Creativity and Strategic Innovation
Management
Creativity and Strategic Innovation Management was the first book to integrate innovation
management with both change management and creativity to form an innovative guide to
survival in rapidly changing market conditions. Treating creativity as the process, and innovation the result, Goodman and Dingli emphasise the importance of a strategic approach to
management through fostering creative processes.
Revised and updated for a second edition, this ground-breaking book now includes:
••
••
••
A new section on contemporary themes in innovation management, such as the use of
social media and sustainability.
More coverage of entrepreneurship, ethics, diversity issues and the legal aspects of technology and innovation management.
More international cases and real-life examples.
The book is also supported by a range of new tutor support materials.
This textbook is an ideal accompaniment to postgraduate courses on innovation management and creativity management. The focused approach by Goodman and Dingli also makes
it useful as supplementary reading on a range of courses from management of technology to
strategic management.
Malcolm Goodman is Senior Teaching Fellow at Durham University, UK.
Sandra M. Dingli is Associate Professor at The Edward de Bono Institute for the Design &
Development of Thinking at the University of Malta, Malta.
Creativity and Strategic
Innovation Management
Directions for Future Value in
Changing Times
Second Edition
Malcolm Goodman and Sandra M. Dingli
Second edition published 2017
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2017 Malcolm Goodman and Sandra M. Dingli
The right of Malcolm Goodman and Sandra M. Dingli to be identified as
author of this work has been asserted by them in accordance with sections
77 and 78 of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
First edition published by Routledge 2013
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
A catalog record for this book has been requested
ISBN: 978-1-138-67509-4 (hbk)
ISBN: 978-1-138-67510-0 (pbk)
ISBN: 978-1-315-56084-7 (ebk)
Typeset in Times New Roman
by Swales & Willis Ltd, Exeter, Devon, UK
Visit the companion website: www.routledge.com/cw/goodman
Contents
List of figures
List of tables
Preface
Acknowledgements
PART I
xx
xxii
xxiv
xxvi
The challenge of changing times
1
1
3
The changing business environment
Learning objectives 3
Introduction 3
Context 4
What is change? 4
Understanding the causes of change 6
Socio-cultural forces 6
Economic forces 8
Technological trends 9
Environmental trends 10
Cause, effect and apprehension 11
Complexity and change 11
Key principles 11
Creating wealth 11
Factors of production 12
Creativity 13
What is creativity? 13
Consequences of the business paradigm shift 13
Types of change 14
Incremental change 14
Transitional change 14
Transformational change 15
Change drivers 15
Practice 16
vi Contents
Business paradigms 16
Marketing and management myopia 16
Least-cost production paradigm 16
Marketing paradigm 17
Customer-perceived value paradigm 17
Service dominant logic paradigm 18
Post-capitalist paradigm 18
Action 18
Backwards or forward into the future? 18
The challenge of change 18
Challenges of initiating change 19
Challenges of sustaining momentum 19
Challenges of system wide rethinking 19
Challenge to traditional management 19
Summary 20
Discussion questions 20
Case exercise 20
Nokia I: early success in the mobile phone industry 20
References 21
Selected YouTubes 23
2
Key business decisions
Learning objectives 24
Introduction 24
Context 25
Time frame decisions 25
Information overload 27
Shareholder, finance and government pressure 27
Shortening business life cycles 27
Feel or process? 28
Key principles 28
Business decision process 28
Rational model 30
Real world complications 31
Contingency approach 31
Concepts of efficiency and effectiveness 33
The S-curve 33
Three strategic approaches 34
Limpet strategy 34
Cautious strategy 34
Innovative strategy 35
Practice 35
Two key questions 35
24
Contents vii
Concept of customer-perceived value revisited 36
Managing bias 36
Action 37
Making decisions: blending knowledge with experience to achieve
know-how 37
Linking creativity, entrepreneurship and innovation 37
Summary 38
Discussion questions 38
Case exercise 38
Tyrell’s: when the chips are down raise a glass! 38
References 39
Selected YouTubes 41
3
Management revisited
Learning objectives 42
Introduction 42
Horse sense! 43
Context 43
Global business environment 43
Key principles 44
A divertimento 44
Defining management 45
Primary management processes 47
Redefining management action: control or lead? 48
Putting the emphasis on control: micromanagement/Theory X 48
Putting the emphasis on leadership: fundamental management
competencies 48
Management: quo vadis? 50
Practice 51
Essential management skills 51
Managing self and individuals 52
Managing groups 52
Managing an organisation 52
Ethical considerations 53
Broad management styles 53
Organisational development 54
Is there a correct style? 54
Japanese management approach 55
Japanese management culture 55
Japanese management techniques 55
Theory Z 55
Quality of Work Life (QWL): issues and strategies 57
Quality circles 57
42
viii Contents
Action 58
New skills for a new world 58
Summary 59
Discussion questions 59
Case exercise 59
SASOL: encouraging individual initiative and freedom 59
References 60
Selected YouTubes 61
PART II
Innovation from theory to practice
63
4
65
Business creativity
Learning objectives 65
Introduction 65
Nasruddin 66
Context 67
What is creativity? 67
Definitions 67
Process 68
Generate ideas 68
Creative people 68
Strive for originality 68
Provide examples of their work 69
Key principles 70
Understanding thinking 70
Physiology of the brain 71
The working brain: a synaptic wonder 72
Practice 72
Contextual factors affecting personal creativity 72
Organisations and creativity 73
Expressing natural skills 73
Action 73
Assessing personal creative potential 73
Personal Creativity Audit 74
Personal creativity in action 74
Work environment and performance 75
Left-brain and right-brain thinking model 76
Learning skills 78
Introducing the total thinking model 78
Perception 79
Half-brained thinkers! 79
Creative thinking applications 80
Summary 80
Discussion questions 81
Exercises 81
Contents ix
Sexism 81
Beijing Express problem 81
References 82
Selected YouTubes 82
Appendix 4.1: Personal Creativity Audit (PCA) 83
Appendix 4.2: assessing PCA performance 84
Appendix 4.3: sexism 85
Appendix 4.4: Beijing Express problem solution 85
Appendix 4.5: priming illusion solution 85
5
Applied business creativity
86
Learning objectives 86
Introduction 86
Context 86
Challenge of change 86
Stimulating creative thinking 87
Creativity and intelligence 87
Key principles 88
The quick-fix approach 88
The creative problem-solving approach 88
Note-taking skills 88
Memory friendly information 89
Learning skills 89
Picture perspectives 90
Getting to grips with creative individual problem solving 90
Demonstration exercise: organising a perfect wedding 90
Practice 94
Building an introductory CPS toolkit 94
Action 95
CPS facilitation 95
Individual or personal CPS activity 95
Group CPS activity 95
Organisational CPS activity 95
Summary 95
Discussion questions 95
Case exercise 96
Toymaker I: from lone apprentice to master craftsperson 96
References 98
Selected YouTubes 99
Appendix 5.1: CPS toolbox notes 99
6
Business innovation
Learning objectives 108
Introduction 108
Context 108
Why innovate? 108
108
x
Contents
What is innovation? 110
Strategic innovation management 111
Key principles 111
Commitment 111
Getting started 111
Innovation champions 112
Levels of innovation 113
Incremental innovation 113
Radical innovation 113
Architectural innovation 114
Technological innovation 114
Sources of ideas 115
Closed sources 115
Open sources 116
The innovation process 117
Phase 1: initial spark of creative activity 117
Phase 2: idea evaluation 117
Phase 3: invention 117
Phase 4: external and internal launch 118
Idea selection 118
Idea Funnel 118
Stage–Gate model 119
Intellectual capital 119
Knowledge and technology transfer 120
Practice 120
Harnessing systems thinking 120
Hard systems approach 120
Soft systems approach 121
Action 121
Private sector 121
Innovation in MNCs 121
Innovation in SMEs 122
Public sector 122
Innovation in NGOs 122
Innovation in charities 123
Innovation in state-funded organisations 123
Innovation bottlenecks 124
Lack of ‘time to think’ 124
Bureaucracy 125
Structure 125
Poor lateral communication 125
External talent 126
Financial constraints 126
Limiting paradigms 126
Inappropriate mental models 126
Limitations of traditional teaching and training 126
Summary 127
Contents xi
Discussion questions 127
Case exercise 127
Nokia II: out of the ashes of disaster grow the roses of success 127
References 129
Selected YouTubes 130
7
Organisational culture and climate
Learning objectives 131
Introduction 131
Context 131
Need for group (collective) creativity 131
Key principles 132
Management commitment 132
Managers and creativity 132
Management styles 133
Manager’s interests 133
Group behaviour 133
Group participation 133
Loyalty and group participation 135
Working in groups 136
Establishing group beliefs 136
Empowering groups to perform 136
Encouraging group members to interact 136
Attempting to understand interactions 137
Preparing for group activity 137
Leadership role 137
Group rewards 137
Group selection and initial briefing 137
Managing groups 138
Advantages 138
Disadvantages 138
Solo or team run? 139
Belbin’s Team Roles 139
Tuckman model 140
The MBTI inventory/Jung’s personality typologies 141
The KAI inventory 142
Practice 143
Empowering people 143
First task of a CPS facilitator 143
Second task of a CPS facilitator 144
Third task of a CPS facilitator 144
Process role of a CPS facilitator 144
Key process skills 144
Conflict in groups and teams 145
Action 145
131
xii Contents
Organisational culture and climate 145
Organisational attitude and commitment 146
Organisational philosophy 146
Organisational climate 146
Key factors for developing a climate that fosters innovation 148
Sustaining an organisational climate 150
Can climate and culture be assessed? 151
Ekvall’s Creative Climate Questionnaire 152
Isaksen’s Situational Outlook Questionnaire 152
Great Place to Work Institute 153
Workplace democracy 153
Summary 153
Discussion questions 154
Case exercise 154
Samsung: seeking a creative corporate culture 154
References 155
Selected YouTubes 156
Appendix 7.1: management traits assessment 157
Appendix 7.2: group CPS audit 157
Appendix 7.3: assessing group performance 158
8
Overcoming resistance: mindsets and paradigms
Learning objectives 159
Introduction 159
Context 159
The power of mindsets and paradigms 159
Key principles 162
Group mindsets 162
Organisational mindsets 162
Challenging mindsets 163
Psychological factor sets 163
Perception 163
Learning 164
Beliefs and attitudes 165
Creativity blockers 165
Perceptual blockages 166
Emotional blockages 167
Process skill blockages 167
Communication blockages 167
Environmental blockages 168
Cultural blockages 168
Practice 168
Obstacles to individual business creativity 168
Tiredness 168
Anxiety 169
Negativity 169
159
Contents xiii
Fear of failure 169
Fear of standing out from the crowd 169
Fear of challenging the rules 169
Fear of emotional things 169
Myopia 170
Obstacles to group business creativity 170
Common problems that challenge the effectiveness of hard
systems thinking 171
Diagnosis 171
Belief in measurement 171
Risk spots 171
Faith in management techniques 171
Action 172
Working with others 172
Viewing management problems 172
Fixed vs. growth mindsets 173
Nudges and wise interventions 174
Summary 174
Discussion questions 175
Case exercise 175
Rose Tree Garden Centre: growing confidence in creativity 175
References 176
Selected YouTubes 177
PART III
Linking creativity to strategic innovation
179
9
181
Applied business innovation
Learning objectives 181
Introduction 181
Context 182
Innovation idea sources 182
Key principles 183
Closed innovation 183
Open innovation 183
Open-source software (OSS) 185
Advantages of OSS 185
The impact of OSS 185
Practice 187
Closed innovation idea sources 187
Idea management systems 187
On-site creativity centres 189
Open innovation idea sources 189
Capturing ideas 190
External R&D agencies 190
Idea scouts and idea connectors 190
xiv Contents
Key personnel, technology transfer 190
Contractual arrangements 191
Developing ideas 192
Co-creation 192
Crowdsourcing 192
Social networking 195
Risk factors 195
Unpredictability vs. certain success 195
Action 196
Innovation networks 196
Innovation and entrepreneurship 197
Summary 198
Discussion questions 198
Case exercise 199
Toyota: an elegant search for innovative ideas 199
References 200
Selected YouTubes 201
10 Building a strategic managing innovation model
Learning objectives 203
Introduction 203
Context 205
Step 1: checking the now before thinking about the how 205
Rethinking time 206
Rethinking space 206
Rethinking mass 207
Linking the Einstein metaphor with strategic innovation 207
Step 2: conventional approach to strategic innovation 207
Content 208
Process 208
Tools 208
Step 3: basic processes of strategic innovation 208
Four key stages 208
Key principles 209
Step 4: innovation action plan 209
Practice 210
Step 5: reviewing the business 210
Challenging mindsets and paradigms 210
Step 6: reviewing the market 211
Deciding which customers to target 211
Challenging mindsets and paradigms 211
Step 7: reviewing the market offering 211
Challenging mindsets and paradigms 211
203
Contents xv
Step 8: creating customer-perceived value 212
Buyer experience cycle 212
The customer-perceived value matrix 213
Step 9: characteristics of strategically innovative organisations 214
Culture 214
Structure 214
Processes 215
Systems 215
People 215
Action 216
Step 10: purpose of strategic innovation 216
Step 11: transformation through strategic innovation 216
Step 12: holistic approach to strategic innovation management 217
Step 13: key issues of intent 218
Create purpose 218
Make innovation happen 218
Sustain model development 219
Final thoughts 219
Summary 219
Questions for discussion 220
Case exercise 220
Yamaha Motor Company: ‘Revs your Heart’ 220
References 222
Selected YouTubes 222
PART IV
Strategic innovation in changing times
225
11 The importance of leadership
227
Learning objectives 227
Introduction 227
Context 229
Avoiding contextual myopia 229
Key principles 229
Leadership competencies 229
The difference between management and leadership 230
Qualities of a manager 230
Qualities of a leader 231
Comparison between managers and leaders 231
Leadership theories I: trait theories 232
Leadership theories II: behavioural theories 232
Leadership theories III: contingency theories 233
Leadership theories IV: emerging theories 234
xvi Contents
Charismatic leaders 234
Leadership characteristics 235
Visionary leaders 235
Transactional leaders 235
Contemporary leadership thinking 235
Courageous leadership 235
Leadership and management: are they mutually exclusive? 236
Practice 236
Assessing individual leadership skills audit 236
Assessing individual leadership skills audit interpretation 236
Action 238
Seizing the initiative 238
Leadership challenges 238
Leadership and innovation 238
The changing role of leadership 239
Summary 240
Discussion questions 241
Case exercise 241
African leaders: perspectives on leadership 241
References 243
Selected YouTubes 244
Appendix 11.1: assessing individual leadership skills
audit interpretation 245
12 Business social responsibility
Learning objectives 246
Introduction 246
Context 246
Business socialisation 246
Revival 246
Leading issues 248
Key principles 249
Definition of business social responsibility 249
Business ethics 249
Value of high ethical standards 249
Corporate social responsibility 250
Carroll’s pyramid 250
Generating and sharing social value 251
Well-being 251
Practice 252
Exploring the bottom line 252
People issues 253
Planet issues 254
Environmental responsibility 254
Resource sustainability 255
Circular economy 255
246
Contents xvii
Profit issues 255
Executive pay 255
Rank and file pay 256
Business profiteering 256
Effects of MNC profit strategies on SMEs 256
Action 257
Business solidarity: implementing CSR 257
Community 257
Workplace 257
Market place 258
Environment 258
Global recognition of BSR 259
Organisational approaches to CSR 260
Global or local? 260
A matter of attitude 260
Summary 261
Discussion questions 261
Case exercise 261
Molinos Rio de la Plata: championing BSR 261
References 263
Selected YouTubes 263
13 Organisational renewal for strategic innovation
Learning objectives 265
Introduction 265
Context 267
View from the boardroom 267
Key principles 267
Business game components 267
Benefactors 269
The risk paradox and casino market games 269
Bets, sweats and debts 269
Investment 269
Business game players 269
Multinational corporations 269
MNCs are gaining strength in Africa, Asia and South America 270
The importance of SMEs 270
Corporate game plays 271
Profit quest 271
Growth quest 271
Corporate game strategies 272
Operating paradigms 272
Three-way stretch model 272
Practice 273
Assessing organisational culture 273
Selecting an organisational style 275
265
xviii Contents
Inside or outside track? 275
Theory Z revisited 276
Theory WB approach 276
Managing change to boost well-being, creativity and innovation 278
Well-being 278
A new workplace democracy model 279
Disadvantages of workplace democracy 280
Action 282
Conventional planning practice 282
Reasons for pre-planning 282
Understand the people 283
Encouraging well-being 284
Understand the task 284
Understand the organisation 284
Develop plans 285
Pre-planning a culture change programme 285
Strategic approaches of Theory Y and Theory WB organisations 285
Importance of gaining and retaining trust 286
Summary 287
Discussion questions 287
Case exercise 288
Semco: a maverick approach to management 288
References 290
Selected YouTubes 291
Appendix 13.1: organisational creativity audit interpretation 291
14 Reflections
Learning objectives 293
Introduction 293
Context 293
Business trends 293
African trends 296
Instant availability 296
Responsible consumption 296
Transaction convenience 297
Gender equality 297
Improved online services 298
Asian trends 298
Network connections 298
Corporate social responsibility 299
Heritage appeal 299
Responsible business 300
The informal economy meets smartphone culture 301
European trends 301
293
Contents xix
The euro: a means not an end in itself 301
Connecting customers 302
Targeting Millennials 302
Importance of SMEs 302
Need for product and service innovation 302
Call for strategic innovation 302
South American trends 303
Immigration and integration 303
Urbanisation 303
Marketing to the time poor 304
Co-creating customer-perceived value 304
Digital opportunities for SMEs 304
Key principles 305
Management and organisation 305
Key trends 306
Organisational culture 306
Theory WB model 306
Determinants of organisational culture 307
Leadership 307
Emergence of multiple layered leadership 307
Key trends 307
Creativity and innovation 308
Growing importance of creativity and innovation 308
Group creativity and self-management 308
The pursuit of happiness 308
Practice 309
Revisiting the practices of wealth creators 309
Economic system 309
Environment 310
Society 310
Action 311
The trumpet sounds 311
Summary 311
Discussion questions 311
Case exercise 311
Toymaker II 311
References 314
Epilogue
Academic index
Subject index
315
317
320
Figures
1.1
1.2
1.3
1.4
2.1
2.2
2.3
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
5.1
5.2
5.3
5.4
6.1
6.2
6.3
6.4
7.1
7.2
7.3
7.4
8.1
8.2
8.3
8.4
8.5
9.1
Explaining the changing business environment
Russian dolls
Business environment changes
Business cycle troughs and peaks
Exploring key business decisions
Business decision process
The S-curve: a comparison between an established and a new technology
Exploring management
Putting the emphasis on leadership
Overview of business creativity
Lateral view of cerebrum, cerebellum
Activities that entail personal creativity
Individual response patterns
What do you see at first?
Personal creativity assessment spectrum
Exploring new skills
Planning the perfect wedding mind map 1
Planning the perfect wedding mind map 2
Planning the perfect wedding mind map 3
Exploring business innovation
The innovation process phases
Idea Funnel
A simple Stage–Gate system
Seeking a suitable organisation environment
Manager’s interests
Group responses
Degrees of group participation
Overcoming mindsets and paradigms
Assumptions becoming mindsets
A matter of perception
Common individual CPS blockages
The Nine Dot test
Exploring innovation idea sources
4
5
7
9
25
28
33
43
49
66
71
74
76
80
84
87
92
92
93
109
116
118
119
132
134
134
135
160
163
164
166
166
182
Figures xxi
9.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
11.1
12.1
12.2
12.3
12.4
13.1
13.2
13.3
13.4
14.1
14.2
E.1
Boudreau and Lakmani (2013) crowdsourcing classification
Building a strategic innovation model
13-step model
Rethinking space, time and mass
Traditional strategic factor set
Four key stages of the strategic innovation process
Buyer experience cycle
Organisational structure to support strategic innovation
Exploring leadership
Exploring business social responsibility
Carroll’s Pyramid
Bottom line issues?
A call to action?
Organisational renewal for strategic innovation management
The three-way stretch
Organisational style matrix
Structure of a Theory WB organisation
Overview of reflections
Circular economy
Creativity and innovation management toolkit
193
204
205
206
207
209
212
215
228
247
251
252
257
266
273
275
277
294
295
316
Tables
1.1
1.2
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
4.1
4.2
4.3
4.4
5.1
5.2
5.3
5.4
5.5
6.1
7.1
7.2
7.3
7.4
8.1
8.2
8.3
9.1
9.2
9.3
Key general forces affecting businesses in developed economies
The factors of production
Student seminar survey I
Student seminar survey II
Major management activities
Basic individual management skills
Summary guidelines for group managers
Summary guidelines for top management
Main management styles
McGregor’s assumptions leading to Theories X and Y
Japanese management culture
Comparison and contrast of Theories X, Y and Z
Examples of Theory Z organisations
Exploring logical and creative thinking
Cortical hemispheres
Personal Creativity Audit
Personal Creativity Audit coding
Illustration of some generated ideas for this exercise
Introductory CPS toolkit
Useful problem evaluation tools
Useful idea generation and development tools
Advantage/disadvantage assessment
Characteristics of incremental and radical innovation
Management styles
The Belbin roles
Jung’s personality typologies
Key factors in Ekvall’s Creative Climate Questionnaire
Individual CPS blockages
CPS difficulties: an empirical sounding
Leading CPS difficulties identified in the literature
Closed vs. open innovation principles
Closed and open innovation rationale and suitability
Closed innovation idea sources
6
12
44
44
48
52
52
53
54
54
55
57
58
77
77
83
84
91
94
100
102
106
114
133
139
141
152
169
170
170
184
184
188
Tables
9.4
9.5
10.1
10.2
10.3
10.4
10.5
11.1
11.2
11.3
11.4
13.1
13.2
13.3
13.4
13.5
Open innovation idea sources
Innovation networks
Matching conventional factor sets with Einstein’s variables
Reviewing the business
Deciding which customers to target
Reviewing the market offering
Customer-perceived value map matrix
Differences between managers and leaders
Leadership attributes
Personal qualities of leaders
Leadership skills status audit
Major business games
Key game activities
Organisational Creativity Audit
Theory Y and Theory WB organisations
Approaches of Theory Y and Theory WB organisations
xxiii
190
197
208
210
211
211
213
230
231
232
237
268
272
274
281
286
Preface
Introduction
This is the second edition of Creativity and Strategic Innovation Management. Business
people and those who study business live in times of rapid and discontinuous changes in
the business environment that have been triggered by a complex set of factors. Businesses
that used to operate on safe ground now experience periodic and violent shifts and aftershocks in their environment. These shocks have been intermittent for some time but since
the beginning of the twenty-first century have been happening at an increasing rate. The
threat posed by climate change, denied by a large part of the business community for far too
long, the financial crises of 2008, military conflicts, political swings, persistent wars, floods
of refugees, the unexpected decision of the UK to leave the EU have combined to seriously
challenge all those concerned with wealth generation and distribution. Then there is the competition to beat.
It is clear that it is time for businesses to seriously review the ways they have traditionally operated and to start to do things differently. Einstein emphasised that ‘To raise
new questions, new possibilities, to regard old problems from a new angle, requires creative
imagination and marks real advance in science.’ But how? The second edition seeks to offer
some help by addressing the following themes in relation to a practical typology, namely:
Key themes
Framework
Management/Leadership
Creativity/Innovation
Organisational culture to support innovation
Business social responsibility and management of change
Context
Key principles
Practice
Action
The text’s main aim is to stimulate thinking about these themes and their interaction with
the Framework topics to provide guidance as to how businesses can achieve and sustain innovation by adopting a holistic approach to creativity and strategic innovation management.
Examples in each chapter have largely been selected from the continents of Africa, Asia,
Europe and South America as the literature is awash with U.S. illustrations.
In many cases the words organisation and company or corporation can be read just as
business activity. Where it makes sense to distinguish between them, this should be apparent
in the text.
The major themes covered apply generally to multinational corporations (MNCs), small
and medium sized enterprises (SMEs), non-governmental organisations (NGOs) and charities. Clearly specific issues such as size, financial strength and organisational fluidity can
present exceptions to this.
Preface xxv
It is recommended that to grasp the intricacies and complexities necessary to obtain
an overview of the task facing modern businesses it is best to read the text sequentially.
However, each chapter is free standing. The argument is presented in four Parts:
••
••
••
••
Part I: The challenge of changing times (Chapters 1–3).
Part II: Innovation from theory to practice (Chapters 4–8).
Part III: Linking creativity to strategic innovation (Chapters 9–10).
Part IV: Strategic innovation in changing times (Chapters 11–14).
To gain the most from the flow of the argument an open mind is necessary. Readers are
invited to explore the exercises and audits featured in the text in an open spirit. Each chapter
contains an exercise or case study and a selection of YouTubes to encourage the enquiring
mind. The text is also supported by a website.
The challenge of changing times
A surprising number of people confuse creativity and innovation. Creativity is necessary for
innovation but not sufficient. It provides the sparks, the ideas that are progressed and actioned
by investment in innovation. Change is a constant factor of life and impacts on all businesses.
Human nature can welcome it or resist it. Most employees accept that incremental changes
are necessary for the business of wealth creation but fewer welcome major change in their
lives. Those at the helm of businesses large and small are traditionally conservative and risk
averse. As the argument presented in the text clearly shows it is time for the business community to review and redesign its approach to wealth creation activity. This requires a new
acceptance and spread of ethical practices, management and leadership, creative thinking,
with a medium- to long-term perspective.
Business creativity techniques are fun and rewarding but are skills that need to be encouraged rather than resisted by top management and employees. A selection of basic tools are
introduced in Chapters 4 and 5 which have been successfully applied in businesses. Whilst
digital and IT sources can greatly assist creativity and innovation, they are no guarantee of
success. They are not piecemeal quick fixes that can be actioned by tapping a keyboard or
screen. A full commitment is required for a strategic approach.
It is time for business practitioners and students to step up to the challenge. Readers are
invited to explore new organisational and management approaches. ‘Our doubts are traitors,
and make us lose the good we oft might win. By fearing to attempt’ (Shakespeare, Measure
for Measure) for ‘fortune brings in some boats that are not steer’d’ (Shakespeare, Cymbeline).
Acknowledgements
Thanks are due to the following people for their contributions to the second edition:
Abi Goodman for the artwork, Andrew Jeffrey for the epigraphs at the beginning of each
chapter and for the Toymaker II case study, Jill Goodman for proofreading and copy correction. Thanks are also due to Sandra Dingli of the University of Malta and Asif Majid of
Sheffield Hallam University for associate interest. Finally, thanks are due to the editorial
staff at Routledge for their professionalism in managing the technical issues associated
with this edition.
Malcolm Goodman
Durham University
Part I
The challenge of changing times
1
The changing business environment
Can anything that is useful be accomplished without change?
If I have seen further it is by standing on the shoulders of giants.
(Emperor Marcus Aurelius)
(Isaac Newton)
Learning objectives
This chapter explores:
••
••
••
••
The importance of the changing global business environment.
The factors that have caused it and the major types of change.
Management response paradigms and their suitability to today’s global business
environment.
The challenges that contemporary organisations face.
Introduction
Organisations of all kinds, large and small, private and public are experiencing profound
changes in their business environment during the opening decades of the twenty-first century.
Many organisations are being affected by rapidly changing business environments. Natural
resources and energy supplies are becoming more expensive and advances in technology
have resulted in the rapid expansion of virtual markets. Changes in the economic fortunes of
individual nation states and their consequent social and political ramifications, together with
an emerging shift in global power dynamics as developing economies rival established ones,
have all presented organisations with the necessity of seriously reviewing their established
modus operandi.
Chapter 1 sets the scene and provides an overview of the complexity of the shifting sands
of the business environment. This establishes a platform for the text which addresses the
equally complex matter of how organisations should identify, innovate and develop new
ways of operating that are in tune with the challenges they face. (See Figure 1.1.)
4
The challenge of changing times
Figure 1.1 Explaining the changing business environment.
Context
What is change?
Everything and everyone is exposed to change. It is a feature of the natural world and dictates
the environment in which the human race exists. At a basic level change may be defined as
‘the movement away from a present state towards a future state’ (George and Jones, 2012).
A useful metaphor for change is a set of Russian dolls (Figure 1.2). The outer doll, which
contains all the others, is the macro-environment that affects us all. The inner dolls can be
taken to symbolise constituent or micro-environments that impact on our lives as results of
political, economic, socio-cultural and technological factors. In the opening decades of the
twenty-first century increasing concerns over the fate of the physical environment are being
The changing business environment
5
Figure 1.2 Russian dolls.
raised by many as global warming, land-use concerns, food provision and a rising world
population are topics that feature daily in the world’s media.
The Concise Oxford English Dictionary (OED) defines change both as a noun and as a
verb. Used as a noun change is defined as ‘becoming different’; ‘an alteration or modification (i.e. a change in someone’s facial expression)’ and ‘a new experience’. As a verb change
is defined as something that concerns action, which ‘makes (something) different’. Change,
then, is both about a state of being and about action to alter it.
The late twentieth century was a period of major social, economic and political changes.
It was also a time in which there were big changes in knowledge – in how people see knowledge and how they use it. This period is now widely known as the beginning of the Knowledge
Age – to distinguish it from the Industrial Age. The Knowledge Age is a new, advanced form
of capitalism in which knowledge and ideas are the main source of economic growth (more
important than land, labour, money, or other ‘tangible resources’). New patterns of work and
new business practices have developed, and, as a result, new kinds of workers, with new and
different skills, are required.
The macro-environmental factors that shape change can move in either small, almost
imperceptible ways (incremental change) or in an explosive tsunami-like way and radically
change the status quo in minutes. Change, whether incremental or radical (and people usually
face a mixture of both) is a paradox of recorded history. Sometimes the environment changes
positively and sometimes negatively. Theories about change have been exercising the human
intellect for thousands of years. In that time there have been many explanations and stories
about how change happens. Much of the recorded wisdom tells you what to do, but not necessarily how to do it. It provides both a challenge and a threat to human endeavour. Individuals
and organisations that cope with the challenges brought about by change can be considered
winners and those that fail to adjust their responses inevitably face a progressive and sometimes sudden deterioration in their perceived well-being (McCalman et al., 2016, pp. 5–6).
6
The challenge of changing times
Understanding the causes of change
To respond effectively to rapid change, it is necessary to understand the underlying causes.
There is a considerable volume of literature that shows that change has provided a major
challenge to organisations since the Industrial Revolution (Grey, 2003). It is not something
that is needed periodically; it is a business constant (Graetz et al., 2006). Specific changes in
an organisation’s internal structure and external markets often derive from wider changes in
society, economics or technology (Senior and Swailes, 2010). Change takes place both ‘out
there’ in the tangible and physical world and ‘in here’ in the internal world of the human
mind, with all its memories, thoughts and ideas. The world appears both ‘objective’ and
‘subjective’. A change project starts from the subjective, inside human imagination, and
gradually works out into the reality of managing other people and organising things in the
world (Table 1.1).
Socio-cultural forces
General trends in society politics and demography touch everyone. In recent years these
have resulted in upsurges in the pensioner, youth and consumer markets; a shift in emphasis
from community to a more individualistic society; increased interest in diversity (Roosevelt
et al., 2001; Bohnet, 2016) and ageing populations. Markets and monetary flows can fluctuate, competitive ways can alter dramatically, and technology and innovation can fracture
Table 1.1 Key general forces affecting businesses in developed economies
Forces/trends
Factors
Socio-cultural
Ageing populations
Growth of youth markets
Trend toward individual centred society
Diversity
Rise of consumerism
Present, recent and projected economic climate
Business cycles
More capital flows
More countries linked to capitalism
Emergence of China and India as major economic powers
Slower domestic growth of developed economies
Rising consumer debts
Competitive threats
Privatisation
Fewer tariffs
Globalisation
Shift from Industrial to Knowledge Age
Pace of change
Rapid advances in communication
Rapid advances in information technology (IT) and IT networks
Commoditisation
Development of global networks
Global warming
Dwindling finite resources, e.g. minerals and carbon fuels
Ecological issues, e.g. carbon footprint
Increase in immigration flows
Increased government legislation, e.g. EU clean air dictates
Economic
Economic Ages
Technological
Environmental
The changing business environment
7
Figure 1.3 Business environment changes.
Note: Horizontal axis indicates the speed of transition from sellers’ to buyers’ market conditions.
established patterns. Technological advance in the twenty-first century is accelerating and is
expected to accelerate exponentially. In particular the revolution in IT is having a profound
impact on the business environment and many companies are also facing increased challenges from ecological and ethical forces (Figure 1.3).
Most managers in the developed economies accept that a diverse workforce is beneficial both to employees and organisations. Whilst cultural diversity is generally encouraged,
gender diversity has tended to gain acceptance but is not always pursued with much vigour
(Bohnet, 2016). In the less developed economies both cultural and gender diversity are often
constrained by strong cultural attitudes and beliefs. Diversity bias is a complex problem that
globally active organisations are seeking to address in order to develop a new mindset. As
global businesses find that the going gets progressively more difficult they are giving more
strategic attention to innovation. Successful diversity programmes break down stereotypes
and enhance the creative process (Kurtzberg, 2005; Hewlett et al., 2013). Inherent diversity,
however, is only half of the equation. Leaders also need acquired diversity to establish a culture in which all employees feel free to contribute ideas (Roosevelt et al., 2001).
People all over the world are expecting more out of life. Despite the emergence of the
global economy millions still live out their lives below the official United Nations breadline.
Basic needs to sustain life such as food, water, shelter and security are yet to be met in many
countries. The technological revolution that has launched the digital age is fuelling people’s
wants for products and services that will improve their standard of living, but the onward
march of global communications often frustrates people who now know about the availability of such things but find it difficult or are unable to afford them.
IKEA react to strong western buyer’s markets for home furnishings
IKEA have found that the demand for home furnishings in the developed western markets
has nearly reached saturation. Despite this IKEA have a target of almost doubling sales
by 2020; changes in customer buying activity was a spur to rethinking the way the company conducts its business. IKEA has decided to concentrate on environmentally friendly
business initiatives worldwide and to increase its penetration of the developing countries.
Source: Adapted from ‘We’ve hit peak home furnishings, says Ikea boss’, The Guardian,
18 January 2016, https://www.theguardian.com/business/2016/jan/18/weve-hit-peak-homefurnishings-says-ikea-boss-consumerism (accessed 29 November 2016).
8
The challenge of changing times
Economic forces
The tides of economics change imperceptibly and sometimes abruptly. Markets and monetary flows can fluctuate, competitive ways can alter dramatically, and technology and
innovation can fracture established patterns. The global financial crisis of 2008 has had a
major impact on the economies of both the developed and developing world. Many businesses have been severely affected by the paradigm change from sellers’ markets to buyers’
markets. The former is characterised by demand for goods and services generally being in
excess of the supply. This has been the case in many developed countries for several decades
and be can described as ‘business management’s heaven’. The successful business response
was to increase the volume of products and services placed on world markets to achieve a
very profitable return. The latter, a buyers’ market, is characterised by the supply of goods
and services being in excess of the demand. This can be imagined as ‘business management’s
hell’, as competition is fierce and businesses need to be careful to meet the expectations of
customers who have a wide choice of suppliers.
To achieve profitable business many organisations are following the trend of commoditisation together with the outsourcing of goods and services to achieve low market prices. This
can result sometimes in their risking criticism in their domestic markets by tacitly accepting
ethical practices that would not be regarded as acceptable in their home market.
Currently the global economy is slowing down and at the time of writing the International
Monetary Fund have called upon states to increase public investment or risk derailing
recovery. Severe downside risks face the world economy due to China’s rebalancing, lower
commodity prices, the collapse in the price of oil (which fell to $28 a barrel in January 2016)
and a pessimistic view of the fortunes of some countries in the emerging world. Globalisation
causes economies to become increasingly interconnected. This has resulted in a greater level
of interdependency, which leads to greater volatility, uncertainty and complexity.
Unilever prepares for tougher global market conditions
To counter growth potential opportunities in the buyers’ markets of the developed
economies Unilever expanded into emerging markets such as China, Brazil and Russia.
However, these once booming markets are experiencing fall-backs in their growth performances. China’s growth is slowing, Brazil is in recession and Russia is struggling
under western sanctions. Stock prices and the oil price have tumbled since the start of
2016, triggering fears that the world economy is entering a recessionary phase.
Source: ‘Unilever Chief anticipates year of crises as stock markets falter’, The Guardian, 19
February 2016; ‘Unilever warns of “tougher” 2016’, BBC News, 19 January 2016.
One remedy for indebted countries is to check and reduce high levels of indebtedness. Whilst
the banking fraternity loudly claim that countries should admire their special cognitive skills,
Daniel Kahneman (2011), winner of the Nobel Economics prize, dramatically exploded this
as cognitive illusion. The probability of successful trading he found largely to be governed
purely by chance as with rolling dice.
BUSINESS CYCLES
According to Parkin and Bade (2011) a business cycle is the periodic but irregular up-anddown movement in economic activity, measured in terms of real gross national product
The changing business environment
9
Figure 1.4 Business cycle troughs and peaks.
(GNP) and other macroeconomic variables. They argue that a business cycle is not a
regular, predictable or repeating phenomenon like the swing of a clock’s pendulum. Its
timing is random and, to a large extent unpredictable. A business cycle is identified as a
sequence of four phases:
1
2
3
4
Contraction (a slowdown in the pace of economic activity).
Trough (the lower turning point of a business cycle, where a contraction turns into
an expansion).
Expansion (a speed up in the pace of economic activity).
Peak (the upper turning point of a business cycle).
A recession occurs if a contraction is severe enough. A deep trough is called a slump or a
depression (Figure 1.4).
Business cycles, according to the International Encyclopaedia of Economics, refer to
‘time periods of rising prices, employment, and output that are followed by declines in these
macro-economic quantities’. There are two streams in business cycle research, one generating ‘theory-based cycles’ and another generating ‘data-based cycles’. The first stream of
research establishes theories which attempt to explain why and how business cycles arise in
an economic system. The second stream of literature is more focused on methods of identifying, measuring and describing the business cycles. Scholars from this stream, notably those
in the National Bureau of Economic Research (NBER) and the Economic Cycle Research
Institute (ECRI), argue that properly understanding business cycles relies first on collecting
and studying observable data.
Technological trends
The development of digital technology has quickened the emergence of the Knowledge Age
at the expense of the Industrial Age. Computer controlled systems have revolutionised manufacturing and service industries. Knowledge Age worker-citizens need to be able to locate,
assess and represent new information quickly. They need to be able to communicate this to
others, and to be able to work productively in collaborations with others. They need to be
adaptable, creative and innovative, and to be able to understand things at a ‘systems’ or ‘big
picture’ level. Most importantly, they need to think and learn for themselves. Digitisation
is also shaping social attitudes and choices through the popularity of social networking
10
The challenge of changing times
platforms such as Facebook and Twitter, which, together with sites such as YouTube enable
organisations to get closer to discovering customers’ perceived value expectations. The purchasing patterns of supermarkets and IKEA have transformed the face of retailing with deep
impact across the global economy. Facebook, Google and Twitter have transformed global
advertising and Amazon has transformed the book trade. The music industry has been revolutionised as digitisation has changed the way people collect and listen to music. The explosive
trend toward increasing digitisation has disrupted and transformed most business activities
and the pace of change continues to disrupt world markets as digital technology becomes
cheaper and the process of miniaturisation continues. Advances in the development of digital
technology are also boosting the rate at which new discoveries are occurring, ranging from
spectacular discoveries in space and the application of new micro techniques in the medical
profession.
Environmental trends
Many companies are also facing increased challenges from ecological and ethical forces
(Wetherly and Otter, 2011). The world environment is under pressure from climate change,
which is being intensified by excessive carbon emissions by both the developed and rapidly
developing economies. The key questions here are:
••
••
••
••
How fast will the climate change?
How fundamentally will it change?
How will it impact on organisations?
How will natural resources be restored?
Barclays: out of Africa
The story of Barclays’ supposed failure in Africa has as much to do with Barclays as
it does with Africa as a continent. Even though Barclays has maintained a presence in
Africa for more than a century, the bank was very slow in taking up the fresh opportunities that presented themselves in the past decade.
Barclays was not as nimble as other banks, such as Standard Bank, Ecobank or GT
Bank, which have been snapping up opportunities in Africa. It was bogged down by the
internal bureaucracy of tying up all its assets in a merger with South Africa’s ABSA
bank in order to create Barclays Africa.
That process began in 2005, and is yet to be fully completed, and both banks have
retained their separate identities thus far.
Sources: Mbele, ‘Why is Britain’s Barclays Bank pulling out of Africa?’, BBC, Africa Business
Report, 1 March, 2016; Treanor, J., ‘Barclays plans sell-off of African operations’, The Guardian,
26 February 2016.
New sources of energy will need to be found as fossil fuels are depleted. Globalisation causes
economies to become increasingly interconnected. The ecological voice calls for the natural
environment to be cleaned up and responsibly managed. The combination and interaction
of these forces explains why so many businesses have experienced a sudden change in their
real-time operating environments at an increasing pace since the turn of the millennium.
The changing business environment
11
These new external conditions have severely challenged both private sector MNCs and
SMEs as well as public sector organisations. Turpin (2015), whilst recognising the importance of the forces in Table 1.1, emphasises the challenges that these forces bring to all
businesses. The fortunes of economies and businesses are acutely affected by the dynamic
shifts in the ages of economic history and the ability of economists’ theories and practices to
guide national economic policies. In the midst of the turbulence the profession itself has cried
‘mea culpa’ (Conway, 2010).
Cause, effect and apprehension
Change is everywhere in business, and people do not appear to be very happy about it. But
it is not just nostalgia or laziness that cause the negative reaction. Change is rarely managed
well. What do managers get wrong about change? There is quite a long list:
••
••
••
••
They underestimate how long it will take people to accept change.
They fail to recognise how difficult it is to spread the message that change may be necessary or unavoidable.
They do not understand what change feels like beyond the boardroom or their own office.
If they are successful in getting the organisation to accept the need for change, they forget
to explain that the new direction or mission may change again and possibly quite soon.
The UK Cabinet Office made a set of predictions on the forthcoming business decade. It
foresees the real emergence of a UK ‘e-economy’ with faster, nimbler firms driven by technology and large companies shrinking to more manageable scales. The report, called: ‘2020
vision’, highlights the emergence of a much greater dependency on IT and mobile commerce
by 2020, as access points and connection speeds increase exponentially and entrepreneurs
seek to tap further into the low overheads that virtual business offers. This new Industrial
Revolution is on its way and will continue to be fuelled by the growth in technology that has
been taking place since the development of the PC in the early 1980s and is now driven by
smartphones, tablets and mobile commerce.
Although access to funding remains a major issue for SMEs, in order to grow within the
current economy, it is essential that smaller businesses embrace the digital opportunities
available to reach and connect with their customers online. The good news is that digital
marketing is not as complicated or expensive as some maintain.
Complexity and change
The interaction, convergence and acceleration of the four major forces of change summarised
in Table 1.1 generate complexity in national, international and global markets. Globalisation
causes economies to become increasingly interconnected. This has resulted in a greater level
of interdependency, which leads to greater volatility, uncertainty and complexity.
Key principles
Creating wealth
In an era affected by turbulent and far reaching change in the business environment, wise
companies and organisations will refocus their view of business from a tendency to emphasise
costs and prices to one that places a greater significance on successfully meeting consumers’
The challenge of changing times
12
perceived values. In other words, they discover, develop and provide what consumers want
instead of assuming that the least-cost production paradigm should dominate their activities.
The pursuit of profit, and by implication corporate wealth, is seen by many to be influenced
by standard economic theory. It is the art of successfully combining traditional economic
factors of production, land, labour and capital. Whilst this provides a sensible direction to
modern corporate activity, it needs to be expanded to include a philosophy and a functional
expertise that can foster and deliver innovative solutions to the growing customer preference for products and services that meet their perceived values rather than for standardised
offerings. This calls for the inclusion of creativity as a key factor of production. This is generally accepted as critical in Europe and North America but less so in Africa, Asia and South
America where a risk averse culture is more common.
IBM’s Institute for Business Value survey found that Chief Executive Officers (CEOs)
identify ‘creativity’ as the most important leadership competency for the successful enterprise of the future (IBM, 2010).
Factors of production
The term ‘factors of production’ relates to the key variables that, according to conventional
economics, go into making goods and services. Table 1.2 presents a brief summary of the
three conventionally accepted factors plus additional ones that are particularly relevant in the
twenty-first century business environment.
The Nomura Institute of Japan has an interesting and different view of the key factors of
production and classifies four areas of economic activity:
1
2
3
4
agricultural
industrial
informational . . . and now through the evolution of technology
creative: constant innovation.
Table 1.2 The factors of production
Factor
Description
Land
Refers to physical land and other natural resources, e.g. the land that a building is
constructed on, oil that is extracted from under the seas, the land, forests and fish
reserves. Providers of land receive rent.
Refers to physical and mental effort, e.g. stacking shelves in a supermarket, or
calculating the final financial accounts of a company. Providers of labour receive
wages.
Exists at two levels. First, financial capital. More importantly, this is used to
purchase physical capital that goes into making other things. Physical capital
consists of machinery, equipment, tools, etc. Providers of capital receive interest.
Is the skill of combining the other factors of production. Entrepreneurs are the risk
takers that set up and run business enterprises. Entrepreneurs receive profit.
Creativity is a core competency for leaders and managers and one of the best ways
to set companies apart from the competition. Corporate creativity is characterised
by the ability to perceive the world in new ways, to find hidden patterns, to make
connections between seemingly unrelated phenomena and to generate solutions.
Generating fresh solutions to problems, and the ability to create new market
offerings, processes for a changing market, are part of the intellectual capital that
give a company its competitive edge (Bilton, 2007; Bilton and Cummins, 2010).
Creativity is a crucial part of the innovation equation.
Labour
Capital
Enterprise
Creativity
The changing business environment
13
Dean and Kretshmer (2007) argue that in most developed economies economic and
social relations are undergoing radical change, expressed in concepts such as ‘knowledge
economy’, ‘weightless economy’, ‘post-industrial society’ or ‘information society’. Ideas,
inventions and innovations are becoming of major importance as companies strive to find
their way in highly competitive global markets. Intellectual capital has come of age and
the literature suggests the arrival of a distinct new factor of production – human or creative
capital – that replaces or supplements the traditional view of land, labour and capital as the
key factors for generating wealth (Erickson and Rothberg, 2000; Erickson and Nerdrum,
2001; Rivett and Kline, 2000). Ideas can be regarded as a form of capital that can be exploited
in post-production economies and should be valued by wise organisations (Bowman and
Swart, 2007). In addition to the growing importance of creativity to the developed economies,
developing countries are competing on creativity as well as cost and this will dynamically
change business everywhere (The Economist, 2010).
Creativity
Organisations that are determined to develop a strategic approach to innovation need to facilitate and sustain cultures that encourage creativity in order to generate ideas (Bowman and
Swart, 2007). A steady flow of ideas feeds the invention and innovation process.
What is creativity?
••
••
It is not a form of magic that only certain individuals can perform.
It is open to all who are prepared to experiment in thinking ‘out of the box’ to produce
new, novel or original ideas and solutions (Goodman, 1995).
According to the IBM 2010 Global CEO Study, which surveyed 1,500 CEOs from
60 countries and 33 industries worldwide, CEOs believe that, ‘more than rigour, management discipline, integrity or even vision – successfully navigating an increasingly complex
world will require creativity. The effects of rising complexity calls for CEOs and their teams
to lead with bold creativity, connect with customers in imaginative ways and design their
operations for speed and flexibility to position their organisations for twenty-first century
success’ (IBM, 2010). Findings from the survey led IBM to define creativity as ‘the ability to
come up with something new that is useful’. To succeed individuals and organisations need
to embrace creativity and innovation at every level.
Consequences of the business paradigm shift
The consequences of this paradigm change are profound and are summarised below:
••
••
••
••
••
There is more competition.
Customers therefore have a choice of provider/supplier.
This tends to result in them demanding more for their money (as they see it).
This results in on-costs to hard pressed providers/suppliers.
Leading to a new business definition of value – it is now heavily influenced by buyers
and has resulted in the evolution of the concept of consumer-perceived value (Kotler
et al., 2016) as a key determinant of business success.
14
The challenge of changing times
••
This increases the importance of the marketing approach to business and stresses the
importance of innovation if organisations are to prosper in their operations.
Wise organisations seriously pay more than lip service to research and development
(R&D) and ring-fence or at least defend it from pressures to reduce R&D budgets.
••
Types of change
Change can be either continuous and mainly incremental or discontinuous. When it bursts
into the business arena it is characterised by sudden shifts in strategy, structure or culture,
and typically all three (Balogun et al., 2016). An example is provided by the privatisation of
publicly owned utilities.
Change, whether incremental or radical, is inevitable in an organisation. Change in social
systems, in particular the formal organisation, may be defined as a planned or unplanned
response to pressures and forces from the natural environment and mostly the activities of
people. Managers are constantly challenged to respond to threats and opportunities in their
organisation’s environment. In order to meet these challenges, they must often change, adapt
or even completely transform their organisations. To manage these organisational changes,
theorists have found it instructive to categorise change. The three types of change that occur
most frequently in organisations are incremental, transitional and transformational (Anderson
and Anderson, 2010).
Incremental change
Incremental change or ‘first-order’ change is essentially about adaptation and assumes that
organisations adjust to relatively minor variations in their operations automatically without
having to face any serious challenges. This mode of change is small and gradual and is easily
operated by individuals, groups and managers. Some writers argue that all change, short of
life or death, is incremental and so should draw a gradual response (Fox-Wolfgramm et al.,
1998). However, the market that most firms face today is becoming more global with greater
and more diverse competition. Because of this, a firm must quickly, efficiently and completely target its methods for meeting the fundamental requirement for change innovation.
If a company decided to improve its processes, methods or performance standards, this
would be considered more of a developmental change. Companies are continually processing developmental change to some degree in order to stay competitive. This type of change
should cause little stress to current employees as long as the rationale for the new process is
clearly conveyed and they are trained in the new techniques. When major change is required,
such as the decision to close a division, employees may be more likely to accept the change
if the company attempts to implement developmental change as the first step in streamlining
the business. The employees could see that the company attempted different strategies before
determining that closing the division was the only option.
Transitional change
This describes the progress changes an organisation makes as it journeys from the realisation
that change is happening and that new and usually radical responses (Laughlin, 1991) must
be implemented over a defined period of time. Transitional change involves a fundamental change in behaviour, attitude and belief so that people meet environmental challenges.
Transitions are a core part of the dynamic of organisational change. Transitional change is
The changing business environment
15
more intrusive than developmental change as it replaces existing processes or procedures
with something that is completely new to the company. The period when the old process is
being dismantled and the new process is being implemented is called the transitional phase.
A corporate reorganisation, merger, acquisition, creating new products or services, and
implementing new technology are examples of transitional change. Transitional change may
not require a significant shift in culture or behaviour but it is more challenging to implement
than developmental change, as the future of the organisation is unknown when the transformation begins.
Because the outcome of transitional change is unknown employees may feel that their jobs
are unstable and their own personal insecurities may increase. Training in the new procedures
should be commenced at each stage of the new process. This will allow employees to feel
that they are actively involved and engaged in the change. As their level of engagement in the
new procedure increases, their resistance to change may decrease. Management needs to be
cognisant of the impact and stress these changes will have on their employees. The company
should continue to inform the employees of their status and offer support in helping them
deal with the personal adjustments they will be forced to make.
Transformational change
Transformational change implies radical change with the aim of improving service quality
and/or reducing costs. It develops new and different ways of working. Transformational
change requires strong leadership. For a transformational change project to succeed it has
to be a leader’s top priority. Transformational change occurs after the transition period.
It may involve both developmental and transitional change. It is common for transitional
and transformational change to occur in tandem. When companies are faced with the
emergence of radically different technologies, significant changes in supply and demand,
unexpected competition, lack of revenue or other major shifts in how they do business,
developmental or transitional change may not offer the company the solution it needs to
stay competitive. Instead of methodically implementing new processes, the company may
be forced to drastically transform itself.
Change drivers
Change has a multitude of causes that present challenges as everyone seeks to sustain and
improve their standard of living. A good place to start when seeking to understand what is
happening in organisations is to study the drivers of change and how people feel about them.
Ask people to brainstorm the change drivers which they think are important. Then encourage
them to rank them, discuss them and express their fears about them.
During the Newspaper Association of America and American Society of News Editors
‘Capital Conference’ in 2008 senior executives from Dow Corning, Eastman Kodak and
Procter & Gamble discussed their respective company’s responses to contextual change. The
six key points on which they were all agreed were:
1
2
3
4
The need for a crisis or some kind of ‘burning platform’ to motivate transformational
change.
A clear vision and strategy that allows room for iteration.
A recognition that transformation is a multi-year journey.
A need to put the customer or consumer in the centre of the transformation equation.
16
The challenge of changing times
5
The critical importance of demonstrating to sceptics that different actions can lead to
different results.
The need to over-communicate to employees, customers, stakeholders and shareholders.
6
Many wonder: what will the world be like in 2050? Arup (the global designers, planners,
engineers, consultants and technical specialists and designers) developed a research-based
Drivers of Change toolkit to help their business and clients identify the leading factors that
will affect the world in the future. The tools help the user to ask the right questions in order
to plan effectively for the future. It investigates themes including: energy, waste, climate
change, water, demographics, urbanisation and poverty. The publication was devised by
Arup’s Foresight, Incubation and Innovation team. Drivers of Change serve not only as a
vibrant, visual record of research, but also as a tool for developing business strategy, brainstorming and education (Luebkeman, 2009).
Practice
Business paradigms
Marketing and management myopia
As peoples’ standard of living increases and as world markets change from sellers’ to buyers’
markets so firms and organisations need to seek a new balance between the often-competing
approaches of market effectiveness (provide what consumers want) and market efficiency
(with due regard to the wise use of funds and scarce resources). This places a great deal of
importance on organisations to be realistic, accepting the desirability of adopting a marketing
philosophy as they fashion suitable functional initiatives to meet the challenges of fiercely
competitive markets. Ignoring the importance of this philosophy is highly dangerous. It is
no good for providers to present to the market a product or service that has been efficiently
supplied if it fails to meet the expectations of customers.
As world markets have been heavily challenged by the forces of change discussed in this
chapter organisations that fail to place the concept of market effectiveness before that of market efficiency are in reality living in past sellers’ markets – a world that is fast disappearing.
Least-cost production paradigm
The least-cost production paradigm is closely associated with the concept of market efficiency and makes a great deal of sense when trading organisations are exposed to sellers’
markets. Producing as much as possible as cheaply as possible generally results in highly
profitable rewards. If the private sector is enjoying a steady and reliable flow of revenue and
profit, this usually leads to a strong tax-take by national and local authorities which provides
considerable resources for public sector spending.
Once private sector markets start to experience the paradigm change from sellers’ to
buyers’ markets, increasing pressure is placed on tax yields, which in turn places a strain
on public sector budgets. If the state or local authorities have inflated their spending during
favourable sellers’ markets or as part of a strategy to win votes overall, national indebtedness
can increase alarmingly. Matters assume an even greater concern if the merchant banking
fraternity have over-reached themselves. Financial crisis results and periods of austerity set
in as organisations struggle to reduce their indebtedness.
The changing business environment
17
In such times as these there is a strong tendency for the concept of efficiency – highly
focused attention to cutting costs – to dominate decisions.
