ONE BIG F***ING ODY DOCUMENT

Appex Corporations
Executive Summary During the past three years under the leadership of Shikhar Ghosh, the Appex Corporation (Appex) has undergone a number of significant and radical structural changes in an attempt to respond to its meteoric growth as one of the primary suppliers in the rapidly expanding and evolving cellular telephone industry. While each of these structural modifications has generally improved the operating performance of Appex for a short period of time, ultimately each different structure has introduced a new set of inefficiencies and barriers that constrained the innovation, performance, and growth of the company. Consequently, Appex is no longer structured to effectively deliver on its overall vision through its strategic plan and objectives. Without major modifications that bring its operating behaviors in line with its vision and goals, its success in the marketplace is in question. These effects are compounded by its recent acquisition by EDS, a highly bureaucratic organization which will impose some of its own vision, structure, and values upon the company. After thorough examination of Appexs current organizational structure, its previous structural transitions, its core competencies, the evolution of the industry it serves, and the institutional context into which it is being placed, it is my recommendation that Appex undergo a substantive restructuring. For a company of Appexs size in this rapidly-evolving, technologically-oriented market a matrix structure is best suited for enabling innovation, performance, and growth. The matrix facilitates communication and information sharing which lead to improved multi-functional coordination. This coordination fosters improvements in existing and new products and services, provides an increased level of efficiency through the reduction of duplication of efforts, and enables a level of flexibility that will allow Appex to rapidly respond to changing market requirements and conditions. The matrix also provides a mechanism for Appex to leverage aspects of EDSs infrastructure and competencies. For the matrix to be successfully implemented and its benefits achieved a clear implementation plan in mandatory. This plan must fully address the exact nature of the matrixs structure, the personnel occupying each position in the matrix, and the performance metrics and incentives to be used to reinforce matrix-oriented behavior. Once the plan has been developed, buy-in must be received from key personnel, it must be communicated to the employees, and it must be executed in an organized, timely, and measurable manner. Analysis Since its inception in 1986, Appex has been at the forefront of the cellular communications revolution providing products and services to fuel its growth. During the past three years Appex has enjoyed revenue growth 1 of over 1600% while watching the industry expand in volume approximately 613%. In order to achieve this phenomenal growth rate, Appex has been forced to expand rapidly, adding personnel at a rate of approximately ten people per month. In an attempt to absorb these people while maintaining its strategy of being an efficient, responsive, and low-cost provider of innovative cellular communications infrastructure and services, the company has been restructured several times. Unfortunately, each restructuring was applied in a reactive manner in an attempt to address the problems at hand rather than to create a proactive structure that would enable future 2 growth in the rapidly evolving cellular telecommunications market . The table below summarizes Appexs structural evolution and the positive and negative effects that each structure had on the company. Timefra Employ Reven me ees ue Structure Positive Effects Negative Effects

1 2

Computed using the 1984-1989 CAGR of 107% and then projecting forward to obtain the 1987 subscriber base.

The evolution of the market is projected to include not only an increased subscriber base but also a large expansion into rural and international areas, especially where there is poor or underdeveloped land-line infrastructure. The result of these factors will necessitate new technology, products, and services to support the increased roaming activities as well as an expanded global presence.

86-87

<< 26

$1M

Informal - Start-Up Innovative, committed Fluid, informal organization workforce Strong informal ties High-bandwidth communication Fast, extensive idea generation Quick market response

No underlying planning structure No product accountability Unclear reporting structure Fire-fighting mentality Lack of customer service focus

Summer < 26 88

Circular Non-hierarchical Concentric circles expanding out from executives to customers

Free flow of information Employees could not relate Theoretically customerAimed at response, not based planning Theoretically responsive Unclear decision structure hierarchies Customer became the enemy

Late 88 ~ 26

$2.3M

Horizontal Non-hierarchical Typical org-chart turned sideways

Impression of traditional Complete failure structure Employees gave no response Extensive politics Development of subfunctions Polarization of teams Reduction on cooperation Poor skill/management matches

Feb 89 ~ 40

Hierarchical/Functional Focus on task completion Separation into functional teams (e.g. Sales, Service, Increased planning Operations) System for assessing accountability

Aug 89 ~ 80

Addition of Product Teams Improved planning Overlay of functional representatives for each Application of management vs. skill to key product products

No system of authority Extensive executive decision support No system of priorities between products

Nov 89 ~ 100

$6.8M

Addition of Business Teams Intermediaries between product teams and corporate management

Decision making authority More tail than tooth too many people in Resource allocation overhead authority Too many layers of management Internal process focus Loss of customer focus Loss of P&L accountability

Aug 90 ~ 150

Divisions Separation into three divisions, ICS, IS, and Operations

Improved accountability, Resource allocations budgeting, and planning squabbles Extensive communications within divisions Cross-divisional antagonism Second guessing of Sr. Management No cross-divisional communication or cooperation Fractal structures Financial gamesmanship

