Knowledge Management

Types of knowledge
The definition of knowledge management also includes three types of knowledge—tacit, implicit, and explicit
knowledge. These types of knowledge are largely distinguished by the codification of the information.

 This type of knowledge is typically acquired through experience, and it is intuitively understood. As a
result, it is challenging to articulate and codify, making it difficult to transfer this information to other
individuals. Examples of tacit knowledge can include language, facial recognition, or leadership skills.
 While some literature equivocates implicit knowledge to tacit knowledge, some academics break out
this type separately, expressing that the definition of tactic knowledge is more nuanced. While tacit
knowledge is difficult to codify, implicit knowledge does not necessarily have this problem. Instead,
implicit information has yet to be documented. It tends to exist within processes, and it can be
referred to as “know-how” knowledge.
 Explicit knowledge is captured within various document types such as manuals, reports, and guides,
allowing organizations to easily share knowledge across teams. This type of knowledge is perhaps the
most well-known and examples of it include knowledge assets such as databases, white papers, and
case studies. This form of knowledge is important to retain intellectual capital within an organization
as well as facilitate successful knowledge transfer to new employees.

**Solving the Case Study: Holacracy and its Transformational Impact on the Workplace**

### Introduction

Holacracy is a self-managed organizational structure that distributes decision-making authority among team
members. This innovative model challenges traditional hierarchies and embraces individual talents, autonomy,
and entrepreneurial mindsets. This analysis explores the key components of holacracy, its effectiveness,
benefits, challenges, and considerations for organizational fit.

### **What is Holacracy?**

Holacracy is a self-managed organizational structure based on distributing decision-making authority among

team members. Coined by Arthur Koestler and developed by Brian Robertson, it features roles, circles, and
distributed authority. The Holacracy Constitution provides transparent rules for enacting change, with roles
and circles being central components.

#### **Roles**

Holacracy replaces job descriptions with roles, defining purpose, domains, and accountabilities. Lead Links,
akin to traditional managers, assign roles within circle governance.

#### **Circles**

Circles are self-managed teams, differing from traditional hierarchies. They align with the company's purpose
and comprise roles. Circles operate with distributed authority, allowing members to define, amend, and
remove roles and policies.

#### **Distributed Authority**

Members in a circle can negotiate and allocate duties, fostering a democratic decision-making process.
Individual initiative is encouraged under specific conditions, emphasizing purpose and cost-effectiveness.

### **Does Holacracy Work?**

Numerous companies worldwide, including Zappos, Mercedes-Benz.io, and Valsplat, have successfully
implemented holacracy. For instance, Zappos transitioned to circles and roles, replacing job titles with skills
badges. This change stimulated innovation, frequent feedback, and a focus on company values.

### **Benefits of Implementing Holacracy**

1. **Removes Bureaucratic Tension:** Shifts focus from hierarchy to results, reducing tension.

2. **Encourages Initiatives:** Focused individuals strive for productivity, fostering experimentation and
innovation.

3. **Promotes Teamwork:** Decentralized management enhances communication, fostering a sense of

community.

4. **Quick Response to Challenges:** Allows for daily small-scale adjustments, increasing flexibility.

5. **Promotes Transparency:** Open discussions and agreement boost healthy work relationships and
productivity.

6. **Fosters Accountability:** Self-management necessitates accountability, eliminating blame games.

7. **Promotes Employee Engagement:** Involving employees in decision-making inspires commitment.

8. **Higher Customer Satisfaction:** Autonomy in decision-making brings employees closer to customers,

addressing their needs promptly.

9. **Gives Freedom of Choice:** Employees can choose tasks, uncovering new talents.

### **Challenges of Implementing Holacracy**

1. **Creates Fragmentation:** Managing multiple roles may lead to dispersed energy and reduced focus.

2. **Complicates Compensation:** Determining fair compensation becomes challenging with multiple roles.

3. **Makes Hiring Difficult:** Identifying suitable candidates for numerous roles can be challenging.

4. **Doesn't Totally Eliminate Status Differences:** Some may struggle to adapt, retaining old hierarchical
habits.

### **Is Your Organization a Good Fit for Holacracy?**

Indicators of readiness include a cooperative culture, trust, transparency, a culture of responsibility, and a
startup mindset.

### **How to Implement Holacracy**

1. **CEO Readiness:** CEO signs the Holacracy Constitution.

2. **Experience Holacracy:** Visualize the new approach with a consultant or a Holacracy Taster Workshop.

3. **Choose Software:** Select tools for role management.

4. **Ratify the Constitution:** Circulate and sign.

5. **Hold Governance and Tactical Meetings:** Establish roles and discuss operational issues.

6. **Implement Holacracy Education Program:** Educate employees on Holacracy Habits.

### **Best Practices for Success**

1. **Hire the Right People:** Self-management requires a specific mindset.

2. **Communicate Effectively:** Address resistance, answer questions, and be patient.

3. **Provide Clarity:** Clearly define expectations for autonomous work.

4. **Walk the Talk:** Ensure alignment between leadership's words and actions.

### **Conclusion**

Holacracy challenges traditional organizational hierarchies, offering a transparent and flexible structure.
Successful implementation requires careful consideration of benefits, challenges, organizational fit, and a step-
by-step approach to ensure a smooth transition. When adopted effectively, holacracy has the potential to
drive innovation, employee engagement, and organizational success.

It seems like the case study is presenting the evolution of Wildfire Entertainment's organizational structure
over time and the challenges it faced. Here's a summary of the key points:

**Initial Phase (2006-2012): Informal Structure**

- Founded by two students with technical university training.

- Informal, exciting workplace culture focused on building great software products, including games,
animations, and learning apps.

- Flat organizational structure with only two levels.

- Rapid growth and success with the release of "Squealers," a puzzle game for the iPhone.

**Challenges Faced:**

- Lack of formalized routines and processes.

