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Quiz 8: Designing Adaptive Organizations
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Question 101
Multiple Choice
Zara clothing stores has developed a system that can order new fashions and deliver them to the store in only three weeks. It uses ____ to pass information to the next person in the line of development.
Question 102
Multiple Choice
The composition of a ____ organization is always changing.
Question 103
Multiple Choice
Yahoo! Welcome to Yahoo! where you'll find a $100 million loss, plummeting advertising sales, a stock price that has fallen from an all-time high of $237 to less than $10 per share, and layoffs that cost 800 people-including the previous CEO-their jobs. At this once-phenomenally-successful company, so many basic things have gone wrong that the question is: Where do you start to fix it? One key problem is the organizational structure: with just 3,200 employees, Yahoo! has forty-four different business units! Even General Electric, with 300,000 employees, has only 13. You think to yourself, "This is unmanageable. Too many people and no focus." Amazingly, despite having 44 business units, Yahoo! doesn't have a direct sales unit. No one, it turns out, is responsible for cultivating customers. Why not? Well, during the "go-go" days, customers were literally throwing themselves and their advertising dollars at the company. As one Yahoo! manager said, "The fish were jumping into the boat." Consequently, most orders took place via email. Yahoo! didn't have to establish relationships with customers because customers came to it. Unfortunately, this led to arrogance. Jeff Bell, a vice president at one of Yahoo!'s potential customers, said the message was, "Buy our stuff [meaning Yahoo!'s advertising], and shut up." Jeff Mallett, Yahoo!'s former president, said, "We ran Yahoo! to optimize market share. I make no apologies for that. If there was a company that didn't get it [Internet advertising], we moved on very quickly." Another problem was the overly creative, freewheeling, spontaneous company culture in which everyone, including the CEO, worked in cubicles. The problem wasn't so much the cubicles, but what they came to represent: an overly informal culture with no controls. At Yahoo!, employees played soccer in a large open space outside the company boardroom, even while the board was meeting. Furthermore, no one had an overall perspective of what was best for the entire company. Consequently, said one Yahoo! vice president, "[Unit] managers would beg, borrow, and steal from the network [meaning the overall company] to help their own properties." Plus, if you had an idea, you pursued it without having to get anyone's feedback or approval. Yahoo!'s chief operating officer said, "Yahoo!'s original mission was to grow as fast as you can and put things out there and see what works." The more serious problem, he said, was that "nobody knew what would work." The most amazing aspect of this culture was that, as one manager explained, "There was a fair amount of resistance toward the strategy of monetizing our businesses." In other words, the culture at Yahoo! was so informal, so unfocused, and so freewheeling that no one really worried about whether the company could charge for the services it provided and make a profit. "There was a fear," said this manager, "that if all of our efforts were put into profit making, we'd starve research and development and lose our innovation." Refer to Yahoo!. What is one of the advantages of Yahoo's new organizational structure?
Question 104
Multiple Choice
Modular organizations ____.
Question 105
Multiple Choice
WWYD Eli Lilly Eli Lilly's 20-year patent on Zyprexa, a drug that generates $5 billion a year runs out in October 2011. This means other manufacturers can sell low-priced generic versions of the drug. Lilly has seven other major drugs that will fall off the "patent cliff" and stands to lose 75% of its annual revenue if it doesn't generate new "blockbuster" drugs. And Lilly isn't the only pharmaceutical company in this situation. The entire industry will see half of its revenues fall off due to expiring patents. When Lilly's patent expired on Prozac, a drug for depression taken daily by 40 million people, then-CEO Sidney Taurel took steps to energize drug development by increasing R&D budget and instructing Lilly's 7,000 researchers to focus on drugs that could produce one-half billion dollars a year in sales. This time, however, expanding headcount and increasing R&D budgets aren't options. The long-term challenge is to grow Lilly's drug pipeline with faster, less expensive innovation. Some think that large budgets, centralized approval for allocating research dollars, and "siloed" research (where few know and understand what others in the company are working on) stifle innovation and slow decision making. Thus, after laying off workers and reducing annual expenses by $1 billion, CEO John Lechleiter had to jumpstart Lilly's drug development process and restructure his company to address this challenge. John Lechleiter restructured Lilly to significantly improve communication in product development teams and speed up the entire drug development process. One of his first actions was to put