Marketing paradigm
At some point in its development, every industry can be considered a growth industry,
based on the apparent superiority of its product. But in case after case, industries have
fallen under the shadow of mismanagement. The emphasis is usually on selling, not
marketing. This is a mistake, since selling focuses on the needs of the seller, whilst marketing concentrates on the needs of the buyer. In a widely quoted article Levitt (2004)
argues ‘the history of every dead and dying “growth” industry shows a self-deceiving cycle
of bountiful expansion and undetected decay’. But, as he illustrates, memories are short.
The railway serves as an example of an industry whose failure to grow is due to a limited
market view. Those behind the railway are in trouble not because the need for passenger
transportation has declined or even because cars, airplanes, and other modes of transport
have filled that need. Rather, the industry is failing because those behind it assumed they
were in the railway business rather than the transportation business. They were railway
oriented instead of transportation oriented, product oriented instead of customer oriented.
For companies to ensure continued evolution, they must define their industries broadly to
take advantage of growth opportunities. They must ascertain and act on their customers’
needs and desires, not bank on the presumed longevity of their products. In short, the best
way for a firm to be lucky is to make its own luck. An organisation must learn to think
of itself not as producing goods or services but as doing the things that will make people
want to do business with it. In every case, the chief executive is responsible for creating an
environment that reflects this mission.
When sellers’ markets get weaker so the concept of market effectiveness becomes of
greater importance to the private sector. Companies need to place an ever-increasing emphasis
on providing the right market offerings for their markets (Grönroos, 1994). Often this results
in increased expenditure, as consumers usually want more for their money, at a time when
firms’ finances are under a great deal of strain. To continue to provide the ‘usual package’
whilst ignoring increasingly difficult trading conditions is a dangerous practice.
Public sector organisations also find that they are required to meet high ‘fit for purpose’
values and that, as their income stream comes under increased pressure, they are faced with
stiffer and stiffer challenges.
Customer-perceived value paradigm
The customer-perceived value paradigm (CPV) (as argued by Grönroos, 1996; Yang and
Peterson, 2004; Chien-Hsin et al., 2005; Grönroos and Ravald, 2011; Kotler et al., 2016)
is a consequence of the movement from sellers’ to buyers’ markets. Customers want more
value, as they perceive it, from private sector providers. They usually continue to expect
at least the same level and quality of services to be provided by public sector authorities.
Essentially, CPV is defined as customer-perceived quality (CPQ), what customers’ expect to
experience, relative to customer-perceived price (CPP), what they are prepared to pay for it.
Whilst buyers’ preferences in the private sector are significantly affected by the offerings of
competitors, in the case of the public sector they are imposed by the degree or lack of degree
of available public funds. In essence the customer takes what is provided, which cost issues
usually determine.
18
The challenge of changing times
Service dominant logic paradigm
Over the course of the last three decades many marketing authors have argued the case for
a new view of marketing that stresses the importance of moving away from the productcentred view (Grönroos, 1994; Gummesson, 1994; Pine and Gilmore, 1998). Vargo and
Lusch (2004) have developed the concept of service dominant logic (S-D logic). This
places the emphasis firmly on the concept of effectiveness and argues that product and
services must be integrated to provide an effective experience for a buyer who has a wide
choice of providers.
In many respects the CPV paradigm and the S-D logic paradigm are opposite sides of the
same coin. The CPV approach emphasises the importance to providers and buyers of offering the right package (tangible and intangible attributes, i.e. product and service attributes)
necessary to attract custom in buyers’ markets. The S-D logic approach stresses the importance of service. Whilst this is important, if a customer receives an impressive service from a
provider but for a poor quality product, the CPV will be low.
Post-capitalist paradigm
‘Paradigm shift’, ‘open society’, ‘post-capitalist society’, ‘re-framing’, ‘changing minds’ and
‘lateral thinking’ are some of today’s current catchphrases to describe the transformation
of thinking necessary to deal with the changing world. The fashionable currency of these
buzzwords indicates the opening up of new grounds in thinking. It is envisaged that as the
digital world takes hold we are moving from an era of scarcity of physical goods to one of
an abundance of information goods (Mason, 2015). The new paradigm has the potential to
create a more socially just and environmentally sustainable way of living. It is imperative
to re-invent our thinking processes, because the world, to which our thinking is directed, is
constantly reinventing itself.
Action
Backwards or forwards into the future?
When confronted with the challenges of discontinuous change organisational management
face two basic decisions. The first is simply to ignore it, walk away and hope that returning
swallows in spring will once again restore the good times. As many managers in organisations rose through the ranks in the softer business conditions of sellers’ markets they lack the
foresight and the skills to change the ‘company way’. If the forces of discontinuous change
intensify, this response pattern inevitably leads to disappointing organisational performance
and ultimately catastrophic failure.
The second decision is to accept the new reality and seek to change the way the organisation operates. This means coming to terms with complex management challenges. It means
being willing to learn new responses.
The challenge of change
In The Dance of Change: The Challenges to Sustaining Momentum in Learning Organizations,
Senge et al. (1999) identify 10 challenges of change and group them into three categories:
The changing business environment
1
2
3
19
challenges of initiating change;
challenges of sustaining momentum; and
challenges of system wide redesign and rethinking.
The 10 items amount to what the authors call ‘the conditions of the environment that
regulate growth’.
Challenges of initiating change
1
2
3
4
‘We don’t have time for this stuff!’ People who are involved in a pilot group to initiate
a change effort need enough control over their schedules to give their work the time
that it needs.
‘We have no help!’ Members of a pilot group need enough support, coaching and
resources to be able to learn and to do their work effectively.
‘This stuff isn’t relevant.’ There need to be people who can make the case for change –
who can connect the development of new skills to the real work of the business.
‘They’re not walking the talk!’ A critical test for any change effort: the correlation
between espoused values and actual behaviour.
Challenges of sustaining momentum
1
2
3
‘This stuff is . . .’ Personal fear and anxiety – concerns about vulnerability and inadequacy – lead members of a pilot group to question a change effort.
‘This stuff isn’t working!’ Change efforts run into measurement problems: Early
results don’t meet expectations, or traditional metrics don’t calibrate to a pilot group’s
efforts.
‘They’re acting like a cult!’ A pilot group falls prey to arrogance, dividing the company
into ‘believers’ and ‘nonbelievers’.
Challenges of system wide rethinking
1
2
3
‘They . . . never let us do this stuff.’ The pilot group wants more autonomy; ‘the powers
that be’ don’t want to lose control.
‘We keep reinventing the wheel.’ Instead of building on previous successes, each group
finds that it has to start from scratch.
‘Where are we going?’ The larger strategy and purpose of a change effort may be
obscured by day-to-day activity. Big question: Can the organisation achieve a new
definition of success?
Challenge to traditional management
Organisations will no longer be shaped by management hierarchy, but by societal changes,
globalisation and technological developments. These forces cannot be accurately predicted.
The key challenge for leaders is to innovate and transform their businesses to be adaptable to
these forces, whilst maintaining the integrity of the business as usual (Chan, 2013).
20
The challenge of changing times
Summary
This chapter has opened the text with a discussion of how change affects the fortunes of business organisations and warns of the dangers of management and marketing myopia. Senior
management of MNCs as well as SME entrepreneurs need to be alert to the dangers of business environmental trends and to respond swiftly. The current and foreseeable discontinuous
change that is impacting on business organisations emphasises the importance of continually
reappraising the business environment. This presents them with a severe set of challenges if
they are to grow their businesses successfully. As this text will argue in subsequent chapters, business creativity and innovation are vital for the successful management of change
(Andropoulos and Dawson, 2014).
Discussion questions
1
2
3
4
5
Why does change present such a problem to organisations these days?
What causes change?
What is creativity and why is it important in times of discontinuous change?
Briefly describe the main types of change.
What is the customer-perceived value paradigm and why is it important in strong buyers’
markets?
Case exercise
Nokia I: early success in the mobile phone industry
Nokia is a multinational communications and information company that was founded in
Finland in 1865 and for 57 years was primarily engaged in forestry-related products including electricity generation. In 1922 it formed a joint partnership with the Finnish Cable Works
and Finnish Rubber Works and in 1967 the three companies merged to form the new Nokia
Corporation; a conglomerate active in the rubber, forestry, cable, electricity and electronics
industries. During the 1970s Nokia became increasingly involved in the electronics industry
and in the 1990s focused its operations on the communications business.
In the first decade of the twenty-first century Nokia was a dominant force in the newly
emerging mobile phone market and became a major contributor to the growth of the Finnish
economy. By 2007 Nokia had become a world leader in the mobile phone industry, peaking
with its 3310 model. Over the next seven years sales fell away alarmingly, despite a programme of continuous innovation that extended battery life, and in 2014 Microsoft acquired
the company’s mobile phone business. The effect in Finland was devastating and thousands
of employees lost their jobs and unemployment escalated to over 14 per cent. However,
though devastated, the rump of the company lived on to fight another day.
What went wrong?
Nokia was not a technological laggard and invested heavily in R&D, developed a
smartphone in 1996 and had built a prototype touch screen Internet-enabled phone by the
end of the decade. The company was essentially a hardware operation that underestimated
the importance of specially designed software that would run on smartphones. In contrast,
Apple saw hardware and software as equally important. In essence, the senior management at Nokia failed to realise that smartphones would become dominant. At the time
Nokia was an established global brand that was achieving healthy profits from its mobile
The changing business environment
21
phone business. A late decision to develop its own smartphone operating system resulted
in teething problems and so in 2011 Nokia embraced the Windows phone. However, the
company’s smartphones failed to live up to consumer expectations and the Nokia brand
lost its appeal.
Questions
1
2
3
4
What were the causes of change in the mobile phone industry?
Why did Nokia’s senior management fail to spot to them?
Explain briefly how the Nokia brand lost its consumer appeal?
Briefly research the demise of Blackberry. What parallels are there with the Nokia case?
Sources: BBC News, 18 March, 10 July 2016; The Financial Times, 19 April 2016;
Cheng, R. ‘Farewell Nokia: The rise and fall of a mobile pioneer’, CNET, 25 April 2014,
http://www.cnet.com/uk/news/farewell-nokia-the-rise-and-fall-of-a-mobile-pioneer/
(accessed 15 July 2016).
YouTube
‘How Did Nokia Fail?’, https://www.youtube.com/results?search_query=Nokia.
References
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Andropoulos, C. and Dawson, P. (2014) Managing Change, Creativity and Innovation, 2nd edn,
London, Sage.
Balogun, J., Hope Hailey, V. and Gustafason, S. (2016) Exploring Strategic Change, 4th edn, Harlow,
Pearson Education.
Bilton, C. (2007) Management and Creativity, Oxford, Blackwell.
Bilton, C. and Cummings, S. (2010) Creative Strategy: Reconnecting Business and Innovation,
Chichester, Wiley.
Bohnet, I. (2016) What Works: Gender Equality by Design, Cambridge, MA, Belknap Press of Harvard
University Press.
Bowman, C. and Swart, J. (2007) ‘Whose human capital? The challenge of value capture when capital
is embedded’, Journal of Management Studies, Vol. 44, Issue 4, pp. 488–505.
Chan, D. (2013) ‘The challenges facing management in a rapidly changing environment’, Cass Business
School Research Note, 19 November.
Chien-Hsin, L. Sher, P. J. and Hsin-Yu, S. (2005) ‘Past progress and future directions in conceptualizing customer-perceived value’, International Journal of Service Industry Management, Vol.16,
Issue 4, pp. 318–36.
Conway, A. (2010) (alias Wollensky, J.) ‘Wanted: The right sort of genius’, Modern Power Systems, 1
December, http://www.modernpowersystems.com/features/featurewanted-the-right-sort-of-genius/
(accessed 30 November 2016).
Dean, A. and Kretschmer, M. (2007) ‘Can ideas be capital? Factors of production in the post-industrial
economy’, Academy of Management Review, April, Vol. 32, Issue 2, pp. 573–94.
Erickson, G. S. and Rothberg, H. N. (2000) ‘Intellectual capital and competitiveness’, Competitive
Review, Vol. 10, Issue 2, pp. 192–8.
Erickson, T. and Nerdrum, L. (2001) ‘Intellectual capital: A human capital perspective’, Journal of
Intellectual Capital, Vol. 2, Issue 2, pp. 127–35.
22
The challenge of changing times
Fox-Wolfgramm, S. J., Boal, K. B. and Hunt, J. G. (1998) ‘Organizational adaptation to institutional
change: A comparative study of first-order change in prospector and defender banks’, Administrative
Science Quarterly, Vol. 43, pp. 87–126.
George, J. and Jones, G. (2012) Understanding and Managing Organizational Behaviour, Student
Value Edition, Boston, MA, Addison-Wesley.
Goodman, M. R. V. (1995) Creative Management, Harlow, Pearson.
Graetz, F., Rimmer, M. and Lawrence, M. (2006) Managing Organisational Change, 2nd Australian
edn, Brisbane, Wiley.
Grey, C. (2003)‘The fetish of change’, Tamara: Journal of Critical Postmodern Organization Science,
Vol. 2, Issue 2, pp. 1–19. See also Grey, C. ( 2013 ) A Very Short, Fairly Interesting and Reasonably
Cheap Book about Organisations, 3rd edn, London, Sage.
Grönroos, C. (1994) ‘From scientific management to service management’, International Journal of
Service Industry Management, Vol. 5, Issue 1, pp. 5–16.
Grönroos, C. (1996) ‘Relationship marketing: Strategic and tactical implications’, Management
Decision, Vol. 34, Issue 3, pp. 5–10.
Grönroos, C. and Ravald, A. (2011) ‘Service as business logic: Implications for value creation and
marketing’, Journal of Service Management, Vol. 22, Issue 1, pp. 5–22.
Gummesson, E. (1994) ‘Service management: An evaluation and the future’, International Journal of
Service Industry Management, Vol. 5, Issue 1, pp. 77–97.
Hewlett, S. A., Marshall, M. and Sherbin, L. (2013) How diversity can drive innovation, Harvard Business
Review, December, https://hbr.org/2013/12/how-diversity-can-drive-innovation (6 June 2016).
IBM (2010) ‘Capitalizing on complexity: Insights from the 2010 IBM Global Chief Executive Officer
study’, http://public.dhe.ibm.com/common/ssi/ecm/gb/en/gbe03297use n/GBE03297USEN.PDF?
(accessed 17 April 2012).
Kahneman, D. (2011) ‘The hazards of confidence’, Brad DeLong, http://www.bradford-delong.
com/2011/10/daniel-kahnemann-the-hazards-of-confidence.html (accessed 24 February 2016).
Kotler, P., Keller, K. L., Brady, M., Goodman, M. R. V. and Hansen, T. (2016) Marketing Management,
3rd European edn, Harlow, Pearson.
Kurtzberg, T. R. (2005) Feeling creative, being creative: An empirical study of diversity and creativity
in teams. Creativity Research Journal, Vol. 17, pp. 51–65.
Laughlin, R. C. (1991) ‘Environmental disturbances and organisational transitions and transformations:
Some alternative models’, Organizational Studies, Vol. 12, pp. 209–32.
Levitt, T. (2004) ‘Marketing myopia’, Harvard Business Review, Vol. 82, Issue 7/8 (July–August),
pp. 138–49.
Luebkeman, C. (2009) ‘Drivers of change’, Appropriate Technology, Vol. 36, Issue 4 (December),
pp. 67–8.
Mason, P. (2015) Post Capitalism: A Guide to Our Future, London, Penguin. Kindle edition.
McCalman, J., Paton, R. A. and Siebert, S. (2016) Change Management: A Guide to Effective
Implementation, 3rd edn, London, Sage.
Parkin, M. and Bade, R. (2011) Foundations of Economics, 5th edn, Harlow, Pearson Education.
Pine, II, B. J. and Gilmore, J. H. (1998) ‘Welcome to the experience economy’, Harvard Business
Review, Vol. 76, Issue 4 (July/August), pp. 97–105.
Rivett, K. G., and Kline, D. (2000) ’Discovering new value in intellectual property’, Harvard Business
Review (January–February), http://hbr.org/2000/01/discovering-new-value-in-intellectual-property
(accessed 18 January 2016).
Roosevelt, T., Thomas, D. A., Ely, R. J. and Meyerson, D. (2001) Harvard Business Review on
Managing Diversity, Boston, MA, Harvard Business School Publishing Corporation.
Senge, P., Kleiner, A., Roberts, C., Ross, R., Roth, G. and Smith, B. (1999) The Dance of Change:
The Challenges of Sustaining Momentum in Learning Organizations (A Fifth Discipline Resource),
London, Nicholas Brealey Publishing.
Senior, B. and Swailes, S. J. (2010) Organizational Change, 4th edn, Harlow, Pearson, Chapters 1 and 2.
The changing business environment
23
The Economist (2010) ‘Developing countries are competing on creativity as well as cost. That will
change business everywhere’, 15 April.
Turpin, D. (2015) ‘Three megatrends that will affect everybody’s business, enabling factors’, Innovation
Management, Sept 29, http://www.innovationmanagement.se/2015/09/29/three-megatrends-thatwill-affect-everybodys-business/.
Vargo, S. L. and Lusch, R. F. (2004) ‘Evolving to a new dominant logic for marketing’, Journal of
Marketing, Vol. 68, Issue 1 (January), pp. 1–17.
Wetherly, P. and Otter, D. (2011) The Business Environment: Themes and Issues, Oxford, Oxford
University Press.
Yang, Z. and Peterson, R. T. (2004) ‘Customer perceived value, satisfaction, and loyalty: The role of
Switching costs’, Psychology & Marketing, Vol. 21, Issue 10 (October), pp. 799–822.
Selected YouTubes
‘Excelling in Global Business Environment’, https://www.youtube.com/watch?v=Xmvo
2mm58m8.
‘Introduction to Global Business Environment’, https://www.youtube.com/watch?v=zW
QW17Q4TYs.
‘The Only Constant in Business is Change’, https://www.youtube.com/results?search_query=
What+is+change.
‘Paradigm Shift in Today’s Business World!’, https://www.youtube.com/watch?v=3Zsq
oaTbP-w.
‘The Key Challenges of a Global Manager’, https://www.youtube.com/watch?v=Q4yJ_
Xb25GU.
2
Key business decisions
The man who is denied the opportunity of taking decisions of importance begins to regard as
important the decisions he is allowed to take.
(C. Northcote Parkinson, 1958)
Whenever you see a successful business someone once made a courageous decision.
(Peter. F. Drucker)
Learning objectives
This chapter explores:
1
2
3
4
5
6
Time frame decisions.
Business decision process modelling.
Three strategic business decision approaches.
Managing bias.
Making decisions.
Linking creativity, entrepreneurship and innovation.
Introduction
A basic definition of business decisions would imply that they simply involve choosing
among alternative responses. However, a fundamental shift in the underlying state of the
business environment challenges organisations to respond in one of two ways. The first is
to do little in terms of their fundamental approach in the hope of riding out the storm. If the
complex disturbances in the business environment are incremental, a contextual recovery
may well provide the prospect of a business recovery. However, if the disturbances amount –
as explained in the previous chapter – to a major environmental paradigm shift, organisations
need to re-evaluate their operations. In most cases this will involve considering a mix of
incremental and radical response changes.
Whilst study of the S-curve (see Figure 2.2) provides a conceptual understanding as to
what business decisions are needed, the following concepts address the necessary responses.
The concept of business effectiveness addresses the need to do the right thing in the new
business environment. The concept of efficiency addresses issues concerned with the wise
use of funds and resources. Radical responses address the changes that will be needed and
sustained to meet environmental challenges. This will demand a committed approach to
Key business decisions 25
Figure 2.1 Exploring key business decisions.
thinking outside the previous sellers’ market paradigm box (business creativity) to secure
effective and efficient business practice in order to foster the growth of innovation and
entrepreneurship. (See Figure 2.1.)
Context
Time frame decisions
Organisations have never faced a more turbulent, complex or changing environment than
they do today, whether in social, political, economic, technological or ecological terms.
Customers are more demanding; product life cycles are shorter; technologies are constantly
changing. Managers must continuously scan the competitive environment. All of us have to
make decisions every day. Some are relatively straightforward and simple; others are quite
complex. A business decision can be defined as a purposeful selection from among a set of
alternatives in the light of a given task objective.
Decision making is not a separate function of management but is intertwined with other
functions, such as planning, coordinating and controlling. Taylor (2012) identifies four key
types of business decisions:
26
The challenge of changing times
1
Strategic decisions: These are ‘those high value, low volume decisions that guide the
overall direction of the company’. Given their often one-off, unique nature, these decisions are not candidates for decision management systems because they lack the key
characteristic of repeatability. An example of a strategic decision is the need to become
a customer-centric enterprise.
Tactical decisions: These types of decisions are typically made by non-senior management and knowledge workers. Taylor characterises them as having ‘medium
value’, which is not meant to undercut their value to the business in any way. Like
strategic decisions, tactical decisions involve reviewing and analysing data from
multiple sources. Unlike strategic decisions, tactical decisions are often made on
a regular basis employing a similar analysis and therefore can be candidates for
decision management systems. For example, decisions related to price discounting
policies are tactical decisions.
Operational decisions: Taylor describes these as decisions that have ‘lower individual
value and typically relate to a single customer or a single transaction’. However, these
‘lower value’ decisions should not be discounted because when you add up the thousands, sometimes millions and billions, of operational decisions made every year in
organisations, their collective worth can out-value important strategic decisions. Taylor
described them as the day-to-day, ‘run-the-business’ decisions – e.g. decisions that
determine which credit facilities to approve, which products to make available for online
purchasing, which product to offer what customer, etc. These are highly repeatable decisions and therefore excellent candidates for decision management systems. The decision
of what discount to offer which customers is an operational decision that can be automated for real time responsiveness across multiple channels.
Micro decisions: A subset of operational decisions, micro decisions are more personalised decisions. According to Taylor, ‘often an operational decision is repeated for all
customers, with the decision being based only on the data available for the particular interaction or transaction concerned. A micro decision, in contrast, uses everything
known or predictable about a customer to make a unique decision just for them.’ The
key difference is a more specific focus on information – taking into account a customer’s
buying history and making a unique offer based on that history. So, deciding to offer a
customer a unique product based on past preferences and buying behaviour is an example of a micro decision.
2
3
4
Business decision making in a predominantly buyers’ market environment is difficult. Three
macro-level elements (Friga and Chapas, 2008), clearly differentiate decision making today,
namely:
1
2
3
information overload
shareholder, finance and government pressure
shortening business life-cycle times.
All decisions are about problems and these are evident at three levels:
1
2
3
Macrocontext draws attention to global environmental trends, the state of buyers’ markets.
Mesocontext attends to organisational cultures and structure.
Microcontext addresses the immediate decision environment – the organisation’s
employees, staff, board of directors, and so on.
Key business decisions 27
Information overload
The abundance of information and the complexity of modern search tools yield a flood of data
that can easily overwhelm individual decision makers. Essential information (provided by a
useful business intelligence system which covers both contextual issues: the state of the market and competitive business intelligence) is needed in buyers’ markets if management are
to take perceptive tactical and strategic decisions (Vasilopoulos, 2010). Managers can quite
easily become confused with too much information unless they are trained in knowledge
management skills. Data is data and true decision-making expertise is about the effective use
of information in addressing management problems.
Business decisions: the need to harness big data
Data plays a critical role in how companies operate and this will only increase in the
future. Marketing needs data in order to understand past, current and future customer
trends, whilst procurement uses information to reduce costs and manage suppliers.
Sales relies on its data to understand its pipeline and where deals are in the sales cycle,
whilst support and post-sales need to keep track of exactly what a customer is doing
after they have purchased. These data sets need to be consolidated to enable companies
to respond proactively in today’s buyers’ markets.
Individual tasks such as getting the data in the first place and keeping each data set
up to date can be problematic on their own. However, the responsibility for how this
data is used and manipulated across different parts of an organisation is an important
task. Making key business decisions based on big data can make all the difference
between success and failure. This requires linking up traditional reporting and budgeting activities with the new analytics and business intelligence capabilities that are
available for sales, marketing, operations and human resources.
With competition in the market remaining fierce, company performance depends on
strong product and service offerings, supported by efficient IT processes and marketing
effectively. However, all of this is underpinned by being able to collect, understand and
use data as a strategic asset.
Source: Adapted from Peters, B. ‘Chief data officers may hold the key to business growth in
2014’, The Guardian, Media and Tech Network, 13 January 2014.
Shareholder, finance and government pressure
The rise and expectations of worldwide capital markets has led to a relentless drive to achieve
short-term financial results, often at the expense of longer-term considerations. In the private
sector the pursuit of growth at any cost has resulted in the demise of many companies. Small
and medium sized enterprises (SMEs) are experiencing tighter and tighter payback deadlines
from financial institutions. Public sector organisations are increasingly expected to maintain
services in the light of funding cuts.
Shortening business life cycles
The time-to-market and overall business cycles have shortened to a level unimaginable
in the closing decades of the twentieth century. Individuals alone and in meetings have to
28
The challenge of changing times
make decisions at an ever increasing pace. These decisions can so easily be made on the
basis of precedent and leave organisations floundering as the accustomed and expected
results fail to materialise.
Feel or process?
In relatively unchallenging times, such as the long period of sellers’ markets that was in
evidence for much of the last half of the twentieth century, many key decisions were made
in a relatively casual manner, as the success of such interventions stood a high chance of
success. Many low-risk decisions were often taken by feel with a tendency to be largely influenced by financial factors (the concept of effectiveness as discussed below). Decisions with
a higher level of risk and commitment have usually been made by the application of process
techniques. Difficult decisions usually involve much more than ‘off the cuff’ responses and
typically involve such issues as:
••
••
••
••
••
Uncertainty – many essential facts may be unknown.
Complexity – demanding attention be given to several inter-related factors.
High-risk consequences – impact of the decision may be of crucial significance.
Alternatives – each possesses its own set of uncertainties and consequences.
Interpersonal issues – which are difficult to predict.
With these difficulties in mind it is wise to make complex decisions by using clear process
techniques that usually lead to consistent, high-quality results. A selection of some of the
most popular are addressed in the following section. In many cases in today’s turbulent business environments it is pertinent to combine both ‘feel’ and ‘process’ techniques.
Key principles
Business decision process
Business decision making in today’s sellers’ markets is difficult. Except in the case of simple
problems, it involves more than just selecting a response from a number of alternatives. It
requires the application of a process that may take time initially, but which will speed up
Figure 2.2 Business decision process.
Key business decisions 29
with experience. Many organisations suffer from a lack of systematic decision making. The
decision-making process can be explained clearly to staff, sponsors and stakeholders. People
tend to be happier to implement decisions when they have participated in them. The vignette
box features the data analysis approach taken by Larsen-Toubrou, a large and progressive
Indian engineering multinational corporation (MNC).
Figure 2.2 presents an example of a typical seven-step approach to business decision
making.
Larsen-Toubrou (L-T) business data analysis
Technical Services’ Data Analysis capability enables the product engineering function
to make decisions about several things, including: purpose of the operation, part
design characteristics, specifications and tolerances of parts, materials, manufacturing process design, setup and tooling, working conditions, material handling,
plant layout and workplace design. Knowing the specifics of the who, what, when,
where, why and how of product manufacturing assists in the development of an
optimum manufacturing method.
••
••
••
••
••
Data cleaning: High-quality data is necessary to make correct timely business decisions. L-T Technology Services’ Data Cleaning models ensure the data is accurate
and conforms to pre-set business rules of the customer. Consistency, completeness, accuracy and uniformity of data is important, as data could be gathered from
different sources, regions and parties, and forwarded to a central processing team.
By careful auditing of data and control over data gathering workflows, integrity of
data can be assured.
Data mining: Discovering patterns in large data sets involving methods that
combine artificial intelligence, machine learning, statistics and database systems is critical to product engineering decision making. The overall goal of L-T
Technology Services’ Data Mining technique is to extract information from a data
set and transform it into an understandable structure for further use.
Data Digitisation: L-T Technology Services’ Data Digitisation service offers an
efficient complete, cost-effective paper-to-electronic solution that enables the storage of data using metadata and schema that facilitates easy discovery.
Segmentation and clustering.
Trend pattern recognition.
Source: Larsen-Toubrou.
Step 1 concerns a clear identification of the problem and addresses the issue of the
current situation and the desired one (Nagurney et al., 2002). For example, in the
case of a family decision, say to purchase a new TV, the main task is to acquire
one that works. In contrast, managers in organisations face a more complex task.
Key factors in the purchase of a new machine tool (Sayer, 2002) would include the
following issues:
••
••
••
expected financial return
technical excellence
compatibility with existing production facilities and staff.
30
The challenge of changing times
Step 2 follows once the problem has been framed clearly and concerns the decision
criteria that would influence the selection of a suitable purchase. Families, for example,
might seek to obtain a new TV set that was technically up to date, had a clear, flat digital
screen and appealing design. Managers intent on purchasing a machine tool would also
be interested in the technical support, training and engineering support provided by the
machine tool company (Figueira and Ray, 2002).
Step 3 addresses the issue that not all the identified decision criteria are of equal importance and so indicates preferences by allocating weights to decision criteria. In the case
of the family TV set, for example, a strong preference might be placed on picture quality
ahead of design. Managers may exhibit a strong preference for a branded provider of
machine tools whose products they have been happy with in the past.
Step 4 involves listing alternatives that might be capable of solving the problem. The
individual replacing the family TV draws up a list of selected brands that meet the
family’s purchase criteria. Management, whilst expressing a strong preference for one
machine tool manufacturer, decide to evaluate this provider’s product against the possible competitive products (Fazlollahi and Vahidov, 2001).
Step 5 can be termed analysis of alternatives and is where our potential imaginary family
seeking a new TV and the organisational management team intent on the purchase of a
new machine tool evaluate the list of possible alternatives. In both cases, though most
likely in the case of the machine tool purchase, our potential buyers score the selected
providers’ products’ key criteria attributes, say on a scale of 1 to 10.
Step 6 follows and is where the key decision makers for both the domestic TV and the
machine tool select a provider.
Step 7 is the stage when purchases are made.
Finally, buyers, whether consumer or business-to-business, seek a satisfactory in-use purchase experience. Our imaginary family will assess the customer-perceived value they
experience with their chosen TV and this will significantly influence their future buying
decisions. An organisation purchasing a machine tool will carry out an overall evaluation of
all aspects of the contribution of the purchase to their business.
Rational model
Individual or organisational decision making is assumed to be rational when those involved
make consistent and value-maximising selections within specified criteria (DeYoung, 2002).
Rationality is the use of scientific reasoning and logical arguments to arrive at decisions
(Burns, 2009). As widely applied, the scientific method is analytical (rather than synthetic),
positivist and reductionist. The rational or scientific model allows for both evolutionary
and revolutionary change, as well as exploitive and explorative contexts and overcomes
the obstacles impacting on objectivity (see previous section on ‘Feel or process?’). It is
objective and theoretically free from the imposition of large egos and bureaucratic thinking
(Friga and Chapas, 2008).
A business decision maker who was completely rational would be totally objective and logical in all stages of the decision-making process described above. Davenport and Harri (2010)
present a best practice guide to using analytics as a tool for leaders at every organisational
Key business decisions 31
level to drive their companies towards better decision making. However, in the predominantly
sellers’ market conditions that characterise developed economies today, the degree of outcome
surety that the rational model demands rarely exists. This is because the precise result of every
business decision alternative is unknown. Therefore, managers can only seek to assign probabilities to the likely success of their decisions. The conventional wisdom as expounded by
adherents to the scientific method is well suited to the natural and exact sciences but unsuited
to management charged with business decision making in highly competitive buyers’ markets.
A more appropriate input to decision-making processes is grounded theory or what Kaplan
(1998) termed innovation action research.
In the real world this results in the need to assess the degree of risk attached to decisions. There is a gap between business education and management on the ground (Shlomo
et al., 2008). Faced with this difficulty decision makers need to blend their rational approach
to well-framed problem statements with an ability to think ‘outside the box’ and harness
the benefits that creativity can bring (Stebbins, 2010). Many scoff when consultants recommend this and often reject such an illogical approach out of hand. However, if the existing
responses fail to deliver in the current buyers’ market environments then it makes sense to
explore new ways of thinking. Creativity can help managers generate ideas and interventions that are different from those of the past (mainly sellers’ markets) but relevant to the
challenges provided by buyers’ markets. It can help greatly by enabling managers taking
decisions to identify all viable alternatives. The management literature is replete with the successes of reductionist research. However, it is incomplete because it does not place sufficient
attention on the process of generating high and consistent levels of customer-perceived value
offering alternatives in today’s highly competitive buyers’ markets (Goodman, 1995).
Real world complications
Every day most of us make decisions that are far from being rational. Economists have their
model of the Rational Man (homo economicus) and lawyers have a similar concept known
in the UK as ‘the man on the Clapham omnibus’. In real life we all make decisions which
are irrational in this sense. We make decisions on the basis of incomplete information and
largely on the basis of intuition rather than scientific processes. At its best such behaviour is
rational within the parameters of a simplified model that captures the essential features of the
problem needing a business decision (Kuhberger et al., 2001; Mintzberg and Westley, 2001;
Dane, 2007; McKinsey Quarterly, 2010; Kandelwal and Tanje, 2010).
Contingency approach
The contingency approach posits the view that there is not necessarily a ‘one-best-way’ of
managing and making business decisions. It maintains that the structures and practices of an
organisation, and therefore its performance, are dependent (i.e. contingent) on the context
that it faces. The main contingencies – situational variables – identified by its proponents are
environmental uncertainty and dependence, technology and organisation size (Burns, 2009).
The contingency approach appeals to the ‘if – then’ formula and constitutes a break with the
‘one-best-way rational approach’ often favoured by organisations. Ambos and Schelgelmilch
(2007) collected data from 134 German multinational companies’ research and development
(R&D) units and found that the contingency approaches returned better results than the more
traditional rational ones. Research by Bradshaw (2009) found that a number of contingency
factors were likely to be relevant for effective non-profit organisations and their boards.
32
The challenge of changing times
Although all boards must fulfil certain critical roles and responsibilities, strategic choices
could be made about adopting different governance configurations or patterns. These choices
could be meaningfully informed by understanding organisational contingencies such as age,
size, structure and strategy – and, even more importantly, by external contingencies and
environmental dimensions, such as degree of stability and complexity. Bradshaw’s research
extends or layers contingency thinking beyond its traditional focus on an alignment between
the external environment and the organisation’s structure to focus as well on the alignment of
the organisation’s governance configuration with its structure and environment.
Ambos and Schelgelmilch focus on control mechanisms used by MNCs to manage their
extra-national R&D units. Drawing on the literature of both organisational power and contingency theory, their study develops and empirically tests a set of hypotheses aimed at
explaining how headquarters control their overseas R&D units. Data collected from 134
R&D units of German MNCs serve to test the hypotheses. Results highlight the importance
of the units’ R&D mandate and its interdependence in explaining control mechanisms.
Moreover, they indicate a relatively weak predictive power of political approaches compared
to contingency approaches.
Sillince (2005) argues that attempts to adapt structure to contingencies will be unsuccessful unless there is also rhetorical congruence, which has two parts. First, rhetorical
congruence exists if rhetoric is appropriate to contingencies. For example, decentralisation
aimed at increasing local initiative will lead to more requests by headquarters for advice
from subsidiaries. Second, it exists if the various rhetorical processes are in balance with
one another.
When important projects fail, the investigation is often focused on the engineering and
technical reasons for the failure. That was the case in NASA’s Mars Climate Orbiter (MCO)
that was lost in space after completing its nine-month journey to Mars. Yet in many cases,
the root cause of the failure is not technical but managerial. Often the problem is rooted in
management’s failure to select the right approach to the specific project. The evolving field of
project management contingency theory provides an opportunity to re-examine the concept
of fit between project characteristics and project management, and offers deeper insights on
why projects fail. Sauser et al. (2009) show that project management contingency theory
can indeed provide new insights for a deeper understanding of project failure. Furthermore,
it suggests implications for a richer upfront analysis of a project’s unique characteristics of
uncertainty and risk, as well as additional directions of research. Such research may help
establish new and different conceptions on project success and failure beyond the traditional
success factors, and subsequently develop more refined contingency frameworks. The results
of such research may enable future project managers to rely less on heuristics and possibly
lead to a new application of ‘project management design’.
Despite its popularity and potential, the field of Enterprise Resource Planning (ERP)
adoption and implementation is littered with remarkable failures (Morton and Hu, 2008).
Though many contributing factors have been cited in the literature, some argue that the integrated nature of ERP systems, which generally require an organisation to adopt standardised
business processes reflected in the design of the software, is a key factor contributing to
these failures. The integration and standardisation imposed by most ERP systems may not
be suitable for all types of organisations. The ‘fit’ between the characteristics of the adopting organisation and the standardised business process design embedded in the ERP system
affects the likelihood of success or failure. This chapter uses the structural contingency theory to identify a set of dimensions of organisational structure and ERP system characteristics
that can be used to gauge the degree of fit, thus providing some insights into successful
Key business decisions 33
ERP implementations. Propositions are developed based on analyses regarding the success
of ERP implementations in different types of organisations. These propositions also provide directions for future research that might lead to prescriptive guidelines for managers of
organisations contemplating implementing ERP systems.
Concepts of efficiency and effectiveness
The concepts of efficiency and effectiveness provide important guidance for business decision
makers. Efficiency is essentially about bearing in mind the resource implications of possible alternative solutions. Good business decisions take into account more than short-term
considerations wherever possible and relevant. As with buying decisions, buying cheap can
result in buying dear if the pressures of the moment saddle the organisation with a problem
solution that fails in the medium term and so calls for more funds to solve. Another practice
to be considered very carefully by wise business managers in the public sector is the overuse
of Private Finance Initiatives. This may seem to be expedient in the short term, as it appears
to be less of a strain on the Public Sector Borrowing Account, but can heavily mortgage the
future. Perhaps, a classic case of ‘backwards into the future’.
The concept of effectiveness stresses the importance of achieving an optimum solution to
a business problem. No half measures but a considered attempt to do what is necessary to fix
a problem.
A balanced approach to these concepts should result in a sound business decision. The
argument is essentially simple but it is both surprising and alarming that research around
the world shows that many CEOs and managers have a poor track record with their business
decisions (Finkelstein et al., 2009).
The S-curve
Business decisions concerning the pursuit of innovation are either incremental or radical in
nature and are subject inevitably to practical constraints. The progress of successful innovations can usefully be examined with reference to an S-shaped curve as depicted in Figure 2.3.
The curve is plotted in a two-dimensional plane and shows how the performance of a
technology in terms of the concepts of market effectiveness and efficiency change over time.
Figure 2.3 The S-curve: a comparison between an established and a new technology.
Source: M. R.V. Goodman, Durham University.
34
The challenge of changing times
The horizontal axis summarises how an innovation develops in terms of time and investment.
The vertical axis reflects some key dimensions of product performance or cost competitiveness. As evident from Figure 2.3 the pace of innovation changes with time. Most decisions
tend to become incremental and progressively more and more costly.
When rival technology emerges many view it as being inferior to existing technology
(position T1). Growing pains may be obvious for all to see and so many competitors may not
identify it as a real threat. Most customers are also unsure about the value offered by the innovation and so pay it scant regard. As time passes and after further investment, the teething
troubles associated with the innovation are addressed and manufacturing costs begin to fall.
At point T2 the innovation matches the perceived value of established technology and starts
to return a superior level of performance. The scenario outlined above has three important
lessons for decision makers:
1
2
3
Businesses seeking to protect their positions with established technology increasingly
face difficult decisions – the limpet strategy.
Pioneers in one generation of technology are not necessarily leaders in the next – the
cautious strategy.
Businesses seeking to exploit innovations enjoy several advantages – innovative entrepreneurial strategy.
Three strategic approaches
Limpet strategy
Companies that cling on to established technologies tend to be challenged by three options:
(a) Totally adopt new technology and abandon established technology.
(b) Retain their existing exploitation of established technology and attempt to raise standards
of performance by means of incremental investment.
(c) Retain their existing interest in established technology but begin to invest in innovative
technology to obtain the best of both worlds.
Option (a) is the most difficult to sustain and involves moving on to a new S-curve. It is also
potentially the most dangerous decision to make. Option (b) means sticking with established
technology that usually attracts incremental business decisions to maintain the effective life
of the innovation. Over time these decisions make only marginal differences and organisations have to contemplate making radical decisions in order to move to a new S-curve.
Option (c) seems to make the most sense in times of discontinuous change, as it enables an
organisation to phase in new technology whilst continuing to benefit as long as possible from
established technology.
Cautious strategy
There are several examples of organisations whose established technology lost out to new
and innovative technologies. When desktop computers took off the then-dominant computer
manufacturer, Digital Equipment Corporation (DEC), displaced IBM as market leader. Swiss
watch manufacturers lost out to East Asian competition with the introduction of innovative battery-driven quartz watches. The well-respected Encyclopaedia Britannica that ran
Key business decisions 35
to 30-plus printed volumes gave way to innovative software packages such as Microsoft’s
Encarta, which in turn was superseded by Internet-based encyclopaedias such as Wikipedia.
In March 2016 Barclays Bank announced that it was pulling out of Africa and decided to
sell its 60 per cent stake in its African business, as management had lost its way and had been
disappointed at the growth of the African economies
Innovative strategy
Several companies that have become household names started as small operations. Apple emerged
from a garage. Hewlett-Packard, DEC, Intel, Microsoft, Dell and eBay also began in this way.
New processes, tools and practices are being introduced into software companies at an
increasing rate. With each new advance in technology, software managers need to consider
not only whether it is time to change the technologies currently used, but also whether an
evolutionary change is sufficient or if a revolutionary change is required (Nikula et al., 2010).
Spotting potentially lucrative market trends and opportunities requires senior management to adopt an entrepreneurial approach to developing their product/service portfolios.
Practice
Eisai spots a lucrative market trend
Eisai Co. Ltd. is a Japanese pharmaceutical company based in Tokyo employing circa
10,000 employees.
In 2014, the Eisai Group carried out proactive investments for future growth. In
particular they found that opportunities for significant growth were imminent in the
fields of dementia and cancer treatment. In regards to the field of dementia treatment,
it is promoting the development of next-generation treatments for Alzheimer’s, which
builds on its original and multifaceted approach based on the knowledge, experience
and expertise accumulated by the company in more than 30 years of drug discovery
activities in the field. Meanwhile, in the field of oncology, following the launch of
the in-house developed Halaven, the company launched in February 2015 another inhouse discovery, Lenvima, in the United States. In the future, this agent will be made
available to patients in Japan, Europe and other parts of the world so that Eisai may
contribute to the enhancement of benefits to patients.
Source: http://www.eisai.com/company/message.html (accessed 7 June 2016).
Two key questions
1
2
Can the challenges of business environmental change be managed successfully?
Should the organisation reappraise and alter the way it does things?
The first question is the hang-on-and-do-nothing strategy often argued on the basis that every
downturn in an organisation’s business is always followed by an upturn. It is just a matter
of making a minor or major financial adjustment, depending on the nature of the problem.
Some consultants refer to this option as the ‘coherence theory of truth’. However, in times of
discontinuous change it is usually disastrous.
36
The challenge of changing times
The second question makes more sense in today’s business environment but is far more
difficult for top management to achieve and calls for a real match between professional
competence and rank. Sadly, many organisations are led by management that honed their
skills in a previous era (sellers’ markets) or religiously follow the dictates of the established organisational culture. Whilst a rising executive may look through the glass clearly,
political pressure – real and imagined – seems so easily to frustrate talent and results in the
executive following the company ways, even it if means looking through a glass darkly.
Concept of customer-perceived value revisited
A crucial consequence of the business environmental paradigm change (see Chapter 1) has
been a transformation in the concept of value. In sellers’ market conditions value was essentially regarded by many businesses as being about cost reduction and production expansion,
effectively placing a heavy stress on the concept of efficiency. In buyers’ market conditions
value is first a matter of providing what customers perceive to have value. This places the
concept of effectiveness before that of efficiency. The implication of this is profound, as it presents a severe challenge to the least-cost production approach to management. Yesterday’s
business solutions cannot now automatically become the default decisions. If CEOs and senior management are to become proactive and seek new ways of conducting their businesses
many consultants will confirm that a major problem resides in their attitudes, mindsets and
paradigms. Biased argument is awash in organisations as they try to maintain the status quo
by management myopia or through the deception that often results from biased thinking.
Managing bias
Before managers make key business decisions they should strive to avoid bias by responding
to the following questions (Kahneman et al., 2011).
Questions that decision makers should ask:
1 Is there any reason to suspect motivated errors?
2 Is the decision maker too emotionally involved with the issue?
3 Any dissenting opinions (group).
Questions that decision makers should ask the team making recommendations:
4 Is the decision overemphasised by salient analogies? (What has happened in the past.)
5 Have all credible alternatives been considered?
6 If the decision had to be made again what information would be needed and can some of
it be acquired now?
7 Where did the justifying numbers come from?
8 Is a halo effect apparent? Charisma . . .
9 Is the decision maker overly attached to past decisions?
Questions focused on evaluating the proposal:
10 Is the case overly optimistic?
11 Is the worst-case scenario bad enough?
12 Is the decision maker overtly cautious?
Key business decisions 37
Whilst key business decisions are ultimately the responsibility of top management, involving
staff groups in the decision-making process has the following distinct advantages:
••
••
••
facilitates the analysis of information;
generates more alternative solutions;
leads to an increased acceptance of the final top management business decisions.
The downside factors are:
••
••
••
Group participation is inherently time consuming.
Groups can be heavily influenced by dominant minorities.
‘Groupthink’ (Janis, 1982) can cloud issues if the group feels threatened by possible
solutions to the business problems being discussed.
Action
Making decisions: blending knowledge with experience to achieve know-how
••
••
••
••
••
••
••
Identify the real problem – what is the gap between what is happening and what should
be happening?
Analyse possible causes of problems and decide on most likely cause – collect evidence
for and against each possible cause. ‘Score’ each cause.
Brainstorm possible (apply creative thinking) solutions to the problem.
Evaluate alternatives and decide on the most sensible (rational or creative response).
Score each identified solution against key criteria (cost, people, time, etc.) and select the
solution with the highest score.
Anticipate what could go wrong. Draw up a ‘Plan B’.
Implement the decision. Who does what with what resources and when?
Linking creativity, entrepreneurship and innovation
If organisations are to become innovative they need to be courageous in their business decisions. This requires a new entrepreneurial creative thinking approach (see Chapter 4) and
a willingness to encourage, fund, develop and implement innovative business decisions.
Managers will need to become entrepreneurs if they are to strike the right balance between
the concepts of efficiency and effectiveness in their targeted markets.
Many in business life have a vague or ill-defined understanding of the terms creativity,
entrepreneurship and innovation. Creativity forms the lead topic in Chapter 4 but can be
taken for now to mean ‘thinking outside the box’ or being original. Entrepreneurship is about
applying creativity and foresight to identify commercial opportunities. Innovation is to do
with fashioning new ideas to improve methods, to design and develop new products and
services that contain appropriate levels of customer-perceived value.
Especially in times of discontinuous change, CEOs and senior managers need to ensure
that their organisations are performing successfully. Doing what they have always done – if
it is done efficiently – is not sufficient unless it is contextually effective. As Drucker has
warned, ‘The enterprise that does not innovate inevitably ages and declines.’ To face today’s
business world with confidence managers must understand the linkage between creativity,
entrepreneurship and innovation.
38
The challenge of changing times
Summary
An organised and systematic decision-making process usually leads to better decisions.
Without a well-defined process that includes both the analytical and feel approaches managers are in danger of making decisions that are based on insufficient information, analysis and
interpretation. Many variables affect the final impact of business decisions. However, if managers establish strong foundations for decision making, generate good alternatives, evaluate
these alternatives rigorously and then check their decision-making process, they will improve
the quality of their decisions. The current business environment demands sound business
decision making. It is not a time to shrink from this executive responsibility.
Discussion questions
1
2
3
4
5
What effect do shortening business cycles have on business decision makers?
Explain why so many successful businesses continue to be characterised by managers
who make courageous business decisions.
Why might a total reliance on the rational/analytical approach to making business decisions be inadvisable in times of discontinuous change?
Explain why the concepts of effectiveness and efficiency are so important for business
decision makers.
How might managers avoid bias in their business decisions?
Case exercise
Tyrell’s: when the chips are down raise a glass!
The gourmet Tyrrell’s crisps brand was founded in the UK in 2002 by struggling potato
farmer and entrepreneur William Chase. The product was a huge success, reconnecting snack
foods with homegrown produce. The business expanded its market into Europe and later into
the US and received numerous awards for the taste and quality of its crisps, in England as
well as internationally.
Chase had a long-running dispute with Tesco over stocking his potatoes, and so refused to
sell them any supplies of Tyrrell’s crisps. His previous farming business had collapsed when
the large supermarkets, led by Tesco, began sourcing produce from overseas to push down
costs. Instead he cultivated relationships with farm shops and delicatessens.
In April 2008, Chase sold a majority stake for £30 million to Langholm Capital. After
Langholm took over, they dropped the existing distribution chain, and focused on large
supermarkets including Tesco; they then dropped Chase as a supplier of potatoes when they
found they could get them cheaper elsewhere.
Chase used the £30 million from the sale of his stake in Tyrrell’s to set up a potato farm
near Hereford and built a distillery and started production of Chase Potato Vodka, using his
own farmed potatoes. Researching the spirits industry Chase discovered that vodka could be
made from any fermented agricultural base, distilled to around 40 per cent alcohol by volume
(ABV). Theoretically vodka could be distilled from anything that contains starch or sugars
such as bananas or beetroots. To contain costs most vodka distillers use cereals rather than
grains, as many believe that this did not affect the taste. The team at Chase, however, believe
that using potatoes improves the taste considerably; they use starchy varieties such as Lady
Rosetta and Golden Wonder – the same as they used for crisps, in fact, as they have a high
dry-matter content they make a quality vodka. Chase Vodka ships in excess of 5,000 bottles
Key business decisions 39
a week, each retailing at £38 and the product was named best in the world at the 2010 San
Francisco World Spirits competition.
The company explored the possibility of distilling gin and decided to produce two types of gin
using their own grown ingredients: one using its potato-vodka base, then flavoured with juniper
buds as well as berries; and one using its cider-apple vodka base, flavoured with Herefordshiregrown botanicals including Bramley apples, elderflower and hops to produce unique tasting
gins. The company sells its £40 a bottle spirits in upmarket outlets such as the supermarkets
Waitrose and Booths and the company is wary of dealing with the supermarket giants who often
treat spirits as loss leaders. To expand the business Chase offer tours of the distillery, warehouses
and barns and guests are welcome to stay at the nearby family owned bed and breakfast hotel.
The original Tyrell’s snacks company business was sold by Langholm Capital in 2013 for
£100m to Investcorp, a Bahrain-based luxury brands investor.
Sources: Neate, R. (2013) ‘Tyrells crisp firm makes a packet in £100m sale’, The Guardian,
1 August 2013; Williams, H. (2015) ‘The family behind the Tyrells crisps brand has found a
new use for its potatoes – artisan vodka’, The Independent, 15 March, http://chasedistillery.
co.uk (accessed 5 May 2016).
Questions
1
2
3
4
Was farmer William Chase’s decision to set up Tyrell’s based on an ‘off the cuff’ basis
and what critical issues might he have missed or given insufficient attention?
Was the decision to establish the crisp business an incremental or a radical innovation?
How might the seven-step approach to business decision making have led him to anticipate the probability that Langholm Capital would supply supermarkets and then cease to
buy his potatoes?
How would you describe the decision to distil two types of gin in the vodka distillery?
Was it a limpet, cautious or innovative strategy?
How did Chase link creativity, entrepreneurship and innovation after setting-up the distillery business?
Sources: chasedistellery.co.uk; The Daily Telegraph, 3 July 2011; The Guardian, 21 July
2011; The Independent, 14 March 2015; BBC, 8 February 2016.
YouTubes
‘Tyrells, Our Story from Seed to Chip’, https://www.youtube.com/watch?v=0ctzr-i8v9o.
‘Inside the Factory 3: The Crisp Makers’, https://www.youtube.com/watch?v=0ctzr-i8v9o.
‘UK Spuds Yield “World’s Best Vodka”’, https://www.youtube.com/watch?v=l6ubCM
DguBA.
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The challenge of changing times
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Kuhberger, A., Komunska, D. and Perner, J. (2001) ‘The dysjunction effect: Does it exist for twostep gambles?’ Organizational Behaviour and Human Decision Processes, Vol. 85, Issue 2, July,
pp. 250–64.
McKinsey Quarterly (2010) ‘How we do it: Three executives reflect on strategic decision making’,
Cover article, Issue 2, pp. 46–57.
Mintzberg, H. and Westley, F. (2001) ‘Decision making: It’s not what you think’, MIT Sloan
Management Review, Vol. 42, Issue 3, Spring, pp. 89–93.
Morton, N. A. and Hu, Q. (2008) ‘Implications of the fit between organizational structure and ERP:
A structural contingency theory perspective’, International Journal of Information Management,
Oct, Vol. 28, Issue 5, pp. 391–402.
Nagurney, A., Dong, J. and Mokhtarian, P. I. (2002) ‘Multicriteria Network Equilibrium modelling
with variable weights for decision-making in the Information Age with applications to telecommuting and teleshopping’, Journal of Economic Dynamics and Control, Vol. 26, Issue 9/10, August,
pp. 1629–50.
Nikula, U., Jurvanen, C., Gotel, O. and Gause, D. (2010) ‘Empirical validation of the Classic Change
Curve on a software technology change project’, Information and Software Technology, Vol. 52,
Issue 6, pp. 680–96.
Sauser, B. J., Reilly, R. R. and Shenhar, A. S. J. (2009) ‘Why projects fail? How contingency theory can
provide new insights: A comparative analysis of NASA’s Mars Climate Orbiter loss’, International
Journal of Project Management, October, Vol. 27, Issue 7, pp. 665–79.
Sayer, J. (2002) ‘Problem-solving success tips’, Business and Economic Review, April/June, pp. 23–4.
Shlomo, M., Srinivas, P. and Seshadri, D.V.R. (2008) ‘Bridging the chasm between management education research, and practice: Moving towards the “grounded theory” approach’, The Journal for
Decision Makers, January–March, Vol. 33, Issue 1, pp. 1–18.
Sillince, J. A. A. (2005) ‘A contingency theory of rhetorical congruence’, Academy of Management
Review, July, Vol. 30, Issue 3, pp. 608–21.
Stebbins, L. H. (2010) ‘Development of reality system theory’, Journal of Business and Economic
Research, April, Vol. 8, Issue 4, pp. 1–22.
Key business decisions 41
Taylor, J. (2012) A Practical Guide to Using Business Rules and Predictive Analytics, Boston, MA,
Pearson.
Vasilopoulos, A. (2010) ‘Development of a competitive business intelligence system’, Proceeding
of the Northeast Business & Economics Association, Morristown, NJ, Montclair State University,
pp. 614–18.
Selected YouTubes
‘Making Better Business Decisions’, https://www.youtube.com/watch?v=fjWl5cBswbg.
‘How Companies Can Make Better Decisions, Faster’, https://www.youtube.com/watch?v=
pbxpg6D4Hk8.
‘Moment of Truth – Business Ethics and Better Decision Making’, https://www.youtube.com/
watch?v=7chfmZ469lE.
‘Business Decision Management (BDM) and Business Process Management (BPM)’, https://
www.youtube.com/watch?v=7chfmZ469lE.
‘How Perceived Value Is Created’, https://www.youtube.com/watch?v=tocNXtRD8H4.
