Skype Company and the Nadler-Tushman Congruence Model Research Paper

Introduction

Background to the congruent model

Developed in 1980s, the congruent model by Nadler and Tushman is one of the most popular models for organizational analysis. According to Nadle and Tushman¹, the congruent model provides analysts with a generalized view of the organizational framework. According to the congruence hypothesis, organizations are made up of a number of components that exist together in multiple states of consistency as well as balance. The model states that this phenomenon is known as “fit”².

According to the model, a high degree of “fit” among the several components of any organization means that the degree of effectiveness of the organization is high, while the reverse is true. In this case, it is evident that the model is used to illustrate the important roles that the state of interdependence plays within an organization³.

In addition, it indicates the importance of the transformation process within an organization, which places an emphasis on the means through which a company transforms input to output. Therefore, the model seeks to develop a comprehensive understanding of how the entire organization works through an analysis of the organizational method of feeding input into the system, the expected outcomes (outputs), the elements or units of transformation and the interaction between these parts.

Background to the Skype Company

Skype, one of the most successful internet-based corporations, is a software application and voice-over-internet protocol service that provides people across the world with an opportunity to communicate through video and audio from their computers, PCs and other internet-enabled devices. The system was initially created in early 2000s by Danish technologist Janus Friis and Swedish technologist Niklas Zennstrom as a project for allowing people to communicate through the internet, a technology that had experienced rigorous changes in the 1990s.

They received technological support from three Estonian technologists Priit Kasesalu, Ahti Heinla and Jaan Tallinn. By the time it was acquired by Microsoft in 2011, the service had more than 720 million registered users and was worth more than $8.5 billion⁴. Although the American Microsoft Corporation acquired the company, Skype’s main office in Luxembourg was retained. In addition, Microsoft decided to retain the technology development sectors in Estonia, where more than 40% of the total employees are based⁵.

Currently, Microsoft Skype is the most popular voice and video communication service in the world, connecting millions of users. In addition, Skype offers its global customers with a system of sending and receiving instant messages over the internet. The clients only need to have Skype software installed on their computers or other internet-enabled devices, a webcam and a microphone fixed to the system.

Purpose of the report

This report provides a comprehensive analysis of Skype Company based on Nadler and Tushman congruent model in order to examine the process through the company transforms its inputs into outputs. In a case analysis, the report will examine all the aspects of the process, including the environment, strategy, tasks, formal system, and key individuals. The report also examines the inputs of the company and the process of feeding them into the organizational system in order to obtain the desired outputs. Moreover, it examines the nature and importance of the desired outputs and the real outputs that the company obtains from its inputs.

Nadler Tushman congruence analysis of Skype

Identification of the corporate inputs at Skype

According to Nadler Tushman congruence model, organizational inputs are the elements that make up the aspects with which the organization has to work at any point in time. Nadler and Tushman⁶ identified three categories of inputs that all affect the organization in different ways.

The environment

At Skype, a number of factors affect the organizational process. They define the company’s environment. For instance, “the people” includes the millions of service users around the world, the owners and employees. First, the company obtains revenue from the customers who use the service for video and audio communication, instant messaging and file transfer processes⁷.

They make an impact on the organization by demanding efficiency of services. The key goal of the company is to ensure that it satisfies the service users and maintain a good relationship with them. The company does not have material inputs because its major function is to connect people from remote locations using modern technology.

Another major aspect of the “people” at the company is composed of the key people that provide corporate leadership and direct the process of service provision in the global market. From its headquarters in Luxembourg, Skype obtains mentorship from Nikas Zennstrom, the co-founder and a long time CEO of the company. He has been the major factor that enhanced technology and marketing development of the company since it was founded in 2003.

In addition, Satya Nadella, the current Microsoft CEO, is a technologist who brings experience to the company after serving as an executive in other companies, including the Sun Microsystems and Microsoft. Another key individual at Skype is Tami Reller, a marketing manager at Microsoft who provides marketing leadership in Skype⁸. The organizational change at Skype is becoming effective after the transfer of the company ownership from the initial development to Microsoft Corporation.

The company’s external environment is not complex, but its level of uncertainty is relatively high. It survives in a highly dynamic industry. It strives to understand the changing preferences of its clients and provide the required response to the demands that customers keep making. Skype is a global organization that operates in every part of the world. This means that the organization must understand the diversity of the market in terms of culture, beliefs, legal systems and needs. For instance, the communication needs of the North American or European market differ significantly from the market needs of the people in Asia or Africa.

