International Council for Small Business 47th World Conference San Juan, Puerto Rico June 16-19, 2002
ICSB 2002-042
Incorporating Paradox and Contradiction: An Activity Systems Analysis of Small Business Activity Frans Prenkert
Abstract After having established the need of being able to incorporate paradox and contradiction in the study and analysis of small business activity, this paper departs from activity theory to analyze small business activity using an activity systems model (ASM). Drawing on previous research analyzing organizations and change, activity theory is proposed as a valid theoretical framework for the study of small business activity and the ASM is suggested as a useful analytical tool for analyzing paradox and contradiction in small business activity. An empirical illustration is provided of a case from the Swedish logistics industry sector.
Introduction The world and our culture is full of paradox. We are prisoners of our minds, but also dependent on and constituted to a large extent by our relations to others and to matter. Nature and culture are intertwined (Eagleton, 2000, pp. 11-12). We are free to act on our own will but constrained by determinism. The concept of ‘culture1’ itself embraces this paradox as it expresses the rejection of an organic determinism on the one hand, and the autonomy of the soul on the other (Eagleton, 2000, p. 13).
Small Business Firms and Paradox Author John Naisbitt have emphasized paradoxes and contradictions as the major trends of the “future” which will have repercussions in many instances, not at least in the business world and for managers (Naisbitt, 1982, 1994; Naisbitt, Naisbitt, & Philips, 1999). And contradictions do occur in business life. For example, Lawrence and Lorsch (1967/1986) identifies the need to manage the “loose-tight” paradox, and in a similar vein, Thompson (1967) identifies the need for organizations to manage the duality of closed and open systems simultaneously by buffering the stable technical core from the volatile task environment. Indeed, paradox has drawn researcher’s attention in a number of areas. In informatics (e.g. Brynjolfsson, 1993) the discussion of the IT-productivity paradox is well established. Paradox and contradiction has also been discussed in the context of; Business Process Re-engineering (BPR) (e.g. Boudreau & Robey, 1996), supply networks and logistics networks (e.g. Choi, Dooley, & Rungtusanatham, 2001), services and technology (e.g. Bitner, 2001), and business networks (e.g. Håkansson & Ford, 2002). Related to marketing, Tom Peters notes that business firms are subjected to paradoxical demands from the market (Peters, 1989). This could be illustrated with the following anecdotal episode: Having a dinner conversation with an entrepreneur managing a small business in the movie and television production industry in Las Vegas, we came to talk about the conditions and circumstances of doing business. On the issue of the demand and expectations from clients, my entrepreneur friend had observed that his job was to cope with paradox in terms of contradictory expectations on how their problems could be solved. Reflecting on this he said: “Well, you know, you want to have it done fast, good and cheap – but the thing is, you can only pick two!” Consequently picking fast and good makes the solution expensive; picking fast and cheap makes it bad, and picking good and cheap makes it slow – there is always a trade-off. Paradox and contradiction is a natural part of the day-to-day operations of the firm. In a study from 1998, researchers observed that small businesses in their temporal orientation towards customers simultaneously employed both long-term and short-term orientation (Hultman, Gunnarsson, Prenkert, & Sanner, 1998; Prenkert, 1998a, 1998b), which could be seen as an expression of these contradictory expectations.
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Paradox is a reality for small firms. Managing contradiction is part of everyday operations as the anecdote above shows us. Researchers within the field of small business and entrepreneurship research have recognized this, although the attention has not been overwhelming. Johannisson and Senneseth (1991) describe entrepreneurship in terms of a number of paradoxes that small business managers need to cope with. In another study, after having studied twelve entrepreneurs and their twelve companies, Johannisson (1992, p 189 ff.) concludes that as many as twelve paradoxes could be identified pertaining to the entrepreneur and entrepreneurship. We shall not submerge into detail about all these suggested paradoxes, but only recognize the prior identification of paradox and contradictions in empirical small business research.