‘Linking Creativity, Innovation and Entrepreneurship’, https://www.youtube.com/watch?
v=xPO1fOR9B68.
3
Management revisited
A good manager is best when people barely know that he exists. Not so good when people obey
and acclaim him. Worse when they despise him.
(Lao Tzu)
If you want to manage somebody, manage yourself. Do that well and you’ll be ready to stop
managing and start leading.
(Anon)
Learning objectives
This chapter explores:
1
2
3
4
5
6
Defining management.
Primary management processes.
Redefining management action – control or lead.
Essential management skills.
Organisational styles (Theories X and Y).
The Japanese approach to management (Theory Z).
Introduction
Setting out to ‘do things differently’ in order to take business decisions that are both
effective and efficient in the use of resources calls for a re-evaluation of current response
(management) practice. This chapter presents some common theoretical models of management and stresses the importance of defining it so that it can be understood by every
individual in an organisation and applied to all their tasks. Many recognise that management practice needs to change, but few organisations have a working definition of what
management should do. This is a serious weakness that severely hampers well-intentioned
executive effort to boost business creativity and strategic innovation. Thought needs to be
focused on ‘doing’. Therefore the term ‘managing’ needs to be codified and communicated
to individuals. This chapter presents ideas to assist organisations to avoid ‘management
myopia’. (See Figure 3.1.)
Management revisited 43
Figure 3.1 Exploring management.
Horse sense!
Literally, the word ‘management’ comes from the French ‘manège’ (Italian ‘maneggio’),
which derives from dressage exercises to train a horse in obedience and deportment in order
to perform better than the competition. In this scenario the rider is firmly in the saddle and can
urge or nag his mount by exercising persuasion, cracking the whip or using spurs. Managers
in organisations can be likened to riders as they also find themselves in a competitive environment. Like the rider they employ a set of process skills to cajole and encourage people to
assist them to complete tasks effectively and efficiently.
Context
Global business environment
Dressage trainers have to train and prepare their horses and riders to perform in whatever
kind of competitive environment they meet. Similarly, managers need to acquire a skill set to
44
The challenge of changing times
enable them to operate in real world conditions. The business environment is their stage and
in common with the horse rider they have to successfully conquer both the contextual arena
and the competition. Keen novice riders can approach specialists and seek to be taught how
to become successful in dressage competitions. The necessary skill sets both for the horse
and the rider are known and codified.
Key principles
A divertimento
Leaving the dressage metaphor aside, learning the basic skills of management can present
quite a challenge. Most know what is usually meant by the term ‘management’ but relatively
few can answer these questions:
••
••
••
What skills are necessary to master individual effort?
What skills are necessary to coordinate and control the efforts of others?
What skills are required to manage organisations?
When individuals wish to learn to drive they naturally want to know what this involves. In
most countries it is necessary to pass a driving test with both a cognitive and a practical component. All driving schools can describe in detail what has to be learnt and assessed. If this
was not the case, learning the necessary skills would be very difficult. What is more, imagine
what it would be like for an individual wishing to learn how to qualify to drive if every person
spoken to said something different needed to be learnt and examined.
As seen in the previous chapter, if individuals and organisations want to change the way they
operate then they will need to have a common understanding of management. Strange as it may
seem few organisations have a standard definition that is known by all ‘on board’. If this were
the case in the UK navy then operations would be a disaster. Is management just a broad set
of magical skills that enable people to get things done individually or collectively, efficiently
and effectively? Part science and/or part art? How can an honest enquirer learn the key skills?
A group of students were asked in a seminar at Durham to list in five minutes the words
they thought best identified the key skills a manager should command. Tables 3.1 and 3.2
present a summary of the results.
Table 3.1 Student seminar survey I
Definition of management
Getting things done by others
Table 3.2 Student seminar survey II
Skills
Focus
Performance
IT
Communication
People skills
Leadership
Professional
Context
Task
Resources
Individual
Group
Organisation
Management revisited 45
The general understanding was that management had something to do with getting things
done by others. However, no agreed statement emerged as to how this might be achieved.
The students were then asked to see if their parents who were managers or had experienced
management could define it. When they reported a week later the consensus was close to their
earlier expressed understanding. Neither the students or their parents identified management
as being about behaviour. The results of this small experiment were alarming as most are
exposed to management activity (good, indifferent and bad) on a daily basis. Management,
like marketing, seems to be in the ether. Marketing can be defined; it is both a philosophy
and a set of action skills. Management, curiously, does not have a widely accepted definition.
This is a real problem when business responses need to change to cope with the challenges of
a highly volatile business environment.
The seminar attracted the interest of both students and most parents who were embarrassed at not being able to define management in a practical way. Both parties delved
into management texts, but many were frustrated at the lack of depth of skill exposition and the relevance of broad definitions for expressing action in real-time conditions.
Many asked whether business schools would have the answer. Several parents who had
attended these organisations rated them very poorly on the practical skills. One parent
remarked ‘the school I attended spoke a lot about management but I was distressed to
see that they hardly ever practised it’. Scholarship does have a place in the evolutionary
definition of management and some schools are engaging with practitioners to sharpen
their practical understanding (Hughes et al., 2011). Schein advocates getting alongside
managers through a process he terms ‘humble enquiry’ to better understand their world
and so be in a better position to blend academic and practitioner thinking on management
(in Lambrechts et al., 2011).
Private moments of doubt and fear come even to managers who have spent years on the
job. Any number of events can trigger them: an initiative going poorly, a lukewarm performance review, a daunting new assignment.
As the balance of economic power swings inexorably towards the East and bearing in
mind recurrent economic crises, Western managers could learn much from Eastern management approaches (Ming-Jer and Miller, 2010). The world is looking for fresh ideas and new
perspectives. Business reality has transformed from ‘West leads East’ to ‘West meets East’.
A thriving Chinese business culture represents not only a source of economic partnership
but also a potential fount of managerial wisdom that can help renew Western economies.
Unfortunately, the cultural distance between East and West makes Chinese examples too different, and at times inappropriate, for Western firms to emulate. ‘Chinese’ thinking, with its
emphasis on balance and self–other integration, offers the promise to bridge global divides
and facilitates the formation of global-minded executives.
Defining management
For a noun that is in common parlance, ‘management’ is surprisingly difficult to explain.
Many business people call themselves managers. So what is a manager? Some would say that
a manager is a manager. Or perhaps a manager is someone who is in a management position.
Then some regard management as a rank or badge and dream about rising in an organisation through the management hierarchy to achieve high corporate office. Perhaps some light
can be shed on the matter by considering what managers do. The verb ‘managing’ suggests
coping or perhaps contriving to accomplish something by the thoughtful choice of certain
responses. If this is the case then any individual can be a manager, as we all have a personal
46
The challenge of changing times
responsibility to cope with the problems of everyday life. The key words here are thoughtful,
choice, problems and responsibility.
The ideal individual manager then assumes responsibility for coping with his or her own
problems by a process (management) that includes thinking, understanding and the deliberate
selection (choice) of appropriate responses. Managers think and managers act, but our thinking and our choice of response may not always be strictly rational. We often exercise our
judgement largely on intuitive grounds or through habitual responses. At the same time we
are not always well organised and so may adopt a reactive rather than proactive individual
management style.
However, we are social beings and much of our life involves interacting with other people. Few individuals are an island. Managing our individual affairs frequently involves a
responsibility to manage others – for example, parents assume the responsibility for managing the early lives of their offspring. When we are at work we are all individual managers,
in the sense described above, but usually find ourselves in some positions where we are
expected to manage others.
The term management can be viewed from a number of perspectives viz:
••
The organisation and coordination of the activities of an enterprise in accordance with
certain policies and in achievement of defined objectives, namely the process of being
managed or managing.
Management is often included as a factor of production along with machines, materials,
and money. According to the management guru Peter Drucker (1909–2005), the basic task
of management is twofold: marketing and innovation. Modern management owes its origin to the sixteenth-century enquiry into low-efficiency and failures of certain enterprises,
conducted by the English statesman Sir Thomas More (1478–1535). As a discipline, management consists of a set of functional skills.
••
The executives who have the power and responsibility to make decisions to administer
business and public organisations.
The size of management can range from one person in a small organisation to hundreds or
thousands of managers in multinational corporations. In large organisations the board of
directors formulate policy which is then implemented by the CEO. Some business analysts
and financiers accord the highest importance to the quality and experience of the managers in
evaluating an organisation’s performance.
••
••
Leading a team to achieve planned objectives.
A corporate rank in an organisation.
The term management thus refers to both a title (position in an organisation) and to a set
of functional skills. Ideally both these descriptors should be effectively combined in the
performances of managers. However, this is not always the case, as some adopt a mindset
of entitlement in the rank and demonstrate poor functional skills. There are many of these in
important positions in organisations having been promoted during easier business conditions
(sellers’ markets) or as a reward for long or loyal service. Others possess considerable functional skills that have been developed over the years but have failed to update their skill sets.
This would logically imply that several organisations might have executives in powerful and
Management revisited 47
important positions that are insufficiently skilled to cope effectively with modern business
life. Worst still they may actually restrict the contributions of younger staff for fear of being
professionally embarrassed. This ‘what I have I hold’ approach to management is in a way a
natural human response but not a professional one. It can lead managers and their organisations to become myopic and blaming external events such as the European immigrant crises,
casino banking, or the weather, for their problems.
Clearly, external or contextual events do impact on business life and require the right
application of necessary functional skills. Here it is useful to picture the task facing a learner
driver. To be successful our driver has to pass both a cognitive and a practical test and apply
skill that is appropriate for the road conditions. Managers too should constantly update their
cognitive skills and learn to cope with contextual problems by constantly practising and
refining their expertise. Crashing a vehicle and claiming that the accident was caused by rain
is bad driving and unprofessional.
Primary management processes
Much of the academic literature declares that the main functional skills of management follow the five management principles described by Fayol (1916):
••
••
••
••
••
planning (mission/strategy planning, objective setting);
organising (time, work and decision-making);
leading (setting direction, aligning the team, motivating and inspiring);
controlling (correcting errors, disciplining, appraising);
achieving (putting it all together and getting things done effectively and efficiently).
For managers to be both effective and efficient in practising Fayol’s basic set of functional
skills they need to acquire and become proficient in:
••
••
••
••
Conceptual skills – the ability to analyse and evaluate complex situations.
Interpersonal skills – the ability to relate and work with people individually and in
groups.
Technical skills – the ability to apply required technical expertise.
Political skills – the ability to liaise successfully with other managers in the organisation and to build professional networks – a task that has benefited greatly from social
networking sites such as Facebook, LinkedIn and Twitter.
The above cluster of functional and general skills form a template for assessing managerial
competencies (Agut and Grau, 2002).
Management involves people and thrives on interaction, it is relational and most people
like being treated respectfully as an individual (Table 3.3). This seems at first an obvious
point to make but with the increasing dominance of information and communications technology (ICT) and the use of smartphones in modern business, people are losing face-to-face
interaction through excessive electronic management by email and text. There is growing
interest amongst the most progressive organisations in the principles of humanistic management (Spitzeck, 2011). It is sometimes said, by people who have not really looked into the
matter, that the humanistic approach is too soft and too people-oriented. However, humanistic consultants always emphasise the importance of doing justice to the task as well as to the
people involved.
48
The challenge of changing times
Table 3.3 Major management activities
Management function
Management activities
Planning
Forecasting
Developing objectives
Programming
Scheduling
Budgeting
Developing procedures
Developing policies
Developing organisational structure
Delegating
Developing relationships
Decision making
Communicating
Motivating
Selecting
Developing people
Developing performance
Measuring performance
Correcting performance
Organising
Leading
Controlling
Redefining management action: control or lead?
Putting the emphasis on control: micromanagement/Theory X
Many managers needlessly operate in a hierarchical way and over-manage, over-scrutinise,
and over-frustrate employees. Such meddlesome bosses now are called micromanagers.
A micromanager can be much more than just a nuisance in today’s complex organisation.
Bothersome bosses who second guess every decision a subordinate makes, fret about the font
size of the latest progress report or inspect all of their employees’ emails not only frustrate
and demoralise their harassed workers, but seriously damage the productivity of the organisation and, over the long run, may jeopardise the organisation’s survival. Unfortunately,
micromanagement is a fact of management life. Micromanagement has been practised and
recognised well before it was labelled as an organisational pathology. In 1946, Peter Drucker
called for a ‘democracy of management’ whereby organisations need to decentralise and delegate more decision-making authority to employees. In 1960, Douglas McGregor described
a Theory X manager as one possessing many of the characteristics of the modern micromanager, ‘one who is poor at delegating but one who believes he delegates well’ (White, 2010).
Putting the emphasis on leadership: fundamental management competencies
A practical approach to learning how to practise management skills is indicated in Figure 3.2.
Essentially it concerns working with people and in this context leadership is of paramount importance. This is true whether management takes place at the individual, group or organisational
level. Anyone who cannot motivate themselves will find it difficult to convincingly lead others.
Self-discipline and determination are essential aspects of personal motivation. Evident and continuous leadership skills result in effective and efficient group teamwork and motivation levels.
Management revisited 49
Figure 3.2 Putting the emphasis on leadership.
Sports Direct: example of a Theory X company
The founder of the UK quoted company Sports Direct has been forced to admit that his
management team practised an autocratic style. Workers in the firm’s Derbyshire warehouse were paid below the minimum wage and were fined 15 minutes’ pay for every
one minute they were late. Furthermore an undercover investigation by The Guardian
in 2015 found that workers had been subjected to rigorous searches and surveillance.
The Unite union revealed to a committee of MPs that the company operated a culture of fear. Union officials said the Derbyshire distribution centre operated a ‘strike
system’ for misdemeanours where staff were given ‘a strike’ for things such as spending too long in the toilet, excessive chatting or taking a day off sick. If an employee had
six strikes, they were automatically dismissed.
(continued)
50
The challenge of changing times
(continued)
‘When you have people under that much fear they come into work ill and that
creates a significant health and safety risk’, said Steve Turner, assistant general secretary of Unite.
In one case, he said an employee had given birth in a toilet at the warehouse, due
to fear of losing her job if she called in sick. He said workers had likened the conditions to a ‘gulag’, or ‘labour camp’ and described the conditions as ‘nineteenth-century
working practices’.
The founder defended the disciplinary system, saying it was necessary, had to be
executed correctly and claimed that the firm’s operation style had resulted from rapid
growth. The chief investment officer at Royal London Asset Management commented
that there had been significant corporate governance failings amongst the warehouse
management. The founder pledged to review and change some management practices
within 90 days. However, the public naming and shaming of his leadership seemed
to have had only a moderate impact. He left the hearing declaring ‘I’m not Father
Christmas, I’m not saying I’ll make the world wonderful’.
Source: BBC News, 7 June 2016.
The next priority is to apply a clearly understood managing method. This involves delegation,
which is an important skill that is often abused. Sound delegation entails:
••
••
••
clearly communicating a task to an individual or group;
clearly explaining any necessary skills;
keeping an eye on the individual or group as the task is tackled.
Walking away after a muddled communication of the task and then blaming an individual
or group if things go wrong is too commonly evident. This approach is not delegation but
abdication and is a totally destructive management practice. The other basic management
method skills include setting targets and assessing performance truthfully and as positively
as possible.
Dynamic managers constantly seek ways to increase efficiency. This requires giving
attention to effective and efficient ways of running meetings, time and stress management.
The contemporary business environment usually requires people in management positions to
display and encourage creative thinking (see Chapter 4). This is necessary because many of
the traditional models and practices can lose their edge and effectiveness. In addition, wise
organisations re-evaluate their vision and study the impact of the consequences of the business paradigm change from sellers’ to buyers’ market conditions (see Chapter 1).
Management: quo vadis?
Many see management mainly as a position that is a statement of authority. The decades
of sellers’ markets encouraged ‘top-down’ activity. Managers on behalf of owners, public boards or shareholders ran organisations. Apart from owners of SMEs, authority for the
larger private sector and public enterprises resided in distant bodies, many of which did
Management revisited 51
not take part in the day-to-day running. Technical advances in communication and computerisation have had a substantial effect on management practice. Whilst few would deny
the benefits this has brought, many would recognise the creeping depersonalisation that has
resulted from the escalation in many organisations of management by email and text.
In sellers’ markets control was everything and management didn’t like surprises.
Organisations (and hence people) could be run automatically and management became
obsessive with detailed planning and reporting systems. However, as every weather forecaster knows, such practice can be illusory, as to measure is not necessarily to control. Sound
managers will keep their eyes on the road all the time – they do when they drive their company cars – if they fail to do this in times of shifting environmental paradigms, they run a real
danger of becoming myopic.
As the decade progresses traditional hierarchical management structures are giving way
to network models. Least-cost supply chains are being replaced by value chains. The entitlement culture is dying. There are no more jobs for life. The role of management needs to
be seen in a new way so that people are seen as the most important resource that organisations command and not merely names on a payroll and an expendable resource. Responsible
organisations will find ways to affirm this perception and discover how to value and recharge
their staff.
Management need to accept that responses and experiences that stood them well in yesterday’s world may not be best for today. New thinking is required and an acceptance that
it is essential for managers to be prepared and to do something about introducing different
attitudes and operating cultures. Of course it is best to keep what is seen to be good practice in current conditions, but those in authority also need to encourage themselves and
their staff to learn new skills. To this end wise organisations are increasingly investing in
knowledge management, recognising that an organisation’s value derives from knowledge,
know-how, and intellectual capital and competencies. The short-termism that is often all
too evident is being increasingly challenged, as the present and the future are seen not to
be separate but as being intertwined. Business creativity is needed as never before to help
organisations become positively differentiated, but is often hampered in its execution by the
mindset that management is essentially about operational and control matters.
Practice
Essential management skills
The divertimento in the ‘Key principles’ section of this chapter posed three questions to assist
aspiring and existing managers to equip themselves with essential skills to enable them to
practice successfully in the current environment:
••
••
••
What skills are necessary to master individual effort?
What skills are necessary to coordinate and control the efforts of others?
What skills are required to manage organisations?
The following three sections draw from interviews with practitioners and from academic
material and argument presented in this chapter to provide a guide to individual, group and
organisational managers.
52
The challenge of changing times
Managing self and individuals
Table 3.4 Basic individual management skills
Management skill set
Specific skills
Tasks
Contextual awareness
Identify business context
Creative thinking
Organising self
Creative problem solving
Task scheduling
1 Sellers’ market
2 Buyers’ market
See Chapters 4 and 5
1 Make a list of tasks
2 Identify the tasks that are essential
for effective performance – active
tasks
3 Identify those tasks that are
essentially reactive
4 Establish priorities in the light of:
(a) importance
(b) urgency
5 Schedule sufficient time for active
tasks tasks and allow time for
reactive tasks
Managing groups
Table 3.5 presents a set of guidelines for those charged with the responsibility of managing others.
Sound self-management skills must be evident before attempting to manage others. Managers
should be seen to be active, effective and efficient by their staff and management colleagues.
Managing an organisation
Top managers should follow the guidelines outlined in Tables 3.5 and 3.6. CEOs are advised
to make selecting the members of a senior management team among their first priorities, to
Table 3.5 Summary guidelines for group managers
Management skill set
Specific skills
Tasks
Contextual awareness
Identify business
environment
1 Sellers’ market
2 Buyers’ market
Information search
Creative problem solving
Delegation
Interpretation
Creative thinking
Organising other
people
From management
to managing or
leading
Leadership
1 Which task?
2 Who does it?
3 Brief people and train them
4 Establish priorities
5 Inform others
6 Be available for advice
7 Check progress
8 Support staff at all time
Managers should be leaders – leadership is
about discovering answers to questions
others have yet to contemplate not
about repeating someone else’s answers
Management revisited 53
Table 3.6 Summary guidelines for top management
Management skill set
Specific skills
Tasks
Contextual
awareness
Identify business
environment
Information search
Creative problem
solving
1 Sellers’ market
2 Buyers’ market
Interpretation
See Chapter 4 – good top management do not
attempt to manage creativity, they manage for
creativity, by providing a work environment
and culture that allows creativity to flourish
Top managing for creativity means taking
most of what we know about management,
standing it on its head and putting the concept
of effectiveness before that of efficiency
1 Exercise vision
2 Declare mission
3 Prepare corporate plan and set goals
4 Define responsibilities
5 Set standards
6 Agree tasks
Empower individuals and groups
Creative thinking
Avoiding
management
myopia
Revelations
Establish a creative
culture
Ethical operation
Prepare organisation for
change
Corporate Social
Responsibility (CSR)
Operate ethically and with regard to CSR
make sure that such teams focus on a set of priorities where their group decision making is
essential and to address the group dynamics of their team (Kruyt et al., 2011). CEOs also
need to take care to see that talented executives do not hold back for fear of exposing the
limitations of those in leadership positions (DeLong and DeLong, 2011).
Ethical considerations
As business becomes increasingly competitive organisations can, sometimes without realising it, slip into management actions that are ethically questionable. Research on business
ethics communication and behaviour indicates a relatively clear, positive link between open
workplace dialogue about ethical issues and ethical conduct. Empirical research by Trapp
(2011) revealed that discussing ethical issues was influenced by two main factors: employee
conceptualisations of business ethics and the level of inter-collegial trust, credibility and confidence. An evident and lasting high level of trust in an organisation is an important influence
on motivation. In addition, socially responsible management pay due to regard to minimising
any harmful effects of their operations on the internal and external environment as well as
pursuing a less than cynical CSR policy.
Broad management styles
The way in which managers behave determines the way in which individuals and groups
will behave towards them. So much of a manager’s job is concerned with acquiring and
fine-tuning a set of interactive skills. The main styles open to a manager are summarised
in Table 3.7.
54
The challenge of changing times
Table 3.7 Main management styles
Style
Feature
Action
Autocratic
Used to retain control
Helps complete urgent tasks or where there
is a high element of risk
May lead to lack of creativity
May trigger resistance
Can damage staff and organisational culture
Gains team commitment
Slow decision making but gains staff support
Motivates staff and builds loyalty
OK for highly trained experts
May lead to chaos without suitable control
Requires regular feedback
Staff may feel valued but frustrated
Little scope for staff to make decisions
Likes to tell people what to do
No consultation
Democratic
Laissez faire
Paternalistic
Fosters staff participation
Shares information with staff
Staff can take part in decisions
Little direction from manager
Staff free to make decisions
Similar to the autocratic style
but with caring attitude
Organisational development
Is there a correct style?
It is difficult to answer this question purely in terms of the style categorisations summarised
in Table 3.7. The emerging and accelerating impact of contextual trends (see Chapter 1) from
the 1960s onwards lead to debate about the future role of management’s attitudes and perceptions towards subordinates and the style of organisations. The work of McGregor (1960)
codified observed managers’ views in terms of two assumption sets that he termed Theory
X and Theory Y.
Table 3.8 McGregor’s assumptions leading to Theories X and Y
Theory X assumptions
1 People have an inherent dislike of work and will avoid it if possible
2 So most people will need to be coerced, controlled, directed and threatened with punishment to
persuade them to put in enough effort to meet organisational objectives
3 Most people prefer to be directed, wish to avoid responsibility, have little ambition and want
security above everything else
Theory Y assumptions
1 Putting effort into physical and mental work is as natural as recreation or rest
2 External control and the threat of punishment are not the only ways of motivating staff to meet
organisational objectives. People will exercise self-management to achieve objectives to which
they are committed
3 Such commitment is a function of the reward associated with the achievement of agreed
objectives
4 Most people learn, under suitable organisational cultures, to accept and welcome responsibility
5 The ability to think creatively in the solution of workplace problems is widely found in people
6 Under most prevalent broad management styles the capacity of people to fulfil their potential is
only partially utilised
Management revisited 55
Japanese management approach
Japanese management culture
McGregor’s main aim was to emphasise the importance of abandoning the limiting
assumptions of Theory X to release individual, group and organisational creativity. The
next step that boosted this was the emergence of the impact of the Japanese management
culture (see Table 3.9) on Western management thinking.
Japanese management techniques
Three broad strands merged in the development of Japanese management technique:
1
2
3
Theory Z
Quality of Work Life (QWL)
Quality Circles.
Theory Z
Ouchi’s Theory Z proposed a new set of assumptions that should be incorporated into management thinking and organisational development that focused on:
••
••
••
increasing employee loyalty to the company;
providing a job for life;
placing a strong emphasis on the well-being of employees both in the workplace and at home.
Theory Z presented an opportunity for organisations to benefit from:
••
••
••
••
a humanist approach to management;
a hybrid approach that combines Japanese philosophy with Western management practice;
placing a large amount of trust with workers; and
assumed that workers if empowered will display sound teamwork and organisational
loyalty.
Table 3.9 Japanese management culture
Attitude
Action
Service to the public
Provision of high-quality goods and services at
reasonable prices
To be practised in all business dealings and
personal contact
Abilities and skills will be pooled based on
mutual trust and respect
Continuous intent to improve corporate and
personal performance
Determination to be cordial and modest and
respect the rights and needs of others
Accept responsibility for preserving and
improving the physical and social environment
Fairness and honesty
Teamwork for the common cause
Uniting effort for improvement
Courtesy and humility
Observance of environment
56
The challenge of changing times
The characteristics of Theory Z are:
1
Long-term employment and job security (Shushinkuyo).
••
••
••
2
New employees are recruited directly from school rather than in an open job market.
••
••
••
3
The entire workforce is held responsible for failure to achieve corporate targets.
The fault of one is the fault of all.
Trust is a key essence in ensuring that teams meet their objectives and goals.
An exchange commitment between the employer and the employee (compact).
••
••
••
4
New employees are recruited directly from school rather than in an open job market.
An exchange commitment between the employer and the employee (compact).
The employer must be prepared to make sacrifices for the employee to ensure lifelong loyalty and commitment.
Employees are briefed on what needs to be done but not specifically told how to do it.
Assumes that every employee will use their intellect, skills and creativity to accomplish their task.
Despite minimal supervision, strict Key Performance Indicators (KPI) must be met.
Collective decision-making.
••
••
All decision making in Japanese companies is a group process.
Ringi System of decision making.
{{
{{
5
Slow evaluation and promotion.
••
••
••
••
6
The longer that an employee stays, the more chance of getting promoted.
A major motivation for an employee to stay in a company.
Japanese employees generally stay an average of 7 to 10 years in a company before
being promoted.
Affirms the company’s commitment to the employees for lifetime employment.
Moderately specialised careers.
••
••
••
7
Newawashi (Tree Root): preliminary and informal sounding out of the employees’ ideas about a proposed course of action or project.
Ringi Seido (Proposal, Decisions, Action): a formal process that provides the
opportunity for equal ranking managers or employees of a group within a company to partake in an individual’s idea.
Traditional Japanese career paths are more non-specialised, allowing employees to
rotate roles and jobs on a frequent basis.
American career paths are more geared towards ‘mastery of craft/specialisation’
allowing little or no crossing between functional roles.
A type Z career path is the ‘middle of the road’, where employees are allowed to
rotate roles but on a less frequent basis.
Concern for total person, including their family (Holistic Concern).
••
••
••
The Japanese strongly believe that problems at home will affect work performance.
Employees and their families are seen as one entity.
Companies usually offer many benefits such as family allowances, insurance, housing
assistance and other benefits for the employee and their family.
Management revisited 57
Quality of Work Life (QWL): issues and strategies
••
••
••
••
••
••
••
••
••
••
Pay and stability of employees.
Job security.
Occupational stress.
Sufficient resources.
Self-managed work teams.
Participative management.
Promotion opportunities.
Recognition.
Organisation health programmes.
Alternative work arrangements – work at home, flexitime, part-time employment, etc.
Quality Circles
Quality Circles were originally associated with Japanese management and manufacturing
techniques and are one of the employee participation methods. They imply the development of skills, capabilities, confidence and creativity through a cumulative process of
education, training, work experience and participation. This requires the creation of facilitative organisational cultures and workplace conditions. Quality Circles have emerged
as a mechanism to develop and utilise the potential of people for improvement quality
and productivity.
Table 3.10 Comparison and contrast of Theories X, Y and Z
Management
concept
McGregor
Theory X and Y
Ouchi
Theory Z
Motivation
Either being unwilling or unmotivated to
work, or being self-motivated towards
work. Threats and disciplinary action
are thought to be used more effectively
in this situation, although monetary
rewards can also be a prime motivator
to make Theory X workers produce
more
Theory X leaders would be more
authoritarian, while Theory Y leaders
would be more participative. But in
both cases it seems that the managers
would still retain a great deal of control
Believes that people are innately
self-motivated to not only do their
work, but also are loyal towards
the company, and want to make the
company succeed
Leadership
Conflict
This type of manager might be more likely
to exercise a great deal of power-based
conflict resolution style, especially
with the Theory Z workers. Theory Y
workers might be given the opportunity
to exert negotiating strategies to solve
their own differences
Theory Z managers would have to have
a great deal of trust that their workers
could make sound decisions. This
type of leader is more likely to act
as a coach, and let the workers make
most of the decisions
Conflict in the Theory Z arena would
involve a great deal of discussion,
collaboration and negotiation. The
workers would be the ones solving
the conflicts, while the managers
would play more of a third-party
arbitrator role
58
The challenge of changing times
Table 3.11 Examples of Theory Z organisations
Organisation
Theory Z
Dangote cement (Morocco)
Happy, training and consultancy (UK)
John Lewis retail (UK)
Nikon, optics (Japan)
Komatsu (Asia)
Oticon, hearing aids (Denmark)
Semco, engineering (Brazil)
East African Brewers (Kenya)
Soantrach (Algeria)
SOSOL (South Africa)

*




*



Note: Companies marked * are examples of Theory WB organisations (see Chapter 13).
Action
New skills for a new world
Private moments of doubt and fear come even to managers who have spent years on the
job. Any number of events can trigger them: an initiative going poorly, a lukewarm performance review, a daunting new assignment. Hill and Lineback (2011) have long studied the
question of how managers grow and advance. Their experience brings them to a simple but
troubling observation: Most bosses reach a certain level of proficiency and stay there – short
of what they could and should be. Why? Because they stop working on themselves. Hill and
Lineback offer three imperatives for managers who seek to avoid this stagnation:
1
2
3
Manage yourself – who you are as a person, the beliefs and values that drive your actions,
and especially how you connect with others all matter to the people you most influence.
Manage your network – effective managers know that they cannot avoid conflict and
competition among organisational groups; they build and nurture on-going relationships
by practising a democratic approach.
Manage your team – team members need to know what’s required of them collectively
and individually and what the team’s values, norms and standards are. Allow teams to
make mistakes and praise them when they do good things.
According to a McKinsey Quarterly Report (Dobbs et al., 2014), the collision of technological disruption, rapid emerging-markets growth and a widespread ageing population
is upending long-held assumptions that underpin strategy setting, decision making and
management. Increasingly managers at all levels will be required to do much more than
just implement the plans declared by top management. They will be expected to define
problems facing their organisations in a rapidly changing and increasingly complex world
and to communicate this to top management. Information search and interpretation will
continue to be key skills and full-time technology workers could be displaced globally by
smart machines.
The convergence of IT and materials science will stimulate innovation that will change
how, where and why natural resources are used. Capturing these resource-technology opportunities will challenge existing management approaches.
Management revisited 59
Summary
Management is both a rank in an organisation and a set of skills that can be practised at the
individual, group and top management (organisational) levels. Good managers learn first to
manage themselves successfully before attempting to lead others. They encourage, facilitate
and sustain effective and efficient team-working toward a common vision.
Discussion questions
1
2
3
4
5
6
7
Explain what is meant by the term management.
What is the difference between the concept of efficiency and the concept of effectiveness?
Describe the five primary management processes.
What are the basic guidelines for managing self or an individual?
What are the basic guidelines for managing groups?
What are the main tasks of top management?
Study the websites of the organisations listed in Table 3.11. What distinguishes a Theory
Z organisation from a Theory Y organisation?
Case exercise
SASOL: encouraging individual initiative and freedom
SASOL is a South African-based international integrated chemicals and energy company,
founded in 1950, that leverages technologies and the expertise of their 30,400 people working in 36 countries. The company develops and markets technologies, and builds and operates
world-scale facilities to produce a range of high-value products, including liquid fuels, chemicals and low-carbon electricity. SASOL has been a consistent investor in capital projects,
skill development and technological research and development to pioneer innovation for
over six decades. As market needs and stakeholder expectations have changed, so too have
their methods, facilities and products, to deliver sustainable long-term shareholder value.
Vision, values and goals
The company’s corporate vision is to grow profitably, sustainably and inclusively, while
delivering value to stakeholders through technology and the talent of their people in the
energy and chemical markets in Southern Africa and worldwide. SASOL’s goal is to be
recognised as a company that delivers long-term value to its shareholders, employees and
stakeholders. The company’s six shared values define what they stand for as an organisation:
••
••
••
••
••
••
Safety: a commitment to safety in all that they do.
People: the creation of a caring, engaged and enabled work environment that recognises
both individual and team contributions in pursuit of high performance.
Integrity: act consistently on a set of values, ethical standards and principles.
Accountability: take ownership of behaviour and responsibility to perform both individually and in teams.
Stakeholder focus: serve stakeholders through quality products, service solutions and
value creation.
Excellence in all they do: delivering what they promise and adding value beyond customers’ expectations.
60
The challenge of changing times
SASOL’s culture
The company’s culture is characterised by a dynamic, entrepreneurial and creative workplace. People are encouraged to use their initiative and take risks. Leadership is visionary,
innovative and risk-oriented. The organisation is committed to experimentation and innovation. A strong emphasis is placed on the importance of the company being at the leading
edge of incremental and radical innovation. Readiness for change and meeting new challenges is important. The long-term emphasis is on rapid growth and acquiring new resources.
Success means producing unique and original products and services. The SASOL organisation encourages individual initiative and freedom.
Questions
1
2
3
4
Which of the management styles featured in Table 3.7 best describes SASOL? What are
your reasons for your choice?
What theory model best describes SASOL?
How, in your opinion, might SASOL take steps to ensure that its R&D and general
innovative activity, in contrast to Nokia’s mobile phone business, is soundly market
oriented?
What lessons might SASOL learn from the Japanese approach to businesses that were
inspired and followed the work of Ouchi?
YouTubes
‘Sasol: A Leading International Integrated Energy and Chemical Company’, https://www.
youtube.com/watch?v=ekTmCXI4WVw.
‘Sasol’s Commitment to Sustainable Development’, https://www.youtube.com/watch?v=
YQ4Z8Wkh2YY.
References
Agut, S. and Grau, R. (2002) ‘Managerial competency needs and training requests: The case of the
Spanish tourist industry’, Human Resource Development Quarterly, Vol. 13, Issue 1, Spring,
pp. 31–51.
DeLong, T. and DeLong, S. (2011) ‘Managing yourself: The paradox of excellence’, Harvard Business
Review, April, Kindle edition.
Dobbs, R., Ramawamy, S., Stephenson, E. and Vigueri, S. P. (2014) ‘Management intuition for the next
50 years’, McKinsey Quarterly, September, pp. 1–3.
Fayol, H. (1916) Industrial and General Administration, Paris, Dunod.
Hill, L. A. and Lineback, K. (2011) ‘Are you a good boss: Or a great one?’ Harvard Business Review,
January/February, Vol. 89, Issue 1/2, pp. 124–31.
Hughes, T., Bence, D., Grisoni, L., O’Regan, N. and Wornham, D. (2011) ‘Scholarship that matters: Academic–practitioner engagement in business and management’, Academy of Management
Learning & Education, March, Vol. 10, Issue 1, pp. 40–57.
Kruyt, M., Malan, J. and Tuffield, R. (2011) ‘Three steps to building a better top team’, McKinsey
Quarterly, Issue 1, pp. 113–17.
Lambrechts, F. J., Bouwen, R., Grieten, S., Huybrechts, J. P. and Schein, E. H. (2011) ‘Learning to
help through humble inquiry and implications for management research, practice, and education:
An interview with Edgar H. Schein’, Academy of Management Learning & Education, March, Vol.
10, Issue 1, pp. 131–47.
Management revisited 61
McGregor, D. (1960) The Human Side of Enterprise Annotated Edition, New York, NY, McGraw-Hill.
Ming-Jer, C. and Miller, D. (2010) ‘West meets East: Toward an ambicultural approach to management’, Academy of Management Perspectives, November, Vol. 24, Issue 4, pp. 17–24.
Mintzberg, H. (1973) The Nature of Managerial Work, New York, NY, Harper Row.
Spitzeck, H. (2011) ‘An integrated model of humanistic management’, Journal of Business Ethics,
March, Vol. 99, Issue 1, pp. 51–62.
Trapp, L. N. (2011) ‘Staff attitudes to talking openly about ethical dilemmas: The role of business ethics conceptions and trust’, Journal of Business Ethics, November, Vol. 103, Issue 4, pp. 543–52.
White, R. D., Jr. (2010) ‘The micromanagement disease: Symptoms, diagnosis, and cure’, Public
Personnel Management, Spring, Vol. 39, Issue 1, pp. 71–6.
Selected YouTubes
Definition of management – ‘Creativity, Innovation and Entrepreneurship: Glenn Gaudette
at TEDxWPI’, https://www.youtube.com/watch?v=xPO1fOR9B68.
‘Management Basic Concepts: The Four Functions of Management’, https://www.youtube.
com/watch?v=eSXP7VgGcz0.
‘What’s Your Management Style?’, https://www.youtube.com/watch?v=HLemo0kQh0s.
‘Akio Morita: Comparing Japanese and American Business Practices’, https://www.youtube.
com/watch?v=b5t4ceerkhg.
‘Douglas McGregor Theory X & Y’, https://www.youtube.com/watch?v=57jNs3EwBQE.
‘Theory Z’, https://www.youtube.com/watch?v=YQo4UXsJHhA.
Part II
Innovation from theory to practice
4
Business creativity
It’s an old maxim of mine that when you have excluded the impossible, whatever remains,
however improbable, must be the truth.
(Sir Arthur Conan Doyle)
Discovery consists of seeing what everybody has seen and thinking what nobody thought.
(Albert von Szent-Györgyi)
Learning objectives
This chapter explores:
1
2
3
4
5
6
What is creativity?
Understanding thinking.
Contextual factors affecting personal creativity.
Assessing personal creativity potential.
Left-brain and right-brain thinking model.
Introducing the total thinking model.
Introduction
The challenges organisations face as a result of the business environmental paradigm
change discussed in Part I call for fresh thinking. The portfolio of management responses
that was both effective and efficient in the era of sellers’ markets (collectively referred to
as the least-cost production/supply paradigm) need to be revised in order to respond successfully to the different problems posed by buyers’ markets. In most cases this requires a
radical change in thinking. This is the essence of business creativity and the process starts
with a review of thinking at the individual level. The chapter explores the process of thinking by describing the physiology of the brain and discussing how the process of thinking
occurs. Once the fundamentals of thinking have been explored the next task is to apply the
key principles to the individual’s problem-solving practice. This requires both mental flexibility and a tolerance of ambiguity and is a fundamentally a personal journey of discovery.
Practical exercises are included to assist individuals to realise the need to evaluate their
thinking approach to business problems. (See Figure 4.1.)
66
Innovation from theory to practice
Figure 4.1 Overview of business creativity.
Nasruddin
Mulla Nasruddin was once attempting to repair something, without apparent success, when
an onlooker asked scornfully, ‘Do you know what you’re doing?’
Nasruddin replied, ‘No, that’s why I’m doing it.’
The field of creativity research is rich with examples from the lives of remarkable individuals, but lacks an accepted framework for approaching the many issues that arise when
trying to make more general sense of the data. To produce such a framework is an important
aim of this chapter.
Business creativity 67
Context
What is creativity?
Creativity is a natural gift and part of the wholeness (gestalt) of every individual. It can and
should be encouraged. This offers the individual the opportunity to derive more satisfaction
from life. Understanding creativity is difficult if we strive to define it in rules and try to put
it in a box. By its very nature it is unpredictable, unique, infectious and real. Most, excepting those with closed minds, can quickly appreciate it when they see it. True creativity has a
beauty of its own that often defies logical explanation. So are civilisations all over the world
in danger of losing their way by attempting to justify creativity? Can it be bottled, concentrated in a pill and swallowed? Is it possible to control it by logic alone? Or is it a mysterious
force that seems to bless us in puzzling, usually joyful, ways?
Creativity is a unique force that distinguishes the higher orders of fauna, such as homo
sapiens from the rest of creation. Other creatures are capable of expressing creativity and
creative thought. Squirrels, for example, can do amazing things in pursuit of food. Humans,
however, are generally accepted to be the most advanced form of life. So the way in which
humans think would seem to hold promise if we are to appreciate human creativity and fully
achieve our individual potential to express it. The next section explains how the human brain
works. Prepare to be surprised.
Definitions
Creativity has been defined as the generation of new ideas by approaching problems or
existing practices in innovative or imaginative ways. It is stated that creativity involves
re-examining assumptions and reinterpreting facts, ideas and past experience. It is also
reported that a growing interest in creativity as a source of competitive advantage has
developed in recent years (Business & Management Dictionary, 2007; Banks et al., 2002;
Dundon, 2002). It is an imaginative process with outcomes that are original and of value.
One way to find out more about creativity is to ask people about their conception of a
creative person. Whether they are lay people or experts in a field, people have implicit theories about what it means to be creative. They usually identify personality and cognitive
elements such as:
••
••
••
••
••
••
••
connects ideas;
sees similarities and differences;
is flexible;
has aesthetic taste;
is unorthodox;
is curious, inquisitive;
questions accepted ways of doing things.
Another way to tease out the governing conditions of creativity is to look at paradigm case
examples of what the most creative people do. Much research has gone into trying to understand creativity by looking at the way creative minds work (Gardner, 1997). By studying
exemplars of creativity such as world-famous writers, artists or inventors one might find a set
of necessary and sufficient conditions which defined their creativity. We then might want to
try to recreate those conditions in our homes, schools, businesses and community. All have
the mental resources to be creative (see Chapter 5).
68
Innovation from theory to practice
Process
Research into the habits of creative people reveals certain common characteristics. They:
••
••
••
••
generate ideas;
are flexible in their thinking, experiment and seek variation;
strive for originality;
provide examples of their work.
Generate ideas
Creative people tend to have lots of ideas. They do not limit their thinking to a few ideas;
they want more ideas and better ideas. The more they have the greater the likelihood that
some of them will work. Some ideas will go wrong. As Edison, the inventor of the telephone
said, he needed 100 ideas for he knew that 99 of them might be wrong. Inside the oyster of
an idea may be a pearl. Creative people do not discard ideas simply because they seem at first
to be a bit odd or unworkable. Output of ideas spurs further ideas, each of which may have
an unexpected potential. Creative people are rarely half-hearted. They make an effort to keep
thinking, to become absorbed, immersed and fascinated in the subject in hand for the ideas
to flood in. When Tolstoy was writing a novel he said he ‘knew’ all his fictional characters
inside out because he had thought so much and generated so many ideas about them.
Creative people
Creative people are able to overcome the mental blocks to their thinking through being flexible and divergent. Some of these blocks include the tendency to think that:
••
••
••
there is only one right way to do things;
we know all there is to know;
it is wrong to experiment with new ideas.
Being creative means not having to be stuck with one idea, one approach and one way
of doing things. It is having the ability to move from a known way to a new way, being
willing to change your ideas or views if you need to. Creative people have a thirst for
knowledge. They use imagination to play with ideas. They are willing to experiment. The
French mathematician Poincaré said: ‘Experiment is the sole source of truth.’ It is also the
source of all creativity. Creative people are curious, open-minded and have the confidence
to try new ideas.
Strive for originality
Creative people strive for originality by thinking of novel ideas, finding new solutions to
problems or creating their own unique ways or plans for doing things. They extend their
thinking through a process of elaboration. They are willing to improve on an original idea,
so that what they add improves on or takes further the original idea. Elaboration is shown
in the number and quality of different ideas used to add on to the original idea, expanding on existing knowledge, extending an idea to make it more complex or build a unique
feature into a given situation. They try alternatives and don’t give up easily. They have
‘stickability’ – they know that creativity often requires a tremendous struggle for a vision
Business creativity 69
to be realised. The painter Turner said: ‘My paintings bring me nothing but pain. The reality is so immeasurably below the conception.’
Provide examples of their work
Creative people work hard and continually to improve ideas and solutions, by making gradual
alterations and refinements to their works. Contrary to the mythology surrounding creativity,
few works of creative excellence are produced with a single stroke of brilliance or in a frenzy
of rapid activity (Breen, 2004). Here is Beethoven describing his way of working:
I carry my thoughts with me for a long time, often for a very long time before writing them
down . . . I change many things, discard others and try again until I am satisfied; then, in
my head, I begin to elaborate the work . . . the underlying idea never deserts me. It rises, it
grows. I hear and see the image in front of me from every angle.
(Gruber and Wallace, 1999)
Newton claimed that what enabled him to make discoveries in mathematics and science was
his ability to concentrate intently on a problem for hours, days and weeks on end. Research
shows that experts in any creative field take about 10 years of practice before they produce a
masterwork (Sternberg and Lubart, 1999). Creative excellence in any field seems to require
long-term interest and investment of effort (Sternberg, 2006).
The problem with studying paradigm cases of creative people who have excelled in their field
is that they are vulnerable to paradigm shift (Kuhn, 1975). Thus the analysis may fit well with the
works of preceding artists who were imbued with a reverence for the tradition they were working
in, but it may not fit the works of revolutionary creative thinkers. The old ways of study may not
fit new technologies. We cannot reinvent the future by copying the traditions of the past. Creative
people can learn from a past tradition but need to move beyond that tradition to achieve the most
creative expression of their ideas. They need to move into new paradigms, new ways of thinking.
Most acknowledge that creativity exists. Many can name a creative person, alive or dead,
though it is amazing how many people seem to think that creativity and the afterlife go
together! This chapter asserts that all individuals are naturally creative and that this is by
design and not an accident of birth. Of course, some are more creative than others. However,
we all have tremendous potential. The curious thing is that many of us keep our creativity
under wraps. Perhaps this is because many of us find it easier this way. Many individuals and
groups seem to radiate a latent hostility toward creative people. This makes about as much
sense as this text trying to convince you that you do not exist!
Curiously, when Western wealth-creation activities were primarily facing a supply gap,
the pearl of great price was not creativity or innovation but compliance. The pursuit of order
portends a strong attraction to many ‒ usually those doing the ordering ‒ and is necessary for
some of the adventures of life. If it becomes the norm ‒ the way things are done at all times ‒ it
restricts the creative force. Practised to excess it can sometimes lead to a dangerous myopic
condition. As the forces of change are ‘neutralised’ or managed for administrative convenience
and short-term advantage so the real, long-term cost becomes staggering. Suddenly in a series
of unstoppable shifts the contextual factors impacting on wealth creation undeniably enter a
period of explosive change. The result is a dangerous crisis that frequently does not play the
game by the rules. As instability is met by complacency, living standards are threatened. What
is needed is a new management approach that is contextually aware.
In such a predicament we can place our trust in man’s ingenuity, but only if it is given
sufficient space.
70
Innovation from theory to practice
Creative people in business in Africa, Asia, Europe and
South America
Africa
Richard Brasher – CEO of Pick n Pay for continued supply of affordable food for all
customers is motivated by the three principles of consumer sovereignty, doing good is
good business and maximising business efficiency.
Yasmin Belo-Osagle ‒ developed female entrepreneurs across Africa.
Asia
Amit Agarwal – the former assistant to Amazon’s CEO, Jeff Bezo, established a dominant foothold for Amazon in India.
Jean Liu – president of Didi Kuaidi, daughter of the founder of Lenovo, built China’s
largest car-sharing and taxi business.
Europe
Maria Grazia Chiuri – reinvigorated the Rome-based Valentino brand together with
co-creative director Pierpaolo Piccioli.
South America
Maria Claudia-Laccutre ‒ president of ProColumbia, rebranded the government agency
that promotes non-traditional Columbian exports, foreign investment and international
tourism.
Carlos Mario Rodriguez – completed a crossbreeding of Starbucks first-ever hybrid of
a high-producing coffee plant that is rust resistant.
Sources: FastCompany, ‘Most creative people 2015 and 2016’; pick n pay website, http://www.
picknpay.co.za/about-us-introduction.
Ordinary individuals just need to believe that it can happen. A vital first step is for an individual to rediscover their own creativity. It is hoped that this chapter will help many honest
enquirers.
Key principles
Understanding thinking
To realise the full potential of our brains it is helpful to briefly explore how the physiology
works before assessing our creative thinking potential.
Business creativity 71
Physiology of the brain
By any account the human brain is an incredible machine. It controls all the activities and
reactions of the body and is the centre of emotion, memory and personality. Whereas the
heart is the functional centre, it is the pump that circulates our blood; it is the brain, the
organic computer that is the true expression of life. Whereas the heart enables us to be,
the brain enables us to live. It is made up of millions of very small cells called neurons.
The average individual has over ten thousand million of them (Encyclopaedia Britannica,
2006). They are two categories of cells: those that carry information to and from the body
via the spinal cord and those that cross-connect the constituent parts of the brain. Basically
there are three key parts to the brain: the cerebrum, the cerebellum and brain stem or
medulla oblongata, as shown in Figure 4.2.
The brain is the coordinator of the nervous system and controls most of our conscious
and unconscious actions. The cerebrum is the largest and most highly developed part of the
brain and on inspection looks a little like a walnut. It consists of two approximately equal
halves or lobes called the cerebral hemispheres. In humans this part of the brain is so large
that it has had to be wrinkled, like a walnut, to fit into our shells or skulls. The surface of the
cerebrum is referred to as the cerebral cortex or grey matter. Below the cerebral cortex is
the white matter that is a mass of nerve fibres connecting the cortex with the body and other
parts of the brain. Information flows into the brain from the body by a process known as
sensation. Messages come from the skin, muscles, eyes, ears, nose and other sense organs by
the sensory nerves. The brain processes the information and then sends out responses along
the motor nerves to the muscles of the body that control all the body movements. Different
areas of the cortex control different parts of the body. Curiously, the left side of the brain
controls the right side of the body and vice versa, with the centre brain somehow coordinating this activity.
The cortex is the place that determines our awareness of the environment around us. The
eyes look at the world and the ears listen, but it is the cortex that sees, hears and understands.
It decides what responses to trigger having evaluated the external stimuli. This is where trust
or suspicion is determined and it is the centre of our creativity. The cerebellum is below the
cerebrum (see Figure 4.2) and assists the cerebral cortex by providing fine control of intricate
movements, such as walking, writing and driving. The medulla oblongata, or brain stem,
connects the cerebrum and cerebellum to the spinal cord and so to the rest of the body. This
part of the brain provides a largely automatic control of the body’s internal organs.
Figure 4.2 Lateral view of cerebrum, cerebellum.
72
Innovation from theory to practice
The working brain: a synaptic wonder
Each brain cell or neuron is structurally independent. In other words, they do not come into
contact with each other. They communicate with other cells by a subtle interchange of complex electrochemical signals, which is a process known as contiguity and was first advanced
by the Spanish scientist Ramon y Cajal in 1889. Each neuron has three distinct components:
the cell body or soma; the main nerve fibre or axon, which is the main exit of information
transmitted by the cell; and a number of receiving branches or dendrites. Dendrites and axons
range in size from a millimetre to one and a half metres in length. All along their length
are little acorn-like shapes called dendritic spines or synaptic buttons that contain chemical
material that provide the means for connections to be made between brain cells. This occurs
when an electrical impulse travels through the liquid filled space between two adjacent cells
and connects their synaptic buttons.
The amount of activity going on in the brain is incredible. It can usefully be likened to the
amount of traffic through a busy electronic telephone exchange. Incoming messages are automatically connected to a multitude of cells as the brain processes the input stimuli to produce
a suitable response or outcome. This is the product of a complex evaluation procedure that
coordinates the contributions of thousands of individual brain cells and produces a distinct
electromagnetic routing or pathway that is known as a memory trace. If the same or similar
stimuli or enquiry is repeated, the brain automatically energises the memory traces it formed,
thus speeding up the response time. This is the essence of learning. As each brain cell is
capable of directing information to as many as 10,000 other brain cells in the same instant,
the problem-solving potential at the individual’s disposal is virtually infinite.
Practice
Contextual factors affecting personal creativity
Anyone is capable of responding creatively. The issue is to what end and how often. Of
course, some will be naturally more creative than others. Figure 4.3 illustrates some of the
ways that ordinary everyday people exhibit creativity. The degree to which personal creativity occurs depends on a complex set of environmental or contextual factors. Social pressures,
such as the pressure to conform to group norms, can either encourage or discourage creativity
depending on the value placed on such activity by the dominant social rules. Technology can
trigger creativity when a new and accepted (wanted) application suddenly appears. A useful
example of this is provided by the development of the electric toothbrush that took off after
the technology behind rechargeable batteries was perfected. Economic factors too can play
their part, as many on low budgets know when they ‘make a penny do the work of a pound’.
Finally, political factors can influence creative responses. Examples of this include a variety
of novel ways of ‘getting round’ ‒ legally and otherwise ‒ existing and proposed legislation.
Take some time out and think of a handful of examples!
Whilst creativity will occur, to some degree, even when it is discouraged and opposed by
organisations in society, its incidence increases if it is actively encouraged. This coaxing has
to occur at two distinct levels: that of the individual and that of the social groups/organisations
to which the individual belongs. An adult, like a child, needs to feel safe if he or she is to play
creatively. Heightened tension and emotional pressure are bad for creativity. The individual
has to experience a satisfactory level of safety and to trust the personnel around him or her.
No trust, little creativity.
Business creativity 73
Organisations and creativity
Organisations cannot respond creatively. What they can do, though, is to actively encourage their individuals. Thus the incidence of creative activity is contextually governed by the
degree of group and/or organisational support. At the individual level the vibes that are in the
air have to be convincing. Corporate motherhood statements and other forms of ‘chin music’
are to no avail unless the ‘place feels right’. When this is the case then the people will invoke
the processes and creative responses will occur.
Expressing natural skills
Whilst it is true that all individuals possess creativity ‒ it’s a gift of nature ‒ most of us fail
to make the most of it. As creativity is a dynamic phenomenon, a force, we cannot learn to
effectively improve our use of it by only studying the literature. If we realistically wish to
develop our creativity skills then we must be prepared to have a go. The first major challenge facing many individuals is to overcome their shyness and apprehension and let the
genie out of the bottle. Starting with the knowledge that all individuals are creative is both
reassuring and challenging. It provides comfort in that most of us are aware of our creative
achievements, no matter what private beliefs we may harbour about their frequency, strength
or durability. It presents a challenge in that most will readily accept that any skill can be
developed by sustained exercise.
Car drivers have to overcome inhibitions and agree to take their first driving lesson.
Then, despite the possibility of a few shocks and surprises, they need the resolution to
see a driving tuition programme through and then to present themselves for examination.
If successful, most drivers then cease to put a lot of sustained effort into improving their
general driving skills. Experience on the open road does develop their driving skills in
some respects but also leaves them prey to developing bad habits. Most, for example,
fail to continuously update their knowledge of the Highway Code. In short, many of us
become lazy. We are easily satisfied with a relatively low level of achievement. Some of
us later rue this, when a sudden challenge to our skill response leaves us wanting. As the
environment on the roads is constantly changing we would be wise to keep our relative
skill level high. Frequently the problems we face are the result of someone else’s failings.
Thus, to survive on today’s roads we need to be continuously updating both our own driving skills and learning how to cope with the mistakes of others. Passing the driving test
and just driving is not sufficient. Likewise, making do with our natural creativity skill
level is not enough.
