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Click today, lead tomorrow: organizing exploration at fast growing internet technology organizations

Lamers, F.C.R. (2009) Click today, lead tomorrow: organizing exploration at fast growing internet technology organizations.

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Abstract:The goal of this research is to get understanding of the organization of exploration in fast growing organizations operating in the internet technology industry. The research question: “How are fast growing organizations, operating in the internet technology industry, engaged in exploration and how do they organize this?” is inspired by the situation at M4N. M4N is a fast growing organization that develops internet technology. They acknowledged that the fast growth has put some pressure on its explorative activities. The causes of the problems they described can also be found in the combination of various theories on the balance between exploration and exploitation, and organizational growth. During the growth phase, the organization gets more complex. A common response is to introduce more structure, and formalize and professionalize tasks and functions, often resulting in a loss of flexibility (Kazanjian, 1988). This will benefit the exploitative capacities, but may hamper exploration. Too much engagement in exploitation can result in a disordered balance between exploration and exploitation, which is called the success trap (Levinthal & March, 1993). However, for organizations in high velocity markets, exploration is an important capability for survival. A problematic situation arises where internal forces go against environmental requirements. Therefore, the question was raised how fast growing organizations in high technology markets handle that situation. The goal of this research is to understand how these organizations behave in the field of exploration during the changing circumstances as result of the growth. To get an insight into how these organizations are engaged in exploration and into how they organize it, multiple case studies were conducted. Data collection was done by means of a questionnaire that collected quantitative data about the presence of exploration. Interviews were arranged to get understanding on how organizations explore, and how growth has affected this. Seven organizations that experienced extremely fast growth were selected. The results showed that continuous development is important for all organizations, but most concentrate on improvements in existing products instead of on explorative projects. Varying strategies towards exploration were found, which were indicated by the strategy types of Miles and Snow (1978). Because of the heterogeneity of the internet technology industry, market conditions in various subcategories vary, which is an important factor affecting the engagement in exploration. Four organizations were categorized as “prospector”. For these organizations, experimenting with new opportunities was part of the core business. Although the velocity of the market is an important factor affecting the strategy, the ambitions of the management and the employees play a major part as well. One organization has chosen an explorative strategy since it is necessary to be explorative to survive in the market. In the other three organizations, exploration was important rather because of their ambitions than necessary conditions. Defenders, analyzers and a reactor were recognized as well. In addition, the structure and presence of external partnerships varied among the cases, which can be related to the varying strategy types and organizational size. In highly explorative organizations it was found that their structure is aligned with this strategy, and a specific team or unit is completely directed towards exploration. Since development requires dedication and concentration, separation of daily practice benefits exploration. At smaller organizations, resources are limited and the organization is still manageable without strict separation of activities. In organizations in which exploration is not part of the core business, it is also less present in the organizational structure. It is not necessary to create a structure in which both exploration and exploitation get full attention and are optimized. During periods in which exploration becomes more important, temporary teams are founded to explore, without affecting the daily business of the standard operation. However, a complete lack of structure or task for exploration, unclear strategy or limited fit between strategy and structure, results in the loss of overview when the organization grows, which affects the explorative intensity negatively. Despite the strategic and structural differences, a common denominator is found as well. Internet technology is an intangible product, created on computers. This has the result that no detailed plans or strict processes need to be drawn. Instead of a sequential process, it is iterative; experimentation by trial and error plays a major part. Based on the feedback and new knowledge, the product is shaped and changed during the whole process. Growth does not really change this; and, therefore, a certain flexibility and openness for creativity is always present. It was also found that the presence of external relationships in order to explore was quite limited. Only two highly explorative organizations were really active with external partners for explorative purposes. 5 The most important conclusion of this study is that the possible negative effects of organizational growth can be prevented when the organization has a clear strategy, and introduces more structure into the organization when complexity increases. In the case of clearly defined strategies, the creation of structure, task specialization and functional differentiation contributes to exploration, contrary to the assumption that an increase of structural elements as specialization would hamper engagement in explorative activities as was suggested in the theory of Levinthal and March (1993). Generally, organizations prefer a form of separation. Larger organizations with explorative strategies prefer structural ambidexterity, since it optimizes both exploration and exploitation. When the organization is small and resources and employees are limited, contextual ambidexterity tends to be present. When the size of the organization increases, more structural ambidexterity is introduced since there are enough resources to do so, and also because the complexity requires a mechanism to ensure control when both exploration and exploitation are performed. Organizations that are less engaged in exploration mostly perform exploration through temporary projects, for which a separate team is formed. Another important finding is that the presumed importance and benefits of external collaborations are mostly undervalued by the organizations. The research also shows that collaborations for explorative projects are limited. Only organizations which regard experimentation and engaging in new opportunities as the core value see the benefit of external collaborations and tie up with them. Most partnerships are established with clients and suppliers for more exploitative objectives, confirming the findings of the research of Faems et al (2005) in which is stated that explorative and exploitative projects require different kinds of partnerships depending on the capabilities and the interest of that partner. One of the recommendations, therefore, is that fast growing high technology originations should focus more on the possibilities of such collaborations. Now it is more or less ignored, but it should have more attention. Organizations have to seriously consider the possibilities, instead of only focusing on the organizational costs and the efforts that need to be made. Fast growing organizations in high technology markets characterized by iterative processes and organic structures may be advised that professionalization and separated structure is beneficial, without losing the creative atmosphere and the explorative vibe in the organization.
Item Type:Essay (Master)
Clients:
M4N
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/59900
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