The family business was formed in 1899 and started making butter churns. Today, the firm is best known for its high-end washing machines, first introduced in 1929. Typically, they sell for
£2,000 apiece. But they are built to last and many owners, including your author, will tell of machines that are still going strong after 20 years. Even Mrs Merkel, the German Chancellor, has told of her trusty family Miele washing machine when growing up as a child. Miele’s sales rose by 3.8 per cent in
Innovation in action
Source: Art Directors & TRIP/Alamy Images
Organisational structures and innovation
The final classification is specialist equipment suppliers. This group of firms is an important source of technology for scale-intensive and science-based firms. For example, instrumentation manufacturers supply specialist measuring instruments to the chemical industry and the aerospace industry to enable these firms to measure their products and manufacturing activities accurately.
This useful classification highlights the flows of technology between the various firms. This is an important concept and is referred to in later chapters to help explain the industry life cycle in Chapter 13, the acquisition of technology in Chapter 10, the transfer of technology in Chapter 11 and strategic alliances in Chapter 8.
Organisational structures and innovation
The structure of an organisation is defined by Mintzberg (1978) as the sum total of the ways in which it divides its labour into distinct tasks and then achieves coordi- nation amongst them. One of the problems when analysing organisational struc- ture is recognising that different groups within an organisation behave differently and interact with different parts of the wider external environment. Hence, there is a tendency to label structure at the level of the organisation with little recognition of differences at group or department level. Nonetheless, there have been numerous useful studies exploring the link between organisational structure and innovative performance.
The seminal work by Burns and Stalker (1961) on Scottish electronic organisations looked at the impact of technical change on organisational structures and on systems of social relationships. It suggests that ‘organic’, flexible structures, characterised by the absence of formality and hierarchy, support innovation more effectively than do ‘mech- anistic’ structures. The latter are characterised by long chains of command, rigid work methods, strict task differentiation, extensive procedures and a well-defined hierarchy.
Many objections have been raised against this argument, most notably by Child (1973).
Nevertheless, flexible rather than mechanistic organisational structures are still seen, especially within the business management literature, as necessary for successful indus- trial innovation. In general, an organic organisation is more adaptable, more openly
2013 to €3.15 billion. The company has a 30 per cent market share of the washing machine market in Germany – much less in other European markets. It continues to manufacture in Germany and has resisted options to manufacture in cheaper labour countries (see the case study at the end of Chapter 2). Miele has resisted moving manufacturing because of the close link between its manufacturing and its R&D. It is proud of its family owned status and it enables the firm to make long- term decisions without any pressure from shareholders or stock market analysts.
The firm argues that because it is a family firm this has also helped its innovation.
The firm’s motto is ‘Immer besser’, which translates to ‘forever better’. This means the firm is always trying to continually improve. Currently, the firm is introducing technology into its washing machines that enables them to use power when it is at its cheapest.
communicating, more consensual and more loosely controlled. As Table 4.3 indicates, the mechanistic organisation tends to offer a less suitable environment for managing creativity and the innovation process. The subject of organisation structures is also discussed in Chapter 17 in the context of managing new product development teams.
Formalisation
Following Burns and Stalker, there have been a variety of studies examining the relationship between formalisation and innovation. There is some evidence of an inverse relationship between formalisation and innovation. That is, an increase in formalisation of procedures will result in a decrease in innovative activity. It is unclear, however, whether a decrease in procedures and rules would lead to an increase in innovation. Moreover, as was argued above, organisational planning and routines are necessary for achieving efficiencies.
Complexity
The term complexity here refers to the complexity of the organisation. In particular, it refers to the number of professional groups or diversity of specialists within the Table 4.3 Organic versus mechanistic organisational structures
Organic Mechanistic
1 Channels of communication 1 Channels of communication Open with free information flow throughout
the organisation Highly structured, restricted information flow 2 Operating styles 2 Operating styles
Allowed to vary freely Must be uniform and restricted 3 Authority for decisions 3 Authority for decisions
Based on the expertise of the individual Based on formal line management position
4 Free adaptation 4 Reluctant adaptation
By the organisation to changing
circumstances With insistence on holding fast to tried and true management principles, despite changes in business conditions
5 Emphasis on getting things done Unconstrained by formally laid out procedures
5 Emphasis on formally laid down procedures
Reliance on tried and true management principles
6 Loose, informal control 6 Tight control
With emphasis on norm of cooperation Through sophisticated control systems 7 Flexible on-job behaviour 7 Constrained on-job behaviour
Permitted to be shaped by the requirements of the situation and personality of the individual doing the job
Required to conform to job descriptions
8 Decision making 8 Decision making
Participation and group consensus used
frequently Superiors make decisions with minimum
consultation and involvement of subordinates Source: Slevin, D.P. and Covin, J.G. (1990) Juggling entrepreneurial style and organizational structure: how to get your act together, Sloan Management Review, Winter, 43–53.
