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Organizing For Innovation & Growth

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Some thoughts on how to organize for innovation and growth.

Published in: Business, Education
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Organizing For Innovation & Growth

  1. 1. „The organizational designs that support innovation are very different from those that support delivery of current performance.“<br />John Roberts, Professor of Economics, Strategic Management, and International Business Stanford Graduate School of Business<br />
  2. 2. But…what are they???<br />14 March 2008<br />2<br />© Marc Sniukas<br />
  3. 3. Organizing for Innovation & Growth<br />A synthesis of readings & research findings<br />
  4. 4. Organizing for Innovation + Efficiency<br />Exploitation<br />Achieve maximal performance delivering the current strategy<br />Requires organisational designs that facilitate focus and execution<br />No slack<br />Continous innovations in the current business<br />Exploration<br />Develop new opportunities<br />High uncertainty<br />Depends on slack<br />Radical innovations outside the current paradigm<br />14 March 2008<br />© Marc Sniukas<br />4<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  5. 5. Organizing for Performance<br />Exploitation<br />14 March 2008<br />© Marc Sniukas<br />5<br />
  6. 6. The Disaggregated Model<br />14 March 2008<br />© Marc Sniukas<br />6<br />Key Architectual Elements<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  7. 7. The Disaggregated Model<br />High strategic focus<br />Divest unrelated businesses<br />Focus activities to a select set<br />Focus on the activities where the organization can create most value<br />Outsourcing & vertical disintegration<br />14 March 2008<br />© Marc Sniukas<br />7<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  8. 8. The Disaggregated Model<br />Small subunits<br />Significant decision rights<br />Clear scope of responsibility<br />Clear accountability<br />Accountable for delivering performance(supported by outines and processes)<br />Linked together by various means to manage the interdependencies<br />Decreased number of management layers<br />Decreased extent of central staff<br />14 March 2008<br />© Marc Sniukas<br />8<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  9. 9. The Disaggregated Model<br />Peer groups<br />Align teams, functions, and businesses into peer groups for support (instead of relying on the center)<br />Introduce peer challenges on performance and targets<br />Best practice sharing<br />14 March 2008<br />© Marc Sniukas<br />9<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  10. 10. The Disaggregated Model<br />Performance incentives<br />Routines and processes hold subunits accountable for delivering performance<br />Tie all employees‘ compensation to performance of their unit and the overall business<br />Cultural norms facilitate the pursuit and realization of improved performance<br />Push (individual) performance evaluation discussions down<br />Performance contracts<br />Track performance closely (e.g. quarterly reviews)<br />14 March 2008<br />© Marc Sniukas<br />10<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  11. 11. The Disaggregated Model<br />Decision making<br />Improved speed and effectiveness of managerial decision-making<br />Transfer decision making from the center to local management on how to run operations and how to meet performance targets<br />Eliminate layers of management<br />Reduce headquarters employment<br />Encourage employees to take respsonsibility and exercise initiative<br />Values needed: caring, trust, opennes, teamwork, cooperation<br />14 March 2008<br />© Marc Sniukas<br />11<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  12. 12. The Disaggregated ModelHow to do it?<br />Establish clarity about strategy and corporate policies<br />Create discrete organizational units that are smaller than previously favored<br />Give the units‘ leaders increased operational and strategic authority<br />Hold them strictly accountable for results<br />Reduce the number of layers in the hierachy (delayering)<br />Reduce the number of central staff positions<br />Increase incentives for performance at the unit and individual levels<br />Increase rewards tied to overall performance<br />Increase the resources devoted to management training and development<br />Promote horizontal linkages and communication among managers, staff and peer units<br />Improve information systems that facilitate both the measurement of performance and communication across units and up and down the hierachy.<br />14 March 2008<br />© Marc Sniukas<br />12<br />John Roberts „The Modern Firm“ Oxford University Press 2004 pages 232f<br />
  13. 13. Organizing for Innovation<br />Exploration<br />14 March 2008<br />© Marc Sniukas<br />13<br />
  14. 14. What does it take?<br />Imagination<br />Thinking outside the box<br />Willingness to take significant risk<br />Accept failures (and even celebrate them)<br />Opennes to the new and untried<br />Slack resources to generate and develop ideas<br />14 March 2008<br />© Marc Sniukas<br />14<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  15. 15. How to do it?<br />Organizational models supporting innovation<br />Establish multiple R&D groups<br />Do not attempt to coordinate and rationalize activity across them<br />Encourage direct communication among the groups<br />Give them the freedom and autonomy to decide how and what to work on<br />Performance measures & rewards: subjective evaluations or milestones achieved (not financial numbers generated)<br />14 March 2008<br />© Marc Sniukas<br />15<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  16. 16. How to do it?<br />Organizational models supporting innovation<br />Informal interaction between functional groups<br />Innovation Project Team<br />Expert Network<br />Shared Services Organization<br />Innovation Community of Practice<br />Ambidextrous Organization<br />Innovation Council<br />14 March 2008<br />© Marc Sniukas<br />16<br />„Organizing for Innovation“ www.innovation-point.com 2004<br />
  17. 17. Complexity and Cost<br />14 March 2008<br />© Marc Sniukas<br />17<br />„Organizing for Innovation“ www.innovation-point.com 2004<br />
  18. 18. Innovation…the Tom Peters way<br />A Bias for Action<br />Close to the Customer<br />Autonomy and Entrepreneurship<br />Productivity Through People<br />Hands On, Value-Driven<br />Stick to the Knitting<br />Simple Form, Lean Staff<br />Simultaneous Loose-Tight Properties<br />14 March 2008<br />© Marc Sniukas<br />18<br />www.tompeters.com <br />
