Organizational Strategy, Structure, and Process

Author(s): Raymond E. Miles, Charles C. Snow, Alan D. Meyer and Henry J. Coleman, Jr.
Reviewed work(s):
Source: The Academy of Management Review, Vol. 3, No. 3 (Jul., 1978), pp. 546-562
Published by: Academy of Management
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 Organizational
Strategy, Structure,
and Process1

RAYMOND E. MILES
Universityof California, Berkeley
CHARLESC. SNOW
The PennsylvaniaState University
ALAN D. MEYER
Universityof Wisconsin, Milwaukee
HENRY1. COLEMAN, JR.
Universityof California;Berkeley

Organizational adaptation is a topic that has received only limited and

fragmented theoretical treatment. Any attempt to examine organiza-
tional adaptation is difficult, since the process is highly complex and
changeable. The proposed theoretical framework deals with alterna-
tive ways in which organizations define their product-market domains
(strategy) and construct mechanisms (structures and processes) to
pursue these strategies. The framework is based on interpretation of
existing literature and continuing studies in four industries (college
textbook publishing, electronics, food processing, and health care).

Raymond E. Miles (Ph.D. - Stanford University) is Professor Alan D. Meyer (Ph.D. - University of California, Berkeley) is
of Business Administration and Associate Director of the In- Assistant Professor of Business Administration at the Univer-
stitute of Industrial Relations at the University of California, sity of Wisconsin, Milwaukee.
Berkeley. Henry J. Coleman, Jr., is a Ph.D. Candidate at the University ot
Charles C. Snow (Ph.D. - University of California, Berkeley) California, Berkeley.
is Associate Professor of Organizational Behavior at The Penn-
sylvania State University. X The authors wish to express their appreciation to Douglas
Received 6/7/77; Revised 8/19/77; Accepted 9/15/77; Darran, Robert Pitts, and Max Richards for their helpful com-
Revised 11/15/77. ments on an earlier version of this paper.
546
Academy of Management Review - July1978 547

An organization is both an articulated pur- top management believes will allow the effec-
pose and an established mechanism for achiev- tive direction and control of human resources
ing it. Most organizations engage in an ongoing (4, 5, 6). Thus the theoretical framework to pre-
process of evaluating their purposes-question- vailing theories of management is also related.
ing, verifying, and redefining the manner of in- An increased understanding of the adaptive
teraction with their environments. Effective or- process, of how organizations move through it,
ganizations carve out and maintain a viable mar- and of the managerial requirements of different
ket for their goods or services. Ineffective organ- adjustment patterns can facilitate the difficult
izations fail this market - alignment task. Organ- process of achieving an effective organization-
izations also constantly modify and refine the environment equilibrium.
mechanism by which they achieve their pur- In the following sections, a typical example
poses-rearranging their structure of roles and of organizational adaptation drawn from one of
relationships and their managerial processes. our empirical research studies is first presented.
Efficient organizations establish mechanisms Second, a model of the adaptive process that
that complement their market strategy, but in- arose from this research is described and dis-
efficient organizations struggle with these struc- cussed. In the third section, four alternative
tural and process mechanisms. forms of adaptation exhibited by the organiza-
For most organizations, the dynamic proc- tions in our studies are described. Finally, the re-
ess of adjusting to environmental change and lationship between the organizational forms and
uncertainty-of maintaining an effective align- currently available theories of management is
ment with the environment while managing in- discussed.
ternal interdependencies-is enormously com-
plex, encompassing myriad decisions and be-
haviors at several organization levels. But the
An Exampleof Organizational Adaptation
complexity of the adjustment process can be
As an example of the problems associated
penetrated: by searching for patterns in the be-
havior of organizations, one can describe and with the adaptive process, consider the experi-
even predict the process of organizational adap- ence of a subsidiary of one of the companies in
our studies.
tation. This article presents a theoretical frame-
work that managers and students of manage- Porter Pump and Valve (PPV) is a semi-auto-
ment can use to analyze an organization as an nomous division of a medium-sized equip-
integrated and dynamic whole-a model that ment-manufacturing firm, which is in turn part
takes into account the interrelationships among of a large, highly diversified conglomerate. PPV
strategy, structure, and process. (For a complete manufactures a line of heavy-duty pumps and
discussion of the theoretical framework and re- components for fluid-movement systems. The
search studies, see (15)). Specifically, the frame- company does most of its own castings, makes
work has two major elements: (a) a general many of its own parts, and maintains a complete
model of the process of adaptation which spe- stock of replacement parts. PPV also does spe-
cifies the major decisions needed by the organi- cial-order foundry work for other firms as its
zation to maintain an effective alignment with production schedule allows.
its environment, and (b) an organizational typol- Until recently, Porter Pump and Valve had
ogy which portrays different patterns of adaptive defined its business as providing quality products
behavior used by organizations within a given in- and service to a limited set of reliable customers.
dustry or other grouping. But as several theorists PPV's general manager, a first-rate engineer who
have pointed out, organizations are limited in spent much of his time in the machine shop and
their choices of adaptive behavior to those which foundry, personified the company's image of
548 Organizational Strategy, Structure, and Process