The Research Problem The task at hand in this paper is to suggest a theoretical tool for understanding, analyzing and managing paradox and contradiction in small business activity. Given the assumption that small businesses exist and act in an environment characterized by paradox, we need tools to better understand their problems and situations. Johannisson (1992) argues that an understanding of entrepreneurship, that renounces established truths in the market, requires models that incorporate what is contradictory. The aim here is to show that an activity systems model is precisely such a model. The research problem motivating this paper is that we are in need of theoretical constructs that have the power to embrace aspects such as paradox and contradiction in small business activity if we are to better understand it. Assuming a paradoxical environment of small business activity, the question in focus in this paper is: How could small business activity be understood and analyzed given a focus on paradox and contradiction? The purpose is to model small business activity in an activity system and to provide empirical illustration from a case study of a small business within the logistics industry sector in Sweden. The above given setting of the problem requires a model that can handle paradox and contradiction, as mentioned earlier. As a minimum, we should expect the model at least capable of incorporating the four dimensions of contradiction as identified by Quinn and 3
Kimberley (1984, pp. 295-313). They have categorized paradox in terms of contradictions in four dimensions: 1) Flexibility – Stability; 2) Internal – External; 3) Means – Ends; and 4) Individual – Organization. These dimensions are expected to be present in business firms as a result of the fact that they exist in a world filled with paradox.
Methodology The methodology employed in the study could be described as a longitudinal multiple case study approach (Yin, 1994). According to Yin (1994, p. 13), the case study research strategy is suitable when a situated analysis is required covering contextual conditions of the studied phenomenon. This is precisely the case here studying small businesses and it constitutes the rationale for choosing a case study research strategy. Data material was collected through a number of ways, most heavily relying on semi-structured qualitative in-depth interviews with managers/entrepreneurs of seven small-and medium sized enterprises2 (SMEs) constituting the focal net. However, the emphasis is on the focal SME and its development.
Study Design A study could be more loosely or tightly designed (Miles & Huberman, 1994, pp. 16-18), depending on how much the researcher allow a conceptual framework to ‘bound’ and focus it. This study is rather tightly designed with a clear conceptual framework directing the attention of the empirical fieldwork and of the analysis. However, this ‘tightness’ was not achieved through theoretical and conceptual development only, but through the confrontation of theory with an empirical business setting. This ‘interactive’ research approach is sometimes labeled abductive – a term first coined by American pragmatist philosopher Charles Sanders Peirce (Peirce, 1931-58).
Procedures The focal SME was followed over a period of approximately three years from 1999 to 2001, and approximately 25 interviews were carried out and approximately 50 participatory observations were made. The observations were documented in writing. Interviews were taped and later transcribed onto paper documents comprising a database of information. The duration of the 4
interviews varied from 1.5 hours to 2.5 hours approximately. Since the questions were open and semi-structured, the respondents had opportunity to expand, to elaborate, and to add other information. The text documents were analysed using the software N’Vivo to structure and categorize data according to the ‘Analysis Readiness Review’ (ARR). The ARR is described later in this paper and is a procedure for identifying the relevant activity systems model from the data.
Theoretical Framework: Activity Theory One stream of research in modern psychology purports that in order to understand mental processes, we must reach outside the isolated individual into the social life of that individual (Vygotsky, 1981, p. 163; Wertsch, 1985, pp. 10-11; Cole, 1985, pp. 146-161; Wertsch and Stone, 1985, pp. 162-179). The goal of this approach is to explain how mental processes are inevitably connected to the cultural, historical and institutional context (Wertsch, 1993). This represents an alternative view to traditional psychological research viewing the object of analysis as an individual acting in a socio-cultural vacuum, and it draws on the research in Soviet psychology initiated by Vygotsky in the 1920-30s and later developed by Leontyev and Luria. It is within this stream of research that the Finnish Scholar Yrjö Engeström develops a theory of human activity as culturally and historically dependent, based on the notion of activity systems (Engeström, 1987). The foundation that activity theory is based upon is the idea that human collective activity and individual mental processes are inescapably dependent on the social context of any given individual. In activity theory, human activity is viewed as a general concept applicable to a wide range of more specific situations, such as, for example, child development and learning (Vygotsky, 1981), developmental work analysis (Engeström and Middleton, 1996), organizational learning (Blackler, 1993, 1995; Virkkunen & Kuutti, 2000), organizational analysis (Holt & Morris, 1993), and exchange relationships (Dahlqvist, 1998; Prenkert, 2000).