- Difficulty in handling the increasing complexity of projects and workload.

- Rising costs and slowing decision-making.

- Initial success not sustained, and cracks in the organization began to appear.

**First Restructuring (2012): Functional Structure**

- Hired Elizabeth Rankin, an INSEAD MBA with consulting experience, to address issues.
- Implemented a hierarchical, functional system with clear job descriptions and layers.

- Greater clarity in work, deepened expertise within each functional unit, and improved efficiency.

- Initial success, but cracks started to appear with increased layering and specialization.

**Second Restructuring (2015): Matrix Structure**

- Acknowledging problems with the functional structure, Elizabeth implemented a matrix structure.

- Dedicated product teams for major product lines reporting to both functional heads and product team
leaders.

- Problems emerged, including disagreements, confusion, and lack of consensus.

- Issues with resource sharing and competing priorities.

**Current Challenge and Consideration for Further Restructuring:**

- Elizabeth is considering a divisional structure (Gaming, Animation & Movie, Learning Tools) to address
evolving product-market segments.

- Concerns about potential redundancies and increased costs.

- Desire for sharper accountability, fluid coordination, and fewer layers.

- Recognizes the challenge of avoiding a silo mentality and capturing efficiencies.

**Key Points to Consider for Further Analysis:**

- The strategic context of the industry is changing, and Wildfire needs to adapt to capture new opportunities.

- Balancing autonomy in a divisional structure while avoiding a silo mentality.

- The need for constant attention to informal, cultural underpinnings of the firm.

- The importance of evolving organizational structures based on the strategic context and reality.

Certainly! Let's break down the advantages and disadvantages of each organizational structure discussed in
the Wildfire case:

### 1. **Functional Structure:**

#### Advantages:

1. **Specialization:** Allows for deep expertise and specialization within each functional unit (e.g., storyline
development, animation, software development).
2. **Clarity in Roles:** Clear job descriptions and layers provide employees with a well-defined understanding
of their roles and responsibilities.

3. **Efficiency:** Work can be carefully planned and coordinated within functional units, leading to increased
efficiency.

4. **Task Clarity:** Employees have a clear understanding of their tasks, leading to focused work.

#### Disadvantages:

1. **Limited Collaboration:** The focus on functions may lead to limited collaboration between different
functions, hindering a holistic view of the business.

2. **Slow Decision-Making:** Decision-making may slow down as important decisions need to be escalated up
the hierarchy.

3. **Lack of Holistic Perspective:** Deep expertise within functions may result in employees focusing on
routines within their function rather than thinking holistically about the business.

4. **Potential for Silos:** May lead to silos where each function operates independently, reducing overall
organizational flexibility.

### 2. **Matrix Structure:**

#### Advantages:

1. **Holistic Perspective:** Combines functional and product-based structures, providing an integrated view
of major product lines.

2. **Flexibility:** Allows for flexibility as individuals report to both functional heads and product team leaders.

3. **Efficiency and Technical Depth:** Maintains the efficiency and technical depth of a functional
organization while incorporating a product-focused approach.

#### Disadvantages:

1. **Confusion and Disagreements:** Shared resources and reporting to multiple leaders can lead to
confusion, disagreements, and lack of consensus.

2. **Potential for Politics:** Competition for resources and decision-making authority may result in internal
politics.

3. **Complexity:** Managing the matrix structure can become complex, especially as the organization grows.

4. **Slow Decision-Making:** Decision-making may still slow down due to the need for consensus among
different axes of the matrix.
### 3. **Divisional Structure:**

#### Advantages:

1. **Autonomy:** Each division operates with a high level of autonomy, allowing for sharper accountability
and faster decision-making.

2. **Focus on Unique Opportunities:** Enables a focus on the unique opportunities in each market segment
(Gaming, Animation & Movie, Learning Tools).

3. **Clear Accountability:** Clear divisional boundaries lead to clear accountability for performance within
each division.

4. **Efficient Use of Resources:** Can lead to more efficient use of resources dedicated to specific product-
market categories.

#### Disadvantages:

1. **Redundancies:** Increased divisions may lead to redundancies, resulting in higher costs.

2. **Potential for Silos:** Divisional structures may encourage a silo mentality, hindering overall integration
and collaboration.

3. **Coordination Challenges:** Coordination between divisions may become challenging, especially if there
are conflicting priorities.

4. **Adaptability Concerns:** May face challenges adapting to changes in the industry or technological
advancements.

It's essential to note that the effectiveness of each structure depends on various factors, including the
organization's size, industry dynamics, and strategic goals. Additionally, the case suggests that the
organizational structure needs to evolve over time based on the company's changing context.

### Case Analysis: General Electric's Transition to a Horizontal Structure

**Background:**

- **Previous Structure:** GE Salisbury initially had a functional and vertical organizational structure, leading to
bottlenecks in the build-to-order process.

- **Challenges:** High product-line costs, inconsistent customer service, declining market share.

- **Goals:** Emphasize teamwork, responsibility, continuous improvement, empowerment, and commitment

to the customer.
**Transition to Horizontal Structure:**

- **Objective:** Produce lighting panel boards of the highest quality, shortest cycle time, competitive price,
and the best service.

- **Teams:** Four linked teams with 10 to 15 members each, covering the entire build-to-order process.

1. **Production-Control Team:** Process owner responsible for planning, coordination, purchasing,

inventory tracking, and keeping teams focused.

2. **Fabrication Team:** Cuts, builds, welds, and paints steel box components.

3. **Electrical Components Team:** Assembles, tests, and handles shipping.

4. **Maintenance Team:** Takes care of heavy equipment maintenance.

- **Managers' Role:** Associate advisors who serve as guides and coaches, bringing expertise to teams as
needed.

**Key Features of the Horizontal Structure:**

1. **Collaboration:** Teams work in concert with each other, ensuring smooth integration.

