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Growing large while staying small : spinning-off as an organizational strategy

Winkel, J.W. te (2007) Growing large while staying small : spinning-off as an organizational strategy.

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Abstract:Growing large while staying small is the motto of the young innovative software house, Topicus. Topicus implemented this motto through separating its organizations when they become too large, by the use of spin-offs. Topicus is very successful with this organizational strategy. It has grown from two until nearly 75 employees and produced three spin-offs in eight years time. This success is not only realized by the organizational strategy, Topicus also developed a product strategy. This product strategy is focused on becoming a network integrator, by developing application services for all actors in a specific sector. Nevertheless, both strategies are not explicitly designed for growth. In addition, these strategies are very different from strategies of other software houses and some problems arise when combining both. This research therefore examines the success of both strategies and improves it where possible. This investigation starts with the creation of a theoretical background that explains the strategies’ success and growth. Literature shows that through spinning-off: personnel is very motivated, an entrepreneurial climate is developed, a very flexible organizational structure is created, and it is a efficient way for entering immature markets. Because it is possible to transfer knowledge, the spin-off can become successful quickly. By developing applications for a specific network, Topicus optimizes the network and reduces the costs made by the organizations in it. In addition, an software house that develops applications for a specific network profits from knowledge, reusability, reputation, and the network effect. These advantages make it easier to sell applications. With this background information, Topicus’ development is analyzed. Topicus’ history shows that all spin-offs started with qualified employees and a launching customer. In the spinoff’s first year it continued working together with the parent. It shares the same building, hires employees from the parent and acquires new projects with the parent. After this year, it is possible to separate entirely because new employees are hired and developed themselves, a first application is finished from which knowledge and/or software can be reused, and a reputation has been established. With this strategy, Topicus realized a unique advantage, the focused spin-offs, and several strategic assets, such as qualitative software. However, these successes come in danger when Topicus’ organizations become too large, because it harms the entrepreneurial climate, agile programming becomes difficult, and the development of personnel slows down. Because employees tend to start for their own, when an organization becomes too large, a new spin-off will be created. Therefore, this process repeats and maintains itself. In this research, an improved strategy is discussed. Topicus investigates new markets for optimization opportunities, on which it bases its spin-off decision. This investigation can be used to create an optimized network approach. When the spin-offs start with small projects that have reusable components, it enables quicker cash flows, needs fewer employees, and can easier attract new customers. This improvement is used for developing a new strategy. This strategy states that with every new customer the possibilities of spinning-off should be investigated, instead of waiting until the organization has grown until 25 employees. It is possible to spin-off if there is a motivated entrepreneur, the parent has several qualified employees available, sufficient financial capital is at hand, and the parent’s network is not saturated. This new strategy is an improvement of the current one, because it stimulates organizational growth, opportunities are better thought over, reusability is improved, and applications are sold easier. However, if Topicus would have applied this strategy from the beginning, it would not have led to much differences. This strategy would have postponed the separation of Finance, because Topicus did not have a network for itself at the time, and the separation of Healthcare in Care and Cure could have been realized yet, instead of beginning next year.
Item Type:Essay (Master)
Clients:
Topicus, Deventer
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:88 social and public administration
Programme:Public Administration MSc (60020)
Link to this item:http://purl.utwente.nl/essays/58226
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