quality and cost efficiency. In the mid-seventies personnel additions have been made to the
corporate management became concerned marketing department and more are planned,
about both the speed and direction of PPV's with particular emphasis on individuals who are
growth. The management and staff at corporate capable of performing field planning and super-
headquarters began considering two new prod- vising and who can quickly bring new fluid sys-
uct and market opportunities, both in the ener- tems to full operation. Budgets of some of the
gy field. Fluid-movement systems required for older departments are being cut back, and these
nuclear power generation provided one of these funds are being diverted to the new areas of ac-
opportunities, and the development of novel tivity.
techniques for petroleum exploration, well re- As illustrated, Porter Pump and Value expe-
covery, and fluid delivery provided the second. rienced changes in its products and markets, in
PPV had supplied some components to these
the technological processes needed to make
markets in the past, but it was now clear that op-
new products and serve new markets, and in the
portunities for the sale of entire systems or large- administrative structure and processes required
scale subsystems were growing rapidly.
PPV's initial moves toward these new op- to plan, coordinate, and control the company's
new operations. None of the usual perspectives
portunities were tentative. The general mana- which might be used to analyze such organiza-
ger discovered that contract sales required ex- tional changes - for example, economics, in-
tensive planning, field-contact work, and careful
dustrial engineering, marketing, or policy - ap-
negotiations-activities not within his primary
area of interest or experience. Finally, in an ef- pears to address all of the problems experienced
fort to foster more rapid movement into these by Porter Pump and Valve. Therefore, how can
new markets, executives in the parent organiza- the adaptive process which occurred at PPVbe
tion transferredthe general manager to a head- described in its entirety?
office position and moved into the top spot at
PPVa manager with an extensive background in The Adaptive Cycle
both sales and engineering and who was adept
at large-scale contract negotiations. We have developed a general model of the
Within a year of the changeover in general adaptive process which we call the adaptive cy-
managers, PPVlanded several lucrative contracts, cle. Consistent with the strategic-choice ap-
and more appeared to be in the offing. The new proach to the study of organizations, the model
business created by these contracts, however, parallels and expands ideas formulated by theo-
placed heavy coordination demands on com- rists such as Chandler (9), Child (10), Cyert and
pany management, and while the organization's March (11), Drucker (12, 13), Thompson (18),
technology (production and distribution system) and Weick (19, 20). Essentially,proponents of the
has not been drastically revised over the past strategic-choice perspective argue thar organi-
two years, workflow processes and the opera- zational behavior is only partiallypreordained by
tional responsibilities of several managers have environmental conditions and that the choices
changed markedly. Materials control and sched- which top managers make are the critical deter-
uling, routine tasks in the past, are now complex minants of organizational structure and process.
activities, and managers of these operations Although these choices are numerous and com-
meet regularly with the executive planning plex, they can be viewed as three broad "prob-
committee. Moreover, a rudimentary matrix lems" of organizational adaptation: the entre-
structure has emerged in which various line preneurial problem, the engineering problem,
managers undertake specific project responsi- and the administrative problem. In mature or-
bilities in addition to their regular duties. Key ganizations, management must solve each of
Academy of Management Review - luly 1978 549

these problems simultaneously, but for explan- movement toward it may originate at lower
atory purposes, these adaptive problems can be managerial levels.
discussed as if they occurred sequentially.
The EngineeringProblem
The Entrepreneurial Problem
The engineering problem involves the crea-
The adaptive cycle, though evident in all or-
tion of a system which operationalizes manage-
ganizations, is perhaps most visible in new or rap- ment's solution to the entrepreneurial prob-
idly growing organizations (and in organizations lem. Such a system requires management to se-
which recently have survived a major crisis). In lect an appropriate technology (input-transfor-
a new organization, an entrepreneurial insight,
mation-output process) for producing and dis-
perhaps only vaguely defined at first, must be de- tributing chosen products or services and to
veloped into a concrete definition of an organi- form new information, communication, and
zational domain: a specific good or service and control linkages (or modify existing linkages) to
a target market or market segment. In an on- ensure proper operation of the technology.
going organization, the entrepreneurial prob- As solutions to these problems are reached,
lem has an added dimension. Because the or-
initial implementation of the administrativesys-
ganization has already obtained a set of "solu- tem takes place. There is no assurance that the
tions" to its engineering and administrative
configuration of the organization, as it begins to
problems, its next attempt at an entrepreneurial
"thrust" may be difficult. In the example of emerge during this phase, will remain the same
when the engineering problem finally has been
Porter Pump and Valve, the company's attempt
solved. The actual form of the organization's
to modify its products and markets was con-
structure will be determined during the admin-
strained by its present production process and
istrative phase as management solidifies rela-
by the fact that the general manager and his staff tions with the environment and establishes proc-
did not possess the needed marketing orienta-
esses for coordinating and controlling internal
tion.
In either a new or ongoing organization, operations. Referring again to Porter Pump and
the solution to the entrepreneurial problem is Valve, the company's redefinition of its domain
marked by management's acceptance of a par- required concomitant changes in its technology
- from a pure mass-production technology to
ticular product-market domain, and this ac-
more of a unit or small-batch technology (21).
ceptance becomes evident when management
decides to commit resources to achieve objec-
The AdministrativeProblem
tives relative to the domain. In many organiza-
tions, external and internal commitment to the The administrative problem, as described
entrepreneurial solution is sought through the by most theories of management, is primarily
development and projection of an organization- that of reducing uncertainty within the organiza-
al "image" which defines both the organization's tional system, or, in terms of the present mod-
market and its orientation toward it (e.g., an el, of rationalizing and stabilizing those activities
emphasis on size, efficiency, or innovation). which successfully solved problems faced by the
Although we are suggesting that the engi- organization during the entrepreneurial and en-
neering phase begins at this point, the need for gineering phases. Solving the administrative
further entrepreneurial activities clearly does not problem involves more than simply rationalizing
disappear. The entrepreneurial function remains the system already developed (uncertainty re-
a top-management responsibility, although as duction); it also involves formulating and imple-
Bower (7) has described, the identification of a menting those processes which will enable the
new opportunity and the initial impetus for organization to continue to evolve (innovation).
550 OrganizationalStrategy,Structure,and Process

