Foundation, growth and innovation Flashcards
Specifics of emerging organizations
- each stage is passed at different pace and not all organizations pass through all stages
- through all stages the organization changes (90% don’t make it over birth phase)
(Parabel life cycle: organizational birth, growth, decline, death)
Foundation phase
- founding = birth of organization and occurs when entrepreneurs take advantage of opportunities to create value using their skills
- dangerous lifecycle phase associated with greatest chances of failure because organization is fragile and liability of newness
- -> most important risk are no formal structure and environmental threats
- -> Business plan important to face threats
Business plan preparation
- Notice a product opportunity and develop a basic business idea
- Conduct a strategic (SWOT) Analyses
- Decide weather the business opportunity is feasible
- Prepare a detailed business plan (mission, goals, resources, timeline)
Population Ecology Theory
- describes external factors which influence an entry to a population of existing organizations
- Population of organizations: competing for the same resources
- Environmental niches: particular sets of resources or skills
Population Density (I)
The number of organizations that can compete for the same resources in a particular environment
• Factors that produce a rapid birth rate
• Availability of knowledge and skills to generate similar new
organizations
• New organizations that survive provide role models
Population Density (II)
As the environment is populated with a number of successful organizations, birth rate tapers off because:
• Fewer resources are available for newcomers
• First-mover advantages: benefits derived from being an early entrant into a new environment
• Difficulty of competing with existing and established firms
Birth Rates Over Time
- in a new environment birth rate is high because firms benefit from environmental advantages and better access to resources
- -> reasons increase:
- new knowledge/skills after first foundation leads to lower risks for imitators and higher change to find investor
- -> reasons for decrease:
- loss of first-mover advantage, access to resources is worse, competition established
Growth phase
- organizations develop value-creation skills and competences that allow them to acquire additional resources (=growth)
Organizations develop competitive advantages and create surplus resources (Growth is not an end in itself)
Institutional Theory
- organizations ability to grow increases by becoming legitimate in the eye of stakeholder
- Institutional environment (norms and values that govern the behavior of a population of organizations)
Organizational Isomorphism
= similarity of processes/structure of an organization to those of another under similar constraints, as a result of imitation
Three processes explain why organizations become similar over time in structure, processes, and organizational culture:
- Coercive Isomorphism
- Mimetic Isomorphism
- Normative Isomorphism
Coercive Isomorphism
- Exists when an organization adopts certain norms because of pressures exerted by other organizations and society in general
- Increasing dependence of one organization on another leads to greater similarity
Mimetic Isomorphism
- Exists when organizations intentionally imitate one another to increase their legitimacy
- Environmental uncertainty increases the likelihood of imitation
Normative Isomorphism
• Exists when organizations indirectly adopt the norms and values of other organizations in the environment
Disadvantages of Isomorphism
- Organizations may adopt behavior that has become outdated –> no longer effective
- Pressure to imitate may reduce the level of innovation
Greiners Model of Organizational Growth
- Paradox that success creates its own problems
- As a firm grows, it faces new challenges & crisis
- each (of the 5) phases is characterized by a gradual, evolutionary period followed by a shorter, revolutionary period
Organizational Decline
- enters when it fails to Anticipate, Neutralize, Recognize, Adapt or Avoid to external or internal pressures that threatens its long-term survival
- It may even occur because organizations grow too fast or too extensively
–> the key is to adjust structure, processes and culture
key figures to assess the effectiveness and profitability
Effectiveness
- comparing its profitability relative to others
Profitability
- generate profit when product is sold
- how well is firm using resources
Factors that cause Organizational Inertia
- Organizations often do not react to changes in the environment because they exhibit a certain organizational inertia (stability vs. less adaptability)
- because of
1. Risk aversion
2. The desire to maximize rewards
3. Over-Bureaucratization
Weitzel & Jonsson‘s Model of Orga. Decline
Stage 1: Blinded Stage (unable to recognize internal or external problems)
Stage 2: Inaction Stage (take little actions - gap between acceptable and actual performance increases)
Stage 3: Faulty action (changes are to little, worming decisions are made or too late)
Stage 4: Crisis Stage (only radical changes can stop decline)
Stage 5: Dissolution (decline is irreversible, organization can not recover)
Innovations in Organizations
Innovations - actions required to create new ideas, processes, or products which – when implemented – lead to positive and effective change
Drivers of Innovations
- start with an idea
- lead to complex processes of change and involve many people
internal and external drivers
- Nurturing Talent (people with natural talent, depends on personality)
- Managing Creativity (ideas are recognized and valued people are motivated)
- Building Relationships (boosts creativity and encourages people)
- Encouraging ‘A Culture of Innovation’ (drives innovations on a continuous basis)
resistance against Innovations
- Innovations have disruptive effect they are connected with change which are employees often afraid of
- new technology, product or marketing methods often imply reshaping of resources/expertise, change of norms/values and rapid obsolesce of accumulated learning
- to avoid resistance: involve employees, explain the need for change right timing, reveal advantage, create a culture for innovations
