The Innovative Organization - New Age Organizational Forms

The Innovative Organization

New Age Organizational

Forms

Karthikeyan Iyer Co-crafter, Founder Director, Crafitti Consulting Pvt. Ltd. [email protected]

mailto:[email protected]

Form defines Function Structure defines Behavior

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Why is structure required? Speed

Flexibility

Adaptability

Evolution

Scalability

Stability

Rigidity

Strength

Productivity

Efficiency 14-06-2010 Crafitti Consulting Pvt. Ltd. 3

Hierarchical Enterprise

Structured Inputs

Known Inputs

Not many surprises

Efficient output

Predictable output

Fast output


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Hierarchical Enterprise’s answer to innovation flow A typically “linear” funnel and stage gate model

Ideas (from various

channels)

The filtration funnel

(based on various criteria)

The stage gate process

(with evaluation and decisions at various stages)

A few ideas make it

Many get stuck midway

And most lose steam very early

The world is changing rapidly and so are the world’s businesses!

Old economy (Weight)

New economy

(Speed) Information travels fast

and wide

Information gets collected locally,

access is restricted

First mover’s advantage lasts

longer

First mover’s advantage is a small

window

You can lose your intellectual advantage

very quickly!

Growth and expansion is slower

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Scale changes everything

• Can’t become too big without losing strength and stability

• Takes too long for information to circulate, percolate


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A Weakening of Hierarchies

• Information abundance permits INDIVIDUALS to by-pass hierarchies that have – deliberately or inadvertently – controlled or limited information

• Alternative human organization forms – based mainly on the Network have proved more effective and efficient for transacting information than hierarchies. In Information intensive enterprises, hierarchical organizations may not be competitive with networks.

IN ATHENA’s CAMP – Preparing for conflict in the Information Age, (Ed) Arquilla J. and Ronfeldt D, RAND, 1997

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Forces that modern organizations face

• Disorder

• Stress

• Unpredictability

Hyper Competition (D’Avini 1994)

• Post-war economy

• New economy based on technological drivers of information, communication and technology

Shift in economic growth cycles (Sparrow

& Cooper 2003)

• Driven by discontinuity (No longer driven by continuation and stability)

• Social factors Drivers


New Challenges in the new world

• Organizations are much more dependent on the fortunes and actions of others Interdependence

• Organizations cannot be sure that they will perform better just by owning important assets Disembodiment

• The speed, at which organizations have to function effectively, has accelerated. Velocity

• Power in organizations now resides in the location of knowledge. Power


D’Avini, Hypercompetition

Our Needs from structure have changed

Flexibility,

Adaptability,

Ability to evolve, change

Stability,

Rigidity,

Strength,

Productivity,

Efficiency

The old world’s needs from

structure

What the new world needs


New Organizational Forms proposed in literature

• Post-bureaucratic and post-modern organization • Re-engineered corporation • Virtual organization • Boundary-less company • Network Organizations • Modular Organizations • Fractal and modular factories • Atomized organization • High-performance or high-commitment work system • Knowledge-creating company • The Ambidextrous Organization • Distributed knowledge system • Learning Organization • Collaborative Organization


In contrast with hierarchy Hierarchical New organizational forms

Goal setting Top-down Decentralized

Power Concentrated Distributed

Size of units Large Small

Leadership function Control, monitoring Guidance, conflict management

Vision Dictated Emergent

Structure Formal hierarchy Team and work-group structures

Primary unit of analysis Firm Network

Boundaries Durable, clearly set Permeable, fuzzy

Objective Reliability, replicability Flexibility

Regulation Vertical Horizontal

Assets Linked to particular units Independent of unit, shared

Role Definition Specialized, clear Fuzzy, General

Uncertainty Try to absorb Try to adapt

Rights and duties Permanent Impermanent

Integrity Rule-based Relationship-based

Motivation Efficiency Innovation 14-06-2010 Crafitti Consulting Pvt. Ltd. 13

Innovative Organizations – New Types

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Ambidextrous Organization

Explore Exploit

• Small improvements in existing products or operations

Incremental Innovations

• Technology or process changes to fundamentally change a component or element of business