This conception of the administrative problem, ganizations: Defenders, Analyzers, and Pros-
as a pivotal factor in the cycle of adaptation, de- pectors. Each type has its own unique strategy
serves further elaboration. for relating to its chosen market(s), and each has
Rationalization and Articulation - In the a particular configuration of technology, struc-
ideal organization, management would be ture, and process that is consistent with its mar-
equally adept at performing two somewhat con- ket strategy. A fourth type of organization en-
flicting functions: it would be able to create an countered in our studies is called the Reactor.
administrative system (structure and processes) The Reactor is a form of strategic "failure" in that
that could smoothly direct and monitor the or- inconsistencies exist among its strategy, technol-
ganization's current activities without, at the ogy, structure, and process.
same time, allowing the system to become so Although similar typologies of various as-
ingrained that future innovation activities are pects of organizational behavior are available
jeopardized. Such a perspective requires the (1, 2, 3, 15, 16, 17), our formulation specifies rela-
administrative system to be viewed as both a tionships among strategy, technology, structure,
lagging and leading variable in the process of and process to the point where entire organiza-
adaptation. As a lagging variable, it must ration- tions can be viewed as integrated wholes in dy-
alize, through the development of appropriate namic interaction with their environments. Any
structures and processes, strategic decisions typology is unlikely to encompass every form of
made at previous points in the adjustment proc- organizational behavior - the world of organi-
ess. As a leading variable, the administrative sys- zations is much too changeable and complex to
tem must facilitate the organization's future permit such a claim. Nevertheless, every organ-
capacity to adapt by articulating and reinforcing ization that we have observed appears, when
the paths along which innovative activity can compared to other organizations in its industry,
proceed. At Porter Pump and Valve, manage- to fit predominantly into one of the four cate-
ment modified its planning, coordination, and gories, and its behavior is generally predictable
control processes substantially in order to pur- given its typological classification. The "pure"
sue the company's newly chosen areas of busi- form of each of these organization types is de-
ness (the "lagging" aspect of administration). At scribed below.
the same time, key personnel were added to the Defenders
marketing department; their duties included
product development, market research, and The Defender (i.e., its top management)
technical consulting. These activities were de- deliberately enacts and maintains an environ-
signed to keep PPV at the forefront of new prod- ment for which a stable form of organization is
uct and market opportunities (the "leading" as- appropriate. Stability is chiefly achieved by the
pect of administration). Defender's definition of, and solution to, its en-
trepreneurial problem. Defenders define their
The StrategicTypology entrepreneurial problem as how to seal off a
portion of the total market in order to create a
If one accepts the adaptive cycle as valid, the stable domain, and they do so by producing only
question becomes: How do organizations move a limited set of products directed at a narrow
through the cycle? That is, using the language of segment of the total potential market. Within
our model, what strategies do organizations em- this limited domain, the Defender strives ag-
ploy in solving their entrepreneurial, engineer- gressively to prevent competitors from entering
ing, and administrative problems? Our research its "turf". Such behaviors include standard eco-
and interpretation of the literature show that nomic actions like competitive pricing or high-
there are essentially three strategic types of or- quality products, but Defenders also tend to ig-
Academy of Management Review - July 1978 551

nore developments and trends outside of their industries lend themselves to this type of organ-
domains, choosing instead to grow through mar- ization more than turbulent industries (e.g., the
ket penetration and perhaps some limited prod- relative lack of technological change in the food-
uct development. Over time, a true Defender is processing industry generally favors the Defend-
able to carve out and maintain a small niche er strategy compared with the situation in the
within the industry which is difficult for compe- electronics industry). This particular form of or-
titors to penetrate. ganization is not without its potential risks. The
Having chosen a narrow product-market do- Defender's primary risk is that of ineffectiveness
main, the Defender invests a great deal of re- - being unable to respond to a major shift in its
sources in solving its engineering problem: how market environment. The Defender relies on the
to produce and distribute goods or services as continued viability of its single, narrow domain,
efficiently as possible. Typically, the Defender and it receives a return on its large technological
does so by developing a single core technology investment only if the major problems facing the
that is highly cost-efficient. Technological effi- organization continue to be of an engineering
ciency is central to the Defender's success since nature. If the Defender's market shifts dramatic-
its domain has been deliberately created to ab- ally, this type of organization has little capacity
sorb outputs on a predictable, continuous basis. for locating and exploiting new areas of opportu-
Some Defenders extend technological efficiency nity. In short, the Defender is perfectly capable
to its limits through a process of vertical integra- of responding to today's world. To the extent
tion - incorporating each stage of production that tomorrow's world is similar to today's, the
from raw materials supply to distribution of final Defender is ideally suited for its environment.
output into the same organizational system. Table 1 summarizes the Defender's salient char-
Finally, the Defender's solution to its ad- acteristics and the major strengths and weak-
ministrative problem is closely aligned with its nesses inherent in this pattern of adaptation.
solutions to the entrepreneurial and engineering
Prospectors
problems. The Defender's administrative prob-
lem - how to achieve strict control of the or- In many ways, Prospectors respond to their
ganization in order to ensure efficiency - is chosen environments in a manner that is almost
solved through a combination of structural and the opposite of the Defender. In one sense, the
process mechanisms that can be generally de- Prospector is exactly like the Defender: there is
scribed as "mechanistic" (8). These mechanisms a high degree of consistency among its solutions
include a top-management group heavily domi- to the three problems of adaptation.
nated by production and cost-control specialists, Generally speaking, the Prospector enacts
little or no scanning of the environment for new an environment that is more dynamic than those
areas of opportunity, intensive planning oriented of other types of organizations within the same
toward cost and other efficiency issues, function- industry. Unlike the Defender, whose success
al structures characterized by extensive division comes primarily from efficiently serving a stable
of labor, centralized control, communications domain, the Prospector's prime capability is that
through formal hierarchical channels, and so on. of finding and exploiting new product and mar-
Such an administrative system is ideally suited ket opportunities. For a Prospector, maintaining
for generating and maintaining efficiency, and a reputation as an innovator in product and mar-
the key characteristic of stability is as apparent ket development may be as important as, per-
here as in the solution to the other two adaptive haps even more important, than high profitabil-
problems. ity. In fact, because of the inevitable "failure
Pursued vigorously, the Defender strategy rate" associated with sustained product and mar-
can be viable in most industries, although stable ket innovation, Prospectors may find it difficult
552 Organizational Strategy, Structure, and Process