2. **Information Sharing:** Teams have access to information about sales, backlogs, inventory, staffing needs,
productivity, costs, and quality.

3. **Responsibility:** Teams set their own production targets, determine schedules, assign duties, and
identify/solve problems.

4. **Mechanisms for Integration:** Joint production meetings, job rotation, and cross-training enhance
collaboration.

**Outcomes:**

1. **Workflow Improvement:** Bottlenecks virtually eliminated, leading to a significant reduction in lead time
(from six weeks to two-and-a-half days).

2. **Productivity and Performance:** Dramatic improvement with the horizontal structure.

3. **Employee Satisfaction:** Increased employee satisfaction due to empowerment, responsibility, and

collaborative work.

4. **Customer Satisfaction:** Improved customer satisfaction, indicating enhanced service delivery.

**Analysis:**- **Efficiency Gains:** The transition to a horizontal structure has led to substantial
improvements in efficiency, eliminating bottlenecks and reducing lead times.

- **Empowerment:** Teams taking responsibility for their targets and problem-solving indicates an
empowered workforce.
- **Collaboration:** Information sharing and collaborative mechanisms demonstrate effective teamwork.

- **Adaptability:** The structure allows for adaptability and responsiveness to customer needs.

- **Customer-Centric Focus:** The emphasis on customer satisfaction aligns with the organization's
commitment to delivering quality products and services.

**Challenges and Considerations:**

- **Maintaining Integration:** Continued efforts are needed to ensure smooth collaboration and information
flow between teams.

- **Sustainability:** The organization should monitor the sustainability of these improvements over the long
term.

- **Employee Development:** Ongoing training and development may be required to support cross-functional
capabilities.

**Conclusion:**

General Electric's shift to a horizontal structure has proven successful in addressing challenges, enhancing
efficiency, and improving employee and customer satisfaction. The focus on collaboration, empowerment, and
a customer-centric approach has contributed to the organization's positive outcomes. Continuous monitoring
and adjustments will be essential to sustain these improvements.

### Case Analysis: Starbucks' Matrix Organizational Structure

**Background:**

- Starbucks, a global coffee chain, has consistently held a leadership position in the coffee industry.

- The organizational structure adapts to market needs and expansion strategies, contributing to its success.

**Matrix Organizational Structure:**

Starbucks employs a matrix organizational structure, incorporating various elements that intersect within the
business. Key features include:

1. **Functional Hierarchy:**

- Grouping based on business functions like HR, finance, and marketing.

 - Prominent at the corporate headquarters.

- Hierarchical functioning, enabling top-down monitoring and control.

- Policies from functional departments are applicable company-wide.

2. **Geographic Divisions:**

- Structured around physical locations of operations.

- International level: United States, China and Asia Pacific, Europe, Middle East, and Africa.

- U.S. level: Western, Northwest, Southeast, Northeast.

- Each division headed by a senior executive.

- Local managers report to both geographic and functional heads.

3. **Product-Based Divisions:**

- Divisions based on different product lines (coffee, baked goods, merchandise).

- Facilitates focused product development strategies.

4. **Teams:**

- Prominently used at lower levels, especially in coffeehouses.

- Organized to better serve customers.

- Illustrates the correct use of a matrix structure.

**Advantages of the Matrix Structure:**

1. **Flexibility:** Allows flexibility in managing various functions, geographies, and product lines
simultaneously.

2. **Efficient Communication:** Facilitates communication between functional and geographic/product-based

divisions.

3. **Customer-Centric Focus:** Teams at coffeehouses ensure a customer-centric approach, aligning with

Starbucks' service-oriented business model.

4. **Effective Product Development:** Product-based divisions contribute to efficient product development

and innovation.
**Challenges and Considerations:**

1. **Complexity:** Managing multiple intersecting elements can lead to complexity.

2. **Coordination:** Requires effective coordination between different divisions and teams.

3. **Potential Conflicts:** Dual reporting structures may lead to potential conflicts for local managers.

4. **Resource Allocation:** Ensuring optimal resource allocation across functions, geographies, and product
lines.

**Conclusion:**

Starbucks' matrix organizational structure has been effective in maintaining its leadership in the coffee
industry. The combination of functional hierarchy, geographic divisions, product-based divisions, and teams
illustrates a well-designed matrix structure. Success lies in the flexibility, efficient communication, and
customer-centric focus facilitated by this organizational model. Ongoing monitoring and adjustments will be
crucial to address challenges and ensure continued success.

### Case Analysis: Contrasting Organizational Approaches

#### Ternary Software:

- **Structure:**

- **Formalization:** Very low. Decision-making is highly participative, with everyone having a voice.

- **Centralization:** Low. A policy-setting team, including frontline workers, consults with other teams,
promoting decentralized decision-making.

- **Specialization:** Medium. Professionalism is high, and non-workflow personnel are dedicated to R&D.

- **Culture:**

- **Participative Decision-Making:** Every employee has a chance to participate in decisions.

- **Informal Meetings:** Highly informal meetings encourage open communication, including sharing
feelings and business ideas.

- **Pros:**
 - Inclusivity in decision-making.

- Flexibility and adaptability.

- High professionalism and R&D focus.

- **Cons:**

- Potential for slower decision-making.

- May face challenges in standardization.

#### Wal-Mart:

- **Structure:**

- **Formalization:** High. Standardized formula for store building and operations.

- **Centralization:** High. Stores are controlled from the top, with limited freedom for store managers.

- **Specialization:** High. Emphasis on efficiency and standard procedures.

- **Culture:**

- **Efficiency Focus:** Emphasis on internal cost efficiency and standardization.

- **Top-Down Management:** Decisions come from the top, and employees follow standard procedures.

- **Pros:**

- High operational efficiency.

- Standardization for consistency.

- **Cons:**

- Limited adaptability to local conditions.

- Lower employee participation in decision-making.

#### State Arts Agency:

- **Structure:**

- **Formalization:** High. Overwhelmed with rules and standard procedures.