While each structural change did address many of the previous organizational and environmental concerns, the number and frequency of the changes has resulted in a work environment fraught with fiefdoms, employee anxiety, and power struggles. Through observation of the results of Mr. Ghoshs structural experiments it becomes readily apparent that Appex is afflicted with a number of operational performance problems that, throughout the companys growth and evolution, have continued to develop and become more systemically ingrained:

Lack of cross-divisional communications, coordination, and resource sharing Duplication of function Excessive hierarchy the fractal effect of the creation of multiple, self-similar substructures Loss of customer focus Failure to innovate, especially in the new product area

Of these problems, the loss of customer focus and the failure to rapidly innovate and create new products for the explosively growing and evolving cellular communication market, if not dealt with immediately, will sound the death knell for Appex. It is no longer able to take advantage of its core engineering capabilities in pursuit of its strategy, a strategy that had previously allowed Appex to compete, and win, against much larger competitors, e.g. GTE, Cincinatti Bell, and McDonnell Douglas, through its development agility and responsiveness. Given the predicted 32% CAGR for the cellular industry, Appex must position itself to be ready to rapidly respond to the demands for new products and services in its existing markets, to enter into newly opening markets, and to proactively create new technology that will enable new cellular capabilities to be established in both. To do so, Appex must: Reestablish strong, fast, consistent, and honest communications throughout the company Enable effective coordination and sharing of resources Factor out duplicated functions (e.g. R&D) Improve its efficiency and cost structures Limit the creation of excessive levels of hierarchy Improve its customer focus The net effect on Appex of doing so will be its ability to again execute its strategy of being an efficient, responsive, and low-cost provider of innovative cellular communications infrastructure and services. To achieve these goals and consequently their desired outcome, it is necessary to identify the gap(s) between the desired outputs and those currently being achieved under the existing organizational structure, determine the root causes of these gaps, and then bring the desired and actual outputs into congruence through manipulation of the structural elements capable of realigning them. The table below summarizes the gaps between the desired and actual organizational outputs. Desired Output Actual Output Root Cause(s) Innovative new products and Very few new products Lack of communication between services Incremental additions and divisions (most innovative new extensions to existing products products came from cross3 3

Using 1990 and 1995 subscriber predictions

and services

Holistic customer focus Rapid response to market and customer demands

Customer focus fragmented by division Lethargy Inward orientation Lack of innovation

Efficient use of shared resources Low-cost

Duplication of resources and effort High-cost

pollinated ideas) NIH syndrome no incentives to apply intellectual capital generated by other division Separate faces to the customer by division Fragmented customer view Overly hierarchical organizational structure Lack of resource depth due to duplication of functionality No incentives provided to cross divisional barriers Excessive layers of overhead Duplication of resources in divisions Lack of sufficient depth and breadth Divisional financial manipulations

As indicated in the table above, the root cause of Appexs problems is the stifling effect of its divisional organizational structure which prevents communications, promotes duplication of resources, function, and effort, and causes a fragmented view of the customer. These results hamper new product creativity and drive up costs. To effectively remove these impediments, it is necessary to create an organizational structure that fosters the necessary cross-divisional linkages for information flow, product development, and resource sharing. Of the structural linking mechanisms available to an organization, Appex has already grown through the use of hierarchy, liaison, cross-unit groups, and integrators in its earlier structural incarnations. This leaves the matrix structure for implementing these linkages. While the cost, both in personnel terms for the time, energy, and effort necessary to attend to the meetings and teams needed to manage both axes of the matrix and in the dependence on the informal structure of the organization can be high in a matrix structure, a matrix ultimately yields an extremely high information processing capacity exactly the capability that Appex needs to reacquire in order to achieve its strategic goals and to continue its growth.

Solution and Action Plan Given the previous line of reasoning, I recommend that Appex overlay the matrix structure illustrated in Appendix 1 onto its current divisional structure. This matrix provides both a product line-centric view of operations as well as a consolidated, functional view that facilitates the exchange of information, the crosspollination of new ideas, and a consistent view of the customer, enables leverage against duplicated functionality, and provides a consistent access point for functions to be provided by EDS. These renewed capabilities will in turn allow Appex to regain its customer focus, responsiveness, and innovative capabilities. In structuring the matrix, great care must be taken in identifying the individuals appointed as the team leaders (matrix managers.) Because of their role serving two masters they need to be strong individuals who are capable of balancing the often conflicting demands of the product and functional line organizations. Research by David McClelland on Social Motives reveals three primary motives that people respond to, achievement the meeting or exceeding a standard of excellence, affiliation the maintenance of close and harmonious relationships, and power the influencing and impacting others in our environment. This examines the social motive profiles that best suit a variety of different roles within an organization. A selection of social motive profiles, including that assumed by successful matrix managers, is included in Appendix II. Given the availability of this research with its extensive examination of successful matrix managers, it is crucial that individuals with the correct matrix manager social motive profile be selected to fill the team leader positions. For the matrix structure to be successfully adopted by Appex a detailed implementation plan must be developed. The plan must fully identify, or articulate the requirements and steps to find, the specific individuals who will fill the newly created roles. Doing so will require analysis of both the top-down strategic organizational design and the bottom-up operational design. In order to guarantee success of the matrix, a series of quantifiable performance metrics must be developed and coupled with a reward system that incents both the members of the matrix and those around its periphery to support both its functional and product design activities. The primary pushback in attempting to achieve buy-in for the matrix will come from the divisional managers who may feel that their power is being diminished. The appropriate strategy for diffusing this argument is an explanation of the reward system coupled with an examination of the efficiency, productivity, and economies of scale and scope benefits that are realizable. Finally, a detailed communications plan which emphasizes the benefits of the change, accompanied by a concrete timetable with measurable goals should be prepared, presented to the employees, and put into motion.

