Published on December 15, 2008
„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
But…what are they??? 14 March 2008 2 © Marc Sniukas
Organizing for Innovation & Growth A synthesis of readings & research findings
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 © Marc Sniukas 4 Following John Roberts „The Modern Firm“ Oxford University Press 2004
Organizing for Performance Exploitation 14 March 2008 © Marc Sniukas 5
The Disaggregated Model 14 March 2008 © Marc Sniukas 6 Key Architectual Elements Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 7 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 8 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 9 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 10 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 11 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 12 John Roberts „The Modern Firm“ Oxford University Press 2004 pages 232f
Organizing for Innovation Exploration 14 March 2008 © Marc Sniukas 13
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 © Marc Sniukas 14 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 15 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 16 „Organizing for Innovation“ www.innovation-point.com 2004
Complexity and Cost 14 March 2008 © Marc Sniukas 17 „Organizing for Innovation“ www.innovation-point.com 2004
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 © Marc Sniukas 18 www.tompeters.com
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 © Marc Sniukas 19 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
HOW??? 14 March 2008 © Marc Sniukas 21
Have a portfolio of activities! 14 March 2008 © Marc Sniukas 22
„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
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 © Marc Sniukas 24 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 25 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 26 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 27 Following John Roberts „The Modern Firm“ Oxford University Press 2004
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 © Marc Sniukas 28 Following John Roberts „The Modern Firm“ Oxford University Press 2004
The Organizational Context of Strategic Innovation 14 March 2008 © Marc Sniukas 29 Research has shown that strategically innovative companies are characterized by a distinctive organizational context enabling strategic innovation.
Characteristics of Strategically Innovative Companies 14 March 2008 © Marc Sniukas 30
Well folks…that‘s it! All you‘ll have to do now is getting started! 14 March 2008 © Marc Sniukas 31
Want more? © Marc Sniukas www.sevenprophets.com 32 10.08.2009
www.sevenprophets.com © Marc Sniukas www.sevenprophets.com 33 10.08.2009
A presentation by Marc Sniukas www.sniukas.com 10.08.2009 © Marc Sniukas www.sevenprophets.com 34
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