Most musings on the strategic management of new organizational forms—e.g., loosely
coupled systems, information-technology-enabled networks, and virtual organizations—
exhibit two fundamental research weaknesses. First, the “new organizational formists”
are insufficiently grounded in research on old organizational forms and old organizational strategies. Second, most studies of new organizational forms are insufficiently
grounded in data from the new organizational forms they purport to explain. This leads
to a situation in which chroniclers of an important change in organizations are too-often
ignored because they are atheoretical and aempirical. This study of John Brown Engineering & Construction’s adoption of an explicit information technology strategy provides
a specific research context in which to consider three related phenomena. The first phenomenon is the continual movement in organizational forms, from firms, to bureaucracies, to institutions, and—most recently—to loosely coupled systems, information-technology-enabled networks, and virtual organizations. The second phenomenon is the
continued accumulation of strategic options : cost leadership, differentiation, strategic
alliances, vertical integration, diversification, globalization, and merger and acquisition
strategies. The third phenomenon is the notion of “schizoid incoherence, ” a condition
common to sensemakers, decision-makers, and strategy makers in which there are
numerous possible directions to take.
Most musings on the strategic management of new organizational
forms—e.g., loosely coupled systems, information-technology-enabled
networks, and virtual organizations—exhibit two fundamental research
weaknesses. First, the “new organizational formists” are insufficiently
grounded in research on old organizational strategies and old organizational forms. Second, the “new organizational formists” are insufficiently grounded in data from the new organizational forms they purport
to explain. This leads to a situation in which chroniclers of an important
change in organizations are too-often ignored because they are atheoretical and aempirical.
This is a study of John Brown Engineers & Constructors (John Brown).
John Brown has a proud heritage dating back to the 1830s. They were
acquired in 1986 by Trafalgar House Group, which acquired Davy International in 1991 and combined the firms to create an engineering and
construction firm ranked third in the world, after the U.S.-based firms
Bechtel and Fluor Daniel. In 1991, John Brown had 25,000 employees
in 182 offices in 30 countries. In the 1990s, John Brown adopted an
explicit information technology strategy which allowed it to become one
of a new-generation of information-technology-enabled success stories
(Dhillon and Lambert, 1996).
John Brown provides a specific research context in which to consider
two related phenomena. The first phenomenon is the continued accumulation of microstrategic options : cost leadership, differentiation,
strategic alliances, vertical integration, diversification, merger and
acquisition, and globalization strategies (Barney, 1997). The second
phenomenon is the notion of “schizoid incoherence, ” a condition common to sensemakers, decision-makers, and strategy makers in which
there are numerous possible directions to take (Greenwood and Hinings, 1988 ; Hinings and Greenwood, 1988).
OLD SCHIZOID INCOHERENCE
In a thorough analysis of strategic organizational change processes,
Hinings and Greenwood (1988) mapped a series of “organizational
tracks” by which organizations changed from one design archetype to
another design archetype (Greenwood and Hinings, 1988). In an idealized linear transformation from Design Archetype A to Design
Archetype B, there is a mid-point at which the organization is presumed to be half-A and half-B. Hinings and Greenwood referred to
this point on the organizational track as a brief period of “schizoid
incoherence.” In our research on loosely coupled systems and information-technology-enabled networks, we have come to believe that
schizoid incoherence is not a temporary condition in complex organizations. Instead, we notice firms in a constant state of schizoid incoherency.
Martin (1992), in her analysis of the corporate culture literature, noted
a similar phenomenon. In the early stages of culture research,
researchers believed in Paradigm 1, an Integration Paradigm, in which
organizational members were presumed to share a common set of values and beliefs. In the middle stages of culture research, researchers
believed in Paradigm 2, a Differentiation Paradigm, in which organizational culture was presented as the interaction of several subcultures.
In late stages of culture research, researchers believed in Paradigm 3,
a Fragmentation Paradigm, in which individual organization members
manage a portfolio of subcultures which slice through the organization.
