Starbucks and Amazon: The Organizational Development Design

Etzion explained that organizations have a choice of three types of power in the compliance theory. Firms can employ force/ coercive power to influence their employees but this alienates workers. Such strategies are common in the military or penitentiary institutions. Sometimes companies can rely on utilitarian power where they attempt to influence their workers through rewards and other benefits. Employees in return respond by being calculative. Such approaches are common in government agencies or workers’ unions. Finally, companies have the alternative of using normative power in which they depend on intrinsic rewards like meaningful work, social responsibility and firm-value identification to influence workers. The approach manipulates intangibles, like esteem, prestige and work rituals. It is prevalent in different types of businesses and companies and causes moral responses from employees.

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All the above approaches to power have direct implications on organizational development. They determine whether workers participate in decision-making and hence commit to continuous growth. Additionally, they can either create obstacles or streamline organizational development. A company’s ability to grow is determined by how it structures the creative process.

How Amazon used innovation in order to foster growth

Amazon is currently one of the top five most innovative organizations in the Fortune 500 firms. The company’s founding father – Jeff Bezos believes in investing in the right people in the organization. Prior to employing an individual, he will often ask them whether they have innovated anything. Additionally, the person needs to believe in his or her capacity to cause change in the world. By investing in the right kind of people, Amazon ensures that innovation in ingrained in the heart of the organization. Scholars agree with this sentiment. Lowell and Claudia (2007) explain that for organizations to foster constant growth and organizational development, they need to invest substantially in talent management. Since a shortage of talent exists in the workforce, it is essential to make talent management a central component of organizational design (Harreld et. al., 2007). Therefore, Amazon is prioritizing talent selection as part of its innovative and growth strategy. Additionally, Jeff Bezos utilizes Etzioni’s power approaches to develop his organization. He usually asks about a person’s personal values. If they believe in changing the world, then chances are that they will resonate with Amazon’s goal of continuous change. Amazon’s power relationship is a form of normative power which leads to moral involvement. People in Amazon stay committed to the company’s goal of continuous growth and development because they already share the same values as the firm (Chesbrough, 2007).

Experimentation is also a key component of Amazons’ successful growth strategy the firm has inculcated a culture of experimentation where groups of employees always change their user interface in order to identify new ways of satisfying their customers (Clausen et. al., 2012). The company tries to minimize the use of the word ‘no’ in its processes such that people can try new ideas without fear of reprisal from their institution. This attitude ensures that disruptive innovation is a part of the company’s processes. A research and development team is not the only unit that creates new things. The organization encourages members to challenge convention and embrace risk (Pisano and Teece, 2007). A number of things stand out in the way Amazon handles its processes. First, the company illustrates that minimization of obstacles in organizational structure can lead to great innovation and success. Development of new products is not bureaucratically restricted to one group at Amazon, so everyone tries it. Lowell and Claudia (2007) explain that companies need to eliminate excessive hierarchy in their organizational designs so as to foster development. Another interesting aspect of Amazon’s business processes is the manner in which the company fosters teamwork. People often work in teams of six to ten. As such, Amazon ensures that they are big enough to harness collaborative ideas but small enough to take accountability for their innovations. Lowell and Claudia (2007, 26) affirm that “firms must overcome unproductive complexity by allocating decision making to those employees who are best-suited to make them”. In this regard, firms ought to be flexible by reducing their vertical layers and expanding capacity in the horizontal realm. Amazon achieved this by allowing work teams to collaborate with each other and take ownership for decisions. Etzion believes that when firms employ normative power, they manipulate intangibles such as authority, self esteem or satisfaction in order to foster cooperation from their employees. Amazon has made thorough use of normative power in creation of its team because employees find satisfaction in their work and they take ownership over decisions. As a result, they have stayed committed to continuous development and establishment of effective organizational growth (Lunenburg Ignacio & Vaccaro, 2012).

In order to make design development more effective at Amazon, it would be imperative to borrow from scholars who state that continuous organizational development occurs through action learning. Firms may develop new ways of doing things but they have to reflect on past developments as well as lessons learnt in order to build on what they had done in the past. Amazon may be highly innovative but it needs to tie this strategic pursuit with continuous reflection as well. It would set a good foundation for growth but it would also ensure that the firm captures lessons learnt in the past.

Starbucks, innovation and organizational development

Starbucks is also one of the top 50 innovative firms of 2012. Its quest for continuous growth explains why the company has become a household name in the coffee industry. This organization prides itself in its knowledge of the coffee business. It starts with bean procurement, processing and serving. The company has leveraged on this management of the supply chain to make alterations in its product. For instance, it has experimented with different aspects of heat and time in the roasting process in order to change the flavor of their coffee. Additionally, it has worked on use of new and effective equipment in the dispensation of coffee. The company achieves this through a committed and strong Research and development team. Their job is to always think of ways in which they can merge innovative technologies with the firm’s business process. Additionally, the company believes in providing its customers with new products that lack the flaws of the past. For instance, many buyers complained about the smell of their sandwiches. In order to deal with this aspect, the company’s research and development team looked for new ways of making the product without the smell. The organization frequently listens to its clientele and incorporates their concerns in business production. For instance, many buyers complained about the poor labor practices in some of the coffee growing areas that Starbucks partnered with. The firm started to source its coffee beans ethically and thus differentiated itself from its competitors.

