Gurpreet Dhillon, University of Nevada Las Vegas

James Douglas Orton, University of Nevada Las Vegas

ABSTRACT

Most musings on the strategic management of new organizational forms – e.g. loosely coupled systems, information-technology-enabled networks, and virtual organizations – exhibit two fundamental research weaknesses. First, the "new organizational formists" are insufficiently grounded in research on old organizational forms and old organizational strategies. Second, most studies of new organizational forms are insufficiently grounded in data from the new organizational forms they pretend to explain. This study of John Brown Engineering & Construction’s adoption of an explicit information technology strategy provides a research context in which to consider the phenomenon of "schizoid incoherence," a condition common to sensemakers, decision-makers, and strategy makers who are attempting to manage new organizational forms.

1. INTRODUCTION

John Brown Engineers & Constructors has a proud heritage dating back to the 1830s. They were acquired in 1986 by Trafalgar House Group, which acquired Davy International in 1991 and combined the firms to create an engineering and construction firm ranked third in the world, after the U.S.-based firms Bechtel and Fluor Daniel. In 1991, John Brown had 25,000 employees in 182 offices in 30 countries. In the 1990’s, John Brown adopted an explicit information technology strategy which allowed it to become one of a new generation of information-technology-enabled success stories (Dhillon, 1995). John Brown provides a specific research context in which to consider two related phenomena. The first phenomenon is the notion of "schizoid incoherence" (Hinings & Greenwood, 1988; Greenwood & Hinings, 1988). The second phenomenon is the continued accumulation of microstrategic options (Barney, 1997).

II. SCHIZOID INCOHERENCE

In a thorough analysis of strategic organizational change processes, Hinings and Greenwood (1988) mapped a series of "organizational tracks" by which organizations changed from one design archetype to another design archetype (Greenwood & Hinings, 1988). In an idealized linear transformation from Design Archetype A to Design Archetype B, there is a mid-point at which the organization is presumed to be half-A and half-B. Hinings and Greenwood referred to this point on the organizational track as a brief period of "schizoid incoherence." In our research on loosely coupled systems and information-technology-enabled networks, we have come to believe that schizoid incoherence is not a temporary condition in complex organizations. Instead, we notice firms in a constant state of schizoid incoherency.

Martin (1992), in her analysis of the corporate culture literature, noted a similar phenomenon. In the early stages of culture research, researchers believed in an Integration Paradigm, in which organizational members were presumed to share a common set of values and beliefs. In the middle stages of culture research, researchers believed in a Differentiation Paradigm, in which organizational culture was presented as the interaction of several subcultures. In late stages of culture research, researchers believed in a Fragmentation Paradigm, in which individual organization members manage a portfolio of subcultures which slice through the organization. The movement between the three paradigms is a movement from infrequent, short periods of schizoid incoherence to a permanent state of schizoid incoherence. The organization does not know if it is currently in Design Archetype A, B, C, D, E, F, or G, and it does not know if it should try to move toward Design Archetype T, U, V, W, X, Y, or Z.

To make some sense of schizoid incoherence in new organizational forms, we study John Brown. We find that John Brown’s own particular brand of schizoid incoherence in 1995 can be clarified by the application of standardized analyses from strategy (Barney, 1997). Furthermore, we find it helpful to shift the focus from macrostrategies to microstrategies. Simon (1976) noticed earlier than most theorists that there was a correspondence between (1) the bounded rationality of organizational members, (2) the loosely coupled nature of organizational forms, and (3) the value of small modules of behavior. As uncertainty and ambiguity go up, organizations are moving from firms to bureaucracies to institutions to loosely coupled systems (Orton & Weick, 1990), which require more use of leverage points, logical incrementalism (Quinn, 1980), action rationality (Brunsson, 1982), and small wins (Weick, 1984). Mintzberg (1994) noted in his book, The Rise and Fall of Strategic Planning, that many corporations believed that strategic planning was giving way to strategic thinking and that strategic thinking was giving way to strategic action. We try to capture this meltdown in strategic theory by focusing not on large, complex, generic strategic plans, but on the identification of a set of microstrategic options.

In 1995, when we join John Brown in its schizoid incoherent state, the firm has been successful with its information technology strategy. Table I shows the 1994 revenues of the nine largest Design/Construction firms (Gale Research, 1995). John Brown’s competitors are imitating its information technology investments, and they are thought to be 18 months away from providing similar capabilities. Inside and outside the organization, discussions are being held on what microstrategic options the firm has. We have grouped these options into seven categories adapted from Barney (1997).