TABLE1. Characteristicsof the Defender

Entrepreneurial Problem Engineering Problem Administrative Problem

Problem: Problem: Problem:
How to "seal off' a portion of the How to produce and distribute goods How to maintain strict control of the
total market to create a stable set of or services as efficiently as possible. organization in order to ensure effi-
products and customers. ciency.

Solutions: Solutions: Solutions:

1.Narrow and stable domain. 1. Cost-efficient technology. 1. Financial and production experts
2.Aggressive maintenance of domain 2. Single core technology. most powerful members of the
(e.g., competitive pricing and ex- 3. Tendency toward vertical dominant coalition; limited envi-
cellent customer service). integration. ronmental scanning.
3. Tendency to ignore developments 4. Continuous improvements in 2. Tenure of dominant coalition is
outside of domain. technology to maintain efficiency. lengthy; promotions from within.
4. Cautious and incremental growth 3. Planning is intensive, cost oriented,
primarily through market and completed before action is
penetration. taken.
5. Some product development but 4. Tendency toward functional struc-
closely related to current goods or ture with extensive division of
services. labor and high degree of formali-
zation.
5. Centralized control and long-
looped vertical information sys-
tems.
6. Simple coordination mechanisms
and conflict resolved through
hierarchical channels.
7. Organizational performance
measured against previous years;
reward system favors production
and finance.

Costsand Benefits: Costsand Benefits: Costsand Benefits:

It is difficult for competitors to dis- Technological efficiency is central Administrative system is ideally
lodge the organization from its small to organizational performance, but suited to maintain stability and efficien-
niche in the industry, but a major shift heavy investment in this area requires cy but it is not well suited to locating
in the market could threaten survival. technological problems to remain and responding to new product or
familiar and predictable for lengthy market opportunities.
periods of time.

Source: Raymond E. MilesandCharles C. Snow, Organizational Strategy, Structure, and Process (New York: McGraw-Hill, 1978)
Table 3-1.

consistently to attain the profit levels of the more The systematic addition of new products or mar-
efficient Defender. kets, frequently combined with retrenchment
Defining its entrepreneurial problem as how in other parts of the domain, gives the Prospec-
to locate and develop product and market op- tor's products and marketsan aura of fluidity un-
portunities, the Prospector's domain is usually characteristic of the Defender. To locate new
broad and in a continuous state of development. areas of opportunity, the Prospector must de-
Academy of Management Review - July 1978 553

velop and maintain the capacity to survey a wide and research and development experts, plan-
range of environmental conditions, trends, and ning that is broad rather than intensive and ori-
events. This type of organization invests heavily ented toward results not methods, product or
in individuals and groups who scan the environ- project structures characterized by a low degree
ment for potential opportunities. Because these of formalization, decentralized control, lateral
scanning activities are not limited to the organi- as well as vertical communications, and so on.
zation's current domain, Prospectors are fre- In contrast to the Defender, the Prospector's
quently the creators of change in their respective descriptive catchword throughout its adminis-
industries. Change is one of the major tools used trative as well as entrepreneurial and engineer-
by the Prospector to gain an edge over competi- ing solutions is "flexibility".
tors, so Prospector managers typically perceive Of course, the Prospector strategy also has
more environmental change and uncertainty it costs. Although the Prospector's continuous
than managers of the Defender (or the other exploration of change helps to protect it from a
two organization types). changing environment, this type of organization
To serve its changing domain properly, the runs the primary risk of low profitability and
Prospector requires a good deal of flexibility in overextension of resources. While the Prospec-
its technology and administrative system. Unlike tor's technological flexibility permits a rapid re-
the Defender, the Prospector's choice of prod- sponse to a changing domain, complete effi-
ucts and markets is not limited to those which ciency cannot be obtained because of the pres-
fall within the range of the organization's pres- ence of multiple technologies. Finally, the Pros-
ent technological capability. The Prospector's pector's administrative system is well suited to
technology is contingent upon both the organ- maintain flexibility, but it may, at least tempo-
ization's current and future product mix: entre- rarily, underutilize or even misutilize physical,
preneurial activities always have primacy, and financial, and human resources. In short, the
appropriate technologies are not selected or de- Prospector is effective - it can respond to the
veloped until late in the process of product de- demands of tomorrow's world. To the extent
velopment. Therefore, the Prospector's overall that the world of tomorrow is similar to that of
engineering problem is how to avoid long-term today, the Prospector cannot maximize profita-
commitments to a single type of technological bility because of its inherent inefficiency. Table
process, and the organization usually does so by 2 summarizes the Prospector's salient character-
creating multiple, prototypical technologies istics and the major strengths and weaknesses
which have a low degree of routinization and associated with this pattern of adaptation.
mechanization.
Analyzers
Finally, the Prospector's administrative
problem flows from its changing domain and Based on our research, the Defender and
flexible technologies: how to facilitate rather the Prospector seem to reside at opposite ends
than control organizational operations. That is, of a continuum of adjustment strategies. Be-
the Prospector's administrative system must be tween these two extremes, a third type of organ-
able to deploy and coordinate resources among ization is called the Analyzer. The Analyzer is a
numerous decentralized units and projects rath- unique combination of the Prospector and De-
er than to plan and control the operations of the fender types and represents a viable alternative
entire organization centrally. To accomplish to these other strategies. A true Analyzer is an
overall facilitation and coordination, the Pros- organization that attempts to minimize risk
pector's structure-process mechanisms must be while maximizing the opportunity for profit -
"organic" (8). These mechanisms include a top- that is, an experienced Analyzer combines the
management group dominated by marketing strengths of both the Prospector and the De-
554 Organizational Strategy, Structure, and Process

