Innovation ManagementAssignment 3

Nadine Woodcock

Which features do you associate with innovative firms? Be sure to justify your answer with references to research on the subject.

According to Mintzberg (1978), the structure of an organisation can be defined as the sum of the way in which it divides labour into different tasks and then coordinates them. In order for firms to be able to operate successfully in terms of innovation, management needs to know that organisations are made up of different parts and that each and every part can exhibit different cultures and operating methods. The key factor to successful innovation in organisations is its ability to coordinate its activities so as to ensure that the entire firm and its employees pull together to work in one direction.

A number of studies on the role of organisational structure and its relation to successful innovation have been done but it is also important to note that each of these studies were done during different times and with different industries and contexts. One academic work by Burns and Stalker (1961) identified that organisations could be placed into 2 categories or types. ‘Organic’ firms exhibit flexible structures and a lack of formality and bureaucracy, or hierarchy that allow them to be better placed to innovate. ‘Mechanistic’ firms on the other hand, tend to have layers of hierarchy, procedures and rigid work methods that restrict the ability for firms to make the most of the creative and thus innovative ideas of its employees.

In other words, successful innovative firms are said to be ‘organic’ in its organisational structure. The idea is that flexible, adaptable, transparent and lightly controlled firms are better able to encourage creativity in its employees so as to encourage innovation in an organisation. In terms of authority for decision-making and channels of communication for example, organic structures are said to exhibit authority for decision-making based on the level of expertise of the individual, and channels of communication are open so as to allow free information flow. However, in some ways this is a stereotypical point of view that does not take into consideration some of the successes of innovation in organisations where the so-called ‘mechanistic’ structure provide a firm with the focus an organisation needs in order to implement an innovative strategy or idea.

Another set of characteristics for innovative organisations include certain ideas such as expansion focused firms, application and flexibility of operations, technology focus firms, outward looking firms, risk taking, over capacity and a certain allowance for freedom and creative flow, internal communication, and the need for wide-ranging capabilities. According to certain authors, innovation is often “driven by a need for growth and change in a business” (A. Pilkington, 2008). In the case of innovative firms, there is a driving need to expand their market and profit margins and so the characteristic of expansion focus can be seen in such firms.

In addition, other characteristics such as the need for flexibility in applying and adapting new ideas in such a way so as to maximise returns and other opportunities which may arise, are often repeated in studies of innovative firms. Another important feature is the firm’s focus on technology. Often there is a need to continue further developments for an invention in order to take it from the initial idea phase to the point where market opportunities become available. As such, there is an inherent

assumption that firms need to continue supporting and maintaining interest and commitment to further developments of potential ideas before they can become recognised innovations.

Features such as the ability to take risks, internal communication and an outward looking focus also contribute to the success of innovative firms. As with any new venture, there is always an element of risk involved. An innovative firm with a strong track record will be able to assess their risks accurately and will also show characteristics of effective internal communication between departments inside the organisation. Firms with a reputation for innovation are also said to show a more outward looking approach whereby they encourage employees and managers to keep up-to-date with the latest developments in their respective fields. Such investments in the management of a wide range of skills and knowledge in the creative, innovative staff, form the core of any innovative firm. Although most of these features can be found in many innovative firms, it is important to note that each organisation, its context, the employees and even the way it operates, all vary and so one may find that a more rigid organisation can also produce innovations alongside the more ‘organic’ firms.