The movement from Paradigm 1 to Paradigm 3 is a movement from
infrequent and short periods of schizoid incoherence to constant, long
periods of schizoid incoherence. The organization does not know if it
is currently in Design Archetype A, B, C, D, E, F, or G, and it does not
know if it should try to move toward Design Archetype T, U, V, W, X, Y,
To make some sense of schizoid incoherence, we use the John
Brown case in 1995 to exemplify a firm at a point of schizoid incoherence. Although John Brown has reinvented itself as an information-technology-enabled loosely coupled system, we find that its own
particular brand of schizoid incoherence in 1995 can be clarified by
the application of standardized analyses from strategy (Barney,
1997). We argue that in their quests to reduce uncertainty, new organization forms need not be divorced from old organizational strategies.
Instead, we find it helpful to shift the focus from macrostrategies to
microstrategies. Simon (1976) noticed earlier than most theorists that
there was a correspondence between 1/ the bounded rationality of
organizational members, 2/ the loosely coupled nature of organizational forms, and 3/ the value of small modules of behavior. As uncertainty and ambiguity go up, organizations are moving from firms to
bureaucracies to institutions to loosely coupled systems (Orton and
Weick, 1990), which require more use of leverage points, logical incrementalism (Quinn, 1980), action rationality (Brunsson, 1982), and
small wins (Weick, 1984). Mintzberg (1994) noted in his book, The
Rise and Fall of Strategic Planning, that many corporations believed
that strategic planning was giving way to strategic thinking and that
strategic thinking was giving way to strategic action. We try to capture
this meltdown in strategic theory by focusing not on large, complex,
generic strategic plans, but on the identification of a set of microstrategic options.
OLD SCHIZOID INCOHERENCE, OLD MICROSTRATEGIES, AND THE MANAGEMENT OF NEW ORGANIZATIONAL FORMS
Of these numerous microstrategic options faced in 1995, the one that
was “chosen, ” was the last one listed : sell Trafalgar House Group to a
John Brown’s new parent company is the Norwegian group Kvaerner
ASA. Kvaerner’s operating revenues for 1996 were $8.4 billion, and
the Kvaerner E&C division employed more than 11,000 people in 55
offices worldwide before the acquisition of Trafalgar House Group.
Kvaerner is reviving its engineering and construction operations. They
have agreed to bid on large construction projects in India, and required
government approvals have been received. The Trafalgar House Company was previously forced to bid on large contracts as a subcontractor because of its relatively small size, but Kvaerner now offers the
financial resources which make it possible for Trafalgar House Company to make and win bids as contractors. Kvaerner also finances
internal technology transfers with royalties of 1.25%, which helps make
it possible for John Brown to continue investing in information technology (Financial Times, 2000).
The analysis of John Brown allows us to suggest three important
points for researchers enamored of “new organizational forms” such as
loosely coupled systems and information-technology-enabled networks.
First, it is not a new thing for organizations and the people in them to
find themselves in a relatively permanent state of schizoid incoherence. It is not a condition unique to new organizational forms. Furthermore, schizoid incoherence is probably best responded to by microstrategic options than macrostrategic genius.
Second, organizations will respond to schizoid incoherence the way
they have always done so, through the accumulation of microstrategic
options. We have found it helpful to adopt a traditional categorization
of generic strategy types as a sorting schemes for microstrategic
options for John Brown. This suggests that perhaps people in schizoid
incoherent organizations could also benefit from the structure of old,
accumulated strategic options. When John Brown is acquired by
Kvaerner, one of the options is exercised, but the accumulated portfolio of options remains for the organization’s next phase of schizoid
Third, we recognize that there is an ongoing movement in organizational forms, from firms to bureaucracies to institutions to a wide variety of new organizational forms. John Brown provides an intriguing
case study of what a virtual organization, an information-technology-enabled network, or a loosely coupled system might look like in 1995,
but it is only a blip in the continual advancement of organization forms.
In order to truly understand new organizational forms, scholars need to
develop a little less breathlessness and adopt a longer term perspective in which there has always been schizoid incoherence, there have
always been accumulated microstrategies, and today’s new organizational form will always be tomorrow’s old organizational form.
Endnote. A version of this paper was presented in the Organization Theory track of the
International Academy of Business Disciplines’ annual meeting, March 30-April 2, Las
Vegas. We appreciate the assistance of track chairs David M. Boje and Grace Ann
Rosile, New Mexico State University. Acknowledgments are also due to Rob Lambert,
Julie Verity of Cranfield School of Management, UK, and many of our graduate students
at UNLV. We also appreciate research funding for the project provided by Cranfield
School of Management, HEC School of Management-Paris, and the College of Business
at the University of Nevada Las Vegas.