Table I. 1994 Revenues of Nine Largest Design/Construction Firms

Table II. Twenty-Six Microstrategic Options for John Brown in 1995

(1) use technology to route tasks to low-cost engineering centers

(2) use technology to reduce engineering hours required on projects

(3) use technology to reduce Total Installed Costs of plants for clients

(4) use technology to reduce duplication inefficiencies in the organization

(5) use global network to reduce travel and lodging costs per project

(6) invest in information technology to differentiate themselves

7. use information technology to differentiate itself on the basis of speed
8. differentiate on the basis of customization of systems to clients’ protocols
9. differentiate on the basis of a comprehensive mix of services

Strategic Alliance Microstrategic Options:

10. create strategic partnerships downstream with its clients
11. be prepared to create joint ventures around clients’ outsourced functions
12. create upstream alliances with suppliers to provide service to a third party

Vertical Integration Microstrategic Options:

13. vertically integrate backward by acquiring one or more of its suppliers
14. lightly vertically integrate forward, from adversarial to trusting relationships
15. heavily vertically integrate forward by acquiring or developing new division

Diversification Microstrategic Options:

16. move into "data-for-life" engineering plans archiving business
17. move into "brownfield" facilities management contract business
18. leverage information technology investment by opening IT consulting unit
19. "de-diversify" by emphasizing engineering and deemphasizing construction

Globalization Microstrategic Options:

20. open more sites around the world to increase "shop-window" visibility
21. create regional hubs to economize on global communications equipment
22. develop a skills database to create a world sourcing solution to projects
23. play an economic patriotism card by presenting itself as non-American firm

Merger and Acquisition Microstrategic Options:

24. convince Trafalgar Group to sell off a division to maintain investments in IT
25. convince Trafalgar Group to sell John Brown to a stronger corporation
26. convince Trafalgar Group to have itself acquired by a stronger corporation

X. THE MANAGEMENT OF NEW ORGANIZATIONAL FORMS

Of these numerous microstrategic options faced in 1995, the one that was "chosen," was the last one listed: sell Trafalgar House Group to a stronger corporation.

John Brown’s new parent company is the Norwegian group Kvaerner ASA. Kvaerner’s operating revenues for 1996 were $8.4 billion, and the Kvaerner E&C division employed more than 11,000 people in 55 offices worldwide before the acquisition of Trafalgar House Group. Kvaerner is reviving its engineering and construction operations. They have agreed to bid on large construction projects in India, and required government approvals have been received. The Trafalgar House Company was previously forced to bid on large contracts as a subcontractor because of its relatively small size, but Kvaerner now offers the financial resources which make it possible for Trafalgar House Company to make and win bids as contractors. Kvaerner also finances internal technology transfers with royalties of 1.25%, which helps make it possible for John Brown to continue investing in information technology (Financial Times).

The analysis of John Brown allows us to suggest three important points for researchers enamored of "new organizational forms" such as loosely coupled systems and information-technology-enabled networks.

First, it is not a new thing for organizations and the people in them to find themselves in a relatively permanent state of schizoid incoherence. It is not a condition unique to new organizational forms. Furthermore, schizoid incoherence is probably best responded to by a rich portfolio of microstrategic options than by narrow macrostrategic genius.

Second, organizations will respond to schizoid incoherence the way they have always done so, through the accumulation of microstrategic options. We have found it helpful to adopt a traditional categorization of generic strategy types as a sorting schemes for microstrategic options for John Brown. This suggests that perhaps people in schizoid incoherent organizations could also benefit from the structure of old, accumulated strategic options. When John Brown is acquired by Kvaerner, one of the options is exercised, but the accumulated portfolio of options remains for the organization’s next phase of schizoid incoherence.

Third, we recognize that there is an ongoing movement in organizational forms, from firms to bureaucracies to institutions to a wide variety of new organizational forms. John Brown provides an intriguing case study of what a virtual organization, an information-technology-enabled network, or a loosely coupled system might look like in 1995, but it is only a blip in the continual advancement of organization forms.

In order to truly understand new organizational forms, scholars need to develop a little less breathlessness and adopt a longer term perspective in which there has always been schizoid incoherence, there have always been accumulated microstrategic options, and today’s new organizational form will always be tomorrow’s old organizational form.

XI. REFERENCES