PEOPLEs EXPRESS
The Corporate Culture at People Express Airlines People Express Airlines begun operating in 1981 and grew into being the fifth largest US carrier by February 1986 . However, by the end of 1986 is had been sold to Texas International Airlines due to its financial problems. In my paper I will try to analyze the decline the company from the point of the view of the corporate culture in the company. Most of the data in my paper comes from a case study on People Express published by the Harvard Business School . From when People Express (PE) was founded by Donald Burr, the company established very clear principles and values to drive its staff in all its activities. As it turned out, the 6 so-called precepts and the corporate culture that everyone cherished were instrumental in bringing the company to its rapid and wide-scale success. However, although staff worked hard to offer a quality service until the very end, by 1985 the company was nicknamed Peoples Distress because of its inability to cope with the scale of its operations. As I will argue, it was managements decision to continue with the rapid expansion of the company despite the arising problems that lead to the growing instability and decline of the company. Thus, People Express failed because the economic and logistical situation made it impossible to continue fulfilling the goals that were part of its corporate culture, particularly its commitment for quality assurance (PEs second precept was to be the best provider of air transportation ). Corporate culture, although a continuous driving force for the company, was eventually undermined by PEs ability to manage its non-human resources. The ideas that Donald Burr built into his airline were revolutionary. In an age where employees were given little flexibility and were closely supervised, People Express was an enterprise that truly empowered its people and gave them independence. The environment in which people worked was very motivating not only because of pay incentives, but mainly because it served some basic spiritual needs of the employees. For instance, it was emphasized that employees were part of People Express goal to become the leading institution for constructive change in the world . This motivated the people, because it was different from most other jobs, where employees worked just for the sake of their bosses profits or their own wages. In addition to this, the work environment was also socially rewarding. Said one Customer Service Manager (PE named all its people managers): The greatest thing was the people; thats what made you go and work hard. *+ The Employees were also empowered by allowing them to rotate to their job of choice (provided it was available and they had the qualifications for it). And finally, they had the freedom to innovate and even to make mistakes, as long as they remained focused on the goals set by the precepts, particularly on taking care of their colleagues and the customers . All these, along with the team spirit, made employees very motivated and willing to work hard: Everyone was working towards a common goal; we all cared about the company. These characteristics of the climate at PE were essential for motivating the employees, and they all worked together with the set of values that Burr built in his company. In addition to hiring only the employees that were a match for this environment, the company also carefully trained its new employees into this culture, with Burr himself being present at the trainings either physically or in the form of a 4-hour video recording . In these workshops, as well as many of the memos sent out to employees, the importance of the precepts was capitalized. Burr explained the rationale behind this: You have people all over the world at 50,000 feet, 10,000 feet, and at airports all over the world. They have to be their own internal system, you cant control them, supervise them and so forth. So if they are internally motivated *and+ they understand the objectives, then they can *+ serve our customers in the best possible way.

Although this strategy was an alternative to classical ways of controlling employees, Burrs success in constructing a corporate culture exactly the way he wanted it ultimately constitutes a success in exerting control on his employees. According to the classification of Charles Perrow, control can be direct, bureaucratic or fully unobtrusive . The recognition of Burrs ideology within the organization, although unobtrusive, was nevertheless a way of exerting control on the employees. PEs corporate culture, both with its ideological and work environment components, never failed. However, there were periods when employees were absolutely overwhelmed. In June 1983, Burr admitted that PE was operating beyond *its+ practical capacity, but remained convinced that stopping the growth was not the solution. As a result, the company employed more workers and restructured itself so that work would be conducted in smaller, more manageable working groups. Eventually the corporate culture remained vigorous and continued to be a driving force for the company.

