Developing Stage Theory: An Industrial Management approach to validate an Organizational Life Cycle Developing Theory By Anika Viljoen Thesis presented in partial fulfilment of the requirements for the degree of Masters of Engineering Management at the University of Stellenbosch Supervisors: Prof CSL Schutte and W Bam March 2016 University of Stellenbosch Department of Industrial Engineering Stellenbosch University https://scholar.sun.ac.za Life Cycle Developing Stage Theory Page I Declaration By submitting this thesis electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification. March 2016 Anika Viljoen Copyright © 2016 Stellenbosch University All rights reserved University of Stellenbosch Department of Industrial Engineering Stellenbosch University https://scholar.sun.ac.za Life Cycle Developing Stage Theory Page II Abstract Kenneth Boulding (1950) developed the first concept of an organizational life cycle model in 1950 (Ionescu and Negrusa, 2007). Ever since, discussions of this concept have developed within many disciplines, including management, education, sociology, psychology and marketing. Some organizational experts are of opinion that no organization progresses through a discrete set of development growth stages, while others have modernized Boulding’s (1950) original life cycle model to accommodate the growth changes seen in organizations today (Penrose, 1959). Marc van der Erve (2013), an organizational philosopher and expert, developed a stage theory which focuses on the growth of natural organizations (Van der Erve, 2013). Although his developed theory is based upon natural sciences (thermodynamics) and the social sciences (particularly sociology), he states that it can be applied to business organizations as well. He is of the opinion that his developed stage theory can predict the future success of organizations. The study is set out to investigate these claims and to determine whether Van der Erve’s (2013) theory can be accepted and is feasible in the industry today. The main discussion however will focus on the investigation of Van der Erve’s development stage theory and the comparison thereof with already existing life cycle models. Together with the main project statement, the study aims to answer two objectives, namely: - Firstly: The investigation of Van der Erve’s (2013) development stage theory and the comparison thereof with already existing life cycle models. - Secondly: Determining whether an organization is successful if its organizational life stage is aligned with the specific leadership role, as presented by Van der Erve (2013). Moreover, in order to answer the above mentioned objectives, the study attempts to formulize a proposed hypothesis on which various organizations will be tested on by evaluating them against certain variables. The hypothesis specifically examines the relationship between organizational life cycle stages, leadership roles, competitive strategy in the market and financial performance of an organization. University of Stellenbosch Department of Industrial Engineering Stellenbosch University https://scholar.sun.ac.za Life Cycle Developing Stage Theory Page III The motivation for this study derives from the research done by Van der Erve (2013) stating that the successful performance, as measured by its revenue growth, of any organization can be predicted if the right leadership role is in line with the respective organizational growth stage of the organization. The focus of this research is to offer a variety of ideas, measures, and empirical facts on how organizations grow and develop throughout their life cycle, and if, as stated in the newly developing stage theory, can predict the success of any organization. The study concludes by stating that the formulating hypothesis can neither be accepted nor rejected when analysing and investigating the four chosen organizations operating in the technology industry. Two organizations, in the service-based technology industry, showed significant correlation between the two factors, developing stage and leadership role, which resulted in a successful performance for the organizations. While the two organizations in the product-based technology industry showed similarities of a product life cycle. Together with the proven formulated hypothesis, interesting results and conclusions were seen in the outcomes of all four organizations under investigation. It can thus be said that the development theory can be applicable to some organizations in the technology theory, but research must be expanded to determine whether it is valid in other industries as