- **Centralization:** High. Rules dictated from the top.

- **Specialization:** Not specified, but likely to be high due to the bureaucracy.

- **Culture:**

- **Rule-Driven Environment:** Overwhelmed with rules and regulations.

- **Top-Down Decision-Making:** Dictated rules and procedures from the top.

- **Pros:**

- Clear rules and procedures.

- **Cons:**

- Overwhelming bureaucracy.

- Frustration among employees.

- Reduced flexibility and adaptability.

#### Overall Considerations:

- The effectiveness of each approach depends on the organization's goals and industry.

- Ternary excels in flexibility and innovation.

- Wal-Mart prioritizes efficiency and consistency.

- The State Arts Agency faces challenges due to bureaucratic overload.

**Conclusion:**

- The optimal organizational approach varies based on the industry, goals, and organizational culture. Each
approach has its advantages and disadvantages, and the key is aligning the structure with the organization's
unique needs and objectives.
### Xerox Corporation: A Tale of Decline and Resilience

#### Organizational Decline:

1. **Complacency and Burox Culture:**

- **High Profit Margins:** Xerox's success with the 914 copier led to complacency, relying heavily on copier
profits.

- **Burox Culture:** The copier-centric bureaucracy, known as Burox, hindered innovation and adaptation to
emerging technologies.

2. **Missed Opportunities and Patent Expirations:**

- **PARC Innovations:** Xerox's Palo Alto Research Center (PARC) pioneered groundbreaking technologies.

- **Missed Opportunities:** Failure to capitalize on PARC's innovations led to a decline in market share as
rivals exploited expiring patents.

3. **Failed Diversification and Leadership Changes:**

- **Insurance Ventures:** Attempts to diversify into insurance and financial services under CEO Kearns led to
financial burdens.

- **Leadership Changes:** Successive leadership changes, including Thoman's brief tenure, contributed to
instability and strategic confusion.

#### Digital Transformation and Challenges:

1. **Digital Age Initiatives:**

- **Digital Presses:** Xerox's success with digital presses and copiers demonstrated an initial step toward
modernization.

- **Underestimation of Threats:** Underestimating the threat of inkjet printers and changing document
consumption habits posed challenges.

2. **Leadership Struggles and Cultural Dysfunction:**

- **Allaire-Thoman Conflict:** Leadership conflicts between Allaire and Thoman exacerbated cultural
challenges.

- **Dysfunctional Culture:** Bureaucratic and political culture hindered adaptation and change efforts.
#### Anne Mulcahy's Turnaround:

1. **Vision, Decision-Making, and Communication:**

- **Visionary Leadership:** Mulcahy provided a vision for Xerox's future and outlined achievements.

- **Decisive Actions:** Massive cost-cutting, closure of unprofitable operations, and focus on innovation
were crucial decisions.

- **Open Communication:** Honest communication about the company's situation, along with empathy,
helped gain employee trust.

2. **Ethical Business Practices and Global Responsibility:**

- **Accounting Scandal Resolution:** Personal involvement in settling accounting investigations

demonstrated commitment to ethical practices.

- **Global Stakeholder Commitment:** Mulcahy emphasized human rights, sustainability, and responsible
business practices.

3. **Strategic Focus on Innovation and Service:**

- **R&D and Customer Contact:** Despite cost-cutting, Mulcahy maintained focus on R&D and customer
interactions.

- **Strategic Acquisitions:** Xerox's entry into new markets and product expansion through acquisitions
contributed to growth.

#### Results and Ongoing Challenges:

1. **Financial Recovery and Recognition:**

- **Financial Rebound:** Xerox's financial performance improved, with sales surpassing $17 billion.

- **Industry Recognition:** Mulcahy's leadership earned her accolades, including "CEO of the Year."

2. **Remaining Challenges:**

- **Management Focus:** Balancing growth and cost controls remains a challenge for Xerox.

- **Economic Uncertainty:** Xerox faces uncertainties in a rapidly changing economic landscape.

### Conclusion:

Xerox's journey reflects the perils of organizational complacency, missed opportunities, and leadership
struggles. Anne Mulcahy's visionary and decisive leadership, coupled with a commitment to ethical practices
and strategic innovation, enabled a remarkable turnaround. However, the ongoing challenges emphasize the
dynamic nature of organizational resilience and the need for continuous adaptation in the face of industry
shifts and economic uncertainties.

### Adapting to Chaos: The Cemex Approach

#### **Challenges and Context:**

1. **Complex Operating Environment:**

- *Unpredictable Conditions:* Cemex operates in areas with unpredictable weather, labor disruptions, and
government inspections.

- *Last-Minute Changes:* Over half of customer orders change or cancel last minute, posing challenges for
scheduling and cost control.

#### **Innovations for Success:**

1. **"Living with Chaos" Approach:**

- *Customer-Centric Design:* Instead of changing customers, Cemex adapts its processes to work on the
customers' terms.

- *System Integration:* Utilizes advanced information technology, including GPS and onboard computers, for
real-time data on orders, schedules, and external factors.

2. **Technology Integration:**

- *Global Positioning System (GPS):* Enables precise tracking and coordination of delivery trucks.

- *Real-time Data Analysis:* Monitors customer orders, production schedules, traffic conditions, and
weather, allowing rapid adjustments.

3. **Organizational and Managerial Changes:**

- *Education and Training:* Invests in weekly secondary-education classes for drivers, emphasizing both
technical and service-oriented skills.

- *Empowerment:* Abolishes strict work rules, giving employees more discretion and responsibility.
 - *Self-Organizing Business Units:* Each delivery truck operates as a self-organizing unit, with well-trained
employees focusing on customer service.

#### **Adaptation to Industry Challenges:**

1. **Housing Collapse and Credit Crisis:**

- *Industry Impact:* Like others in construction, Cemex faces challenges due to housing collapse and credit
crisis.

