„The organizational designs that support innovation are very different from those that support delivery of current performance.“
John Roberts, Professor of Economics, Strategic Management, and International Business Stanford Graduate School of Business
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But…what are they???
14 March 2008
Organizing for Innovation & GrowthA synthesis of readings & research findings
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Organizing for Innovation + Efficiency
Exploitation
Achieve maximal performance delivering the current strategy
Requires organisational designs that facilitate focus and execution
No slack
Continous innovations in the current business
Exploration
Develop new opportunities
High uncertainty
Depends on slack
Radical innovations outside the current paradigm
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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Organizing for Performance
Exploitation
14 March 2008
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The Disaggregated Model
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
Key Architectual Elements
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The Disaggregated Model
High strategic focus
Divest unrelated businesses
Focus activities to a select set
Focus on the activities where the organization can create most value
Outsourcing & vertical disintegration
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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The Disaggregated Model
Small subunits
Significant decision rights
Clear scope of responsibility
Clear accountability
Accountable for delivering performance(supported by outines and processes)
Linked together by various means to manage the interdependencies
Decreased number of management layers
Decreased extent of central staff
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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The Disaggregated Model
Peer groups
Align teams, functions, and businesses into peer groups for support (instead of relying on the center)
Introduce peer challenges on performance and targets
Best practice sharing
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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The Disaggregated Model
Performance incentives
Routines and processes hold subunits accountable for delivering performance
Tie all employees‘ compensation to performance of their unit and the overall business
Cultural norms facilitate the pursuit and realization of improved performance
Push (individual) performance evaluation discussions down
Performance contracts
Track performance closely (e.g. quarterly reviews)
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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The Disaggregated Model
Decision making
Improved speed and effectiveness of managerial decision-making
Transfer decision making from the center to local management on how to run operations and how to meet performance targets
Eliminate layers of management
Reduce headquarters employment
Encourage employees to take respsonsibility and exercise initiative
Values needed: caring, trust, opennes, teamwork, cooperation
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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The Disaggregated ModelHow to do it?
Establish clarity about strategy and corporate policies
Create discrete organizational units that are smaller than previously favored
Give the units‘ leaders increased operational and strategic authority
Hold them strictly accountable for results
Reduce the number of layers in the hierachy (delayering)
Reduce the number of central staff positions
Increase incentives for performance at the unit and individual levels
Increase rewards tied to overall performance
Increase the resources devoted to management training and development
Promote horizontal linkages and communication among managers, staff and peer units
Improve information systems that facilitate both the measurement of performance and communication across units and up and down the hierachy.
14 March 2008 John Roberts „The Modern Firm“ Oxford University Press 2004 pages 232f
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Organizing for Innovation
Exploration
14 March 2008
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What does it take?
Imagination
Thinking outside the box
Willingness to take significant risk
Accept failures (and even celebrate them)
Opennes to the new and untried
Slack resources to generate and develop ideas
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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How to do it?
Organizational models supporting innovation
Establish multiple R&D groups
Do not attempt to coordinate and rationalize activity across them
Encourage direct communication among the groups
Give them the freedom and autonomy to decide how and what to work on
Performance measures & rewards: subjective evaluations or milestones achieved (not financial numbers generated)
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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How to do it?
Organizational models supporting innovation
Informal interaction between functional groups
Innovation Project Team
Expert Network
Shared Services Organization
Innovation Community of Practice
Ambidextrous Organization
Innovation Council
14 March 2008 „Organizing for Innovation“ www.innovation-point.com 2004
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Complexity and Cost
14 March 2008 „Organizing for Innovation“ www.innovation-point.com 2004
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Innovation…the Tom Peters way
A Bias for Action
Close to the Customer
Autonomy and Entrepreneurship
Productivity Through People
Hands On, Value-Driven
Stick to the Knitting
Simple Form, Lean Staff
Simultaneous Loose-Tight Properties
14 March 2008 www.tompeters.com
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Innovation…the Whirlpool way
Making innovation a central topic in Whirlpool‘s leadership development programs.
Setting aside a substantial share of capital spending every year for projects that were truly innovative.
Requiring every product-development plan to contain a sizable component of new-to-market innovation.
Training more than 600 innovation mentors charged with supporting innovation throughout the company.
Enrolling every employee in an online course on business innovation.
Establishing innovation as a large component of top management‘s long-term bonus plan.
Setting aside time in quarterly business review meetings for an in-depth discussion of each unit‘s innovation performance
Creating an Innovation Board to review and fast-track the company‘s most promising ideas.
Building an innovation portal to give employees access to a compendium of innovation tools, data on the company‘s global innovation pipeline, and the chance to input their ideas.