Action
Assessing personal creative potential
If we are intent on discovering what we can do to improve our creativity, it is helpful to
start by getting a measure as to where we are now. This can be achieved, to some extent, by
recourse to an appropriate audit or inventory. An improvement programme can then build on
this apparent skill level. It is important to realise that such ‘tests’ are not infallible measures
of our creative performance. They merely confirm that we are creative and provide some
indicative evidence of the use to which we consciously put creative skills. A subsequent running of the selected audit should then provide evidence of development.
74
Innovation from theory to practice
There are a number of tests widely available that can help us to get a picture of our present level of creative activity. However, few were designed exclusively to reflect creative
responses. Most are intended to reveal other personal characteristics such as psychological
type (Myers-Briggs and McCaulley, 1988), personality (16PF, see http://similarminds.com/
cattel-16-factor.html (accessed 15 June 2016)) and learning styles (Kolb, 1984; Honey and
Mumford, 1985; Pritchard, 2014) or team working attributes (Belbin, 1981). One (Kirton,
1987) was developed to measure creative style.
Personal Creativity Audit
The Personal Creativity Audit (PCA) was developed at Durham University to provide evidence that individuals are creative and to give an indication of an individual’s tendency to
use creativity skills in daily situations. Appendices 4.1 and 4.2 contain the PCA together with
responses and scoring instructions. For any such inventory to be useful it has to be capable
of measuring what it is intended to measure and to be reliable in the responses that it elicits
from respondents. However, some people will inevitably try to read the algorithm to deliberately register high scores rather than complete the inventory with a view to seeing what it
says about them. Despite these reservations such inventories can provide a snapshot that can
be illuminating.
Personal creativity in action
How do you think you can help yourself to release more of your natural creativity? Take a
short break and try to jot down at least five ideas.
Figure 4.3 Activities that entail personal creativity.
Business creativity 75
Here are a few exercises and ideas to help you develop your own creative thinking.
••
••
How many potential uses can you think of for an ordinary paper clip?
Irrespective of how good an artist you judge yourself to be, grab a piece of paper
(A4 size is ideal) and try and draw a quick head and shoulders sketch of yourself. Now
choose a hat from the options below.
{{
{{
{{
{{
{{
Mexican hat
Top hat
Cloth cap
Deerstalker
Chef’s hat
Now draw your chosen hat on your head and shoulders.
Why did you choose the hat you did? Express your reasons in a short sentence.
Would you have preferred to have chosen one of the other hats? If so, which one and
why did you pass it by? If it was because you had doubts as to whether you could draw
it have a go right now.
How many uses can you think of for an ordinary builder’s brick?
Now ponder on the following:
According to all the laws of aerodynamics, a bumblebee cannot possibly fly. The bumble
bee does not know this, so it goes ahead and flies anyway (Anonymous).
When in doubt, make a fool of yourself. There is a microscopically thin line between
being brilliantly creative and acting like the most gigantic idiot on earth. So what the
hell, leap (Heimal, 1983).
••
Play a track of your favourite music. How would you:
{{
{{
{{
••
Briefly describe it with words?
With pictures?
Can you hum it unaccompanied?
Look out of the window and focus for half a minute on an object.
Now close your eyes. Think of something that has been troubling you today. Think about
the object . . . make any connections? Get any good ideas? If not, try again, and you too can
experience the Eureka effect!
Work environment and performance
No matter how we look at individual responses there is little doubt that the organisational
work environment has a direct effect on performance. The role models, paradigms, reward
systems, management culture, peer pressures, official and unofficial and psychological contracts all act to encourage some responses and to discourage others. This places – as will be
explored in Chapters 5 and 7, a considerable responsibility on individuals who seek to work
in teams. Figure 4.4 summarises four response sets that have been discovered in research
work in England. If an individual is working in an environment where the management
76
Innovation from theory to practice
are highly concerned about their own interests and render poor regard to the individual’s
interest, this is likely to result in programmed, robotic responses from the member of staff.
This situation is typified by people going through the motions to earn their corn and is
unlikely to encourage a creative attitude to the job. On the other hand, where management
are concerned with the personal wishes of their staff this will trigger a reciprocal response
from the individuals and will provide the opportunity for highly creative responses.
However, if these responses are not continuously encouraged and action is seen to result,
this can lead, sadly, to situations where the individual becomes disenchanted. If this occurs
then the goose that laid the golden egg is effectively killed and the individual will slip into
the damped innovation quartile and possibly to the robot quartile.
Whilst there is merit in an individual taking stock and seeking to discover a position on an
audit such as KAI (n.d.), MBTI (n.d.) or LSI (Duff and Duffy, 2002), it must be remembered
that these inventories only provide, at best, some indicative information. This must then be
closely vetted for its contextual relevance – most people appear to be different at home from
the way they are at work. Most psychometric tests carry error propensities resulting from a
variety of factors such as environmental/contextual issues, test procedures and classification
typologies, and so on. Furthermore, some individuals may be discouraged by the results of
such inventories and so withdraw into their shells, especially if they perceive that management are not very interested in them. Others may, unless carefully advised, believe that core
behaviours and responses cannot be changed. Whilst this is true for the broad personality
characteristics that tend to be set in the first 20 years of life, it is not true for several learnt
behavioural responses that can be changed. Individuals can choose to change many of their
behavioural responses such as learning and skill styles.
Left-brain and right-brain thinking model
Have you ever heard people say that they tend to be more of a right-brain or left-brain
thinker? From books to television programmes, you’ve probably heard the phrase mentioned
numerous times or perhaps you’ve even taken an online test to determine which type best
describes you. In right-handed people it is thought that the left-brain lobe is the centre of
Figure 4.4 Individual response patterns.
Business creativity 77
deductive logical thinking with the right lobe being the centre of creative thought. The pattern is reversed for left-handed people. The theory was first publicised by the American
psychologist R. W. Sperry who was awarded the Noble Prize in 1981.
Clearly, it is desirable to gain insight into how we can maximise our thinking potential.
We need both critical and creative thinking, both analysis and synthesis, both the parts and
the whole to be effective in our thinking. We need reason and intuition, order and adventure.
We need creative thinking to generate the new, but critical thinking to judge it. The technological world enables us to access knowledge in abundance, but creativity is in short supply.
Many have sought to differentiate these two kinds of thinking Table 4.1 presents a summary
of the most commonly found distinctions.
According to the American psychologist R. W. Sperry, the two hemispheres of the cortex
appeared to control separate, distinct intellectual enquiries (see Table 4.2).
The right hemisphere appeared to be active in the processing of the following:
••
••
••
••
••
••
rhythm
spatial awareness
gestalt (wholeness)
imagination
colour
dimension.
Table 4.1 Exploring logical and creative thinking
Logical left-brain thinking
Creative right-brain thinking
Analytic
Convergent
Vertical
Probability
Judgement
Hypothesis testing
Objective
Single solution
Closed
Linear
Quantitative
Logical
Yes but . . .
Generative
Divergent
Lateral
Possibility
Suspended judgement
Hypothesis forming
Subjective
Possibility of several solutions
Open-ended
Associative
Qualitative
Intuitive
Yes and . . .
Table 4.2 Cortical hemispheres
Left-brain functions
Right-brain functions
Written language
Number skills
Reasoning
Spoken language
Scientific skills
Right-hand control
Insight
3-D forms
Art awareness
Imagination
Music awareness
Left-hand control
78
Innovation from theory to practice
The left hemisphere, by contrast seemed to process an equally important but different pattern
of memory traces covering a variety of learnt skills including:
••
••
••
••
••
••
language
logic
quantitative ability
sequential ability
linear ability
analytical ability.
Generally speaking, the left side of the brain tends to control many aspects of language and
logic, while the right side tends to handle spatial information and visual comprehension.
However, recent research has shown that the brain is not as dichotomous as once thought.
Today, neuroscientists know that the two sides of the brain collaborate to perform a broad
variety of tasks. The left-brain and right-brain theory has been over-generalised by popular
psychology and self-help texts but has its place in helping people to understand their respective thinking strengths and weaknesses.
Learning skills
When the range of skills – the ability to cut, develop and maintain complex memory trace
sets – of both cortical hemispheres are combined, the individual has a dazzling potential to
develop his or her thinking. The equipment is there for us to generate an amazing array of
responses. The degree to which we are able to do this is a function of our thinking skills and
our determination to improve them.
Many of us regard thinking as a natural skill and tend to get lazy in our approaches to
information processing and problem solving. Effective thinkers take care of their grey matter
as an athlete takes care of his physical skills. To do our best we need to look after our brains.
If we look at the incredible human machine in computer terms, as a unit of hardware, then
we can work towards getting the maximum from it by paying attention to how we put it to
use. Thinking can be likened to the sustained development of software. The quality of output
produced by computers is directly related to the quality of the input (in terms of clarity – the
what); the method of processing it (software – the how); and the performance specification of the machine (individual ability). Whilst it is true that each individual has a different
potential in terms of what can be achieved, as some are just cleverer than others, many of
us can improve our thinking performance by making the best use of our potential. This can
be achieved by thinking about thinking to select the most appropriate approach to solving a
particular problem. Many of us try to get our brains to give us an instant answer or quick fix.
We turn on our hardware and use the software already installed. If this can find the required
collection of memory traces then this represents our thinking. Whilst this is probably in order
for familiar problems this rather mechanistic or programmed approach will not serve us too
well with rather more complex and or infrequent problems. This requires total as opposed to
partial thinking.
Introducing the total thinking model
Total thinking, it is posited, occurs when we seek to focus the full power of our brain on
a problem. This means using the potential of both hemispheres of the cortex described
Business creativity 79
above. Strange as it may seem, many peoples around the world choose to develop the skills
in the left hemisphere to a higher level than those of the right hemisphere. This produces
an over dependence on logic as a key response to stimuli and the associated tendency to
try to think in terms of programmed patterns. Overdependence on such partial thinking
can result from personal choice or from a perception that the intuitive, emotive and ‘arty’
skills such as colour, design, imagination, movement and sound are in general not the way
to behave in public. This is curious as many of us actually take part in activities that utilise
these skills in public as well as paying to view other people performing! Obviously there
has been some sustained conditioning here that over time has resulted in the development
of certain traditions or paradigms that preclude the regular adoption in our public lives of
many right-brain skills.
Perception
Priming illusion
1000
20
30
1000
1030
1000
20
________
Add up the row of numbers out loud. What is your answer? Do it again? Most people
get the wrong answer! Only look in the appendices after you have tried to this exercise.
Half-brained thinkers!
Both hemispheres of the cortex provide potentially powerful problem-solving power.
In reality, all individuals will display a degree of total thinking in their private and professional lives, as they are people. The issue is the degree. In most cases it is small, as
individuals tend to select a thinking style that is usually highly biased to the left hemisphere, so in terms of degree are predominantly partial thinkers. Gifted artistic individuals
can exhibit the reverse pattern. Both will fail to achieve the benefits that flow from a
better-balanced use of total thinking. In many respects such people could, with tongue in
cheek, be accused of half-brained thinking! Perfection, defined as a completely balanced
total thinking approach to life, is very difficult to achieve. However, as the positive benefits
from minor gains in our use of both left- and right-brained thinking are so immense we are
all capable of developing our problem-solving performance. The question is whether we
choose to do so.
80
Innovation from theory to practice
Figure 4.5 What do you see at first?
Creative thinking applications
The following are some of the ways creative thinking can be used:
••
••
••
••
••
••
To foster a more innovative, forward thinking culture able to respond to rapid changes
in the marketplace.
To support the development of a new, more effective innovation strategy.
To enable leaders to solve persistent problems.
To help an older more traditional organisation shake off bureaucracy and shift to a more
flexible, responsive, innovative culture.
To help develop creative thinking approaches in project work teams faced with solving
new business challenges.
To respond to the impact of technology on business processes.
The ability to demonstrate creative thinking is much in demand by companies and many may
wonder just how do I, an ordinary person, develop the ability to demonstrate prowess. See the
outline notes on the CPS toolbox featured in the appendix to Chapter 5.
Summary
This chapter has revisited thinking. In the current business environment, individuals, groups
and organisations need to sharpen their thinking skills. Whilst core knowledge (general or
specific) is necessary, in times of discontinuous change it requires special thinking skills if it is
Business creativity 81
to result in discoveries that are truly innovative. Total thinking is a process that enables the full
power of people’s brains to be applied to problems that result from the challenges presented
by a dynamic and competitive business environment. Success cannot now be assumed to result
by steadfastly using yesterday’s processes and theories. The business world requires managers
to develop a new way of doing things. This chapter has sought to show how thinking can be
boosted if individuals, groups and top management personnel can learn to make use of both
left- and right-brain thinking. This will enable them to discover a new expertise for today’s
challenging business context. Chapter 5 seeks to equip you with a set of practical thinking tools.
Discussion questions
1
2
3
4
How would you explain what creativity is to a fellow student or work colleague?
Name three living creative business people.
Why is meant by the term total thinking?
What is the difference between logical thinking and creative thinking?
Exercises
Sexism
List as many examples of gender discrimination in the workplace as you can. See Appendix 4.3
for the top 10!
YouTube
‘Sexism Coverage Steals the Show at 2016 Olympics’ https://www.youtube.com/watch?
v=eUhf-Jyy1_Y.
Beijing Express problem
Instructions
See if you can solve the problem posed below. Proceed as follows:
1
2
Try to solve the problem in 10 minutes maximum. If you feel that you have discovered
the answer turn to Appendix 4.4 to check if you have been successful.
Now find a friend or colleague and see if they can solve the problem in 10 minutes maximum.
If they declare the wrong answer explain how you worked out the correct solution.
Brief
••
••
••
••
••
••
••
Four spies in trench coats sat in four facing seats.
They travelled the Beijing Express.
With two by the window and two by the aisle.
The arrangement was strange, as you’ve guessed.
The British spy sat on Mr B’s left.
Mr. A had a tan coloured coat.
The spy dressed in olive was on the German’s right.
82
Innovation from theory to practice
••
••
••
••
Mr. C was the only cigar smoking man.
Mr. D was across from the American spy.
The Russian, in Khaki, had a scarf around his throat.
The British spy stared out of the window on his left.
SO WHO WAS THE SPY IN THE RUST COLOURED COAT?
References
Banks, M., Calvey, D., Owen, J. and Russell, D. (2002) ‘Where the art is: Defining and managing
creativity in new media SMEs’, Creativity & Innovation Management, December, Vol. 11, Issue 4,
pp. 255–64.
Belbin, M. (1981) Management Teams: Why they Succeed or Fail, Oxford, Heinemann.
Breen, W. (2004) ‘The 6 Myths of Creativity’, Fast Company, December, Issue 89, pp. 75–8.
Business & Management Dictionary (2007) London, Bloomsbury Business Library.
Duff, A. and Duffy, T. (2002) ‘Psychometric properties of Honey & Mumford’s Learning Style
Questionnaire’, Personality and Individual Differences, 5 July, Vol. 33, Issue 1, pp. 147–63.
Dundon, E. (2002) Seeds of Innovation, American Marketing Association, Chapter 1, ‘Believe in creativity’.
Encyclopaedia Britannica (2006) 15th edn, Chicago, IL, Encyclopaedia Inc.
Gardner, H. (1997) Extraordinary Minds: Portraits of Four Exceptional Individuals and an Examination
of Our Own Extraordinariness, New York, NY, Basic Books.
Gruber, H. E. and Wallace D. B. (1999) ‘The case study method and evolving systems approach
for understanding unique creative people at work’, in Heppell, S. (ed.), Handbook of Creativity,
Cambridge, Cambridge University Press.
Heimel, C. (1983) ‘Lower Manhattan survival tactics’, Village Voice, Vol. 13, p. 26.
Honey, P. and Mumford, A. (1985) The Manual of Learning Styles, Maidenhead, Peter Honey
Publications.
KAI (n.d.) Kirton Adaptation Index, http://www.kaicentre.com (accessed 16 November 2016).
Kirton, M. J. (1987) Adaption-Innovation Theory (KAI) – Manual, 2nd edn, Hatfield, Occupational
Research Centre.
Kolb, D. (1984) ‘Problem management: Learning from experience’, in Srvastra, S. and Associates
(eds.), The Executive Mind, London, Jossey Bass.
Kuhn, T. (1975) The Structure of Scientific Revolutions, Chicago, IL, University of Chicago Press.
MBTI (n.d.) Myers-Briggs Type Indicator, http://www.myersbriggs.org/my-mbti-personality-type/
mbti-basics/ (accessed 16 November 2016).
Myers-Briggs, and McCaulley, M. H. (1988) Myers-Briggs Type Indicator, Palo Alto, CA, Consulting
Psychology Press.
Pritchard, A. (2014) Ways of R.J Sternberg (2006), ‘The nature of creativity’, Creativity Research
Journal, Vol. 18, Issue 1, Jan., pp. 87–98.
Sternberg, R. J. and Lubart T. I (1999) ‘The concept of creativity: Prospects and paradigms’, in
Sternberg, R. J. (ed.), Handbook of Creativity, Cambridge: Cambridge University Press.
Selected YouTubes
‘What Is Creativity?’, https://www.youtube.com/watch?v=By-lJdS6ofQ.
‘The Brain’, https://www.youtube.com/watch?v=kMKc8nfPATI.
‘Can You Solve the Chameleon Riddle?’, https://www.youtube.com/watch?v=IRC7_Uv72iI.
‘Left Brain vs Brain Education’, https://www.youtube.com/watch?v=XxSmOOaXrHk.
‘Balance Logical & Creative Thinking’, https://www.youtube.com/results?search_query=
Logical+vs+Creative+thinking.
Business creativity 83
‘How to Use the Brain More Effectively’, https://www.youtube.com/watch?v=BXJDJ8rqjLY.
‘How to Use a Mind Map’, https://www.youtube.com/watch?v=L0XzZCd2tPE.
Appendix 4.1: Personal Creativity Audit (PCA)
Instructions
1
2
3
Copy the questionnaire before attempting the audit.
Answer the questions honestly and as quickly as you can by placing a tick in the box that
most closely matches your characteristics.
Do not confer with others as you are completing the audit exercise.
Table 4.3 Personal Creativity Audit
Question
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Do you remember your dreams as images?
How often do you make time for hobbies?
How often do you read?
Do you like to stick to the rules?
Do you listen to others’ ideas?
Do you inspire others?
How often do you show a sense of
humour?
Do you take part in sporting activity?
Are you a perfectionist?
Are you an optimist?
Do you have any ideas of your own?
Are you courteous?
How often do you hum or sing?
Are you predictable?
Do you like exercising administrative
(rank) authority?
Are you a good listener?
Are you a resourceful person?
Do you tend to work on one idea at a
time?
Do you welcome change?
Do you have many original ideas?
Do you actively promote them?
Are you a loner?
Do you like organisations with lots of
rules and identified procedures?
Are you self-motivated?
Are you a good problem solver?
Are you good at improvisation?
Do you prefer to adapt the ideas of
others?
Do you challenge rules if you think that
they are silly?
If people oppose your ideas do you give
up promoting them?
Do you use metaphors when
communicating key points?
Never
Sometimes
Fairly often
Regularly
84
Innovation from theory to practice
Appendix 4.2: assessing PCA performance
Instructions
1
2
Circle the Descriptor you selected (i.e. Never, Sometimes, Fairly Often or Regularly) in
the table below.
Next add up your overall score and place it on the creative spectrum in Figure 4.6.
Table 4.4 Personal Creativity Audit coding
Question
Never
Sometimes
Fairly Often
Regularly
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
1
1
2
1
1
1
1
1
1
1
1
1
4
4
1
1
4
1
1
1
4
4
1
1
1
4
1
4
1
2
2
2
4
2
2
2
2
2
2
2
2
2
3
3
2
2
3
2
2
2
3
3
2
2
2
3
2
3
2
3
3
3
3
3
3
3
3
3
3
3
3
3
2
2
3
3
2
3
3
3
2
2
3
3
3
2
3
2
3
4
4
4
1
3
4
4
4
4
4
4
4
4
1
1
4
4
1
4
4
4
1
1
4
4
4
1
4
1
4
Figure 4.6 Personal creativity assessment spectrum.
Business creativity 85
Appendix 4.3: sexism
Findings of Stylist magazine survey
1
2
3
4
5
6
7
8
9
10
Being expected to make the tea – 43 per cent.
Enduring sexual innuendos – 38 per cent.
Having appearance/clothing commented on – 33 per cent.
Being accused of being pre-menstrual/menstrual – 29 per cent.
Being presumed less competent than male colleagues – 27 per cent.
Been joked about in a sexist way – 24 per cent.
Being paid less than male colleagues for the same job – 19 per cent.
Being presumed to be more junior than they are – 18 per cent.
Being spoken over/patronised in meetings – 18 per cent.
Being expected to keep the office tidy – 17 per cent.
Source: Matharu, H., ‘The top 10 sexist things that happen to women at work’, Independent,
News/Business,17 September 2015.
Appendix 4.4: Beijing Express problem solution
The British spy has the rust coloured coat.
Appendix 4.5: priming illusion solution
The answer is 4100.
5
Applied business creativity
Genius is one per cent inspiration and ninety-nine per cent perspiration.
(Thomas Edison)
You can’t solve a problem with the same thinking that’s creating the problem.
(Albert Einstein)
Learning objectives
This chapter explores:
1
2
3
4
5
6
Management options when addressing the challenges of change.
Stimulating creativity.
The link between creativity and intelligence.
The creative problem-solving approach.
Building an introductory CPS toolkit.
Facilitating CPS activity.
Introduction
This is essentially a practical chapter. Having made the case for a new approach to thinking, individuals are presented with a programme to assist them in acquiring the necessary
knowledge and developing expertise by applying it to problem solving. The chapter helps
readers by presenting a Gateway Personal Creative Thinking Toolbox and encourages them
to develop this in accordance with their respective needs. (See Figure 5.1.)
Context
Challenge of change
A more competitive business environment presents top management with two clear options
(see Chapter 2).
1
2
Ride out the storms and hope for a better tomorrow.
Realise the need to do things differently.
The second option places a heavy stress on the need in the private sector to deliver
customer-perceived value and in the public sector best value solutions. In both cases there
is a need to acquire and practice new thinking skills.
Applied business creativity 87
Figure 5.1 Exploring new skills.
Stimulating creative thinking
To think creatively individuals have to really believe that they enjoy the freedom to think in ways
different from the accepted norms. For this to happen regularly individuals should be given a
succession of positive challenges and be constantly encouraged to perform to the best of their abilities. ‘Carrot and stick’, excessively autocratic management styles tend to cause creative output
to die away to residual levels. This reductionist approach in the management of creativity is the
opposite of what is needed when organisations are battling for business in crowded markets. To
achieve a consistent market edge creative thinking must be released and continuously supported.
Creativity and intelligence
Many people strongly associate creative thinking with intelligence. Like many things in life,
this is both true and false. Research into this question has not come up with any conclusive
proof that intelligent people per se are generally more creative than individuals who would
not see themselves as being intelligent. Then what is meant by intelligence? There is a body
of evidence that suggests that creative people tend to have high intelligence quotients (IQs),
but not all people with high IQs are creative. Many of the psychometric profiles that have
88
Innovation from theory to practice
been constructed have often been built from data that has been recorded from tests that were
originally intended to measure IQ levels. Several, notably Torrance (1988), Kim et al. (2010),
Benedek et al. (2014), have tried to devise and validate tests (Sullivan and Ford, 2010) that
can accurately detect and measure the presence or otherwise of creativity.
Creativity tests are typically divided into four main components:
1
2
3
4
divergent thinking
convergent thinking
artistic assessments
self-assessments.
Divergent thinking is the ability to consciously generate new ideas that branch out to many
possible solutions for a given problem. These solutions or responses are then scored on four
components:
(a) Originality – statistical infrequency of response.
(b) Fluency – number of responses.
(c) Flexibility – the degree of difference of the responses, in other words do they come from
a single domain or multiple domains.
(d) Elaboration – the amount of detail of the response.
Convergent thinking is the ability to focus on the single correct solution to a problem. In
creativity, convergent thinking often requires taking a novel approach to the problem, seeing
the problem from a different perspective or making a unique association between parts of the
problem. These solutions are scored either correct or incorrect (Mednick, 2009).
Artistic assessments are the evaluations of an artistic product (e.g. painting, story, poem,
musical composition, collage, drawing). Evaluations are typically made by two or more
judges who must be in near agreement on the creativity of the product.
Self-assessments are the individual’s responses to the amount of creativity each person
believes they exhibit.
Key principles
The quick-fix approach
Many of us regard thinking as a natural skill and tend to get lazy in our approaches to information processing and problem solving. Many of us try to get our brains to give us an instant
answer or quick fix. We turn on our hardware and use the software already installed. If this
can find the required collection of memory traces then this represents our thinking. Whilst this
is probably in order for familiar problems, this rather mechanistic or programmed approach
will not serve us too well with rather more complex and or infrequent problems. This requires
total as opposed to partial thinking.
The creative problem-solving approach
Note-taking skills
A problem that many of us face, whether at home or at work, is how to study efficiently.
The student who has to summarise key information from articles and texts in a form that is
Applied business creativity 89
user-friendly for memorising and understanding; the individual at work who has to write a brief
summary report for management on a complex subject. In both cases creative problem solving
(CPS) has a lot to offer. Note taking can be a long and painstaking exercise which can easily
become frustrating when an individual later returns to his or her notes only to find that the passage of time has made them difficult to use. In common with Buzan and Buzan (2009), years
of observing students reveals that there would appear to be three main styles of note taking:
1
2
3
Narrative – writing all selected information in narrative form.
Listing – recording interesting ideas as they occur.
Outline – seeking to arrange the material in a hierarchical sequence.
The narrative style demands a lot of writing and may be useful to those who are anxious to
convince themselves that they really understand some taxing argument or theory. Generally
speaking this style demands much recording effort and can be difficult to summarise for the
purpose of revision or in order to write an essay or report. The listing style certainly saves on
paper and on time but may just produce copious columns of material that become difficult
to handle later. The outline style is better, as the use of main and subheadings provide both
order and visual variety for the brain.
However, such predominantly left-brain presentation, even if all three styles are combined, often results in the brain having to work hard to understand the key points. Many
individuals find it difficult to make sense of such notes and may well have to devote a lot
of time in getting to grips with the material. This is because the brain basically gets bored,
as these styles of note making only effectively stimulate the left brain and almost ignore
the right brain. For efficient brain activity – learning and thinking – to occur, the missing
stimuli are essential, especially for recall and argument. Sadly, many individuals make notes
in a format that is almost guaranteed to bore the brain into wandering off in an effort to find
something interesting to do.
Memory friendly information
To study effectively it is necessary to input information in the correct format for the brain to
process. This means taking notes and using total thinking (Jones, 2015). For example, we can
produce better notes if we seek to:
••
••
••
••
••
use as few words as possible;
use analogies, metaphors;
use diagrams, sketches;
use colour for picking out key words and in marking key sections of diagrams;
summarise notes, once prepared, in a predominantly picture style such as mind maps.
Learning skills
For learning, as opposed to note taking, try using the capabilities of the right brain by the
following measures:
••
Converting important pieces of factual information into ghost lyrics to well-known tunes
and then do some humming. For example, if you were trying to remember Ohm’s law
consider setting it to the tune of the ‘Rain in Spain’ from Lerner and Lowe’s musical My
Fair Lady. (The unit of resistance is the Ohm!) Record it, play it back for the rhythm.
90
Innovation from theory to practice
••
Selecting words that have a rhythmic flow rather than formal language. This is a technique that is often used by schoolchildren when they are swotting for exams. Here are a
couple of examples.
{{ Remembering trigonometry formulae:



{{
Remembering the names and order of the planets:

••
tan = opp/adj or ‘toads over act’
sin = opp/hyp or ‘snakes only hiss’
cos = adj/hyp or ‘cats always howl’.
‘My vet Eric munched jam sandwiches usually near Paris.’ (Mercury, Venus,
Earth, Mars, Jupiter, Saturn, Uranus, Neptune and Pluto).
Playing music, to your taste, in the background as you study. This text was written to a
mixture of classical, light and pop background music.
Picture perspectives
Picture perspectives
You can also seek to produce material that appeals to the visual skills of the brain.
For example:
••
••
••
••
••
••
summary charts
mind maps
picture books
picture charts
broadsheets
designs.
See Appendix 5.1 for coverage of basic CPS picture tools.
Put them up on the walls of your study. The brain works best when it is well stimulated. This
incredible machine is a true multimedia device. Try to provide sufficient stimuli to keep your
brain interested and entertained. Then even the most potentially boring of tasks assumes a
different hue. Escape from the grey world of predominantly left-brain note-taking styles.
Getting to grips with creative individual problem solving
Organisations must be continuously creative to survive and thrive in today’s highly competitive, rapidly changing environment. A century of creativity research has produced several
descriptive models of creativity and hundreds of prescriptions for interventions that demonstrably improve creativity. This section is based on an adaptation of the Nominal Group
Technique first expounded by Delbecq et al. (1973), Rikards (1990) and VanGundy (1988).
Demonstration exercise: organising a perfect wedding
To illustrate how CPS can assist in personal problem solving (PPS), imagine that you wish to
formulate some ideas for discussion with your family to plan for the big day. A useful CPS
Applied business creativity 91
template to adopt to begin with is a simple, but powerful, three-stage approach (after Kolb,
1984 and Kreitner, 1980):
1
2
3
Problem evaluation – what is the problem?
Idea generation – process for generating and selecting ideas.
Implementation– converting thinking into action.
The Nominal Group Technique involves six basic steps:
(a)
(b)
(c)
(d)
(e)
(f)
private brainstorming
round robin collection of ideas
consideration of each idea
preliminary selection of ideas
consideration of chosen ideas
final choice.
PROBLEM EVALUATION
In this case the problem is known, but it is good practice to state it, in as few words as possible, in a formal problem statement: planning the perfect wedding.
IDEA GENERATION
Now generate some ideas using an adaptation of the Nominal Group Technique.
(a) Private brainstorming
This is a widespread and popular process for generating ideas and the rules are widely
known:
••
••
••
••
••
List spontaneous thoughts – do not exercise any judgement.
Write down everything, however trivial it may seem at first.
Aim to record as many ideas as possible.
Use ideas you have written down to stimulate other ideas.
Collect up your ideas on a flipchart.
A period of about five minutes is usually enough for this step.
(b) Round robin
Transfer your ideas to Post-It notes. Write out a separate Post-It slip for each idea (see
Figure 5.2).
Table 5.1 Illustration of some generated ideas for this exercise
Venue
Choir
Best man
Reception
Guest list
Seating plan
Bouquets
Adults
Music
Bridesmaids
Organ
Food
Children
Ring
Pageboys
Church bells
Drink
Teenagers
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Innovation from theory to practice
Figure 5.2 Planning the perfect wedding mind map 1.
(c) Mind mapping
Next record your problem evaluation statement on a Post-It note and place at random all
your Post-It notes on a suitable flat surface such as a wall or the floor (see Figure 5.3).
(d) Consider each idea and cluster
Once your Post-It notes are in place examine them closely and look for further ideas.
Then rearrange the notes into clusters of closely connected ideas (see Figure 5.3).
According to Tassoul and Buijs (2007) it is about expanding knowledge, about connecting ideas, and connecting ideas to problem statements, functionalities, values and
Figure 5.3 Planning the perfect wedding mind map 2.
Applied business creativity 93
consequences. It is about building a shared understanding, in other words about ‘making
sense’. It is an essential creative activity in the development of concepts and, although
different from a more freewheeling divergent phase, can be as creative and maybe even
more so. Object clustering is mainly aimed at categorising ideas into an over-viewable
set of groups of ideas that appear to make sense (see Figure 5.3). The Post-It notes are
particularly useful, as they provide the facility to move ideas around and to experiment.
(e) Analogy
Now if you should need to generate some more ideas, select a tangible item at random,
such as a picture, the view from the window, an outside tree. You may like to keep a
pack of picture post cards of famous paintings, views or steam engines! Or perhaps you
may find that listening to your favourite music helps. Explore your multimedia brain!
Often you can jump straight from this stimulus and think of new ideas. For example,
looking out of the window, you may notice that it is raining and then get the idea of making sure that a supply of umbrellas are available for the wedding day! (See the expanded
mind map in Figure 5.4.)
(f) Reversal
Selecting ideas and inverting them often suggests additional useful ideas. Imagine the
worst possible wedding. For example, the best man fails to turn up, the bride’s car breaks
down, one of the bridesmaids is sick over her dress. Now simply invert and place on a
Post-It note, and add to the mind map. It is a simple technique but it works!
(g) Shaping
Now study the Post-It notes on your wall or table-top and do some further clustering if
necessary. Spend some time looking at the complete pattern that has evolved. Look at
the problem statement again. Is there anything else that you would like to add?
Figure 5.4 Planning the perfect wedding mind map 3.
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Innovation from theory to practice
(h) Preliminary selection and consideration of ideas
At this stage choose the most important matters and mark them with a red dot. For example, booking the church, settling on a venue for the reception. Now spend a few minutes
writing out some brief guideline notes on your preliminary selection. For example, list
some possible places in which to hold the reception, who you need to invite.
(i) Time-out
Comparatively few problems really have to be ‘solved’ on the spot. Try to take time
out to think about your notes. Many things that worry us are processed by the subconscious mind overnight when hopefully the conscious, worrying, mind is resting. Often
gentle messages to our conscious minds, first thing in the morning contain real pearls
of wisdom (Notebook).
Practice
Building an introductory CPS toolkit
Table 5.2 presents a creative problem-solving (CPS) starter toolbox. Pick a problem of your
own and first try all the tools in sequential order. Begin in Stage 1 by spending some time
getting a clear statement of your problem, i.e. an effective diagnosis (Okes, 2010).
Then resist any temptation to come to an immediate answer (the quick-fix approach) and
in Stage 2 generate as many ideas as you can. Many have found it helpful to collect ideas on
Post-It notes. These facilitate the construction of mind maps and provide a picture, which
appeals to the right-brain functions. Use the tools as described in the perfect wedding example to come up with as many ideas as you can.
Stage 3, implementation starts with the application of a simple selection technique such
as the use of coloured sticker dots to pick out very good ideas (green sticker dot) and good
ideas (blue sticker dot) for the problem under investigation. Finally, an idea is selected as the
best – usually the one with the most green dots.
Table 5.2 Introductory CPS toolkit
Function stages
Action tool
1 Problem evaluation
2 Idea generation
State problem in as few words as possible
Private brainstorming
Round robin
Mind mapping
Clustering
Analogy
Reversal
Shaping
Time-out
Notebook
Stage 1 – Selection
•• Colour coding
•• Intuition
•• Advantages/disadvantages
Stage 2 – Final choice
3 Implementation
Applied business creativity 95
Action
CPS facilitation
CPS is necessary in all three dimensions of management, i.e. individual, group and organisational.
Individual or personal CPS activity
The sequence in which individuals approach CPS is important. Considerable care should be
taken in Stage 1 to ensure that the problem being tackled is clearly stated. The CPS tools that
are used in Stage 2 can be used in the sequence they appear in Table 5.1 or some variation in
the running order may be appropriate. It may, for example, be suitable to start with Reversal
rather than Personal brainstorming. The key action point here is to mix the tools to generate
ideas. Using sticky notes is helpful, as it enables the individual to construct a mind map of the
ideas and then to Cluster and Shape it to see the big picture and apply a selection technique
in Stage 3. The exercise should be carried out at speed with the individual moving smoothly
between the Stage 2 tools.
Group CPS activity
This process is similar to that for an individual CPS session with the following differences.
Preferably a trained CPS facilitator should act as moderator. The maximum number of participants should be kept to five or six and each should be encouraged to contribute and not
to indulge in idle chatter. As with individual CPS, sessions should be fast paced with the
facilitator moving smoothly through the tools of Table 5.1.
Organisational CPS activity
At top or senior management level a trained facilitator is essential and participants must enter
into the spirit of CPS and especially resist any temptation to harness their functional skills to
present a prescriptive solution rather than play along and generate ideas.
Summary
If managers at the individual, group or organisational level are to do things differently to successfully meet the challenges of the current business environment there must be a willingness
to both accept and to learn new ways of thinking. As Einstein has written ‘You can’t solve the
problem with the same thinking that’s creating the problem’. Mastering CPS requires time
and determination. To learn anything other than the stuff you find in books, you need to be
able to experiment, to make mistakes, to accept feedback and to try again. It doesn’t matter
whether you are learning to ride a bike or starting a new career, the cycle of experiment, feedback and new experiment is always there. Be bold and have ago at some CPS.
Discussion questions
1
2
A curious enquirer has asked, ‘Is intelligence both a necessary and sufficient condition
for acting creatively?’ How would you frame your answer?
What are the four main components of creativity tests?
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Innovation from theory to practice
3
4
5
6
Name the three main styles of note taking.
List the three stages of CPS process.
What are the basic steps of the Nominal Group Technique?
Explain how CPS activity can be applied to individual, group and top management.
Case exercise
Toymaker I: from lone apprentice to master craftsperson
From what to . . . help!
You are invited to picture a doting father who wants to give his daughter an extra special
birthday present. However, he is of modest means and cannot afford to go to the local toyshop
and purchase something nice. Faced with this problem he thinks of giving up his intention to
buy a special present. This leaves him inwardly unhappy and ill at ease. He knows that this
is not a solution that he can accept and so decides to dwell on the problem overnight. As the
morning light streams into his room he awakes with a jolt and realises that he wants to build
a doll’s house for his daughter. Excited, he begins to think about such a project and experiences difficulty in picturing the finished article. Driven by a force that he cannot understand
he gets up, sighs and feels a strong urge to open the bedroom curtains. As the full glory of the
morning sun is revealed he blinks his eyes and looks over the garden below. The first thing
that he notices is that his lawn is twice as high as his neighbour’s; he shrugs his shoulders
and commits himself to wrestling once more with the elderly and rather moody hover mower.
To avoid the sun’s rays, he looks sideways across his garden and suddenly realises that his
eyes have come to rest on the new house that has just been built down the road. In a flash he
is convinced that he wants to build a model of this house. Happy in his discovery of what he
will build, he goes downstairs for breakfast. As he leaves the bright light in his bedroom and
enters the relative darkness of the hall he becomes depressed. He is worried as to how he is
going to build the doll’s house in time.
Aware of a very strong inner motivation, he looks for inspiration in his cornflake bowl. A
few soggy flakes stare back at him from the bottom of the bowl and, intrigued, he stares back
and is suddenly aware that his daughter would really like a doll’s house with a thatched roof.
Getting started
After breakfast our man rushes out, gets into his car and reverses into the world. ‘Backwards
into the future’ again he sighs as he speeds off down the road to buy a set of carpentry tools.
A short while later he is back and proudly unpacks his new toolbox and tools. Picking up
each tool, he imagines just what he could do if he could handle them as professionally as
an expert. This is both exciting and almost immediately depressing. He feels nervous and
exposed and now somewhat out of pocket but firmly decides to banish all self-doubt and go
for it. Mastering a new skill set may be difficult but then so was learning to play the piano
and how to drive. A cold shiver runs down his spine as he recalls that it took him 10 years to
learn how to play the piano! Oh, well, wrong example for he passed his driving test after 10
lessons. Mm, he thinks, just 15 days to go.
That evening the garage light shines late into the night as he tries out his new tools. Some
are easy to handle but others claim bits of his fingers as he struggles to come to terms with
them. Spurred on by his determination to build the doll’s house he enthusiastically assaults
Applied business creativity 97
a piece of plywood only to find that it bends one way then the other and then jumps off his
workbench and clouts him over the head. Cross at this unreasonable behaviour and in a crazy
attempt to release his fretsaw blade from the offending plywood board he bashes it with his
hammer. The board takes off again and smashes into his lamp, knocking it off the bench to
the sound of shattering glass. Suddenly he is in the dark again. As his eyes refocus to the
subdued light from the street lamp he realises that he will have to stop rushing at things and
work within his capabilities. Imagination, top marks; tools, pretty good; technical proficiency
with the tools, pretty basic. The thought of giving up once more flashes across his mind. No
way, he thinks, for this is a task that he is going to complete and on time!
Assessing the situation
‘In a word, depressing’, he thinks, as he feels the pain from his bleeding and bruised fingers.
There is something strangely informative about the semi-darkness in his garage. It seems to
describe how he feels – a pale shade of grey instead of light, bright and active. So he decides
to lighten up the garage with a tin or two of white emulsion and to fix up a couple of fluorescent lights. That will lighten up the environment, he thinks. However, it will cost money and
he knows he will have to plead his case with his wife for some extra cash for, as luck would
have it, the current month is one when all the bills seem to come in. He remains quietly determined to argue the case for some of the scarce household disposable income; he knows that
this is going to challenge the existing order of things.
In the half-light of his garage he begins to think about the whole business of combining
ideas, tools and rather basic technique and is pleased to discover that he can build a dolls’
house as long as he works within the constraints of his limitations. Abandoning the idea of
making a scaled down replica of the house down the road, he resolves to design a simpler
structure that will be within his capabilities. Hearing the dawn chorus he resolves to leave
things for the time being, take some time out and have a cup of coffee.
Staring into his cup as he stirs his coffee he searches for inspiration. Soggy cornflakes
gave him an idea yesterday morning; perhaps his coffee will now. After a minute with
nothing of any note happening he begins to be discouraged. Perhaps he should give it
up. After all, one night working in the garage has resulted in very little to show for his
pains except of course his injured fingers. Finding himself thinking about the story of
Archimedes in his bath, he suddenly shouts eureka! followed by aha! The circular movement of his coffee has led him to see that he will go round and round and make little
progress unless he learns from the lessons of the night. He ponders on this for a while.
Well, the tools are up to the job. His revised task seems sensible but his technical ability is
still suspect. However, if he learns from his mistakes in handling the tools: rushing ahead
before reading the instructions in the DIY carpentry book he has purchased with his tool
set but which lies on his workbench. Keen to follow this line of thought he opens his diary
and starts to list the lessons that he has learnt that night.
A creative workshop
Two days later our father returns to the task of making a doll’s house, having successfully
obtained sufficient resources to brighten up his garage and install some effective lighting.
As he settles down to work he disciplined himself into starting with a brief quiet time and
resolves not to charge into his work. He remembers his childhood days when grand projects
always seemed fun, when they were tackled in a relaxed playful spirit rather than as a chore.
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Innovation from theory to practice
Play was fun; chores were boring. To add to the new environment in the garage he has
brought in his iPad loaded with some of his favourite music. Now to work . . . no, just a minute. What did I learn from my experiences in the garage earlier in the week? Mm!
Three hours later much has been accomplished. The tools seem friendlier. The structure,
though simple, is starting to emerge and he feels at peace with himself. So he decides to take
time out and go to bed. He falls asleep almost as soon as his head hits the pillow but he can
see the finished article in full colour and is sure that his daughter will be very pleased.
Master class
Ten years later our father has become a master toymaker and has achieved considerable fame
throughout the country for his one-off and low-volume designs. It seems amazing but it is
true. He has acquired a reputation for both his quality build and his designs; has left his old
job in a solicitor’s office and is now running his own business. Lucy, a keen young reporter,
stops by, determined to find out how such creative people function. Content in his sense of
fulfilment he is quite happy to talk to her.
He explains how he had started and describes a couple of nights in his garage a decade
ago. As the conversation develops, the reporter can see clearly that his first dolls’ house
has been a significant event in his life. (The creative techniques that fired his imagination
are described and then summarised in a picture of a dolls’ house with a thatched roof.) The
master’s main guides are:
1
2
3
4
5
6
7
8
A determination to prevent himself from restricting the flow of his and his staff’s creative energies by the provision of a stimulating environment.
A fascination in learning new skills and the patience to master them.
The ability to stop and quickly select the best tools for the job rather than be trapped in
the repetitive boredom of always using the same techniques.
A determination to regularly think about the quality of how he and his staff work as well
as what they work on. He is concerned to ensure that working practices are adapted to
suit the needs of his markets rather than become enshrined in company mindsets.
Valuing the work of all his staff, encouraging them to work to the best of their capabilities when under pressure and to develop their creative skills.
Encouraging his staff to adopt a free rein in their design work, to practice total thinking
unashamedly.
To build a climate of security and trust so that all feel free at all times to question the
status quo in a positive way.
To seek inspiration from the natural world.
Task
Study the master’s main guides above. Then select a problem of your own that needs managing.
Which of the eight guides would you use and why?
References
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Applied business creativity 99
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Selected YouTubes
‘Paul Sloane: Creativity and Lateral Thinking in Business’, https://www.youtube.com/
watch?v=5RCb_zkKXWU.
‘Only 3% of People Pass this Creative Test, Can You?’, https://www.youtube.com/watch?v=
aH2ll5bwpKw.
‘Edward de Bono Six Thinking Hats’, https://www.youtube.com/watch?v=_5DK8XPUEaU.
‘Edward de Bono on Creative Thinking’, https://www.youtube.com/watch?v=UjSjZOjNIJg.
‘Facilitating Creative Thinking’, https://www.youtube.com/watch?v=eq056i4tJx0.
Appendix 5.1: CPS toolbox notes
Introduction
Several authors, philosophers and teachers have contributed to the invention and recording
of CPS tools. Skilled workmen and workwomen read about, try and collect their own selection of tools to facilitate their real-life situations. The CPS toolbox in this appendix is one of
Malcolm Goodman’s and draws on contributions from many – some known (see references),
some unknown and some honed through experience – and it is hoped that it will stimulate
readers to experiment and develop their own set of CPS tools.
Innovation from theory to practice
100
CPS stage 1: problem evaluation
Table 5.3 Useful problem evaluation tools
CPS tool
Notes
Five Ws and H
How to . . .
Stakeholder analysis
Why?
Sometimes known as ‘Kipling’s Questions’ see below
Do something to tackle the issue
Who are the important third parties?
Can things be left the way they are? What are the reasons for doing
something? Is the problem short term or long term? Important or trivial?
Five Ws and H (Kipling’s questions)
This tool uses the main interrogatives of the English language: Who? What? When? Why?
and Where? and can be supplemented with the How to? question. Each member of the
problem-solving group is asked to write down the six questions and then apply them to the
problem statement.
Kipling’s questions
••
••
••
••
••
••
Who is involved in this matter? Who is interested?
What is it all about? What is the matter? What went wrong?
When did this happen? When must the problem be solved?
Why did this happen?
Where did it happen?
How did this come about?
This is a simple but surprisingly powerful tool that enables creative problem-solving groups
to define a problem at several levels of abstraction. The tool has four-cycle steps:
1
2
3
Read the problem statement as originally defined.
Question why you want to do what is in the problem statement.
Redefine the answer in the form of a new problem statement.
Repeat as many times as is sensible (step 4). Then agree a new problem statement. Here is
an example:
Question and redefine
••
••
••
Question: Why do we want to go on holiday?
Answer: To get a break from daily life.
Redefine: In what ways might we get a break from daily life?
Applied business creativity 101
••
••
••
Question: Why do we want to get a break from daily life?
Answer: To relax and recover from the stress of everyday life.
Redefine: In what way might we relax and recover?
••
••
••
Question: Why do we want to relax and recover?
Answer: To recharge our batteries.
Redefine: In what ways might we charge up our batteries?
How to . . .
The advantage of the format of this question and the way in which it is used is that it welcomes all ideas irrespective of whether the group intends to adopt the suggested solution.
Thus practical constraints do not deter thinking. Suppose that the group was faced with the
problem of a cracked furnace. They might ask the questions below.
How to tool
••
••
••
••
••
How can we get the furnace going?
How can we stop it from causing so much trouble to our operations?
How can we get it properly relined?
How can we best project manage the job?
How can we avoid this problem in future?
Stakeholder analysis
In both personal and group CPS exercises the problem and the potential outcomes are often of
interest to other parties. This can be addressed in a variety of ways so feel free to experiment.
You might like to try the sequence below.
Stakeholder analysis tool
1
2
3
4
Problem owner states the problem.
Individual or group carries out a personal brainstorm.
Problem owner or facilitator performs a round robin and gathers ideas.
Problem owner or facilitator collects information on a mind map.
Wishful thinking
This is a useful technique to a help groups to break out of the constraints imposed by conventional approaches to problem solving and work practices. There are four steps involved.
102
1
2
3
4
Innovation from theory to practice
State the problems.
Now tell the group to imagine that anything is possible.
Ask them to state what they would like to see happen.
Get them to relate this back to the problem statement.
If you need to, repeat steps 3 and 4.
Stage 2: idea generation and development
Dealing with stuckness
Sometimes it is hard to generate ideas for progressing problems when groups find that conventional tools such as brainstorming, checklists and so on do not produce any good results.
When this occurs it can cause a facilitator to panic. Fortunately there is a group of imaginative CPS tools that can come to the rescue (Table 5.4).
ANALOGY
This tool encourages you to take a break from the problem statement and to try to see the
problem in a different scenario.
••
••
Place a writing pad (A4 ideal) and a sharp pencil to hand.
Relax, breathe in and out slowly for a few seconds, then close your eyes for a minute or so.
Table 5.4 Useful idea generation and development tools
CPS tool
Notes
Analogy
Attribute listing
Checklists
Cut and connect!
Imagineering
•• Passive tools
{{ Relaxation
{{ Sounds inspirational
•• Active
{{ Computer-based tools
{{ Drawing
{{ Therapeutic
Metaphors
Reversal
Scamper
Time out
Windows
Useful reorientation tool to gain a fresh perspective
Reductionist approach
Useful but can become monotonous.
Fun tool but surprisingly useful as an ice-breaker
Seeking practical solutions through the free-flow of creative thinking
A surprisingly powerful technique
What is the worst thing that can happen?
Proprietary kit of tools
Taking a break from the problem to refresh minds
Looking outside to stimulate the flow of ideas
Applied business creativity 103
••
••
••
Now think of your favourite hobby (e.g. listening to pop music) or sport (cricket, football, hockey, rugby, tennis) or your last summer holiday, or your last trip to London or
a recent long-distance trip. Concentrate on your experience and attempt to picture the
scene in as much detail as you can. Picture the sky, the background and the foreground,
listen for any sound, see if you can detect any movement.
Now open your eyes and summarise what you have ‘seen’ on your A4 pad, trying to use
drawing, sketches and symbols as far as you can.
Then relate the material on your pad back to the CPS problem statement.
ATTRIBUTE LISTING
This tool entails reducing the problem statement to its prime components and auditing
the characteristics of each identified part. This can be extended through a number of subcomponent rounds if necessary. The ultimate objective is to discover what is really needed
to do the job and whether the existing components can be put together in another, more
efficient, way that directly addresses the problem statement. A more complex version of
this tool, morphological analysis, is often used in the development of new products, services and systems. It is a powerful though time-consuming tool, and has resulted in some
spectacular successes in high-technology industries.
CHECKLISTS
These can be useful for personal CPS but can easily become monotonous if used in group
CPS sessions. Essentially they are stepping stones that can prove useful to define a path to
approach a problem statement. It’s what you do on each stepping stone that is important.
They can be useful in the same way that a motorist, for example, may use a road atlas to find
the way. Coping with what happens on the way is an entirely different proposition.
CUT AND CONNECT!
Try this one! Get a selection of old magazines and give each member of the CPS group a pair
of scissors. Ask them to cut out five pictures each, show them to the group and the facilitator
then encourages the group to relate, say six pictures, back to the problem statement.
IMAGINEERING
The deliberate selection of imagery tools to stimulate ideas has assumed the title of
‘Imagineering’ (Morgan, 1997). Einstein stated that ‘Imagination is more important than
knowledge’. Imagination raises new questions, new possibilities, to regard old problems
from a new perspective. For ease of explanation the nine imagery tools included in the introductory CPS toolkit have been divided into two categories: passive and active.
Two passive tools are particularly useful:
1
2
Relaxation.
Sounds inspirational.
104
Innovation from theory to practice
Relaxation – all CPS sessions should begin with a quiet time of relaxation. Too hasty a use
of CPS tools will result in a temptation for individuals and the group to directly seek a prescriptive response to the problem statement. Facilitators can avoid this tendency by helping
groups to relax by encouraging them to:
••
••
••
Take a few deep breaths – three or four is usually enough.
Relax all their muscles to ease tensions from their faces, arms, legs, neck and torso.
Close their eyes and to imagine the tension flowing out of their bodies.
Sounds Inspirational – sound is a powerful and emotive medium. So too is nature. Good
recordings can capture the natural world in great clarity and depth. Many facilitators find it
helpful to have soothing classical music playing in the background. The following composers
have been found to be particularly evocative:
••
••
••
••
••
••
••
Beethoven – Symphony no. 6 (‘The Pastoral’);
Copland – ‘El Salon Mexico’;
Grofe – ‘Grand Canyon Suite’;
Handel – ‘Water Music’, ‘Fireworks’;
Mozart – Piano Concerto no. 21;
Smetena – ‘River Moldau’;
Vivaldi – ‘The Four Seasons’.
Active tools that are worth trying include: computer-based methods, drawing and therapeutic
exercises.
Computer-based methods – specialist problem-solving software can be useful for individual
CPS activity. Both idea generating and mind mapping software deserve a place in a CPS
toolkit. However, as with most software packages, in the final analysis:
••
••
••
Each problem statement is unique and, especially with group CPS sessions, requires
a skilled facilitator who will select suitable tools.
Computers should serve rather than control a CPS session.
Many people experience problems in correctly using software and these can completely take over a CPS session and dissipate creative effort.
Drawing – this group of tools switches the traditional emphasis on verbal to graphical skills.
Given a free hand to draw a problem on paper, individuals or groups are presented with an
entirely new perspective that avoids the tendency to get trapped in convergent logical cognitive
memory traces. Here are a couple of the simpler tools that are useful for group CPS sessions.
••
Picture – a ‘user-friendly’ tool that helps to get idea generation going. There are
three stages:
1
2
3
Write the problem statement on a flip chart.
Instruct the group to read the statement and ask them translate the words into
diagrams, sketches and pictures on a new flip chart.
Discuss the second flip chart in the light of the first flip chart.
Applied business creativity 105
••
Picture book – this tool is suitable for individual or group CPS sessions. There are
seven stages:
1
2
3
4
5
6
7
Convert a problem statement into a simple picture format.
Generate ideas to progress the problem and express them in picture format.
The facilitator then asks each individual to name a way the problem (i.e. what
needs to be done) can be progressed and to express this as a diagram, mind map
or sketch.
The individual ‘pictures’ of how the problem can be tackled are then shown to
the group.
The facilitator requests the group to select the best ‘picture/s’ and sticks them
on a wall with Blu-tack.
The group then choose the best ‘picture’ and proceed to carry out a partial revision if necessary.
The facilitator draws the final ‘picture’ as the group would like to see it.
Individuals do not have to be gifted artists for this tool to work. If the facilitator meets with
some diffidence a good way to encourage participation is by giving each member of the
group a sheet of picture stickers.
Therapeutic – a number of tools are available:
••
••
Guided imagery – well-regarded short scenarios are available on tape that should
sensitively be read by the facilitator.
Selection – generating a flow of ideas is an important process in any CPS session. To
progress effectively there comes a point when an individual or facilitator needs to relate
and assess the ideas in the light of the problem statement and to select the most promising ideas for CPS Stage 3, the realisation stage. Four tools are particularly useful:
1
2
Colour code – for quick and easy selections give every group member a supply
of blue and green stickers. Then ask them to mark the best ideas with a green
sticker and the second best with a blue sticker. The ideas with the most green
stickers emerge as the most promising to apply to the problem statement.
Creative evaluation – this is a ranking tool that can be used after colour code
and assigns numbers to the leading ideas as follows:
{{
{{
{{
1 represents a simple idea (requires little time and money);
2 represents a hard idea (requires more time and money);
3 represents a difficult idea (requires the most time and money).
