Question

In the last 25 years, three prominent U.S. corporations faced disruptive technology in industries they invented: IBM, Motorola, and Eastman Kodak. The challenge to IBM came in the 1980's from Personal Computers which they had invented. But IBM's top management refused to embrace PC's and competitors swooped in to grab the emerging market. IBM collapsed to $40 a share and laid off tens of thousands. Then new management took the company into other directions which became its future away from mainframes. Motorola invented digital phones. It had a dominant position in messaging devices (pagers) and analog phones that made a ton of money. They were making so much money on analog they were slow to switch due to internal fights. The management took away its lifeblood: "Innovation and decided to buy technology from outside and not invent it within. It didn't take long until Motorola was just selling "me, too" Android phones. Eastman Kodak has a long history of innovation and being a patent leader. Ek considers itself a chemical company. In manufacturing film, it was laying down layers of chemicals and light sensitive silver on a substrate. George Eastman's idea was to sell you a cheap camera (the razor) and then sell you a ton of film (razor blades) to put inside it. What killed Kodak is that it didn't listen to the innovators within who believed that digitization was going to eventually destroy the film business. Kodak invented digital photography but the film guys argued that they made all the money and those "Inventor Guys" were dragging down profits. It was the exact same battle that had been fought within IBM and Motorola a decade or two ago. 1. Explain what happened with IBM, Motorola, and Eastman Kodak from a Systems Theory perspective. 2. When is a bureaucracy a good choice for an organization? What alternatives exist when a bureaucracy is not a good choice? Briefly discuss. 3. Discuss the role of intuition in organizational decision making. Explain some of the factors that prompt use of intuition in decision making. 4. According to Drucker's article what are the main assumptions that drive the theory of the business. Explain with current examples.

Answer 1

1.

All three companies IBM, Motorola and Eastman Kodak were leaders in their respective industries, and enjoyed a dominant market share. They had products which were hit in the consumer markets and the top management attitude was to milk these cash cows. There was apparent aversion to embracing change and innovation, despite of seeing warning signs that could topple their business models.

Systems Theory can be termed as a conglomeration of multiple parts and processes which can be natural or human, that help run that particular system. Any change to one or more components can affect the entire system. All three companies were being affected by change for the betterment of their respective industries, but the companies were reluctant to adapt towards that change, which in a way collapsed their system as time embraced new changes.

2.

A bureaucracy is a top-down structure where the CEO takes all the decisions which are then passed over to the top management. It then passes down to the senior and mid level management who instruct the blue collared workers. Such a system is passe and could only work in the manufacturing domain, where inputs from the bottom tier are not insightful because of the systems and processes in place.

In this new digital age, flat structures are the norm, which provides a lot of independence to every corporate level. As millennials join the workforce, there is a greater need and acknowledgement for flexibility. Value points and insights are collected from every level to incorporate them in to the betterment of the organisation.

3.

Traditionally decision making has been selecting the most logical course of action from a set of alternatives. In a business setting, information is first collected, analysed, interpreted and then formed into alternatives, and the best option is chosen from these. However, increasing complexities and and an unpredictable environment has made decision making a rather complex activity.

There has been an emphasis on intuition because of the volatility in the market and the pressure to succeed against all odds. Although intuition can be termed as highly complex, it is a a highly developed form of reasoning, which has evolved through years of experience, learning, gathering facts, patterns, concepts, procedures and abstractions. However, this is a highly individualistic skill which can work in some instances and might not during other times. It takes a lot of experience and knowledge to take decisions based on intuitions, the decisions themselves can be trusted only when the pass four crucial tests. The familiarity test - here familiarity is judged on on major uncertainties in the situation. The feedback test - these are a derivatives of decisions taken in the past and the lessons learnt from them. The measured emotions test - this relates to the strength of emotions associated with previous decisions. The independence test - this is to avoid any conflicts of interest.

4.

According to Drucker, the assumptions around which a business is built are key for the business to be successful. There are mainly three types of assumptions:

Assumptions about the business environment: These consists of factors like, structure, society, market, customers and technology.

Assumptions about the company's mission: These are the results which the company considers as a benchmark for success.

Assumptions about core competencies: These are the core competencies or the areas in which the company must excel to maintain its leadership position.