Organizational Inertia

Organizational Inertia is the tendency of a mature organization to continue on its current trajectory. This inertia can be described as being made up of two elements -- resource rigidity and routine rigidity. Resource rigidity stems from an unwillingness to invest, while routine rigidity stems from an inability to change the patterns and logic that underlie those investments. Resource rigidity relates to the motivation to respond, routine rigidity to the structure of that response. In the face of rapid or discontinuous external change, it is the organizational inertia that must be overcome if a firm is to survive. In a competitive situation where new players are entering the industry, it is the incumbents that are particularly susceptible to the downside of this inertia. In this case it is often referred to as incumbent inertia.

Organizational Inertia Forces and Examples Organizational Inertia are the internal and external forces that make it difficult to change the strategy or organization architecture of an enterprise. These inertia forces include cognitive schemata, internal political constraints, organizational culture, strategic commitments and capabilities, and external institutional constraints.

• Cognitive Schemata: In the course of their work managers form cognitive schemata, which are mental models of the world their enterprise inhabits. These mental models include beliefs about what works and does not work in their business and about what is important and unimportant. These models are based on experience. When a management team has worked together for some time, they often come to share the same worldview—the same cognitive schema—and this can influence their decision making. Although this can lead to quick decisions, management teams with a shared cognitive schema tend to ignore events, data, and suggestions that fall outside their schema. Cognitive schemata are usually adopted because they have worked in the past. Danny Miller has postulated that senior managers in successful enterprises often develop powerful cognitive schemata about the right way to do business, and this makes them particularly vulnerable to cognitive blind spots when new competitors or new technologies emerge. One of Miller’s examples is Ken Olson, the brilliant entrepreneur who founded Digital Equipment Corporation (DEC), one of the dominant computer companies of the 1970s and 1980s. The success of DEC was based on minicomputers, which were smaller than mainframe computers but far more powerful than the personal computers of the day. For all of his brilliance, Olson and his management team at DEC failed to see the threat posed by the rise of the personal computer, primarily because it fell outside their cognitive schema. DEC made powerful machines that were sold to businesses and accessed through terminals. Olson believed that such machines were the way of the future. In 1977 Olson was asked what he thought of personal computers, which were just starting to emerge. He replied, “There is no reason anyone would want a computer in their home.” Olson didn’t get it! His company missed the personal computer revolution. Meanwhile, people who did get it, such as Steve Jobs at Apple, Bill Gates at Microsoft, and Michael Dell at Dell Computer, were busy laying the foundations for a revolution in the industry.
• Internal Political Constraints: Organizations can be thought of as political systems within which there is an existing distribution of power and influence. The power and influence enjoyed by different managers is a function of several things, including their position in the hierarchy, their control over valuable resources and information, and their perceived expertise. For example, a well-regarded marketing vice president whose sales database gives her access to important information about customer preferences might enjoy significant power in an organization otherwise dominated by engineers. Personal attributes are also a source of power, including a manager’s energy, eloquence, empathy with others, and physical endurance. Senator Ed Muskie, one of the most powerful members of the Senate during his day, was reputed to be able to get things done, and thus accumulate power, in part because of his enormous physical stamina. When a bill was being debated in committee, he never left the room, not even to go to the bathroom—proving the old adage that a large bladder can be an asset in a bureaucracy.