Introduction to E-business and understanding Business

ITU

Spring 2013

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Any questions so far?

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I have some questions!

• What is e-business?• What is e-commerce?• Dis-, Re- and Counter-intermediation?• Major market models?

We must still understand business• Way to many business fail when trying to transform into e-

business• That is often because they don’t understand the basics of their

own organization, strategy, culture and leadership• It furthermore takes a new understanding of customers• An how to transform and change – while the environment

change..

Waves of change

Customer Segmentation

E-business environment

Preparing for next time • What is an organization?

Organizations • Organization:

– a social arrangement which pursues collective goals, controls its own performance, and has a boundary separating it from its environment.

Images of Organization- Morgan, G. (1998)

What is a good metaphor for an organization?

EconomicsEngineering

SociologyPolitical Science

Biology-EcologySocial Psychology

Cultural AnthropologyFolklore Studies

Semiotics and HermeneuticsLinguistics

Postmodern ArchitecturePoststructural Philosophy

Literary Theory

PREHISTORY1900-1950’s

MODERN1960’s & 70’s

SYMBOLIC-INTERPRETIVE

1980’s

POSTMODERN1990’s

Smith (1776)Marx (1867)

Durkheim(1893)Taylor (1911)Follett (1918)Fayol (1919)Weber (1924)Gulick (1937)

Barnard (1938)

Von Bertalanffy (1950)Trist & Bamforth (1951)

Boulding (1956)March &Simon (1958)

Emery (1960)Burns & Stalker (1961)

Woodward (1965)Lawrence & Lorsch (1967)

Thompson (1967)

Schutz (1932)Whyte (1943)

Selznick (1949)Goffman (1959)Gadamer (1960)

Berger & Luckmann (1966)Weick (1969)Geertz (1973)

Clifford & Marcus (1986)

Saussure (1959)Foucault (1972)

Bell (1973)Jencks (1977)Derrida (1978)Lyotard (1979)Rorty (1980)

Lash & Urry (1987)Baudrillard (1988)

Fig 1.1 Sources of inspiration for organization theory

Cultural Studies

Why methaphors?• Metaphor is a way in which humans create meaning by using one

element of experience to understand another. • Metaphors gives us the opportunity to stretch our thinking and

deepen our understanding, therefore allowing us to see things in new ways and act in new ways.

• Applied in this way, metaphor becomes a tool for creating an understanding about what we now recognize as organization and management.

• To achieve greater effectiveness, managers must become skilled at analyzing organizations from different perspectives and develop action strategies that are consistent with the insights they glean.

• Managers who are skilled in the art of reading organizational life have a capacity to remain open and flexible, suspending immediate judgements until a more comprehensive view of the situation emerges.

Machine• Theorist Henri Fayol, F.W. Mooney, and Col. Lyndall Urwick• Interest in rational planning, organization, budgetting, command,

coordination, and control.• Organization seen as a form of engineering. Just like an engineer

designs a machine, classical theorists were attempting to achieve a similar design approach to organizations: 1) conceived organization as a network of parts2) they designed the organizational structure to operate as precise

as possible.• The whole thrust of classical management theory suggest that

organizations can or should be rational systems that operate in as efficient manner as possible. This is easier said than done, because we are dealing with people, not inanimate cogs and wheels.

Strenght and limitations• Some organizations are run as a machine. Max Weber’s bureaucracy –

precision, speed, clarity, regularity, reliability, efficiency is achieved through a fixed division of tasks, hierarchy, supervision, detailed rules, regulations.

• Strengths:• 1) Mechanistic approaches work well under conditions where

machines work well: straightforward task, consistency, precision is a premium (fast food example).

• Limitations:• 1) Mechanistic approaches create organizational forms that have

difficulty in adapting to change.• 2) Mechanistic approaches result in mindless and unquestioning

bureaucracy – ready-made responses, myopic views.

Organisms• Whereas under “Taylorism” organizations were viewed as a technical

problem (machines) and reduced to “paying the right rate for the job,” much of organizational theory since the late 1920’s has focused the limitations of the machine perspective and sought to identify the social and psychological needs of people in organizations.

• The Hawthorne Studies (1920’s-1930’s), lead by Elton Mayo are now famous for identifying the importance of social needs in the workplace.

• A new theory of organization began to emerge, built on the idea that individuals and groups, like biological organisms, operate most effectively when their needs are satisfied.

• Abraham Maslow’s theory suggests that humans are motivated by a hierarchy of needs, not just money as suggested in bureaucratic organizations.

Revelations• The Organismic metaphor has helped organizational theorist to identify:

• 1) Organizations as “open systems”• 2) The process of adapting organizations to environments• 3) Organizational life cycles• 4) Factors influencing organizational health and development• 5) Different species of organizations• 6) The relations between species and their ecology

• Open system theory emphasizes the importance of environment in which the organization exists.

• Organizations are seen as sets of interrelated sub-systems.• The open systems approach encourages us to establish contingencies or alignments

between different systems and to identify and eliminate potential dysfunctions.

Mechanistic vs. Organic (Burns&Stalker (1961)

Stable environment Works best when the environment is relatively stable.

Dynamic and uncertain environment

Works best when the environment is relatively dynamic and uncertain.

Low differentiation of tasks

Tasks will not be differentiated much, because each subtask is relatively stable and easy to control.

High differentiation of tasks

Because tasks are often changing, tasks may need to be differentiated, so specialists, each responsible for one or few tasks, are able to respond quickly.

Low integration of e.g. departments and functional areas

Due to the stability of tasks, there will be low integration between departments and functional areas, because tasks stay relatively stable, and because the functional areas are not heavily dependent on each other.

High integration of e.g. departments and functional areas

In complex environments, rapid communication and information sharing is necessary. Therefore, departments and different functional areas need to be tightly integrated

Centralized decision-making

When the environment is stable, there is no need for complex decision-making that involves people at lower levels. Therefore, decision-making is centralized at the top of the organization.

Decentralized decision-making

When the environment is dynamic and uncertain, there is a need for complex decision-making that involves people at lower levels. Therefore, decision-making power should be distributed to lower ranks, which should get empowered in making decisions.

Standardization and formalization

When tasks are stable, tasks should be standardized and formalized, so that operations can run smoothly without breakdowns.

Little Standardization and formalization

When tasks change rapidly, it is unfeasible to institute standardization and formalized procedures. Instead, tasks should be mutually adjusted, so that each subtask is balanced with other subtasks.

Validate e-business concept• Why is it an e-business concept?• How can you create value on the idea?• Who are the potential customers?• What could be the competition?• Is the technology available or…?

• Desirable – Feasible - Viable

Apply the theory!• What kind of model are you using in your

concept?• Use proper references!

• Presentation next time:– Application of all the relevant theory from chapter

1,2 and 4