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

Bryan Fenech – Founder and Director
Building the Organisation of Tomorrow
www.oot.org
Toward an enterprise logic
for the 21st century

Contents
Introduction
Definitions
Key Principles
Enterprise Logic – A Unified Model
The Logic of Industrial Era Organisations
Building a Knowledge Era Enterprise Logic
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INTRODUCTION
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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
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Introduction
• It highlights the need for a new
enterprise logic for the knowledge era
and explores some of the emerging
ideas in this area
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DEFINITIONS
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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
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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
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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
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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.
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KEY PRINCIPLES
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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ENTERPRISE LOGIC – A UNIFIED
MODEL
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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
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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
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THE LOGIC OF INDUSTRIAL ERA
ORGANISATIONS
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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
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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
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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
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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
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BUILDING A KNOWLEDGE ERA
ENTERPRISE LOGIC
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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
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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
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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:
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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”
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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
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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
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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”
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Distributed capitalism
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
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Distributed capitalism
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
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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
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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
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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
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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.
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