everyone involved in the drug development process under one building, which Lilly named the Development Center of Excellence. In addition to improving chances for spontaneous communication, the company focused on ways to achieve dramatic improvements in cost, quality, service, and speed. Lilly began using Critical Chain project management developed by physicist Eli Goldratt, which eliminates delays that occur in a process when a task is completed by one person and then handed off to the next to begin the next step or task in the process. Lilly also created a group within the company called Chorus, which outsources 80% of Lilly's research to contract research organizations (CROs) . To ensure results, CROs earn bonuses for successfully meeting deadlines-and, if the products make it to market, they earn drug sale royalties too. The cost of using CROs is roughly a third less than it would have cost for Lilly to do the testing in-house. Of course, modular organizations have disadvantages, too, such as the loss of control that occurs when key business activities are outsourced to other companies. Also, suppliers to whom work is outsourced can sometimes become competitors. So, is Lilly risking its future by outsourcing the core function of researching and testing new drugs? While CROs may help pharmaceutical companies do a faster job of determining which drugs don't deserve more expensive late-phase testing, some critics doubt whether they can help firms like Lilly uncover the blockbuster drugs they need to replace the drugs that are coming out of patent protection. Refer to WWYD Eli Lilly. The shift to "siloed" research would likely be proposed by those in the company who advocate______departmentalization.
Question 106
Multiple Choice
A military expert describes how the military forces were organized for Operation Desert Storm as pooled interdependence. This means that each branch of the military that took part in the operation ____.
Question 107
Multiple Choice
Yahoo! Welcome to Yahoo! where you'll find a $100 million loss, plummeting advertising sales, a stock price that has fallen from an all-time high of $237 to less than $10 per share, and layoffs that cost 800 people-including the previous CEO-their jobs. At this once-phenomenally-successful company, so many basic things have gone wrong that the question is: Where do you start to fix it? One key problem is the organizational structure: with just 3,200 employees, Yahoo! has forty-four different business units! Even General Electric, with 300,000 employees, has only 13. You think to yourself, "This is unmanageable. Too many people and no focus." Amazingly, despite having 44 business units, Yahoo! doesn't have a direct sales unit. No one, it turns out, is responsible for cultivating customers. Why not? Well, during the "go-go" days, customers were literally throwing themselves and their advertising dollars at the company. As one Yahoo! manager said, "The fish were jumping into the boat." Consequently, most orders took place via email. Yahoo! didn't have to establish relationships with customers because customers came to it. Unfortunately, this led to arrogance. Jeff Bell, a vice president at one of Yahoo!'s potential customers, said the message was, "Buy our stuff [meaning Yahoo!'s advertising], and shut up." Jeff Mallett, Yahoo!'s former president, said, "We ran Yahoo! to optimize market share. I make no apologies for that. If there was a company that didn't get it [Internet advertising], we moved on very quickly." Another problem was the overly creative, freewheeling, spontaneous company culture in which everyone, including the CEO, worked in cubicles. The problem wasn't so much the cubicles, but what they came to represent: an overly informal culture with no controls. At Yahoo!, employees played soccer in a large open space outside the company boardroom, even while the board was meeting. Furthermore, no one had an overall perspective of what was best for the entire company. Consequently, said one Yahoo! vice president, "[Unit] managers would beg, borrow, and steal from the network [meaning the overall company] to help their own properties." Plus, if you had an idea, you pursued it without having to get anyone's feedback or approval. Yahoo!'s chief operating officer said, "Yahoo!'s original mission was to grow as fast as you can and put things out there and see what works." The more serious problem, he said, was that "nobody knew what would work." The most amazing aspect of this culture was that, as one manager explained, "There was a fair amount of resistance toward the strategy of monetizing our businesses." In other words, the culture at Yahoo! was so informal, so unfocused, and so freewheeling that no one really worried about whether the company could charge for the services it provided and make a profit. "There was a fear," said this manager, "that if all of our efforts were put into profit making, we'd starve research and development and lose our innovation." Refer to Yahoo!. One of the causes of the precipitous drop in the value of Yahoo's stock was that too many unrelated decisions were being made by unrelated people in the company without any regard for what was best for the entire company. One way to solve this problem would be to use more ____.
