Organizational Change and Relational Resources

Karol Marek Klimczak, Yochanan Shachmurove, Karol Marek Klimczak, Yochanan Shachmurove

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000479409
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Organisationsentwicklung

Transitioning organizations to the new normal following environmental shocks, economic upheavals, and technological innovations is a challenge to classic organizational management. The main reason: because no single organization knows precisely what the target of change is. Resources created and operated in relationships can support the organization in overcoming its constraints, changing faster, and adapting better.

This book takes a relational perspective on how organizations adjust and adapt to their turbulent environment. Drawing from a broad literature and empirical studies, this book offers novel insights into how businesses create, grow, and manage relationships with partners to support strategic change. It discusses the benefits of cooperating with partners and relying on shared resources, while controlling relational risks. It presents key relational processes including organizational intelligence, open culture, knowledge sharing routines, motivation, co-creation, and communication. It discusses focus areas: longevity of family firms, improving health and safety in medical services, crisis management, public administration reforms, and relational risk management.

This book is a valuable resource for researchers and students in the fields of organizational studies, organizational change, technology, and innovation management. Managers and entrepreneurs can find inspiration, motivation, and strategies for implementing and managing relationships along the value chain.

Part I Relational Perspective on Change in Turbulent Environments

1 Transforming Organizations in Turbulent Environments

Yochanan Shachmurove

DOI: 10.4324/9781003172604-1

Introduction

Academic literature is replete with concepts about the various objectives of a firm. Mainstream authors maintain that the objective of a firm is to maximize profits (Friedman, 1953, 1970), increase sales, expand market share, or achieve market dominance. Some claim that a firm should consider social and environmental factors, which is known as corporate social responsibility (CSR); see Carroll (1991). Others talk about profit satisficing (Simon, 1952–53, 1955, 1956 and his Nobel Memorial Lecture, 1978).

There exists a relatively less pronounced consideration that the utmost objective of a firm is survival. This chapter claims that if, or when, this objective is not the top priority of each firm manager, she is not fulfilling her obligations to the stakeholders of her organization. Few companies of different sizes – large, medium, or small – are immune from failures, bankruptcies, and insolvencies. Companies which experience rapid implementation of new technologies are not insulated from market turbulence. Volatile and unpredictable business environments require strategic planning for survival. Managers of organizations who believe that their past inventions, patents, and innovations will allow their firms to successfully and continuously stand guard against the storms approaching them, are bound to fail. The key to success is to be prepared.

By observing the number of the corporations replaced every year in the S&P 500, it is possible to gather information about the dynamic nature of running business organizations. The replacement happens when companies are not generating enough revenues or income to meet its liabilities; an example is the replacement of AIG in 2008 and GE in 2018. Another reason for removal from the Dow Jones Industrial Average is widespread shifts in the economy, which happened in 1997 when emblematic companies such as General Electric, AT&T, Sears, and General Motors were removed from the Dow Jones Industrial Average (Dierking, 2013).

The replacement of the corporations from the S&P index has increased in recent years. According to Anthony et al. (2018), the average term a company stays on the S&P 500 decreased from 33 years in 1964 to 24 years by 2016, and it is expected to decrease to 12 years by 2027. This is explained by the increase in mergers and acquisition (M&A) and the advance of billion-dollar valuation startups. The dynamic in the index is an important indicator to warn leaders about the current and future trends in the market. The disruptive forces in the financial markets are strongly affecting retailers, healthcare, energy, travel, and real estate industries. In the middle of this unstable environment, companies are forced to embrace transformation, focusing more on the customer needs and change in corporate strategies to survive. For instance, the turnover rate in the S&P 500 was of 5.2% in 2017, with 26 companies replaced. At this rate, as Anthony et al. (2018) point out, half of the companies currently included in the S&P 500 will be replaced over the next decade.

This chapter looks at the challenges faced by a variety of organizations and provides examples of why organizations fail when confronting those challenges. How is it possible that these corporations were not able to forecast the business environment? How did they lose their leading position in a turbulent environment? These cases are presented to shed light on and learn from the mistakes of other firms, to stir and motivate organizations to move in a timely manner and embrace changes, to build dynamic capabilities, and to engage in relations with other organizations. The chapter describes and analyzes how small and big organizations, leaders in their areas of operation, failed to see the upcoming storms, the high ocean waves, that eventually led them to lose their leadership positions, and even brought them down, becoming bankrupt and insolvent.

