Hurdle the Cross-Functional Barriers to Strategic Change

As firms attempt to speed decision making, improve their business processes, and become more market-oriented, they have a number of managerial prescriptions to choose from. Most share a common theme: remove the barriers that divide functional units and business units. To this end, many organizations are adopting leaner structures and emphasizing team-based processes to harness their collective strength. However, the introduction of strategic or technological change often signals that traditional barriers remain, barriers that require delicate management to surmount.

We have traced a highly contested strategic decision — the Techno project — in a Fortune 500 communications company. The Techno case exemplifies the change that is transforming the U.S. service sector, most notably in telecommunications, insurance, banking, and financial services, where productivity-enhancing technological gains are generating sharp reductions in employment and a blizzard of new offerings.1 The project centered on the development of a core technology that promised to alter radically the way the firm operated. For some, the technology represented improved productivity, a stream of new products, and a stronger competitive position. For others, it threatened their budgets, existing strategies, and even job security.

The Techno case gave us an opportunity to examine the germination and development of a strategic decision through the eyes of managers in different functions and at different levels. We conducted in-depth interviews three times during the decision process. As the Techno project unfolded, three barriers to strategic change emerged. Here we explore each and highlight the implications Techno has for managing strategic change.

First, we briefly review the strategic decision-making literature, focusing on the forces that often produce markedly different views of the appropriate strategic course across units. Next, we describe the Techno project, explore the turf battles, and contrast the key functional units’ divergent opinions. We also profile the cross-functional communication patterns that united or isolated participants in the process and explore top managers’ roles. Finally, we discuss the implications for managing strategic change.

Cross-Functional Barriers

Strategic change can be best understood as a political process.2 How you feel about a decision depends on “where you sit” in an organization. Rather than emphasizing neat, orderly administrative procedures, emerging concepts “depict strategic decisions as messy, disorderly, and disjointed processes around which competing factions contend.”3 Innovation and change processes may be seen as outcomes of the competition between organizational stakeholders, who each interpret a strategy’s meaning from a different perspective.

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References

1. J.E. Rigdon, “Technological Gains Are Cutting Costs, and Jobs, in Services,” Wall Street Journal, 24 February 1994, pp. A1, A6.

2. For a review, see K.M. Eisenhardt and M.J. Zbaracki, “Strategic Decision Making,” Strategic Management Journal 13 (1992): 17–37; and

C.R. Schwenk, The Essence of Strategic Decision Making (Lexington, Massachusetts: Lexington Books, 1988).

3. J.M. Pennings, “On the Nature and Theory of Strategic Decisions,” Organizational Strategy and Change, ed. J.M. Pennings et al. (San Francisco: Jossey-Bass, 1985), p. 10; see also:

M.D. Hutt, P.H. Reingen, and J.R. Ronchetto, Jr., “Tracing Emergent Processes in Marketing Strategy Formation,” Journal of Marketing 52 (1988): 4–19.

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For retrospective commentary, see:

J.B. Quinn, “Strategic Change: Logical Incrementalism,” Sloan Management Review, Summer 1989, pp. 45–60.

See also:

J.B. Quinn, Strategies for Change: Logical Incrementalism (Homewood, Illinois: Richard D. Irwin, Inc., 1980).

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R.I. Hall, “The Natural Logic of Management Policy Making: Its Implications for the Survival of an Organization,” Management Science 30 (1984): 905–927;

G.L. Frankwick, J.C. Ward, M.D. Hutt, and P.H. Reingen, “Evolving Patterns of Organizational Beliefs in the Formation of Strategy,” Journal of Marketing 58 (1994): 96–110;

A.M. Pettigrew, “Examining Changes in the Long-Term Context of Culture and Politics,” Organizational Strategy and Change, ed. J.M. Pennings (San Francisco: Jossey-Bass, 1985), pp. 269–318;

Ashforth and Mael (1989);

Hall (1984); and

W.D. Guth and I.C. MacMillan, “Strategy Implementation Versus Middle Management Self-Interest,” Strategic Management Journal 7 (1986): 313–327.

11. Ashforth and Mael (1989), p. 25; and

R.J. Brown and G.F. Ross, “The Battle for Acceptance: An Investigation into the Dynamics of Intergroup Behavior,” Social Identity and Intergroup Relations, ed. H. Tajfel (Cambridge, England: Cambridge University Press, 1982), pp. 155–178.

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D. Dougherty, “Interpretive Barriers to Successful Product Innovation in Large Firms,” Organization Science 3 (1992): 179–202;

Daft and Huber (1987); and

C.R. Schwenk, “The Cognitive Perspective on Strategic Decision Making,” Journal of Management Studies 25 (1988): 41–55.

13. Dougherty (1992), p. 179.

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Zenger and Lawrence (1989);

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16. Frankwick et al. (1994).

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22. J.P. Workman, Jr., “Marketing’s Limited Role in New Product Development in One Computer System Firm,” Journal of Marketing Research 30 (1993): 405–421.

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24. J. Galbraith, “Designing the Innovative Organization,” Organizational Dynamics 10 (1982): 5–25.

25. R.M. Kanter, “When a Thousand Flowers Bloom: Structural, Collective, and Social Conditions for Innovation,” Research in Organizational Behavior, vol. 10, ed. B.M. Staw and L.L. Cummings (Greenwich, Connecticut: JAI Press, Inc., 1988), pp. 169–211; and

L. Hirschhorn and T. Gilmore, “The New Boundaries of the Boundaryless Company,” Harvard Business Review, May–June 1992, pp. 104–115.