Question 108
Multiple Choice
Novo Nordisk is a European manufacturer of pharmaceuticals. An employee , Rikke NedergaardBischoff, who is a clinical-development scientist, contends that Novo upholds the standards expected of public institutions without the stifling bureaucracy. She says, "There's a great deal of empowerment at Novo Nordisk." Novo Nordisk provides NedergaardBischoff with ____.
Question 109
Multiple Choice
In the automobile industry, three car manufacturers and a variety of suppliers and distributors have formed a network to create economies in production through outsourcing. It is intended for this ____ to cut as much as $3,000 from the costs of producing one car.
Question 110
Multiple Choice
WWYD Eli Lilly Eli Lilly's 20-year patent on Zyprexa, a drug that generates $5 billion a year runs out in October 2011. This means other manufacturers can sell low-priced generic versions of the drug. Lilly has seven other major drugs that will fall off the "patent cliff" and stands to lose 75% of its annual revenue if it doesn't generate new "blockbuster" drugs. And Lilly isn't the only pharmaceutical company in this situation. The entire industry will see half of its revenues fall off due to expiring patents. When Lilly's patent expired on Prozac, a drug for depression taken daily by 40 million people, then-CEO Sidney Taurel took steps to energize drug development by increasing R&D budget and instructing Lilly's 7,000 researchers to focus on drugs that could produce one-half billion dollars a year in sales. This time, however, expanding headcount and increasing R&D budgets aren't options. The long-term challenge is to grow Lilly's drug pipeline with faster, less expensive innovation. Some think that large budgets, centralized approval for allocating research dollars, and "siloed" research (where few know and understand what others in the company are working on) stifle innovation and slow decision making. Thus, after laying off workers and reducing annual expenses by $1 billion, CEO John Lechleiter had to jumpstart Lilly's drug development process and restructure his company to address this challenge. John Lechleiter restructured Lilly to significantly improve communication in product development teams and speed up the entire drug development process. One of his first actions was to put everyone involved in the drug development process under one building, which Lilly named the Development Center of Excellence. In addition to improving chances for spontaneous communication, the company focused on ways to achieve dramatic improvements in cost, quality, service, and speed. Lilly began using Critical Chain project management developed by physicist Eli Goldratt, which eliminates delays that occur in a process when a task is completed by one person and then handed off to the next to begin the next step or task in the process. Lilly also created a group within the company called Chorus, which outsources 80% of Lilly's research to contract research organizations (CROs) . To ensure results, CROs earn bonuses for successfully meeting deadlines-and, if the products make it to market, they earn drug sale royalties too. The cost of using CROs is roughly a third less than it would have cost for Lilly to do the testing in-house. Of course, modular organizations have disadvantages, too, such as the loss of control that occurs when key business activities are outsourced to other companies. Also, suppliers to whom work is outsourced can sometimes become competitors. So, is Lilly risking its future by outsourcing the core function of researching and testing new drugs? While CROs may help pharmaceutical companies do a faster job of determining which drugs don't deserve more expensive late-phase testing, some critics doubt whether they can help firms like Lilly uncover the blockbuster drugs they need to replace the drugs that are coming out of patent protection. Refer to WWYD Eli Lilly. Although product departmentalization-each unit devoted to particular drug-would work well in developing new drugs for Lilly, which of the following would be the most problematic issue for this kind of project management?
Question 111
Multiple Choice
In essence, reengineering changes organizations by ____.