- *Adaptive Capacity:* Cemex's combination of technology and a learning-focused management approach

positions it for resilience.

2. **Continuous Learning Culture:**

- *On-the-Job Learning:* Employees learn continuously through on-the-job experiences.

- *Training Programs:* Formal training classes contribute to skill development.

- *Knowledge Sharing:* Cemex emphasizes sharing knowledge not only within the organization but also with
competitors.

#### **Outcomes and Future Prospects:**

1. **Enhanced Service Delivery:**

- *Mindset Shift:* Employees transition from seeing themselves as drivers to service providers.

- *Competitive Advantage:* Cemex differentiates itself by delivering a service that competitors cannot
replicate.

2. **Capacity for Anticipation and Innovation:**

- *Proactive Problem-Solving:* Cemex develops a capacity to anticipate customer needs, solve problems, and
innovate quickly.

- *Mindpower Utilization:* Tapping into the collective mindpower of every employee contributes to
organizational adaptability.

3. **Knowledge Sharing for Industry Thriving:**

- *Widespread Knowledge Sharing:* Cemex believes in sharing knowledge with other organizations, fostering
an environment of collective learning.
 - *Thriving in Complexity:* Embracing complexity and rapid change, Cemex positions itself for long-term
thriving.

### Conclusion:

Cemex's innovative approach to "living with chaos" showcases a blend of technology integration,
organizational empowerment, and a continuous learning culture. This adaptive model not only positions
Cemex for success in challenging environments but also fosters collaboration and knowledge-sharing across
the industry, emphasizing the significance of resilience and adaptability in the face of dynamic complexities.

CASE ONE: XEROX CORPORATION -

ORGANIZATIONAL STRUCTURE AND
DESIGN
🗒️Answer
Organizational Decline:
Xerox Corporation's downfall is a classic case of organizational decline. Despite early success
and innovation, Xerox faced significant challenges, including a decline in sales, financial
losses, and a damaged reputation.

Key Issues:

1. Lack of Innovation: Xerox failed to capitalize on innovations from its research center
(PARC), allowing competitors to surpass it.
2. Bureaucracy (Burox): The entrenched copier-centric culture hindered adaptation to
emerging technologies and market changes.
3. Failed Diversification: Attempts to diversify into insurance and financial services
under CEO Kearns led to massive liabilities.
4. Misjudgment of Market Trends: Xerox underestimated the impact of inkjet printers
and the shift to digital document management.

Leadership Changes:

1. CEO Succession Issues: Successive leadership changes, including Thoman and Allaire,
showcased the challenges of reinventing a traditional company.
 2. Cultural Dysfunction: Internal politics and resistance to change hindered the
implementation of digital strategies.

Turnaround under Mulcahy:

1. Visionary Leadership: Mulcahy provided a vision for the future, fostering hope and
setting clear objectives.
2. Decisive Actions: Massive cost-cutting, closure of unprofitable operations, and a
focus on innovation were crucial turnaround strategies.
3. Ethical Commitment: Mulcahy addressed fraudulent practices, emphasizing ethical
business conduct and corporate responsibility.
4. Strategic Focus: Transferring production, focusing on R&D, customer contact, and
entering new markets through acquisitions contributed to success.
5. Global Responsibility: Mulcahy emphasized human rights and sustainable practices,
aligning with global expectations.

Results:
Under Mulcahy's leadership, Xerox rebounded, introducing numerous products, expanding
into new markets, and achieving financial stability. Sales exceeded $17 billion, and Mulcahy
received recognition as a successful CEO.

CASE TWO: TERNARY SOFTWARE VS.

WAL-MART VS. STATE ARTS AGENCY -
ORGANIZATIONAL STRUCTURE AND
DESIGN
🗒️Answer
Ternary Software:

1. Leadership Style: CEO Brian Robertson adopts a participatory approach, allowing

every employee a voice in decision-making.
2. Decision-Making Process: Decisions are made collectively by a seven-member
policy-setting team, including frontline workers, fostering a democratic and inclusive
environment.
 3. Informality and Openness: Meetings are highly informal, encouraging open sharing
of both business ideas and personal feelings.
4. Adaptability: The company values adaptability and encourages diverse perspectives,
as evidenced by the rejection of the CEO's proposal in favor of a collaborative
decision on the profit-sharing program.

Wal-Mart:

1. Centralization and Standardization: Wal-Mart is highly formalized, specialized, and

centralized, emphasizing efficiency through uniform displays and merchandise.
2. Top-Down Control: Decision-making is centralized at the top, with store managers
having limited freedom to adapt to local conditions.
3. Procedural Efficiency: Standard procedures set by management guide employees,
leading to high-performance levels.
4. Employee Perception: While employees have limited involvement in decision-
making, they generally perceive fair treatment due to the company's efficiency and
streamlined operations.

State Arts Agency:

1. Bureaucratic Structure: Reflecting a government bureaucracy, the arts agency is

overwhelmed with rules and standard procedures.
2. Top-Down Dictation: Rules and regulations are dictated from the top, limiting
autonomy at lower levels.
3. Heavy Reporting Requirements: Employees face extensive reporting demands,
affecting their ability to implement rule changes and serve community-based
organizations effectively.
4. Frustration and Challenges: Overwhelmed employees and community-based
organizations express frustration due to bureaucratic constraints.

Structural and Contextual Dimensions:

1. Ternary Software: Low formalization and centralization, medium specialization, high

professionalism, emphasizing adaptability and employee involvement.
2. Wal-Mart: High formalization, specialization, and centralization, low professionalism,
focused on efficiency and standardization.
3. State Arts Agency: Overwhelmed by rules and standard procedures, reflecting a
small part of a large government bureaucracy.