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A lot of lessons emerge on why Starbucks is leading in the innovation front. The company leans on clients. Several of them engage in prototyping and have ways of improving the business models (West. and Lakhani, 2008). Experts affirm that in order to create value in one’s innovation endeavors, forms ought incorporate customer insight in lean innovation. These institutions can then work together to create models that meet their needs directly. Another fact that stands out is the willingness to pursue risks. This is a concept that must be fostered by companies that want to achieve organizational development continuously. Furthermore, it is evident that management and the research and development team are committed to similar goals of innovation (Teece, 2007). This company has used utilitarian and normative power to foster organizational development. Utilitarian power is evident from the provision of benefits and perks to the research and development team while normative power is seen through their belief in Starbucks model of high growth (Gumusluoglu & Ilsev, 2009).

Starbucks often works on its business models such that it can always be on the path of continuous growth. For instance, it started as a producer of whole beans but then it introduced beverages. Thereafter, the company moved next to key retail outlets in the US where it was associated with in store brands. Thereafter, the company altered its business model to include other aspects of service development like reward points and digital ventures. The company has the courage to shut down thousands of stores around the world. In the relentless pursuit of growth, the company forgot about sustainability. It opened-up businesses in inappropriate locations and wound up with unprofitable establishments. The restored CEO needed to reengineer the firms’ organizational structure by decluttering. It was particularly difficult to do this when some stores had existed for less than 20 years. Starbucks has achieved continuous development by pulling back on processes, services or products that diluted its brand (Lichtenthaler and Holger, 2007). For instance, the company’s founder Howard Schultz realized that introduction of baked goods was neutralizing the distinct coffee aroma that was synonymous to Starbucks. Therefore, the CEO decided to eliminate some of these products or at least minimize their smell so as to maintain the distinct aroma of coffee. From these strategies it is evident that high risk takers and strong leaders are central to highly innovative forms (Justin et. al., 2012). Howard Schultz has created and fostered the culture of innovation in his café.

However, a number of issues emerge from this case study that should have been done differently in order to foster growth. First, the CEO ought to democratize the innovation process. He can learn from Amazon which expects everyone to contribute towards its innovation goals. Additionally, it should have taken smart risks. The company took too long to pull back when continuous expansion was not working. Also, it is not certain whether the company will survive without the President’s input. It may be necessary for him to focus less on utilitarian power and instate normative power. Decentralization of creative processes will ensure sustainable growth even after his departure (Sharif & Huang, 2010).

References

Chesbrough, H. (2007). The market for innovation: implications for corporate strategy. California Management Review, 49, (3), 45–66

Clausen, T., Pohjola, M., Sapprasert, K. & Verspagen, B. (2012). Innovation strategies a source of persistent innovation. Industrial and Operate Change, 21(3), 553-585.

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Gumusluoglu, L., & Ilsev, A. (2009). Transformational leadership, creativity, and organizational innovation. Journal of Business Research, 62(4), 461–473

Harreld, B., O’Reilly, C. and Tushman, M. (2007). Dynamic capabilities at IBM: driving strategy into action. California Management Review, 49(4), 3-18.

Justin, F., Jansen, F., Van Den, B. & Volberda, A. (2012). Management Innovation and Leadership. Journal of Management Studies, 49(1), 28–51.

Lichtenthaler, U. and Holger, E. (2007). External technology commercialization in large firms: results of a quantitative benchmarking study. R&D Management, 37, (5), 383–397.

Lowell, B. & Claudia, J. (2007). Better strategy through organizational design. The McKinsey Quarterly, 2, 22-29

Lunenburggnacio, F. & Vaccaro, G. (2012). Compliance Theory and Organizational Effectiveness. International Journal of Scholarly Academic Intellectual Diversity, 14, 1, 34-39.

Pisano, D. and Teece, D. (2007). How to capture value from innovation: shaping intellectual property and industry architecture. California Management Review, 50(1), 278-296.

Sharif, N. & Huang, C. (2010). Innovation strategy, firm survival and relocation: The case of Hong Kong-owned manufacturing in Guangdong province, China. Research Policy Journal, 41(1), 69-78.

Teece, J. (2007). Explicating dynamic capabilities: the nature and micro foundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319-1350.

West, J. and Lakhani, K. (2008). Getting Clear About the Role of Communities in Open Innovation. Industry and Innovation, 15(3), 55-58.

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