The ideas are then referred to senior management for consideration and evaluation.
1
2
Reporter – this is a quick converging tool that usually produces a positive
response. The facilitator simply informs the group that a journalist is arriving
soon (20 minutes seems to work well) and needs to be given a one-page summary of the selected options.
Advantage/disadvantage – after colour code, issue all participants in the group
with a selection matrix and ask them to privately evaluate all the green ideas in
the light of the criteria indicated in the matrix. Table 5.5 presents an example
of this tool in a group CPS session concerned with finding a suitable hotel for a
one-day CPS workshop.
Innovation from theory to practice
106
Table 5.5 Advantage/disadvantage assessment
Criteria
Advantages
Location
Ease of access
Parking
Conference facilities
Reputation of venue
*
*
*
Disadvantages
*
*
METAPHORS
Metaphors are a fascinating source of inspiration for a creative manager (Morgan, 1997).
We hear them virtually every day as sports commentators, politicians and ordinary folk use
them to make powerful points about groups in such expressions as ‘first past the post’; their
moves always break down ‘in the box’; ‘have we missed the boat?’ List the metaphors that
you habitually hear when you are involved in group activity at work.
REVERSAL
For some strange reason, and nobody quite knows why, it is often possible to generate good
ideas using the tool of reversal. The procedure is simple: just reverse the problem statement,
note the ideas that flow and then select the best ideas and reverse them. For example, if the
problem statement is ‘How can we improve our ability to innovate?’ reverse it to read ‘How
can we really make a mess of innovation?’ Now be mischievous and generate ideas. Then
reverse the best ones and you will probably be amazed at the results.
SCAMPER
This is a variation of Osborn’s 1957 (Osborn, 1979) checklist rearranged by Eberle (1972).
S
Substitute – who else? Alternative inputs/outputs, people.
C
Combine – blend different approaches, ideas, use, cross-functional teams, cost
centres, etc.
A
Adapt – what else is similar to this? What other ideas seem to fit this problem? What
precedents are there? Who else had this problem recently?
M
Magnify/minify – what needs to be added? Time, resources, product/service
features, and promotional messages, etc./What needs to be reduced, saved, omitted,
simplified, etc.
P
Put to other uses – how else could this product/service be used? Who else may want
it? Where else might it be used?
E
Eliminate/elaborate – what needs to be scrapped? How can this be made userfriendlier? How can things be simplified? What savings can be made? What needs
to be developed? Can we manage with existing supply/logistic arrangements?
R
Rearrange/reverse – What other ways can we find/develop to do this?
How can consequences be reversed?
Applied business creativity 107
TIMEOUT
Take time out – leave the room, take a break, go for a brief walk then re-address the problem
statement.
WINDOW GAZING
Ask the group to look out of a window or around the room and then ask them to select and
focus on an object. Instruct them to close their eyes, count to 10 and remember the object in
as much detail as they can. Then ask them to think of the problem statement and open their
eyes, and there is a good chance that they will have generated some relevant ideas.
CPS Stage 3: realisation planning
Once a CPS session has generated realistic ideas (What can be done) it is important before
too much of the momentum is lost that some action is planned to achieve implementation
(How to respond to the problem statement). It is wise at this stage for group members to
discuss possible objections to their ideas and comfort zones using a tool popularly known as
bullet proofing.
(For further information, contact AJM Management Development +44 1246 520655.)
6
Business innovation
But innovation comes from people meeting up in the hallways or calling each other at 10:30 at
night with a new idea, or because they realised something that shoots holes in how we’ve been
thinking about a problem.
(Steve Jobs)
Innovation is the specific instrument of entrepreneurship . . . the act that endows resources with
a new capacity to create wealth.
(Peter F. Drucker)
Learning objectives
This chapter explores:
1
2
3
4
5
6
7
8
The purpose of innovation.
The strategic approach to innovation.
The role of ‘innovation champions’.
Levels of innovation.
The innovation process phases.
Idea selection.
Application of systems thinking.
Innovation process problems.
Introduction
In the business world, creativity manifests itself as innovation. An IBM survey in 2010 of
over 1,500 CEOs reported that creativity was seen as the most important aspect of leadership
needed to face the challenges presented by fiercely competitive global markets. Another survey by Adobe Systems in 2012 in three continents found that 80 per cent identified creativity
as a vital driver of economic growth. On the basis of this understanding CEOs can approach
the task of generating innovation through internal activity, external activity (commonly
referred to as open innovation) or by a combination of both initiatives. (See Figure 6.1.)
Context
Why innovate?
If customers were predictable, if markets were stable and competitors relatively inactive
in their commitment to innovation, and if technology was steady, innovation would not be
Business innovation 109
Figure 6.1 Exploring business innovation.
of critical importance. All the evidence shows that global markets are being impacted by
escalating rates of change. As markets in the developed economies approach saturation, companies increasingly worry about the damage this may do to their finances as competitors
fight fiercely for the remaining market demand. Executives at the helm of companies large
and small are faced with the challenge of securing their fortunes of their businesses. Clearly
there is a need to do something different to keep current customers loyal and to attract new
ones. Soon heads start turning to innovation to rescue their fortunes. What companies and
entrepreneurs sometimes forget is that the purpose of innovation is not simply to make new,
110 Innovation from theory to practice
improved products and services; it is to deliver solutions and experiences that have cost saving or revenue potential.
Innovation, like creativity discussed earlier in the text (see Chapters 4 and 5), promises a
potential solution but to many there is considerable confusion as to what it actually involves.
Is it about:
••
••
••
••
••
Lowering the cost of current products and services?
Dropping prices?
Trusting in modern digital marketing techniques to boost sales?
Pondering the question what do our present customers want?
Discovering how the business might appeal to competitors’ customers?
Is it simply a matter of tweaking present market offerings seeking to add incremental attraction to customers? Or might it be best to ask customers what they want? Then perhaps just
exporting to underdeveloped economies and trusting this to restore growth potential can
solve problems.
Current contextual change forces (see Chapter 1) are making it difficult for companies
to solve their problems through heavy advertising spends alone. Revenues are falling or
profit targets are going to be missed and the reverberations will cause disconcerting waves in
financial circles. So many organisations are increasingly seeking to counter the impact of the
uncertainty caused by change by recognising that a serious and strategic pursuit of innovation
is the route to obtaining long lasting profits.
What is innovation?
The word innovation is derived from the Latin innovare, which translates as ‘to make new,
alter’ and defined by the Concise Oxford Dictionary as being concerned with bringing in new
methods and ideas. These can be absolutely new in the sense that they have never been aired
or practised before or are new to a particular organisation. The innovation can refer to a new
system, device, policy, programme or customer-perceived value offering (product/service).
Innovation is a key driver for added value, increased competitiveness, growth and profitability. The successful and effective application of an innovation process involves designing and
cultivating a climate and culture that is conducive to innovation (see Chapter 7). This takes
time and money to realise. Faced with undue concern about their profit potential and soft
buyers’ markets many companies have failed to invest in new product development (NPD)
to a sufficient degree for years. They have regarded spending on NPD as a cost rather than
an investment. Some have favoured the instant solution of acquiring other companies with
a view to diversifying or taking out a competitor. Is sufficient strategic attention paid to the
operating issues involved? Issues that relate to:
••
••
••
process, service and product innovation;
systems service and product innovation;
systems thinking and innovation.
Innovation raises questions about what companies are doing to generate ideas, invest in prototype inventions and the processes that are needed to convert inventions into new products/
services that have customer-perceived value. True innovation results in a significant positive
change to internal processes and procedures and to the provision of significant new customer
Business innovation 111
experiences. The outcome of successful positive differentiation is new growth. In a social
context, innovation helps create new methods for alliance creation, joint venturing, flexible
work hours and creation of buyers’ purchasing power.
Strategic innovation management
Strategic innovation is a holistic organisational intent to invest in a multi-functional approach
that brings together all its creative assets, capabilities and disciplines to develop new growth
opportunities. In a world that is changing rapidly and in unpredictable ways, strategic innovation
becomes vital to adapt to change.
Evidently, the term ‘strategic innovation’ implies a connection between innovation and
strategy, such that strategic innovation realises corporate strategy. Porter (1985), who is widely
credited for providing a fresh look on corporate strategy, argues that firms may pursue three
different generic strategies:
1
2
3
Cost-leadership – producing a product at a lower relative price than competitors while
meeting basic customer needs.
Differentiation – producing a unique product meeting a unique set of needs sold at
a higher relative price. Examples of successful differentiation include Apple’s iPad.
Today, the tablet market boasts many competitors offering technical specifications that
are comparable and sometimes superior to the iPad. However, the iPad beats competition on user-friendliness, a key differentiator. Steve Jobs, much like Leonardo da Vinci
who once claimed that ‘simplicity is the ultimate sophistication’, is reported to have
asked his teams to ‘simplify, simplify, simplify’ the iPad. Today, consumers are willing
to pay a higher relative price for a product that is easier to use than competing products.
Thus, strategic innovation, in the case of differentiation, means finding ways to optimise
a specific set of differentiators that are most relevant to a specific set of needs. Thus,
when Apple is developing new ways to increase user-friendliness they are pursuing
strategic innovation.
Focus – strategic innovation, in the case of a focus strategy, refers to innovations that
better meet the specific needs of the targeted segment.
Key principles
Commitment
Getting started
Given that an organisation has made a holistic commitment to innovation, it is critical for
all those involved in new product development or internal and external systems improvement that they hold firm to the belief that the prime aim is to create meaning and value
for people. Marketing is essentially about making people aware of the perceived value an
organisation creates.
Innovation is about creating this perceived value or customer affinity. The starting point
is the internal or external customer (Drucker, 1973). Apple’s Steve Jobs did not start with
the idea of the product but rather by thinking about whom it was for and what mattered to
them. Similarly, Checkland (1981) developed his soft system methodology (SSM) to help
managers solve complex qualitative human issues as sellers’ markets morphed into buyers’
112 Innovation from theory to practice
markets. It is affinity that is earned, not attention that is bought, that generates growth now.
It is a growth mindset (Dweck, 2008).
Innovation champions
Traditional innovation champions are known to be responsible for leading and sponsoring
innovations in both medium and large organisations. They have sometimes been known as
product or technology champions but increasingly this has expanded to include those promoting new processes or business models, etc. The person can be a champion in a division,
at board or senior management level or someone informally working in the organisation that
wants great ideas to succeed. Innovation champions can be found in small, medium or larger
organisations that are highly enterprising and highly innovative. They are good at creating
new ideas and inventions but also at making them happen. Innovation champions are sometimes called corporate intrapreneurs as they generate new businesses and internal corporate
ventures and potential spin-off companies. Innovation champions can also be found in SMEs.
The owner/entrepreneur has a different role from the innovation champions described above.
Their job is to promote the innovation throughout the firm at a top-down level rather than
bottom up.
Innovation champions according to Tellis (2013) need to be properly supported and
given structured responsibilities, goals and resources if they are to flourish. His research into
innovation stories, which covered over 100 years of inventions and 66 markets created by
innovators, identified four characteristics they share:
1
2
3
4
Champions have a vision for the future mass market. Innovation champions are able
to see subtle signs about the direction in which the market is evolving and identify its
unmet needs ahead of the competition. They have a unique worldview and they are not
content to follow the groupthink of their industry or profession.
Champions are mavericks and dissenters. Their vision is unique, and they are stubbornly
committed to it, despite what other executives and experts may say. Such resistance and
ridicule is a major reason why innovation champions often leave their organisations to
develop their idea on their own or within an organisation that will give them the responsibilities and resources they need to bring it to life.
Innovation champions have the conviction to persist against heavy odds. New ideas
face many obstacles in today’s organisations, including a non-existent market for the
idea, resistance from entrenched interests, an inability to demonstrate their idea’s future
potential and setbacks in production, manufacturing or testing of new product concepts.
‘Champions have the motivation and passion to overcome these obstacles and persist
with the vision they believe holds the promise of success’, Tellis explains.
Champions are willing to take extraordinary risks to bring their ideas to fruition, and are
able to instil this trait in their teams. Tellis cites Bezos of Amazon and Zuckerberg of
Facebook as examples of champions who were able to withstand tremendous pressure to
stay the course, often over many years, to transform their compelling visions into reality.
To support innovation champions companies need to cultivate them across the organisation by identifying and mentoring them early in their careers. Google’s Associate Product
Manager programme is a case in point. To innovate successfully to stay ahead of its competition Google not only needs to attract the best talent and train them to be relentlessly
innovative, it must also create a culture that empowers people.
Business innovation 113
Levels of innovation
Incremental innovation
Disruptive innovation (Pisano, 2015) requires a new business model but not necessarily
a technological breakthrough. For that reason, it also challenges, or disrupts, the business
models of other companies. For example, Google’s Android operating system for mobile
devices potentially disrupts companies like Apple and Microsoft, not because of any large
technical difference but because of its business model: Android is given away free; the
operating systems of Apple and Microsoft are not.
Camera industry
Have you ever made improvements to existing technologies, processes, products or
services? That’s incremental innovation and is the most common form of innovation
today. However, incremental innovation often only produces incremental growth.
Radical innovation entails high uncertainty with high risks, and the potential, though
not guaranteed, for high returns.
To illustrate the difference between incremental and radical innovation think about
the camera industry. Kodak led the industry for years, developing new and improved
products based on traditional film. However, these were all incremental innovations
based on the same technology. The radical innovation in this industry was the development of digital imaging. This revolutionised the industry and the way people captured,
stored and used images. Smartphones are now threatening the digital camera industry.
Radical innovation
Radical innovation is the polar opposite of disruptive innovation. The challenge here is
purely technological. The emergence of genetic engineering and biotechnology in the 1970s
and 1980s as an approach to drug discovery is an example. Established pharmaceutical companies with decades of experience in chemically synthesised drugs faced a major hurdle in
building competences in molecular biology. But drugs derived from biotechnology were a
good fit with the companies’ business models, which called for heavy investment in R&D,
funded by a few high-margin products.
Toyota and innovation
Whether it be alternative energy sources, interconnected traffic and safety systems,
human assisting robots or new modes of personal transport, Toyota is constantly
focused on developing for the future. Through improvements of conventional
technology, as well as pioneering efforts in the application of new technologies,
Toyota is taking great steps to develop eco-cars which will help the progress
toward a low carbon society.
Source: Toyota website: http://www.toyota-global.com/innovation/ (accessed 15 May 2016).
114 Innovation from theory to practice
Table 6.1 Characteristics of incremental and radical innovation
Incremental innovation
Radical innovation
Exploits existing technology
Low uncertainty
Focuses on cost or feature improvements
in existing products or services,
processes, marketing or business model
Improves competitiveness with current
and new markets or industries
Explores new technology
High uncertainty
Focuses on processes, products or services with
unprecedented perceived value attributes
Creates a dramatic change that transforms existing
markets or industries, or creates new ones
Architectural innovation
This combines technological and business model disruptions (Pisano, 2015). An example
is digital photography. For companies such as Kodak and Polaroid, entering the digital
world meant mastering completely new competences in solid-state electronics, camera
design, software and display technology. It also meant finding a way to earn profits from
cameras rather than from ‘disposables’ (film, paper, processing chemicals and services).
As one might imagine, architectural innovations are the most challenging for incumbents
to pursue.
Technological innovation
Technological innovations are usually associated with product and process innovation,
whereas non-technological innovations are generally associated with organisational and
marketing innovations. Technological and non-technological innovations are highly interconnected. The commercialisation of technological product innovations often requires
the development of new marketing methods. Similarly, a new production technique will
typically increase productivity only if is supported by changes in the organisation. The
majority of innovative firms (both large firms and SMEs) introduce technological innovations (i.e. process and product innovations), as well as non-technological innovation
(i.e. marketing and organisational innovations).
The pace of technological innovation is accelerating rapidly as modern computers can
review massive amounts of data in milliseconds and are developing the ability to learn
24 × 7 × 365 without being programmed (OECD, 2015). The pace of learning will soon
exceed our ability to understand and use it and we will have to surrender responsibility for
analysing data, trialling models and running scenarios. We live in the advent of the machine
learning age and the biggest business impacts today lie in social, mobile, annalistic, cloud
(SMAC) and related Internet of Things (IoT) technologies. A wave of tsunami proportions
is appearing on the horizon and gathering speed every day. Experts anticipate a second
wave after 2020 as present technological research and adaptations become available for
commercial exploitation.
Apple watch
Apple is exceedingly secretive when it comes to releasing early information about projects under development but its hiring strategy and patent filings provide strong clues.
Business innovation 115
Wrist-mounted devices
The design and human interface teams at Apple spent two years thinking about what
a wrist-mounted device could add to peoples’ lives and how the new digital technology could be made to be user-friendly. The watch delivers high functionality but
also a positive personal user experience that prioritises information according to the
wearer’s reaction to it. For example, after notifying the user that a text message has
been received, the ‘Short Look’ feature either displays the message or leaves it unread,
depending on how the wearer keeps their wrists aloft.
Virtual reality
Headsets that immerse the user in video and audio have attracted the Apple CEO’s
interest. However companies, such as Facebook, are already active in this market.
Augmented reality (AR)
The superimpositioning of virtual data in to real scenes, or augmented reality, is the concept behind the PokemonGo craze and Apple may be featuring AR in future iPhones.
TV content and channels
Apple is believed to be working on launching its own TV service through its Apple
TV set-top box.
Cars
Apple is known to be working on a car under the code name Project Titan.
Sources: Pierce, D. (2015) ‘iPhone killer: The secret history of the Apple Watch’, Wired, www.
wired.com/2015/04/the-apple-watch/; The Observer, 30 July 2016.
Sources of ideas
Closed sources
Until the early twenty-first century, most innovation was closed. That is, it occurred within
the boundaries of an organisation and was performed by the company’s own employees
within its internal R&D function. This model was based on a number of assumptions that
have changed radically in today’s marketplace. The paradigm of closed innovation asserts
that successful innovation requires control and ownership of intellectual property. A company should control the creation and management of ideas. The practice of closed innovation
goes back to the beginning of the twentieth century when universities and governments were
not involved in the commercial application of science. Some companies therefore decided to
run their own R&D units. Their entire NPD cycle was then integrated within the company
where innovation was performed in a ‘closed’ and self-sufficient way.
116 Innovation from theory to practice
An African innovation: Mellowcabs
Mellowcabs are high-tech electric pedicabs manufactured from recycled materials.
These vehicles primarily provide first and last mile public transport in urban areas,
thereby filling the gap for commuters who need micro transport within a 3 km radius.
Mellowcabs have the ability to provide more than 100 km of transport per day and
feature cutting edge technologies like regenerative braking, hydrogen fuel cells, illuminated body panels, human powered charging and on-board tablet computers which
feature Mellowcab’s own proprietary software with augmented reality facility, geoactivation advertising and full social media integration features. The Mellowcab was
developed in South Africa by Neil du Preez.
Source: Forbes, February 2014, http://www.forbes.com/sites/mfonobongnsehe/2014/02/13/seveninnovative-products-from-africa-you-should-know/#203c722b107b (accessed 15 May 2016).
The period between the end of the Second World War and the mid-1980s was the era of
closed innovation and internal R&D. Many R&D departments of private companies were at
the leading edge of scientific research. The setup of internal R&D was perceived as a strong
barrier for potential new competitors, as large investments had to be made to be able to compete. Often, closed innovation paradigms are set equal to the ‘Not Invented Here’ syndrome
sometimes referred to by decision makers: everything coming from outside is suspicious and
unreliable. Chapter 9 discusses the major closed innovation practices and stresses that in the
prevalent business world wise companies combine both methods of finding suitable ideas to
develop, process and commercialise promising innovations (see Chapter 9, Figure 9.1).
Open sources
Recently, growing attention has been devoted to the concept of ‘Open Innovation’, in
academia as well as in practice. Chesbrough, who coined the term ‘Open Innovation’
describes in his book Open Innovation: The New Imperative for Creating and Profiting from
Technology (2003) how companies have shifted from so-called closed innovation processes
towards a more open way of innovating. As a result, companies have started to look for other
ways to increase the efficiency and effectiveness of their innovation processes. For instance,
they actively search for new technologies and ideas outside the firm, but also cooperate with
suppliers and competitors, in order to create customer value. Another important aspect is the
further development or out-licensing of ideas and technologies that do not fit the strategy of
the company. See Chapter 9 for a discussion of the open sourcing of ideas.
Figure 6.2 The innovation process phases.
Source: M. R.V. Goodman, Durham University.
Business innovation 117
The innovation process
Phase 1: initial spark of creative activity
Phase 1 of an innovation process features two inspirational creative acts:
••
••
Generation of ideas by asking the question ‘is there a better way to . . . ’ by observing
and seeking inspiration from different cultures or organisations.
Selection of the best idea/s to progress to address either a clearly expressed need, for
example a transparent baby’s potty to answer every parent’s question – ‘have you been
yet?’ Or the sudden realisation that an idea generated by chance is the perfect answer to
a problem, as in, for example, the case of non-drip paint.
Fashion fun: mismatched clothing
LittleMissMatched started with a very simple mission: Build a girls’ clothing brand
that is fun, inspires creativity, embraces individual style and celebrates self-expression.
In the LittleMissMatched World, matching is mundane, but mixing patterns and colours is monumentally cool. The girls’ clothing line started with colourful girls’ socks
sold in packs of three, then the company realised that there was a whole world of girls
who share their passion for showing their creativity and self-expression through their
clothes. The LittleMissMatched line was expanded and now includes bold girls’ clothing and beauty accessories, colourful bedding, sporty arm and leg warmers, backpacks,
handbags and slippers.
Source: http://littlemissmatched.com/about-us (accessed 15 May 2016).
Phase 2: idea evaluation
Phase 2 is concerned with testing a selected idea to decide whether it is advisable to invest
more time and resources to develop it further into a proposal. The key questions are:
••
••
••
••
Effectiveness – does the idea meet a need for which there is or is likely to be a demand?
Relevance – does the idea lie within the compass of the company or organisational strategy?
Know-how – does the idea fit the company/organisation’s business and technical
competencies?
Efficiency – is it sensible for the organisation to invest resources to further develop the
idea and is it likely to offer a competitive advantage?
If the answers to these questions are positive, the innovation process enters Phase 3.
Phase 3: invention
Phase 3 is concerned with developing the selected idea into a form that can be implemented,
that is, a new customer-perceived value package offered to pre-researched customers or
introduced within the parent organisation – for example a new administrative procedure.
If the answers to these questions are positive the innovation process enters Phase 4.
118 Innovation from theory to practice
Phase 4: external and internal launch
This phase covers the external introduction of the fully developed idea, that is, new product
roll out. In the case of internal introductions the idea is practically adopted.
Phase 1 is essentially about the practical expression of creativity. Phases 2, 3 and 4 are essentially about innovation. Creativity also plays a critical part as the idea progresses from an
original spark to a final entity.
Idea selection
Sometimes successful innovations result from serendipity as an organisation hits the jackpot
with little regard to sound practice. This is said to have been the case with the decision to
launch the original Walkman. The Sony CEO had a hunch it was a winner. In most cases,
however, it is prudent to pay considerable attention to picking the right ideas to move into the
invention and innovation phases. Curiously, many organisations that are serious innovation
players are not hampered by a lack of ideas but rather a lack of noticing the ideas they have
already (Burkis, 2013) and an ability to be realistic about their potential. Two well-known
filter models are the Idea Funnel and Stage–Gate systems.
Idea Funnel
Ideas that emerge successfully from Phase 1 should be screened to reveal those with the
greatest potential and with an acceptable degree of risk. It may sound negative at first but it
is sensible policy for organisations to isolate and kill all the ideas that are unlikely to pass
all the innovation phases. Though sometimes brutal, this releases time and resources for
promising ideas.
The Idea Funnel has a wide entrance to receive ideas that successfully complete Phase 1.
The ideas are then subjected to periodic test criteria and only those that pass move toward
the neck of the funnel, toward Phase 4 launch programmes. However, the Idea Funnel is a
Figure 6.3 Idea Funnel.
Source: M. R. V. Goodman, Durham University.
Business innovation 119
simple model and there is a danger that it could result in many embarrassing and/or expensive
innovation failures as the model is critically dependent on the quality of the decisions taken
at each checkpoint in the funnel.
Stage–Gate model
The model (after Grönlund et al., 2010), which was traditionally applied in manufacturing
industries, segments the innovation process into sequential stages. The model consists of an
alternating series of development periods and assessment ‘gates’ that evaluate the chances
of an idea passing through all four phases of an innovation programme. Some have claimed
that the model is too simplistic and linear for today’s business environment. The Idea Funnel
and Stage–Gate models are only as good as the decisions that are made (Sethi and Iqbal,
2008). Use of modern systems thinking can greatly strengthen the quality of the ‘go, no-go’
decision deliberations as the basic model does enable the incorporation of IT and dynamic
elements, such as learning, strategy, iteration, feedback, agility, flexibility and adjustments.
Metrics for evaluation, agility, flexibility, feedback and adjustment should and can be incorporated into the innovation process regardless of the model which is selected. The successful
application of an innovation process builds on the unique capabilities of an organisation and
on its strengths.
Intellectual capital
Collective knowledge (whether or not documented) of the individuals in an organisation or
society, can be used to produce wealth, multiply output of physical assets, gain competitive
advantage, and/or to enhance value of other types of capital. Intellectual capital is now beginning to be classified as a true capital cost because:
••
••
investment in and replacement of people is similar to investment in machines and plants;
and
expenses incurred in education and training to maintain the shelf life of intellectual
assets are equivalent to depreciation costs of physical assets.
Intellectual capital includes customer capital, human capital, intellectual property and
structural capital.
Figure 6.4 A simple Stage–Gate system.
Source: M. R.V. Goodman, Durham University.
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Knowledge and technology transfer
Knowledge transfer (KT) is a term used to encompass a very broad range of activities to
support mutually beneficial collaborations between universities, businesses and the public
sector, and involves the transfer of tangible and intellectual property, expertise, learning
and skills between academia and the non-academic community. It is recognised by government and funders as an important return on investment in academic research, one that
provides a significant driving force for enhancing economic growth and societal well-being.
For academics, KT can be a way of gaining new perspectives on possible directions and
approaches for research. This two-way exchange element of KT is at the heart of successful
and sustainable collaboration.
InnovationKT (Innovation through Knowledge Transfer) is an initiative to promote and
raise the profile of knowledge transfer and innovation, and provide publication opportunities
for all those involved in the discipline.
KT can be defined as the means by which expertise, knowledge, skills and capabilities are
transferred from the knowledge-base (for example, a university or college, a research centre
or a research technology organisation) to those in need of that knowledge (for example a
company, social enterprise or not-for-profit organisation).
Hence, KT involves the application and commercialisation of skills and expertise possessed by higher education and its purpose is to catalyse and facilitate innovation. Examples
of KT mechanisms and paradigms include, but are not limited to:
••
••
••
••
••
••
••
••
the UK Technology Strategy Board (TSB) Knowledge Transfer Partnership (KTP)
product;
spin-out companies;
incubators and entrepreneur schemes;
university–industry contracts and consultancy;
licensing of university-originated intellectual property;
other modes of KT and technology transfer, e.g. work-based learning projects;
the knowledge transfer, knowledge origination and knowledge exchange process;
innovation, open innovation and the generation of new ideas.
Practice
Harnessing systems thinking
Given the occurrence in most problem situations of both technical and human dimensions,
a hybrid of scientific, hard systems and soft systems methodologies will give the best solution. The soft systems approach will ensure that the human dimension is incorporated at an
early stage in the process and that all groups of people are involved in developing a solution.
Within this soft systems overview, hard systems and scientific techniques can be used to
optimise aspects of the solution (Kirk, 1995).
Hard systems approach
Hard system approaches are heavily dependent on the core beliefs of the rational-analytical
thinking school. They assume that a manager’s goals are both rational and well communicated, that problems can be identified easily and clearly and that organisations can be run
Business innovation 121
successfully by management techniques. Cause and effect are mapped to provide managers
with ‘fix it’ models that can be realised easily. Best theory and practice seek to:
••
••
••
••
••
reduce uncertainty by rationalisation;
predict the future – to anticipate customer needs and adopt a strategic approach to
innovation;
prepare for the future – to discover and select winning innovations;
generate ideas, select the winning ones and proceed quickly to develop them into prototypes (inventions) and trigger implementation processes;
develop an ideal solution.
Hard systems are appropriate if the innovation task is clear, the systems are mechanistic, and
the relationships between the component processes follow known paths that can be addressed
independently of an organisation’s core strategy. However, many of the problems that face
management charged with responsibility to generate successful innovation are difficult to
define, fuzzy and messy.
Soft systems approach
The highly competitive global markets that are challenging organisations today are concerned massively with the need to understand external customer values and internal process
improvements. Qualitative human factors are of paramount importance and as stakeholders interpret their needs differently there is no objective reality. The SSM pioneered by
Checkland is a quantitative technique that can be used for applying systems thinking to nonsystemic situations. It is a way of dealing with problem situations in which there is a high
social, political and human activity component. Thus increasingly creative and intuitive (or
soft) approaches to innovation are required to address the ‘what’ shall we do question as well
as the ‘how’ should we do it question of hard systems thinking. For most organisations there
is no one perfect answer. Best theory and practice seek to:
••
••
understand the perceptions of critical internal and external customers through a variety
of so-called right-brain problem solving techniques (see Chapter 4);
build a learning organisation culture that interacts with closed and open idea sourcing.
Action
Private sector
Innovation in MNCs
The ability of MNCs to leverage their innovation competencies across globally dispersed
subsidiaries is an increasingly valuable source of competitive advantage (Mudambi et al.,
2007). When MNCs turn to foreign subsidiaries’ R&D to develop innovations questions
arise regarding the most effective organisational structures for global innovation. Although
organisational cultures that satisfy the needs for self-determination and teamwork have long
been considered intrinsic motivators in home markets, a pressing concern for many MNCs is
how to energise and assimilate innovation in overseas subsidiaries. This text argues the case
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for the adoption of a holistic approach to innovation that draws on the strengths of national
cultures that meet the practise standards of Theory Y or Z management approaches (see
Chapter 3) but preferably those of Theory WB organisations (see Chapter 13).
Innovation in SMEs
SMEs are driving most economies, but not all are enjoying the benefits of innovation, either
through lack of knowledge or a perceived lack of time. Recent research by Bain (Bain &
Company and Institute of International Finance, 2013) found that two-thirds of organisations
highlighted innovation as a priority, yet fewer than 25 per cent thought their company was an
effective innovator. From adopting cloud computing to digitising holiday requests, there are
myriad ways companies can move into the twenty-first century.
Many SMEs are family businesses and several prefer the traditional paper-based means
of managing and are often uncertain about seriously adopting digital technology. Due to
their size and straightforward management structure SMEs can be quicker on their feet to
explore and exploit innovation than their MNC rivals. Gaining an understanding on how
to use digital technology and systems in pursuit of their business goals will give SMEs a
considerable fillip, as they will be able to benefit from making smart marketing, productivity
and resourcing decisions.
SMEs, as MNCs, face real risks in fiercely competitive national and global markets. If they
can get over any inhibitions they may have about networking with other SMEs and MNCs
they can gain significantly from open innovation initiatives. Research by Van de Vrand et al.
(2009) and Lichtenthaler (2008) has shown that the international competitiveness of SMEs
is highly dependent on the cumulative effects and interrelationship between two key internal
components – R&D capacity and managerial structure and competencies – coupled with two
external factors – open innovation practices and the ability of the firm to attract government
grants for R&D and technological development (Wynarczyk, 2013).
Public sector
It is evident that non-governmental organisations (NGOs), charities, state-funded entities
and public organisations operate in an environment that differs from that of private organisations. The latter generally focus on profitability in a context where competitive forces play a
key role, which does not generally apply to the former. Although not much has to date been
published on innovation related to NGOs, charities, state-funded entities and public organisations, it is relevant to discuss the role which innovation may play (or has the potential to play)
and the differences in focus that emerge in these types of organisation.
Innovation in NGOs
Innovation is a buzzword throughout development circles from large institutional grant
making organisations to grassroots NGOs working in some of the poorest places on earth.
Innovation is more often than not a necessity for NGOs with strictly limited funds and
resources which are yet trying to conquer huge development challenges. Many NGOs are
forced to think differently and creatively about how to utilise their resources and environment just to survive.
Increasingly, innovation is something that is inescapable for most NGOs and especially
those keen to secure grant-based project funding. The huge majority of grant funding
Business innovation 123
opportunities from Newcastle to New Delhi demand that applicant NGOs demonstrate that
their proposed projects are innovative in one way or another. Whether it is the delivery or
services, communications techniques, donor support or the application of technology, most
people within NGOs understand why grant makers are so keen to support innovative projects. They need to continue to think and do things differently to try and improve the world,
but innovation is also an increasingly common source of frustration for grant writers and
project developers. Often NGOs have successful projects that are proven, highly effective
and in demand, yet funders often won’t support them unless new innovative elements are
introduced to modify the project. This can be difficult and challenging for NGOs and can
often compromise otherwise excellent projects that are simply in need of more funding and
little else.
Innovation in charities
Charities are generally considered to be non-profit organisations, independent from government, run by volunteers, often with a distinctive legal position and tax status, dedicated to
improving the welfare of others. Charities are regulated in a number of countries and require
registration. This leads to their having to follow a strict set of legal and financial procedures
which may increase regulation and bureaucracy but which allows for increased trust, transparency and higher standards of operation. Although there is some overlap between NGOs
and charities, since both operate as non-profit organisations, charities focus on philanthropic
goals with activities generally directed towards the public interest or the common good with
clear perceived benefits for humanity.
Many of the factors concerning NGOs and innovation could be relevant for charities in
their attempts to raise funds, increase the pool of donors, improve their image in the media,
campaign for their cause, organise events, operate effectively and regulate their affairs in a
transparent and efficient manner. Top charities are finding innovative ways of fundraising
from a data-driven gaming website to social psychology and mobile giving.
Innovation in state-funded organisations
State-funded entities contribute to innovation through research, funding programmes and the
implementation of government policy related to innovation. Whether an innovation will be a
success is uncertain and it can take longer than traditional banks or venture capitalists are willing to wait. The European Commission in Europe regularly calls for projects on specific topics
to be funded and these generally require the participation of universities, research institutes
and, at times, private organisations. Dissemination of the knowledge acquired as a result of
research and collaboration plays a key role in the success of European projects selected for
funding under the various calls, with the subsequent publication of reports, journal articles and
books which are publicly available. Government may fund entities to promote research that is
theoretical and not necessarily related to market forces, the latter being generally undertaken
by private research institutions or R&D laboratories in private organisations.
The research undertaken may, however, eventually have applications for commercial gain
and this may be achieved through the creation of alliances with strategic partners. This is one
way to overcome the restraints that may occur with private funding of research, where confidentiality is often imposed due to fear of competition from rival organisations. This may lead
towards more collaborative initiatives where both private organisations and governmentfunded entities such as university or research laboratories share information and knowledge.
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Innovation from theory to practice
Government procurement plays a key role where innovation is concerned, as governments could be considered as ‘lead users’ capable of making substantial purchases. When
properly managed, innovative procurement can have a positive effect on innovation related
to technological advancement, it may define product quality and standards, and may lead to
increased interoperability. Through placing orders for large quantities of products, governments can be instrumental in encouraging innovation by influencing the suppliers that are
selected to deliver the goods. Large orders could act as an incentive for suppliers to focus on
more innovative products or services due to the financial benefits that follow from the award
of a large tender. This could provide incentives for increased private investment in R&D,
particularly since governments have the power to set standards and to certify technologies as
being reliable and promising.
Innovation bottlenecks
Effective innovation management may often encounter a number of obstacles and a prior
understanding of these is essential. Strategies can then be designed to diminish the effects of
the obstacles that are encountered. Some of the main barriers to organisational innovation are:
••
••
••
••
••
••
••
••
••
••
the process of changing a corporate climate;
lack of time to think;
bureaucracy;
structure;
poor lateral communication;
external talent;
financial constraints;
limiting paradigms;
inappropriate mental modes;
limitations of traditional teaching and training.
One of the most difficult challenges is the process of changing a climate or corporate
attitudes. This requires an imaginative, consistent, persistent and integrated programme
of work aimed at modifying people’s personal attitudes towards risk taking and sustaining flexible mind-frames. Organisations that take innovation seriously should emphasise
the importance of developing an all-embracing climate where ideas can be generated,
communicated, evaluated and implemented (see Chapter 7).
Lack of ‘time to think’
Managers generally do not allow subordinates to waste their time on non-productive activities. Creativity requires a certain amount of time to think and the absence of slack can act as
a barrier to the successful implementation of the whole innovation process. Organisations
that allow employees a certain level of slack are in a better position to generate ideas
and identify valuable innovations. Google, for example, reputedly allows its employees
to spend 80 per cent of their time on core projects and 20 per cent on innovation activities
related to their personal interests and passions, much of which results in efforts towards
increased innovation.
Business innovation 125
Bureaucracy
Although bureaucracy is important in organisations as it creates necessary controls, organisations sometimes introduce bureaucracy under the misguided notion that it is a way of
ensuring administrative effectiveness and productivity. One cannot expect employees to generate ideas directed against procedures that are accepted as unchanging. Management may
take steps to neutralise the effect of bureaucracy such as:
••
••
••
eliminating irrelevant or inexplicable forms of bureaucracy;
promoting the overriding role of innovation at all levels (specific instructions which
explain the circumstances in which creative behaviour must override administrative
rules must be clearly outlined);
periodically reviewing the reasons behind bureaucratic procedures.
Structure
Small organisations seldom have major organisational problems. They may function
extremely well without a formal structure. The manager knows precisely what is going on
and can respond to needs or take decisions in a pragmatic way. Provided the manager has
the right attitude towards other people’s ideas, the organisation can benefit from a relaxed
and informal flow of ideas and the implementation of innovations. Some large organisations
restructure their hierarchy in an attempt to create better communication channels and subsequently increase the potential for innovation. This is often done by dividing the organisation
into smaller autonomous divisions. It is important to keep in mind the fact that structural
changes should not be authorised until:
••
••
the impact of such changes has been thoroughly explored; and
strategic planning is in place to mitigate the possible undesirable impact of any changes
to organisational structure.
Poor lateral communication
Communication is a key element for the successful implementation of an idea management
system in an organisation. Effective communication implies both cooperation and purpose
with the aim of achieving a successful outcome. Open channels of communication mitigate
against the possibility of insecurity, suspicion and lack of motivation, particularly where
innovation and the change which it brings in its wake are concerned. Factors which may
obstruct lateral communication include:
••
••
••
••
manipulative practices on the part of management such as holding back information,
excessive secrecy or reluctance to communicate;
conflicting objectives amongst departments or sections within the organisation;
difference of attitudes, values and beliefs which give rise to incompatibility where
communication is concerned;
inadequate training which is essential for staff to become better aware (and better
understand) the value of innovation and its practices for the organisation.
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External talent
A serious barrier to the development of a climate in which innovation can be successfully
managed is the notion that progress may only be achieved through the importation of external talent. This tends to give rise to feelings of humiliation, insecurity and a subsequent
lack of confidence. It may also demotivate those individuals who feel they should have had
the opportunity to be considered for a position which is offered to a person external to the
organisation. Another possible consequence is the adoption of a status quo attitude where
employees may feel it is safer not to take the initiative since any newcomer may just be a
flash in the pan to be eventually replaced by another.
Financial constraints
It is well known that financial departments are never very forthcoming when resources are
required, particularly for innovative projects. Some individuals may take offence at having
their ‘brilliant’ ideas evaluated in financial terms. Innovation requires an element of financial
risk and those who control the organisation’s finances should recognise the advantages of
innovation: to do things differently, better, cheaper or more aesthetically, for the well-being
of the organisation. Too tight financial control on ‘creatives’ is not conducive to successful
innovation, which needs a full resource support.
Limiting paradigms
This involves a mental ‘lock-in’, a way of thinking which is directed in favour of established and well-known ways of doing things and which includes theories, values and beliefs.
Paradigms are similar to mindsets or worldviews. Paradigms may often operate at a subconscious level and cannot always be easily brought to awareness. It is as a result of paradigms
or mindsets that new ideas or new systems are often initially rejected. It is only human to
rationalise our actions and to avoid the discomfort which innovative change may bring about.
Paradigms may block the innovation process through constraints that limit thoughts, beliefs,
perceptions and action.
Inappropriate mental models
This barrier is closely related to the previous one. Mental models operate at a conscious level
and include fixed ideas on how, for example, business models, such as a specific revenue
model, should operate. This gives rise to inflexibility, as there is the mistaken assumption that
the models by which the organisation operates are the best, regardless of context. We are, however, living in a scenario where models may shift like sand and where new business models are
being applied in efforts to make organisations increasingly sustainable from a social, economic
and environmental perspective. Although existing mental models may have worked in the past,
there is no guarantee that they will continue to do so. Adapting mental models in an attempt to
make them more agile, flexible and adaptive to complexity and change is therefore necessary.
Limitations of traditional teaching and training
Traditional methods of teaching and training are no longer applicable in today’s scenario where young people (often known as Generation Y or ‘digital natives’) are raised
Business innovation 127
on fast interactive multiplayer online games and where they generally require a series of
challenges in order for their imaginations to be fired and their motivation to be increased.
Baby boomers (those born around the 1950s) also need to move beyond traditional methods of training; if they stick to tried and tested routines they risk being totally ineffectual.
Communication plays a key role in teaching and training; however, it is to be acknowledged
that the best way to learn is not through theory, explanations or mere understanding –
rather, it is through experience that transferrable skill sets may be built. There is no point
in, for example, reading a manual if you wish to learn how to drive an F1 racing car or play
tennis. The only way to build such a skill is through experience, through trial and error and
through regular practice.
Identifying the barriers which create bottlenecks and which act to inhibit the implementation of innovation management systems is the first step to overcoming them. Once they are
identified, a strategy may be formulated and steps taken for the barriers to be challenged and
eliminated.
Summary
Business innovation is the practical application of business creativity that results in a process,
product or service outcome that has perceived value. To positively differentiate themselves
organisations need to continually seek to increase productivity and customer appeal. This
requires a holistic commitment by management to take a strategic approach to managing
innovation. Innovation champions should be encouraged at all levels of an organisation to
foster and develop the generation of suitable ideas that have the potential to make a difference. Innovation can result in incremental radical, architectural and technical advantages.
Strategic innovation involves four phases that require a balanced hard and soft systems input.
The dedicated application of creative thinking to perceived business problems inevitably
causes disturbance to organisational operations resulting in obstacles that management must
have the determination to tackle.
Discussion questions
1
2
3
4
5
6
7
What is innovation and why is it important to private and public sector organisations?
Briefly explain the role of an ‘innovation champion’.
What are the characteristics of incremental and radical innovation?
What do you understand by the term ‘architectural innovation’?
What is systems thinking? How does it help the innovation process?
How do organisations process innovation programmes?
What are the main innovation development bottlenecks?
Case exercise
Nokia II: out of the ashes of disaster grow the roses of success*
*Sherman Brothers, ‘The Roses Of Success’, from the 1968 film Chitty Chitty Bang Bang.
When Nokia sold its mobile phone business to Microsoft for $7.2 billion in 2014 there
was widespread despair in Finland. There was high unemployment in the greater Helsinki
area and a country’s as well as a company’s pride had been tarnished. To achieve and
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support its technical breakthrough in the mobile phone market Nokia had invested heavily
in R&D. Falling sales and profitability that resulted in the off-loading of the phone left a
rump of gifted technological talent. A business wake revealed that the company’s failure
was not due solely to its lack of technical expertise but rather to senior management’s
mindset that sustained success depended on hardware innovation. They failed to see that
in a rapidly developing technological market consumers expected R&D expenditure to
result in products that they wanted to buy. This meant that software development was
important to support its phones. They also underestimated the increasing importance of
smartphones.
When the dust had settled after the sale of the phone business, Nokia’s management set
about rebuilding the company by focusing on the lucrative telecommunications infrastructure
market providing high-end networking gear and software to telecommunications companies
and Internet service providers. In 2016 they purchased a strong competitor Alcatel-Lucent
for $16.6 billion. Nokia’s non-consumer electronics business has thrived. The company has
more than 100,000 employees working on telecommunications infrastructure and achieved a
profit of €1.5 billion in 2015.
Though bruised by its failure in the mobile phone business, the company has continued
its interest in electronics and its Technologies division makes an Android-based tablet
for the Chinese market. The acquisition for €170 million, also in 2016, of the French
digital health company Withings signalled Nokia’s ambition to get back into consumer
electronics. Nokia’s Technical division is also pursuing a strong interest in virtual reality
(VR) focusing on the development of a leading edge VR camera to incorporate in a high
specification VR headset.
Still dreaming of its past success in the mobile phone industry Nokia licensed its brand
name to a new Finnish company founded by former Nokia executives in 2015. The company, Global HMD, plans to use the Nokia brand name to market Android-based phones
and tablets. Ironically, Microsoft’s acquisition of the Nokia mobile phone business did not
prove a success. They retired the Nokia brand and wrote the deal sale off as a massive loss.
In 2016 they off-loaded their ‘feature phone line’ (known in the business as ‘dumbphones’
to distinguish them from smartphones) to Foxconn’s FIH subsidiary for $350 million, which
has agreed to build the new Nokia phone for HMD.
Sources: Finley, K. (2016) ‘Nokia is plotting a big comeback to the phone business’, Wired,
18 May; Lane, E. ‘Nokia: Life after the fall of mobile phone giant’, Business reporter, BBC
World Service, 18 March; Hern, A. (2016) ‘Nokia returns to the phone market as Microsoft
sells brand’, The Guardian, 18 May; Lee, D. (2016) ‘Nokia no longer the butt of technical
jokes’, North America technology reporter, BBC, 18 May.
Questions1
1
2
3
4
How have Nokia combined Porter’s three generic strategies of cost leadership, differentiation and focus?
How might the Nokia’s brand name once more become a leading light in consumer electronics?
What lessons from Nokia’s original mobile phone business should it and HMD be careful to note regarding the balance between incremental and radical innovation?
What radical innovations are Nokia pursuing?
Business innovation 129
YouTubes
‘Nokia Looks to Make Mobile Comeback, but Faces Fierce Competition with Apple’, https://
www.youtube.com/watch?v=1YTvwJJOAyc.
‘Nokia Lumia Augmented Reality Case Study’, https://www.youtube.com/watch?v=bV4
UT3r7vfk.
‘Introducing Noke OZO: The New Virtual Reality Camera from Nokia’, https://www.
youtube.com/watch?v=HuYpOBp1Q-M.
‘Wild Dolphins VR/360 Degree Video Experience’, https://www.youtube.com/watch?v=
BbT_e8lWWdo.
Note
1 Conduct some brief Internet research to build and frame responses.
References
Bain & Company and Institute of International Finance. (2013) Restoring Financing and Growth to
Europe’s SMEs, Boston, MA, Bain & Company.
Burkis, D. (2013) ‘Innovation isn’t an idea problem’, Harvard Business Review, 23 July, https://hbr.
org/2013/07/innovation-isnt-an-idea-proble (accessed August 2015).
Checkland, P. (1981) Systems Thinking, Systems Practice, Hoboken, NJ, Wiley.
Chesbrough, H. W. (2003) Open Innovation: The New Imperative for Creating and Profiting from
Technology, Boston, MA, Harvard Business School Press.
Drucker, P. (1973) Management: Tasks, Responsibilities, Practices, New York, NY, Harper & Row.
Dweck, C. (2008) Mindset: The New Psychology of Success, New York, NY, Ballantine Books.
Galliers R. D. and Currie, W. (eds) (2011) Soft Methodology, The Oxford Handbook of Management
Systems: Critical Perspectives and New Directions, New York, NY, Oxford University Press.
Goodman, M. R. V. (1995) Creative Management, Hemel Hempstead, Prentice Hall International (UK)
Limited, Chapter 6.
Grönlund , J., Sjödin, D. R, and Frishammar, J. (2010) ‘Open innovation and the stage–gate process:
A revised model for new product development’, California Management Review, Spring, Vol. 52,
Issue 3, pp. 106–31.
Kirk, D. (1995) ‘Hard and soft systems: A common paradigm for operational management’, International
Journal of Contemporary Hospitality Management, Vol. 7, Issue 5, pp. 13–16.
Lichtenthaler, U. (2008) ‘Opening up strategic technology planning: Extended roadmaps and functional markets’, Management Decision, Vol. 46, Issue 1, pp. 77–91.
Mudambi, R., Mudambi, S. and Navarra, P. (2007) ‘Global innovation in MNCs: The effects
of subsiduary self-determination and teamwork’, Product Innovation Management, Vol. 24,
pp. 442–55.
OECD. (2015) ‘Innovation today’, in The Innovation Imperative: Contributing to Productivity, Growth
and Well-Being, Paris, OECD Publishing.
Pisano, G. P. (2015) ‘You need an innovation strategy’, Harvard Business Review, June, pp. 44–54.
Porter, M. E. (1985) Competitive Advantage, New York, NY, Free Press.
Sethi, R. and Iqbal, Z. (2008) ‘Stage–gate controls, learning failure, and adverse effect on novel new
products’, Journal of Marketing, January, Vol. 72, Issue 1, pp. 118–34.
Tellis, G. J. (2013) Unrelenting Innovation, San Francisco, CA, Jossey Bass.
Van de Vrande, V., de Jong, J.P., Vanhaverbeke, W. and de Rochemont, M. (2009) ‘Open innovation in
SMEs: Trends, motives and management challenges’, Technovation, Vol. 29, pp. 423–37.
130
Innovation from theory to practice
Wynarczyk, P. (2013) ‘Open Innovation in SMEs: A dynamic approach to modern entrepreneurship
in the twenty-first century’, Journal of Small Business and Enterprise Development, Vol. 20,
Issue 2, pp. 258–78.
Selected YouTubes
‘Innovation 5 Step Process’, https://www.youtube.com/watch?v=N70RK3_zXhc.
‘Strategic Innovation: Design Thinking in Business’, https://www.youtube.com/watch?v=
nmkGNXfYmYw.
‘Tellis on Empowering Innovation Champions Within Firm’, https://www.youtube.com/
watch?v=NYfX2-wS9xc.
‘Will Mitchell on Innovation at Three Levels: The Nokia Case at Tilburg University’, https://
www.youtube.com/watch?v=zP9R4LkjEXw.
‘Systems Thinking and Evaluation’, https://www.youtube.com/watch?v=2vojPksdbtI.
7
Organisational culture and climate
We must cultivate our garden.
(Voltaire, Candide)
Cultivate simplicity.
(Charles Lamb)
Learning objectives
This chapter explores:
1
2
3
4
5
6
7
Management acceptance and encouragement of business creativity.
Understanding group dynamics and performance.
Building teams – with reference to Belbin, MBTI and KAI inventories.
Empowering groups – tasks of a creative problem-solving facilitator.
Dealing with conflict in groups and teams.
Concepts of organisational culture and climate.
Establishing and assessing a climate that fosters innovation.
Introduction
Learning the fundamental skills of business creativity and innovation is one thing; putting
them into regular practice is another and in most cases requires an attitude change. For individuals and groups attention needs to be given to a number of working environment factors
that concern organisational cultures and climates. This chapter first reviews what is needed
to encourage personal and group creativity before discussing what changes need to be made
to traditional organisational structures. (See Figure 7.1.)
Context
Need for group (collective) creativity
Many organisations are experiencing pronounced operating difficulties as a result of contextual changes in their business environments and some are already facing a crisis. After
several decades of sellers’ market conditions organisations are being buffeted by social cultural, economic, technological and environmental factors, as discussed in Chapter 1. Added
to this competition is getting fiercer and more difficult to beat.
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Innovation from theory to practice
Figure 7.1 Seeking a suitable organisational environment.
Key principles
Management commitment
Managers and creativity
If managers are to make a real commitment to learning creativity techniques they need to
welcome creative responses and then champion them. This will involve developing individual
Organisational culture and climate 133
and personal relationships with their staff. Whilst there always have been managers in organisational life with powerful interpersonal skills, many have been tempted to play the detached
corporate game. If individual members of staff are to practice creative responses they will need
to trust their managers.
Management styles
This will depend not on the individual manager’s perception of themselves but rather on
the collective perception of employees. Food for thought! If you are a manager respond,
on a separate sheet of paper, to the brief questionnaire in Table 7.1 by ticking the appropriate column. Now turn to Appendix 7.1 and score your responses. Would you be happy
for your staff to complete this questionnaire? Do you think that they would broadly agree
with your perceptions?
Manager’s interests
Figure 7.2 presents a matrix that looks at individual staff and managers’ interests. The ideal
situation is when the interest of the manager and the individual is high. This is the high-trust
quadrant and will enable the manager to cultivate creative responses and excellence. The
quadrant below, high/medium trust is when the individual is convinced of the manager’s
personal support but doubts if the manager really values the support of the individual. The
quadrant to the left is where the interests of both are low. This produces mutual indifference.
Finally, the quadrant above this is where the manager’s interest is high and the individual
member of staff’s is low. This results in low trust, if any, as the individual assumes the worst.
Group behaviour
Group participation
Man is a social animal and thus most of what we do as individuals has an effect on other
people. Similarly what other individuals and groups do has an effect on us, either consciously
or unconsciously. We are all prone to modify our behaviour, whether we are in the company
of a single individual or a group. The degree to which we modify our responses is directly
related to what we believe the expected behaviour pattern is (the group norm) and the magnitude of the threat that we perceive in the social transaction. In the company of some people
we are at ease whilst the company of others leaves us fidgety and nervous. Generally speaking behaviour breeds behaviour – how other people behave towards us determines the way
that we behave towards them.
Table 7.1 Management styles
Behaviour trait
Approachable
Honest
Supportive
Fair
Open dealing
Communicative
High
High/medium
Medium/low
Low
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Innovation from theory to practice
Figure 7.2 Manager’s interests.
In the course of our everyday lives most of us belong to several different groups.
Each of these groups assumes a collective individuality and personality and we choose
whether or not to adapt our behaviour accordingly. In our private lives we tune our
responses toward domestic stimuli and often feel quite at home in the social groups we
choose. Traditional professional groups, on the other hand, are usually regarded as being
different, as many are deeply suspicious of the ‘rat race’ culture. Thus our responses
tend to be carefully considered and can become programmed to fit the observed habits of the group. This can and does place a damper on individual creativity as people
seek the non-controversial comfort of the group viewpoint. Figure 7.3 shows how our
individual responses change from unchecked spontaneity (high tendency for creativity)
to controlled norms (low tendency for creativity) depending on the degree of ‘ease’ or
comfort the group culture provides.
Movement from high comfort individual behaviour to conditioned low comfort group
behaviour is critically dependent on individuals’ trust expectations. If this is consistently
high, individuals will tend to adopt common behaviour patterns and the group will function
as a cohesive and united team. Everyone will pull together and the collective purpose (vision)
Figure 7.3 Group responses.
Organisational culture and climate 135
of all will boost performance. Close identity with a group or team generates a collective
loyalty or supra individuality that in the right context can be highly creative. If this is missing
in groups then the collective individuality loses its dynamism and simply becomes a label –
individuals go through the motions. They play the notes but the tune is flat.
Loyalty and group participation
Individuals choose the degree to which they are prepared to relax in a group culture
(i.e. within a set of recognised and accepted norms or behaviour patterns). When loyalty is
high and the degree of participative membership is low (see Figure 7.4) individuals can be
said to be displaying dutiful adherence. In this case the vision or the purpose of the group
is accepted but there is little enthusiasm for joining in to further the cause. This appears to
be the behaviour pattern adopted by many towards such groups as local churches, charities, and so forth. If both loyalty and degree of membership are low then individuals are
practising nominal adherence. Such ‘take it or leave it’ attitudes rarely result in much
creative output. This response is neatly captured by the words of President Kennedy who
invited Americans in his inaugural speech to ‘ask not what your country can do for you but
rather what you can do for your country’. When group loyalty is low and group membership high, individuals will tend to see their inputs as being merely professional adherence.