Activity Systems Following Engeström (1987, p.78), human activity is modeled in a triangle-shaped model consisting of a large triangle with three apices and its connecting sides (see figure 1). The larger
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activity triangle consists of four sub-triangles; production, distribution, exchange and consumption. Instrument
Production Object Æ
Subject
Outcome
Consumption Exchange
Distribution
Rules
Division of Labor Community
Figure 1: Engeström’s (1987, p. 78) model of the structure of human activity.
One of the three apices each of the sub-triangles of production, distribution and exchange is also an apex of the larger activity triangle, while the other two are shared among the sub-triangles. Spread around the larger activity triangle is the six constituent elements of human activity located. These elements comprise a subject performing the activity, instruments aiding in the activity, an object of the activity, a division of labor to distribute the outcome of the activity, a community in which the activity takes place, and finally, rules governing the activity performed in the community. This model of human activity depicts the constituent elements and their relations in terms of an activity system, and it is hereafter referred to as an Activity Systems 6
Model (ASM). These elements are of two types: Core elements such as subject, object/outcome, and community; and mediatory elements such as instruments, rules and division of labor. This generic ASM is based on the triangles of activity and depicts the essential elements of human activity and their internal relations. The uppermost sub-triangle labeled ‘Production’ is basically the Vygotskyan root-model of an instrument-mediated relation between subject and object of action (Vygotsky, 1978). This has been expanded with the lower part of the activity system representing the collective social nature of activity, hence inflating the model into a larger triangle representing the collective activity system (Engeström, 1987, p.78). Albeit incorporating instrument-mediated action, an activity system comprise much more, which the lower part clearly indicates. In addition, the object of activity as an essential element has been supplemented with the notion of outcome as an equally important but distinctly different element. The reason for that is that a collective dimension has been added implying a difference between the object of an activity and the outcome of it. What connects the object of an activity with its motive in terms of expected outcome is the collective group of humans amongst which the outcome is shared and distributed. The sub-triangles at the apices of the larger activity system triangle depict the three dominant aspects of human activity: Production at the top (as already mentioned), Distribution at the right, and Exchange (social interaction) or communication at the left. Subordinated to these three dominant aspects are the fourth; Consumption (Engeström, 1987).
Key Features of Activity Systems Analysis We may now identify some key features of activity systems analysis, using an ASM as an analytical tool. These key features are characteristic to the use of an ASM as a model of analysis, regardless of the setting. It may be that of information systems design, organizational learning, or small business activity, the key features of an activity systems analysis remain the same. So any well-performed analysis taking the contents of activity theory seriously and using the ASM scrupulously should display these features. However, before we explore the key features of activity systems analysis in more detail, we need to clarify one very important trait of activity systems analysis; its situational nature. The original ASM of (Engeström, 1987, p. 78), must be adapted to the specific activity to which it is applied as an analytical tool. The ASM is inherently situational and to apply the 7
original model without adaptation would be pointless. So, the challenge for any activity systems analyst is to identify the specific constituent elements of the specific ASM of the activity in question. These identifications involve choices to be made. What should be identified as the central object of the activity? There may be a number of competing candidates for that, and it is then of outmost importance to be familiar with the ASM as an analytical tool, so as to choose the most appropriate candidate for the central object. A thorough understanding of the ‘analytical behavior’ of the ASM, such as the ability to incorporate shifts in the constituent elements, as well as its inner structural constitution, is of good serve when using it for empirical and conceptual analysis. The key features of activity systems analyses are (apart from a situated application of the original ASM): •
An explicit object-orientation
•
A recognition of the collective character of human activity
•
A notion of cultural mediation
•
An incorporation of contradiction and paradox