The role of the individual in the innovation process
organisation. For example, a university, hospital or science-based manufacturing company would represent a complex organisation. This is because, within these organisations, there would be several professional groups. In the case of a hospital, nurses, doctors and a wide range of specialists represent the different areas of medi- cine. This contrasts sharply with an equally large organisation that is, for example, in the distribution industry. The management of supplying goods all over the coun- try will be complex indeed; but it will not involve the management of a wide range of highly qualified professional groups.
Centralisation
Centralisation refers to the decision-making activity and the location of power within an organisation. The more decentralised an organisation, the fewer levels of hierarchy are usually required. This tends to lead to more responsive decision mak- ing closer to the action.
Organisational size
Size is a proxy variable for more meaningful dimensions, such as economic and organisational resources, including number of employees and scale of operation.
Below a certain size, however, there is a major qualitative difference. A small busi- ness with fewer than 20 employees differs significantly in terms of resources from an organisation with 200 or 2,000 employees.
The role of the individual in the innovation process
The innovation literature has consistently acknowledged the importance of the role of the individual within the industrial technological innovation process (Boh et al.
2014; Langrish et al., 1972; Martins and Terblanche, 2003; van de Ven, 1986;
Wolfe, 1994). Furthermore, a variety of key roles have developed from the literature stressing particular qualities (see Table 4.4).
Some have gone further, arguing that the innovation process is, essentially, a peo- ple process and that organisational structure, formal decision-making processes, delegation of authority and other formal aspects of a so-called well-run company are not necessary conditions for successful technological innovation. Studies have revealed that certain individuals had fulfilled a variety of roles (often informal) that had contributed to successful technological innovation.
In a study of biotechnology firms, Sheene (1991) explains that it is part of a scien- tist’s professional obligation to keep up to date with the literature. This is achieved by extensive scanning of the literature. However, she identified feelings of guilt asso- ciated with browsing in the library by some scientists. This was, apparently, due to a fear that some senior managers might not see this as a constructive use of their time. Many other studies have also shown that the role of the individual is critical in the innovation process (Allen and Cohen, 1969; Allen, 1977; Hauschildt, 2003;
Wheelwright and Clark, 1992).
IT systems and their impact on innovation
The impact of large IT systems on firms and the way they operate has been one of the most noticeable changes within organisations of the late 1990s and early twenty- first century. Enterprise resource planning (ERP) business software has become one of the most successful products in the world. For many firms, such as Microsoft, Owens Corning, UBS and Procter & Gamble, it has changed the way they work (Gartner, 2002). Indeed, substantial claims are made about the software’s capabili- ties. A complete system could take several years and several hundred million dollars to deploy. The market leaders in this highly lucrative business-to-business market are SAP and Oracle. SAP has over 20,000 R/3 products installed worldwide and Oracle has installed databases in nearly every one of the world’s top 500 companies.
However, the impact of these systems on a firm’s innovative capability is now under scrutiny. In some creative working environments, where previously autonomous and creative minds were free to explore, they are now being restricted to what is on offer via ‘pull-down’ menus.
ERP systems have been adopted by the majority of large private sector firms and many public sector organisations in the United Kingdom, Europe and the industrialised world in general. This growing trend towards ERP systems would not materialise Table 4.4 Key individual roles within the innovation process
Key individual Role
Technical innovator Expert in one or two fields. Generates new ideas and sees new and different ways of doing things. Also referred to as the ‘mad scientist’.
Technical/commercial
scanner Acquires vast amounts of information from outside the organisation, often through networking. This may include market and technical information.
Boundary spanner Similar to above, but with emphasis on personal networking and making links beyond the boundary of the firm.