The companys logistical problems were not, however, as easy to overcome. As staff continued to work on efficiency and the delivery of the best possible service, the company was also being pushed forward by an extraordinary ambition at the level of its management, despite the fact that PE was obviously operating beyond its practical capacity. The decision for continued growth exacerbated the following logistical problems, leading to subsequent financial problems . Firstly, the Newark terminal, which People Express used for its operations, had been operating well over its design capacity (about 1,000,000 passengers a month instead of the 100,000 which it was designed for). This lead to overcrowding and delays, especially during holidays and weekends. Secondly, People Express had run into the problem of having to deny boarding to some ticketed passengers because it had decided to overbook planes . Finally, People Express had begun to face increasing competition because it was now operating on routes where major airlines were already well-established. Thus, in the face of the declining quality and attractive fares from other airlines, customers began to turn away from People Express. The discrepancy between the quality of service that PE aimed to offer and the resources available to achieve this goal should have been recognized earlier by those running the company. As a low-cost carrier that challenged the preconception that good service can be offered at an affordable price, the companys position on the market depended on continuously offering reliable and impeccable service. In my opinion, the price that the company set for its service was not even that important given the fact that it had already established a customer base and that its fares were substantially lower than those of the competition anyway. However, allowing the quality of the service to drop should have been avoided at all costs. Whats more, PEs finances had been managed on the edge from the very beginning, so the company was also very vulnerable to even small drops in its income. Unlike the major carriers, which could drop their prices in order to compete with PE even despite short-term losses, Burrs company had to rise its prices as soon demand for its services fell. Having lost its reputation for providing high-quality service and its ability to offer competitive prices, it could no longer retain its customers. In addition to failing to recognize the gravity of the logistical problems, Burr made an additional decision that was not in the spirit of the principles that he had taught his employees: the purchase of Frontier Airlines. Firstly, this went against his previously stated commitment not to buy another airline . Secondly, Frontier Airlines culture and business model was too different from PEs to be able to successfully integrate with it in the intended timeframe. Frontier had high operating costs and a unionized workforce, and was already struggling financially . This, along with concern from industry analysts , should have discouraged Burr from closing the deal. Nevertheless, he went ahead with the boldness that characterized him, despite the risks and PEs own problems, which now included the resignation of Hap Pareti and Lori Dubose, two key figures in the organization . To sum up, the failure of People Express came because of a clash between the organizations established goals and the too ambitious pursuit of market share. During the first years of People Express, the corporate culture and the ambitions of management worked hand-in-hand to drive the company ahead: after having set up a system which insured significant cost cuts, the ambitious management succeeded in increasing the scale of the business manifold. However, by 1985, because the business had grown so large, the employees had begun to have trouble fulfilling PEs goal of being the best provider of air transportation . The ambition to further expand before logistical issues were resolved sealed the organizations fate. Burr eventually had to sell People Express because of its financial difficulties, but the business model of his company has permanently transformed the airline industry. It was, after all, Burrs principle of cutting costs that eventually allowed other carriers to compete successfully with People Express and drive it out of the market. By the time People Express was able to expand its service to cities where other carriers had been operating for decades, its competitors had already learned new ways to cut costs and costumers had already learned that air travel can be affordable. In this sense, although the context of the industry as well as some managerial mistakes forced Burr to eventually sell People Express, in only five years he had established a new way to conduct business , and his vision had gathered enough momentum to make a better world.