Architectural innovations

• Radical advances that may significantly alter the basis for competition in an industry

Discontinuous innovations

Explore Exploit

Structural, cultural independence

Top Management


The Ambidextrous Organization Alignment of: Exploitative

Business

Exploratory

Business

Strategic intent Cost, profit Innovation, growth

Critical tasks Operations,

efficiency,

incremental

innovation

Adaptability, new

products,

breakthrough

innovation

Competencies Operational Entrepreneurial

Structure Formal,

mechanistic

Adaptive, loose

Controls, rewards Margins,

productivity

Milestones,

growth

Culture Efficiency, low risk,

quality, customers

Risk-taking, speed,

flexibility,

experimentation

Leadership Role Authoritative, top-

down

Visionary, involved

The Ambidextrous Organization, HBR, O’Reilly and Tushman


Traditional Teams

Team-based organizations

Collaborative Organizations

Collaborative Organizations

- Levels

Beyerlein et al. 2002


The Collaborative Organization - Levels

Traditional Teams Team-Based Organizations Collaborative Organizations

Characteristics of the work Concrete interdependencies

that can be broken down into

smaller (team size) units

Abstract work that requires

significant levels of planning and

decision making; significant

interdependencies across teams

and at business unit levels

Fluid set of interdependencies

that may exist inside and outside

the

organization; moving target;

varying levels of complexity

Primary focus of collaboration Team Project Varies

Organizational Type Traditional Matrix Varies

Purpose of Redesign Cohesion, commitment,

better use of

expertise at all levels

of the organization

Coordination, resource

management, responsiveness,

better use of

expertise

Responsiveness,

coordination,

entrepreneurship

Primary Intervention Point Relationship System Culture/ context

Framework for Decision Making Consensus within self managing

teams; star

model; teams and managers

negotiate

over goals, schedules,

and so on

Consensus and voting

within teams; hierarchical and

lateral set of governing and

coordinating systems;

teams managing

teams; expertise/

accountability primary

source of influence

Varies; decisions made

at all levels of the

organization; clear and

communicated set of

priorities and tradeoff

criteria; highly disciplined decision

making; expertise, accountability,

and relationship sources of

influence


Beyerlein et al. 2002

The Learning Organization

These organizations focus on experimentation and learning as the key goals to be pursued.

There is a clear orientation towards the pursuit of perfection at all levels (Garvin et al. 2008).

Knowledge (and thereby change) is expected to be continuously created.

Ikujiro Nonaka from his HBR article, The Knowledge Creating Company, “To create new knowledge means quite literally to re-create the company and everyone in it in a nonstop process of personal and organizational self-renewal. In the knowledge-creating company, inventing new knowledge is not a specialized activity – the province of the R&D department or marketing or strategic planning. It is a way of behaving, indeed a way of being, in which everyone is a knowledge worker – that is to say, an entrepreneur.”


Learning Organization

Building blocks to institutionalize

learning (Liker 2004):

A supportive learning

environment

Concrete learning processes and

practices

Leadership behavior that reinforces

learning

Means to Competitive Excellence (Senge

1994).

Systematic problem Solving

Long-term strategy for sustained growth and innovation (Nonaka

1991).

Transparently share learning and

knowledge with the environment


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Typical Evolution of Learning Processes

Ad-Hoc

Standardized

Facilitated

Self-learning

Reduction in perceived complexity due to greater understanding

Simple, repeatable, deterministic

Complex, probabilistic or chaotic, needs active intelligence

The benefit of multi-disciplinary learning and state-of-the art thinking on innovation

Emergent Structures

In Nature, complexity is countered and embraced by

emergent structures.