First, the central activity that is focused in the analysis need to be clearly identified and defined, along with the central object of the activity. This may appear easier than what it actually is due to temporary object – instrument shifts in the activity system. The object of the activity is one of the core elements of an ASM, and determines how the subject is defined, which in turn, determines how the rest of the constituent elements of the activity are defined. A vaguely identified central activity and object results in a vague and opaque analysis. The level of analysis is dependent on the identification of the subject (which in turn is dependent on how the object is identified) because it is from the point of view of the subject actor that the ASM analyzes the activity. This is important to keep in mind when identifying the object and subject of an activity. So, an unclear identification of the object, and in consequence, the subject of the activity results inevitably not only in an unclear analysis, but also in an unconscious and haphazard choice of analytical level. Secondly, not only the core elements of object and subject need to be clearly identified, but also the third core element, that of the collective community, recognizing the 8
inherent collective character of human activity. An analysis of individual action is undoubtedly unsatisfactory and incomplete, is the aim set to analyze human activity. However, it deserves repeating that this socially distributed and interactive nature of human activity is a very important key feature, and it is sometimes more hidden than visible, making it somewhat elusive and opaque in many analyses of ‘social action’. The triadic structure of individual action is merely the top of the iceberg, where the lion share of the activity system depicting human collective activity is hidden beneath the surface of the sometimes-raged ocean of social exchange and distribution of tasks, powers and rewards (Engeström, 1990, p. 172). When performing an activity systems analysis, one must allow oneself to be submerged in the ocean of social structures, as well as to be elevated to an aerial view of the purposive actions of individuals and the tool-mediated production and consumption of outcome, otherwise the iceberg will sink the enterprise, regardless of size and equipment. Human activity is the molar unit of analysis, collective in nature and driven by complex motives usually unknown by each individual participating in the activity. Thirdly, the analysis needs to incorporate cultural mediation in terms of the identification of the three mediatory elements of the activity system in relation to the three core elements. When this is done, the full triangular-shaped graphical representation of an ASM could be drawn. However, the analysis cannot halt there. It must, finally, incorporate the paradox inherent in any activity system by identifying internal and external contradictions among and between; (1) elements of the activity system, and; (2) entire activity systems as a whole. Such an analysis uncovers the dynamics of the activity under study and brings it to life under the magnifying glass.
The ‘Analysis Readiness Review’ We may now establish an ‘Analysis Readiness Review’ (ARR) in terms of a checklist defining the concrete procedures of an activity systems analysis. The ARR is based on the key features of activity systems theory. Before we go into the procedural aspects, we need to recognize that we are starting with the identification of the ideal representation of the ASM – as it is designed to function in the specific situation and in the specific type of activity at hand. The procedural steps to be followed are very much a matter of dressing the generic ASM of Engeström (1987) with 9
empirical life and content. Hence, the steps described in the ARR are very much of concrete character. Following the assumptions made in activity systems theory, an ASM comprise contradictions, which will eventually alter and change the ASM. These contradictions could be modeled only after the ASM has been identified, and the ARR is therefore divided into two parts, of which only Part I will be employed here, due to restrictions in scope and space of this paper. In ARR Part I, we need to establish the 8-step procedure for the identification of the ideal ASM. 1. Identify the central activity 2. Identify the central object of the activity 3. Identify the subject and the outcome 4. Identify the community 5. Identify the instrument mediatory element 6. Identify the rules mediatory element 7. Identify the division of labor mediatory element 8. Draw the resulting ASM If these steps are followed, we may avoid falling into some of the most common pitfalls of activity systems analysis, such as failing to identify the central activity, or failing to define the ASM properly. By employing the ARR Part I, we ensure that the ASM is being properly identified. The ARR Part I is intended to be used to structure and analyze empirical data.
