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Virtual Organizations:
A new organizational form or just 'business as usual'?

This section of the module will examine the concept of the Virtual Organization as a Strategic Vision. It will examine some of the contrasting views concerning what Virtual Organizations are, what their supposed benefits might be and how they might be classified and differentiated.

Organizations have always tried to adapt their organizational structure to suit their organizational strategy. The factory system that brought labour, materials and motive power together in the industrial revolution was one example of this. In later years, organizations have continued this trend of matching strategy with structure and have gone through cycles of centralisation and vertical integration followed by decentralisation and a focus on product groups or geographical markets.

Reorganization on this scale is costly and time consuming and much of the deeply ingrained tacit knowledge about markets and products that a company has built up can be lost in the 'churn' of restructuring. Faced with an environment in which change was becoming the rule rather than the exception, organizations began to look for a more flexible way to approach the problem.

Matrix management was an early example of this but proved difficult to manage in practice, particularly in large, multinational organizations that spanned several time zone. The notion of the 'virtual organization' is now seen as an organizational form is capable of addressing the problem of managing transformations in the social, economic and technological environments in which organizations now operate.

'Virtual organizations' are a set of organizational that rely on multiparty co-operative relationships between people across structural, temporal and geographic boundaries. Flexibility is brought about in part by reconfigurable networks of computer based communications that allow organizations to co-ordinate their activities and in part by a management philosophy based on collaboration and innovation.

The conditions in which Virtual Organizations operate, were discussed earlier in this module and are discussed in greater detail in The Environment: Working in Virtual Organizations from the MSc IP HI2 module.

The distinction between the Virtual Organization and other forms of virtual group such as distributed teams, home based work and telework and communities of practice will be examined in greater detail later in the module.

The broad issues behind Distributed Collaborative Working are discussed in greater detail in an overview of Distributed Collaborative Work, which is also from the MSc IP HI2 module. Finally, the Encyclopedia from CALT at Insead offers a large selection of material that may be of general interest for this section on and the Virtual Organization, as well as for the later sections on other types of virtual group.






Case Studies

These case studies present two contrasting views of virtual organizations. The first sees them as 'members bound by a long term common interest or goal' and the second as 'a transitory network of individuals'.


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