TABLE2. Characteristics of the Prospector

Entrepreneurial Problem Engineering Problem Administrative Problem

Problem: Problem: Problem:

How to locate and exploit new How to avoid long-term commit- How to facilitate and coordinate
product and market opportunities. ments to a single technological numerous and diverse operations.
process.

Solutions: Solutions: Solutions:

1. Broad and continuously 1. Flexible, prototypical 1. Marketing and research and devel-
developing domain. technologies. opment experts most powerful
2. Monitors wide range of environ- 2. Multiple technologies. members of the dominant coali-
mental conditions and events. 3. Low degree of routinization tion.
and mechanization; technology I 2. Dominant coalition is large, diverse,
3. Creates change in the industry.
4. Growth through product and embedded in people. and transitory; may include an
market development. inner circle.
5. Growth may occur in spurts. 3. Tenure of dominant coalition not
always lengthy; key managers may
be hired from outside as well as
promoted from within.
4. Planning is comprehensive, prob-
lem oriented, and cannot be
finalized before action is taken.
5. Tendency toward product structure
with low division of labor and low
degree of formalization.
I
6. Decentralized control and short-
looped horizontal information
systems.
7. Complex coordination mechan-
isms and conflict resolved through
integrators.
8. Organizational performance
measured against important com-
I
petitors; reward system favors
marketing and research and devel-
opment.

Costs and Benefits: Costs and Benefits: Costs and Benefits:

Product and market innovation Technological flexibility permits a Administrative system is ideally
protect the organization from a rapid response to a changing domain, suited to maintain flexibility and effec-
changing environment, but the or- but the organization cannot develop tiveness but may underutilize and
ganization runs the risk of low profita- maximum efficiency in its production misutilize resources.
bility and overextension of its resources. and distribution system because of
multiple technologies.
l

Source: Raymond E. Miles and Charles C. Snow, Organizational Strategy, Structure, and Process (New York: McGraw-Hill, 1978),
Table 4-1.
Academy of Management Review - July 1978 555

fender into a single system. This strategy is diffi- pector's technological orientation. In manufac-
cult to pursue, particularly in industries charac- turing organizations, it frequently includes a
terized by rapid market and technological large group of applications engineers (or their
change, and thus the word that best describes equivalent) who are rotated among teams
the Analyzer's adaptive approach is "balance". charged with the task of rapidly adapting new
The Analyzer defines its entrepreneurial product designs to fit the Analyzer's existing sta-
problem in terms similar to both the Prospector ble technology.
and the Defender: how to locate and exploit The Analyzer's dual technological core thus
new product and market opportunities while reflects the engineering solutions of both the
simultaneously maintaining a firm core of tradi- Prospector and the Defender, with the stable and
tional products and customers. The Analyzer's flexible components integrated primarily by an
solution to the entrepreneurial problem is also a influential applied research group. To the extent
blend of the solutions preferred by the Prospec- that this group is able to develop solutions that
tor and the Defender: the Analyzer moves to- match the organization's existing technological
ward new products or new markets but only af- capabilities with the new products desired by
ter their viability has been demonstrated. This product managers, the Analyzer can enlarge its
periodic transformation of the Analyzer's do- product line without incurring the Prospector's
main is accomplished through imitation - only extensive research and development expenses.
the most successful product or market innova- The Analyzer's administrative problem, as
tions developed by prominent Prospectors are welt as its entrepreneurial and engineering prob-
adopted. At the same time, the majority of the lems, contains both Defender and Prospector
Analyzer's revenue is generated by a fairly stable characteristics. Generally speaking, the admin-
set of products and customer or client groups - istrative problem of the Analyzer is how to dif-
a Defender characteristic. Thus, the successful ferentiate the organization's structure and proc-
Analyzer must be able to respond quickly when esses to accommodate both stable and dynamic
following the lead of key Prospectors while at areas of operation. The Analyzer typically solves
the same time maintaining operating efficiency this problem with some version of a matrix or-
in its stable product and market areas. To the ex- ganization structure. Heads of key functional
tent that it is successful, the Analyzer can grow units, most notably engineering and produc-
through market penetration as well as product tion, unite with product managers (usually
and market development. housed in the marketing department) to form a
The duality evident in the Analyzer's domain balanced dominant coalition similar to both the
is reflected in its engineering problem and solu- Defender and the Prospector. The product man-
tion. This type of organization must learn how to ager's influence is usually greater than the func-
achieve and protect an equilibrium between tional manager's since his or her task is to identi-
conflicting demands for technological flexibility fy promising product-market innovations and to
and for technological stability. This equilibrium supervise their movement through applied en-
is accomplished by partitioning production ac- gineering and into production in a smooth and
tivities to form a dual technological core. The timely manner. The presence of engineering and
stable component of the Analyzer's technology production in the dominant coalition is to rep-
bears a strong resemblance to the Defender's resent the more stable domain and technology
technology. It is functionally organized and ex- which are the foundations of the Analyzer's
hibits high levels of standardization, routiniza- overall operations. The Analyzer's matrix struc-
tion, and mechanization in an attempt to ap- ture is supported by intensive planning between
proach cost efficiency. The Analyzer's flexible the functional divisions of marketing and pro-
technological component resembles the Pros- duction, broad-gauge planning between the ap-
556 Organizational Strategy, Structure, and Process

TABLE3. Characteristics of the Analyzer

Entrepreneurial Problem Engineering Problem Administrative Problem

Problem: Problem: Problem:

How to locate and exploit new How to be efficient in stable portions How to differentiate the organiza-
product and market opportunities of the domain and flexible in changing tion's structure and processes to ac-
while simultaneously maintaining portions. commodate both stable and dynamic
a firm base of traditional products areas of operation.
and customers.

