/25/2014 www.oot.org 23
  • 24. Enterprise logic – a unified model14 Structural Arrangements Leadership and Governance Capabilities and Resources Strategic Imperatives socio-economic forces Internalisation of assumptions , new Politico-technical, paradigms – “enterprise logic” Organisational Adaptation 9/25/2014 www.oot.org 24
  • 25. Intent of enterprise logic model • An organising tool that makes explicit the relationships between different categories of theory • Enables the different approaches to understanding OOTs to shed light upon each other • Provides a holistic theoretical basis to inform organisational design – concept of organisational form extended beyond structure 9/25/2014 www.oot.org 25
  • 26. THE LOGIC OF INDUSTRIAL ERA ORGANISATIONS 9/25/2014 www.oot.org 26
  • 27. From mercantile to industrial era • Adam Smith’s critique, articulated in The Wealth of Nations (1774), of the system of guilds and his advocacy for a new bureaucratic organisational form built upon the division of labour reflects a more fundamental transition from a mercantilist era enterprise logic to an industrial era enterprise logic15 9/25/2014 www.oot.org 27
  • 28. The challenges of era of mass consumption • This industrial era enterprise logic emerged “because it could better address the transaction economics of mass consumerism through new [industrial] technologies, organisational forms and practices that delivered low-cost products and services”16 9/25/2014 www.oot.org 28
  • 29. Development of managerial hierarchy • The emerging industrial era organisation required “a new managerial hierarchy with a relentless internal focus on the control and measurement of production and distribution. Managers and engineers inherited the task of planning and overseeing a minute division of labour to accomplish the standardization, increased throughput, and reduced unit costs necessary to meet the new demands of mass consumption”17 9/25/2014 www.oot.org 29
  • 30. Enterprise logic of the industrial era •Hierarchy •Division of labour Structural Arrangements Leadership and Governance •Operational •Command and control •Legalistic bureaucracy management •Factory model •Technicians Capabilities and Resources Strategic Imperatives •Mass production •Standardisation •Cost control Forces: Industrial Revolution Logic: The mass production mindset Organisational Adaptation 9/25/2014 www.oot.org 30
  • 31. BUILDING A KNOWLEDGE ERA ENTERPRISE LOGIC 9/25/2014 www.oot.org 31
  • 32. The persistence of outmoded forms • The concept of enterprise logic provides a critical insight why outmoded organisational forms persist in spite of leadership efforts to transform them – Low female representation rates at senior management18 – White collar crime and high risk behaviour, and consumer and environmental protection19, 20 9/25/2014 www.oot.org 32
  • 33. The need for a new enterprise logic • The implication of these ideas is the recognition that the formulation of a new enterprise logic is a precondition to the fundamental organisational renewal required in the 21st century, one that integrates new values at its core • We need to become conscious of the deep structure in order to change it 9/25/2014 www.oot.org 33
  • 34. Emergent enterprise logic of the knowledge era •Networked, cellular •Fluid federations Structural Arrangements Leadership and Governance •Dynamic •Distributed leadership •Internal markets capabilities •Social capital •Value co-creation Capabilities and Resources Strategic Imperatives •Differentiation and innovation •Flexibility •Strategic alliances Information Technology Revolution Logic: The innovation mindset Organisational Adaptation Forces: 9/25/2014 www.oot.org 34
  • 35. The need for a new logic • A number of authors have begun the process of constructing such a logic – see for example – Dovey and Fenech (2007) – “covenantal culture” and – Zuboff and Maxim (2003) – 11 metaprinciples of “distributed capitalism” 9/25/2014 www.oot.org 35
  • 36. Covenantal culture21 • 6 characteristics of covenantal culture 1. A strong sense of ownership among all stakeholders of the organization underpinned by passionate commitment to the mission, shared values and creative participation in everyday activities 2. ‘Non-authoritarian’ distributed power bases 3. Risk managed through the socialization of all members to cultural norms that dictate the framing of all decision-making by the mission and values of the collective 9/25/2014 www.oot.org 36