An Empirical Illustration – The Case of Palletco Two brothers founded Palletco in 1989 and the core of the business was the assembly of warehouse storage equipment (WSE) for the internal logistics of industrial warehouses. Since then, the business has developed and expanded to comprise more than the assembly of WSE. The demand from the market directed the business firm into the supply of WSE as complementary operations. Today, the small family owned business firm have seven employees and an annual turnover of approximately $0.7 million. The areas of operations comprise three main branches (Anonymous, 2001): •
The offering of new and used warehouse storage equipment 10
•
The offering of information and technical data on warehouse storage equipment
•
The offering of advanced services such as inspections, projecting and assembly
Products The products of Palletco are quite standardized and with a relatively low technological complexity, although exceptions exist. Products range from various sorts of interiors such as pallet racking, storage shelves fixtures, pallet fixtures, entresols, and conveyors to a large number of fittings items for the use in warehouses. The most important products are pallet racking and storage shelves fixtures accounting for approximately 40% of the total annual sales. The rest of the sales volume is accounted for by a vast array of products and items ranging from different types of conveyors, through document cabinets for industrial use, to interior walls for office space within warehouses etc. The total number of items carried is approximately 2 000 supplied from approximately 500 different suppliers. Palletco also work with used parts that they procure and sometimes also have in stock. This area of the operations sometimes involves the dismounting of used warehouse equipment at the seller’s site and the transportation of the equipment, either directly to a buyer or to Palletco’s own warehouse for storage. In the latter situations, Palletco functions as a broker between sellers and buyers. Palletco offers their services in four major areas: 1) installation, 2) inspections, 3) interior warehouse design, and 4) documentation. The first two areas are carried out on site by Palletco personnel with special training, especially in regards to the inspections, which only certified personnel could carry out. When warehouses are being built and rebuilt Palletco offers services in interior warehouse design. This includes layout of the warehouse with respect to the internal logistics problems. Palletco has a database with technical data and installation information concerning a large number of storage shelves fixtures, shelves, pallet fixtures and pallets of various origin and makes, foreign as well as domestic. This information is sometimes crucial for the design and construction of warehouses. All together, Palletco offers complete warehouse solutions including the physical design and layout of the warehouse area, the supply and installation of new or used warehouse equipment according to ISO standards, final inspection, and documentation.
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The Industry Sector The industry sector in Sweden in which Palletco is operating could be characterized as rather competitive. The physical products are quite standardized and sector wide norms and regulations creating industry standards for installation and modification of warehouse equipment guide the installations. One reason for this standardization is the dangers involved in warehouse interiors with falling and crushing goods, breaking fixtures and the use of heavy equipment for lifting palletized goods high up in the air etc. The European Union dictates some of the demands put on the industry sector mainly concerning the working environment for warehouse person. Given the rather standardized physical products and the rather standardized installation and modification of these products (although deviations from the ISO standard do occur), the entire industry sector becomes rather competitive and the margins are sometimes being cut. Sometimes, purchase decisions are based mainly on the lowest price offered and Palletco experiences this on occasion. The overall atmosphere in the industry is of a transactionoriented nature. Another reason for this is the way customers use the products offered by the firms in the industry. Warehouse equipment is necessary for many business firms indeed, although as supplied products they are seldom, if ever, directly involved in the production process of the buying party. They are regarded as indirect material in the production process, rather than direct material. As a consequence, these products are being purchased with a more transaction-oriented view, as they do not directly contribute to the value creation of the production process and these buying business firms are therefore attempting to minimize the cost. However, on the long term, this purchasing strategy might prove to be more expensive than what was hoped for.
The Structure of the Industry Sector and Palletco’s Position The business network between the firms within the industry sector are tightly structured. Everyone have their position, and exists from their niche. The large equipment manufacturers have their sales channels into the large manufacturing industries, relationships that have existed for many years. Smaller businesses such as Palletco thrive as they are specialized and provide additional sales channels. Palletco is positioned in the sector as a wholesaler and is as such highly dependent on its suppliers for the physical products that it offers. A number of such wholesalers exist which 12
constitute competitors to Palletco, but also partners for cooperation. Not to seldom, Palletco and their competitors do business with each other helping each other out with the supply of a specific equipment etc. However, the cooperation spans only over one specific episode and at the end of the day they are still mainly competitors, but with the difference that now they have a history of some cooperation. Sometimes these cooperative episodes change the way they compete. Nevertheless, competition is the rule – anything else is exception. Once Palletco sold some used equipment to one of its competitors. After a few weeks it turned out that they needed that particular equipment for a customer who requested it. So, they contacted the competitor to buy it back, which they could do. The price, however, was higher this time turning the deal to a not too successful one. But, the customer was satisfied and Palletco had a margin so it all worked out in the end. This is a typical example of cooperation under competition, which is so common in the industry sector, or differently expressed: It is an example of interaction in a business relationship under the economic reality of a transactionoriented industry sector.