While the western world relies heavily on communication based on technology due to the tight nature of the people’s schedule, most countries in Asia, Latin America and Africa are characterized by social and economic systems that allow people to meet regularly and socialize, which reduces the need for technology⁹. In addition, the market demand for video communication in the western world is higher than in other parts of the world because the access to technology is easy. Therefore, Skype must consider these aspects of diversity, which affects its operations.

Skype is highly attuned to the specific country, the social diversity as well as government requirements in its service provision. In addition, it must be concerned with the breakthroughs and changes in the telecommunication sector, which is affected by the dynamic nature of technology. The company must ensure that it employs the most appropriate and latest technology to enhance its service provision as well as develop customer loyalty.

Resources

According to the congruence model, resources make a major element of input in an organization. The term is used in reference to a wide range of assets that the company accesses and uses, including employees, capital, technology and information. According to the model, less tangible assets of an organization are also included in the category.

At Skype, the organizational resources include the employees, technology and information. Because the company does not provide material products to the market, it seeks to use technology to ensure that the clients are highly connected at any time and place. Thus, technology and information are some of the major resources in its operations. Technology includes “freemium voice-over-IP system” and instant messaging¹⁰.

To enhance these services, the company uses a hybrid peer-to-peer and client-service systems, which allows it to connect its customers by making background processing in centralized servers that connect client computers running on Skype software. One aspect of the technological resource of the company is the special Skype software, which customers must purchase or download before installing on their computers. Without this input, the clients cannot access Skype services.

Currently, the company’s technological resource input also includes the wide range of operating systems on which Skype software runs, including Windows, OS X, iOS, PSP, Linux, Windows Phone, PSVita, Android, Symbian, BlackBerry OS and Xbox One. These inputs are operating systems obtained from other companies through purchase of rights. For instance, Android is an OS obtained from Google Inc., While Windows operating systems are obtained from the Microsoft Inc. Moreover, the company purchases the rights to use a number of computer languages that are used to develop the Skype software, which includes Objective-C, C++ and Delphi¹¹.

All these technologies are resource inputs that the company feeds into its system to ensure that the processes involved provide the customers with an easy way of video and audio communication, instant messaging as well as file transfer, which in turn yield the expected outputs. Without these technologies, the customers cannot communicate, which means that the company cannot operate as a service provider.

Capital is also an important resource input at the company.

The three developers of Skype provided the company’s initial capital resource when it was launched as a project in 2003¹². However, Microsoft injected some $8.5 billion to purchase the company and became the major stakeholder in the company and the provider of capital. Currently, the company’s capital is attained through revenue collected from the users. Internet providers in various parts of the world are the intermediaries between the company and the users. They are the major channel through which Skype collects revenue from its users.

In addition, company employees make an important part of its resource input. The company uses its employees located in Luxembourg in the corporate, financial and market management. On the other hand, technological maintenance, innovation and development tasks are performed at Tallin and Tartu in Estonia. The employees in these two sections are technology experts involved in developing, innovating and maintaining technological inputs for the company. They provide the required support to the clients throughout the day, week, month and year. They make an important asset to the company because their knowledge, experience and abilities in technological development and maintenance ensure that the company is ahead of competitors in providing the best service to their global market.

Organizational strategy and tasks

According to Nadler and Tushman¹³, environmental conditions of a company, resources and history cannot change without the impact of an effective corporate strategy and a number of tasks involved in changing inputs to outputs. According to the model, organizational strategy refers to a set of major decisions that enhance the process of allocating resources against the demands, opportunities as well as constraints of the corporate environment. The model further simplifies the meaning of the organizational strategy to include the explicit choice of technologies, products, markets and competence.

Organizational managers must take into consideration the threats, opportunities, strengths and weaknesses of a company through SWOT analysis in order to take decisions that ensure that the appropriate products and services are provided to the right markets. In addition, they must use SWOT skills to distinguish the company from others in the industry in ways that will provide an effective and sustainable competitive advantage.

Noteworthy, the resources are scarce, but they are required to meet the demands, constraints and opportunities of the environment. This means that the strategy used at a company must be a highly complex and effective means of using the scarce resources as inputs to meet the forces of constraints, demands and opportunities and yield the desired outputs.

According to the model, the organizational definition of its core mission, including its market and the products or services it provides to the markets is an important aspect of the corporate strategy. In addition, the specific basis in which an organization competes as well as the supportive strategies employed to achieve the core mission are important elements of corporate strategy. It is also worth noting that the corporate strategy is defined by the specific objectives set for the organizational output.

