“It is not necessary to change. Survival is not mandatory.”
- W. Edwards Deming (1900 - 1993)

Businesses operate in dynamic and evolving environments. In the ever-more competitive corporate world, organizations have to continually review their practices and change/adapt accordingly to remain relevant and attractive in the market. The most successful organizations create structures and build processes that encourage and embrace change. However, people often find it challenging to adapt to change; it is certainly not easy for most employees (see reasons for resistance to change).

As Professor W. Edwards Deming said, it is important for businesses to adapt to change if they are to survive. The external business environment (or the STEEPLE factors) mean that forces of change require the attention of businesses and decision makers to adapt their practices as well as their organizational structures. Some of these changes create opportunities whilst others can present threats to businesses and their operations. For example, increased competition, new technologies, and evolving consumer habits and tastes all have an impact on organizations, causing them to adapt their business objectives, strategies, and business operations.

Business success emerges from the willingness and ability to research and respond to signals in both the internal and external business environment in order to meet the ever-changing needs, wants and preferences of customers. Those that do not embrace and adapt to change simply fail to survive. For example, in December 2020, after an extremely challenging year for all businesses due to the global coronavirus pandemic, IKEA stopped production and distribution of its physical catalogues. The home furniture retailer had used catalogues for 70 years prior to 2020, and opted for online catalogues instead as an increasing number of customers switched to e-commerce options.

Managers might question the appropriateness of organizational structures given changes in external factors. These may be planned (such as a merger or joint venture) or unplanned (such as a hostile takeover or outbreak of an infectious pandemic). External factors that might prompt a change in an institution's organizational structure include technological advances, the intensity of competition, and changes to the growth and evolution of businesses.

For example, organizations that embrace the latest technologies tend to prosper, whereas those that resist or respond slowly tend to become less competitive. Such developments have meant that business managers have access to much more information in order to support decision-making.

Techonological advances can have an impact on changes to organizational structures

The examples below show how changes in external factors can impact on business operations and hence organizational structures.

• Mobile technologies have also enable more people to work from home (WFH). This was evident in many parts of the world during the COVID-19 pandemic that caused many people across different industries to have to WFH. Hence, organizational structures may need to change to reflect such changes, especially as many businesses realised the potential benefits of having fewer people in the office, even after national lockdown restrictions were lifted. Such benefits include not having to locate offices in high-rent central business districts, as well as higher productivity due to staff not having to commute to and from work, for example.

• Similarly, developments in mobile technologies have created many job opportunities in the gig economy. This reduces the need for organizations to hire and retain employees in the same way as traditional business models suggest. Hence, organizational structures can be flatter as fewer people actually work for the business in question.

• The use of big data, data analytics and data mining, have enabled retailers to improve their customer loyalty programmes (see Management Information Systems). This can mean fewer in-house market researchers are required (so a smaller or restructured marketing team) resulting in businesses switching to flatter organizational structures.

• Kodak and Polaroid were once market leaders in the camera film and photography industry, with their innovative products. However, changes in digital camera technologies and the development of smartphones (with built-in digital high-definition cameras) along with the resistance of Kodak and Polaroid to adapt to digital-photo technology resulting in both these companies downsizing their operations and workforce, and eventually failing.

• Developments in social media marketing (SMM) have created additional jobs and roles in organizations as businesses face increasing pressures to respond to changing customer needs and expectations. For example, SMM personnel may be required to monitor and respond to dissatisfied customers who use social media platforms (such as Twitter, Telegram, LinkedIn, Instagram, and Facebook) as powerful channels to communicate with online communities. Hence, many businesses have incorporated social media marketing teams to provide remedial responses to such criticisms expressed on social media. SMM is also used for social outreach as well as through the line (TTL) promotional strategies in order for businesses to gain competitive advantages.

• The intensity of competition in many markets also necessitates competitve prices. This could result in some businesses having to delayer or even cut the size of its workforce in order to remain competitive. For example, many airlines struggled during the COVID-19 era and made cost savings by switching full-time worker to part-time employoment contracts or implementing staff redundancies to reduce the size of their workforce. Only the most competitive airlines would survive the aftermath of the pandemic.

• Growth and evolution of businesses (such as mergers and acquisitions, hostile takeovers, or joint ventures) may  necessitate a change in organizational structures. The larger a business becomes, the more complicated its organizational structure is likely to be. For example, as a business becomes a multinational company (MNC) with operations in many international locations, it might need to adopt organizational structures based on geography rather than by function. It would be impractical to manage MNCs without more formal structures and delegation of authority. By contrast, a small sole trader business might not even have a formal organizational structure.

• Crises can also result in changes to organizational structures due to the high risks and uncertainties depending on the nature and scale of the disasters (see "Case Study - COVID-19 and the new norm" below).

Being able to recognise the signs of the need for organizational change can help leaders and managers to prepare for the change and to implement appropriate strategies to ensure the survival and prosperity of the business. Being proactive about change and its impacts (i.e., effective change management) will put a business in a better position to deal with uncertainties in the corporate world.