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Oticon has done a very good job in rendering its internal boundaries permeable. Yet, one might argue that it is somewhat impermeable to its environment, in particular its business partners - customers and suppliers. Following in Kolind's steps, what could you suggest for Oticon to open its external boundaries? How would you use IT in doing so?
According to the kolinds steps that he managed to acquire a nearly encyclopedic knowledge of the hearing aid business and reduced cost by stopping providing cars to the executives. Furthermore, his vision was to go for knowledge and innovation based economy and finally formed a group to design new electronic infrastructure. So he did good job to make internal boundaries permeable.
But to answer the question, by making specific external boundaries more permeable, organizations can dra- matically increase speed, flexibility, integration, and innovation. As product life-cycles shrink, global competition heats up, the cost of innovation spirals upward, customers demand more, and everything moves faster, companies are realizing that they cannot keep up by working alone. They need to join forces to drive technologies, expand distribution, enter new markets, ensure sources of supply, and match end-user expectations. These structures can take a number of forms for an individual organization. So I suggest Oticon to focus on the following and to use the necessary IT tools discussed:
External sourcing and alliances: Using technology as an interface, many companies are seeking the integration of functions, which reach beyond the organization's boundaries. Frequently, there is substantial customizing of products or services by suppliers and in return, the company makes them preferred partners guaranteeing a certain volume of work. For example, a company and its suppliers may work together closely on a product's design or develop an order fulfillment process whereby they share real time information. Such as Del company.
Partnerships and joint ventures: setting up an external entity with one or more partner organizations for the benefit of all the partners. Typically, this entity is focused on developing and supplying a product, a service, or a technology. The companies involved are frequently competitors who work together, sharing expertise and costs, to develop or create something they both need.
Business webs: Ultimately, as electronic communication and e-commerce become ubiquitous, networks will grow and develop increasingly complex forms. Tapscott suggests that we will increasingly see companies identify a customer value proposition and build an appropriate system of suppliers, distributors, commerce services providers, infrastructure providers, and customers to make it profitable
Sophisticated computer system should be introduced to compete with the competitors such as automated order delivery and distribution
IT should be used get closer to the customers and suppliers
Introducing ERP and CRM systems in Oticon company
Reducing time to response customer request by using IT tools.
Personalized service and products should be introduced to customers
What were the characteristics of Oticon's workforce that constituted together a challenge and an opportunity for the transformation Kolind undertook?
Kolind and various work groups spent hundreds of hours setting out the basic values that would guide the re-organized company. These discussions led figure out some specific qualities the oticon's employees should have and this transformation resulted by introducing the following innovation:
Employees should be treated as responsible adults, but also as unique individuals.
Employees would want to receive complete information and be treated as fundamentally honest.
Oticon Employees have complete freedom in choosing the projects they work on, the hours they work, their vacation time and the training they need.
They publicize their needs on the electronic bulletin board, and interested employees respond directly online.
The shift from hierarchical systems to networks of experts also applied to specialized fields such as hearing, acoustics, psychology, anatomy, chip design, marketing, and finance.
Employees are encouraged to develop an interest in fields other than their own by getting involved in activities for which they may have no prior qualifications.
Employees are responsible for creating their own competency profile. They define their own tasks and adapt activities to suit levels of knowledge and ability.
Project managers exercise a great deal of freedom. They have complete responsibility for their project, from recruitment through budgeting and determining the resources required.
Giving employees free and full access to information. "Anyone can click on our strategic plan (in the computer) and see what we intend to do to:
Chapter 5 discussed the attributes, competencies, and functions of the leader. Discuss each element with respect to Kolind's leadership.
The leadership piece of the management puzzle was described along four main dimensions: personal attributes of the leader, leadership responsibilities, leadership competencies, and leadership functions.
Competencies: Even at the earliest stages of a potential project he always started considering how potential problem formulations could be both analytically solved and operationally implemented. It is perhaps this intuitive talent that more than any other has characterized his success in his more recent activities". Strategic thinking and communication skills are strategic competencies characterizing Kolind's leadership.
Attributes: According to his entourage, Kolind indeed possessed a high degree of discipline and commitment. Karen Jespersen, Danish Minister of Social Affairs, worked with Kolind on a project to make Danish corporations more sensitive to social issues. She describes Kolind as being "totally committed" to whatever project he is driving. Neils Jacobsen, who was named Oticon co-CEO in 1992, and eventually succeeded Kolind in 1998, said of Kolind that he was "deeply committed and absorbingly engaged". Kolind's commitment to his vision went so far as having him take a "large personal financial risk by investing millions of borrowed DKK in Oticon in the early days".38 With members of upper management who showed resistance toward change, he was firm: "I was not afraid to use power.
Responsibility or function:Kolind assumed his leadership responsibilities during the whole transformation process, from reimaging - developing a vision for the organization - to renewal- monitoring and improving organizational performance, going through reshaping - determining how the organization will operate, and realization - deploying the necessary resources to realize the vision
How would you qualify the role of IT in the case of Oticon? Was it just accessory, and not absolutely necessary to make the change feasible? Was it central to Kolind's Strategy?