  19. 19. Innovation…the Whirlpool way<br />Making innovation a central topic in Whirlpool‘s leadership development programs.<br />Setting aside a substantial share of capital spending every year for projects that were truly innovative.<br />Requiring every product-development plan to contain a sizable component of new-to-market innovation.<br />Training more than 600 innovation mentors charged with supporting innovation throughout the company.<br />Enrolling every employee in an online course on business innovation.<br />Establishing innovation as a large component of top management‘s long-term bonus plan.<br />Setting aside time in quarterly business review meetings for an in-depth discussion of each unit‘s innovation performance<br />Creating an Innovation Board to review and fast-track the company‘s most promising ideas.<br />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.<br />Developing a set of metrics to track innovation inputs, throughputs, and outputs. <br />14 March 2008<br />© Marc Sniukas<br />19<br />Gary Hamel „The Future of Management“ Harvard Business School Press 2007, page 30<br />
  20. 20. „…firms must develop multiple business opportunities, and to continue to grow and survive they must do this on an ongoing basis.“<br />John Roberts, Professor of Economics, Strategic Management, and International Business Stanford Graduate School of Business<br />
  21. 21. HOW???<br />14 March 2008<br />© Marc Sniukas<br />21<br />
  22. 22. Have a portfolio of activities!<br />14 March 2008<br />© Marc Sniukas<br />22<br />
  23. 23. „Searching for new opportunities, selecting among identified opportunities, building new businesses, running existing ones, exiting others – all may need to be done at once.“<br />John Roberts, Professor of Economics, Strategic Management, and International Business Stanford Graduate School of Business<br />
  24. 24. Difficulties with Multi-Tasking<br />Motivation!<br />Exploratory activity is typically hard to measure in a precise and timely way.<br />According behavior is hard to specify, connection between efforts and results achieved is subject to randomness<br />Exploitation is more easily measured  rewarded<br />Inducing one sort of behavior increases the cost of getting the other.<br />14 March 2008<br />© Marc Sniukas<br />24<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  25. 25. Job Design for Multi-Tasking<br />Divide the jobs: some explore, while others exploit.<br />Internal competition<br />Costly<br />Morale problems<br />Attention and energy<br />Backwards integration of the new unit?<br />Change the fundamental trade-offs involved, by working on the people and cultural elements of organizational design.<br />14 March 2008<br />© Marc Sniukas<br />25<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  26. 26. High Commitment HRM<br />Trust<br />Transparency<br />Empowerment<br />Egalitarianism<br />Job enrichment<br />Teamwork<br />Abscence of explicit individual monitoring and performance pay<br />Employees identifying their interests and those of the firm<br />Accepting the vision<br />Motivation<br />Personal pride<br />Inspiration<br />Strong identification with the company<br />Fluid architecture, project teams<br />Lots of opportunities for learning and taking new responsiblities<br />Value-based leadership (customer satisfaction, respect for the individual, achievement, continous learning)<br />14 March 2008<br />© Marc Sniukas<br />26<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  27. 27. Roberts‘ How To Do It<br />Strategic and organizational choices must be made holistically, recognizing the interdependencies<br />Scope of the Firm: what, where, how, for whom<br />How is it going to distinguish itself from competition, gain competitive advantage, create value<br />Right people must be attracted, retained, assigned to different roles<br />Formal architecture must be crafted to allow effective coordination and motivation<br />The processes, procedures, and routines that guide and control behavior must be be developed<br />The fundamental beliefs, and norms that will be shared across the firm must be created, transmitted, and adopted<br />All these must mesh properly with one another, so the organization really does allow the strategy to be executed.<br />The people, the networks among them, and the routines they follow must give the firm the capabilities it needs to create value.<br />The system of incentives must motivate the particulat people that have been attracted to deliver the strategy and let the firm reach ist goals.<br />The formal structure and the allocation of decision authority need to be aligned with where expertise liea and with what motivates the people.<br />Finally, all the elements of the strategy and organization need to fit with the competitive, technological, social, legal, and regulatory realities the firm face.<br />14 March 2008<br />© Marc Sniukas<br />27<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  28. 28. Roberts‘ How To Do It<br />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.<br />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.<br />The formal elements of the design can influence the networks and culture, so managers can have some indirect control over them.<br />Leadship must play a crucial role in successfully shaping the culture.<br />Leaders must give specific meaning to the values, which then sets the basis for the generating of expected behavior.<br />Solving the problems of strategy and organization is an act of real creativity.<br />Chasing after best practices is largely futile if the aim is to achieve differentiation.<br />14 March 2008<br />© Marc Sniukas<br />28<br />Following John Roberts „The Modern Firm“ Oxford University Press 2004<br />
  29. 29. The Organizational Context of Strategic Innovation<br />14 March 2008<br />© Marc Sniukas<br />29<br />Research has shown that strategically innovative companies are characterized by a distinctive organizational context enabling strategic innovation.<br />
  30. 30. Characteristics of Strategically Innovative Companies<br />14 March 2008<br />© Marc Sniukas<br />30<br />
  31. 31. Well folks…that‘s it!<br />All you‘ll have to do now is getting started!<br />14 March 2008<br />© Marc Sniukas<br />31<br />
  32. 32. Want more?<br />© Marc Sniukas www.sevenprophets.com<br />32<br />10.08.2009<br />
  33. 33. www.sevenprophets.com<br />© Marc Sniukas www.sevenprophets.com<br />33<br />10.08.2009<br />
  34. 34. A presentation by Marc Sniukas<br />www.sniukas.com<br />10.08.2009<br />© Marc Sniukas www.sevenprophets.com<br />34<br />

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