SUN MICROSYSTEMS
This report will aim to explain the life cycle of Sun Microsystems from the perspective of the population ecology theory. Sun Microsystems Inc. was a company selling computers, computer components, and software and information technology related services. It was founded in 1942 by Vinod Khosla, Andy Bechtolsheim, Bill Joy and Scott McNealy. The company was headquartered in Silicon Valley, and was considered a pioneer of, among other things, the Java platform, the SPARC processor, the Solaris operating system and MySQL. It was also well known for its notable contributions to the world of open source in general and Unix in particular. Suns fortunes took a turn for the worse after the dotcom bust, and it never seemed to recover. It showed a loss in its Quarterly earnings in 2002 for the first time since its inception in 1982, and was unable to show a book profit for the next three years. This led to a spate of layoffs and budget cutbacks, which further hurt the firm. In the first half of 2009, it was finally bought out by Oracle Corporation in a deal worth $ 7.4 billion. Early Beginnings Vinod Khosla, having completed his Bachelors at the Indian Institute of Technology Delhi, a Masters in Biomedical Engineering at the Carnegie Mellon University and an MBA at the Stanford School of Business founded Daisy Systems, a start-up which specialized in computer aided design, or CAD. Although it failed, this experience gave him an invaluable insight into two of the fundamental problems facing engineers. The first was that in 1981, engineers were forced to share time on super computers. He figured that a solution to this seemingly complex problem lay in building smaller, inexpensive computers which could handle complex processes. The second was that communication between computers was not a well-developed field and this prevented collaborations between engineers on a larger scale. His extensive and diverse education and his experience in the failed start up were one of the major reasons Sun Microsystems became a success story. Organizational Birth Vinod Khosla met Andy Bechtolsheim through a mutual reference, and realized that he had the technology to make Vinods vision a reality. Andy decided to stop work on his PhD and decided to work on their project fulltime. They drew up a detailed business plan to implement their ideas and sell their product. Thus, they took advantage of existing opportunities to use their skills and competencies, in order to create a product which would address the needs of the engineering community. SWOT analysis Based on their detailed business plan, they quickly realized that they were competing with many established players in the market, ranging from microcomputer manufacturers like Data General and Hewlett-Packard to personal computer makers like Apple and Tandy. The workstations they designed were smaller, cheaper and more flexible than super-computers yet more powerful than personal computers. Thus, they also came up with an optimal price band of $25000 to $100000 for their product. They forecasted that they would achieve a sales figure of $4 million in their first year of operations, and register a 250% growth to $10 million in the second year. They over performed from the very first quarter of their setting up Sun sales of $8.6 million in the first year and $39 million in the second. Birth-rate of similar organizations The technological environment of the early 80s fostered the growth of not just Sun, but several similar and competing organizations as well. Microsoft, which would later become one of Suns fiercest rivals, was also born in the early 80s. Silicon Graphics (popularly known as SGI) and AST Research were organizations which were direct competitors to Sun Microsystems even in the early years, and they were also founded in this era. There were a plethora of other organizations formed which were later acquired or absorbed by the key players in this field, proving that resources were not a constraint. This shows a large degree of natural selection at play. In such an environment, being a first-mover was not much of an advantage, as any technology introduced could be replicated in a short span of time (about a year) and constant innovation was the only strategy which could keep an organization up and running. Thus, we see that Sun Microsystems used the r-specialist-strategy of entering and dominating the market, and they successfully carved out a niche for themselves. Institutional theory of growth Sun targeted technical customers first, developing a huge following among the sophisticated, independent buyers who were up to date with the latest technology. This customer base also helped in evolving the software and

programs which ran on Suns systems, thus helping the company grow further. Sun thus tried to project itself as a company of engineers selling to engineers. Thus, Sun increased their ability to survive and grow in a competitive environment by becoming legitimate in the eyes of their stakeholders. The unparalleled success of Sun had a far reaching impact, and spawned many firms which operated in different product-spaces, but used the same differentiation strategy. Expansion of the workforce Staffing is a major problem with most new start-ups, and the co-founders were well aware of this issue. They turned to Scott McNealy, who would later become the face of Sun Microsystems. When the three were working on the Sun-I workstation, the quickly recognized their weakness with programming on their current operating system, and set out to get Bill Joy on board their project. These four are considered to be co-founders of Sun Microsystems. Organizational Structure They realized that they had to grow their workforce quickly to stay in step with increasing demand. Thus, they settled on an Organic structure, with a special emphasis on joint specialization. The four co-founders achieved a good balance of decentralization and hierarchy to achieve their organizational goals long term planning was controlled by the founders, whereas managers such as Bernie Lacroute, a manager of one of the technology teams was allowed to innovate and plan for his department. A fine example of this is the work done on Sun-2 workstation, where Lacroute was allowed sufficient leeway in dealing with the problem of excess static from the monitors which shorted their CPU circuit boards. Being a fully technology driven function, the sales and marketing roles were very ad-hoc in nature, and the emphasis on joint-specialization was a big plus for these functions. Most coordination was on a face-to-face basis with the employees, being a small firm, and this required a great degree of mutual adjustment from all involved. In 1983, just a year and a half after it was founded, they celebrated their first major success a $40 million sale to Computervision, and this achievement by a firm of 40 employees showed that their style of functioning was clearly working well. Acquisitions and further expansion Over the next decade, Sun went on an expansion spree. The following is the list of companies acquired from 1986 to 1995 # 1987 - Trancept Systems, a high performance graphics hardware company # 1987 - Centram Systems West, maker of networking software for PCs, Macs and Sun systems # 1988 - Folio, Inc., developer of intelligent font scaling technology and the F3 font format # 1991 - INTERACTIVE Systems Corporation's Intel/Unix OS division, from Eastman Kodak Company # 1992 - Praxsys Technologies, Inc., developers of the Windows emulation technology # 1994 - Thinking Machines Corporation hardware division

Organisational Growth Greiners model for organizational growth can be used to dissect Sun Microsystems growth in a very systematic manner Stage 1: Growth through creativity When Khosla and Bechtolsheim were working on their first workstation, the firm can be said to be in this phase. Stage 2: Growth through direction The hiring of Scott McNealy and Bill Joy was critical to the success of Sun. Scott McNealy was known for his operational expertise and became an unparalleled man-manager whereas Bill Joy was a leader in technological innovation. These two, now regarded as industry stalwarts, gave the firm a specific direction during the initial phases, which helped it grow and become another Silicon Valley success story.