This behaviour pattern produces prescribed results characterised by a tendency to do just
enough to meet expected job requirements but is often rule-bound and robotic. When the
contextual stimuli are both complex and fast changing, professional groups need to display both a high degree of loyalty and participative membership. This is termed inspired
adherence and can be seen in the daily work of many teachers, preachers, researchers,
and health and social workers whose loyalty to their clientele is often stronger than their
loyalty to the organisation.
Figure 7.4 Degrees of group participation.
Source: M. R. V. Goodman, Durham University.
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Innovation from theory to practice
Working in groups
Individuals are managers, as they make decisions relating about what behavioural actions
they are going to select in response to contextual stimuli. Managing group responses is a
totally different matter. As most training films point out, individuals need to learn how to
manage themselves before they seek to manage groups. Individuals who are poorly focused
will only confuse themselves. If they are exposed to groups their confusion will be compounded. This inevitably leads to them becoming isolated in the group and often regarded
with disrespect and scorn. Primitive attempts to pull rank to get their own way just result in
inadequate and poorly supported group responses.
Every aspiring group manager should be aware of the basics of group dynamics before
practising working with groups. Naive managers who just blunder in will cause severe damage to professional group relationships. They are like over-hasty drivers who attempt to
change gear without first depressing the clutch. Similarly, power managers who attempt to
get their own way by hoodwinking groups will soon be found out and then found lacking.
The resultant damage this approach does to groups can be devastating and long lasting.
Responsible group managers should pay heed to:
••
••
••
••
establishing group beliefs;
empowering groups to perform;
encouraging group members to interact;
attempting to understand interactions and group belief systems.
Establishing group beliefs
The group must have a constructive purpose or vision. This needs to be effectively communicated to all group members. When groups are formed to look at problems that are complex
and messy, wise managers invite group members to discuss the initial brief to achieve a consensus understanding of what is involved and what progress options can be explored.
Empowering groups to perform
Avoid threatening individuals or deliberately forming subgroups under the manager’s control
to check or thwart progress. Divide-and-rule policies are sometimes legitimate ploys but only
in exceptional circumstances. Frequent use of such tactics is a trait of the guerrilla manager –
a person who is easily recognised by a tendency to have an exaggerated opinion of their own
talents that is not validated by the group.
Encouraging group members to interact
Interaction is the mechanism that builds and sustains the belief system of a group. Interactions
involve the mutual sharing of a situation between two or more people, so that each of them
benefits from the experience and has their belief system strengthened. Sensitive managers
will be aware that interactions need not necessarily mean the same to all those who are
involved. People are individuals and will have differing perceptions of the real meaning of
what happened. Recognise this as a human trait and remember to summarise deliberations
Organisational culture and climate 137
at regular intervals – in any case a good convergent creative problem-solving technique.
As evidence of this, try asking each person what they thought of their group meeting – you
can expect a variety of answers!
Attempting to understand interactions
Responsible managers should endeavour to discover why one group clearly works more
effectively than another that is apparently equally resourced. Why are the individuals who
work in one section off-putting and difficult to talk to, while those in another section are
happy and willing to help? Often it is because of the influence of one individual or a small
subgroup of people who exert a strong influence on the rest of the group. This common
occurrence is caused by the nature of the interaction within the group. Individuals who interact frequently tend to be the ones who influence the development of the group.
Preparing for group activity
Leadership role
Much has been written about the leadership role of the manager (Adair, 1987 [1983, 1985];
Carneli et al., 2012). If the intention is to focus the total thinking potential of the group, in
the expectation of finding a suitable agreed solution to a messy problem, the role of leader
assumes a special significance. In this instance the traditional military task-oriented command approach needs to give way to a softer, more subtle, steering role that enables the
group to perform to high standards. This is a highly skilled function that facilitates rather than
dictates a response from the group. It is an enabling role that can be described as creative
facilitation (see also Chapter 11).
Group rewards
Man does not necessarily live by bread alone. Whilst the level of remuneration will always
remain important to an individual, it is not the only reward that most individuals expect. If an
individual is respected by group peers this acts as a powerful motivator. If managers join groups
as team members and not as members of the corporate aristocracy this will generate high comfort behaviour in the group and is likely to encourage creative responses. Most individuals will
warm to this approach, as it is often in marked contrast to the expected authoritarian behaviour.
Soon the group will become more like a team that displays high levels of trust and appreciation
of the contributions of its members. If managers can achieve this and it may take some sustained
action, then a real corporate family culture will develop and individual group members will
positively identify with the group. The resultant mutual appreciation and respect is, for many,
a highly valued experience. This high level of mutual internal support will soon attract external
attention and further enhance the kudos of group membership within the organisation.
Group selection and initial briefing
To minimise the potentially stultifying effect of deeply entrenched mindsets, creative facilitators should assemble unstructured groups. The choice of individual group members itself
is a subtle task that balances technical expertise with cross-functional objectivity. Nominated
individuals should then be invited to attend a briefing meeting that is designed to:
138
••
••
••
••
Innovation from theory to practice
inform them why they have been chosen for the exercise in question;
assure them that they are all equally valued;
tell them how the creative facilitator will operate;
tell them what they can expect to get out of the process.
Managing groups
Every individual is a manager and regularly accepts and accomplishes a variety of tasks.
Many may legitimately feel that they are the best person for an important job and opening up
the matter to group creative problem solving is not a very attractive option, as it will lead to a
lower performance standard and introduce the additional complexity of managing others. So
does it always make sense to use groups?
Advantages
If a group is defined as consisting of more than one person then clearly more than one mind
can be focused on the problem, which should lead to a greater concentration of total thinking. This has real advantages if the problem is difficult. In any case even under traditional
management practice, groups can potentially offer the following advantages to the lone
manager:
••
••
••
••
••
A mix of skills and experiences.
The potential to generate more ideas than a lone individual.
A division of task responsibility.
Members can bullet proof each other’s arguments, thus cutting down the risk of the
adoption of faulty or suspect solutions.
The stimulation that results from personal interaction can lead to improved ideas or
solutions.
Disadvantages
Whilst there are obvious benefits to be obtained from working in groups it is interesting to
note that even the smallest of groups – basic partnerships – often seem to generate operational difficulties. How many such difficult partnerships can you recall? Start your train of
thought with Gilbert and Sullivan, Sir Tim Rice and Sir Andrew Lloyd Webber, etc. On the
other hand, some groups have been found to be disastrous for the following reasons:
••
••
••
••
••
••
••
••
••
••
Members were too similar in character and functional speciality.
Group discussion was poorly managed and failed to harness potential group strengths.
There were too many members – 10 to 12 is probably the optimum number.
The group developed what Janis (1982) referred to as group think – ‘a determination
of mental efficiency, reality testing and moral judgement that results from in-group
pressures’.
There was a tendency for certain members to dominate group discussion.
Too many tended to wander off the point.
There was poor use of CPS skills.
There was an overhasty desire to find a solution at any cost.
There was a failure to identify expertise lying within the group.
There was deliberate restriction of key information.
Organisational culture and climate 139
A skilled creative facilitator can directly address all these disadvantages as long as the
organisational management are supportive. However, when pressed to achieve something
quickly, many individuals seriously consider doing the job themselves. This can become
such a strong personal behavioural norm that it can potentially threaten the acceptance of
the group manager by his or her staff. A suspicion arises that their manager does not trust
them with important tasks and assignments and this inevitably dampens enthusiasm and the
standard of group performance.
Solo or team run?
Clearly it is impossible for group managers under pressure to do everything. Delegating
authority for important tasks remains a difficult challenge for many managers. If the contextual stimuli are well known the solution to the problem is often straightforward and may
simply entail a subordinate following a clearly defined problem-solving sequence. However,
if the contextual stimuli are complex and changing rapidly, a group may better address the
problem under examination. The decision to go it alone or to take the problem to a group is
one of the most taxing that managers have to make. The key element here is mutual trust. If
this is not evident then interactions will be severely limited in what they can accomplish. The
interactive process of management becomes more difficult when the contextual stimuli are
complex. This is often the time when managers need to open up to their staff. If their style in
more stable times has been autocratic they will need to set about securing a democratic style
and this may take some time. Often the problem is that time is not available. If the underlying
contextual stimuli are changing rapidly managing successfully may mean abandoning traditional mindsets and intricate management models and risking real-time action. Theory often
lags behind practice. Indeed it often manifests itself as the codification of previous practice.
Rapidly changing stimuli call for a new style of practice; the creative management response
that encourages creativity and innovation (Goodman, 1995).
Belbin’s Team Roles
In a study first published in the mid-1970s that addressed the release of creativity in successful teams, Belbin (1981) suggested that there were a number of finite and limited roles
‘adopted naturally by the various personality-types found among managers’ (Adair, 1987
[1983, 1985]). These team roles are presented in Table 7.2. This inventory produces wellbalanced teams and looks to the people-oriented Chairperson to keep the group together and
moving in the right direction, the task-oriented Shaper to see that the job is achieved, and the
Plant to provide the creative spark. The other five roles are supportive ones once the people,
task and ideas inputs have been addressed.
Table 7.2 The Belbin roles
Role
Description
Chairperson
Shaper
Plant
Resource Investigator
Monitor Evaluator
Team Worker
Implementer
Completer/Finisher
Good with people
Good at getting things done
Good at generating ideas
Good at finding out what is needed
Good at measuring progress and performance
Good at supporting and helping the group
Good at working for the organisation
Good at attending to detail to get the job done
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Innovation from theory to practice
These are, in turn, split into three role groups:
1
2
3
action-oriented
people-oriented
thought-oriented.
Action-oriented roles:
••
••
••
Shapers are dynamic and energetic – they tend to challenge teams to improve and to
maintain focus and momentum.
Implementers are disciplined and task-oriented – they get things done through planning
an implementable strategy.
Completers (or Finishers) pay attention to detail and stick to deadlines to ensure a project is completed thoroughly and on time to the highest standards possible.
People-oriented roles:
••
••
••
Chairpersons take on the role of leader – they delegate tasks and guide team members
to achieve specific goals.
Team workers provide support to ensure effective teamwork – they are good negotiators
who give priority to team cohesion.
Resource investigators are enthusiastic team members and good networkers who explore
options and negotiate for resources to help the team to accomplish its goals.
Thought-oriented roles:
••
••
••
Plants are creative innovators who have good ideas but who prefer to work on their own.
Monitors (or evaluators) critically assess and evaluate other peoples’ ideas in an objective and impartial manner before taking decisions.
Completer/Finishers are experts who are in possession of the specialist knowledge
which is required for the attainment of the group project or task.
Although Belbin’s model provides clearly stated roles for team members, what happens in
real life is often more complex as individuals’ skill and attributes may overlap from one
role to another. This may depend on context and team dynamics. Research confirms that all
individuals and groups have their own specific role mix and so every team has a unique team
culture and climate (Mostert, 2015). Some team members may move easily from one role to
another when the conditions that constitute the group change, such as when new members
join the group or when a new group is formed (Bell, 2013).
Tuckman model
Another model of team development first developed by Tuckman in 1965 is the Forming,
Storming, Norming and Performing model (Bonebright, 2010). During the forming phase,
people get to know each other, relationships and trust are built, and implicit or explicit rules
are formulated. The four stages demonstrate how a team develops, faces up to challenges,
gets down to action and delivers results. Another final phase is sometimes added. This is
the Mourning or Adjourning stage, when the team goes through the process of disbanding.
Organisational culture and climate 141
During this stage, personal conclusions are formed and steps may be taken to deal with the
stress of splitting up the team, which is often a consequence of the project coming to an end.
One of the main advantages of utilising teams is the synergy which emerges as a result of
the accumulation of the skills and attributes of team members. Team sports, such as football
(soccer), where one player may be better in defence, another at attack and another at scoring
goals, provides an interesting analogy. Although each player is assigned a specific role, the
outcome of the collaboration and the role assignment is based on individual strengths and is
likely to lead to increased synergy and success.
Effective teams may provide valuable input to the innovation management process, particularly if attention is paid to the manner in which the team is constructed and how it evolves
and develops over time. Teams may, moreover, build, collaborate with and support internal
and external sources of ideas, networks and relationships.
The MBTI inventory/Jung’s personality typologies
The Swiss psychologist Jung, though an early follower of Freud, advocated that behaviour
was influenced by drives other than purely sexual ones. He studied the differences between
people and developed a set of typologies that reflected whether individual personalities were
characterised by a tendency toward introversion or extroversion. He described eight basic
scales (see Table 7.3).
1
2
3
4
Extroverts (E) tend to look outward and focus on an outer world of people and things.
They prefer to communicate verbally rather than in writing and tend to prefer action and
variety.
Introverts (I), on the other hand, prefer to focus more on their inner world and they can
appear to be timid and shy.
Sensing (S) types prefer to work with what is given and so appear as practical people that
have an eye for detail and prefer proven methods.
Intuitive (N) individuals can look beyond their senses and harness their imagination in
order to see new possibilities and are not too bothered with points of detail.
For each of the four preference scales Jung identified two opposite preferences (making 16
personality types in total). Thinking types rely heavily on their powers of reason and are good
at sizing up situations. Feeling types, on the other hand, pay an especial regard to the impact
of their behaviour on others. Judgers have a strong liking for order, control and organisation.
Lastly, Perceivers prefer to react and adapt to the moment and thus appear more flexible
(see Myers-Briggs, 1987).
Table 7.3 Jung’s personality typologies
Extroversion
Introversion
Sensing
Thinking
Judging
Intuition
Feeling
Perceiving
Looking outward
Looking inward
Manipulating facts according to established procedures
Application of logic and analysis in decision making
Tendency to be organised and controlled
Using imagination and refusing to be submerged by detail
Reacting to personal preferences (own and others) and value sets
Tendency to be spontaneous and flexible
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Innovation from theory to practice
The 16 types described are not intended to be predictive but to assist individuals to recognise their own and others’ gifts. The assessment procedure selects the highest score on each
of the four scales as being the dominant characteristic of the individual. So, for example, a
person who scores 10 for extroversion and 13 for introversion would be classified by the
MBTI inventory as being introverted. As with the KAI inventory, environmental factors can
distort the results.
The KAI inventory
Kirton’s KAI inventory (Kirton, 1987) seeks to assess individuals’ response styles in terms
of their characteristic approaches to decision making. His adaption-innovation theory places
individuals on a continuum from highly adaptive to highly innovative.
Adaptive individuals are seen as those who like to do things better within the same personal, group and organisational standard practices or mindsets. They prefer not to rock the
boat. They are less radical in their approach than innovators and so their failures tend to be
less damaging to their reputation. They easily work with others. Innovators, on the other
hand, approach problems from an entirely different perspective. They tend to escape from
mindsets that surround the problem, the workplace and look for inspiration by exploring the
problem in another environmental setting. They reconstruct the problem and tend to produce
less conventional solutions. They often find it difficult to work with others and many see
them as being abrasive and insensitive.
The KAI continuum ranges from 46 (extreme adaptor) to 145 (extreme innovator) with a
mean of 90. A difference of 10 points between individuals can lead to communication difficulties. The inventory seeks to measure an individual’s response to three subscales:
O
Originality, which has a range from 13 to 65 and a mean of 39. Innovators with a
high score tend to produce a proliferation of ideas, whether needed or not and tend
to adopt a radical style.
E
Efficiency, which has a range from 7 to 35 and a mean of 21.
R
Conformity, which has a range from 12 to 60.
The question remains what is it measuring? The way individuals respond to the KAI inventory
is influenced by the key stimulants they experience in their total living environment (domestic
and professional). As much of Kirton’s work was researched within an organisational context
the organisation itself will significantly affect the KAI score. Individuals will be more inclined
to work within the accepted mindsets in tight cultures than in freer environments. Whilst it is
undeniable that the KAI inventory does reveal some interesting information about individuals
it also says quite a lot about the organisations in which they work.
High-trust managers, groups and organisations are more likely to encourage, what Kirton
terms, innovative responses than restrictive cultures. It can therefore be difficult to determine
what the characteristic style is. Is it that of the individual? That of the organisation? That of
the individual within the organisation? There is a danger with the KAI inventory that organisations may see it as a way of classifying individuals according to their perceived level of
creativity. Despite Kirton’s efforts to prevent this – as he does argue that creativity can be
exhibited at both ends of his continuum – many users of his inventory probably do associate
active creativity with a high KAI score.
Organisational culture and climate 143
Practice
Empowering people
First task of a CPS facilitator
As Chapter 4 demonstrated, individuals need to step off the familiar stepping stones
(memory traces) of their everyday lives and express a willingness to try a different path.
The first task of a creative facilitator is to stimulate individuals to become curious about
creative thinking. The creative force is omnipresent but not always obviously active in
the behaviour of individuals. As individuals can choose their behaviour, they can choose
to harness their natural creativity to any challenge in life. So it is a matter of choice to
get going with the force, rather than specific know-how, and this choice factor is heavily dependent on dominant contextual factors such as organisational climate, culture and
working environment.
To foster creative thinking the championing individual needs to create a local climate in
the work organisation that, first, upholds the favourable psychological dimensions, as, for
example, described in the research of Ekvall and Ekvall (1983) of the Swedish Council for
Management and Work Life Issues in Stockholm:
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The need to issue a challenge to employees.
To grant them the freedom, at least at regular intervals, to exercise their own initiative
on problems – to do their own thing. This is a powerful motivator.
To support CPS as a bona fide workplace activity.
To trust individuals to deliver an answer or set of options to the what problem without
feeling that the method (the how) has to be proven beforehand. A purely cognitive explanation of creativity is not possible, as its presence is critically dependent on contextual
stimuli (Goodman, 1995). Thus, it cannot be modelled and repeated. It may, and usually
does, throw light on complex issues, but it cannot be switched on and off like a streetlight. It is not a standard single solution to a problem. A streetlight is a static object with
a single intensity light. Creativity is a spontaneous flash that can be regular or intermittent in frequency and can also vary in its illumination (obviousness) to others.
To acknowledge that real-life stimuli are dynamic and so, therefore, should be the
response patterns of individuals, groups and organisations. The construction of individual and organisational patterns, rules and mindsets that are too tight, in a bid to capture
the cognitive understanding of control, is always a dangerous practice – particularly in
times of rapidly changing stimuli.
The acceptance that playfulness is a legitimate creative trait and not a childish, gimmick
activity.
The openness both to permit and then debate the effectiveness of various CPS tools and
techniques.
The recognition that conflicts occur in groups, will need to be sensitively managed, but
can be a powerful stimulant to creative activity.
The realisation that quickly changing stimuli cannot always be accommodated by low
risk responses. New challenges always will put pressure on precedent. New memory
traces have to be fashioned.
The realisation that teams can only function well in crises if there is mutual respect.
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Second task of a CPS facilitator
Second, the aspiring creative facilitator needs to give careful attention to the visual climate
or environment. This entails:
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Taking a positive lead – in the creation of a new climate.
Getting self and others trained as creative facilitators.
Seeing that a suitable room is available, that is light and airy, with uncluttered walls,
informal physical layout (chairs in circles rather than rows), good table tops, preferably
brightly painted with some carefully chosen stimulants placed on shelves and walls (e.g.
plants, interesting shapes, pictures, audio/visual facility, etc.).
Seeing that the room is well stocked with vital materials (such as, Blu-Tack, paper (A4,
and it is useful to have a supply of A3 sheets too), marker pens, flip chart/s, Post-It notes,
clipboards and notebooks) encouraging individuals and groups to use the room.
Third task of a CPS facilitator
Third, it is important for would be creative managers to take the plunge themselves and lead
by example:
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Perhaps the first task here is to generate a supportive atmosphere in the established
physical setting by purposefully signalling to your work groups that you really mean
business. Convey that you have a genuine desire for the group to solve real problems and
expect to see some action.
Be prepared to give it a sustained go for at least a year and to be prepared to meet and
manage any criticism from other parts of the organisation.
Encourage the formation of small groups (seven is about right) and balance the group
members in terms of functional and general skill and length of service. Resist any early
temptation to invite senior executives to attend. Wait until you have sorted out early
teething troubles and when the group is ready to include senior management.
Encourage all group members to contribute. Discourage any tendency for any one individual to assert too great an influence on the group. Keep the group together and resist
the formation of splinter groups.
Inform the group that you are looking for the interplay of three main roles in the meetings of the Creative Group Problem Solving Team.
(a) a problem owner;
(b) up to five additional assists or helpers; and
(c) a creative facilitator – a responsibility you should be prepared to take on initially
yourself – who is responsible for keeping the group on a creativity path and for
introducing suitable CPS tools.
Process role of a CPS facilitator
Key process skills
The role of creative facilitator is a vital one and calls for an understanding of the basics of
group dynamics and a familiarity with simple CPS tools and techniques. It is important to:
Organisational culture and climate 145
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Practice both divergent and convergent thinking modes. This is a subtle task that requires
the application of the total thinking concept. If the group gets stuck, it is the responsibility
of the creative facilitator to prompt some CPS excursions to get the group back on track.
Mix periods of heavy disciplined thinking with periods of light and zany thinking.
Watch the quality of the group’s performance. Be flexible. It is better to have several
short bursts of energetic activity than to persevere with long sluggish sessions. Most
people’s performance starts to wane when they get tired and hungry.
After each session ask each group member to write down on a Post-It note what they
liked about the session and one thing that could be improved.
End each session by thanking people for their involvement and announce the date and
time of the next session.
Conflict in groups and teams
Conflict and tension may arise in teams, especially in circumstances when strong personalities clash, when communication amongst team members is ineffective or when tasks
assigned to individual team members are not sensitively distributed. Team leaders should
be constantly aware of this and eliminate possible tension by exercising empathy, listening
skills and encouraging participation.
Since conflict may arise as a result of divergent opinions, attitudes or decisions, team
members may be trained in skills such as the Six Thinking Hats (de Bono, 2009), which
allow for ‘parallel thinking’, a method which may be used for planning, decision making,
generating ideas and conflict resolution. Training in mediation or in conflict resolution skills
develops increased acceptance of individual differences, together with an appreciation of the
richness of divergent opinions and personalities. Sometimes a decision to reach a compromise may be taken and sometimes negotiation skills may be sufficient for the conflict to be
resolved.
The team’s perception of conflict may be challenged and shifted from a threat to an opportunity. Constructive conflict may give rise to a healthy competitive climate with outcomes
which may surpass initial expectations. Achieving a balance between resolving conflict and
drawing out positive competitive elements, which may result from conflict, is not an easy
task. It is important for team members to recognise and deal with any destructive elements
which may arise and to appreciate, respect and understand the value of diverse perspectives. Although conflict often arises as a result of differences of opinion, values or attitudes,
diversity in the manner in which a team is constituted is one of the main factors which adds
dynamism to teams.
Action
Organisational culture and climate
The concepts of culture and climate are often confused in the literature. Climate refers to
the environmental factors (physical and psychological) within an organisation and includes,
communication, trust, feedback and reward. Culture, on the other hand, involves the norms,
values, beliefs and traditions of an organisation, which are often incorporated into the mission and vision statements and which constitute the philosophy and behaviour of the people
who make up the organisation.
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Organisational attitude and commitment
Top management both inherit and fashion the attitude that an organisation takes to creativity
and innovation. Some place importance in fostering and sustaining creativity and innovation.
Others occasionally show interest, usually in the good times, when they are happy to commit resources to encouraging them. Others essentially prefer to base their actions strongly
on the least-cost production paradigm. In reality all organisations can be said to innovate to
some degree. Incremental and radical innovation initiatives should not be seen as mutually
exclusive. Continuous or incremental improvements to organisational activity are generally
accepted as being an essential part of general management activity. Radical innovation may
result from a flash of inspiration; however, consistently successful innovation requires a strategic approach to managing innovation.
Senior management who regard innovation as important will carefully evaluate their business environments. In relatively static environments organisations are likely to be strongly
focused on running their concerns efficiently in the short term. Most organisations, however,
are faced with more dynamic and changing business contextual pressures and need to adopt
a strong innovative orientation. This will necessitate ensuring that their strategy and structure
are carefully tuned to the development of an organisational climate and culture that facilitates
business creativity and innovation.
Organisational philosophy
Bower defines ‘company philosophy’ as:
the basic beliefs that people in the business are expected to hold and be guided by – informal,
unwritten guidelines on how people should perform and conduct themselves. Once such a
philosophy crystallizes it becomes a powerful force indeed. When one person tells another
‘That’s not the way we do things around here,’ the advice had better be heeded.
(Kotter and Rathegeber, 2016)
Expected patterns of behaviour are developed, either through leadership or through trial and
error, until they evolve into ‘a set of laws or guidelines that gradually become established’
(Kotter and Rathegeber, 2016).
John Lewis: how far does the ownership of a firm shape its culture?
That was the question behind the experiment started by John Spedan Lewis with his
family’s retail business in 1929, aiming to align managers and managed and laying the
foundations for the UK’s most famous employee-owned company – the John Lewis
Partnership.
Organisational climate
Interest in the literature and amongst practitioners in the link between organisational climate,
culture and performance is gaining momentum. However, as yet there is no consensus agreement
even on their definitions and, to compound the difficulty in examining these variables, they are
dynamic and interact with each other. Climate and culture are sometimes used synonymously.
Organisational culture and climate 147
Empirical research does reveal that there is a significantly positive connection between climate
and organisational performance (Turnipseed, 1988; Kangis, 2000).
Generally speaking organisational climate refers to the environmental variables (physical
and psychological) within an organisation and includes:
••
••
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••
communication
trust
feedback
reward factors.
East African Brewers, Kenya
East African Brewers is Kenya’s largest brewer. The company produces, markets, distributes and sells an extensive portfolio of alcoholic beverages including its flagship
beer brand, Tusker Beer, and spirits such as Baileys, Smirnoff and Black Label. The
company also produces and distributes soft drinks such as Alvaro and Malta Guinness
in Kenya, Uganda and Tanzania. At the heart of their business are core values that
show them to be an employer of choice for talented and ambitious people. Their values
are brought to life by their guiding purpose – to celebrate life every day, everywhere,
which permeates their work.
The company is committed to the professional and personal development of employees by offering and creating a variety of opportunities and to maintaining a diverse
workforce where the different contributions made by employees, through their different personalities, experiences and perspectives, creates a stimulating and rewarding
working environment. A diverse cultural workplace environment gives the company a
deeper insight into consumer needs and enhances relationships with their stakeholders.
Source: Adapted from https://www.eabl.com/careers/life-at-eabl (accessed 1 March 2016).
Isaksen (2007) defines climate ‘as the recurring patterns of behaviour, attitudes and feelings that characterise life in the organisation’. Expanding this he describes a psychological
climate that refers to ‘the intrapersonal perception of the patterns of behaviour, attitudes
and feelings as experienced by the individual’. Finally, he identifies an organisational
climate that comprises the aggregation of the psychological climate and involves ‘the
objectively shared perceptions that characterise life within a defined work unit or in the
larger organisation’.
Organisational climate is determined essentially by the interaction between physical and
psychological factors. People need to like going to work. Organisations that place a strong
emphasis on innovation (e.g. Semco (Semler, 1994) and Happy Ltd. (Stewart, 2012) ensure
that the physical working environment is conducive to creativity and innovation. Offices and
meeting rooms are carefully designed to provide essential support services with attention also
being paid to providing a stimulating environment.
Careful attention also needs to be afforded to developing a stimulating psychological climate for small as well as large businesses (Manning, 2010). People at all levels need to be seen
as being important to the operation of the organisation if it is to work effectively and efficiently
as a team. As this text argues, it is vitally important for an organisation to build a climate
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of trust that enables staff to firmly believe that they work for a just and supportive concern.
This results in an esprit de corps that is apparent to both internal and external customers.
Whilst attention to the physical and psychological determinants of organisational climate
is necessary to stimulate creativity and innovation, friction and conflict will occur. Good
teams respect both their peers and leaders. A degree of conflict can be a good thing and can
provide stimulation as long as it is well managed and all parties believe that justice in the
workplace is seen to be even-handed.
Isaksen (2007) argues that ‘group problem solving, decision-making, communication and
coordination’ are ‘organisational processes’, while ‘psychological’ processes include ‘learning, individual problem solving, creating, motivating and committing’. Collectively, these
influence the performance of employees, teams and the organisation as a whole.
Key factors for developing a climate that fosters innovation
Seven key factors are of crucial importance in developing a climate that fosters innovation:
1
2
3
4
5
6
7
structure
leading individuals and teams
vertical and lateral communication
trust
motivation
rewards and recognition
training and staff development.
STRUCTURE
The organisational structure influences the creative climate in an organisation. As discussed in
Chapter 10 there is no magic formula for an ideal structure which may be applied. Organisations
should assess their situation to ensure that the organisational structure is designed to enable the
flow of communication and to be in line with its desired goals and outcomes.
LEADING INDIVIDUALS AND TEAMS
The key individuals in the innovation process can be described as innovation champions, idea
scouts and idea connectors and are important elements to consider where climate is concerned.
Innovation champions play a key role in maintaining and sustaining the motivation of employees where idea generation and communication are concerned. Idea scouts scan the external
environment for feasible innovative ideas which ensure that the organisation maintains and
sustains momentum. Idea connectors create internal and external networks to be able to identify the right person who has the power to act to connect to specific ideas. Teams are also an
important element and are constituted on the basis of the members talent and skills. Teams
work on new product development and on various stages of the innovation process.
VERTICAL AND LATERAL COMMUNICATION
An appropriate communication strategy, with a two-way flow of communication (both vertical
and horizontal), is essential for the creation of the right climate for innovation. Ideas, suggestions, feedback and plans related to change should be effectively communicated to all
Organisational culture and climate 149
concerned. Communication concerning planned changes should include all relevant stakeholders. The information which flows through communication may be used to create a
feedback loop through which adjustments to the system may be flexibly applied whenever
the need arises.
TRUST
Employees trust each other in a climate which is conducive to successful innovation and
where the sharing of ideas is facilitated. Trust enables social cohesion, engagement, commitment and allegiance to the values and beliefs of the organisation. It acts to increase
confidence, self-esteem and honest communication and to mitigate fear of failure. The belief
that what is good for the organisation is good for the individual is based on the construction
of a trustful relationship.
MOTIVATION
Motivation is linked to communication, feedback, rewards and recognition. Employees feel
motivated if they know they have access to the right person with whom they may exchange
their ideas and discuss issues. Challenging tasks which are assigned to the right people act as
motivating forces. Feedback is important, as it evokes a sense of participation and belonging.
Employees are motivated if they feel that their efforts are being acknowledged, appreciated
and rewarded. Emphasis on motivation as an integral element for a successful climate results
in an increased commitment by employees towards the organisation and reduced resistance
to and fear of change.
REWARDS AND RECOGNITION
Leadership that is committed to nurturing a creative environment understands the motivating
elements involved in rewarding employees for their efforts. Intrinsic rewards are generally
considered to be more valuable than bonuses or monetary rewards. These include recognition
and acknowledgement and positive reinforcement demonstrated through approval and genuine appreciation, and benefits which could include an increase in status or the assignment of a
challenge or task which carries particular significance (such as representing the organisation
at an important event or being assigned to a work-related trip overseas) and possible perks.
Innovation may be self-rewarding, since the innovator may be perceived by other employees
and management as an ‘expert’ with an enhanced reputation.
When employees own a stake in a company it can create a positive culture. Employee
ownership is the fastest growing form of business ownership. An increasing number of business owners planning retirement are arranging for their employees to take over ownership of
their firm, and entrepreneurs creating new businesses are seeing the advantages that employee
ownership can bring for business growth. Employee ownership takes this to a new level, by
involving everyone in the ownership of a significant part of the business, often a majority or
100 per cent. Companies such as John Lewis are longstanding pioneers.
These companies tend to have a positive culture and committed employees (according
to Edinburgh Napier University, 80 per cent of staff of employee-owned companies would
recommend them as places to work), but employee ownership is not about creating a warm
feeling in a comfortable place. Like every other business, they operate in a highly competitive environment and will only survive through financial success. When carefully structured
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and managed, employee ownership can help a business achieve excellence and strong profit
levels, sharing those rewards with everyone who has helped create them. Employees can
become owners directly, by personally holding shares in their company, or indirectly, through
an employee trust.
Being an owner does not make every employer a manager: like any successful company,
one owned by employees will need a professional and effective management team. But its
managers are far more likely to be paddling with the flow, supported by staff who are committed to their company’s success because they have a stake in it. It differs from a cooperative,
which tends to be owned by its users and/or its employees. An employee-owned business is
solely owned by its employees.
TRAINING AND STAFF DEVELOPMENT
This should be an on-going practice as opposed to one-off training sessions where the skills
and knowledge learnt may be forgotten in a short period of time. Employees require training in soft skills which include idea generation methods, communication skills, opportunity
recognition, risk taking and leadership skills. Skills need to be practised over a period of time
in order for them to be developed and applied. Follow up training sessions to elicit feedback
and to reinforce the skills learnt enables the sustaining of the benefits received during the
training session.
Sustaining an organisational climate
This is not an easy task. It requires continuous monitoring, feedback, evaluation and assessment. Successes should be celebrated and disappointments investigated with a positive focus
on the lessons to be learnt by individuals and groups. Culture is a social concept that is transmitted from person to person. It is adaptive as opposed to static, and it may change when
necessary to address the challenges or needs which it faces. Culture is social and it is visible
in relationships, rather than in individuals, as it comes about as a product of people sharing
agreed norms, values and beliefs. Organisations are composed of people and, just as social
groups assume a social culture, so do organisations adopt a culture of their own.
Many would agree in principle that organisations would solve their problems if they were
to develop working atmospheres or cultures which consistently featured trust and teamwork;
this is fine as far as it goes. It represents a start but what it does not do is to address the thorny
problem of how can an organisation change its culture. Jacques (1952) developed a definition
of organisational culture which covers, first, the dominant corporate style or operating fashion:
The culture of the factory is its customary and traditional way of thinking and of doing
things, which is shared to a greater or lesser degree by all its members, and which new
members must learn, and at least partially accept, in order to be accepted into service in
the firm.
This is followed by a description of supportive behaviours:
Culture in this sense covers a wide range of behaviour: the methods of production; job
skills and technical knowledge; attitudes towards discipline and punishment; the customs
and habits of managerial behaviour; the objectives of the concern; its way of doing business; the methods of payment; the values placed on different types of work; beliefs in
democratic living and joint consultation; and the less conscious conventions and taboos.
Organisational culture and climate 151
Organisations, like individuals, develop their own ‘personality’ (or ‘character’) which are
fashioned over time by the factors described in the vignette below. Managing organisational
cultures is a dynamic process as they shift incrementally in response to internal and external
changes (Watkins, 2013).
Organisational personality factors
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The organisation’s unique history, including tradition, that moves from the past to
the present and on to the future.
The behaviour of the people who make up the organisation, who share the culture,
and for whom it becomes a way of life.
Norms, ideology, ideals, values and accepted ways of doing things.
Identity, which includes image, branding, symbols, rituals, traditions, dress code,
myths and reputation.
Functional and dynamic elements, including the way problems are solved and the
manner in which the organisation adapts to the environment.
Mental elements, including learned habits and social controls.
Shared values are at the centre of organisational culture. These include perceptions, beliefs
and ideology. These values persist over time, regardless of changes in the membership of
the group. They are manifest in the behaviour of people in the organisation and through
expressions which include symbols, language, ideology, beliefs, rituals, traditions, myths and
products. Employees who join an organisation feel they need to learn how they are meant to
act, what they are supposed to do, how they are supposed to do it and how they can expect
others to act. This is a response to a felt need for acceptance, security, stability, safety and to
avoid embarrassment.
Learning to adapt to and absorb the culture of an organisation may come about through:
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formal or informal induction training;
shadowing another employee;
modelling the behaviour of others;
trial and error;
intuitively;
through direct instructions.
As the behavioural norms, basic assumptions and values which form part of the organisational culture are absorbed by new employees, they learn what the expected ways to behave
are and how they should expect others to behave.
Can climate and culture be assessed?
Cameron and Quinn (1999) devised the Organisational Culture Assessment Instrument
(OCAI), which investigates the current, and the desired organisational culture. The OCAI
has been used extensively and it claims to be both valid and reliable. It is in the form of a
questionnaire, with six groups of questions and four alternative answers to the questions.
It is not easy to assess the climate and culture in an organisation. Although quite a few
tools are available which claim to measure creativity and innovation within an organisation,
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to date there is no one tool which is considered reliable and valid for assessing either
organisational climate or culture. Culture is more difficult to assess than climate. Ekvall
(1996) and Isaksen (2007) both agree that it is very difficult to change the norms, attitudes and beliefs which constitute organisational culture. They both recommend focus
on the organisational climate, as this would allow for the required changes to behaviour
and attitude which could, in turn, have some effect on the organisational culture.
Assessing the climate or culture in an organisation is a useful exercise, as it brings
out the strengths and weaknesses and draws attention to areas where improvement is
required through intervention.
Ekvall’s Creative Climate Questionnaire
Ekvall developed the Creative Climate Questionnaire (CCQ) in 1990. This is a 50-item
questionnaire which covers ten dimensions of five items each. The 10 factors which Ekvall
identifies, which are based on theoretical and applied research and experience are shown
in Table 7.4. Ekvall maintains that this instrument is an organisational measure and not an
individual measure, as respondents are asked to contribute by taking on the position of an
observer of life in the organisation.
Isaksen’s Situational Outlook Questionnaire
Isaksen’s (2007) paper reports on research conducted with organisational leaders which is
based on case studies and which describes the use of the Situational Outlook Questionnaire
(SOQ). This tool, which is also used for assessing organisational climate, is based on Ekvall’s
early work and is quite similar to his questionnaire. Nine climate dimensions are addressed
through the delivery of a questionnaire which has 33 questions.
Table 7.4 Key factors in Ekvall’s Creative Climate Questionnaire
Factor
1 Challenge
2 Freedom
3 Idea support
4 Trust/openness
5 Dynamism
6 Playfulness
7 Debates
8 Conflicts
9 Risk taking
10 Idea time
Description
This involves meaningfulness and job satisfaction which motivates
people to invest additional energy in the tasks they assume
This relates to independent behaviour where information is shared and
issues discussed in a free and open manner
New ideas are communicated and discussed in a constructive and positive
atmosphere where possibilities for testing new ideas are created
Initiatives are taken and ideas and opinions communicated without fear
of failure and communication is open and honest
Life in the organisation is dynamic and lively with new things happening
in a lively way
A comfortable and relaxed environment where jokes are shared and
where laughter is often experienced
People are keen to discuss and debate their ideas, viewpoints may clash,
diversity of thought and forceful arguments are prevalent
Personal and emotional tension is present, gossip, slander, plots and traps
are prevalent
Uncertainty is tolerated, opportunities are taken up and experimentation
is encouraged
Slack time for discussing, testing and developing new ideas
Organisational culture and climate 153
Great Place to Work Institute
Great Place to Work (GPW) is the global authority on building, sustaining and recognising
high-trust organisational cultures. The Great Place to Work Trust Model is built on 25 years
of research and data collected through the institute’s Trust Index Employee Survey, which
is taken by millions of employees annually worldwide. The Great Place to Work Institute
believes in changing the quality of work life for all employees throughout the world. As pioneers of this social movement, they encourage all those who wish to create their own great
workplaces. Clients include Diageo, Samsung and Walkers.
Workplace democracy
Workplace democracy is generally understood as the application of democratic practices,
such as voting, debate and participatory decision-making systems, to the workplace. At one
extreme lie small firms and charities that have embraced pure, direct democracy. Some claim
that this is unwieldy in any but the smallest firms, since more time would be spent deciding than doing. At the other extreme lie firms where executives follow recent management
fads and exhort employees to practise self-management and ‘feel like owners’. In the 1990s,
the idea was co-opted by organisational development and management studies and underwent a change: workplace democracy, which mostly meant limited participation, became a
managerial tool to boost employees’ motivation and efficiency and so contribute to entrepreneurial success. In the last few years, however, the ideal of workplace democracy has become
increasingly attractive (Pausch, 2014).
Generally speaking, an enterprise can be run in a top-down manner or a bottom-up
approach. In a top-down approach, input as well as decision making is the exclusive task
of managers. In a bottom-up and emergent approach, employees can provide input for decisions, which are still made by managers. Only a democratic approach includes all employees
in all stages of the decision-making process (van der Vliet, 2012). The general assumption
of organisational development is that a bottom-up approach would be more effective than an
old-fashioned top-down approach. It holds that entrepreneurial strategy needs to be a fluid
and an on-going process with inputs from all people concerned.
Summary
For organisations to successfully innovate it is essential for top management to adopt a holistic attitude and climate that encourages business creativity and innovation. Most people work
in groups or relate closely to them so organisations need to empower their employees by
ensuring all in management or leadership positions understand the basics of group dynamics. Whilst innovations can result from an individual having a flash of inspiration most result
from dedicated team working. The role of trained CPS facilitators can smooth the process
of idea generation and development and can be useful in dealing with individual and group
conflict situations. Important factors that need to be addressed to develop and sustain a supportive corporate climate are flagged, the most important of which is the full commitment of
top management to the cause. Businesses that take a democratic workplace approach to pursuing their objectives have built cultures and climates that foster innovation. Whilst this can
be easier for an SME to develop it is not impossible for larger organisations such as MNCs
if a determined effort is made by top management to redesign their corporations to accommodate employee and group self-management activity.
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Discussion questions
1
2
3
4
5
6
7
How can management styles encourage individual and group creativity on-site and off-site?
How can managers facilitate group performance?
What are the process roles of creative problem-solving facilitators?
How can individual and group conflict be managed?
What is meant by organisational culture and climate?
What are the key factors for developing a climate that fosters innovation?
How can culture and climate be assessed?
Case exercise
Samsung: seeking a creative corporate culture
As its smartphone sales stutter and a generational leadership succession looms, Samsung
Electronics is under pressure to reinvent itself – to be more innovative, but not to lose the
rigour and focus that made it a global powerhouse. Following a heart attack in the spring of
2016, Chairman Lee Kun-Lee has been succeeded by his son and heir-apparent, the Harvardeducated Jay Y. Lee. ‘The company is in a Catch-22 situation when it comes to changing
its culture,’ said Jay Subhash, a former senior product manager who left Samsung in April.
‘It desperately needs to adopt a culture that fosters openness, creativity and innovation.
However, doing so would jeopardise its greatest existing cultural asset, its militaristic hierarchy, which enables it to operate at lightning speed to outpace the competition.’
The company has for some time believed that it needed to seek a creative corporate culture
and in 2007 approached the American Great Place to Work (GPW) Institute to compile a
confidence index survey of its domestic and overseas workforces. Based on the GPW analysis results, each division and department prepare and implement improvement plans to build
a GPW by filling the gaps in the five survey categories (trust, respect, fairness, pride and
solidarity). Also, 400 GPW officers supervise and implement corporate culture improvement
activities at each workplace.
Based on the belief that sharing best practices is one of the most effective ways to build the
GPW, Samsung Electronics operates a separate GPW portal within its intranet and publishes
the GPW magazine to share best practices of improving corporate culture and GPW-related
information. In particular, the semiconductor and LCD business divisions hold GPW Awards
to encourage pertinent departments and employees to share their GPW activities and performances annually.
Samsung wants to speed up the change of its internal culture to make the 300,000-person company operate more like a start-up. Executives have pledged to move the company
away from its traditional corporate structure to a more open working environment. Changes
will include holding more online internal discussions and reducing extraneous meetings;
cutting down the levels of staff hierarchy; and reducing overtime and encouraging employees to spend their weekends with family or pursuing professional education opportunities.
Samsung, which has been criticised for its infamously rigid working culture, is hoping that
the cultural shift will help it to encourage creativity and to speed up innovation.
These corporate changes come at the same time as Samsung has said it’s attempting to
change from being a hardware manufacturer to a software leader. Software, as with Nokia,
has always been secondary to Samsung. Now the company is actively seeking to acquire
software companies, including those focused on artificial intelligence. At the same time,
while Samsung’s smartphone shipments still dominate the global market, it has seen a steady
decline in global market share during the period 2011–15.
Organisational culture and climate 155
Samsung has long emphasised the need for creativity while hiring more foreign talent, as it
operates in increasingly diverse markets. Along with relaxed rules on work hours, it stresses
a ‘Work Smart’ philosophy to reduce unnecessary time spent at the office. While it’s hoped a
looser environment will help stir new ideas, some insiders say progress is slow against what
is often described as an entrenched culture of rigid, top-down management. ‘Samsung’s doing
some soul searching right now, it’s asking itself “who am I, and what should I do next?”’ said
Chang Sea-Jin, a business professor at Korea Advanced Institute of Science and Technology.
In the long term, the company needs to become global and open. Giving employees more
autonomy requires a new culture and shared leadership approach. For a national culture that
is heavily influenced by a Confucian conformist culture the company faces powerful social
mindsets. Confucianism is a culture that has deep respect for age. Hierarchy is very important
and this poses problems if employees feel that new ideas could be interpreted as challenging their boss. Senior management are aware of this potential constraint and determined to
overcome it, whilst also preserving the respect that the Confucian cultural code expects, have
established a Creative Lab programme. This permits individuals or in teams take a year to
develop an idea if it is deemed worthy of pursuit. Samsung says it had some 14,000 ideas last
year through this programme and other company initiatives.
Though widely respected in Korea, Samsung has a reputation for imposing a heavy workload and limiting personal time. This runs counter to its declared aim of accepting the need
to provide space and time to boost creativity and innovation and to improve the work–life
balance for its employees. The original Theory X management style has morphed into a
Theory Y style over the years but now needs to morph again into a Theory Z approach. The
succession of a new Chairman provides an opportunity for a new style of leadership that will
speed the transition to a fully fledged Theory Z organisation.
Questions
1
2
3
How can individual managers encourage creative thinking in Samsung?
How can individual managers reconcile their need to champion employee’s ideas and
respectfully deal with any conflict that may arise from Confucian values?
How is the company assessing its progress toward developing a new culture and climate
that supports creativity and innovation?
YouTubes
‘How BIG Is Samson?’ https://www.youtube.com/watch?v=6Afpey7Eldo.
‘The Best of Corporate Culture’ https://www.youtube.com/watch?v=XzkflxO82O4.
‘Why Work at Samsung?’ https://www.youtube.com/watch?v=9Gg_tQ8FVeA.
Sources: Korea Times, 13 October 2015; Reuters, 16 March 2016; Samsung website, http://
www.samsung.com (accessed 30 November 2016).
References
Adair, J. (1987 [1983, 1985]) Effective Leadership, London, Pan.
Belbin, M. (1981) Management Teams: Why they Succeed or Fail, Oxford, Heinemann.
Bell, G. (2013) ‘Teamwork makes the team work: An interview with Dr. Meredith Belbin’, Human
Resource Management International Digest, Vol. 21, Issue 2, pp. 45–7.
Bonebright, D. A. (2010) ‘40 years of storming: A historical review of Tuckman’s model of small group
development’, Human Resource Development International, February, Vol. 13, Issue 1, pp. 111–20.
156
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Cameron, K. and Quinn, R. (1999) Diagnosing and Changing Organizational Culture, Reading,
Addison-Wesley.
Carneli, A., Tishler, A. and Edmonson, A. C. (2012) ‘CEO relational leadership and strategic decision
quality in top management teams: The role of team trust and learning from failure’, Strategic
Organisation, Vol. 10, Issue 1, pp. 31–54.
de Bono, E. (2009) Six Thinking Hats, London, Penguin. See https://www.youtube.com/watch?v=UjSj
ZOjNIJg (accessed 12 July 2016).
Ekvall, G. (1996) ‘Organizational climate for creativity and innovation’, European Journal of Work
and Organizational Psychology, Vol. 5, Issue 1, pp. 105–23.
Ekvall, G. A. and Ekvall, I. (1983) Creating Organizational Climate: Construction and Validation of a
Measuring Instrument, Stockholm, F. A. Rodet.
Goodman, M. R. V. (1995) Creative Management, New Jersey, Prentice Hall.
Isaksen, S. G. (2007) ‘The climate for transformation: Lessons for leaders’, Creativity and Innovation
Management, Vol. 16, No. 1, pp. 3–15.
Jacques, E. (1952) The Changing Culture of a Factory, New York, NY, Dryden Press.
Janis, I. L. (1982) Groupthink, Boston, MA, Houghton Mifflin.
Kangis, P. (2000) ‘Organisational climate and corporate performance: An empirical investigation’,
Management Decision, Vol. 38, Issue 8, pp. 531–40.
Kirton, M. J. (1987) Adaption-Innovation Theory (KAI) – Manual, Hatfield, Occupational Research Centre.
Kotter, J . and Rathgeber, H. (2016) That’s Not How We Do It Here!, New York, NY, Penguin.
Manning, R. I. (2010) ‘Development of the psychological climate for small busineses’, Journal of New
Business Ideas and Trends, Vol. 8, Issue 1, pp. 50–65.
Mostert, N. M. (2015) ‘Belbin – the way forward for innovation teams’, Journal of Creativity and
Business Innovation, Vol 1, pp. 35–48.
Myers-Briggs (1987) Type Indicator Report Form, Palo Alto, CA, Consulting Psychologist’s Press.
Pausch, M. (2014) ‘Workplace democracy: From democratic ideal to a managerial tool and back’, The
Innovation Journal: The Public Sector Innovation Journal, Vol. 19, Issue 1, pp. 1–14.
Semler, R. (1994) Maverick: The Success Story Behind the World’s Most Unusual Workplace, London,
Random House.
Stewart, H. (2012) The Happy Manifesto: Make Your Organization a Great Workplace, London,
Kogan Page.
Turnipseed, D. L. (1988) ‘An integrated interactive model of organisational climate, culture and effectiveness’, Leadership & Organization Development Journal, Vol. 9, Issue 5, pp. 17–21.
van der Vliet, M. (2012) ‘An alternative organizational model: Workplace democracy’, master’s thesis, Department of Organization and Strategy, Faculty of Economics and Business Administration,
Tilburg University, Tilburg, The Netherlands.
Watkins, M. D. (2013) ‘What is organizational culture? And why should we care?’, Harvard Business
Review Press, May, https://hbr.org/2013/05/what-is-organizational-culture.
Selected YouTubes
‘Understanding Group Dynamics’, https://www.youtube.com/watch?v=gl_0bGD5Jv8.
‘Belbin’s Theory on Team Dynamics’, https://www.youtube.com/watch?v=gl_0bGD5Jv8.
‘Tuckman’s Model: Fight Right!’, https://www.youtube.com/watch?v=MNgzjYb02JM.
‘Conflict Resolution’, https://www.youtube.com/watch?v=KY5TWVz5ZDU.
‘What Is Corporate Culture?’, https://www.youtube.com/watch?v=gficoigz1xs.
‘The Best of Corporate Culture’, https://www.youtube.com/watch?v=XzkflxO82O4.
‘Organizational Climate’, https://www.youtube.com/watch?v=MfHKW4txFts.
‘From Desire to Disciple: Creating a Culture of Innovation in Our Workplaces’, https://www.
youtube.com/watch?v=a_pHGbL5138.
Organisational culture and climate 157
Appendix 7.1: management traits assessment
Behaviour trait
High
(score 4)
High/medium
(score 3)
Medium/low
(score 2)
Low
(score 1)
Approachable
Honest
Supportive
Fair
Open dealing
Communicative
Total
Note: The higher your total scores the better! Do reflect on your individual behaviour trait scores.
Appendix 7.2: group CPS audit
Question
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Are the group’s members at ease with one another?
Do individual members participate?
Does the group always know what it is supposed to
achieve?
Is the group closely facilitated?
Is the group empowered to achieve?
Do group members interact well with each other?
Is their work acknowledged by a manager?
Do group members socialise after work?
Are their efforts visibly rewarded?
Are they optimistic?
Does the group generate many ideas of its own?
Is the group membership well balanced?
Can the group spirit be described as ‘one for all
and all for one’?
Is the group’s achievement predictable?
Is the group’s expertise fully utilised?
Is the group’s work appreciated by the
organisation?
Has the group assumed an identity of its own?
Does it use CPS tools and techniques?
Is change welcomed?
Does the group like meeting?
Does the group use Imagineering (right-brain) tools?
Does the group work well?
Are group members highly motivated?
Does the group reach decisions by consensus?
Does the group deal with conflict effectively and
efficiently?
Does the group get easily distracted?
Does the group prefer to adapt the ideas of others?
Does the group challenge rules if they think that
they are silly?
When the going gets tough does the group stick
together?
Does the group have a tendency to wander off the
point?
Never Sometimes Fairly often Regularly
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Innovation from theory to practice
Appendix 7.3: assessing group performance
Question
Never
Sometimes
Fairly often
Regularly
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8
Overcoming resistance
Mindsets and paradigms
The innovator makes enemies of all those who prospered under the old order and only luke-warm
support from those who would prosper under the new.
(Machievelli, The Prince)
We can’t solve problems by using the same kind of thinking we used when we created them.
(Albert Einstein)
Learning objectives
This chapter explores:
1
2
3
4
5
The power of mindsets and paradigms in the operations of business organisations.
The role of thinking pattern sets.
How group and organisational mindsets interact.
The role of psychological factor sets in shaping perceptions.
How these perceptions can act as blockages to individual and organisational business
creativity.
Introduction
Many individuals, groups and organisations appreciate the need to adopt a fresh approach
to meeting the complex challenges of modern buyers’ markets. However, successfully
converting this ‘wish’ to practical achievement is often frustrated and sometimes killed
by the destructive power of individual, group and organisational mindsets and paradigms.
Resistance to practising business creativity skills and to successfully managing innovation
and entrepreneurial skills is common. Commitment to learning new methods of problem
solving requires both a dedication and a time commitment. The chapter explores the destructive power of this resistance and explains how steps can be taken to overcome many of the
frequently experienced creativity blockers. (See Figure 8.1.)
Context
The power of mindsets and paradigms
In their Handbook for Creative Team Leaders, Rickards and Moger (1999) include Charles
Handy’s gruesome metaphor of the boiled frog to dramatically illustrate the power of mindsets. Handy noticed that if a frog is placed in water that is at a comfortable temperature it is
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Figure 8.1 Overcoming mindsets and paradigms.
quite calm. If the temperature is raised gradually the frog shows no sign of discomfort until,
well before the water boils, the frog dies. If a frog is dropped into water that is very hot or
close to boiling it will attempt to jump out as the sudden realisation of impending danger triggers a reaction. This metaphor shows how human mindsets may be blind to mounting threats
until a sudden shock causes people to realise the seriousness of their situation.
Overcoming resistance 161
Mindsets are defined by the Concise Oxford Dictionary as ‘fixed opinions or states
of mind that are formed by earlier events’. They are mental attitudes that influence the
ways individuals interpret and respond to experienced real-time conditions. As managers are placed under sustained pressure to perform in a rapidly changing wealth-creating
environment how they think in chaotic uncomfortable conditions is attracting increasing
attention. This is determined by a complex pattern of mental input factors including
personal, group and organisational influences. At the individual level thinking patterns
that fashion behaviour are determined by four key factor sets: cultural, social, personal
and psychological.
1
2
3
4
Cultural factor sets include the dominant cultural and social class factors that surround
an individual from birth.
Social factor sets encompass an array of influences such as preferred reference groups,
family expectations, and so forth.
