Case: The capacity to reconfigure your resources
Yasmine, the latest Jester, has studied the agility of organizations, in which dynamic capabilities play an important role. In this blog she describes a case from her research and tells what organizations can learn from this.
Agility as a means of survival and growth
Now that we have been living in a corona era for over a year, almost no organization can ignore the importance of agility. Agility to be able to react to the events in your environment, in order to stay upright. But agility is certainly just as important in times when the economy is doing well, because the struggle to remain relevant continues. Research has shown that maneuverability is important in both stable and unstable environments. Today, organizations are required to constantly adapt and innovate.
Charles Darwin recognized the importance of agility 200 years ago when he said: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change. ”
In short: agility is indispensable for any organization! At Jester Strategy, we therefore believe it is important to create a robust and future-proof strategy for organizations.
The constant renewal that is required of organizations today demands certain skills and processes from an organization, namely: dynamic capacities. Dynamic capabilities are the capabilities an organization needs to integrate, build and reconfigure its processes. The routines of the organization that are of an organizational and strategic nature. This allows an organization to realize new reconfigurations of resources in a rapidly changing market. In the market, an organization must be able to spot opportunities and be able to seize them. In order to respond to the environment, organizations must make use of their knowledge of the external environment. This knowledge must first be internalized by the organization, by sensing the opportunity and learning from the newly acquired knowledge. Subsequently, the new knowledge must be combined and integrated with the existing knowledge. This should then lead to re-configuration of the organization's resources.
The time when an organization had a safe position with a valuable, rare, inimitable and irreplaceable product or service is over. To remain competitive as an organization, you must have dynamic capabilities. The organization must be able to compose and combine the resources within your organization in a different way, in order to be able to respond to changes in the market.
Research has shown that there is a relationship between having dynamic capabilities and organizational performance. Organizations that can respond quickly, are flexible and are able to restructure internal and external resources are the winners of the marketplace.
The importance of reconfiguration
Perhaps the most important dynamic capacity for SME innovation is the capacity to reconfigure resources. In addition, this is important for organizations in a dynamic environment. Research has shown that organizational efforts for this capacity lead to positive results. Reconstituting resources is a key capability as it transforms resources following monitored market developments and changes. To innovate and gain a competitive advantage, it is critical for organizations to put resources together differently. There are four dimensions of this dynamic capacity relevant to this case: 1) Scope expansion, 2) Scope reduction, 3) Innovation and 4) Institutional frictions.
The impact of the organizational structure
The organizational structure facilitates dynamic capacities. It affects the impact of dynamic capabilities on the performance of an organization. Change in organizational structure can reflect reconfiguration processes. The efficient performance of these processes is improved by modular shapes in the structure. For strategic flexibility, an organization must have a simplified structure, but it must maintain control over non-core functions. Renewing the organizational model and reassembling the structure at the same time causes problems. To mitigate these problems, the organization could reconfigure already existing structures and activities to realize new opportunities. So reconfiguration of structure and resources are interrelated. Organizational structure is divided into a number of dimensions, namely that of 1) Size, 2) Centralization of authority and decision-making and 3) Interdependence of organizational components. These three specific dimensions have been selected because of their relevance to the case organization and / or the development of this dynamic capacity.
The influence of organizational culture
Organizational culture influences dynamic capabilities, to be more precise in the process of reconfiguration of resources. The culture of an organization determines the shared beliefs and expectations that people have. This creates shared norms that have a major impact on the behavior of individuals and groups within an organization. Culture is an important - and therefore frequently researched - aspect for part of the success of an organization. If management has a good understanding of organizational culture, this can reduce the likelihood of organizational failure. Organizations usually do not change if there is a mismatch between the planned change and the existing culture. In addition, organizations often fail in the change process because cultural issues are ignored. If an organization decides to change its strategic direction, it may discover that culture is either a source of strength or a source of weakness. Because building an organizational culture takes a long time, it is also difficult to adapt. In order to understand the organizational culture on a deeper level, it will be divided into several dimensions, namely: 1) People orientation, 2) Innovation and 3) Results orientation.
To what extent do organizational structure and organizational culture influence the development of resources for reconfiguration?
This was investigated through a case study with qualitative interviews with employees and managers of a multinational company in the design & consultancy industry. The study showed that increased organization size contributes to the development of reconfiguration capacities through institutional frictions. This is due to the increased amount of resources available with a larger organization size. Resources that could be missed and therefore could be used for this process in order to innovate. The case organization had a decentralized decision-making structure. This did not induce resource reconfiguration through scope shrinkage and institutional frictions. A centralized approach with a shared vision can help overcome fragmentation and stimulate focused and concerted efforts in the reconfiguration of resources. A high level of interdependence of the organizational components was the reason for the development to be able to reconfigure resources.
People-centricity also helped the organization progress in their digital transformation, developing opportunities for resource reconfiguration through institutional frictions. People were the greatest asset of this organization. A high people-orientation may not have a positive effect on organizations where this is not the case. Innovation orientation and innovation as a dimension of resource reconfiguration were also found to be interrelated. A need to innovate proved stimulating to reconfigure existing resources. Finally, the study found that a strong focus on outcomes did not enhance an organization's ability to innovate, and hence their ability to reconfigure resources through institutional frictions. However, this should be interpreted with caution as a result orientation is necessary for vision and efficiency and this could be stimulating for the development of the ability to reconfigure resources. In summary, the findings suggest that organizational structure and culture can positively impact the ability to reconfigure resources.
What can we learn from this?
The case about developing reconfiguration capabilities to be more agile as an organization is certainly relevant in the current corona pandemic. More than ever, agility is necessary for organizations to build into their organizational structure and culture. This case shows how you can build dynamic capacities through organizational structure and culture in order to compose your resources differently. Innovation by assembling and deploying the (existing) resources within your organization in a different way. To achieve this, it is important to turn the right buttons on your organizational dashboard. The size of the organization, centralization of decision-making and the interdependence of organizational components are structural aspects that can be changed relatively easily. Adjusting cultural aspects such as the degree of people-orientation, innovation-orientation and result-orientation is a longer process. Nevertheless, this can also be changed.
Jester Strategy is happy to help you develop a robust and future-proof strategy. It is important to take a good look at the resources that the organization already has and to make optimal use of them and to reassemble the resources in your organization where necessary. Is your organization ready for the future? We like to think along with you.
Yasmine advises and guides organizations in both the public and private sector in the field of strategy development and scenario planning. Yasmine can best be described as enthusiastic with a fresh, yet critical view. She enjoys taking on the challenge and achieving the best result together with the customer. In her spare time, this Burgundian explores new restaurants and can regularly be found in the gym.