Skype competes as a differentiated player in the VoIP industry. The company's business model is based on free distribution of its software, and then encouraging users to sign up for a payment plan that covers usage. The company's technology was once innovative but has now been commoditized (Blodget, 2011). The company was recently purchased by Microsoft for $8.5 billion (Saporito, 2011). The value of the company derives not from the software but from the company's 170 million-strong user base.
The company's strategy therefore relies heavily on throughputs. The most important input for Skype is the technology, which is now common. The technology allows users to interact with each other, using text messaging, voice or video calls. The company charges for this service, but still loses money. The main input for Microsoft is the user base. Without the massive user base, Skype has little intrinsic value and little means of generating income. Thus, the brand becomes a key throughput for the company, because it is the brand that attracts the users and provides an opportunity for the company to earn income.
The Nadler-Tushman Congruence Model emphasizes that in order for the organization to be successful, its inputs, throughputs and outputs need to be congruent. Given the lack of profits at Skype, the reasonable conclusion is that there is poor congruence, despite the company's substantial user base. This paper will illustrate how this is so.
Inputs
There are four key categories of input identified by Nadler and Tushman: environment, resources, history and strategy. The environment, characterized by rapid technological change, first created the opportunity that Skype seized but now represents an ongoing existential threat to the organization. The social environment for the company -- with increased use of technology and increased globalization -- has resulted in a dramatic increase in the need for efficient, low-cost means of communication, and Skype fulfilled that role.
The company has traditionally relied on a combination of human capital and investment capital to drive its business. Money and effort is spent on improving the existing Skype technology, developing...
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