Personal factor sets describe a complex collection of variables that shape individuals’
thinking and value choices, such as age, life-style, economic status and personality, etc.
Psychological factor sets address the key variables that determine individuals’ perceptions, learning patterns, and the way that they acquire beliefs and attitudes. These factor
sets integrate to form a complex system (personal mindset) that governs the general/
habitual thinking patterns of individuals.
Clashing ideologies
Two mindsets can be found in the boardrooms of many organisations that seem to be
mutually exclusive.
The first is the belief that the business of business is business. This is the view held
by many established Anglo-Saxon economies. This view contends that the sole purpose of management is to create shareholder value and that social issues are not a major
concern of corporate management.
The second mindset stresses the importance of corporate social responsibility and
argues that business activity should actively reflect social issues and that these are not
peripheral activities but central to business practice.
This text argues that these mindsets should not be taken as mutually exclusive and
that corporate mindsets should reflect a balanced approach that combines the goal of
generating shareholder value with that of social contracts to nurture and build the longterm development of the market infrastructures in which they operate.
Source: Davis, I. ( 2005) ‘The biggest contract’, The Economist, May.
When individuals are viewed in group situations further complexity arises. By definition
a group is a collection of individuals all with their own unique collection of factor sets.
Harmonising their behaviour is cognitively a highly complex task. The imposition of linear
causality – for example, the belief that the way to get individuals to work together, is to stick
them together, give them something to do and then determine their reward on how much they
accomplish in a given period of time – is a mechanistic approach to management that will
inevitably constrain individual performance. At its most extreme this reduces individuals to
units of input, and unless they have private reasons for accepting this (because there is little if any alternative employment) most individuals will tend to go through the motions and
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Innovation from theory to practice
do the minimum that is necessary to earn their bread. Others, though severely repressed by
insensitive management, will for their own satisfaction – perhaps to stay sane – put in some
extra effort to innovate somehow.
Key principles
Group mindsets
A group of individuals is by definition a collection of individual mindsets. The cognitive and
motor behaviour that people perform in the course of pursuing a goal can induce a mindset that persists to influence the strategy they use to attain very different goals in unrelated
situations (Wyer and Xu, 2010). Individuals also change their behaviour patterns when they
interact with others. Behaviour breeds behaviour. The degree to which behaviour choices are
changed is governed by a complex set of factors that include perceived trust, motivation and
so on. (Individuals tend to naturally release more creative effort at home than in the work
place where the sensed group and/or organisational climate – contextual stimuli – makes
them more at ease.) A new group mindset emerges that is separate from and additional to
each individual’s personal mindset. The nature of this is conditioned by the perceived level
of trust in the group. In short, more personal trust produces more collective or group trust and
potentially greater creativity.
Chapter 7 discussed the basics of group dynamics and the leading factors that commonly
arrest group performance. Individuals can be encouraged to express themselves in groups
and this is a key skill of an effective traditional manager. Sustained high group performance
requires sensitive management skills that seek to enable or release it rather than impose it.
If external stimuli make a group’s task more and more difficult to achieve then effective
managers will know that they have a real problem. Months of sound management practice
can dissipate into chaos, falling morale and disillusionment if a group manager is tempted to
go for a quick (often linear) fix to appease some organisational authority. The credibility –
and thus success – of an enabling manager can take months to achieve but can be lost in less
than a minute. Group managers under pressure should be given open encouragement by their
organisations to audit their own skills, and be given the opportunity to improve key competencies and to acquire new ones that are relevant to the prosecution of their responsibilities.
They should not be required to perform in new and changing contextual situations by being
expected to use management tools and techniques that were designed for quite different days.
Nor should they be hindered by beliefs and attitudes that were formed to serve the needs of
former times.
Organisational mindsets
So a manager who is responsible to his staff/group (is loyal) will have to find an approach
that harmonises all the constituent mindsets. This is further complicated by his or her need to
exercise responsibility to the organisation (Pina e Cunha et al., 2001), which will possess yet
another collection of mindsets. Managing effectively in a chaotic context will often place the
manager where it is very difficult to win. The organisational mindsets may insist that things
are done in certain ways because that is how they have always been done. To suggest anything
different smacks of disloyalty. Most of us at some time or another have been reprimanded
for an unconventional approach to a problem by the sharp retort, ‘We don’t do things this
way here’. Organisations like individuals are jealous guardians of their beliefs and attitudes.
Overcoming resistance 163
Figure 8.2 Assumptions becoming mindsets.
Again, individuals may dislike some organisational ways that perhaps owe their origin to
sunnier days and over the years have become enshrined in corporate mindsets. Frustration
abounds when individuals realise that these organisational mindsets are blocking their efforts
to solve today’s complex problems. Then there are the work groups. These often present real
problems, as they tend to be caught between the individual and corporate mindsets.
To any manager, and especially a potential creative manager, warring mindsets pose
a really difficult challenge. To make matters worse, they are self-perpetuating and selfreinforcing mechanisms that are capable of flying high over current contexts whilst attempting to understand and manage them with the tools and techniques that originated in the past
(see Figure 8.2).
Challenging mindsets
It is therefore quite understandable for managers to spend much time agonising over how
much they can challenge an organisational mindset if they honestly believe that it is restraining problem-solving activity. Some managers, in the belief that most problems are temporary
and organisational mindsets are permanent, sacrifice the pressures of the contextual reality to
those of history. In turbulent times these responses can severely damage individual and group
morale and hence achievement levels.
Psychological factor sets
Some useful light can be thrown on understanding individual, group and organisational
mindsets by taking a brief look at the psychological factor sets whilst, for the time being,
treating the cultural, social and personal factor sets as hygiene factors (Hertzberg, 1987). The
key psychological factors are: perception, learning, and beliefs and attitudes.
Perception
When individuals and groups are exposed to external contextual stimuli they either accept
that the stimuli are real and so seek to respond positively to the challenges this brings, or they
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Figure 8.3 A matter of perception.
Do you see a white triangle even though there are no edges or contours? Does the triangle appear whiter than
the white background?
modify this reality (Figure 8.3). One modification is to distort the reality so that it becomes
agreeable or comfortable. An alternative modification is to reject the current stimuli altogether and to retain older, more comfortable, perceptions. Once individuals and groups have
made their respective selections they need to collect and collate information that will assist
them to interpret fully the meaning of the contextual factors and so be able to think about
their positions. As individuals and groups tend to be closer to contextual reality than organisations they are often aware earlier of the need to move away from the virtual reality that
many organisations display. This means that they are often ready to think about alternative
courses of action before their organisations. So why try and change organisations from the
top down? In essence an organisation is the shared view of its members and so can be seen
as a single collective mind (Mitroff, 1984). The private response activities of individuals and
groups will be characterised by changes in behaviour resulting from a careful consideration
of the changing stimuli. This is the learning factor.
Learning
A willingness to modify and sometimes abandon old ways makes sense for private groups,
for they are custodians of their own future. Stay in one place too long and the social world
passes you by. Organisations, on the other hand, are frequently characterised by entrenched
mindsets and so seek to maintain the comfort of their status quo when everything else
around them is changing rapidly. This stiff-upper-lip approach can be quite valid if the
Overcoming resistance 165
change dynamics are purely temporary and confidence expects the good old times to return
soon. If the change dynamics are not temporary this failure to acknowledge the real state of
the environment can be suicidal.
Beliefs and attitudes
Organisations can so envelop themselves with mindsets and paradigms that they effectively
lose sight of their operating environment. Solid successes in previous times may well have
led to the construction of immense bureaucracies whose job is often interpreted as being to
maintain this status quo at all costs. Sometimes whole organisations can become the prisoner
of myopic thinking and overzealous administrators. Forms, regulations, statistics and other
measures are designed to keep the organisation happy. If powerful cliques feel that the real
news is just unacceptable then some will attempt to blow it away by altering the measuring
system so that it says what they want it to say. This is an acute version of distorted perception but it is more common than many would like to admit. Supposedly a sign outside Albert
Einstein’s door read: ‘Not everything that counts can be counted, and not everything that is
counted, counts.’ We must not get hypnotised into relying solely on the power mindset of
research, numbers, data and facts – we must continue to trust in and recognise the invaluable
quality of creativity in energising business activity (Berliner, 2015).
Of course, there are many fine organisations that capture the wind of change and use it to
create wealth, but, sadly, many fail to perceive accurately the seriousness of their contextual
positions until very late in the day. No over-harsh criticism of administrators is intended, for
their services are required. However, they are needed to support management not to subsume
it or to place it in chains. Administrators should serve organisations and not dominate them.
Organisations that allow their administrations to escalate in the good times later discover that
they are still employing large numbers of administrators when times become less prosperous.
Some even continue to expand their administrative departments even when operating conditions are waning.
Consultancy work has given first-hand awareness of many vastly inflated administrative
empires that in some cases outnumber the productive headcounts in organisations. As operating environments become harsher, most organisations are faced with more and more complex
problems that require more than basic rational-analytical thinking and the common tendency
to oversubscribe to linear causality models. Today’s ‘borderless world’ is a complex place
that is increasingly characterised by complex systems. To understand these systems, managers need to become acquainted with systems thinking. There is mounting evidence to suggest
that how managers think about problems and their organisations is directly related to their
ability to achieve responses (Senge, 1990). The next sections provide an overview of hard
and soft systems thinking.
Creativity blockers
Expecting resistance to change and planning for it from the start will allow managers to
effectively cope with objections. Understanding the most common reasons people object to
change gives a manager the opportunity to plan a strategy to address these factors.
The key six blockages to personal creativity commonly identified in the literature (e.g.
Osborn, 1963; Kreitner, 1980) are as shown in Figure 8.4.
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Figure 8.4 Common individual CPS blockages.
Perceptual blockages
These blockages arise from the way that we have learnt (instruction and experience) to adapt
to the stimuli that surround us in the world as we see it. Habitual responses can lead us to miss
other, perhaps contextually more suitable, responses. For example:
••
••
••
••
Seeing only what we expect to see, failure to really understand contextual stimuli – driving
in fog! (Figure 8.5.)
Stereotyping – tendency to jump to conclusions too quickly.
Eyes down – propensity to tunnel vision.
Mistaking cause and effect – if there turns out not to be a hotel room for an invited guest
and we assume that is the hotel’s fault when in reality our secretary forgot to make a
reservation, our search for solutions will be misdirected. The fact that there is no room
for our guest is an effect of the problem not the cause.
Figure 8.5 The Nine Dot test.
Overcoming resistance 167
Emotional blockages
These blockages are evident when we deliberately suppress an idea or course of action
because we perceive that it will be unpopular with our peer group and do not want to risk
their scorn. Or, perhaps, when we come up with an idea that is different (such as, for example, an Imagineering (Morgan, 1997) approach) and we do not want to look ridiculous in the
eyes of our fellows. For instance:
••
••
••
••
••
Fear of making mistakes or looking silly.
Racing away – rushing in too quickly may result in the wrong problem being solved or
the right problem but with the wrong CPS approach.
Playing it safe and avoiding anxiety – a common response in individuals who are uncertain of how much support they will receive from the group or organisation.
Awaiting instruction – related to the above cause, and tends to be found in rule-bound
organisations.
Sloppy response – tends to be found in situations where the problem is routine and the
overall motivation of the staff is low.
Process skill blockages
These are caused by a basic lack of technique. This can all too easily arise when we have been
used to existing in fairly stable operational conditions where real problems and challenges
are few and far between. For example:
••
••
••
••
••
••
Lack of knowledge in problem-solving process.
Lack of creative thinking – a reluctance to use creative thinking.
Too heavy a reliance on logical skills – wanting to write the proof before the problem
is solved.
Snatching at the problem – failure to apply methodical convergent/divergent tracking
points.
Lack of sufficient contextual information, poor or the wrong problem statement and poor
CPS ability.
Lack of understanding of the facts – shooting in the dark.
Communication blockages
These occur when we are unable to communicate in a suitable style for our voice to be heard
and understood by those charged with tackling the problem in question. Examples are as
follows:
••
••
••
••
••
Failure to couch the problem and its proposed solution in suitable terms. General management will not comprehend functional jargon. Not all concerned outside publics will
understand the organisational ‘speak’.
Difficulty in explaining the situation to others, as it is sometimes unconsciously cloaked
in jargon and/or organisational ‘speak’. The safe default is to explain things clearly and
simply.
Failure to justify recommendations.
Failure to capture the attention of vital parties owing to weak presentation skills.
Autocratic, argumentative styles that annoy people.
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Environmental blockages
These often crop up to distract us from getting to grips with a problem and frequently result
from unexpected or seasonal increases in our workload. For example:
••
••
••
••
••
Management culture – the impact of organisational mindsets.
Comfort factors – poor facilities (everything from toilets to coffee and tea provision) can
dampen enthusiasm and quality of response.
Ambivalent attitude of key contacts in the organisation.
Monotony – need-to-know management causes people to get bored.
Absence of kaizen – people are more responsive if they know that they are expected to
look continually for better ways of doing things.
Cultural blockages
This set of blockages impact on us as a result of of personal, group, organisational and
national cultures. For example, some managers feel that the Creative Management style is
too open and risky and may harbour the latent opinion that staff are to be instructed and not
consulted! Instances are as follows:
••
••
••
••
••
••
••
••
••
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••
••
Religious acceptance of the status quo.
Resistance to major change.
Distrust of illogical ‘right-brain’ and total thinking skills.
Belief that humour is for private life only.
Reluctance to work in teams – everyone-for-himself mentality does not foster cooperative effort.
Lack of vision.
Work environment
Socio-cultural factors
Emotional charge.
Communication factors.
Perception issues.
Participation issues.
Practice
Obstacles to individual business creativity
After a creativity workshop in Durham, delegates were asked to brainstorm the main obstacles, as they saw them, to introducing creative personal problem solving (CPPS) into the lives
of their colleagues at work. They were also asked to suggest ways that these obstacles might
be overcome. Table 8.1 summarises the results.
Tiredness
Many exhibited a reluctance to put in the necessary time to learn a new skill. Home was seen
as a place to relax and that did not include thinking about being creative! Work was identified
Overcoming resistance 169
Table 8.1 Individual CPS blockages
Obstacle
Advice
Tiredness
Anxiety
Negativity
Fear of failure
Fear of standing out from the crowd
Fear of challenging the rules
Fear of emotional things
Myopia
Get a good night’s sleep
Relax
Be positive
Trust your intuition
Stand your ground
Rules should help, not hinder
Realise that total thinking makes sense
Wake up!
with pressure – paper and politics that made people tire quickly and reduced their enthusiasm
to attempt anything new. Invariably the workplace was seen as a mechanistic culture where
some pulled the levers and the others ‘did their bit’.
Anxiety
Experienced at work, was often transferred after working hours to home life. Many found it
difficult to relax away from work and free their minds to attempt anything new.
Negativity
The harsh economic climate of the North East led many to adopt a pessimistic outlook on
life. Often frustration with the performance of ‘the management’ or the euphemistic ‘they’
seemed to produce a pronounced negative culture.
Fear of failure
This occurred frequently and was cited by individuals working in both large and small organisations. Many in this group did not realise that it was possible to practise creativity at home
in a safe environment (Kennedy, 2011; Storm and Angello, 2010).
Fear of standing out from the crowd
Several delegates were tempted but reluctant to speak out for fear of the consequences, preferring to keep their heads down.
Fear of challenging the rules
Unsure of how managers might react to suggestions to do things differently, many opted to
keep quiet.
Fear of emotional things
Many delegates felt that they would risk emotional responses if they advocated total thinking
practices.
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Innovation from theory to practice
Myopia
Many thought that top management were not in tune with the real world faced by the front
line personnel and felt that signalling this would result in hostile management reactions.
Obstacles to group business creativity
Some weeks after, delegates on a creativity workshop in Durham were requested to report
what they saw as the main barriers to introducing CPS to individuals in their organisation;
another set of delegates on a creativity workshop were asked to indicate what they saw as
the main blockages to introducing CPS successfully. Table 8.2 summarises the results. On
the other hand, blockages commonly identified in the literature on CPS – basically stemming
from a poor understanding of how to manage groups – are summarised in Table 8.3.
Table 8.2 CPS difficulties: an empirical sounding
Obstacle
Advice
Negative attitudes
Quietly get on and try some CPS tools and
techniques without feeling it necessary to explain
the how involved and produce some good results
Stand your ground; argue to be judged on results –
seeing, rather than telling, encourages believing
Operate tactfully. Tackle problems; don’t evangelise
the CPS cause
Calmly explain the contextual factors affecting the
problem to all group participants
Select non-complex do-able issues at first
Need for guidance of a skilled CPS facilitator
Do your best to earn it
Introduce and demonstrate some basic tools
Develop a problem statement to clarify
Indicate your understanding and seek to influence
the system
Politics
Fear of exposing poor team
work of others
Myopia
Concern over problem choice
Low creativity
Lack of trust
Poor problem-solving skills
Unclear aims
Reward structure viewed as
unfair
Table 8.3 Leading CPS difficulties identified in the literature
Obstacle
Advice
Lack of vision
Inform group of what is involved and seek their collective ownership
of it
Encourage individuals to contribute – provide a safe environment;
avoid power driving the group
Get the group to talk amongst themselves as well as to you; promote a
‘one for all and all for one’ philosophy
Up to the facilitator to dispel
Requires the facilitator to use imagination – successful group behaviour
has to be recognised in some way. People do not live by bread alone
Facilitator needs to carefully guide the group and to resist people
looking for pre-conceived answers rather than generate ideas
Facilitator should steer the group to converge and diverge ideas at
suitable intervals
Poor participation
Poor interaction
Lack of trust
Poor reward
Starting too soon
Confused focus
Overcoming resistance 171
Common problems that challenge the effectiveness of hard systems thinking
Diagnosis
A tenet that is open to question, especially in times of accelerating change, is that individuals, groups and organisations are able to diagnose key problems correctly. Frequently
it is organisations, rather than groups or individuals, that have the greatest difficulty in
obtaining accurate problem diagnoses, as their collective thinking can be confused and
distorted by their corporate milieu of mindsets. Some organisations like to believe that
they never really have serious problems for these only confront other, and in their eyes
usually badly run, organisations. This mindset has variations, such as a strong confidence
in the power of rational-analytical thinking to solve almost anything, and the belief that
all problems have happened before so may confidently be considered as temporary irritants that will soon be gone.
Belief in measurement
Another drawback in turbulent times is the tenet that all goals, decisions and important issues
can be quantified and measured. This positivist contention has prompted many organisations
to invest in sophisticated IT systems to produce vast wads of information. Whilst this has
made many corporations ‘feel good’ it has also left many of them struggling to get to grips
with all the data that their mainframe and networks provide. However, many organisational
activities, such as operational and tactical matters, where the situations are clearly structured,
can be capably handled by hard systems thinking.
Risk spots
Even in the best of times most organisations have risk hot spots in their operations that
seem to continually resist the efforts of hard systems to control. Here chaos reigns and life
is uncomfortable. Attempts to rationalise and programme these hot spots inevitably lead to
disappointment and frustration. Some organisations find that their mindsets blind their vision
so causing them to function in an imagined or virtual reality. When this occurs frustration
mounts, as the chaos continues and managers tend to apportion blame for poor performance
levels on the contextual factors. In stable times, when most of the organisation is functioning
well (in equilibrium) the hot spots, though still irritating, can be carried along by the general
positive momentum of the organisation. As fundamental changes in contextual stimuli cause
chaos in the base operations and as the hot spots become more and more unstable, many
managers must feel that life is very unfair. In this situation soft system thinking may be the
most appropriate course of action.
Faith in management techniques
Finally, the belief that organisations can be steered into the future by traditional management techniques alone is a critical assumption especially in times of accelerating contextual
change. Mechanistic planning is fine where the probability of being able to forecast the future
accurately is high; when the reverse is the case managers need to form a clear picture of what
makes sense in the new context.
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Innovation from theory to practice
Action
Working with others
Most would agree that the potential output of several minds is greater than that of a single
mind. Working with others obviously seems to make sense. However, in the often frantic
activity of an average day, many managers probably attempt to progress far too many problems under their own steam. Opening problems up to others makes sense, but is there time to
call the necessary meetings? Or might there be some latent reluctance to do so, as the organisational culture may view that it is the manager’s job to solve problems?
When this occurs in organisations it tends to make individual managers reluctant to separate the what from the how in problem-solving activity. Some managers may even perceive
working with others as a sign of weakness, preferring to take everything on themselves and
working long and arduous hours. Such managerial supermen can find it very difficult to share
problems with others, even though they may appreciate the logic of harnessing the talents of
colleagues. Coping with pressure is a constant process for busy managers. As the problems
come faster and faster and as the complexities increase, many managers must feel that they
are running in order to stay in one spot. There inevitably comes a point when sheer workload
convinces them to actively contemplate involving others.
Viewing management problems
Change, whether driven by cost, technical factors or the corporate organisation, can threaten
the social culture and workplace norms. A desirable approach to successfully implementing
change is to involve employees who have both a professional and personal stake in helping
managers understand resistance to change (Eroke, 2014). Management problems can usually
be viewed in the light of six key issues:
1
2
3
4
5
6
functional/technical skills;
general management processing skills;
cost constraints;
time constraints;
quality expectations;
climate change.
Most managers have a sound perspective on their functional/technical ability and experience has equipped many with know-how in relation to cost, time and quality constraints.
However, with climate change (Holtum, 2014) companies are skilled at doing straight-line
extrapolations of current trends and adjusting accordingly. When there is an upward trend
in, say, energy prices, they extrapolate it and take energy-saving action. When energy prices
trend back downward, they extrapolate that trend linearly and tend to shelve energy-saving
actions. From the perspective of most corporate executives, the greatest threat from climate
change is not straight-line deterioration but rather a discontinuous and irreversible shift lurking out in the future. As their operational environment becomes more and more chaotic, so
greater emphasis needs to be placed on the realisation of the skill potential contained within
groups and organisations. This contextual pressure is challenging many individual management styles and is promoting the cause for effective team working and the development of
industry-specific scenarios.
Overcoming resistance 173
Whilst managers usually value talking to others about functional and technical skills, there
is frequently a marked resistance to seek the thoughts of others on problem-processing matters. The management how is often seen as a very private affair. There are immense gains
to be made by opening up problems to groups. As the pressures on managers to perform to
high standards in difficult conditions intensify, so many, hitherto private, managers will steel
themselves to explore the dynamics of team working. Apart from organisational mindsets the
major factor restraining many managers is probably a deep concern of losing control. There
is no doubt that whilst opening up problems to others is beneficial and, if handled correctly, a
creative joy, people can be difficult too. Individuals regularly need to check up on their interpersonal skills as it so easy gradually to slip back into an autocratic style in the heat of the
moment. Then, as behaviour breeds behaviour, suspicions gain ground and the essential band
of trust is damaged. Most team workers will allow the captain to have the occasional private
moment and still respect his or her role. If this becomes the regular mode of behaviour, then
teams will soon collapse in a regrettable climate of mutual suspicion and fear. Effective managers have to win through thick and thin. Collaborative team spirit is essential and of especial
importance to CEOs (Ibarra and Hansen, 2011).
Fostering good group relations is not easy. It means giving people space to express themselves. It means not being too judgemental too early and too negative in any criticism that
you may make. It means being responsible to all your individuals, to groups and to the organisation. It means promoting ‘a one for all and all for one’ climate in place of ‘all for one and
one for one’ approach. It means playing a considered and honourable political game when
pressures threaten individual, group or organisational relationships. Politics was intended to
be an honourable pursuit; it has only become an object of popular scorn because it has been
conducted irresponsibly for private gain. However, private gain can be achieved both by
responsible means as well as irresponsible means. The latter is unlikely to foster the growth
of group creativity, the former will and, in the process, make a real hero of the manager.
So, many managers who are determined to become creative managers can expect to be
apprehensive to begin with and need to be bold enough to re-examine their interpersonal skills
and practical understanding of group dynamics. Apart from any individual contemplation that
managers may care to make, a good way of sparking business creativity is to examine organisational mindsets, to call a meeting of key staff away from the work place and explain to them
just why it is sensible to try something new (Capozzi et al., 2011). This is the value of a strong
contextual approach. Different conditions require a different approach. Every sports person
knows that and most others soon appreciate it too. Once the contextual argument has been
put, concerned individuals should then open up to new problem-solving initiatives, then, as
soon as possible, demonstrate some CPS action. Help from a fully trained creative facilitator
is invaluable at this stage. Be careful of the temptation to do too much too soon.
Once underway, talk about experiences with various CPS tools and techniques amongst
colleagues. Find others who are also in the process of getting to grips with CPS and compare
notes. Set up a networking system to share knowledge and experience in the use of the CPS
tools and techniques. This can be done using a variety of means, including face-to-face meetings, email and social networking (e.g. Facebook, LinkedIn and Twitter).
Fixed vs. growth mindsets
Those with a fixed mindset, a mental block that stops them from achieving something, will
resist opportunities to learn and practice CPS techniques. Their main goal is to appear smart
and capable and to avoid failure at all costs. When these people do fail, they view it as a direct
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Innovation from theory to practice
measure of their competence and self-worth. People with a fixed mindset are often overly
sensitive to appearing wrong or being judged.
According to the Stanford psychologist Carol Dweck (2008) people with a growth mindset have another approach to life entirely. In this mindset, the hand you’re dealt is just the
starting point for development. This growth mindset is based on the belief that your basic
qualities are things you can cultivate through your efforts. Although people may differ in
their initial talents and aptitudes, interests or temperaments – everyone can change and grow
through application and experience.
Dweck has shown that praising people for being bright or talented nurtures the fixed mindset, whereas focusing on their hard work and perseverance fosters a growth mindset. With a
growth mindset, attitudes change and people believe change is possible and even necessary.
They do not view failures as the end of the world but see them as opportunities for learning.
They become comfortable with taking risks, and even seek out calculated risk opportunities.
They want to challenge themselves to achieve something harder, stretch beyond their perceived limits, and go for things others might not think they are capable of achieving.
Nudges and wise interventions
Fixed and growth mindsets are now a common starting point for ‘wise psychological interventions’ (WPIs). Psychologists believe that these are effective in unblocking mindsets
caused by psychological barriers that keep people stuck in inflexible patterns of behaviour. Superficially WPIs are like ‘nudges’ – external interventions designed to guide people
towards desired behaviour choices. Though similar to nudges in spirit, WPIs are quite different in practice, based on making long-lasting changes to peoples’ thought processes rather
than short-term changes to their environment. Managers should tread carefully. WPIs inevitably revive the fears that were expressed about nudges. Who decides who needs to be wised
up? Will they be told what is happening to them, and how it is supposed to work, and how
they might benefit? More importantly, can they opt out?
The use of psychological nudges to persuade people to become organ donors or to renew
their car tax on time are clearly good examples of their use in society. Use of the more sophisticated psychological WPIs to help individuals to overcome blockages to creative thinking
requires respectful experimentation. Three contextual factors are important elements of the
creative process for helping managers overcome the challenge of resistance to adopting creative thinking challenge. These are: the current business climate, leadership styles and team
characteristics (Gibson and Shalley, 2014; Hon et al., 2004).
Summary
Both organisations and management theory seem obsessed with creativity and a fixation with the
new is accompanied by just as strong a rejection of that which is different. Muhr (2010) turns to
the moral philosophy of Emmanuel Levinas (1981) to address this paradox and argues that profound novelty can only be accomplished in ethical encounters that nourish trust and confidence.
Good managers do not attempt to manage creativity, they manage for creativity by providing a
working environment and culture that allows creativity to flourish. This challenges all managers
‘to bring paradoxes, conflicts, and dilemmas out in the open, so that collectively we can be more
intelligent than we can be individually’ (Senge, 1990). Finally, as Gosling and Mintzberg (2003)
argue ‘imagine the mind-sets as threads and the manager as weaver. Effective performance
means weaving each mindset over and under the others to create a fine, sturdy cloth’.
Overcoming resistance 175
Discussion questions
1
2
3
4
5
6
7
8
Briefly describe the thinking pattern factor sets.
Why do managers, whether individual, group or CEOs have to be wary of assumptions
in current buyers’ markets?
How can consideration of psychological factor sets assist managers to overcome resistance of employees to new ways of thinking?
What are the leading blockages to individual creative thinking?
What are the leading blockages to group creative thinking?
Briefly discuss the common problems that challenge the effectiveness of hard systems
thinking in times of discontinuous change.
Name the five key issues that help to address management problems.
‘“Assume” makes an “ass” out of “u” and “me”’ (Anon). Discuss.
Case exercise
Rose Tree Garden Centre: growing confidence in creativity
Rob Malin founded a family owned garden centre in north-east Derbyshire in 2010 with a
combination of family savings and his redundancy pay. At first the business grew steadily
and to the family’s surprise covered all its start-up expenses and returned a small but growing profit. Suddenly in 2013 the firm’s fortunes stated to decline and in 2014 the business
recorded a loss for the first time.
In July 2015 Rob Malin’s son Clive graduated from a northern business school where he
obtained a first class MBA. As the family business faltered Rob expected Clive to take up a
senior role in the garden centre. Clive agreed, as he was keen to apply as much as he could of
the learning he had experienced on his MBA course. His father had worked for 40 years in an
engineering company in South Yorkshire and had ended his career as the Production Director
of a subsidiary company making high quality utility pipes for gas, oil and water logistics.
The parent company disposed of the subsidiary in 2010 and shortly afterward Rob was made
redundant. Rob, a finance specialist, was not always an easy man to work with, as, over the
years, he had become single minded and autocratic in his management style. He saw his role
as the boss and let everyone who worked in the business know it.
Clive quickly grasped the serious position of the garden centre and challenged his father
to explain why he had suddenly rented space in the centre to a fancy goods firm and a garden
pond company while Clive was away studying in 2014. Rob explained that he felt it made
sense to cover expected difficulties in the main business that had been hit by poor weather in
the previous year and by competition from a local farm shop that had diversified into the plant
nursery business. When challenged on what logic he had applied to the selection of these startup companies he became obviously embarrassed as he replied just ‘business feel, son’.
The family firm employed 20 full-time staff and a number of part-time staff on a seasonal
basis to help with the spring, summer and Christmas business peaks. Trade was declining fast
on the traditional side and both the fancy gift and garden pond companies were loss making.
Clive, alarmed at the state of the business and at the way in which it was run decided to summon all the staff to a meeting to discuss the firm’s position. To his father’s amazement he
was determined to arrange the meeting in a local small hotel and to invite all employees that
were on site plus seven guests.
Now that he had taken over the business from his father Clive was determined to run the
business in a new way. He wanted to create a company climate in which all employees could
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Innovation from theory to practice
feel that they were valued and in which they would enjoy working. Once everyone had seated
themselves he outlined his vision for the company and emphatically declared that he wanted
his staff to feel free to exercise their creativity. At first the assembly looked at him with puzzled brows asking him to explain what he meant. ‘Things are not too good at present and we
must all work together to fashion the future for the business.’
After presenting a brief review of the current position of the garden centre Clive called for
some suggestions as to how the business could be developed. The sound of silence echoed
around the room. Clive then invited all present to participate in a problem-solving exercise in
which they were going to be encouraged to think creatively to come up with ideas that could
potentially transform the business. Several looked puzzled and one well-respected senior
employee asked what was on everyone’s mind . . . how?
Clive introduced his guest explaining that he was an experienced creative problemsolving facilitator, he left the front of the room and sat down amongst his employees. He had
met Mark whilst at university and had been amazed at how he enthusiastically involved people in his sessions despite many claiming that they just were not naturally creative thinkers.
He began by asking his audience why they felt that they were either not or only slightly creative. This exposed a common set of creative thinking blockages (see Figure 8.4) or mindsets.
Mark then proceeded to classify his audience into two groups (sceptics, open-minded) and
gave every attendee a hand-out and invited them to think about where they thought they were
on the matrix (Figure 8.4).
Clive returned to the front of the room and asked people to form groups of four before
giving the floor back to Mark who asked his team of six CPS facilitators to run a 15-minute
CPS session to assist the group members to generate ideas that in their belief held innovate
potential. To the surprise of many several good ideas resulted and Clive informed everyone
that his management team would consider the best ideas and report their conclusions to all
staff. In closing the meeting he thanked everyone for taking part and was pleased that they
had enjoyed the experience. He also expressed his determination to create a culture that
encouraged positive attitudes that generated a climate of positive thinking that he hoped
would change the behaviour of initial resistors and sceptics. He announced that everyone
would receive training in CPS tools and techniques and that personnel would be sensitively
encouraged to develop their CPS and team working skills.
Questions
1
2
3
How might Clive build on the meeting in the hotel and encourage individuals to cultivate
growth mindsets?
How might Clive best deal with employees that harboured fixed mindsets?
Clive intended to change the way things were done at the Rose Tree Garden Centre, to
introduce a flatter organisational structure and to encourage all employees to practise
both individual and group CPS in their everyday work when appropriate. What problems
do you think he may face and how might he overcome them?
References
Berliner, M. (2015) ‘Data, technology and creativity: New opportunities for marketers’, The Guardian,
25 August.
Capozzi, M. M., Dye, R. and Howe, A. (2011) ‘Sparking creativity in teams: An executive’s guide’,
McKinsey Quarterly, April, pp. 74–81.
Dweck, C. (2008) Mindset: The New Psychology of Success, New York, NY, Ballantine Books.
Overcoming resistance 177
Eroke, L. (2014) ‘Nigeria overcoming employees resistance to change’, This Day, 9 June, http://allafrica.com/stories/201406092097.html (accessed 6 June 2016).
Gibson, L. L. and Shalley, C. E. (2004) ‘A little creativity goes a long way: An examination of teams’
engagement in creative processes’, Journal of Management, August, Vol. 30, pp. 453–70.
Gosling, J. and Mintzberg, H. (2003) ‘The five minds of a manager’, Harvard Business Review,
Vol. 81, Issue 11, pp. 54–63.
Hertzberg, F. I. (1987) ‘One more time: How do you motivate employees?’, Harvard Business Review,
September/October, Vol. 65, Issue 5, pp. 109–20.
Holtum, C. (2014) ‘Top tips for overcoming short-termism’, Guardian, 22 January, https://www.
theguardian.com/sustainable-business/overcoming-short-termism-top-tips.
Hon, A. H. Y., Bloom, M. and Crant, J. M. (2014) ‘Overcoming resistance to change and enhancing
creative performance’, Journal of Management, Vol. 40, Issue 3, pp. 919–41.
Ibarra, H. and Hansen, M. T. (2011) ‘Are you a collaborative leader?’, Harvard Business Review,
Kindle edition, July.
Kennedy, D. (2011) ‘Moving beyond uncertainty: Overcoming our resistance to change’, Leader to
Leader, September, Issue 62, pp. 17–21.
Kreitner, R. (1980) Management: A Problem-Solving Process, Boston, MA, Houghton Mifflin.
Levinas, E. (1981) Otherwise than Being, or, Beyond Essence (translated by A. Lingis), Pittsburgh, PA,
Duquesne University Press.
Mitroff, I. I. (1984) Stakeholders of the Organizational Mind, San Francisco, CA, Jossey-Bass.
Morgan, G. (1997) Imaginization, London, Thousand Oaks, Delhi, Sage.
Muhr, S. L. (2010) ‘Ethical interruption and the creative process: A reflection on the new’, Culture &
Organization’, March, Vol. 16, Issue 1, pp. 73–86.
Osborn, A. E. (1963) Applied Imagination, New York, NY, Scribner.
Pina e Cunha, M., da Cunha, J. V. and Kamoche, K. (2001) ‘The age of emergence: Toward a new
organizational mindset’, SAM Advanced Management Journal, Summer, Vol. 66, Issue 3, pp. 25–31.
Rickards, T. and Moger, S. (1999) Handbook for Creative Team Leaders, Aldershot, Gower.
Senge, P. (1990) The Fifth Discipline, New York, NY, Doubleday.
Storm, B. C. and Angello, G. (2010) ‘Overcoming fixation: Creative problem solving and retrievalinduced forgetting psychological science’, Psychological Science, Vol. 21, Issue 9, pp. 1263–5.
Wyer, R. S. and Xu, A. J. (2010) ‘The role of behavioral mind-sets in goal-directed activity: Conceptual
underpinnings and empirical evidence’, Journal of Consumer Psychology , April, Vol. 20, Issue 2,
pp. 107–25.
Selected YouTubes
‘New Business of Paradigms’, https://www.youtube.com/watch?v=5uL2CXVTpp4.
‘Are You Open Minded? Three Ways to Break Thinking Patterns’, https://www.youtube.com/
watch?v=4vgl3v8rjj8.
‘Creative Thinking: How to Get Out of the Box and Generate Ideas’, https://www.youtube.
com/watch?v=bEusrD8g-dM.
‘Game of Your Mind: What Is Perception?’, https://www.youtube.com/watch?v=5Tb_
pL47AVM.\
‘How to Solve Creative Blocks’, https://www.youtube.com/watch?v=WXJfwk4Mii0.
‘How to Make Problem Solving in Groups More Creative?’, https://www.youtube.com/
watch?v=KGod99-gGmE.
‘The Great Egg Drop: Extremely Creative, Fun Group Problem-Solving Initiative’, https://
www.youtube.com/watch?v=xubDVbVM_w0.
Part III
Linking creativity to strategic
innovation
9
Applied business innovation
It is better to have enough ideas for some of them to be wrong, than to be always right by
having no ideas at all.
(Edward de Bono)
Innovation distinguishes between a leader and a follower.
(Steve Jobs)
Learning objectives
This chapter explores:
1
2
3
4
5
6
7
8
The importance of generating ideas for innovation.
Reviewing ‘closed’ sources of ideas.
Exploring ‘open’ sources of ideas.
Reviewing the pros and cons of open source software.
The advantages of combining ‘closed’ and ‘open’ sourcing.
Balancing unpredictability of successful innovation with experienced success with existing process, product and service activity.
The importance of innovation and social networks.
Understanding the link between innovation and entrepreneurship.
Introduction
Many organisations both large and small are not benefiting from innovation, either through
lack of commitment to see it as an investment or to perceived lack of time. MNCs, worried
by fading growth in traditional markets, are steadily realising that an active intent to discover potentially profitable innovative products, processes and services requires a strategic
approach. The main barriers to innovation for SMEs are availability of finance and the risk
involved in developing radical innovation. This chapter explores the closed and open channels available to both MNCs and SMEs as they seek to generate and develop innovative
projects. (See Figure 9.1.)
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Linking creativity to strategic innovation
Figure 9.1 Exploring innovation idea sources.
Context
Innovation idea sources
Closed innovation channels include ideas that emerge from internal operations, be they
planned or the result of serendipity. Until the early twenty-first century, most innovation was
closed. That is, it occurred within the boundaries of an organisation and was performed by
the company’s own employees within its internal R&D function. This model is based on a
number of assumptions that have changed radically in today’s marketplace.
Applied business innovation 183
Recently, growing attention has been devoted to the concept of open innovation, both in
academia as well as in practice. Chesbrough (2003), who coined the term ‘open innovation’
describes how companies have shifted from so-called closed innovation processes towards a
more open and inclusive way of innovating.
Open innovation has so far been studied mainly in high-tech MNCs. But its impact on
the fortunes of SMEs can be transformational. Van de Vrande et al. (2009) researched
Dutch SMEs and found that many were innovating through open innovation practices
and had increasingly adopted such practices during the past seven years. In addition, they
found no major differences between manufacturing and services industries, but mediumsized firms were on average more heavily involved in open innovation than their smaller
counterparts. SMEs pursued open innovation primarily for market-related motives such
as meeting customer demands, or keeping up with competitors. Their most important
challenges relate to organisational and cultural issues as a consequence of dealing with
increased external contacts.
Key principles
Closed innovation
Within the closed innovation paradigm, the process leading to innovation is completely
controlled; all the intellectual property is developed internally and kept within the company until the new product or service is released on the market or a new internal process
is implemented. R&D activities are important because they potentially increase organisations’ absorptive capacity, i.e. the capacity of firms to assimilate and apply new external
knowledge. Internal or closed R&D activities are not only important in terms of their
direct knowledge input into innovation processes, but also provide opportunities to nurture
internal learning.
Several factors have led to the increasing abandonment of a total reliance on closed
innovation (Chesbrough, 2003). First of all, the mobility and availability of highly educated people has increased over the years. As a result, large amounts of knowledge
exist outside the research laboratories of large companies. In addition, when employees
change jobs they take their knowledge with them, resulting in knowledge flows between
firms. Second, the availability of venture capital has increased significantly, which makes
it possible for good and promising ideas and technologies to be further developed outside the firm in specialist entrepreneurial research organisations and companies. Finally,
other companies in a firm’s supply chain are playing an increasingly important role in
the innovation process.
Open innovation
‘Open innovation’ is a term coined by Chesbrough (2003) and can be defined as: combining internal and external ideas as well as internal and external paths to market to advance
the development of new technologies. In the first place, the shift described above means
that companies have to become aware of the increasing importance of open innovation.
Not all good ideas are developed within their own company, and not all ideas should necessarily be further developed within the own firm’s boundaries. The table below further
illustrates this:
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Linking creativity to strategic innovation
Table 9.1 Closed vs. open innovation principles
Closed innovation principles
Open innovation principles
Recruit the smartest people in an
organisation’s field
R&D is most profitable when kept
in-house from start to finish
Conduct the best research in the industry
Harness the knowledge of people who work for other
organisations
Appreciate the value of external R&D and maximise
value by investing in supportive internal R&D
Gather the best ideas irrespective of whether they were
generated internally or externally
Maximise profit potential by granting licences to users
of an organisation’s innovations and negotiate
licences with external organisations to use their
intellectual capital
Regard innovation activity as a managed investment
activity
Generate top quality ideas
Maximise profits by controlling all
innovation activity
Source: Adapted from Chesbrough, 2003.
This means that within the organisation a shift takes place in the way people look at the company and its environment. The involvement of other parties when developing new products,
processes and technologies has significant advantages. Cooperation with other firms, suppliers, universities, and end-users delivers real added value. According to Rigby and Zook
(2002), open market innovation has four distinct advantages:
1
2
3
4
Importing new ideas can help to multiply the building blocks of innovation.
Exporting ideas is a good way to attract and keep talent.
Exporting ideas provides companies with a real measure of an innovation’s true value.
Exporting and importing ideas helps companies develop their expertise.
How and when external knowledge is required and used is to a large extent determined by
company’s business model, which describes how value can be created from innovations and
which elements have to be sourced internally or externally.
Table 9.2 summarises the rationale and suitability of closed and open innovation processes.
Table 9.2 Closed and open innovation rationale and suitability
Rationale
Closed innovation
Open innovation
•• Exploits known talent and
knowledge
•• Keeps competitors at bay
•• Cost effectively expands an
organisation’s talent base
•• Provides insight into customer
attitudes, needs and concerns
•• Generates a broad section of ideas
•• Shares and so mitigates risk
•• Provides insight into the unique
features of an innovation
•• Projects that are low tech and more
open
•• Protects intellectual property
•• Allows maximum control
•• Reduces time to market
Suitability
•• Innovation projects that involve a
high level of company expertise
and intellectual property
•• Secret and large scale projects
•• Examples: new weapons
systems, new drugs
•• Smaller scale modular open projects
where secrecy is not important
•• Examples: consumer products, films,
music
Applied business innovation 185
According to Wikhamn (2013) academic research since 2006 identifies nine trends of open
practice:
••
••
••
••
••
••
••
••
••
Industry penetration: from pioneers to mainstream.
R&D intensity: from high to low tech.
Size: from large firms to SMEs.
Processes: from stage–gate to probe-and-learn.
Structure: from standalone to alliances.
Universities: from ivory towers to knowledge brokers.
Processes: from amateurs to professionals.
Content: from products to services.
Intellectual property: from protection to a tradable good.
Open innovation is moving from the periphery of business life to the centre of managerial
attention as the need to innovate becomes increasingly important.
Open-source software (OSS)
Advantages of OSS
Open-source is a term that refers to software development which is redistributed freely in which
the copyright holder provides the right to study, change and distribute the software to anyone
for any purpose (St. Laurent, 2004). The use of the word free refers to freedom and not price.
Open source software can be available to download with no charge (e.g. Linux) or can be
accessed by the purchase of low-cost licenses (e.g. Microsoft and Adobe, who sell limited lowcost versions to educational establishments). Leaving source code open has generated some
of the most sophisticated developments in computer technology. OSS should be regarded as a
useful infrastructure platform that everyone can use and a poor one for specialised applications.
The absence of legally enforceable intellectual property claims promotes prosperity.
The challenge for organisations is to find the appropriate balance between OSS and proprietary software to advance the generation of innovative ideas (Meeker, 2015). Organisations
that focus on technology are particularly benefiting by combining OSS with proprietary
software (purchased or developed in-house). Raymond (2001) used the metaphorical terms
bazaar to describe the OSS approach in which the code is developed over the Internet in view
of the public and cathedral to differentiate source code that is available with each software
release, but code developed between releases is restricted to an exclusive group of software
developers. Raymond asserts that more time is need to debug cathedral OSS as the working
version of the code is only available to a few software developers.
The impact of OSS
The digital revolution has changed the landscape of the business world and has given rise to
organisations that thrive on volunteers, peer production and collaboration. Google Chrome,
Linux, Wikipedia, and many more are competing today with some of the best-financed and
resourceful enterprises across the globe. Even some of the organisations that have a history of opposing and deriding open source developments are now engaging in collaborations
to create win-win situations. Microsoft is the biggest example. Its wholly owned subsidiary, Microsoft Open Technologies Group, follows a community-driven approach to create
innovative solutions.
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IBM is another big example and its engagement with the Apache web server project and
Linux are well known. In 1999, IBM announced its support to the open source Linux project
and since then has contributed considerable financial and technical resources to the Linux
community. It played an instrumental role in establishing the Apache software foundation
and the Linux development group. Not only did the IBM save millions that would have gone
into developing its own operating system, it learned and mastered the workings of a new type
of business model that was set to change the software industry forever.
Organisations and institutions across sectors are seeking new partnerships and to gain
from the vast amount of unique skilled talents not available within the confines of their
own companies. Initiatives like InnoCentive, Human Genome project, and MIT and Harvard
University’s edX program offer platforms and opportunities for world-changing innovations.
The Internet has become a nucleus of global economic activity. More and more people
today are making their living by selling bits and bytes. The cost of starting a web-based business is extremely low relative to starting a business that relies on physical channels. This low
cost of bootstrapping a business combined with the creative nature of the Internet has encouraged millions to launch their own ventures. The low cost of starting a web-based business has
become possible primarily because of the availability of open source software and infrastructure. The open source movement and its methodologies have contributed significantly to the
business world and created ecosystems that have positively impacted all industries and billions
of people across the globe. The movement has largely been fuelled by thousands of volunteers
and organisations that contribute to these projects for a wide range of reasons, including:
••
••
••
••
••
••
cost efficiency over proprietary software;
membership of community teams that vary in expertise, industry and ideas;
adaptation and integration of OSS and into many different technologies that can outpace
the development of proprietary software;
peer recognition;
career benefits as resumés become attractive to headhunters;
access to research funds for software development.
In a 2011 Wall Street Journal opinion piece, the venture capitalist Marc Andreessen famously
said ‘software is eating the world’, meaning that software is invading and disrupting all parts
of the economy. ‘More and more major businesses and industries,’ Andreessen wrote, ‘are
being run on software and delivered as online services.’ The leaders in nearly every segment
of the economy – from books, to telecommunications, to transportation, to retail, to financial
services, to health care, to national defense – are or will soon be disruptive new software
companies or incumbents that transform themselves into software companies. Software, in
other words, is where Andreessen sees innovation is happening. Since that time, several
others have amended – or, perhaps, extended –Andreessen’s quote, by pointing out ‘open
source is eating software’ as it is a process that disrupts and transforms nearly all segments
of software.
There are multiple lists to be found detailing the ways in which open source is besting – or
‘eating’ – proprietary offerings. But to understand the significance of this, it’s useful to return
to Andreessen’s original argument. The key to his 2011 thesis is that ‘all of the technology
required to transform industries through software finally works and can be widely delivered
at global scale’. The very characteristics that are allowing software to ‘eat the world’ – a
networked world enabling faster innovation, scalability, customisation, and collaboration –
are the same characteristics that put open source ahead of proprietary. Open source means
Applied business innovation 187
quality, security and cost-effectiveness. Its main advantage is that it offers genuine interoperability to fully enable the networked world.
The Internet is the open source truly where innovation is happening. This claim is clearly
recognised in the marketplace today. According to a recent survey on the future of open
source, 78 per cent of companies in 2015 run part or all of their operations on open source,
which is double of what it was in 2010. Sixty-four per cent of companies currently participate in open source projects and 88 per cent expect their companies to increase contributions
to open source projects in the next two to three years. Nearly 9 in 10 surveyed respondents
said that open source greatly impacts the speed of innovation. Nearly as many say that open
source improves margins and grows revenues.
Where does this leave the question of what policy makers should do? Strategies should
be designed to encourage the uptake of open source. The first and most powerful step that
policy makers can take is to use public procurement and public administration information
and communications technology (ICT) programmes as means to bring government to where
innovation is. Things like promoting the specification of open standards in procurement, and
allowing and encouraging the participation of government ICT workers in external open
source projects are key. Also, the creation or updating of government interoperability roadmaps, such as the European Interoperability Framework that will provide needed guidance
for public administrations.
Policy makers should also study and adopt the best practices of governments that have
made significant progress in implementing open standards and promoting open source internally. For example, in 2015 the UK government mandated the adoption of Open Document
Format (ODF) in software purchases in all public administrations. Before that, in late 2012,
the French government published a guideline urging the country’s public administrations to
make a thorough and systematic review of free alternatives when building and revising ICT
infrastructure and applications. They were also required to use the savings realised by using
open source to develop expertise and engage upstream communities. While in the past progressive government policies have been poorly implemented or not implemented at all, it’s
imperative that these efforts continue given that open source is the future.
Given the broader, direct and indirect market impact of government, action will help to
encourage other segments of the economy that are not up to speed. Beyond that, directly
educating the public on the value of open standards and their importance in promoting innovation and avoiding supplier lock-in will help, as well. There is good example of leadership
in this area in both the US and in Europe. Governments the world over recognise that the
effective promotion of ICT in their economies is central to their competitiveness, growth,
and prosperity. All too often, however, these policies are motivated out of fear, resulting in
protectionist measures. Frequently they are designed for the realities of the past as opposed to
the future. Innovation is the future and open source is where innovation is happening.
Practice
Closed innovation idea sources
Idea management systems
Table 9.3 summarises the main sources of ideas for closed innovation initiatives. Sometimes
an employee or group may get a flash of inspiration and a novel idea with commercial potential surfaces. Most successful innovations, however, are not the result of serendipity but are the
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Linking creativity to strategic innovation
result of conscious effort, whether formal or informal, that attracts sufficient interest and funding.
Suggestion schemes are to be found in many organisations and provide employees with an organised system for submitting ideas. These are typically considered by dispassionate reviewers who
accept or reject them depending on pre-established criteria from management.
Table 9.3 Closed innovation idea sources
Source
Notes
Serendipity
Suggestion system
New knowledge
In-house R&Ds
Benchmarking
Reverse engineering
Ideas that are the result of flashes of inspiration
Systematic collection of ideas from employees
Most radical innovations are the result of new knowledge
Ideas that emerge from specialist research and development teams
Seeking to match the perceived quality standards of competitors
Deconstructing competitors’ market offerings to assess costs,
processes, etc. needed to meet or beat them
To find incremental ideas to improve costs and customer offerings
Continuous improvement
teams
New venture teams
Incubator labs and specialist
innovation teams
Customer and lead user
reports
Empathetic design
Scenario planning
Specialist groups charged with seeking new opportunities
Specialist teams gathered to seek radical innovations
Provided data that can trigger incremental improvements
Anticipating customer needs before they reveal them
Studying future industry and market trends to find radical
innovations
Whilst suggestion programmes typically encourage individuals to contribute ideas, continuous improvement initiatives are focused on inspiring team collaboration to improve design,
product/service performance or to better process efficiency. Sometimes called Kaizen teams
(kaizen is Japanese for continuous improvement) they are focused on incremental rather than
substantial or radical improvements. Nevertheless, these often small and constant tweaks
from rank and file employees have a significant bottom-line impact. Reverse engineering
is a form of continuous improvement and involves the detailed study of design, production
and marketing processes, and is aimed at securing cost and price parity with the competition.
Sometimes known as benchmarking this practice is largely aimed at incremental innovations.
Market research data derived from customer and lead user reports can trigger incremental
innovation activity.
Traditional in-house research and development teams address the task of seeking ideas
that can be developed into radical innovations. Some companies set up a specialist department to undertake this work. A variant of this approach is the establishment of company-wide
cross-functional innovation teams staffed by employees who have demonstrated innovative
skills and are charged with the responsibility of finding new ideas that have potential.
Some companies provide specific space and resources away from main workplaces and encourage employees to form small specialist teams targeted at the speedy development and launch of
new ventures. These are sometimes known as garages, incubator labs, innovation factories and
skunkworks and are primarily directed to produce new knowledge based radical innovations.
The motivation to avoid future dangers is matched by the human need to create plans
and move forward. These twin motivations can be very powerful and help to stimulate the
fields of Futures Studies and Applied Foresight (Slaughter, 2004). Companies with an eye
Applied business innovation 189
on the longer-term market potential, especially those who are dependent capital-intensive
operations such as oil exploration and extraction, invest in scenario planning, a technique pioneered by Shell in the 1960s (Wilkinson and Kupers, 2013). Scenario planning (sometimes
called ‘scenario and contingency planning’) is a structured way for organisations to think
about the future. A group of executives sets out to develop a small number of scenarios –
stories about how the future might unfold and how this might affect an issue that confronts
them. The issue could be a narrow one: whether to make a particular investment, for example. Should a supermarket put millions into more out-of-town megastores and their attendant
car parks, or should it invest in secure websites and a fleet of vans to make door-to-door
deliveries? Scenario planning draws on a wide range of disciplines and interests, including
economics, psychology, politics and demographics.
Scenario planning: a guide to or a prediction of the future?
From the beginning, those engaged with Shell’s scenario practice maintained that
scenarios are not predictions but can provide a deeper foundation of knowledge and
self-awareness in approaching the future. They also felt that the ‘official’ view of the
future – the business-as-usual outlook – both reflects an optimism bias and is based on
the human tendency to see familiar patterns and be blind to the unexpected.
Source: Wilkinson and Kupers (2013).
Empathetic design is an anthropological technique for generating ideas whereby innovators observe how people use existing products and services in the field (Kelley and Kelley,
2014). Electrolux and IKEA study the way people use their kitchens. Harley-Davidson sends
experts (engineers, marketing people, social anthropologists) to attend Harley Owners Group
meetings. Proctor & Gamble observes how customers use products in real-life conditions. All
seek to discover how they can help their existing and target customers.
On-site creativity centres
A powerful symbol of top management’s commitment to innovation is their willingness to
invest in on-site creativity centres which provide an oasis for people to get away from the
humdrum of daily life and spend time seeking inspiration. A creativity centre may contain periodicals, executive toys, pictures, art equipment, coffee machines, Post-It notes,
comfortable seating, etc. to stimulate visitors’ creativity. Some organisations (e.g. 3M)
require staff to spend a mandatory percentage of their time in such centres and target them
to come up with both incremental and radical innovations that can be developed to full
commercialisation.
Open innovation idea sources
An idea management system which includes ideas submitted by sources external to the
organisation could also be adopted (Table 9.4). This may take the form of a proprietary or
open source online platform or it may adopt the process of crowdsourcing. Idea scouts can be
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Linking creativity to strategic innovation
used to scan the external environment for new ideas. This, however, is not sufficient, as the
ideas need to be communicated to the right people who have the power to take action within
the organisation.