Palletco’s Use of the Internet Palletco has a position of being the most ‘IT-savvy’ in the industry sector by virtue of its bold venture of launching an industrial business-to-business web site enabling on-line purchases from an on-line store. Of course other actors in the industry sector have web sites, although no one are offering e-commerce and e-business services such as Palletco. Some offer on-line catalogues and some limited ordering features, but no one comes near the level of Palletco in their web-based services. Palletco offers the possibility to login into customized customer web pages with order history and other customized information. Purchasing is made possible through the on-line store, where almost the whole product line is available, as well as used equipment, and technical information concerning norms and regulations. A special application is under development to help customers individually design their warehouses, using equipment from Palletco’s database. The application enables three-dimensional visualization and the creation of a virtual rendering of the warehouse that the customer have designed, in which he could ‘take a walk’ to see how it came out. The visualization could be saved for later viewing on the customer’s personalized web pages. A purchasing order could also be generated from the visualization indicating the sum total
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of the order and all details, and it could be saved for future reference or forwarded to a corporate purchasing agent to carry out the purchase, etc. The development and testing of the web site takes a lot of energy and draws heavily on personnel resources, as well as money, which is a perennial subject of debate in Palletco. However, the utilization of the Internet is judged to be of strategic importance to the survival of the company and has been given highest priority since 1999. Indeed, this type of use of information technology for interorganizational interaction is rare in the industry, and a number of problems are associated with the enterprise. These problems are currently the most strategic issues being handled by Palletco, as a part of the change process and they are working hard to get the ends to meet.
The Palletco ASM Following the ARR, first of all we need to identify the central activity of Palletco. Given the focus of this paper and in accord with the formulation of our problem, it is here identified as small business activity. The identification of the central activity gives some early indications on how the ASM will look like. Following the ARR, the central object of the activity is the Warehouse Storage Equipment that Palletco offer their customers. The subject of the activity is the individual CEO, and the outcome of the activity is business exchange. This exchange generates the monetary and financial flows from customers compulsory for the existence and necessary for the continuous survival of any business firm – small or large. In this case WSE is exchanged for money. The collective is identified as the network of the other managers/CEOs of the business firms in the industry sector as well as other important people, such as bank agents, industry specialists, partners etc. A number of instruments could be identified. The Internet and the information system (IS) of Palletco, as well as the employees with their skills and experiences is instruments used in the activity, but also money and knowledge is such instruments. Rules are identified as the ‘atmosphere’ of the industry sector, which enables companies within the sector to do some things, but delimits them from doing other things. Division of labor is identified as Palletco’s identity in the industry sector as being an intermediator between a large number of suppliers of warehouse equipment components and buyers of entire warehouse equipment solutions. But Palletco also has a reputation of being early adopters of IT, and industry leaders in
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using the Internet. By employing the ARR on the specific situation of Palletco, we arrive at the ideal ASM depicted in figure 2:
The Internet, People in Palletco, Knowledge, Money, IS
WSE Æ Business Exchange
Individual CEO
Industry Sector
Intermediary, Early Network of other Significant
Atmosphere
People in Industry Sector
Adopter, Industry Leader
Figure 2: The Situated ASM of Palletco.
This ASM is the result of the employment of the ARR Part I on the Palletco case data and it comprise the constituent parts of small business activity, which is the central activity. However, having identified the ASM is only the starting point of a thorough activity systems analysis. The task of identifying and modeling contradiction and change in the ASM is still ahead of us. We shall here give only an example of how such an analysis could be performed focusing on one specific issue; the use of the Internet.