Question 112
Multiple Choice
Yahoo! Welcome to Yahoo! where you'll find a $100 million loss, plummeting advertising sales, a stock price that has fallen from an all-time high of $237 to less than $10 per share, and layoffs that cost 800 people-including the previous CEO-their jobs. At this once-phenomenally-successful company, so many basic things have gone wrong that the question is: Where do you start to fix it? One key problem is the organizational structure: with just 3,200 employees, Yahoo! has forty-four different business units! Even General Electric, with 300,000 employees, has only 13. You think to yourself, "This is unmanageable. Too many people and no focus." Amazingly, despite having 44 business units, Yahoo! doesn't have a direct sales unit. No one, it turns out, is responsible for cultivating customers. Why not? Well, during the "go-go" days, customers were literally throwing themselves and their advertising dollars at the company. As one Yahoo! manager said, "The fish were jumping into the boat." Consequently, most orders took place via email. Yahoo! didn't have to establish relationships with customers because customers came to it. Unfortunately, this led to arrogance. Jeff Bell, a vice president at one of Yahoo!'s potential customers, said the message was, "Buy our stuff [meaning Yahoo!'s advertising], and shut up." Jeff Mallett, Yahoo!'s former president, said, "We ran Yahoo! to optimize market share. I make no apologies for that. If there was a company that didn't get it [Internet advertising], we moved on very quickly." Another problem was the overly creative, freewheeling, spontaneous company culture in which everyone, including the CEO, worked in cubicles. The problem wasn't so much the cubicles, but what they came to represent: an overly informal culture with no controls. At Yahoo!, employees played soccer in a large open space outside the company boardroom, even while the board was meeting. Furthermore, no one had an overall perspective of what was best for the entire company. Consequently, said one Yahoo! vice president, "[Unit] managers would beg, borrow, and steal from the network [meaning the overall company] to help their own properties." Plus, if you had an idea, you pursued it without having to get anyone's feedback or approval. Yahoo!'s chief operating officer said, "Yahoo!'s original mission was to grow as fast as you can and put things out there and see what works." The more serious problem, he said, was that "nobody knew what would work." The most amazing aspect of this culture was that, as one manager explained, "There was a fair amount of resistance toward the strategy of monetizing our businesses." In other words, the culture at Yahoo! was so informal, so unfocused, and so freewheeling that no one really worried about whether the company could charge for the services it provided and make a profit. "There was a fear," said this manager, "that if all of our efforts were put into profit making, we'd starve research and development and lose our innovation." Refer to Yahoo!. Before restructuring, Yahoo! was described as having an overly creative, freewheeling culture, a highly decentralized decision-making structure in which managers did only what was best for their units rather than what was best for the entire company and exhibited resistance to actually making a profit by placing too much value on innovation to the exclusion of profit. What kind of an organization did the company have?
Question 113
Multiple Choice
Yahoo! Welcome to Yahoo! where you'll find a $100 million loss, plummeting advertising sales, a stock price that has fallen from an all-time high of $237 to less than $10 per share, and layoffs that cost 800 people-including the previous CEO-their jobs. At this once-phenomenally-successful company, so many basic things have gone wrong that the question is: Where do you start to fix it? One key problem is the organizational structure: with just 3,200 employees, Yahoo! has forty-four different business units! Even General Electric, with 300,000 employees, has only 13. You think to yourself, "This is unmanageable. Too many people and no focus." Amazingly, despite having 44 business units, Yahoo! doesn't have a direct sales unit. No one, it turns out, is responsible for cultivating customers. Why not? Well, during the "go-go" days, customers were literally throwing themselves and their advertising dollars at the company. As one Yahoo! manager said, "The fish were jumping into the boat." Consequently, most orders took place via email. Yahoo! didn't have to establish relationships with customers because customers came to it. Unfortunately, this led to arrogance. Jeff Bell, a vice president at one of Yahoo!'s potential customers, said the message was, "Buy our stuff [meaning Yahoo!'s advertising], and shut up." Jeff Mallett, Yahoo!'s former president, said, "We ran Yahoo! to optimize market share. I make no apologies for that. If there was a company that didn't get it [Internet advertising], we moved on very quickly." Another problem was the overly creative, freewheeling, spontaneous company culture in which everyone, including the CEO, worked in cubicles. The problem wasn't so much the cubicles, but what they came to represent: an overly informal culture with no controls. At Yahoo!, employees played soccer in a large open space outside the company boardroom, even while the board was meeting. Furthermore, no one had an overall perspective of what was best for the entire company. Consequently, said one Yahoo! vice president, "[Unit] managers would beg, borrow, and steal from the network [meaning the overall company] to help their own properties." Plus, if you had an idea, you pursued it without having to get anyone's feedback or approval. Yahoo!'s chief operating officer said, "Yahoo!'s original mission was to grow as fast as you can and put things out there and see what works." The more serious problem, he said, was that "nobody knew what would work." The most amazing aspect of this culture was that, as one manager explained, "There was a fair amount of resistance toward the strategy of monetizing our businesses." In other words, the culture at Yahoo! was so informal, so unfocused, and so freewheeling that no one really worried about whether the company could charge for the services it provided and make a profit. "There was a fear," said this manager, "that if all of our efforts were put into profit making, we'd starve research and development and lose our innovation." Refer to Yahoo!. After restructuring, Yahoo's four new departments were consumer services, marketing services, business and enterprise services, and premium services. What type of organizational structure did Yahoo adopt during its restructuring?