Gatekeeper Keeps informed of related developments that occur outside the organisation through journals, conferences, colleagues and other companies. Passes information on to others, finds it easy to talk to colleagues. Serves as an information resource for others in the organisation.
Product champion Sells new ideas to others in the organisation. Acquires resources.
Aggressive in championing his or her cause. Takes risks.
Project leader Provides the team with leadership and motivation. Plans and organises the project. Ensures that administrative requirements are met. Provides necessary coordination amongst team members. Sees that the project moves forward effectively. Balances project goals with organisational needs.
Sponsor Provides access to a power base within the organisation: a senior person. Buffers the project team from unnecessary organisational constraints. Helps the project team to get what it needs from other parts of the organisation. Provides legitimacy and organisational confidence in the project.
Source: Based on Roberts, E.B. and Fushfield, A.R. (1981) Staffing the innovative technology-based organisation, Sloan Management Review, Spring, 19–34.
IT systems and their impact on innovation
unless significant advantages were to be expected from its introduction. Although there may be some isomorphic effects at work that facilitate the spread of perceived best practice and help the marketing efforts of key players in the industry to succeed, these factors on their own would not be able to explain the widespread adoption of ERP systems in the absence of real benefits.
The principal benefits that can arise from ERP systems are linked to expected gains in the efficiency and effectiveness of business processes that come about with the availability of more accurate and timely information. ERP offers integration of business functions and can reduce data collection and processing duplication efforts.
In summary, some of the potential benefits of implementing ERP systems are:
● more efficient business processes;
● reduction of costs to several business procedures;
● better coordination and cooperation between functions and different company departments;
● better management monitoring and controlling functions;
● modification and adaptation abilities accordingly to company and market require- ments;
● more competitive and efficient entrance to electronic markets and electronic com- merce;
● possible redesigning of ineffective business functions;
● access to globalisation and integration to the global economy;
● inventory visibility and better decision support;
● active technology for market research and media environment; and
● improving communication between partners of the channel.
Business managers of organisations with significant ERP experience suggest that ERP system introduction into an organisation amounts to a near reinvention of the organisation. ERP systems do not easily fit any organisation. ERP systems offer sig- nificant advantages, but, in order to work efficiently and effectively, they require that organisational processes be made to fit their system demands. As we will dis- cuss below, the price to be paid for efficiency and effectiveness comes with a pre- scribed rigidity that may hinder innovation and creativity.
There is also a problem with the impact of ERP on the innovative climate in organ- isations and on the existent company operations (Johannessen et al., 2001). In short, ERP systems very often require a reconfiguration of work processes and routines.
Many people, however, feel unhappy when they are asked to change established ways of doing things and they may, rightly, feel that new standardised work processes may undermine their autonomy enjoyed in current non-standardised operations. ERP sys- tems, however, can deliver only the promised efficiency gains with a standard infor- mation set and leave no alternatives to a standardised approach. But it is not only that information processing and work routines have to be standardised; with an integrated system, everyone’s performance and achievements become much more visible.
Information sharing easily can be perceived as serving the purpose of tightening man- agement control if the organisational climate has deteriorated in the ERP implementa- tion process. If employees feel that they are losing their autonomy and that they are subjected to a culture of instant accountability, then this may have dramatic effects on their productivity and creativity and may nullify some of the potential ERP gains.
There are several ways in which ERP systems operations may have a negative impact on individual creativity. First of all, ERP systems may reduce the richness of
information content when informal communication processes get increasingly replaced by standardised data exchanges made available through ERP systems. The previous section noted the role of tacit knowledge with respect to innovation and that it is embedded in social processes. If ERP becomes the key communication medium and information has to be made palatable to its data requirements, then tacit knowledge outside the system may be sidelined (Johannessen et al., 2001; Nonaka, 1991). As a consequence, explicit knowledge may get preference over tacit knowledge. But indi- vidual and group creativity is not only dependent on rich information. There are moti- vational factors at work as well. If ERP leads to a culture of instant control and accountability, then this may undermine the intrinsic motivation of employees and may lead to a culture where risk taking and experimentation becomes increasingly less desirable. It will always be safer to use the available ERP data than to look elsewhere for inspiration. Diligent users of the ERP system are more difficult to blame for their mistakes or lack of achievement. ERP can become a very useful legitimating tool.