Solutions: Solutions: Solutions:

1. Hybrid domain that is both 1. Dual technological core (stable 1. Marketing and engineering most
stable and changing. and flexible component). influential members of dominant
2. Surveillance mechanisms mostly 2. Large and influential applied coalition, followed closely by
limited to marketing; some engineering group. production.
research and development. 3. Moderate degree of technical 2. Intensive planning between mar-
3. Steady growth through market rationality. keting and production concerning
penetration and product-market stable portion of domain; com-
development. prehensive planning among
marketing, engineering, and prod-
uct managers concerning new
products and markets.
3. "Loose" matrix structure combin-
ing both functional divisions and
product groups.
4. Moderately centralized control
II
system with vertical and horizontal
feedback loops.
5. Extremely complex and expensive
coordination mechanisms; some
conflict resolution through product
managers, some through normal
hierarchical channels.
6. Performance appraisal based on
both effectiveness and efficiency
measures, most rewards to mar-
keting and engineering.

Costs and Benefits: Costs and Benefits: Costs and Benefits:

Low investment in research and Dual technological core is able to Administrative system is ideally suited
development, combined with imita- serve a hybrid stable-changing to balance stability and flexibility, but
tion of demonstrably successful domain, but the technology can never if this balance is lost, it may be difficult
products, minimizes risk, but domain be completely effective or efficient. to restore equilibrium.
must be optimally balanced at all
times between stability and flexibility.
I

Source: Raymond E. Miles and Charles C. Snow, Organizational Strategy, Structure, and Process (New York: McGraw-Hill, 1978),
Table 5-1.

plied research group and the product managers ized control mechanisms in the functional divi-
for the development of new products, central- sions and decentralized control techniques in
Academy of Management Review - July 1978 557

the product groups, and so on. In sum, the key aggressively in the future. Thus, the Reactor is a
characteristic of the Analyzer's administrative "residual" strategy, arising when one of the oth-
system is the proper differentiation of the organ- er three strategies is improperly pursued.
ization's structure and processes to achieve a Although there are undoubtedly many rea-
balance between the stable and dynamic areas sons why organizations become Reactors, we
of operation. have identified three. First, top management
As is true for both the Defender and Pros- may not have clearly articulated the organiza-
pector, the Analyzer strategy is not without its tion's strategy. For example, one company was
costs. The duality in the Analyzer's domain headed by a "one-man" Prospector of immense
forces the organization to establish a dual tech- personal skills. A first-rate architect, he led his
nological core, and it requires management to firm through a rapid and successful growth pe-
operate fundamentally different planning, con- riod during which the company moved from the
trol, and reward systems simultaneously. Thus, design and construction of suburban shopping
the Analyzer's twin characteristics of stability and centers, through the construction and manage-
flexibility limit the organization's ability to move ment of apartment complexes, and into consult-
fully in either direction were the domain to shift ing with municipal agencies concerning urban
dramatically. Consequently, the Analyzer's pri- planning problems. Within ten years of its incep-
mary risks are both inefficiency and ineffective- tion, the company was a loose but effective col-
ness if it does not maintain the necessary balance lection of semi-autonomous units held together
throughout its strategy-structure relationship. by this particular individual. When this individ-
Table 3 summarizes the Analyzer's salient char- ual was suddenly killed in a plane crash, the com-
acteristics and the major strengths and weak- pany was thrown into a strategic void. Because
nesses inherent in this pattern of adaptation. each separate unit of the company was success-
Reactors ful, each was able to argue strongly for more
emphasis on its particular domain and opera-
The Defender, the Prospector, and the Ana- tions. Consequently, the new chief executive of-
lyzer can all be proactive with respect to their en- ficer, caught between a number of conflicting
vironments, though each is proactive in a differ- but legitimate demands for resources, was un-
ent way. At the extremes, Defenders continually able to develop a unified, cohesive statement of
attempt to develop greater efficiency in existing the organization's strategy; thus, consistent and
operations while Prospectors explore environ- aggressive behavior was precluded.
mental change in search of new opportunities. A second and perhaps more common cause
Over time, these action modes stabilize to form of organizational instability is that management
a pattern of response to environmental condi- does not fully shape the organization's structure
tions that is both consistent and stable. and processes to fit a chosen strategy. Unless all
A fourth type of organization, the Reactor, of the domain, technological, and administra-
exhibits a pattern of adjustment to its environ- tive decisions required to have an operational
ment that is both inconsistent and unstable; this strategy are properly aligned, strategy is a mere
type lacks a set of response mechanisms which it statement, not an effective guide to behavior.
can consistently put into effect when faced with One publishing company wished, in effect, to
a changing environment. As a consequence, Re- become an Analyzer - management had arti-
actors exist in a state of almost perpetual insta- culated a direction for the organization which in-
bility. The Reactor's "adaptive" cycle usually volved operating in both stable and changing
consists of responding inappropriately to envi- domains within the college textbook publishing
ronmental change and uncertainty, performing industry. Although the organization was com-
poorly as a result, and then being reluctant to act prised of several key Defender and Prospector
558 OrganizationalStrategy,Structure,and Process