Stage 3: Growth through delegation As the firm grew, their ad-hoc nature of dealing with problems began to fail. They recruited Bernie Lacroute as executive vice president, Carl Swirsding who handled creative services and Carol Bartz as vice president of marketing. This clear demarcation of roles helped move away from the organic structure which was begin to show signs of failing toward a more mechanistic structure. The managers of individual functions now had more power to make decisions. Thus, a balance was struck between the need for professional management and the opportunity for entrepreneurship. A fight erupted between Owen Brown, who was Suns president and Vinod Khosla, over the Computervision deal, which Sun had almost lost. This led to further organizational changes, with Brown forced out of the company and Khosla re-staking his claim as the key decision maker in the organization. Thus, there were crises of control and power struggles emerged to the fore. Stage 4: Growth through coordination As the organization grew, complaints about Vinod Khosla mounted and the four board members Bob Sackman, Doug Broyles, John Doerr and David Marquardt realized something had to change. Khoslas authoritarian style of functioning was rubbing employees and managers the wrong way, and after several mutual consultations they decided that Khosla had to go. As Khosla left and McNealy took over control over the organization, a visible shift was seen toward a more inclusive and coordinated operating style. Stage 5: Growth through collaboration As Sun grew further and acquired companies such as Trancept Systems and Folio, Inc, a greater spontaneity was emphasized in management action, especially with respect to the integration of newer employees. This was the fifth and final stage of growth.

The Decline With the burst of the dot-com bubble, the entire Internet sector was literally shaken and things were no different for Sun. In fact, Sun is considered to be one of the more badly hit firms solely because it had earned a lot during the boom and had failed to add depth to their system unlike competitors like Microsoft etc. Failed acquisitions and lock of profitability on sustainable products like Java quickened this pace. The company posted its first loss in 2002 and was never able to recover from the shock. By end of 2001, the stock prices were back at their prebubble prices and within a year, they declined to under $10 (one-tenth of 1990 value). The coming 8 years saw many acquisitions, desperate attempts at innovations, layoffs, consolidations and executive departures. Nothing however was able to slow the decline and losses spiralled up to 9 million in Q3 2005 and 1.68 billion in Q1 2008. Eventually, in early 2009, Oracle Corporation announced that it had bought Sun for $9.50 per share. This marked the end of what was once one of the most innovative IT corporations on the planet which was once referred to as the dot in dotcom.

Analysis of the decline: Weitzel and Jonssons Model of Organizational Decline Stage 1: Blinded Sun had been blinded by the dotcom bubble. They did not anticipate that their revenues were solely dependent on the huge majority of new entrepreneurs who built cheap and high end systems on Suns Solaris and SPARC frameworks. As these entrepreneurs faded away due to the burst, so did Suns revenues. There were huge signals that Sun had failed to pick during this time like the industry-wide shift to the cheaper x86 and Linux based systems. During the boom, Sun had sold huge amounts of hardware to small dotcoms and when the assets of these firms were liquidated on bankruptcy, there was a lot of used high-end Sun hardware available in the market at cheap prices. This affected sales in a big way. Also, the world was shifting to the much low-end and cheaper x86 and Linux platforms. Stage 2: Inaction Sun had a huge hit with Java. It was one of the biggest software solutions at that point of time. But Sun had been a hardware companies since its inception and majority of its revenues were from hardware sales. So Sun did not

know what to do Java and ended up with not doing anything. They did not hand it to freelance developers and although they did conferences, a developer base for Java was not built. They were paranoid of ceding control of Java that they refused to monetize it. Also, the industry was consolidating and focussing resources in specific directions. Sun, on the other hand, was still developing multi-processing processors like UltraSPARC T1 and also Sun Grid. They basically continued on the same track and speed and were too slow and too late to react to the rapid change happening all around them. Stage 3: Faulty Action Even when the company was going through a rough patch, the company did not alter the expansion policy. While everyone was consolidating forces, Sun was confused about its approach. On one hand there were layoffs of employees and they closed their manufacturing plant in Newark, California and consolidated the US production in Hillsboro, Oregon. But, at the same time, the firm went about buying a lot of ventures and technologies and majority of them were failed buyouts. They were diversifying into a wide range of products and bought companies like MySQL (databases) and VirtualBox (virtualization). Also, on one hand the firm was constantly investing in their proprietary solutions of Solaris, SPARC chips and the Sun grid platform. At the same time, the company tried to fit-in with the industry trend of moving towards open source and made a few products for the x86 processors and also support for Linux and MySQL. This however was too late and too little. Stage 4: Crisis The crisis faced by the firm was not a sudden one and had gradually worsened from 2000 to 2009. The company cut jobs by around 15-165 in 2008 just to reduce costs and stay sustainable. Its efforts to rebuild its business model around open source had failed miserably by then and much hypes buy outs like those of MySQL had failed. The stock lost 80% of its value between November 2007 and November 2008 and was dealing below $10 per share and its total valuation was reduced to $ 3 billion. Stage 5: Dissolution By 2009, Sun had stagnated in the market and although they still had a considerable amount of products in the market, the share was not growing and they were primarily based on US sales for growth which had been hit by the recession and the economy was not favouring buying and investing at all. With Cisco entering the server business, selling out to a larger firm was one of favourable options at that point of time. It was at this point when IBM wished to buy Sun for $6.5 billion and the talks were reportedly on for more than a month. The talks however fell apart due to various terms including the payouts to executives. The CEO Jonathan Schwartz and co-founder and Chairman Scott McNealy had contracts that they would receive three times their annual pay and bonuses in case of an acquisition and this was one of the points of contention. The share of Sun was trading at $6.56. Soon after the talks ended, Oracle agreed to buy Sun at $9.50 per share which was 42% more than Suns stock price. The premium was primarily considered to be for Suns brand name and many analysts considered it to be an over-valuation.