Developing a set of metrics to track innovation inputs, throughputs, and outputs.
14 March 2008 Gary Hamel „The Future of Management“ Harvard Business School Press 2007, page 30
„…firms must develop multiple business opportunities, and to continue to grow and survive they must do this on an ongoing basis.“
John Roberts, Professor of Economics, Strategic Management, and International Business Stanford Graduate School of Business
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HOW???
14 March 2008
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Have a portfolio of activities!
14 March 2008
„Searching for new opportunities, selecting among identified opportunities, building new businesses, running existing ones, exiting others – all may need to be done at once.“
John Roberts, Professor of Economics, Strategic Management, and International Business Stanford Graduate School of Business
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Difficulties with Multi-Tasking
Motivation!
Exploratory activity is typically hard to measure in a precise and timely way.
According behavior is hard to specify, connection between efforts and results achieved is subject to randomness
Exploitation is more easily measured rewarded
Inducing one sort of behavior increases the cost of getting the other.
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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Job Design for Multi-Tasking
Divide the jobs: some explore, while others exploit.
– Internal competition– Costly– Morale problems– Attention and energy
Backwards integration of the new unit?
Change the fundamental trade-offs involved, by working on the people and cultural elements of organizational design.
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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High Commitment HRM
Trust
Transparency
Empowerment
Egalitarianism
Job enrichment
Teamwork
Abscence of explicit individual monitoring and performance pay
Employees identifying their interests and those of the firm
Accepting the vision
Motivation
Personal pride
Inspiration
Strong identification with the company
Fluid architecture, project teams
Lots of opportunities for learning and taking new responsiblities
Value-based leadership (customer satisfaction, respect for the individual, achievement, continous learning)
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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Roberts‘ How To Do It
Strategic and organizational choices must be made holistically, recognizing the interdependencies
Scope of the Firm: what, where, how, for whom
How is it going to distinguish itself from competition, gain competitive advantage, create value
Right people must be attracted, retained, assigned to different roles
Formal architecture must be crafted to allow effective coordination and motivation
The processes, procedures, and routines that guide and control behavior must be be developed
The fundamental beliefs, and norms that will be shared across the firm must be created, transmitted, and adopted
All these must mesh properly with one another, so the organization really does allow the strategy to be executed.
The people, the networks among them, and the routines they follow must give the firm the capabilities it needs to create value.
The system of incentives must motivate the particulat people that have been attracted to deliver the strategy and let the firm reach ist goals.
The formal structure and the allocation of decision authority need to be aligned with where expertise liea and with what motivates the people.
Finally, all the elements of the strategy and organization need to fit with the competitive, technological, social, legal, and regulatory realities the firm face.
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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Roberts‘ How To Do It
People throughout the firm must be involved, the knowledge of how things really work, how customers really behave, how choices really interact is highly dispersed.
Leaders must provide a vision of the strategy and organization, indicating the underlying principles and how the basic trade-offs are to be resolved. They need to communicate the model in a clear and compelling way, so that others understand and embrace it and are motivated to try to realize it in designing their parts of the organization.
The formal elements of the design can influence the networks and culture, so managers can have some indirect control over them.
Leadship must play a crucial role in successfully shaping the culture.
Leaders must give specific meaning to the values, which then sets the basis for the generating of expected behavior.
Solving the problems of strategy and organization is an act of real creativity.
Chasing after best practices is largely futile if the aim is to achieve differentiation.
14 March 2008 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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The Organizational Context of Strategic Innovation
14 March 2008
Research has shown that strategically innovative companies are characterized by a distinctive organizational context enabling strategic innovation.
Characteristics of Strategically Innovative Companies
Culture Questioning attitudeRewards success and failure, punishes inactionTolerates mistakesWelcomes changeSupports risk taking and changeSupports teamwork and collaboration
Structure Fast and flatSmall unitsEncourages collaborationAutonomous teams at the front line
Processes Fast and unbureaucraticDecentralized decision makingSupport idea generation, experimentation and execution
Systems Support the process of strategic innovationEnable collaborationEnable the use and creation of knowledgeReward risk taking and actionUsed to create relationships with customers
People Variety (internal and external)CollaborationEducated in regard to the strategy and skills needed
14 March 2008© Marc Sniukas30
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Well folks…that‘s it!
All you‘ll have to do now is getting started!
14 March 2008
04/11/2023© Marc Sniukas www.sevenprophets.com
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Want more?
04/11/2023© Marc Sniukas www.sevenprophets.com
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www.sevenprophets.com
04/11/2023© Marc Sniukas www.sevenprophets.com
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A presentation by Marc Sniukaswww.sniukas.com
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