The remainder of the chapter is organized as follows. Section “How Do Leaders Fall? Lessons from History” provides a few historical events about how super-powered nations lost their leading position because they were not able to change, overcome their weaknesses, and strengthen their might. Section “Standing Still in Turbulent Environments” describes examples of companies that failed to respond to a continuously changing turbulent environment. Section “Strategies to Persevere during Turbulence” offers common strategies used to persevere in turbulent environments. Section “A Comprehensive Strategy Framework” presents implications to managers, and Section “Conclusion” provides conclusion.

How Do Leaders Fall? Lessons from History

This section provides a few historical cases to demonstrate how superpower nations, examples of huge organizations, are not immune from failing to assess their strength and adapt to necessary changes as they face challenges to their leadership positions. One of history’s first true superpowers, the Persian Empire, saw its rule ended by Alexander the Great, who marched into Persia in 334 BC with an army of merely 50,000. To put that army in perspective, King Darius III of Persia was in command of a total of 2.5 million soldiers. Yet, this huge Persian army was not able to respond to the strategy devised by Alexander.

When the Persians planned to fight in a wide, open valley, Alexander lured them into a narrow strip of land, where the Persian number advantage would be useless. When the Persians anticipated he would attack at night, Alexander attacked in the morning. His army used upgraded weapons. Instead of the shorter ‘dory’ or Greek wooden spear, they used the much longer ‘sarissa’, a 20-foot-long hunting spear with an iron tip that could puncture heavy armor and impale charging cavalry horses (Roos, 2019).

In the summer of 1812, Napoleon led his veteran army into the Russian Empire, but the Russians avoided engaging him in a full-scale battle. Instead, they would retreat whenever the French army attempted to attack, drawing the enemy deeper and deeper into Russia. The French army was not prepared for an extended campaign, and when they reached Moscow, they discovered that the population and the supplies had been evacuated. After waiting a month for a surrender that never came, in extreme weather and starving, the exhausted army left Moscow to march back. Russian troops attacked Napoleon’s forces all along the way, reducing their numbers from some 600,000 to 100,000 before they crossed the border out of Russia.

When the Second World War ended, Marc Léopold Benjamin Bloch, a medieval historian, university professor, and French Army officer, wrote a book about the defeat of France early in the war entitled Strange Defeat. Bloch (1946) blames the French army for not being able to anticipate, change its strategy, and utilize its comparative advantage. The Germans used their military in a way which at that time was unheard of. Their army moved fast, obtained air superiority, punched through the enemy’s front line with massed tanks, and then ran around the rear areas of its enemy creating fear and confusion. The French then retreated to defense lines that were still under German artillery reach and its fast moving armored and tank progression. The French army failed to comprehend this new strategy of the advancing German troops, retreating to lines that remained vulnerable to the German advancing army.

Similarly, the 1973 Arab–Israeli War, known as the Yom Kippur War, saw new weapons of startling power: wire-guided anti-tank missiles and surface-to-air missiles that transformed the battlefield. Those glamorous, expensive weapons of the 20th century, the tank and the aircraft, seemed incapable of defeating the advancing Egyptian and Syrian armies. That war revealed the power of tactical guided missiles, a process that still can be seen in today’s laser and GPS-guided smart bombs (Peck, 2018).

The abovementioned examples show how powerful nations are prone to failure when they are ill prepared to face new challenges. The next section provides examples of organizations that were not able to adapt to turbulent environments.

Standing Still in Turbulent Environments

This section presents some examples of well-known successful business organizations that have lost their edge and faded or are on the path to decline. Consider Kodak; for most of the 20th century, the company dominated the photographic film market. Kodak was the first to invent the digital camera back in 1975. Yet, the company saw filmless photography as a threat rather than an opportunity. As a result, the company filed for bankruptcy in 2012, missing the digitization revolution it had started (Mui, 2020).

Another innovative company that failed is the Finish company, Nokia. The population of Finland is about 5.6 million. Ye...