Strategy and Performance Management
Neu-Ulm University of Applied Sciences
July 22, 2025
After this section, you should have a solid understanding of
Changes in strategy often require changes in the way an organization is structured, for two major reasons. First, structure largely dictates how objectives and policies will be established [..] The second major reason [..] is that structure dictates how resources will be allocated. David and David (2016) *[p. 329-330*]
Powell (1992) defines organizational alignment as the coherence among various components within an organization, including structure, processes, culture, and strategies.
Firms with a high degree of alignment are better equipped to adapt to changes in their external environment, are more resilient to threats and better able to capitalize on emerging opportunities.
Changes in strategy often require changes in organizational structure because structure dictates how objectives and policies are established and determines how resources are allocated (David and David 2016).
Structural adaptation becomes necessary when strategic objectives change, new markets or products are pursued, or environmental conditions shift significantly.
Understanding this relationship, what structural options are available to organizations, and how do they evolve over time?
Organizations can pursue vertical integration (forward or backward), horizontal integration, or related diversification.
Each integration strategy requires different structural approaches.
Lawrence and Lorsch (1967) outline following guidlines for integration strategies:
Organizations can choose from simple structures for small firms, functional structures for specialization, divisional structures for diversification, or matrix structures for complex coordination.
Strategic business unit (SBU) structure represents a hybrid approach that combines divisional autonomy with corporate portfolio management and strategic coordination.
Different organizational structures create distinct performance patterns: efficiency vs. innovation trade-offs, speed vs. coordination challenges, and cost vs. flexibility implications.
Digital transformation (DT) requires new leadership roles: CIOs evolving from operational to strategic and CDOs emerging to lead transformation.
Form small groups of 3 to 4 students. Discuss your findings from reading Lorenz and Buchwald (2023). Create a presentation that summarises the key findings. Each presentation should last 5 minutes.
Your summary must include the following considerations:
The Chief Information Officer (CIO) traditionally leads the IT department, ensuring technology infrastructure supports organizational goals. They manage data, information systems, and IT operations as well as they address cybersecurity, data privacy, and compliance with IT regulations (Lorenz and Buchwald 2023).
The Chief Digital Officer (CDO) is responsible for driving digital innovation and transformation across the organization. They often focus on enhancing customer experiences through digital channels and technologies. They collaborate across departments to integrate digital solutions into various aspects of the business (Lorenz and Buchwald 2023).
They may face challenges in aligning strategic objectives and collaborating effectively.
The CDO role is typically introduced with the objective of leading digital transformation initiatives and ensuring that the organization maintains a competetive edge in the digital age.
Organizations need to balance exploitation (efficiency and optimization) and exploration (innovation and new opportunities) through structural solutions.
Most successful firms experience periods of convergence with incremental changes followed by periods of upheaval with major system-wide transformations (Mintzberg 2014).
In convergent periods stable and interconnected social systems emerge, in which the most successful and resilient actors maintain their position.
Periods of upheaval with frame-breaking change occurs in response to major environmental shifts and involves revolutionary transformation of organizational systems.
The need for discontinuous change usually springs from (Mintzberg 2014):
Convergence periods require maintaining alignment and incremental adjustment while frame-breaking change demands comprehensive executive involvement and fresh perspective.
The following questions are designed to review and consolidate what you have learned and are a good starting point for preparing for the exam.