The case illustrates diverse organizational structures reflecting the nature of the business,
leadership styles, and industry demands.
CASE THREE: CEMEX - ADAPTING
ORGANIZATIONAL DESIGN IN A
COMPLEX ENVIRONMENT
🗒️Answer
Cemex's Adaptive Approach:
Cemex, a leading concrete producer in Monterrey, Mexico, has successfully embraced a
cutting-edge organizational design to navigate the complexities of the construction industry
in the twenty-first century.

Challenges Faced:

1. Unpredictable Environment: Dealing with unpredictable weather, traffic conditions,

labor disruptions, permit issues, and government inspections.
2. Customer Changes: Over half of customer orders are changed or canceled at the last
minute, posing scheduling and cost challenges.

Adaptive Strategies:

1. "Living with Chaos": Cemex's approach is to accept and adapt to chaotic conditions
rather than trying to change customer behavior.
2. Technological Innovation: Implementation of a sophisticated information
technology system, including GPS and onboard computers, streamlining operations
and enabling real-time adjustments.
3. Educational Initiatives: Weekly secondary-education classes for drivers, emphasizing
both academic and service training.
4. Empowerment: Abolishing strict work rules to provide employees with more
discretion and responsibility, turning each truck into a self-organizing business unit.
5. Mindset Shift: Employees view themselves as delivering a service, not just concrete,
fostering a customer-centric mindset.

Continuous Learning and Adaptation:

1. Networking Technology: Extensive use of technology to gather and analyze data on

customer orders, production schedules, weather, and traffic conditions.
2. Employee Development: Continuous learning on the job, through training classes,
and by visiting other organizations.
 3. Innovation Culture: Cemex fosters a culture of innovation, problem-solving, and
quick adaptation to changing customer needs.
4. Knowledge Sharing: The organization freely shares knowledge and information with
other organizations, even competitors, recognizing the value of widespread
collaboration.

Future Adaptation:
Despite challenges from the housing collapse and credit crisis, Cemex's capacity for learning,
problem-solving, and innovation positions it for continued success in a rapidly changing
environment.

ORGANIZATIONAL STRUCTURES IN THE

THREE CASES
Case One: Xerox Corporation
Traditional Hierarchical Structure:

1. Top-Level Management: CEO, followed by executive leadership.

2. Departments: Functional departments like Research and Development,
Manufacturing, Marketing, and Finance.
3. Communication Flow: Hierarchical with information flowing top-down.
4. Decision-Making: Centralized decision-making, slow to adapt.

Case Two: Ternary Software vs. Wal-Mart vs. State Arts

Agency
Ternary Software:

1. Flat Structure:
 Emphasis on equality and participation.
 Decision-making involves all employees.
2. Informal Communication:
 Highly informal meetings allowing open sharing.
 Flexibility in adapting to customer needs.

Wal-Mart:
 1. Hierarchical Structure:
 Centralized decision-making.
 Standardized procedures and displays.
2. Efficiency-Focused:
 Streamlined operations for cost efficiency.
 Limited employee involvement in decision-making.

State Arts Agency:

1. Bureaucratic Structure:
 Top-down decision-making.
 Overwhelmed with rules and regulations.
2. Heavy Reporting:
 Extensive reporting requirements for compliance.
 Limited autonomy at lower levels.

Case Three: Cemex

Adaptive and Decentralized Structure:

1. Networked Structure:
 Extensive use of information technology for real-time data.
 GPS and onboard computers for efficient operations.
2. Self-Organizing Business Units:
 Each truck operates as a business unit.
 Empowered employees with decision-making authority.
3. Continuous Learning:
 Educational initiatives and ongoing training.
 Employees constantly learn and adapt to changing conditions.

Customer-Centric and Innovative Culture:

1. Service-Centric Mindset:
 Shifted from delivering products to delivering services.
 Focus on meeting customer needs and preferences.
2. Innovation and Problem-Solving:
 Emphasis on quick adaptation and innovation.
 Frequent sharing of knowledge and information.

These suggested structures align with the unique characteristics and challenges of each
case, emphasizing adaptability, efficiency, and customer-centricity.
ORGANIZATIONAL STRUCTURE
SUGGESTION FOR ITC AND IIC HOTELS
Current Scenario:
ITC's demerger plan involves separating its hotels division into a new entity, IIC Hotels. ITC
retains a significant 40% stake in the new entity, named IIC Hotels.

Proposed Organizational Structure for IIC Hotels:

1. Board of Directors:

 Chairman and Managing Director (CMD): Head of the board responsible for overall
strategic direction.
 Independent Directors: Including experts in the hospitality industry to provide
valuable insights.
 Representatives from ITC: To ensure a link with the former parent company for
strategic alignment.

2. Executive Leadership Team:

 CEO/President: Responsible for day-to-day operations and execution of strategic

plans.
 CFO: Manages financial aspects and ensures financial health.
 COO: Oversees operational efficiency and implementation of business strategies.
 Chief Marketing Officer: Focuses on branding and market positioning.

3. Functional Departments:

 Operations: Manages the day-to-day functioning of hotels.

 Finance and Accounting: Handles financial transactions, budgeting, and reporting.
 Marketing and Sales: Develops strategies to attract guests and increase revenue.
 Human Resources: Manages staffing, training, and employee relations.

4. Hotel Management Units:

 General Managers for Each Property: Responsible for the performance and
profitability of individual hotels.
 Front Office, Housekeeping, F&B Departments: Ensures smooth operations within
each hotel.
5. Corporate Support Functions:

 IT and Technology: Manages digital infrastructure and technological innovations.

 Legal and Compliance: Ensures adherence to legal requirements and industry
standards.
 Quality Assurance: Maintains service standards and customer satisfaction.

6. Advisory Board:

 External Advisors: Experts from the hospitality industry providing strategic guidance.

Key Considerations:
1. Independence: IIC Hotels should operate independently with a focus on its own
growth and profitability.
2. Strategic Alignment: While independent, maintaining a strategic alignment with ITC
can be beneficial for shared resources and brand leverage.
3. Flexibility: The structure should allow for adaptability to industry trends and
changes.
4. Transparency: Clear communication channels within the organization and with ITC
for a seamless transition.

