Section B – TWO questions ONLY to be attempted
Webfilms was originally a film rental organisation, offering DVD rentals which were sent to customers and returned using parcel couriers. Webfilms enrolled members who paid a monthly fee and could rent as many films as they liked, receiving their next choice as soon as a previous film was returned. However, Webfilms found this model was not as successful as it had hoped. It struggled to gain a large customer base and high courier fees made it difficult for the company to make a reasonable profit.
The company underwent a radical strategic change and remodelled itself as an internet television network screening films and drama series. This service is now available in over 25 countries worldwide. All programmes are original and so have not been previously shown on any television channel in any country. The programmes are all produced by a creative team at Webfilms, headed by Paolo Butterfield, and all are only available in English. Members pay a monthly subscription charge and have access to unlimited viewing. Webfilms relies entirely on member subscriptions for funding as, to enhance the customer experience, its programmes do not carry advertising. Webfilms considers itself to be a focused differentiator, offering only programmes which it feels will attract a younger audience (the teens and twenties).
Until recently, Webfilms had no close competitors in this form of internet television. Indeed, it was the main substitute for traditional television channels, causing a downturn in that industry. However, its success has been noted and this has led to the emergence of a number of competitors in different countries. These competitors have recognised and capitalised on any perceived weakness of Webfilms. So, for example, some of them include programmes which are not in English and others also include popular programmes which have also been shown on other television channels. This means that customers need to only subscribe to one television service.
The CEO of Webfilms, who previously transformed the organisation from a postal to internet-based service, has recognised that strategic change is required in order for Webfilms to continue competing effectively in a dynamic market environment. Her proposal to the board included the following key points:
– The creation of a wider range of new programmes, including documentaries and current affairs programmes
– The inclusion of popular programmes which were created for one country’s viewers being shown in other countries
– Broadening the types of programmes so that the company can appeal to all age ranges
– Introduction of on-screen advertisements to create another revenue stream
– Translation of the most popular programmes into languages other than English
– The introduction of new services including broadband provision and online gaming
– A focus on efficiency, using the existing customer base to expand and to gain economies of scale, before any new competitors can gain a large market share
– The drive for efficiency should not be at the cost of quality, allowing the company to operate a hybrid strategy
The CEO is keen to pursue a boundary-less organisational model. Three options are presented in her proposal:
Hollow – where non-core processes are outsourced to external providers.
Modular – a hollow organisation which outsources some elements of the production process
Virtual – an organisation with no formal geographical structure, but operates through a series of Iinked IT systems, partnerships and collaborative agreements.
She further stated that it would be imperative to set all the new key points of the strategy in place as soon as possible, to be implemented on a pre-announced date, with a large marketing campaign to support it.
At a meeting with the creative director, Paolo Butterfield expressed concerns about many of the changes being suggested: ‘This is an effective demotion for me and my team. Customers pay their monthly fees because they love what we do, and yet you want to change it. Why are we following the crowd, when our existing business model is successful?’ The CEO responded, ‘There is no demotion. You will still be responsible for the creative element, just not producing all the programmes. This will allow you to take a much more strategic view of what we show, where and in what language. Argue as much as you like, but this is going to happen, it’s up to you whether you want to be involved in deciding how such change will take place.’
The meeting ended with some disharmony and a further meeting was arranged to determine which form of boundary-less working would be the most appropriate for Webfilms.
Required:
Balogun and Hope Hailey developed a change model which examines the contextual features which can influence the success or failure of strategic change.
Assess how five of the internal contextual features defined in Balogun and Hope Hailey’s model (time, scope, readiness, preservation and power) would influence the likely success or failure of the strategic change proposed by the CEO for Webfilms.
The Balogun and Hope Hailey model is used to explore the contextual features of change which need to be considered if that change is to be successful. Five of those contextual features were explored in this question.
Time – This looks at how quickly change is needed. There does not appear to be an immediate need for change as the business is doing well, but is looking at how to successfully compete in the future. Therefore there should be sufficient time to adequately plan the change, leading to a greater chance of success. Indeed, the actions leading towards the change are likely to be incremental, at least internally. However, the CEO has suggested that the entire switchover to the new strategy needs to take place in a single event. From an external perspective, this may be viewed as a ‘Big Bang’ change, which may lead to greater resistance from those external stakeholders affected by the change. However, if the marketing campaign is well-planned, then change may appear incremental, as customers will have time to get used to the changes which will be implemented.