Contradictions in the Palletco ASM First, primary contradictions could be identified within the constituent parts of the ASM. In the case with Palletco, focusing on the Internet, two contradictions could be identified in the instruments node between the Internet and the employees. First, as reported earlier, the concentration on the Internet has lead to debate between the people of Palletco. This debate sometimes borders to open conflict and is a 15
manifestation of the contradiction between the spending of resources on developing solutions for the Internet and on spending resources to generate business exchange (indicated as [1] in figure 3). At a more profound level, it could be expressed as the contradiction between immediate shortterm operational demands and strategic, long-term demands. Palletco need to survive the day and must be able to pay the bills at the end of the month, anything else is regarded a failure. But Palletco also needs to secure its long-term survival and development in a tightly structured industry sector, where they are at constant risk of being disintermediated, anything else would also be regarded as a failure. Another contradiction lay in the utilization of the Internet as a tool in business activity. The Internet is used to strengthen the relationship with some customers, and the IS is designed to promote relationship building, in order to create reliable and dependent customers when applicable. In this circumstance the opposite would be regarded as a failure of the IS. But the Internet is also used to supply occasional customers with exactly the product that they seek, without requiring from them to participate in any relationship building activities. In this circumstance, the IS must be able to support also this type of interaction, since the opposite would be a failure producing unsatisfied and annoyed customers. This contradiction is a result of the utilization of the Internet linking different types of customers to an IS, which must be able to handle both transaction oriented and relationship oriented interactions (indicated as [2] in figure 3). 1
2
People in
A Individual CEO
IS-relations
C
B
WSE Æ Business Exchange
Industry Sector
Intermediary, Early Network of other Significant
Atmosphere
People in Industry Sector
Adopter, Industry Leader
Figure 3: Contradictions in The ASM of Palletco.
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Secondary contradictions are contradictions between the constituent parts of the ASM. In the Palletco ASM, the following secondary contradictions were identified, focusing on the Internet as an instrument in small business activity. First, there exist a contradiction between the use of the Internet and the industry sector atmosphere (indicated as [A] in figure 3). People in this sector have been used to performing their activities without using the Internet and there is a great deal of resistance. Palletco have experienced episodes with customers looking at their products on the web and citing their own item numbers as they place the order via telephone. Accepting this means a failure of the utilization of the Internet, but refusing to take the order over the phone also is a failure, as they would eventually lose their customers. Second, there exist a contradiction between the use of the Internet and the industry sector network (indicated as [B] in figure 3). This is especially prominent on the supplier side. One of the most important suppliers of Palletco express so far, little propensity to develop their use of the Internet to involve any further integration. They see no incentive to do so, as they are in a position in the industry sector of being manufacturers of pallet racking using a number of channels to the market, of which Palletco is only one. Accepting this lack of integration between themselves and their suppliers is a negative result of the utilization of the Internet for Palletco, while they have no means to change the situation, as it is a consequence of the industry sector structure. On the other hand, not being heavily integrated with a specific supplier offers the opportunity to be flexible and switch supplier quite easily. Here the opposite would be regarded as a negative outcome of the utilization of the Internet. Third, there exist a contradiction between the use of the Internet and Palletco as occupying an intermediary position in the industry sector (indicated as [C] in figure 3). Being an intermediary, Palletco use the Internet to gather products from a large number of suppliers in an effective way, otherwise it would be regarded a failure. But at the same time, Palletco, seek to establish long-term substantial relationships with their suppliers by integrating their information systems, and again, anything else would be a failure. These contradictions will eventually lead to an emergent new ASM. Initially this ASM will exist in parallel with the old one and contradictions will occur between the two. That is what Engeström (1987) denotes quaternary contradictions, while tertiary contradictions are 17
contradictions between the focal ASM and neighboring ASMs with other central activities. Neither one is further elaborated here because the space is too limited, but the interested reader could take a minute to ponder how the emergent ASM could look like.