characteristics such as functional structures and stable strategies of Defender, Analyzer, or Pros-
decentralized control mechanisms, these struc- pector.
ture-process features were not appropriately
linked to the company's different domains. In Management Theory Linkages to
one area where the firm wished to "prospect", Organizational Strategy and Structure
for example, the designated unit had a function-
al structure and shared a large, almost mass-pro- Organizations are limited in their choices of
duction technology with several other units, adaptive behavior to those which top manage-
thereby making it difficult for the organization ment believes will allow the effective direction
to respond to market opportunities quickly. and control of human resources. Therefore, top
Thus, this particular organization exhibited a executives' theories of management are an im-
weak link between its strategy and its structure- portant factor in analyzing an organization's
process characteristics. ability to adapt to its environment. Although our
The third cause of instability - and perhaps research is only in its preliminary stage, we have
ultimate failure - is a tendency for manage- found some patterns in the relationship between
ment to maintain the organization's current management theory and organizational strategy
strategy-structure relationship despite over- and structure.
whelming changes in environmental conditions. A theory of management has three basic
Another organization in our studies, a food- components: (a) a set of assumptions about hu-
processing company, had initially been an indus- man attitudes and behaviors, (b) managerial pol-
try pioneer in both the processing and market- icies and actions consistent with these assump-
ing of dried fruits and nuts. Gradually, the com- tions, and (c) expectations about employee per-
pany settled into a Defender strategy and took formance if these policies and actions are im-
vigorous steps to bolster this strategy, including plemented (see Table 4). Theories of manage-
limiting the domain to a narrow line of prod- ment are discussed in more detail in Miles (14).
ucts, integrating backward into growing and har- During the latter part of the 19th Century
vesting, and assigning a controller to each of the and the early decades of the 20th, mainstream
company's major functional divisions as a means management theory, as voiced by managers and
of keeping costs down. Within recent years, the by management scholars, conformed to what
company's market has become saturated, and has been termed the Traditional model. Essen-
profit margins have shrunk on most of the firm's tially, the Traditional model maintained that the
products. In spite of its declining market, the or- capability for effective decision making was nar-
ganization has consistently clung to a Defender rowly distributed in organizations, and this ap-
strategy and structure, even to the point of cre- proach thus legitimized unilateral control of or-
ating ad hoc cross-divisional committees whose ganizational systems by top management. Ac-
sole purpose was to find ways of increasing effi- cording to this model, a select group of owner-
ciency further. At the moment, management managers was able to direct large numbers of
recognizes that the organization is in trouble, employees by carefully standardizing and rou-
but it is reluctant to make the drastic modifica- tinizing their work and by placing the planning
tions required to attain a strategy and structure function solely in the hands of top managers.
better suited to the changing market conditions. Under this type of management system, em-
Unless an organization exists in a "pro- ployees could be expected to perform up to
tected" environment such as a monopolistic or some minimum standard, but few would be
highly-regulated industry, it cannot continue to likely to exhibit truly outstanding performance.
behave as a Reactor indefinitely. Sooner or later, Beginning in the twenties, the Traditional
it must move toward one of the consistent and model gradually began to give way to the Hu-
Academy of Management Review - July 1978 559

TABLE4. Theories of Management

Traditional Model Human Relations Model Human Resources Model

Assumptions Assumptions Assumptions

1. Work is inherently distasteful to 1. People want to feel useful and 1. Work is not inherently distasteful.
most people. important. People want to contribute to
2. What workers do is less important 2. People desire to belong and to meaningful goals which they have
than what they earn for doing it. be recognized as individuals. helped establish.
3. Few want or can handle work 3. These needs are more important 2. Most people can exercise far more
which requires creativity, self-direc- than money in motivating people creative, responsible self-direction
tion, or self-control. to work. and self-control than their present
jobs demand.

Policies Policies Policies

1. The manager's basic task is to 1. The manager's basic task is to make 1. The manager's basic task is to
closely supervise and control his each worker feel useful and make use of his (her) "untapped"
(her) subordinates, important. human resources.
2. He (she) must break tasks down 2. He (she) should keep his (her) sub- 2. He (she) must create an environ-
into simple, repetitive, easily ordinates informed and listen to ment in which all members may
learned operations. their objections to his (her) plans. contribute to the limits of their
3. He (she) must establish detailed work 3. The manager should allow his (her) ability.
routines and procedures and subordinates to exercise some self- 3. He (she) must encourage full
enforce these firmly but fairly. direction and self-control on participation on important mat-
routine matters. ters, continually broadening sub-
ordinate self-direction and control.

Expectations Expectations Expectations

1. People can tolerate work if the pay 1. Sharing information with subor- 1. Expanding subordinate influence,
is decent and the boss is fair. dinates and involving them in self-direction, and self-control will
2. If tasks are simple enough and routine decisions will satisfy their lead to direct improvements in
people are closely controlled, basic needs to belong and to feel organizational performance.
they will produce up to standard. important. 2. Work satisfaction may improve as
2. Satisfying these needs will improve a "by-product" of subordinates
morale and reduce resistance to making full use of their resources.
formal authority-subordinates
will willingly cooperate and pro-
duce.

a
Source: Raymond E. Miles, Theories of Management (New York: McGraw-Hill, 1975), Figure 3-1.