Overall, a major part of Suns failures can be attributed to either management mistakes or the lack of management to identify market trends. The firm which was one of the most innovative in terms of products failed to innovate on its goals and methods as an organization. It is one of the classic cases where the company failed even after having a perfect product and being the market leaders at one point of time all due to managerial myopia.

THE CYBERTECH PROJECT (A)

The Australian meat industry has traditionally depended on exports. Although the industry is very old it is still not automated to the extent of the other industries. A brief overview of the operating environment provides us reasons for the poor penetration of automation and its future prospects.

Firms: For automation process to be cost effective, the firms capacity should be higher. Firms in the meat industry are operating at a lower capacity at too many sites. But from 1987-88 to 1991-92 the number of sites decreased and the annual turnover of the firms has also increased. So, in the future, automation process could be cost effective. Also firms are not ready to experiment with new processes and this is also hampering the growth of automation. However, Australia firms are lagging behind the global competition, and given the importance of export revenues, this gives the firms sufficient incentive to adapt to new process. Role of government and labor: Considering the strict labor laws of the Australia federation, firms have an incentive to substitute labor with machines, and develop automation processes. However this could also have a downside, as was the case with the downward hide pulling technology. Here, the government decreased minimum tally, and gave in to pressure from labour unions, thus nullifying the advantages gained by a new technology. The government induced costs such as inspection costs which made firms less competitive, leading them to find a way to reduce costs. For the automation process to be successful the industry needs to secure labor union support. This does not appear possible with the modular approach to automation. Additionally, the workers multi skill levels and career lifespans are low. These factors will increase the possibility that meat processing firms will look at automation in a more favourable light, leading to a growth in demand for such technologies. Customers: Over the previous two decades demand has varied seasonally. This hampers the cost effectiveness of the automation process, as inventory costs are going to increase when demand is less. Also the mix of customers is changing as the industry is exporting larger quantities to Asian countries. This, coupled with changing food habits means customization is increasing. This factor is critical from an automation perspective, as the industry progresses towards expensive integrated automation systems due to an increase in variety demanded. We also need to look at the different steps of meat processing to see whether automation is feasible. The process has four steps Slaughtering: Cattle are killed by first rendering them insensible and then killing them by passing a heart-stopping current through the torso. The exact sequence of the process is highly regulated. In addition to standard process, there are a growing number of custom processes in slaughtering, which continue to expand in a multitude of ways as new markets evolved. For this reason labourers are beginning to require more skill. Difficulties involved in the manual process: The process of cutting of orifices in the carcass is a high skilled job as it might be source of infection. Mistakes could cause costly product safety or quality problems, leading to a fall in profits. There are safety and diseases issues. Buddy cuts for the workers are frequent. This job is for young persons with a short career. So turnover is high and replacements are needed at regular intervals.

Scope for automation: The main reason for poor penetration of automation is the natural biological variation to which a skilled worker can adapt. Also the industry has so far failed to attract talented engineers. We need a computer integrated automation to facilitate the industry to get to grips with evolving customization trends. Automation can help in the slaughtering process by reducing injuries and improving quality standards. It may also help in monitoring the process effectively. Deboning: After about a day of chilling, the carcass is passed to the deboning stage. Here, the major bones are removed from the animal. Deboning required greater skill and a large degree of strength and ambidexterity. Difficulties involved in the manual process: Cycle time of the process is just over one minute. This may cause problems in efficiencies for the workers.

Boners needed around six months of training to do the job effectively. We infer that this may lead to high training costs, especially considering their low career span. Also considering the high strength required for the job, it is possible that workers may suffer injuries. Since the level of accuracy needed for the process is high, there is less scope for mistakes. As manual processes generally lead to a larger number of mistakes, we infer that revenue loss due to such an event is high.