  • 37. Covenantal culture • 6 characteristics of covenantal culture (continued) 4. The destiny of each is viewed as being bound up with the destiny of the others 5. Learning viewed as an obligation to the collective 6. A 'negotiated order' in which power relations are governed democratically through a set of mutually-endorsed and personally-binding core values 9/25/2014 www.oot.org 37
  • 38. Distributed capitalism22 • 11 metaprinciples of distributed capitalism 1. All value resides in individuals 2. Distributed value necessitates distributed structures among all aspects of the enterprise 3. Relationship economics is the framework for wealth creation 4. Markets are self authoring 5. Deep support is the new “meta product” 9/25/2014 www.oot.org 38
  • 39. Distributed capitalism • 11 metaprinciples of distributed capitalism (continued) 6. Federated support networks are the new competitors 7. All commercial practices are aligned with the individual 8. Infrastructure convergence redefines costs and frees resources 9/25/2014 www.oot.org 39
  • 40. Distributed capitalism • 11 metaprinciples of distributed capitalism (continued) 9. Federations are infinitely configurable 10. New valuation methods reflect the primacy of individual space 11. A new consumption means a new employment 9/25/2014 www.oot.org 40
  • 41. Visit www.oot.org Bryan Fenech Founder and Director About www.oot.org • www.oot.org is the website of Building the Organisation of Tomorrow, a networked community and set of resources to assist leaders to meet the imperative for organisational renewal • All institutions are under increasing pressure to adapt to 21st century technological and socio-economic forces. Successful leaders need appropriate frames of reference to manage these processes of transformation; however, such frames of reference are rare • Find articles, presentations, book reviews, and other resources 9/25/2014 www.oot.org 41
  • 42. References 1. Dovey, K. and Fenech, B. (2007), ‘The Role of Enterpise Logic in the Failure of Organisations to Learn and Transform’, Management Learning, Vol 38, No 5, pp 573-590. 2. Zuboff, S. and Maxmin, J. (2002) The Support Economy: Why Corporations are Failing Individuals and the Next Episode of Capitalism. New York: Allen Lane. 3. Miles, R. E., Snow, C. C., Mathews, J. A., Miles, G. and Coleman Jnr, H. J. (1997) ‘Organising in the Knowledge Age: Anticipating the Cellular Form’, Academy of Management Executive, Vol 11, No 4, pp 7-24. 4. Dovey, K. and Fenech, B op cit. 5. Obloj, T., Obloj, K., and Pratt, M. G. (2010) ‘Dominant Logic and Entrepreneurial Firms’ Performance in a Transition Economy’, Entrepreneurship: Theory and Practice, January, pp 151-170 9/25/2014 www.oot.org 42
  • 43. References 6. Miles , R. E, et al op cit. 7. Zuboff, S. and Maxmin, J. op cit. 8. Dovey, K. and Fenech, B op cit. 9. Gordon, G. (2002) Genes: A Philosophical Inquiry, New York: Routledge 10. Salingaros, N. (2006) Theory of Architecture, Umbau-Verlag. 11. Zuboff, S. and Maxmin, J. op cit. 12. Bettis, R. A. and Prahalad, C. K. (2006) The dominant logic: Retrospective and extension, Strategic Management Journal, 16(1). 13. Neilson, Gary; Pasternack, Bruce A.; Mendes, Decio (Winter 2003). "The Four Bases of Organizational DNA". Strategy+Business (Booz & Company) 14. Fenech, B. (2013) ‘Emerging Organisational Forms: Leadership Frames and Power’, Proceedings of the 9th European Conference on Management, Leadership and Governance, ACPI: Reading 9/25/2014 www.oot.org 43
  • 44. References 15. Fenech, B. (2013) op cit. 16. Dovey, K. and Fenech, B (2007) op cit. 17. Zuboff, S. and Maxmin, J. (2003) op cit. 18. Dezső, C. E. and Ross, D. G. (2008) ‘Girl Power: Female Participation in Top Management and Firm Performance’, University of Maryland Robert H Smith School of Business, Working Paper No. RHS-06-104. 19. Lee, I. B. (2005) Is There a Cure for Corporate ‘‘Psychopathy’’? American Business Law Journal, 42(1). 20. Bakan, J. (2004) The Corporation: The Pathological Pursuit of Profit and Power, Free Press: New York. 9/25/2014 www.oot.org 44