This proposed structure aims to provide IIC Hotels with the autonomy needed for
independent growth while keeping ties with ITC for strategic benefits. It ensures efficient
management at both the corporate and hotel levels, promoting a balance between
independence and collaboration.

Analysis and Summary

Structural Dimensions:
1. Formalization:
 High in large state universities.
 Low in small, family-owned businesses.
2. Specialization:
 Extensive in machine bureaucracy (mass production-oriented organizations).
 Low in professional bureaucracy (organizations with highly skilled
professionals).
3. Hierarchy of Authority:
 Tall hierarchy in machine bureaucracy.
 Professional bureaucracy has a flat structure with professionals having
autonomy.
 4. Centralization:
 Centralized decision-making in machine bureaucracy.
 Decentralized decision-making in professional bureaucracy.
5. Professionalism:
 High in professional bureaucracy with highly educated professionals.
 Varies in machine bureaucracy based on the nature of tasks.
6. Personnel Ratios:
 Varies based on the organization's type and structure.

Contextual Dimensions:
1. Size:
 Measured by the number of employees.
 Large in machine bureaucracy, small in entrepreneurial structures.
2. Organizational Technology:
 Varies based on the organization's type and industry.
 Includes tools, techniques, and actions used for production.
3. Environment:
 Includes industry, government, customers, suppliers, and more.
 Varies in complexity and dynamism.
4. Goals and Strategy:
 Varies based on the organization's purpose and competitive techniques.
 Reflects the scope of operations and relationships with stakeholders.
5. Organizational Culture:
 Underlying set of values, beliefs, and norms shared by employees.
 Influences behavior and provides cohesion.

Additional Concepts:
 Learning Organization:
 Focus on communication, collaboration, and adaptability.
 Horizontal structure, self-directed teams, and empowered roles.
 Efficient Performance vs. Learning Organization:
 Traditional vertical structure vs. flattened horizontal structure.
 Routine tasks with centralized control vs. empowered roles with
decentralized knowledge.

Managerial Guidelines:
1. Understand the Organization:
 Describe based on size, formalization, decentralization, specialization, etc.
2. Context Matters:
 Be cautious about applying one-size-fits-all approaches.
 Tailor organization theory to the specific characteristics of each organization.
3. Competence through Organization Theory:
  Use organization theory frameworks to interpret and understand the
organization.
4. Design Considerations:
 Consider technical core, support functions, top and middle management
when designing.
 Design the organization based on Mintzberg's organizational types.

Organizational Types by Mintzberg:

1. Entrepreneurial Structure:
 Small start-up with direct supervision from the top.
2. Machine Bureaucracy:
 Large, mature organization with extensive formalization.
3. Professional Bureaucracy:
 Emphasizes highly skilled professionals in areas like hospitals and law firms.
4. Diversified Form:
 Large, subdivided into product or market groups to solve inflexibility.
5. Adhocracy:
 Developed for innovation and adaptability in a complex environment.

Contemporary Design Ideas:

 Shift from Mechanical to Natural Systems:
 Move from rigid vertical structures to flexible, adaptable, and horizontal
collaboration.
 Efficient Performance vs. Learning Organization:
 Traditional vs. dynamic, adaptable, and continuous learning.

This comprehensive analysis covers various structural and contextual dimensions, providing
insights into the diversity and adaptability of organizational designs. It emphasizes the
importance of context, challenges traditional structures, and introduces the concept of the
learning organization in response to today's dynamic environment.

Analysis and Summary

Walgreens: Transitioning to a Broad Health Care Provider
Strategic Shift:
 1. Historical Success:
 Walgreens' historical success was based on strategic goals of opening
conveniently located stores and dominating prescription filling.
2. Changing Landscape:
 Faced with increased competition and economic challenges, Walgreens
reevaluated its strategy.
3. Redefining Strategic Intent:
 Shifted from merely selling prescriptions to becoming a broad health care
provider.

Strategic Initiatives:

1. Diversification:
 Opened pharmacies in hospitals and assisted living facilities.
 Offered flu shots and immunizations in stores.
 Established Take Care Health Clinics in Walgreens stores.
2. Health Care Industry Expansion:
 Acquired firms operating health care centers in large corporations.
 Targeted office sites with 1,000 or more employees for health care centers.
3. Integration of Operations:
 Vision of integrating various operations—prescription services, in-store
clinics, specialty pharmaceuticals, and workplace health care centers.
 Utilizing electronic prescriptions and medical records.

CEO Vision:

 CEO Jeffrey Rein envisions Walgreens as a comprehensive health care solution

meeting a broad range of customers' health care needs.

Competitive Advantage:

 Leveraging core competencies in customer service and pharmacist knowledge on a

larger scale.
 Strategic focus on developing and expanding services aligned with the health care
industry.

State Farm Insurance: Mission, Vision, and Values

Mission:

 To help people manage risks, recover from the unexpected, and realize their dreams.

Shared Values:

 Quality service and relationships.

  Mutual trust.
 Integrity.
 Financial strength.

Vision for the Future:

 Customer's first and best choice in products and services.

 Leadership in the insurance industry and a leader in financial services.
 Adaptability guided by customer needs and shared values.

Core Competencies and Competitive Advantage:

 Walgreens:
 Strong customer service.
 Top-notch pharmacist knowledge.
 Application of these competencies on a broader scale in the health care
industry.
 State Farm:
 Shared values emphasizing quality service, trust, integrity, and financial
strength.
 Customer-centric vision and commitment to being a leader in insurance and
financial services.

Managerial Strategies:
 Walgreens:
 Strategic focus on core competencies for competitive advantage.
 Diversification and integration of health care services.
 State Farm:
 Alignment of strategies with shared values and customer-centric vision.
 Aspiration to lead in the insurance and financial services sectors.

