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Object-oriented strategy

Richard T. WatsonThe University of Georgia

rwatson@mis.terry.uga.edu

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Frederick R. Weisman Art Museum, by Frank O. GehryUniversity of Minnesota

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Weatherhead School of Managementby Frank O. GehryCase Western Reserve University

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OO design

The goal of OO design is to identify accurately the principal roles in an organization or process, assign responsibilities to each of these roles, and define the circumstances under which roles interact with one anotherPancake, C. M. 1995. The promise and cost of object technology: a five-year forecast. Communications of the ACM. 38 (10):33-49.

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Chandler’s thesis

• Strategy structure• New structures reflect changes in

the economy• Organizations are influenced by

the state of administrative art• Administrative art is influenced by

the vocabulary of discourse

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Why OO?

• Success in building complex systems• It provides a vocabulary for thinking

about networks of cooperating firms• The network economy• Virtual corporation

• Networks have nodes (objects) and links

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Classes

• A group of objects with similar properties

• A group of firms with similar properties• An industry

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Objects

• Software containing data and methods

• Firms with an organizational memory and business rules

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Messages

• Means by which objects communicate

• Objects request services from each other

• Objects cooperate by exchanging messages

• Means by which firms communicate

• Firms request services from each other

• Firms cooperate by exchanging messages

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Generalization/specialization• Classes can be

specializations or generalizations of other classes

• A multi-divisional corporation

DevilleCatera CenturyRiveriaAurora

SaturnPontiacOldsmobileBuickChevroletCadillac

GeneralMotors

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Inheritance• Classes inherit

properties from their superclass

• Inherited properties can be reused or overridden

• Eliminates redundancy

• Divisions inherit properties of their corporation

• Inherited properties can be reused or overridden

• Eliminates redundancy

• A design decision

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Encapsulation

• All processing that changes the state of an object is done within that object

• A firm is an autonomous unit, but there are situations where de-encapsulation is beneficial

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Levels of encapsulation

Know whyKnow how

Know what

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Trade-off

Cost Suboptimality

costs

Coordination

costs

Low HighEncapsulation

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Types of messages

• Operational• Tactical• Encapsulation

• Know what

• Relationship• Strategic• De-encapsulation

• Know how• Know why

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Reuse

• A new application can be built from existing objects

• Code must be written to exchange messages between objects

• A new firm can be built from existing firms

• Procedures must be developed for exchanging messages between firms

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Calyx & Corolla

physical flow

electronic flow

Growerpickingpackingorder

flowers

Retailersales

sale

check

credit card statement

credit cardaccount details

creditauthorization

tracking data

Calyx & Corollasales

marketingIS

R&D

Bankpayment

Customerorder

order

flowers

Parcel servicedelivery

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Calyx & Corolla

• “Ruth created the relationship with FedEx, but when it comes to managing the logistics on a daily basis, she does not get involved. All Ruth wants to know is that the package got there eventually; how it gets there is my problem and Fed Ex's problem.”• A grower

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Amazon.com

physical flow

electronic flow

Bookwholesalerinventory

order

book

Parcel servicedeliverytracking

servicerequest

Customereditorial

sales

book

editorial

sale

Affinity groupsales

sale

check

credit card statement

credit cardaccount details

creditauthorization

order

Amazon.comsales

marketingIS developmentserver operations

editorial

Bankpayment

Authormarketing

link to Web site

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ezgov.com—Portal

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ezgov.com—Payments

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ezgov.com—Competitors

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Some principles

• Encapsulation enables executive management to focus on the core object

• Significant IT investment is frequently required to tie the objects together

• The core object must encapsulate knowledge critical to long-term success

• Where possible get customers to add value to other customers

• By using other business objects an organization can reduce transaction diversity

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Theory of the firm

• Coase• “A firm, therefore, consists of the

system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur.”

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Williamson’s organizational forms

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A taxonomy of organizations

few

many

low

low

high

high

low

high

low

high

low

high

low

high

low

high

low

high

Encapsulation

Encapsulation

Encapsulation

Encapsulation

Messaging

Messaging

Encapsulation

Encapsulation

Encapsulation

Encapsulation

Messaging

Messaging

Inheritance

Inheritance

Objects

low

high

low

high

low

high

low

high

low

high

low

high

Market

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The fully functional firm and the network organization• Ownership of

most functions• Hierarchy of

authority

• Low encapsulation

• High inheritance

• Separate companies

• Coordinated by mutual interest or network integrator

• High encapsulation• Low inheritance

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Networks

• Relatively large core object• Nike• Benetton

• Relatively small core object• Calyx & Corolla• Amazon.com• CDNow• Travel Bids

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A design methodology• Identify the methods the business must

perform• Identify the competitiveness preserving

methods and allocate these to the core object • Identify reusable objects with competitive

competency in any of the unallotted methods and allocate methods to them

• Allocate remaining methods to other reusable objects or the core object

• Specify the message passing protocol between objects

• Examine each object to determine the level of encapsulation

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Rethinking strategy

• Existing theory based on studies of industrial era firms• From Chandler to Prahalad and

Hamel

• Economics is being rethought• Arthur and increasing returns

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Revising Chandler

Availableobjects

Structure

Strategy

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Coping with information overloading• Allocate less time to each input• Disregard low priority inputs• Reduce the reception of messages by

filtering• Redraw boundaries to shift transactions

to other parties• Fragmentation• Encapsulation• OO strategy

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Economies of agglomeration• The utility of an economy, just like a

network, grows exponentially as the number and diversity of objects increases• Metcalfe’s law

• Pockets of industry• Silicon Valley and computers• Dallas and telecommunications• Northern Italy and textiles

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Economies of agglomeration• Declining factors

• Geography

• Growing factors• Electronic networks• Language (English + jargon)• Standards

• Knowledge-based agglomerations• Consulting partnerships• Software ecologies

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Contribution

• A concise and complete set of concepts for describing complex systems that interact electronically

• Extends the network model to focus on the nodes as well as the links

• Unites a variety of strategic thinking notions (e.g., core competency and empowerment as encapsulation)

• A tool for designing organizations• A theoretical foundation for studying

information age organizations

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Conclusion

• The modern firm• Endoskeletial• Integration• Differentiation• Conglomerate

• The postmodern firm?• Exoskeletial• Fragmentation• Dedifferentiation• Core object