Compared to the high-tech industry with its wealth of product innovations, most industries seem slow and boring. That is what I thought when I visited one of the largest office furniture manufacturers in North America in the summer of 2007. The Global Commodity Manager of the company granted me a tour through the production facility including an area where partition walls for office cubicles and metal filing cabinets were manufactured. The production manager responsible for the area proudly announced that they were busy with three shifts producing office partition walls and filing cabinets five days a week.
Fast forwarding ten years, I had the opportunity to re-visit the same facility. Not understanding how technology has changed even the seemingly slow and boring woodworking industry, I learnt that open concept workspaces and cloud computing have changed the way how office workers interact with each other and how information is stored. The once hustling manufacturing area of partition walls and filing cabinets got modified as the demand for both products has dwindled to one shift that runs 2 days per week.
The main conclusion I drew from this experience is that technology has changed many aspects of our lives including the way how offices are created, and information is stored. Creating new products, services, and processes that address these changes is pivotal to the very existence of a company.
Although some companies have adopted their production technology and product and service offering according to changing market needs, some companies have missed the turn for more innovation. Startup companies rely on innovation to differentiate themselves from others in the market place. Established companies that follow “Best Practices” emphasis mainly on operational efficiency essentially creating a “me-too” environment void of strategic differentiation. While there is no value in reinventing the wheel, blindly following what works for others seems a sure-fire way to create a race to the bottom.
So, what can companies of all sizes and industries do to organize themselves for innovation?
There are four main areas that an organization can focus on for the identification and incubation of innovation:
- Corporate Strategy
- Organizational Structure
- Organizational Culture
- Human Resources
Entrepreneurship as a New Dominant Logic
As a new dominant logic of a company, the concept of corporate entrepreneurship promotes agility, flexibility, creativity, and continuous innovation throughout the company. The overriding focus of the company is opportunity identification, the discovery of new sources of value, and product and process innovation that will lead to greater profitability. An example of such an entrepreneurial strategy is Google’s Area 120, a workshop that promotes the generation of new ideas and the acquisition and retention of entrepreneurial-minded talent. The strategy of corporate entrepreneurship is then translated into objectives, reward systems, control systems, planning approaches, structure, and human resource management practices. A scorecard keeps track of the progress and success of the strategy implementation.
Agile Organizational Structures
Since entrepreneurship is all about the creation of new things, the organizational structure needs to move into this new direction. Functional hierarchies need to be replaced by more agile, organic structures where ideas can be created and promoted without the consideration of positional power and functional hierarchies. Building cross-functional teams, that interact without borders can build a fertile environment for idea generation and implementation as a more holistic or company-wide approach is taken. Office partition walls are a visual reminder of the old mindset of organizational structure with a close-minded approach whereas open office spaces that create room for interaction among people provide a deeper understanding of issues, a more fluent and natural idea exchange, and ample opportunities for collaboration. Apple’s new headquarters in Cupertino symbolizes the shift from fragmented buildings that were spread over a larger geographical area to one building that allows for unobstructed interaction, collaboration, and cross-functional team environments.
Embracing Entrepreneurial Culture
Entrepreneurial cultures involve big visions for what can be achieved, encouragement of healthy dissatisfaction, an ongoing sense of urgency, and acceptance of change as a norm. While a significant emphasis is placed these days on teams and groups, we must not forget the vital role played by individuals. When you think that you don’t have the positional power to change anything in the organization I am sorry, but you are wrong. Anybody has ideas and the organizational culture needs to identify, appreciate, incubate and implement some of these ideas. Unused ideas can be stored in an idea repository for later consideration. The design of jobs, company structure, performance appraisals, and rewards should balance incentives for individual initiatives and risk-taking. The culture of innovation within Amazon is the responsibility of CEO and Founder Jeff Bezos. As Amazon grew, Bezos insisted on keeping teams small allowing for independent exploration and experimentation. Bezos famously instituted the “two-pizza-rule”; teams should be small enough to be fed by two pizzas underlining the power of small teams. These teams are encouraged to launch ideas early as a minimum viable product, service, or process to learn quickly whether they will resonate with customers thereby avoiding wasted years of working on potential innovations that never sell. Failure, as a result, is accepted as part of the learning process for implementing the most promising ideas for innovation.
t is not enough for management to simply declare that entrepreneurship is important and that they want a culture of champions and innovation. The Human Resource function can play a vital role in developing and implementing a formal “innovation champions” program to provide rewards and resources to support innovative efforts. As the entrepreneurial process in organizations is ultimately about destruction and construction, the organization needs to be able to tolerate healthy friction or abrasion. Instead of selecting people based on their experience and education, HR management should consider selecting employees based on their ability to solve complex problems combined with their ability to work with cross-functional teams within loose boundaries.
Technology is affecting even seemingly slow-changing industries like the woodworking industry. Businesses are operating in more complex environments leading to the inevitable extinction of solitary leadership forcing organizations to think about leadership as a company-wide instrument. Entrepreneurship as a dominant logic enables startup and well-established organization to address complex issues more effectively by considering strategy, organizational structure and culture, and human resource management practices. Individuals and small groups are counted on to question the status quo and develop ideas to move organizations forward. Changing the organization to an entrepreneurial focus provides an antidote for slow and seemingly boring industries. Add paragraph text here.