Appex Corporation (Appex) was a highly successful information service provider in the fast-paced cellular phone industry. It sustained impressive revenue growth of 1600% over three years between 1986 and 1989, while increasing employee count by 600%. In order to absorb these new employees efficiently, Appex restructured several times (see Appendix 1 for the chronology of restructuring events). Each restructuring, however, created new problems for the company as it sought to successfully integrate the new personnel and run the organization efficiently and productively. However, it should be noted that Appex was relatively successful while implementing rapid organizational changes.
In August 1990, Appex implemented a "divisional" structure in response to problems created by the previous functional structure. In actuality, this structure was a mix between a functional and divisional structure establishing an ICS and IS divisions (historical product-based categories) while maintaining separate divisions for Operations and Finance and HR. While this had the effect of improving company focus on cost, schedule, and responsibility, it was not without its limitations.
In particular, the structure created two (practically) independent divisions. While communication within the divisions was unimpeded, communication between the divisions was minimal. Ghosh, Appex's CEO, speculated that lack of communication was reducing the number of new product ideas. In addition, there were resource contention issues requiring management to purchase additional resources for each division. Finally, as the divisions grew, they became less transparent to and less accountable to senior management.
For Octicon, the spaghetti experiment resulted in a number of product innovations, increased growth and revenue. While innovation is a concern for Appex, growth and revenue increases have already been achieved under the previous organizational structures. The disadvantages seen in Octicon included coordination problems, difficulties in knowledge sharing, as well as influence activities (with a relatively flat structure, subordinates...