Scope – This refers to the degree of change required. This may be considered a realignment of existing processes, or a transformational strategic change. Webfilms is planning to move from being a focused differentiator to a hybrid company operating with a broader customer base and a greater focus on cost efficiencies. This is a leap in strategy which needs to be very well planned in order for it to be successful. It is not impossible for a company to move around the strategy clock, but it may take time to gain acceptance from its customers. The continuing focus on quality, which may also be considered under preservation, should help with the success of the strategic change.
Scope also considers the type of business being carried out. This is being expanded to include services which have not previously been offered (e.g. broadband provision). The way in which business is to be carried out (boundary-less working) is also changing. These are areas unfamiliar to Webfilms and may influence the success of the change unless appropriate expertise is acquired.
Readiness – This examines how ready the workforce is for change. Webfilms has successfully undergone transformational change in the past and so its workforce may be well prepared for it to happen again. However, it appears there is resistance from a key player in this strategy. The creative director and his team are important to the success of the change and their resistance could jeopardise the strategy. The CEO will need to bring them on board for it to be successful.
Preservation – This looks at the organisational resources and characteristics which will be maintained throughout the change. The main business of the company will stay the same: offering programmes through the internet. This should ensure that the existing customer base remains, as long as it is still done successfully. However, the failure to preserve the advertisement-free approach may alienate existing customers.
Power – This looks at the power the change leader has to impose the change on the organisation. The CEO is the person driving the change and has the power to do so by virtue of her position in the organisation. She also has the experience, as she transformed the company from a postal-based to internet-based provider. However, it appears she plans to do this using force rather than consensus (‘this is going to happen. It’s up to you whether you want to be involved…’). This use of power may initially deter resistance, but it may have the opposite effect in the long term, demotivating the critically important creative development team.
There seems little doubt that the CEO is again suggesting transformational change as the company reinvents itself. Whether it is incremental or big bang depends on perspective. As mentioned before, internally it could be perceived as incremental and so the change would be classified as evolution. However, to external stakeholders it might appear as big bang, and hence represents revolutionary change.
Discuss how the different models of boundary-less working (hollow, modular and virtual) might be used to deliver parts of the CEO’s future strategy for Webfilms.
Boundary-less organisation structures increase flexibility of organisations in dynamic environments and require collaboration with external parties to work. The lack of traditional structures and use of external relationships is becoming common in organisation, particularly those in a hi-tech environment. Boundary-less organisations are frequently dispersed over geographical borders and so require good communications technology and integrated systems to succeed.
Three forms of boundary-less working are mentioned in the scenario, as options for change in Webfilms.
Hollow organisation structure – where non-core processes are outsourced to external providers. This does not seem to be far-reaching enough for Webfilms. It would assist with cost efficiencies but would probably prevent them from being able to implement the full new strategy as it lacks the resources to achieve this. However, if it considers some of the new services to be incremental and non-core, such as the online gaming service, then these could be outsourced to a company with expertise in this area. Similarly, advertising might be defined as non-core and sub-contracted to an organisation which has experience in this area. There may also be administrative services within the company, such as information technology, payroll, accounts, which could be outsourced.
Modular organisation structure – a hollow organisation which further outsources some elements of the production process. This would assist Webfilms in carrying out their new strategy. It could outsource some of the production processes for programmes, making use of external expertise to deliver those programmes with which it has little or no experience, such as documentaries and current affairs programmes. It could also outsource the translation of programmes into different languages. This would allow Webfilms’ own creative staff to continue to provide programmes which they are familiar with and might ally some of the fears and concerns of the creative director.
Virtual organisation structure – an organisation with no formal geographical structure, but operates through a series of Iinked IT systems, partnerships and collaborative agreements. This appears to be most appropriate to Webfilms. It would incorporate the modular structure described above but further extend this to incorporate a range of agreements with external parties together with a more flexible approach to internal working. For example, agreements would be needed with providers of previously screened programmes, with advertisers and with local technical support services for broadband provision. Relationships may have to be developed with competitors and Webfilms may need to be willing to make compromises, for example, by offering competitors access to original Webfilms programmes and films. Internally, Webfilms could operate flexibly over geographical boundaries, allowing them to have local personnel in place to better understand the viewing preferences of the different geographical locations which it serves.
Overall, it seems that boundary-less working is necessary if the new strategy is to be successful. It will not only increase the flexibility of operations, but will also contribute towards cost efficiencies.