IT, played an important role in Oticon's transformation, we might say that it was an enabler, rather than a driver... Kolind's strategy document actually mentioned IT as the critical component of the transformation's success. It also identifies it as the tool by which the new organizational form would become feasible, by "liberating ourselves from the idea of always working in the same place," and by helping doing away with paper "which binds us to one place." The scanning/imaging system - with its ability to incorporate images, text, and other multimedia data types into the same database - supports the "paperless office," and is a key element in rendering this part of the vision feasible. The IT infrastructure (LAN, scanning system and central database, etc.) put into place makes information available to all employees, anywhere in the headquarters. Therefore, project teams can move around and still have access to information from one of the workstations located throughout the office.
Oticon's information system was designed to give everyone access to all information, even the CEO's agenda - one of the few exceptions to this is individual salaries; as Kolind said, he had to compromise a bit on this point. If people wish to see the firm's strategic plan, it is available on the system. This way, says Kolind, if people know where the firm wants to go, they will position themselves accordingly, by choosing projects for which they feel that their skills will be most helpful in reaching the firm's objectives.
A large insurance company launched a major project toward the "paperless office." Numerous task forces were constituted. Their mandate included the identification of the main vendors and of the best practices in this domain. Numerous vendors were either visited or invited to make presentations of their highly sophisticated technology. Several firms that represented best practices were visited in order to determine the set of best practices that would be adopted by the insurance company. A 2-year, 50 million dollars project was undertaken. The technology and the accompanying systems were delivered on time, and complied with the requirements. Three years after the end of the project though everybody's desk is still inundated with stacks of papers, and the most recent statistics indicate that less than 20 percent of the technological features provided are indeed used. How would you explain this situation?
According to this scenario, there may be two issues either the top management doesn't have the motivation to monitor the effect of the technology towards the organizational performance or the employees were not familiar with the technology and they didn't get enough training regarding this new system. Furthermore, the technology may reduce response and delivery time by just creating one central data base with all the information stored inside it so that the information can be transparency to the customers. The company can provide enough technology inside the cars so that their communication to company may be easy for them if they encounter any accidents.
Section Two: Questions and Answers of Chapter 8 respectively
How an organization with a structure like the one Li & Fung has adopted support strategic changes?
Its strategy is formulated every 3 years, very formally. The leaders adopt a triennial plan to guide their actions and do not formally revise it during that period. One way of providing better operations and lower cost is to take advantage of different suppliers in different countries. Li & Fung does this very efficiently; this is at the very core of Li & Fung's strategy. The suppliers in different countries are selected for their respective comparative advantage. The different activities are assembled and coordinated across distant sites to provide a single integrated interface for the client. The strategy should be an interesting mixture of total integration and total decentralization.
Organization can adapt strategic changes by considering these four elements as critical at the strategic level: an integrated interface provided to each client, flexibility of the organization that provides instant turnaround capabilities to respond to any market change, low-cost structure, and finally, flexibility given to the client to modify orders at will during order processing.
What are the core competencies of Li & Fung?
Their core competencies focus on price, service quality, and so on. There is a very low likelihood of tacit agreement, simply because there are many players on the market.
They really act in tandem and are responsible for all four leadership responsibilities (reimaging, reshaping, realization, and renewal). The Fung brothers are said to have a highly collaborative and cerebral approach to business. This indicates a great ability to conceptualize both the company's activities and its direction. The company's core competence is undoubtedly its ability to assemble suppliers seamlessly. By orchestrating partners all over the world in a transparent fashion for the clients, it enjoys tremendous flexibility. One element that is hard to replicate is the scale of the activities. By aggregating orders, marginal cost is driven very low. This is hard to imitate for any new entrant. The geographical spread of the activities ensures that the firm takes advantage of currency fluctuations; labor costs differences, and so on. Building such a network of business partners is a major investment and cannot be replicated easily by competitors.
How should Li & Fung proceed to survive after the Fung brothers will have reached retirement age?
In this case, strategy is the key element of the puzzle. Li & Fung has a clear vision of its role as a network node, linking buyers, and sellers across the globe. The strategy is explicit, well articulated, original, and leads to tangible results. It is coherent with the company history. In fact, one could say that Li & Fung has kept the same strategic orientation for most of its history. While its content has changed over time, Li & Fung's role as most value able intermediary has been a constant. Therefore, with the help of the IT tools that enables the full awareness of the information of the organization all the employees can handle the position of top managers if any one of the top management retires.
Arrow mentioned that history mattered, meaning that, If organizations could be changed, they were still very dependent from past actions and events. Can a company like Li & Fung be reproduced?
Yes it can be reproduced, Although Li & Fung is constantly changing, it remains under the strict leadership of both Fung brothers, who are able to keep a clear focus on future objectives and command strict discipline. The brothers appear to have a clear understanding of the market, the business environment and the opportunities around it. They convinced their father to take the company public in 1973. They also headed the management buyout in 1988. They refocused the company on its trading business and subsequently took it public once again, after restructuring it. Their leadership must have been successful, considering the results obtained by the firm. Leah Zell, lead portfolio manager at Acorn International, described it as one of the companies with the best potential. It has been outperforming the Hong Kong stock exchange average by a comfortable margin.
Can you imagine another traditional industry in which a company could be virtualized like Li & Fung?
This organization is a good example of new structure and adaptability to the environment. Li & Fung's operation is in a very competitive industry. Technology is used to support these elements. If that traditional has the same requirements and characteristics like this company, it could be, but to a certain extent. In order to remain in business, Li & Fung has to constantly provide value to its clients. To do so, the organization has established an interesting configuration, adapting its strategy and its structure to thrive in a very competitive environment.