More significantly, firms must recognise that ERP systems (like any database) are driven from master data, such as customer records, bill of material records (BoM), and, like other databases, are unforgiving. Get a field entry wrong and it can cause serious problems. Most likely, the internal logic of ERP systems will require large amounts of time being devoted to ensuring the correct entry is made. This is yet another example of how the IT infrastructure impacts on people’s working prac- tices. A simple example may be useful here. Consider the activities of an architect working for a major property developer in Europe. The architect develops a variety of homes for consideration and specifies the building design and materials required.
Whilst, in the past, the architect may have flicked through some trade catalogues or contacted suppliers for what might be available, now all possible options available are prescribed via a pull-down menu. The advantages are clear to see: reduced time searching, order processing at the press of a few keys. But what about the impact on the creativity of the design of the building?
Unlike other IT management information systems, ERP has a dramatic impact on the way people work. Indeed, such business intelligence systems force change on an organisational structure, working practices, policies and procedures. The interde- pendence of the organisational components is never more clearly illuminated.
Indeed, it is the knock-on effects of ERP in other aspects of the organisation, such as staff skills, budgets, performance measurement procedures, and so on, that fre- quently cause most angst.
The level of personal autonomy individuals have and are perceived to hold is fre- quently cited as one of the key people issues during the implementation of ERP systems (Sauer, 1993). There is much more emphasis on correct routines and prescribed ways of working; indeed, individual peculiar working practices have to be removed for ERP to be effective. Staff may find their daily activities dominated by highly prescriptive proce- dures on their computer screens. The overall perception often is one of the enterprise moving towards a more autocratic, centralised management style. There are a signifi- cant number of conflicts between the demands on the organisation of an ERP system and the necessary characteristics that have been identified within the literature for inno- vation to occur. For example, ERP requires discipline and aids managerial control, whereas freedom and creativity in the form of professional autonomy is continually cited as necessary for innovation to occur. Figure 4.8 provides an overview over some of the key fundamental clashes of organising principles between ERP systems require- ment and the success factors of innovative organisations (Trott and Hoecht, 2004).
Management tools for innovation
Management tools for innovation
Many science and technology-related organisations innovate for a time, successfully exploit their innovations to gain status in their industry or field of research, then stagnate. Well-established management principles can help the leaders of an organ- isation sustain innovation and even recover from a period of stagnation, if they are applied correctly and vigorously. This section explores some of these principles and the relevant tools and techniques that may help leaders of firms ensure they remain leaders in their industry.
We do not have to look very far to draw up a lists of successful firms that later became less successful. Indeed, Peters and Waterman’s (1982) famous study of suc- cessful firms in the 1980s that were less than successful in the 1990s is a useful reminder. Firms such as Disney, IBM, Ford, General Motors, AT&T and Philips can all be found here. If we focus on technology-intensive industries where firms are innovative for a period and then stagnate, the list may take slightly longer to com- pile, but it, too, provides us with a timely reminder of the need for good manage- ment and the impact that poor management can have. Firms like 3M have an impressive record of innovation. It frequently received accolades as the most innova- tive firm in the 1980s and 1990s, but struggled to deliver a return for its sharehold- ers in 2000 and beyond. Pilkington Glass, similarly heralded as a world leader in glass technology as a result of its float glass process in the 1960s and 1970s, failed to follow up this technology development. It was sold in 2006 to Nipon Glass. Even Apple Inc., whilst extremely successful at present with its iPod and iPhone, struggled in the late 1980s with a series of product failures including the Pippin (a games con- sul) and Newton (a personal digital assistant). Most high profile of all was the dom- inant position once enjoyed by Nokia, only for it to fail to keep pace with Apple and Samsung.
Innovation management tools and techniques
Developing successful innovative products does not always mean using the latest patented technology. Being successful at managing innovation is rather a way of thinking and finding creative solutions within the company. With this in mind, Figure 4.8 Paradox of ERP systems and innovation organisational requirements
Key features of innovative organisations
Autonomy of individual Professional accountability Provision of creative space (scientific freedom) Participation in open cross-functional teams Richness and diversity of data
Conflict of principles
ERP systems requirements
Control and discipline (autocracy) Systems-led accountability Efficiency through standardisation (routines and procedures) Participation in pre-designed processes
Accuracy and uniformity of data