Scope for automation: Phoenix had also begun experimenting with a new method for boning beef. The system provided mechanical assistance to workers. It is well received by workers. But there is still scope for further improvements through automation, as the process requires an even higher level of accuracy. Automation appears the natural solution as it can help in reducing the cycling time and injuries. Slicing: Slicing had traditionally been considered lower grade work but currently is one of the high skilled jobs in the industry. Meat partitions varied a great deal between U.S and Japan markets - some would need a particular muscle pulled out and some would require fat trimmed etc. Scope for automation: Even though customization makes automation difficult, it is possible to develop a computer integrated program to automate all 80 cut specifications. Packaging: The packing process in phoenix had traditionally been done by women. This process also requires a stringent verification of quality, reducing the scope for automation. From above analysis we can infer that the meat processing industry needs automation but it should be an integrated automation system. The slaughtering process appears to have the most to benefit from such a system. Cybertech an overview The Vision The Cybertech project aimed to not just bring the Australian meat producers at par with international competition, but to overtake them in terms of technology used. This project was conceived by the AIRC (Australian Industrial Research Council) in 1977, some sixteen years prior to our current situation. The members of the AIRC realized that the meat industry was largely untouched by technology, and pioneered a program Alternative Slaughtering Technology to address this issue. The AIRCs objective was to ensure that this technology would eventually prove useful to the domestic meat packing industry. Development of the project The slaughtering process proved to be harder to automate than expected, but steady progress was made in the development of input-variance resistant techniques. Seven years after the project was conceived, significant progress had been made and modules were developed for lead-up, capture, stunning/killing, automatic hock control, carcass tripping and brisket cutting. By 1988, a full-scale computer integrated prototype was build and running. It relied on a combination of automation of key processes and integration working alongside manual operators who performed tasks too difficult to automate. Commercial feasibility and industry response In 1991, EJD Engineering was contracted to work out the commercial feasibility and they concluded the Cybertech Mark I was ready for commercial implementation. Many plants showed interest in being the second commercial site, but not the first. This shows the reluctance of the meat-processing industry to spend capital on a new technology with large sunk costs, without further proof. This could also point to all the players in the field not wanting to be the first to take such a radical step. Ultimately, Wollagong Meatworks agreed to be the first to try the product. They reasoned that if their competitors got this infrastructure up and running, while they did not, they would be in trouble. A detailed analysis of Cybertech While Woodward focuses on how an organizations technology affect its structure, Perrows model The Theory of Joan Woodward 1. Effectiveness: The Phoenix plant processes 850 cattle per day, compared to the Cybertech Mark II, which is estimated to have a capacity of 1800 cattle per day. Assuming both plants operate at full capacity, we

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see from the table below that the latter is more cost effective than the former. Quality of the final processed meat is a factor in existing meat processing plants, as the process of slaughtering is manual with minimal automotive components. Thus we see that of the three principal approaches to increasing organizational effectiveness, this project attempts to incorporate the technical approach. The technical approach aims to use technology to improve efficiency and reduce costs while simultaneously enhancing the quality and reliability of its products. Programmability: The system is considered an incredible engineering achievement. Each sub system ensures that the steps which occur after it have access to the exact information about the work it carried out and any measurements it has taken. This ensures a streamlining of operations. In addition, there was sufficient flexibility to tweak the system as required from the control booth. Thus we infer that the process is a programmed technology. Complexity: This is a measure of the extent to which the production process can be automated. At the center of the system, a computer controlled booth allowed managers access to controls and overview of the entire process. It had incorporated over 3000 input/output ports and sensors were placed extensively through the system. When any part of the plan malfunctioned or a person stepped into a high danger area, the sensors would be able to detect this and either open a maintenance screen suggesting corrective measures and implement the managers orders. The automated system had the capability to be tweaked to ensure that any variation in one part does not interfere with the operation of another part. From the given information, we infer that the process has a high degree of complexity.

This process is one using mass production technology, and is bound to have a tall hierarchy with a wide span of control. The Theory of Charles Perrow 1. Task variability: A worker in the production process is unlikely to face an unexpected situation, as the nmber of exceptions to his given task is limited. Thus, the new system has low task variability. Task analyzability: The system is designed in a way to reduce variability and pass on all information including measurements from one sub-process to another. The role of the worker in searching for information to complete his job is minimal, as it is programming driven, leading to high task analyzability. These two factors according to the theory of Charles Perrow result in the Cybertech project being classified as routine manufacturing. This is evident from the design where the entire complex process of slaughtering is broken down into smaller components and is easily managed. Processes like this require centralized decision-making authority and an overall mechanistic structure. The nature of the job also points to a tall hierarchy of authority. The Theory of James D Thompson This is a typical example of a long-linked technology because the input, conversion and output activities must be performed in a series, one after another. This also points to sequential task interdependence, which is evident from the nature of the slaughtering process.

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Challenges faced by the Cybertech project 1. Labour unions 2. Aversion to complete use of robots 3. Opposition to complete integration 4. Cost needs to be driven down 5. Competition from a US-based firm