well. University of Stellenbosch Department of Industrial Engineering Stellenbosch University https://scholar.sun.ac.za Life Cycle Developing Stage Theory Page IV Opsomming Kenneth Boulding (1950) het die eerste konsep van ‘n lewensiklus model vir organisasies ontwikkel (Ionescu and Negrusa, 2007). Sedertdien het die model ontwikkel en uitgebrei in na ander disiplines en velde, onder andere bestuur, opvoeding, sosiologie, sielkunde en selfs bemarking. Deesdae is sommige organisatoriese kenners van mening dat Boulding se model nie meer toepassing vind in die hedendaagse organisasie nie en dat geen organisasie deur ‘n diskrete stel stadiums van ontwikkelende groei beweeg nie. Ander het weer Boulding (1950) se lewensiklus model gemoderniseer om die ontwikkeling en groei wat gesien word in vandag se organisasies, te akkommodeer (Penrose, 1959). Marc van der Erve (2013), ‘n organisatoriese filosoof en kenner in die veld, het ‘n teorie ontwikkel wat fokus op die ontwikkeling en groei van natuurlike organisasies (Van der Erve, 2013). Alhoewel sy ontwikkelde teorie hoofsaaklik gebaseer is op die natuurlike wetenskappe, termodinamika en gedragswetenskappe, is hy van mening dat die ontwikkelde teorie ook toepaslik is op besigheids organisasies. Hy is van mening dat sy ontwikkelde teorie die toekomstige sukses van enige organisasie kan voorspel. Die studie is daarop gemik om van der Erve se opinie te bestudeer en te bepaal of die teorie werklik beskou kan word as geldig vir hedendaagse industrieë. Die hoofbespreking sluit onder andere die ondersoek en vergelyking van Van der Erve se teorie met reeds bestaande lewensiklu modelle en ander teorieë in. Saam met die voorgestelde projek verklaring, is twee ander projekdoelwitte bereik: - Eerstens: Die ondersoek van Van der Erve (2013) se ontwikkelde teorie en die vergelyking daarvan met ander alreeds bestaande lewensiklusmodelle en teorieë. - Tweedens: Om te bepaal of ‘n organisasie suksesvol is indien die organisasie se lewensiklus in lyn is met ‘n spesifieke leierskapsrol soos voorgestel deur Van der Erve (2013) in sy studies. Verder, om bostaande projeksdoelwitte te kan beantwoord, poog die voorgestelde studie om ‘n hipotese te formuleer waarteen verskeie organisasies teen die geïdentifiseerde kriteria getoets kan word. Die geformuleerde hipotese ondersoek spesifiek die verhouding University of Stellenbosch Department of Industrial Engineering Stellenbosch University https://scholar.sun.ac.za Life Cycle Developing Stage Theory Page V tussen organisatoriese lewensiklusmodelle, bestuurstyle, kompeterende strategieë in die industrie en die finansiële prestasie van ‘n organisasie. Die motivering agter die studie word verkry deur die empiriese studies gedoen deur Marc van der Erve waar die sukses van ‘n organisasie, indien in terme van finansiële prestasie gemeet voorspel kan word indien die leierskapstyl in lyn is met die ooreenstemmende organisatoriese stadium waarin die organisasie homself bevind. Die hoof doelwit van die studie is om ‘n verskeidenheid van idees, maatreëls en empiriese feite van hoe organisasies groei en ontwikkel deur hul lewensiklus, bekend te stel e naan die hand van die nuut voorgestelde ontwikkelde teorie, die sukses van enige organisasie te bepaal. Die studie word afgesluit deur om die stelling te maak dat die geformuleerde hipotese nie aanvaar of verwerp kan word nie. Twee van die organisasies wat ondersoek was, het sterk korrelasie getoon tussen twee faktore, die organisasie se ontwikkelde fases en die betrokke leierskapstyl, wat daarnatoe gelei het dat die organisasie suksesvolle uitkomste in hul prestasie getoon het. Terwyl twee organisasies, gebaseer in the tegnologie industrie en produkte aan hul kliënte lewer, ‘n sterk korrelasie van ‘n produk lewensiklus getoon het. Daar kan dus tot die gevolgtrekking gekom word dat die ontwikkelde teorie relevant is vir sommige organisasies in die tegnologie industrie, maar verdere navorsing gedoen moet word om te bepaal of dieselfde gevolgtrekking bereik kan word vir organisasies in ander industrieë. University of Stellenbosch Department of Industrial Engineering Stellenbosch University https://scholar.sun.ac.za Life Cycle Developing Stage Theory Page VI Acknowledgements “Unselfish and noble actions are the most radiant pages in the biography of souls.” ~ David Thomas (2008) I am thankful for all the support, inspirational words and encouragement I have received during the past two years. I dedicate this project to my supportive, loving parents, Hannes and Margaret Viljoen, without whom this would not have been possible! Thank you for the valuable insights