Organising For Innovation

Organising for Innovation - Technology Management, MIB 5 London

Melissa, Ishfaque & Mark 18 November 2009

Size of Firm Advantages and Disadvantages

Large Firm • Easy Financing • Spread fixed costs of R&D. • Greater global reach. • Learning effects. • Risk.

Small Firm • Flexible structures leading to enhanced creativity • Higher Success Rate • More effective Incentive Structure

Size of Firm Ability to Innovate

Large Firm

Small Firm

• Efficiency decreases.

• More flexible.

• Less nimble and responsive to change.

• Easy monitoring. • selection of projects. • Shorter development cycles.

Size of Firm Ability to Innovate

Hybrid Firm • Breaking into subunits. • Advantages of the small and big firms.

Structural Dimensions Affects a Firms propensity to Innovate

Standardisation • Uniformity • Advantages: Predictable Quarterly Earnings • Disadvantages: Can limit innovation.

Formalisation • Degree of use of rules, procedures and written documentation. • Advantages: Smooth Running of Large MNC • Disadvantages: Rigid firm, Limits Creativity

Structural Dimensions Affects a Firms propensity to Innovate

Centralisation

Decentralisation R&D

Division

Division R&D

Division

Division HQ .

R&D

Division HQ

R&D Division

Division

Division

Division R&D

Division R&D

Structural Dimensions Affects a Firms Propensity to Innovate

Centralisation

Decentralisation

• Maximisation of economies of scale.

• Enables development of new products.

• More Coordinated

• Disadvantages: Risk, redundancy.

• Top Management have Control

Mechanistic vs Organic Structures Efficiency or Flexibility...

Mechanistic

Organic

• Blend of Formalisation and Standardisation

• Free Flowing Structure

• Suited to Large Volume Low Margin Setting • Not Suitable for Innovation

• Entrepreneurial Environment • Little Standardisation or Formalisation

Efficiency or Flexibility Striking the balance...

Efficiency

Flexibility

Efficiency or Flexibility Striking the balance...

Economies of Scale Control

E

y c n e ffici

Fl

y t i l i exib

Efficiency or Flexibility Striking the balance...

Effic

iency

Innovation Creativity

Flexi bility

Efficiency or Flexibility Striking the balance...

• Modular Manufacturing o o

Flexible Manufacturing Systems (Sony) Standardised Components (PCs)

• Loosely Coupled Organisations o o

Embedded Coordination (Open Standards) IT Enabling Advanced Coordination (B-2 Bomber) ! Transparency ! Lower Searching Costs ! Monitoring

• Flexibility Leads to Specialisation

“ Ambidextrous Organisation - a firm that can achieve both short term efficiency and long term innovation” - Bartlett & Ghoshal

70/20/10 - Eric Schmidt, Google CEO

Managing Innovation Across Borders Centre for Global

Local for Local

• All Innovation occurs at a central hub

• R&D tailored for individual markets

• Advantages: Tightly Coordinated, Specialisation

• Advantages: Locally Responsive, Customised Innovation

• Disadvantages: Slow Response to Local Demands

• Disadvantages: Duplication of Tasks, Reinventing the Wheel

Managing Innovation Across Borders Locally Leveraged • Transfer Local innovations to other divisions • Advantages: Take advantage of diverse talent pool

Globally Linked • Decentralised structure but each division is given with a global task. • Advantages: Capture broad talent pool whilst maintaining global perspective

“ Companies should adopt a transnational approach to innovation - increasing effectiveness of global innovation whilst increasing efficiency of local innovation.” - Bartlett & Ghoshal

Thank You Group: Melissa, Ishfaque & Mark