Results We have now seen an example of how paradox and contradiction in small business activity could be identified and modeled in an ASM. Recalling the work of Quinn and Kimberley, (1984, pp. 295-313), categorizing paradox in terms of contradictions in four dimensions, it is now of interest to discuss, although briefly, whether an ASM incorporates these four dimensions or not. We contend here that it does. An activity systems analysis explicitly focus contradiction and the type of contradiction being identified is independent of the ASM as an analytical tool, but so much more dependent on the empirical data available in the analysis. We argue therefore that an ASM analytically and theoretically incorporates all four dimensions of contradictions identified by Quinn and Kimberley (1984). The first dimension (Flexibility – Stability) were not explicit in the Palletco case, although indirect evidence could be found in contradiction [B] in figure 3; between the use of the Internet as an instrument of small business activity and the industry sector network being the community of small business activity. The second dimension is explicit as contradictions [A] through [C] in figure 3 all relates to this internal – external dimension of contradiction, whereas the upper part of the ASM denotes the interior of Palletco and the lower part the exterior. The third dimension (Means – Ends) was also explicit in contradiction [1] in figure 3; between immediate short-term demands (serving as means…) and strategic long-term demands (…to and end). The fourth dimension (Individual – Organization), finally was not focused in the Palletco case data, neither explicit nor implicit. The reason may be the focus on the Internet as a tool in Palletco and that with such a focus such potential contradictions do not surface. Whether they actually exist or not, we simply do not know – our data do not tell. However, as argued above, this does not imply that the ASM is incapable of modeling it, only that it were not emphasized in our data, given our focus. The results of this analysis indicate that activity systems analysis of small business activity is of good use when attempting to identify and model paradox and contradiction. An ASM displays the theoretical and analytical sharpness necessary and it incorporates the 18
dimensions of contradictions identified by Quinn and Kimberley (1984). However, further empirical testing is needed to fully determine the value of activity systems analysis of small business activity. Such an investigation could, as a suggestion, focus on the twelve specific contradictions of entrepreneurship and entrepreneurs proposed by Johannisson (1992).
Epilogue Author philosopher Arthur Koestler has recognized the paradoxical feature of reality. Departing from the notion of hierarchical structures, he develops a notion of human beings as holons (Koestler, 1978/1989, pp 34-35 and specifically appendix I). Holons are sub-totalities; integrated structures outfitted with self-regulatory mechanisms and highly autonomous, but they are also simultaneously parts of a larger hierarchical structure. As such, holons are dependent on the larger structure – they are quasi-autonomous totalities. According to Koestler (1978/1989), the term ‘hierarchy’ should be understood in this way; comprising autonomous, self-controlled holons furnished with flexibility and freedom to a varying degree. Holons, thus, have two faces, like a Janus figure, and this janusprinciple – being simultaneously an autonomous unit and an integrated part of a structure – is prevalent. In a similar vein, Sjöstrand (1997) discusses the realties of business firms and of management. Uncertainty, which is the trademark of managerial positions, is necessary for any businessperson to deal with, so also for any small business manager/entrepreneur. Sjöstrand (1997, p. 10) contends that dealing with uncertainty is a paradoxical process per se including both individual and collective elements. Managing a business firm means to deal with the janusprinciple and to manage holarchies3. In the words of Sjöstrand (1997): “Hierarchy, as such is not as imperative as is usually assumed. The reason for this doubt is concerned with the observation that individuals appear to be simultaneously both integrative and self-assertive. In other words, they tend to act like holons (cf. Koestler, 1989). An organization is thus regarded here as something similar to a hierarchy of holons, i.e. a holarchy.” (Sjöstrand, 1997, p. 95, emphasis in the original.) So, business firms in general could be seen as holarchies encompassing holons. People in business firms are holons and they pass this feature on to the firm turning them into holarchies. 19
However, a business firm is in fact a holons in itself. It is not only furnished with people acting like holons turning it into a holarchy, it is a holon as it is a sub-totality itself. It is simultaneously a self-assertive autonomous unit, and embedded and dependent of a context or environment. Hence a business firm is a holon of holons. The janusprinciple is at play, precisely because business firms are holarchies – but most of all because they are holons – and that is the very explanation to their paradoxical and contradictory nature. Where business firms not holons they would not display paradox and contradiction.
1
According to Eagleton (2000), the concept of ‘culture’ is said to belong to the two or three most complex words in the English language, whereas ‘nature’ is said to be the most complex of them all. These words, their meanings and relationships are outlined in Eagleton’s first chapter, which is well worth reading for the interested reader. Theses issues are not further discussed in this paper as it is beyond its scope. 2 An SME is here defined as a firm with no more than 250 employees. The focal firm in this paper; Palletco have seven employees. 3 The term is borrowed from Koestler (1978/1989, p. 41).
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About the author: Author: Frans Prenkert E-mail:
[email protected] Country: Sweden Company or Institution: The e-Business Research Group Department of Business, Economics, Statistics and Informatics (ESI) Örebro University and Department of Business Studies Uppsala University
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