At Skype, the company core mission states “together we will bring innovative technology to the people, the friends, family and colleagues wherever they are located¹⁴. Now, the future possibilities of our clients are very exciting because we strive to enable more individual to connect in a number of ways in order to enhance and well as change their lives¹⁵. This is only the beginning of our mission”¹⁶.

Evidently, the mission is a short but complex statement that shows how the company seeks to change throughout its operations and life. First, it is evident that the company considers its customers as the most important asset. It states that its main objective is to “bring technology to the people”, which includes friends, families and colleagues. It shows that the peer-to-peer voice, video and data transfer services are open to everybody, regardless of the location, background or any other aspect.

It targets the worldwide market and considers communication as one of the major needs of the world population. To develop and sustain a competitive advantage, Skype’s mission states that the organization seeks to empower the world population through the provision of better technology in order to transform their lives. It seeks to ensure that its technology remains ahead of the competitors in all aspects to ensure that the customers recognize what “Skype” means to their lives¹⁷.

The organization defines this strategy by stating that the company will seek to “enable more people to connect in more ways¹⁸” in order to ensure that their lives are not only transformed but also changed in a positive means. From an in-depth analysis, this mission means that the company’s strategy involves exploring customer needs in communication and developing technologies that will meet customer demands.

It also shows that the consideration of the dynamic nature of customer needs in the technology sector is included in the corporate strategy. It implies that more technologies are needed to meet the changing demands of communication. The company seeks to explore what the customer requires in using technologies as well as the emerging demands once a new technology is introduced into the communication system. It uses its innovation and technology development sections in Estonia to meet these demands through the development of new and better technologies that support the Skype system.

The corporate strategy at Skype also includes the use of methods, systems and technologies invented and developed by other companies and incorporating them into the company’s communication services in order to stay ahead of competitors. For instance, the Skype relies on Operating Systems developed by Microsoft, the mother company, including Windows and Windows Phone¹⁹. In addition, the company purchases the right to use operating systems developed by other companies such as Google’s Android, Apple’s iOS, Linus’s Linux, Blackberry’s BlackBerry OS and Symbian’s Symbian OS²⁰.

Organizational strategy and environmental inputs

The organizational strategy at Skype is in line with the company’s environmental inputs. As described above, the company relies on technology, employees, customers and innovation to achieve its mission. These components are the organizational inputs that are needed to ensure that it provides communication, socialization services to the worldwide market.

The organizational strategy of using technology to connect more and more people every day and every year and using innovation to develop better technologies to meet the emerging demands in the global market relies on the environmental inputs described above. Without technology, innovation, employees and customers, the company cannot use the corporate strategy to achieve its dreams. Similarly, without the strategy, it is not easy to develop a method of using technology to connect a global population without the need for travelling to meet peers, family and friends.

Conclusion and recommendations

The key individuals, who are aligned to the technological and marketing segments of the company, fit the corporate strategy because they strive to achieve the core mission defined above. Nevertheless, the organization must ensure that it continues to develop its own technologies because the tendency to rely on the technologies developed by other companies is an issue that may result into risks.

For instance, relying on companies like Google, Linux and Apple to develop operating systems is a risky feature because these companies are likely to develop their own audio and video communication systems at any time, which might compete with Skype. In addition, such companies are likely to enter into a contract with the major competitors for Skype and provide them with the required OS and other supporting technologies, which risks Skype’s competitive advantage. For instance, the major competitors for Skype are SIP, Linphone and Google Hangouts. They are likely to improve their technologies in the future and seek to reduce Skype’s presence in the world telecommunication market.

Footnotes

1. Nadler, DA & Tushman, ML, ‘A model for diagnosing organizational behavior’ Organizational Dynamics, vol. 9, no. 2, 1981, pp. 35-51.
2. Nadler, DA, ‘Concepts for the management of organizational change’, Managing change, vol. 2, no. 6, 2003, pp. 85-98.
3. Cawsey, TF, Organizational change: An action-oriented toolkit, Sage, New York, 2011.
4. Branzburg, J, ‘Talk Is Cheap: Skype Can Make VoIP a Very Real Communication Option for Your School’, Technology & Learning, vol. 27 no. 8, 2010, pp. 31-36.
5. Ibid
6. Ibid
7. Ibid
8. Ibid
9. Ibid
10. Ibid
11. Ibid
12. Ibid
13. Ibid
14. Skype, About Skype: Mission statement, 2014. Web.
15. Ibid
16. Ibid
17. Ibid
18. Ibid
19. Ibid
20. Ibid