These structures do not have sharp lines, they are scale-

agnostic (similar but not exactly same)

Termite Mound

Water crystals on glass Sand dunes


Emergent Organization

Extraordinary Decentralization Adapting to change and creating change Boundary-less organizations Leader-less organizations Simple micro-structure and micro-behavior

Swarm Behavior of Ants


Key Differences between Organizational Forms

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Organization Form Hierarchical Ambidextrous Collaborative Learning Emergent

Key function Efficient

allocation of

resources

Balance growth

and efficiency

Information

flow, 1+1 > 2

Continuous

improvement

Evolution

Flow Uni-directional,

top-down

Conditional Multi-directional,

peer-to-peer

Cyclic, Directed

towards ideality

Natural, not

consciously

directed

Evolution Standard Tree

hierarchy

The banyan tree

model

Cross-Pollination Continuous

improvement, pursuit

of perfection

Living system

principles

Knowledge Assumed to be

codified, known

Some knowledge

codified, some to be

obtained

Potential to be

maximized through

sharing

Knowledge to be

improved and

increased

continuously

Created as needed

Interdependence Clear, closed

boundaries

Modular

architecture, Clear,

closed boundaries

Fuzzy boundaries Clear but open

boundaries

Boundary-less

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Iyer, K. 2009, ‘Fueling Innovation Through New Organizational Forms’, Real Innovation

New Age Organization Structures are Fundamentally “Networks”


The Internet Capillary network Inter-disciplinary collaborations

High School Friendships

Complex system design diagram

You must have noticed . . .

• are never linear (even though we report mean attrition rates) – they ebb and flow, much like population densities of animals in a natural reserve.

Attrition patterns

• in reality, never actually follows linear patterns – some teams at some particular times seem to be more “lucky”

Sales

• happen in clusters, without any obvious reason and completely unconnected with the flows of R&D investment

New breakthroughs in

R&D


Enterprise Social Networks

• How your networks are structured will determine how your enterprise responds to external stimuli

• Are you trying to fight non-linearity with linear structures?

• Is your enterprise finding it difficult to innovate despite the best intentions? Form will define behavior . . .

Innovative organizations will design their structures to maximize benefits from network effects.


CONCEPTUAL SOLUTION: GLOBAL ENTERPRISE AS A SOCIAL

SYSTEM

The Tipping Point that refers to the moment when something unusual becomes common. The book seeks

to explain "social epidemics", or sudden and often chaotic changes from one state

to another. (Wikipedia)

Three types of people create Idea Tipping Points Connectors are those with wide social circles. Mavens are knowledgeable people. Salesmen are charismatic people with powerful negotiation skills. They exert "soft" influence rather than forceful power.

The PROCESS of TIPPING POINTS The Law of the Few: Find out Connectors, Mavens and Salesmen – a few of these is what one idea needs to become an epidemic Stickiness: Ideas or products found attractive or interesting by others will grow exponentially for some time. The Power of Context: Human behavior is strongly influenced by external variables of context.


Competent Jerks and Lovable Fools

Competent Jerks

Lovable Star

Incompetent Jerk

Lovable Fool

Increasing competence

Increasing Likability Source: Casciaro & Lobo, HBR


Granovetter’s – Strength of Weak Ties

• Despite being clustered in our own links, we connect with other such clusters through random, long-range, infrequent, and weak ties. The sociologist Mark Granovetter in his now classic paper of 1973 titled Strength of Weak Ties showed that effective social coordination happens through the presence of occasional weak ties between individuals and not through densely interlocking strong ties. In Figure 1, dotted lines indicate the weak ties.


Net Promoter Score


Promoter 9-10

Passively Satisfied

7-8

Detractor 0-6

How Likely is it that you would recommend [brand

or company X] to a friend or colleague?

Not at all likely Extremely Likely Neutral

0 10 5

Simple micro-metrics to

capture the essence of

complex macro-behavior

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Routine Response Ego-centric Centralized

Modular Response Socio-centric

Request-based

Customized Response Socio-centric Hub-Swarm

Customized Response Open

Swarm

Routine Response Ego-centric Centralized


Request-based


Swarm


Request-based



Request-based Modular Response

Socio-centric Request-based




Swarm

Hierarchical

Ambidextrous

Collaborative

Learning

Emergent

Transitioning

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Bhushan, N & Iyer, K. 2008, ‘Organizational forms and Social Network types – A framework for analysis’, International Conference on Social Network Analysis, TISS Mumbai

Crafitti helps craft innovation in

multiple contexts.

Karthikeyan Iyer Co-crafter, Founder Director Crafitti Consulting Pvt. Ltd.

[email protected]

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Ltd.