A multidimensional organization is an organization that pursues its objectives simultaneously through multiple dimensions (product, region, account, market segment).
The multidimensional organization was discussed as early as the 1970s.[1] [2] It required the combination of the fall of costs of information, the development of dynamic multidimensional markets, and a new generation of workers and managers, to create this paradigm shift in organization forms.
The multidimensional organization exhibits the following:
The most basic reason for the rise of the multidimensional organization is that due to the fall in costs of information, customers start to behave in multidimensional ways in terms of their preferences, in the ways in which they select and purchase goods and services, make use of distribution channels, etc. To answer this increasing variety in customer behavior, both in private consumers and between businesses, firms need to increase their internal variety.[3]
The multidimensional organization also answers the emergence of multidimensional strategies,[4] in which firms not only pursue market dominance and superior efficiency, but also need to exploit economies of scale.
The multidimensional organization is a new organization form, compared to the U-form, the M-form and the H-form. It transcends the restrictions with the M-form or multi-unit organization, as well as the problems with the matrix-organization. Examples of firms with a multidimensional organization are IBM, Microsoft, and ASML.[5]
The differences between the multidimensional organization and the matrix organization can be summarized as below:
| Matrix organization | Multidimensional organization | |
|---|---|---|
| One person may have two bosses, each with their own objectives | Limited number of managers work n-D, most workers within modules in hierarchy; managers having one common challenge, the performance of the firm with customer C | |
| Products and regions are profit center | Customer is the primary profit center | |
| Transaction data is owned by regions | Transaction data is owned by corporate headquarters | |
| No shared performance information | Shared information from trusted sources on performance; no information asymmetry | |
| Transfer prices between dimensions | No transfer of pricing between dimensions | |
| No proper management process for planning & control | Clear management process, giving priority to most critical dimension | |
| Based on economic model of unit organization | Based on economic model of exploiting intangible assets in integrated firm |
The multidimensional organization implies specific requirements on how transactions are recorded in enterprise resource planning (ERP) systems, implicating a shift away from the traditional paradigm in IT-governance of business IT-alignment. Now transactions need to be recorded, not only multidimensional, to allow multiple consolidations to occur simultaneously. Particularly, the recording needs to be neutral with respect to business models. ERP systems tend to have a technical lifetime of 10–15 years, whereas business models last for 3–5 years.