Every company needs an organization which changes as quickly as its business changes. If not, the company is falling behind. In order to keep from falling behind, many companies are devoting enormous amounts of time and energy in “Change Management”. This change task can be made less difficult and less time consuming if some of thechange effort focused on designing organizations from the outset to be more easily changeable. If change is constant, why not design our organizations to be constantly and quickly changeable? It is this easily changeable or reconfigurable organization that I would like to describe in this article. Competing With No Sustainable Advantage One of the needs for a reconfigurable organization arises fromthe decline in the sustainability of competitive advantages. Organizations have always been created in order to execute business strategies. Different strategies have lead to different organizations. But when advantages do not last long, neither do the organizations which execute them. In the past, management crafted a winning business formula and erected barriers to entry to sustain theiradvantage. Then management created an organization structure around functions, products/services, markets or geographies, which was designed to deliver the success formula. To complete the integrity of the organization, planning and budgeting processes, information systems, new product development processes, compensation systems, selection and promotion criteria, career paths, performance appraisals andtraining and development sequences would all be designed and aligned with each other and with the organization’s strategy and structure. Such an aligned organization would execute the strategy with as little friction as possible. This thinking resulted in models like the one shown in Figure 1 (Galbraith, 1995). Figure 1 — The Star Model
ProcessesJAY R. G ALBRAITH
Today, in many industries, that model of organization design is flawed. The reason is the success formulas do not last very long (D’Aveni, 1994). The advantages around which the organization is designed are quickly copied or even surpassed by high speed competitors. Therefore, to focus and align the organization is to become vulnerable.Some people have concluded that alignment is no longer a useful organizational design criterion. While I agree that alignment around a focused strategy can impede change to a new strategy, it is the continued focus on a non-sustainable advantage that is the flaw, rather than the alignment. The point can be made by focusing on the alternative which is misalignment. Misalignment of strategy,structure and processes will cause activities to conflict, units to work at cross-purposes and a loss of organizational energy over many frictions. Instead, we need a new, aligned organizational design. We need to have organizational structures and processes which are easily reconfigured and realigned with a constantly changing strategy. Thus, the challenge is to design organizations to executestrategies when there are no sustainable competitive advantages. When product advantages are not sustainable over time, the winners will be those who create a series of short-term temporary advantages. Under this scenario, the leaders will be future-oriented and will continuously create capabilities that lead to customer value. They will move quickly to combine these capabilities to match and surpasscurrent advantages (including their own.) They will outmaneuver competitors by stringing together a series of moves and countermoves, as in a game of chess. Those companies with the capabilities for flexible responses and a variety of moves over the course of time will most likely win. The reconfigurable organization is the means to execute this continuous strategy shifting. An Example of the...