man Relations model. This model accepted the this approach urged managers to employ de-
traditional notion that superior decision-making vices to enhance organization members' feel-
competence was narrowly distributed among ings of involvement and importance in order to
the employee population but emphasized the improve organizational performance. Sugges-
universality of social needs for belonging and tion systems, employee counseling, and even
recognition. This model argued that impersonal company unions had common parentage in this
treatment was the source of subordinate resist- philosophy. The Depression and World War II
ance to managerial directives, and adherents of both acted to delay the development and spread
560 OrganizationalStrategy,Structure,and Process

of the Human Relations model, and it was not are more likely to be found in Defender and Re-
until the late forties and early fifties that it be- actor organizations, while Human Resources be-
came the prime message put forth by managers liefs are more often associated with Analyzer
and management scholars. and Prospector organizations. But this relation-
Beginning in the mid-fifties, a third phase ship appears to be constrained in one direction;
in the evolution of management theory began it seems highly unlikely that a Traditional or Hu-
with the emergence of the Human Resources man Relations manager can function effectively
model which argued that the capacity for effec- as the head of a Prospector organization. The
tive decision making in the pursuit of organiza- prescriptions of the Traditional model simply do
tional objectives was widely dispersed and that not support the degree of decentralized decision
most organization members represented un- making required to create and manage diversi-
tapped resources which, if properly managed, fied organizations. It is quite possible for a Hu-
could considerably enhance organizational per- man Resources manager to lead a Defender or-
formance. The Human Resources approach ganization. Of course, the organization's plan-
viewed management's role not as that of a con- ning and control processes under such leader-
troller (however benevolent) but as that of a fa- ship would be less centralized than if the organ-
cilitator - removing the constraints that block ization were managed according to the Tradi-
organization members' search for ways to con- tional model. Using the Human Resources phi-
tribute meaningfully in their work roles. In re- losophy, heads of functional divisions might
cent years, some writers have questioned the ex- either participate in the planning and budgeting
tent to which the Human Resources model is process, or they might simply be delegated con-
applicable, arguing for a more "contingent" the- siderable autonomy in operating their cost cen-
ory emphasizing variations in member capacity ters.(In Defender organizations operated accord-
and motivation to contribute and the technol- ing to the Human Resources philosophy, hu-
ogical constraints associated with broadened man capabilities are aimed primarily at cost ef-
self-direction and self-control. The Human Re- ficiency rather than product development.)
sources model probably still represents the lead- The fit between management theory and
ing edge of management theory, perhaps await- the strategy, structure, and process characteris-
ing the formulation of a successor model. tics of Analyzers is perhaps more complex than
with any of the other types. Analyzers, as previ-
Linking the Strategic Typology to ously described, tend to remain cost efficient in
Management Theory the production of a limited line of goods or serv-
Are there identifiable linkages between an ices while attempting to move as rapidly as pos-
organization's strategic type and the manage- sible into promising new areas opened up by
ment theory of its dominant coalition? For ex- Prospectors. Note that the organization struc-
ample, do top executives in Defenders profess ture of the Analyzer does not demand exten-
Traditional beliefs about management and those sive, permanent delegation of decision-making
in Prospectors a Human Resources philosophy? authority to division managers. Most of the Ana-
The answer to this question is, in our opinion, a lyzer's products or services can be produced in
bit more complex than simply "yes" or "no". functionally structured divisions similar to those
One of our studies investigated aspects of in Defender organizations. New products or
the relationship between organizational strate- services may be developed in separate divisions
gy-structure and management theory. Although or departments created for that purpose and
the results are only tentative at this point, rela- then integrated as quickly as possible into the
tively clear patterns emerged. In general, Tradi- permanent technology and structure. It seems
tional and Human Relations managerial beliefs likely to us, although our evidence is inconclu-
Academy of Management Review - July 1978 561

sive, that various members of the dominant zations in high-technology industries, etc.), and
coalition in Analyzer organizations hold moder- their struggles may well produce a new organi-
ate but different managerial philosophies, that zation type and demands for a supporting the-
certain key executives believe it is their role to ory of management. Whatever form this new
pay fairly close attention to detail while others type of organization takes, however, clearly its
appear to be more willing to delegate, for short management-theory requirements will closely
periods, moderate amounts of autonomy nec- parallel or extend those of the Human Resources
essary to bring new products or services on line model (15).
rapidly. If these varying managerial philosophies
are "mismatched" within the Analyzer's operat-
Conclusions
ing units - if, for example, Traditional managers
are placed in charge of innovative subunits -
then it is unlikely that a successful Analyzer strat- Our research represents an initial attempt:
egy can be pursued. (a) to portray the major elements of organiza-
Holding together a dominant coalition with tional adaptation, (b) to describe patterns of be-
mixed views concerning strategy and structure is havior used by organizations in adjusting to their
not an easy task. It is difficult, for example, for environments, and (c) to provide a language for
managers engaged in new product or service de- discussing organizational behavior at the total-
velopment to function within planning, control, system level. Therefore, we have offered a theo-
and reward systems established for more stable retical framework composed of a model of the
operations, so the Analyzer must be successfully adaptive process (called the adaptive cycle) and
differentiated into its stable and changing areas four empirically determined means of moving
and managed accordingly. Note that experi- through this process (the strategic typology). In
mentation in the Analyzer is usually quite lim- addition, we have related this theoretical frame-
ited. The exploration and risk associated with work to available theories of management (Tra-
major product or service breakthroughs are not ditional, Human Relations, Human Resources).
present (as would be the case in a Prospector), Effective organizational adaptation hinges on the
and thus interdependencies within the system ability of managers to not only envision and im-
may be kept at a manageable level. Such would plement new organizational forms but also to
not be the case if Analyzers attempted to be direct and control people within them.
both cost-efficient producers of stable products We believe that managers' ability to meet
or services and active in a major way in new successfully environmental conditions of to-
product and market development. Numerous morrow revolves around their understanding of
organizations are today being led or forced into organizations as integrated and dynamic wholes.
such a mixed strategy (multinational companies, Hopefully, our framework offers a theory and
certain forms of conglomerates, many organi- language for promoting such an understanding.

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