Conclusion:
 Both Walgreens and State Farm showcase strategic shifts, diversification, and a
commitment to core competencies to stay competitive and relevant in evolving
markets. Walgreens, in particular, is navigating a significant transformation to
become a comprehensive health care provider.

This analysis highlights the proactive responses of Walgreens and State Farm to changing
market dynamics, emphasizing the importance of strategic alignment with core
competencies and shared values to achieve a sustainable competitive advantage.
Analysis and Summary
Apple's iPhone Strategy: Creating a Status Symbol
Product Launch:

1. Pricing Strategy:
 Launched the iPhone at a high price of over $599.
 Positioned the iPhone as a premium, must-have device.
2. Consumer Appeal:
 Cultivated strong demand, making the iPhone a status symbol.
 Even at a high price, long lines of eager shoppers demonstrated the appeal.

Innovation and Marketing:

1. Innovative Technology:
 iPhone's innovative technology, providing easy access to the Internet, digital
music and video, and mobile social networks.
 Positioned as a "smartphone" appealing to a broader consumer market.
2. Marketing Impact:
 Described as "perhaps the most-hyped gadget in history."
 Creative marketing efforts and the cachet of Apple contributed to consumer
perception.
3. Market Expansion:
 Successfully expanded sales by lowering the price to reach a wider consumer
group.
4. Competing with BlackBerry:
 Apple aimed directly at the business user market dominated by BlackBerry.
 Opened the door to third-party software applications for enhanced
compatibility.

Consumer Perception:

 Apple's focus on design, innovation, and consumer appeal transformed the iPhone
into a desirable and iconic product.
 Positioned the iPhone as the "coolest thing you'll touch."

Umpqua Bank's Differentiation Strategy: A Lifestyle Brand

Differentiation in Financial Services:
 1. Lifestyle Brand Approach:
 Umpqua Bank aspires to be a "lifestyle brand" beyond a traditional financial
institution.
 Emphasizes creating a unique and appealing customer experience.
2. Branch Ambiance:
 Branches designed with free wi-fi access, spacious seating areas, and big-
screen televisions.
 Differentiates from typical banking environments.
3. Branded Coffee and Music:
 Provides Umpqua branded coffee to enhance the overall experience.
 Released a music CD in collaboration with a music marketing firm.

Business Growth:

 Over a dozen years, Umpqua Bank's differentiation strategy contributed to

substantial growth.
 Deposits increased from about $150 million to over $7 billion.

Service Firms and Differentiation:

 The cases of Apple and Umpqua Bank demonstrate how service firms can
successfully implement a differentiation strategy.
 Differentiation goes beyond the product itself and includes creating a unique brand,
customer experience, and lifestyle appeal.

Conclusion:
 Apple's iPhone and Umpqua Bank exemplify effective differentiation strategies in the
technology and financial services sectors.
 Both cases highlight the importance of innovation, marketing, and a focus on
customer experience in creating a competitive edge and achieving business growth.

Thank you for providing the case study on IndiGo Airlines. Based on the information
provided, here is an analysis focusing on organizational structure and design:

Organizational Structure:

1. Simple Structure: IndiGo Airlines appears to have a relatively simple organizational

structure. The case does not provide detailed information on the organizational
hierarchy, but it mentions the airline's success in maintaining a low-cost structure. A
simple structure is often associated with flexibility and quick decision-making, which
could be crucial in the dynamic aviation industry.
 2. Functional Structure: Given the emphasis on cost management and efficiency,
IndiGo likely has a functional organizational structure. Different functions, such as
operations, marketing, finance, and customer service, are likely well-defined within
the organization. This can facilitate specialization and expertise in specific areas.
3. Centralized Decision-Making: The case does not explicitly mention the decision-
making process, but the focus on cost management and the airline's ability to adapt
to market changes quickly suggest a degree of centralized decision-making.
Centralization can enhance efficiency, especially in a competitive industry.

Organizational Design:

1. Cost-Effective Operations: IndiGo's success is attributed to its focus on cost

management. The airline strategically manages its fleet, uses fuel-efficient
technologies, and maintains a low-frills approach. This design aligns with the overall
strategy of being a low-cost carrier (LCC).
2. Fleet Management: The case highlights IndiGo's strategy of having a single type of
aircraft (Airbus A320) in its fleet. This approach simplifies maintenance, reduces
spare parts diversity, and streamlines inventory management. It also contributes to
cost savings and operational efficiency.
3. Efficient Turnaround Times: IndiGo's ability to achieve lower turnaround times than
the industry benchmark is an essential aspect of its organizational design.
Automated processes, including efficient signaling methods, contribute to the
airline's high in-the-air time, optimizing resource utilization.
4. Customer-Centric Service Portfolio: The case mentions a sequential structure of
service offerings, from booking to in-flight services. This customer-centric approach,
with features like online booking, kiosk check-in, and differentiated seating options,
contributes to a positive passenger experience.

Challenges and Future Considerations:

1. Competition and Market Changes: The case briefly mentions the entry of new
carriers like Vistara and AirAsia, and uncertainties in the aviation sector. IndiGo may
need to continuously adapt its organizational structure and design to stay
competitive and navigate industry changes.
2. International Operations: While the case focuses on domestic operations, the
expansion of IndiGo's international operations (started in 2011) could introduce
additional complexities. Managing a consistent organizational approach across
diverse markets is a challenge that may require adjustments to the organizational
structure.
3. Turbulence in the Sector: The case acknowledges potential challenges ahead,
including competitive fare pressure and uncertainties. IndiGo needs to carefully
manage these challenges, possibly revisiting its organizational strategies to maintain
profitability and market leadership.
In summary, IndiGo Airlines has achieved success through a simple and cost-effective
organizational structure and design. Continuous adaptation to market changes and a focus
on efficiency will likely be crucial for sustaining this success in the future.