Why organizational resources can result in organizational rigidities
We typically think of strong organizational capabilities as been an asset to a firm. Having leading capabilities is a key component of achieving a competitive advantage over competitors. However, there is a danger that the very resources that have led to the firm’s success may make it hard for a firm to change to respond to a changing environment. The strength of the capability may make the firm very resistant to change.
The whole firm is geared up to take advantage of the resource and capability
Part of the reason that core competencies of the firm may make lead to rigidities that make change difficult, is that the whole organization may be geared around exploiting this resource. Routines may be established that look to capitalize on the resource. Investments may have been made in other parts of the company that support the capability. Change becomes difficult because it requires change throughout the firm – and changing an entire organization is difficulty.
The resource and capability is seen as the identity of the firm – making people resistant to change
Another reason why core capabilities may lead to organizational rigidity is that the capability itself has become a key source of the firm’s identity. Employees see the resource as the essence of what the company is, and it becomes unthinkable that the firm would deviate from this area. The firm’s strength in the resource makes people reluctant to change that moves it away from its core.
Examples of situations that can result in organizational capabilities becoming rigidities
Some of the situations where organizational capabilities can turn into rigidities include:
Changes in the technology
Changes in the technology environment can result in processes and approaches that previously were very efficient no longer being so efficient. Potentially new firms are able to develop different approaches to compete in a market that under-cut your advantage, potentially offering goods or services more efficiently than you are able to provide.
Sometimes a very efficient organizational setup can result in it becoming difficult to operate with a new technology. The new technology cannot be easily integrated into your company, and the processes that worked well before are no longer competitive.
Change in customer demands
Another situation where organizational capabilities can result in the firm being resistant to change is gradually changing customer demands. Your previous offerings are no longer meeting customer demands, but because your company is so well optimized for your existing offerings (or you have a subset of customers who want you to continue your operations as they are), it is difficult to adjust to the new demands.
Final thoughts: Dynamic capabilities
The concept of dynamic capabilities tries to address the danger of firms becoming too rigid. The idea is that companies should actively try and develop capabilities that themselves adapt to the changing environment. The company has a capability to change – continually monitoring the environment to sense the need for change, and putting in place new practices to allow the firm to adapt to the environment.