Question 114
Multiple Choice
Roughly 70 percent of all reengineering projects fail because ____.
Question 115
Multiple Choice
Leaders during any disaster need to give their employees a sense that everyone is participating in the relief effort. The Gap gave its employees the authority to transfer their paid time off to some 1,300 employees affected by Hurricane Katrina. The Gap used ____ to allow its employees to gain a feeling of intrinsic motivation.
Question 116
Multiple Choice
A(n) ____ organization is part of a network in which many companies share skills, costs, capabilities, markets, and customers with each other.
Question 117
Multiple Choice
Which of the following is an approach to managing interorganizational processes?
Question 118
Multiple Choice
Yahoo! Welcome to Yahoo! where you'll find a $100 million loss, plummeting advertising sales, a stock price that has fallen from an all-time high of $237 to less than $10 per share, and layoffs that cost 800 people-including the previous CEO-their jobs. At this once-phenomenally-successful company, so many basic things have gone wrong that the question is: Where do you start to fix it? One key problem is the organizational structure: with just 3,200 employees, Yahoo! has forty-four different business units! Even General Electric, with 300,000 employees, has only 13. You think to yourself, "This is unmanageable. Too many people and no focus." Amazingly, despite having 44 business units, Yahoo! doesn't have a direct sales unit. No one, it turns out, is responsible for cultivating customers. Why not? Well, during the "go-go" days, customers were literally throwing themselves and their advertising dollars at the company. As one Yahoo! manager said, "The fish were jumping into the boat." Consequently, most orders took place via email. Yahoo! didn't have to establish relationships with customers because customers came to it. Unfortunately, this led to arrogance. Jeff Bell, a vice president at one of Yahoo!'s potential customers, said the message was, "Buy our stuff [meaning Yahoo!'s advertising], and shut up." Jeff Mallett, Yahoo!'s former president, said, "We ran Yahoo! to optimize market share. I make no apologies for that. If there was a company that didn't get it [Internet advertising], we moved on very quickly." Another problem was the overly creative, freewheeling, spontaneous company culture in which everyone, including the CEO, worked in cubicles. The problem wasn't so much the cubicles, but what they came to represent: an overly informal culture with no controls. At Yahoo!, employees played soccer in a large open space outside the company boardroom, even while the board was meeting. Furthermore, no one had an overall perspective of what was best for the entire company. Consequently, said one Yahoo! vice president, "[Unit] managers would beg, borrow, and steal from the network [meaning the overall company] to help their own properties." Plus, if you had an idea, you pursued it without having to get anyone's feedback or approval. Yahoo!'s chief operating officer said, "Yahoo!'s original mission was to grow as fast as you can and put things out there and see what works." The more serious problem, he said, was that "nobody knew what would work." The most amazing aspect of this culture was that, as one manager explained, "There was a fair amount of resistance toward the strategy of monetizing our businesses." In other words, the culture at Yahoo! was so informal, so unfocused, and so freewheeling that no one really worried about whether the company could charge for the services it provided and make a profit. "There was a fear," said this manager, "that if all of our efforts were put into profit making, we'd starve research and development and lose our innovation." Refer to Yahoo!. One of the causes of the precipitous drop in the value of Yahoo's stock was the company's inability to subdivide work and workers into separate organizational units responsible for completing particular tasks. For example, Yahoo has no sales unit to cultivate and call on advertising customers. Yahoo caused itself trouble when it decided to not engage in ____.
Question 119
Multiple Choice
Except for the core business activities that they can perform better, faster, and cheaper than others, ____ outsource all remaining business activities to outside companies, suppliers, specialists, or consultants.