Clearly seeking to find innovation ideas from both internal and external sources provides
the opportunity to gather a richer harvest of ideas. Some companies prefer to surrender this
to other companies and accept a follower role to a network leader organisation. Open innovation sourcing or, as it is commonly known, crowdsourcing is addressed below by means of
three dominant themes: capturing ideas, business initiatives and developing ideas.
Table 9.4 Open innovation idea sources
Source
Notes
External R&D agencies
Idea scouts and idea
connectors
Capture of key personnel
from rival organisations,
technology transfer
Co-creation
Research associations, interest groups, universities
Getting key ideas to key potential developers
Crowdsourcing
Contractual arrangements
Social networking
Competitive enticement – may get an organisation a bad name if
practised excessively
Involvement of external parties such as individuals, e.g. customers,
in the formation of suitable ideas
Involving Internet communities to generate ideas
Formal and legal methods of establishing partnerships – licensing,
acquisition, joint venture, strategic alliances
Use of networks such as Facebook, LinkedIn and Twitter
Capturing ideas
External R&D agencies
The growing complexity and pace of industrial technological change is forcing firms to forge
new alliances and to respond more efficiently to market changes. Developing cooperation
skills and increasing innovativeness provides an opportunity for companies to compete successfully on both domestic and international markets.
Idea scouts and idea connectors
Combing the outside world for potentially useful innovation ideas is necessary but not
enough. Managers must find ways to ensure the best new ideas reach those who can exploit
them. Some do this via an ‘idea connector’ who links up the ‘idea scouts’ – people with
well-developed knowledge and social networks outside their company but limited networks
within it to the R&D engineers and others who can develop suggestions.
Key personnel, technology transfer
One way of obtaining innovative ideas that have potential is to poach key personnel from
educational, government or competing organisations. Companies that are determined to give
an instant boost to their open innovation activity keep a constant eye out for possible recruitment candidates and keep in touch with key expert agencies.
Applied business innovation 191
Another is to seek the transfer of intellectual property, developed and generated somewhere else by legal means such as licensing or franchising with a view to converting this
technology into marketable goods and services.
Nordic Folkecenter for Renewable Energy
For many years Folkecenter has exported know-how around the globe. Farm biogas
digesters, windmills and solar systems as well as integrated systems have been installed.
Projects in Europe, Asia, Africa, North and South America are realised with know-how
from Folkecenter, Thy, Denmark. The projects are completed in cooperation with local
companies, NGOs or governmental authorities. This way renewable energy know-how
is spread to several corners of the globe, to the benefits of the world society and future
generations.
Source: Nordic Folkecenter, Hurup Thy, Denmark.
According to the Encyclopaedia of Management (2009) four varieties of technological transfer are commonly featured in business periodicals:
••
••
••
••
International technology transfer: the transfer of technologies developed in one country
to firms or other organisations in another country.
North–South technology transfer: activities for the transfer of technologies from
industrial nations (the North) to less-developed countries (the South), usually for the
purpose of accelerating economic and industrial development in the poor nations of
the world.
Private technology transfer: the sale or other transfer of a technology from one company
to another.
Public–private technology transfer: the transfer of technology from universities or government laboratories to companies.
Contractual arrangements
Once the organisation has at least started to establish ownership of the technology, there are
several possible legal and/or contractual mechanisms for transferring technology from one
organisation to another:
••
••
••
••
Licensing: the exchange of access to a technology and perhaps associated skills from one
company for a regular stream of cash flows from another.
Cross-licensing: an agreement between two firms to allow each other use of or access to
specific technologies owned by the firms.
Strategic supplier agreement: a long-term supply contract, including guarantees of
future purchases and greater integration of activity than a casual market relationship.
Contract R&D: an agreement under which one company or organisation, which generally specialises in research, conducts research in a specific area on behalf of a sponsoring
firm.
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••
••
••
Linking creativity to strategic innovation
Joint or cooperative R&D agreement: an agreement under which two or more companies
agree to cooperate in a specific area of R&D or a specific project, coordinating research
tasks across the partner firms and with sharing of research results.
R&D cooperation or research joint venture: the establishment of a separate organisation,
jointly owned by two or more companies, which conducts research on behalf of its owners.
Research consortium: any organisation with multiple members formed to conduct joint
research in a broad area, often in its own facilities and using personnel on loan from
member firms and/or organisational business unit teams.
The choice of which mechanism to use in a particular technology transaction depends on
many factors, including the stage of development for that technology, what the company
receiving the technology is willing or able to pay, what technology or other assets it might be
able to offer in place of money, the likely benefits of establishing a longer-lasting partnership
between the organisations instead of a one-time transfer, and the exact legal status of ownership over that technology. For example, if a small firm simply wants to sell its technology to
a large firm in exchange for money, it will probably choose to license the technology. If the
small firm also wants access to the large firm’s complementary assets, such as its production
facilities and distribution network, it will try to negotiate a more substantial and permanent
relationship, such as an R&D contract or a cooperative R&D agreement.
Developing ideas
Once ideas have been captured they need to be fully defined and developed. Three popular
ways of proceeding are co-creation, further crowdsourcing and social networking.
Co-creation
Essentially co-creation is the difference between people creating a great idea for an organisation and people working in an organisation to develop a successful innovation. Another
practice subject to trade-offs is customer involvement in the innovation process. Advocates
of ‘co-creation’ approaches argue that close collaboration with customers reveals insights
that can lead to novel offerings (Ramaswamy and Gouillart, 2010). But others say that working too closely with customers will blind you to opportunities for truly disruptive innovation
(Christensen, 2003). Apple’s Steve Jobs was adamant that customers do not always know
what they want – the reason he cited for eschewing market research. Companies such as Audi
and Mars have embraced this practice and allow their brands to reflect customers’ personal
values. Tapscott and Williams (2006) argued that the traditional ‘plan and push’ approach to
innovation has been replaced by the ‘engage and co-create’ approach.
Crowdsourcing
Crowdsourcing is a term first defined by Howe (2006) meaning to generate ideas and to create consumer-generated marketing campaigns and involves inviting the Internet community
to help create content, software or to raise funds in support of innovative projects. The development of Wikipedia is a classic example of crowdsourcing, as the project gave the crowd
the ability to create the information on their own. The result was one of the most comprehensive encyclopaedias the world has ever known. Apple uses crowdsourcing to tap the brains
of users and developers worldwide to generate innovative apps and supportive podcasts to
enhance its products.
Applied business innovation 193
It has a lot of merits: by inviting a vast number of people, most of whom an organisation could probably not have found on their own, to address their challenges, they increase
the probability of developing a quality novel solution. Research by Boudreau and Lakhani
(2013) provides strong evidence that crowdsourcing can lead to faster, more efficient and
more creative problem solving. Crowdsourcing tends to work best for highly modular systems, in which different problem solvers can focus on specific components without worrying
about others. Crowdsourcing can also be used to get designs for furniture, fashion, advertisements and videos, and product design. Just about anything that can be designed can be
crowdsourced. The choice between a demand-pull and a supply-push approach involves
weighing the trade-offs. If you choose the former, you risk missing out on technologies for
which markets have not yet emerged. If companies choose the latter, they may create technologies that never find a market.
Crowdsourcing can be applied in a variety of ways to gather ideas as well as resources and
specialist skills to assist in the development of innovative projects. Boudreau and Lakhani
classified crowdsourcing in four distinct categories (Figure 9.2):
••
••
••
••
Crowd contests – an organisation identifies a specific problem and offers a financial
reward and an invitation to submit solutions. These are particularly useful for solving
design problems and are used widely by clothing firms such as H&M.
Crowd collaborative communities – crowds are motivated by the desire to achieve recognition and fame in a community of peers. In less than a decade Wikipedia transformed
the reference market with its Internet-based organisational model.
Crowd complementors – build on platforms developed by other companies. iTunes have
added value to Apple’s mainstream iPod, iPhone , iPad and Mac product lines by accessing software developers.
Crowd labour markets – are spot markets that match buyers and sellers of services who
require expertise to contribute to the development of innovation projects with skilled
people on a services rendered contracts
Figure 9.2 Boudreau and Lakmani (2013) crowdsourcing classification.
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Linking creativity to strategic innovation
Crowdsourcing has often been criticised, particularly when it targets non-experts or people
who are not well versed in relevant subjects, as it utilises the input of anyone who may be
motivated to contribute ideas related to a particular issue, task, problem or question. There is
debate, moreover, about whether the ‘crowds’ can actually exhibit ‘wisdom’.
The main advantages of crowdsourcing are:
••
••
••
••
••
••
••
••
••
••
••
••
••
low cost;
payment is often by results or there may be none at all;
rapid process with relatively fast results;
possibility of tapping extensive talent – a broader range than exists in one organisation;
input involves tapping into potential or actual customer needs, desires or visions;
brand building through a sense of collaboration;
willingness of people to participate and to share ideas, locally and even more, globally;
satisfaction obtained through working with a relatively large number of people;
eliminates financial barriers to participation when organised online;
anonymity (when applicable) or ‘remote’ participation increases depth of participation
as people tend to reveal more when participating remotely and face-to-face;
may generate better results than internally commissioned research;
can handle a broad range of problems related to a variety of disciplines;
facilitates peer-to-peer collaboration when addressing customer support issues.
Some of the disadvantages include the following:
••
••
••
••
••
••
••
quality of results may vary considerably;
can be used to exploit others by sourcing low-cost or free labour;
large-scale projects can be difficult to manage and time consuming;
risk of far too few participants, lack of interest or motivation;
language barriers;
lack of trust, as there is no contractual or non-disclosure agreement;
possibility of false, malicious or unethical input by participants.
Digital technology and the possibilities it offers to form and to collaborate has provided new
opportunities for crowdsourcing. Large organisations often use web-based platforms to generate ideas and solve problems.
P&G Connect + Develop (C+D)
P&G operates a web-based innovation platform to tap externally developed intellectual property to accelerate internal innovation and for sharing its internally developed
assets and know-how to help others outside the company.
The idea of partnering externally to accelerate innovation is applied across the company and around the world in all its brands. Within P&G, a global team dedicated to
empowering C+D, searching for innovations, works with prospective partners to shepherd breakthrough innovations through the company and into market.
Source: P&G dedicated website, http://www.pgconnectdevelop.com/home/pg_open_innovation.html.
Applied business innovation 195
Dawson and Bynghall (2011) identified 22 platform categories of crowdsourcing that can be
used to tap the creative potential of crowds. Six prominent ones are:
1
2
3
4
5
6
Distributed innovation platforms: to support innovation processes that cross-organisational
boundaries (or take place outside an organisation).
Idea platforms: used within a company context to gather, filter and source idea.
Innovation prizes: challenges designed to catalyse new thinking and ingenuity, such as
Electrolux’s Design Lab.
Content markets: platforms where people can submit their work for people to purchase.
Prediction markets: gather opinions to predict the future, often based on ‘stock markettype’ mechanisms, which provide a value of a particular prediction. Google uses prediction markets, using its employees to predict which of its innovations and new projects
are most likely to be successful.
Competition platforms: used to gain expertise in fashion, graphic design and viral
marketing.
In a world driven by innovation, those companies that can successfully tap the power of
crowdsourcing to drive innovation will enjoy an immense advantage over those that steadfastly depend on closed internal skills and ideas.
Social networking
Social networking is the practice of expanding the number of one’s business and/or social contacts by making connections through individuals. While social networking has gone on almost
as long as societies themselves have existed, the unparalleled potential of the Internet to facilitate
such connections is only now being fully recognised and exploited, through web-based groups
established for that purpose. Based on the six degrees of separation concept (the idea that any
two people on the planet could make contact through a chain of no more than five intermediaries), social networking establishes interconnected online communities (sometimes known as
social graphs) that help people make contacts that would be good for them to know, but that they
would be unlikely to have met otherwise. Depending on the social media platform, members
may be able to contact any other member. In other cases, members can contact anyone they have
a connection to, and subsequently anyone that contact has a connection to, and so on. Some services require members to have a pre-existing connection to contact other members. Social media
sites include Facebook, Twitter, LinkedIn and Google and as the ownership of smartphones
expands, social networking is becoming one of the fastest growing Internet activities.
Risk factors
Unpredictability vs. certain success
Innovations inherently have a wide array of risks that depend on attempting to predict the
unknown. Even though companies have long been dedicating extensive resources to manage these risks, uncertainty surrounding innovation continues to plague many unprepared
innovators who jump too quickly into the market. When managers engage in the process of
brainstorming how to minimise innovation risk, they generally do so under a flawed decision
model or imperfect context. As a result, many innovation failures do not necessarily stem from
the innovation itself but from the process used to determine how the innovation is introduced.
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Linking creativity to strategic innovation
In order to successfully manage innovation risk, managers must take adequate time and
thought to developing and improving their decision model under which they are evaluating
their respective innovations. The more reliable and relevant information companies use in
making choices about when and how to introduce innovation into the marketplace, the less
risk those companies are assuming that they have missed an important variable to consider in
their calculations, and thus reducing unintended consequences.
A Harvard Business Review article (Merton, 2013) addresses critical elements of innovation risk by offering five basic rules for managing them.
Five rules to manage innovation risk
1
2
3
4
5
Recognise that a foundation of knowledge (model) exists and needs to be developed for judging risk and return. This is a pre-step in that the team is setting up
the context in which the innovation should be considered.
Every innovation model has its own set of limitations and will never be perfect.
Expect the unknowns.
Obtain intimate knowledge and understanding of the user.
Consider the infrastructure the innovation will be placed in. For example, the
infrastructure that the cloud has produced has altered many companies’ business
models.
Innovation by its very nature is a risky business and may prove to be a disruptive process that
requires attempting to know the unknown. Accepting this fact and having a strategy in place
to mitigate risk is critical to being a successful innovator. Using these five rules, companies
will be better equipped to tackle many of the risks related to innovations that go unaddressed.
Risk assumption is non-sufficient, but it is an absolutely necessary condition.
Action
Research from a variety of perspectives has argued that innovation no longer takes place
within a single organisation, but rather is distributed across multiple stakeholders in a value
network (Bogers and West, 2012). Innovation is almost never an either/or choice. As most
companies have discovered, their innovation goals involve a complex mix of closed and open
innovation that is uniquely tailored to their innovation objectives (Albats et al., 2016).
Innovation networks
The most valuable and complex technologies are increasingly innovated by networks that
self-organise. Networks are those linked organisations (e.g. firms, universities, government
agencies) that create, acquire, and integrate the diverse knowledge and skills required to
invent complex technologies (e.g. aircraft, telecommunications equipment, biomass). In other
words, innovation networks are organised around constant learning. Self-organisation refers
to the capacity these networks have for combining and recombining these learned capabilities without centralised, detailed managerial guidance. The proliferation of self-organising
innovation networks may be linked to many factors, but a key one seems to be increasing globalisation. Indeed, globalisation and self-organising networks may be coevolving. Changes
in the organisation of the innovation process appear to have facilitated the broadening geographical linkages of products, processes, and markets. At the same time, globalisation seems
to induce cooperation among innovative organisations.
Applied business innovation 197
As with many definitions, many people have defined the term ‘innovation networks’ in
many ways and so far there is no agreed definition. Table 9.5 summarises the key components of innovation networks.
Table 9.5 Innovation networks
Innovation networks
Innovation network functions
•• Are all forms of organisations that serve
the exchange of information, knowledge
and resources
•• Comprise at least two partners that help to
deliver innovative solutions to identified
problems
•• Networks are based on confidence and
stable cooperative relations
•• Innovation activities are coordinated, legally
independent organisations that pool their
innovation initiatives
•• The joint activities result in innovative
processes, products and services
•• Stable relations formed between organisations
and (training and research institutions, etc.)
result in advantages to all parties
In the light of intensified competition, technological complexity and institutional instability,
firms are increasingly inclined to actively seek competitive advantage through innovation.
Consequently, the survival, profitability and growth of organisations are in most industries
intimately related to their innovative capabilities, i.e. the capacity to combine resources
needed to generate novel and valuable products, processes, services, business models and
organisational forms. Innovation is a social and interactive process in which collaboration and
exchange of knowledge and information play crucial roles. Hemphälä and Magnusson (2012)
focus on the way in which social networks contribute to innovation. They demonstrate that
the characteristics of social networks have a major influence on the outcome of the innovation
process. Dense or open networks support incremental or radical innovations, respectively. The
implementation of open innovation instruments strengthens an organisation’s social capital,
which is, in turn, positively related to firm performance (Rass et al., 2013).
Innovation and entrepreneurship
There is a close interrelationship between innovation and entrepreneurship. Innovation
involves an entrepreneurial mindset, with the ability to recognise opportunities and be prepared to take risks. Entrepreneurship thrives on innovation as new enterprises or start-ups
require the implementation of original products, services, processes or business models.
Innovation involves elements related to invention together with an entrepreneurial mindset
in order to create value. The term entrepreneurship is generally understood to refer to new
company start-ups or as new business creations, while intrapreneurship refers to business
development in existing organisations.
Entrepreneurship is important to policy makers and educators, as it is considered to be a
source of job creation and an important accelerator for the growth of an economy. New enterprises are a source of job creation with subsequent benefits for society and for the economy.
Some organisations may have been reluctant to engage persons with entrepreneurial skills in
the past because of the risks these persons could have posed (such as requiring constant challenges, moving on to a competitor or adopting ideas from the organisation for a new start-up
which they would establish as a competitor). However, things are changing. Organisations
are increasingly appreciating the importance of a strong entrepreneurial approach to innovative activities and encouraging employees to become intrapreneurs.
Linking creativity to strategic innovation
198
Innovation, entrepreneurship and intrapreneurship are complementary processes that
enhance organisational performance. According to Zhao (2005) they hold ‘the key to organisational sustainability in this period of rapid change and non-linear dynamics’. His three
main propositions are:
••
••
••
Innovation and entrepreneurship are complementary because innovation is the source of
entrepreneurship and entrepreneurship allows innovation to flourish and helps to realise
its economic value.
Entrepreneurship uses innovation to expand business scope and boost growth. Therefore,
entrepreneurship and innovation are dynamic and holistic processes that are not confined
to the initial stage of a new venture.
The development of entrepreneurship and innovation, and interaction between them for
the successful commercialisation of innovation, require an organisational culture and a
management style that are innovation-focused and supportive.
Skills for entrepreneurship and innovation
••
••
••
••
••
••
The ability to search for and identify innovative opportunities.
A proactive attitude to the promotion of innovation through a strategic vision.
The ability to create a cultural environment that fosters innovation and entrepreneurship.
The ability to develop effective plans to implement innovation and commercialisation procedures.
The ability to integrate research, design and market information to convert new
ideas and inventions into commercially viable innovations.
The ability to develop effective and realistic procedures for the evaluation of R&D
projects in terms of innovation, quality and commercial value.
Source: Zhao, 2005.
Summary
Whilst any individual or group of employees can have a flash of inspiration, it is generally
best for organisations to take a strategic approach to the generation of suitable ides for innovatory projects. Both ‘closed’ and ‘open’ sourcing provide potential, the greatest of which is
obtained when the two methods are combined. Most organisations nowadays regard innovation as important for the future of their businesses. Top management that adopt a holistic
and sustained approach to innovation are able to gain positive differentiation status as long
as they are contextually aware and take positive steps to actively develop an organisational
climate that supports innovative activities.
Discussion questions
1
2
3
Why it is important for companies to benefit from innovation?
What are ‘closed’ idea sources? Answer with a description and with two examples.
What is meant by the term ‘open sourcing’?
Applied business innovation 199
4
5
6
7
What are the advantages and disadvantages of OSS?
Why might a business opt to combine ‘closed’ and ‘open’ sources in its ideation and
innovation activities?
The pursuit of innovation is both costly and risky so why do businesses increasingly see
it as an important activity?
What is an intrapreneur?
Case exercise
Toyota: an elegant search for innovative ideas
Many hold Toyota in high regard for its culture that stresses the importance of innovation.
Sakichi Toyoda founded the company as a handloom company in the last decade of the
nineteenth century. In 1898, Toyoda created Japan’s first steam-powered loom and in 1924
the company invented an automatic loom. Four years later it developed a small petrol engine
and in 1935 the company produced a prototype car. In 1937 the Toyoda family founded the
Toyota Motor Company and having set up a factory adopted the concept of ‘Just In Time’
logistics in 1938.
The Toyota family have been continuously driven to cut costs by scrutinising the production, operational and logistical costs of the processes that supported the company. From its
earliest days Toyota Motor Company has invested heavily in R&D to support innovation and
now claims to implement a million new creative ideas every year. According to Matthew
May, a senior University of Toyota advisor, and the author of Elegant Solution: Toyota’s
Formula for Mastering Innovation (2007), this success results from an embedded culture of
guiding principles and practice.
There are three guiding principles at Toyota and they create both the policy and the framework for innovation:
1
2
3
Ingenuity – a creative innovative mindset.
Pursuit of perfection – determination to innovate to achieve optimal solutions, for example Lexus cars epitomise perfection.
Rhythm of fit – application of solutions to anticipated contextual and use problems, for
example, the development of hybrid technology.
Toyota operates a model known as the Idea Factory that is energised by the three guiding
principles and a blend of closed and open innovation practice. Production activity is rigidly controlled by the company’s Total Production System to meet its goal of producing the
highest quality level, at the lowest cost and with the shortest lead-time. Since 1951 Toyota
has operated its Creative Idea and Suggestion System (TCISS) to empower every employee
to participate in improving product quality by inviting them to make informed suggestions
on ways to improve the production process. Previously it had only been the privilege of
upper management to make suggestions in that respect, but was now opened up to include
employees at the sharp end of production arguably the ones most likely to highlight potential
issues. Additional motivation was incorporated into the system with the presentation of an
Individual Annual Award to honour excellent suggestions.
Training programmes were developed to sharpen employees’ skills at generating product
ideas and key performance drivers such as quality, productivity and safety. These programmes came to be known as activators, as they were developed to give employees a deeper
understanding of their work. Key Toyota activators include:
200
••
••
Linking creativity to strategic innovation
Poka-yoke or error proofing: this is a simple technique that is designed to help employees to avoid making repetitive mistakes. It is an empowering and easy to learn method
that helps people generate many ideas.
5S or rigorous housekeeping: these programmes help employees to become more productive. The five S’s are:
{{
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seri (putting things in order);
seiton (arranging things efficiently);
seiso (preventing problems by exercising due diligence);
seiketsu (doing after-work maintenance and cleanup);
shitsuke (showing discipline, following the rules).
The culture that supports continuous innovation at Toyota results from an impressive application of the Japanese principle of kaizen. The company has empowered employees to
encourage the free flow of creativity by systematically removing hierarchical barriers that
often stifle innovation. For years Toyota has taken soundings of consumer experiences and
this activity is growing rapidly since the advent of the digital revolution and the explosion
of interest in social media. Innovation leads to evolution and this belief lies behind Toyota’s
desire for customers and interested third parties to contribute ideas by means of crowdsourcing to improve and develop their products, services and environmental research.
Questions
••
••
••
••
Why has Toyota been so successful in generating ideas over the years?
How might other companies learn from their success?
How might companies that are not historically dominated by a family culture that champions the generation of ideas develop a lasting ideation strategy?
To what extent do you think that Toyota will be prepared to contribute internally generated and developed technical and production process ideas to open source networks?
Source: Toyota website, http://www.toyota-global.com.
YouTubes
‘Toyota Motors: Building a Culture of Innovation and Sustainability in a Global Economy’,
https://www.youtube.com/watch?v=QitwXzhtZ80.
Keynote Speech by President Akio Toyota at TOYOTA Investors Meeting 2015, https://
www.youtube.com/watch?v=m5RoMTh2yd8.
References
Albats, E., Podmetina, D., Dabrowska, J. and Teplov, R. (2016) ‘Open innovation: Do you really do
what you think you do?’, paper presented at the XXVII ISPIM Innovation Conference, Porto.
Andreesen, M. (2011) ‘Why software is eating the world’, The Wall Street Journal, 20 August,
http://www.wsj.com/articles/SB10001424053111903480904576512250915629460 (accessed
30 November 2016).
Bogers, M. and West, J. (2012) ‘Managing distributed innovation: Utilisation of open and user innovation’, Creativity and Innovation Management, Vol. 21, Issue 1, pp. 61–75.
Applied business innovation 201
Boudreau, K. J. and Lakhani, R. (2013) ‘Using the crowd as an innovation partner’, Harvard Business
School Review, April, pp. 61–9.
Chesbrough, H. (2003) Open Innovation: The New Imperative for Creating and Profiting from
Technology, Boston, MA, Harvard Business School Press.
Christensen, C. M. (2003) The Innovator’s Dilemma: The Revolutionary Book that Will Change the
Way You Do Business, London, Harper Paperbacks.
Dawson, R. C. and Bynghall, S. (2011) Getting Results from Clouds: The Definitive Guide to Using
Crowd Sourcing to Grow Your Business, San Francisco, CA, Advanced Human Technologies.
Encyclopedia of Management (2009) http://www.encyclopedia.com/topic/Technology_Transfer.aspx.
Hemphälä, J. and Magnusson, M. (2012) ‘Networks for innovation: But what networks and what
innovation?’ Creativity and Innovation Management, Vol. 21, pp. 3–16.
Howe, J. (2006) ‘The rise of crowdsourcing’, Wired, June, Vol. 14, Issue 6, pp. 1–4.
Kelley, T. and Kelley, D. (2014) Creative Confidence, London, William Collins.
May, M. E. (2007) Elegant Solution: Toyota’s Formula for Mastering innovation, London, Simon &
Schuster.
Meeker, H. (2015) A Practical Guide to Open Source Software Licensing, North Charleston, South
Carolina, CreateSpace Independent Publishing Platform.
Merton, R. C. (2003) ‘Innovation risk: How to make smarter decisions’, Harvard Business Review, April,
https://hbr.org/2013/04/innovation-risk-how-to-make-smarter-decisions (accessed 30 November 2016).
Ramaswamy, V. and Gouillart, F. (2010) ‘Building the co-creative enterprise’, Harvard Business
School Review, October, pp. 100–9.
Rass, M., Dumbach, M., Danzinger, F., Bullinger, A.C. and Moeslein, K. M. (2013) ‘Open innovation
and firm performance: The mediating role of social capital’, Creativity and Innovation Management,
Vol. 22, Issue 2, pp. 177–94.
Raymond, E. S. (2001) ‘The cathedral and the bazaar’, cf. text and copyright at www.TUXEDO.ORG/ESR/WRITINGD (accessed 7 April 2016).
Rigby, D. and Zook, C. (2002) ‘OpenMarket innovation’, Harvard Business Review, October,
pp. 80–9.
St. Laurent, A. M. (2004) Understanding Open Source and Free Software Licensing, Sebastopol, CA,
Oreilly Media, p. 4.
Slaughter, R. A. (2004) Beyond Dystopia, Routledge, Abingdon.
Tapscott, D. and Williams, W. (2006) Wikinomics: How Mass Collaboration Changes Everything,
New York, NY, Portfolio.
Van de Vrande, V., de Jong, J. P. J., Vanhaverbeke, W. and de Rochemont, M. (2009) ‘Open innovation in SMEs: Trends, motives and management challenges’, Science Direct, Technovation, Vol. 29,
pp. 423–37.
Wikhamn, B. R. (2013) ‘Two different perspectives on Open Innovation’, Creativity and Innovation
Management, Vol. 22, Issue 4, pp. 375–89.
Wilkinson, A. and Kupers, R. (2013) ‘Living in the futures’, Harvard Business Review, May,
pp. 118–27.
Zhao, F. (2005) ‘Exploring the synergy between entrepreneurship and innovation’, International
Journal of Entrepreneurial Behaviour & Research, January, Vol. 11, Issue 1, pp. 25–41.
Selected YouTubes
‘Where Ideas Come From’, https://www.youtube.com/watch?v=NugRZGDbPFU.
‘Why Use Open Sources Software: The Benefits’, https://www.youtube.com/watch?v=fch
9WjHjAXI.
‘What Is Open Source Explained in LEGO’, https://www.youtube.com/watch?v=fch
9WjHjAXI.
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Linking creativity to strategic innovation
‘Why Success Is Not Predictable (Vince Ebert)’, https://www.youtube.com/watch?v=QC
8svQCxbT4.
‘Les McKeown on How to Make Your Business a Predictable Success’, https://www.
youtube.com/watch?v=ZhEo6tj42g8.
‘Entrepreneurs and Innovation the Myth of the Idea’, https://www.youtube.com/watch?
v=BeFjKXyMDug.
‘Rethinking Capitalism: Porter Explains Why Business Leaders Must Focus on SharedValue Creating Products . . . ’, https://www.youtube.com/results?sp=SBTqAwA%253D&q=
Rethinking+business+reality.
10 Building a strategic managing
innovation model
Talking isn’t doing. It is a kind of good deed to say well; and yet words are not deeds.
(Shakespeare, Henry VIII )
Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking
and commitment of resources to action.
(Peter. F. Drucker)
Learning objectives
This chapter explores:
1
2
3
4
5
6
7
Rethinking reality.
What is wrong with the conventional approach to strategic management.
Taking a new approach to strategic innovation.
Reviewing the business, markets and market offerings, and creation of customer perceived value.
Basic processes of strategic innovation.
Characteristics of strategically innovative companies.
Enabling strategic innovation.
Introduction
This chapter addresses the need for the management of organisations to take a strategic
approach to innovation if they wish to obtain and sustain a ‘market edge’ in the contemporary
business context. If top management in organisations accept that innovation is an important
concern for their business they need to regard expenditure on creativity and innovation as an
investment item and not an activity that can be starved of resources when business fortunes
are under pressure. In increasingly over-supplied domestic markets incremental innovation,
whilst sound, is unlikely to result in radical or breakthrough innovations. Boards must realise
that a holistic, rather than piecemeal, approach needs to be taken to innovation management.
The pursuit of profitable innovations is potentially a risky activity. If a strategic approach is
adopted then most innovation projects will result in a profitable return. However, some will
fail and organisations must prepare to absorb the cost.
To play safe many organisations like to operate conventional strategic blueprints and
apply conventional business school approaches. In under-supplied markets this does generate
204
Linking creativity to strategic innovation
a positive outcome. Such driving ‘by numbers’ does work and is both effective and efficient.
In turbulent market conditions (buyers’ markets) this is often found to be wanting. New thinking is required. The chapter explores (see Figure 10.1):
••
••
••
What is wrong with conventional strategic approaches today.
What is meant by strategic innovation.
How to design and enable a strategic innovation management model.
Figure 10.1 Building a strategic innovation model.
Building a strategic managing innovation model
205
Context
Figure 10.2 presents the 13 step strategic innovation model recommended in this text.
Step 1: checking the now before thinking about the how
Metaphors have a valuable capacity to help us see the wood from the trees. To see things and
relationships that concern us from a different perspective. They enable us to reframe our thoughts
and stimulate creativity – the core of innovation. Before presenting some thoughts that will assist
in designing a strategic innovation model it is pertinent to spend a little time thinking about key
relationships through the use of metaphor. Complex relationship sets can at first be confusing
and a good metaphor can often clear the way and help us understand how concepts interact.
Einstein explored the interaction between mass, space and time in his celebrated research
on relativity. In his book Future Perfect Davis wrote that the world is moving from a world
dominated by Newton to a world dominated by Einstein (1987). A comparable change in the
business world is the move from buyers’ (old world) markets to customers’ markets and the
information age. In such conditions established ideas can become constraints that block creative thinking and hence innovative projects. Take the case of watches. Wind-up mechanical
analogue time pieces were challenged by a market drive led by Swatch that resulted in customer demand for fashion watches. Digital watches have changed the direction of the watch
market, which in turn has been challenged by the abandonment of wrist watches in favour
of mobile phones. In similar vein the fasteners have morphed from buttons, laces and zips to
Velcro (Lorentz and Lorentz, 2012).
Most businesses are still based primarily on the equivalent of Newtonian physics. Can they be
transformed with regard to their innovative efforts if they become more Einsteinian? Let’s spend
a little time rethinking the relationship between mass, time and space in the business world.
Organisations and their structures are physically dissolving and diffusing across space and
time as they decentralise, globalise and morph into flexible networking systems. They used
to be defined on the basis of the old world focus of mass and tangibility. Organisations used
Figure 10.2 13-step model.
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Linking creativity to strategic innovation
to be defined on the basis of where they were. Now they are increasingly to be found in the
ether. Digital technology has created a new world where the emphasis is on information and
the growth of diffuse interconnecting networks such as the Internet. Information is interesting from an Einsteinian point of view, as it does not have mass. (See Figure 10.3.)
Rethinking time
Time is an important factor in human life and of vital importance to companies and organisations. Time is money. Time-poor customers demand timely service. Let us consider how
time affects the market offerings (product/services). Ever since the dawn of the industrial age
successive technological advances, such as Just in Time, have speeded up mass production.
Sophisticated networks and logistics quickly link customers and producers. Amazon can
deliver books within hours to a customer’s door. Music can be instantly downloaded from
the Internet. Fast food companies work hard to keep their promise. Instant bookings can be
made for planes and trains. Instant transactions can be conducted with the banks. Airlines
touch down and take off in record times to avoid heavy landing fees. Companies and organisations that are able to bring customer-perceived value (CPV) innovations speedily to market
can gain real competitive advantage. High-tech companies find that their product/service life
cycles are increasingly shrinking under competitive pressure. Life has become a 24-hour,
seven-day a week phenomenon. Many now expect to be served instantly by suppliers.
Rethinking space
Life is lived in space and this, like time, is under pressure. Many are space-poor and live
in small flats and houses and in ever more crowded locations. Small has become beautiful
to many. Basic mass-market offerings, often the only choice in sellers’ markets, are giving way to increased concentration on customising market offerings to individuals who
place a premium on design and brand image. Restaurants and other leisure providers have
to pay close attention to customer experience factors such as ambiance and service attention. Technological items such as desktop computers are giving way to sophisticated mobile
smartphones. Thinner wallets are on sale now as many have reduced their use of paper
Figure 10.3 Rethinking space, time and mass.
Building a strategic managing innovation model
207
currency in favour of conducting purchases with credit and debit cards. TV sets, smartphones,
watches take up less space and/or are designed to multitask, reducing the need for people to
purchase additional equipment. Many TVs now offer programme recording, mobile phones
are equipped with sophisticated digital cameras, and digital watches can keep a running
check on their owner’s health and use of time.
Rethinking mass
As well as time and space, market offerings are also being transformed by mass. Whilst
many products are becoming smaller (taking up less space) they are also becoming smarter.
Bookshelves and video cabinets are being replaced by cloud locations. Wikipedia has significantly reduced the potential for hardback encyclopaedias. Digital photographs and
presentations can be viewed on tablet computers and smartphones thus substantially reducing the demand for projection equipment. Cars are getting lighter, providing potential for
improved engine performance and speed capability.
Linking the Einstein metaphor with strategic innovation
The main thrust of Einstein’s Theory of Relativity is commonly summed up in his E = MC2
formula where E represents kinetic energy, M, mass and C2, the speed of light. With a degree
of licence the formula can be related to the factors impacting on time, space and mass in company and organisational domains. Let’s redefine the components of the formula as follows:
E = Management expertise and enterprise
M = Market offerings (product and service packages)
C2 = speed of delivering innovative products to market.
Next see if the conventional approach to strategy can help.
Step 2: conventional approach to strategic innovation
In the light of the previous section there appears to be lot wrong with conventional approaches
to strategy with regard to the traditional strategic factor set of content, content and tools
(Figure 10.4).
Figure 10.4 Traditional strategic factor set.
Linking creativity to strategic innovation
208
Content
••
••
••
••
Too much focus on best practices, operational effectiveness and incremental improvements in costs and profits.
Too much imitation of competitor’s moves.
Too much holding onto strategic position.
Operational effectiveness is not strategy.
Process
••
••
••
••
Strategy as adaptation of last year’s plan (no searching for new opportunities, differentiation and new growth).
Planning being too formal and analytical.
Little if any creativity.
Validity of assumptions.
Tools
••
••
••
••
Too analytical.
Focus on control.
Developed for a different purpose.
Conventional tools provide a snapshot of conventional wisdom.
The conventional factors can be matched with the adapted Einsteinian variables as shown in
Table 10.1.
Table 10.1 Matching conventional factor sets with Einstein’s variables
Conventional strategic factor set
Key adapted Einsteinian variables
Content
Process
Tools
Market offerings (M)
Speed of commercialisation of innovations (C)
Management expertise and experience (E)
Step 3: basic processes of strategic innovation
Four key stages
The four key stages of the strategic innovation process (Figure 10.5) are:
1
2
3
4
visualising strategy
generating ideas
evaluating ideas
implementation.
VISUALISING STRATEGY
••
••
Communicating the organisation’s vision and strategy for achieving it.
Describing the strategy.
Building a strategic managing innovation model
209
Figure 10.5 Four key stages of the strategic innovation process.
••
Building a common picture and language, metaphors can be particularly powerful
in this regard. Identifying possible areas of innovation; defining the kind of innovation that drives growth and helps meet strategic objectives. When senior executives
ask for substantial innovation in the gathering of consumer insights, the delivery of
services or the customer experience, for example, they communicate to employees
the type of innovation they expect. In the absence of such direction, employees will
come back with incremental and often familiar ideas.
GENERATING IDEAS
••
••
••
••
Generating as many ideas as possible.
Using internal and external sources.
Taking people out of their workplace environment.
Invoking a variety of people and views.
EVALUATING IDEAS
••
••
Applying a structured approach.
Encouraging strategic experimentation.
IMPLEMENTATION
••
••
••
••
••
••
••
Addressing the barriers.
Demonstrating the need for change.
Involvement.
Communication.
Learning and acceptance of possible project failure.
Sense of urgency.
Adding innovation to the formal agenda at regular leadership meetings. This sends an
important signal to employees about the value management attaches to innovation.
Key principles
Step 4: innovation action plan
Strategic innovation is the planned creation of growth strategies, new product categories, services or business models that change the game and generate significant new perceived-value
for consumers, customers and organisations (Birkinshaw et al., 2008).
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Linking creativity to strategic innovation
Strategic innovation is a multi-functional approach that brings together all the creative assets,
capabilities and disciplines of an organisation to produce breakthrough innovative ideas to drive
business growth. In a world that is changing rapidly and in unpredictable ways, strategic innovation becomes vital in order to adapt to change. Strategic innovation is about innovating the
strategy itself. It requires a substantial review of the real situation of the organisation and needs
a willingness on the part of senior executives to sanction and foster a climate which encourages
innovation. This usually involves a change in modus operandi and the provision of sufficient
resources. Strategy involves answers to three basic questions that define a business:
1
2
3
Who are a company’s customers?
What CPV does the organisation provide?
What business model is best suited to the revised corporate mindset?
As such, approaching strategic innovation involves:
••
••
••
••
••
reviewing the business;
reviewing the market;
reviewing the market offering;
re-examining how CPV is created and delivered;
redesigning basic processes of strategic innovation.
Practice
Step 5: reviewing the business
Table 10.2 Reviewing the business
Switch the strategic goal
Challenge industry assumptions
Challenge assets and capabilities
••
••
••
••
••
••
••
••
From beating the competition to being different
Create awareness in the organisation
Look across substitute industries
Look across strategic groups
Look at completely different industries and countries
Blur industry boundaries
Use current assets and skills or start again?
Mobilise hidden assets
Challenging mindsets and paradigms
••
••
••
••
••
••
••
••
What are the main industry assumptions, relating to pricing, customers, products and
services, delivery, etc.?
Does the industry have a product-centric, customer-centric or competency-centric
approach? What would a change in approach entail?
Is the organisation constrained by the current assets and capabilities?
Do your major competitors possess the same or similar assets?
What are the organisation’s unique assets that cannot be easily imitated by competitors?
Do companies without these assets face a cost disadvantage in obtaining them?
Which of the company’s assets or capabilities are obsolete?
Which new assets does the organisation have to acquire to achieve a competitive advantage?
Building a strategic managing innovation model
211
Step 6: reviewing the market
Deciding which customers to target
Table 10.3 Deciding which customers to target
Existing
New
Most profitable
Most satisfied
Focus on differences
Focus on finer segmentation
Focus on attributes – preferred by customers
Less profitable
Less satisfied
Focus on commonalities
Focus on de-segmentation
Focus on circumstances – what is needed to do the job
Challenging mindsets and paradigms
••
••
••
••
••
••
••
••
••
Who are the firm’s current customers?
What are their needs?
Why are they buying the company’s product or service? What jobs are customers trying
to do?
Which customer needs are the company actually meeting?
Are there customer segmentations with similar needs that the company is not serving?
Which customer needs can be serviced best with the company’s unique competencies?
Who is the real final customer?
How can existing assets and capabilities be leveraged?
Discover what customers really want rather than what they say they want.
Step 7: reviewing the market offering
Table 10.4 Reviewing the market offering
Focus on existing assets
Single product or service
Functional appeal
Specific buyers
Focus on market offering
Build in new customer-perceived value features
Start again, or use existing assets in a new way
Total solution, bundling
Emotional and experiential appeal
Chain of buyers
Focus on function to be met and the job to be done
Raise, reduce, create, eliminate selectively
Challenging mindsets and paradigms
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Which of the company’s assets, capabilities and core competencies are truly unique?
Which of these does the customer value?
What are the customer’s needs and wants? What is the job that they are trying to do?
What is the problem that they are trying to solve?
What job can customers not get done?
How can the company build on core competencies to meet these needs more effectively?
Why are non-customers not buying the company’s market offerings?
Does the company welcome customer involvement in co-creation projects?
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What trends are evident? (See Chapter 14.)
How might they change customer’s priorities?
What do companies in similar or different industries or countries offer?
How can the company serve less profitable needs in a profitable way?
What emotions does the company’s market offering evoke?
What alternative technologies might meet customer requirements?
Step 8: creating customer-perceived value
Buyer experience cycle
A new market offering has to appeal to customers by promising a high level of CPV at an
acceptable price that will generate an acceptable return to the company. Market knowledge
can be gathered from regular market research. Attention to the expectations of buyers with
reference to the stages of the buyer experience model (Figure 10.6) will assist company’s
innovation activity. Relatively straightforward incremental innovations should become obvious quickly. Radical or breakthrough innovations usually take longer to emerge.
PURCHASE
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How long does it take to find a market offering?
Is the place of purchase attractive and accessible?
How secure is the buying environment?
How quickly can a purchase be made?
DELIVERY
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How long does delivery take?
How difficult is it to unpack the purchased item?
Figure 10.6 Buyer experience cycle.
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USE
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Is any training or expert assistance required?
Is the purchase item easy to store when not in use?
Does the purchase meet CPV expectations?
SUPPLEMENTS
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Are any other items and/or services needed (e.g. Internet security software to go
with purchase of a new tablet) to gain full utility form the market offering?
How costly are they?
MAINTENANCE
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Does the purchase require regular maintenance?
How easy is it to arrange this?
DISPOSAL
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Does use of the market offering create waste?
How easy is it to dispose of this waste?
The customer-perceived value matrix
Successful innovating companies expand the buyer experience cycle by adding researched
attributes of CPV. Table 10.5, for purpose of illustration, adds five such attribute factors on
the ‘x axis’.
Table 10.5 Customer-perceived value map matrix
Purchase
Delivery
Use
Supplements
Maintenance
Disposal
Customer utility
Customer
convenience
Ease of use
Packaging
Prestige
Environmental
friendliness
The ‘y-axis’ illustrates ways in which companies can deliver CPV attributes. Customer
productivity attribute factors – helping customers do things faster, better or in easier ways.
By placing a new market offering on one of the 36 spaces of the customer-perceived value
map, companies can quickly see if/how the new innovation is positively differentiated
over existing market offerings. Over and above highlighting opportunities for incremental
innovations the CPV map is a valuable means of suggesting potential radical innovations
(Table 10.5).
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CPV map positioning
Starbucks revolutionised the office-workers’ coffee break, traditionally coffee in delis
or fast-food outlets. Competitors offered fast plus cheap coffee – in terms of the CPV
map competitors focused on delivering productivity in the purchasing experience.
Starbucks, however, moved into a new space entirely; by opening chic coffee bars
with an exotic mix of brews, the company injected fun and cachet into the coffee purchasing experience. They innovated in the fun and image attribute CPV factor space.
Same CPV factor at a new buyer decision stage:
Innovation through extending a CPV attribute to different parts of the customers’ buying experience.
Amazon burst into the book retail business by offering a superior delivery service
to that of conventional book shops by shipping purchases directly to customers within
a few hours of registering their orders. In terms of the map this was productivity in the
delivery sector of the CPV map.
New CPV factor at a new buyer stage:
Alto, a disposable fluorescent bulb manufactured by Phillips.
Most bulb manufacturers competed to offer customers more productivity in use;
they did not pay attention to the fact that the bulbs had to be carried off to a special disposal facility because of their harmful mercury content. By creating a bulb that could
be disposed of in an environmentally friendly way Phillips moved into a whole new
CPV space – environmental friendliness in disposal.
Source: Goodman, M. R. V., Durham University.
Step 9: characteristics of strategically innovative organisations
Figure 10.7 shows an organisational structure that supports strategic innovation.
Culture
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••
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Has a questioning attitude.
Rewards success and failure; is critical of inaction.
Tolerates mistakes.
Welcomes change.
Supports risk taking and change.
Supports teamwork and collaborations.
Structure
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Fast and flat.
Small units.
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Figure 10.7 Organisational structure to support strategic innovation.
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Encourages collaboration.
Autonomous teams at front line.
Processes
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Fast and unbureaucratic.
Decentralised decision making.
Support idea generation, experimentation and execution.
Systems
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Support the process of strategic innovation.
Enable collaboration
Reward risk taking and action. Set performance metrics and targets for innovation.
Leaders should think about two types of metrics: the financial (such as the percentage of
total revenue from new market offerings) and the behavioural. What metrics, for example, would have the greatest effect on how people work? Leaders can also set metrics to
change ingrained behavior, such as the ‘not invented here’ syndrome, by requiring 25
per cent of all ideas to come from external sources.
Used to create relationships with customer.
People
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Four types of people drive innovation: inventors, entrepreneurs, extreme individual
achievers in their fields (such as the arts, entertainment, or sports) and super mentors.
Variety (internal and external).
Collaboration.
Educated in regard to strategy and needed skills.
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Action
Step 10: purpose of strategic innovation
The innovation strategy defines the role of innovation and sets the direction for innovation
execution. However, the role of innovation in helping organisations achieve growth targets
is often unclear and the revenue growth from innovation is insufficient, unless managed with
great rigour. Many companies fail to develop and execute an innovation strategy.
It is important to develop a common understanding of the definition of the innovation
strategy’s purpose. Is it about successfully commercialising new ideas, i.e. inventions with
market impact? However, ‘new’ can have different meanings, ranging from new on the world
market to new in one specific industry but already established in another industry, to new to
a company or maybe even just new to some of us. The word ‘strategy’ implies taking action
with a potentially large impact on the company, i.e. does not include simply a series of incremental product line extensions. Based on this understanding, the following are five factors
that make up a sound innovation strategy:
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4
5
It should be inspiring.
It should be ambitious and challenging.
The approach should morph closed and open ideation sources.
It should be within the capabilities of the organisation.
It should be iterative and capable of adaptation over time.
Organisations should:
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Allow time and space for creative thinking.
Encourage and motivate people to pursue ideas.
Use resources to start small-scale experiments. Just do it!
Encourage risk taking.
Challenge old habits and ways of doing things.
Step 11: transformation through strategic innovation
One of the most frequently asked questions is how companies can transform their organisation to become more innovative and create a culture of continuous innovation that enables
strategic renewal. A simple question but a big challenge that touches the fundamentals of
why anyone would want to start a business. Businesses exist because of opportunity and this
is why innovation is a key driver of business success. But what enables successful innovation? How can it be embedded in an innovation culture?
Many executives experience difficulty and disappointment in their ability to stimulate innovation. What explains the gap between the leaders’ aspirations and execution?
Starting to build an organisation in which innovation plays a central role is often far more
frustrating than most executives ever imagine it to be. When people read or hear about
successful companies that pursue one good opportunity after another they admire them
and try to understand how they do it. The Apples and Googles of this world, the Legos
and Virgins all have great stories to share and each is a worthwhile company to study.
But benchmarking, copying or emulating doesn’t guarantee success; on the contrary, it
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often leads to disappointing results. If the ambition is a complete transformation of an
organisation into one where innovation is at the core of what the company does then
there are better ways. Sustaining innovation to create a flow of real market offerings that
deliver CPV is even harder. There are no best-practice solutions to seed and cultivate
innovation. The structures and processes that many leaders reflexively use to encourage
it are necessary but not sufficient. People and corporate culture are the most important
drivers of innovation. A disciplined rather than an ad hoc approach focusing on three
people-management fundamentals has the potential to produce the building blocks of an
innovative organisation.
1
2
3
Executives can formally integrate innovation into the strategic-management agenda
of senior management. In this way, innovation can be encouraged but also managed,
tracked and measured as a core element in a company’s growth aspirations.
Executives can make better use of existing (and often untapped) talent for innovation by
creating the conditions that allow dynamic innovation networks to emerge and flourish.
Executives can take explicit steps to foster an innovation culture based on trust among
employees. In such a culture, people understand that their ideas are valued, trust that it
is safe to express those ideas and oversee risk collectively, together with their managers. Such an environment can be more effective than monetary incentives in sustaining
innovation.
This list of steps is not exhaustive. Still, given the limited time and means – as well as the
short-term performance pressures that executives constantly face – pursuing innovation with
anything other than existing talent and resources often is not an option. These three fundamentals are a practical starting point to improve an organisation’s chances of stimulating and
sustaining innovation where it matters most – among a company’s people.
Step 12: holistic approach to strategic innovation management
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Make innovation a central topic in leadership programmes.
Set aside capital budget for truly innovative projects.
Train creative problem-solving facilitators charged with supporting innovation throughout the company.
Enrol all employees on courses in business innovation.
Install a business ‘innovation room’ in all business units and at company headquarters.
Include innovation as a significant component of employees’ bonus plans.
Schedule time in business review meetings to discuss business unit innovation performance.
Create an innovation pathway to review and fast track the most promising ideas.
Build an innovation portal to give people access to innovation tools and data and assist
them to input their ideas.
Develop a set of metrics to track innovation inputs, throughputs and outputs.
Allow time and space for creative thinking.
Encourage and motivate people to pursue ideas.
Resources should be used to start small-scale experiments. Just do it!
Encourage risk taking.
Challenge old habits and ways of doing things.
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Linking creativity to strategic innovation
Step 13: key issues of intent
There are three key issues of intent that businesses should focus on to address this challenge:
1
2
3
create a clear purpose for the organisation;
use that purpose to make innovation happen from day one; and
take policy steps and commit to sustain strategic innovation processes.
Create purpose
Often companies state their ambition in numbers, e.g. market share, percentage growth, margins, etc. However, the problem with numbers is they very seldom excite most of us unless
we’re discussing world records!
Organisations need a clear vision and purpose (Hamel and Prahalad, 1989) that connect on
a more emotional level, something that is engaging, exciting and provides a compelling reason
and a clear direction to seek opportunity for the business. A purpose should describe what the
company aspires to, an ambition should describe what it wants to achieve. Both should be clearly
linked to opportunity because that is at the heart of why the company is in business. Also the
ambition needs to be stated at the right level. All in management positions should continually ask
does the company have a clear aspiration that stretches the imagination and stimulates innovation.
Innovation has become a core driver of growth, performance and valuation. Executives
see innovation as the most important way for companies to accelerate the pace of change in
today’s global business environment. Leading strategic thinkers are moving beyond a focus
on traditional product and service categories to pioneer innovations in business processes,
distribution, value chains, business models and even the functions of management. Strategy
should be a clear and detailed statement of an organisation’s vision, ambition or future state.
It provides direction and drives the organisation to make clear choices about where they
will compete. This is why strategy and innovation are very closely linked (Pisano, 2015).
Opportunity informs strategy and strategy drives choice on an ongoing basis about which
opportunities to pursue and which to ignore.
Make innovation happen
Opportunity drives innovation whereas processes and organisational development (OD) enable innovation to happen efficiently and repeatedly. It is necessary to design processes, and
develop capability and the right organisational culture to support innovation in the longer
term. But innovation is initially about generating excitement, about realising people’s ideas.
It has the power to mobilise teams to focus on delivering something new and of value to the
business. People generally do not get excited about processes and organisational design.
Starting with that kills any momentum that may have been generated initially.
Instead, focus often tends to be on running innovation challenges that activate and execute
company strategy. These challenges range from what could be termed early stage (broader
opportunity areas that need to be explored) to late stage (specific ideas an organisation wants
to realise), and from management innovation (new ways to organise, lead, coordinate or
motivate) to practical (engaging the wider organisation or even beyond for ideas). So rather
than solely focusing on a ‘breakthrough innovation’ which rarely comes right first time it is
better to start innovating incrementally, building momentum, removing obvious roadblocks
along the way and learn what works best in organisational circumstances. Designing a strategic innovation model should be an iterative process that is encouraged by top management.
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Sustain model development
If top management stress the importance of company strategy and innovation, this will build
core beliefs that will ensure that what has been started is boosted to last and forms the basis of
strategic renewal. Motivating individuals and teams with Innovation Challenges (capability
building: learning by doing) are useful to start to develop and sustain a company’s strategy, build momentum and communicate real results to the business. Innovation Challenges
are highly participative, engaging activities, which enable people to develop capability in
organisations from day one. When teams work on innovation challenges they will learn and
adopt new behaviours through specific tools and techniques and understand the principles
that support them.
Systemic challenges (learning by doing) require systemic solutions and capability building is but one element of that process, which also includes the sponsorship of appropriate
training courses for employees. Other elements include portfolio management, innovation
processes, organisational structures, metrics and leadership development. A committed
policy to developing and sustaining strategic innovation is necessary to embed and scale
innovation across an organisation.
In many organisations the top three ways managers spend time making decisions about
innovation involve determining what types or strategies to focus on, who gets to work on the
resulting projects and how to commercialise the fruits. Few spend time on targets, metrics
and budgets for innovation. That is telling, since executives whose companies do have such
targets and metrics feel the greatest confidence in their decisions.
Final thoughts
There are three essential questions and one challenging acceptance for executives in creating
and implementing an innovation strategy:
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How is innovation expected to create value for customers and for the company?
How can we create a high-level plan for allocating resources to the different kinds of innovation? Ultimately, where a company spends money, time, and effort is their strategy.
How can we manage trade-offs, as every function will naturally want to serve its
own interests? Only senior leaders can make the choices that are best for the whole
company.
Recognise that innovation strategies must evolve. Any strategy represents a hypothesis
that is tested against the unfolding realities of markets, technologies, regulations, and
competitors. Just as product designs must evolve to stay competitive, so too must innovation strategies. Like the process of innovation itself, an innovation strategy involves
continual experimentation, learning and adaptation.
Summary
It is hoped that this text will provide readers with an appreciation of the key principles associated with creativity and strategic innovation management. Just as the opening quote from
Shakespeare’s Henry VIII declares, words are not enough unless followed by action. The
14-step prototype model described in this chapter is intended to act as a stimulus for readers
to walk the talk and to gain practical experience in real time. Interpret the 14-step model in
the light of the key characteristics of proven strategically innovative companies.
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Questions for discussion
1
2
3
4
How do you check the now before addressing the how?
Why does the conventional approach to strategic innovation management so often disappoint?
What is the buyer’s experience cycle and how can it help in the development of strategic
innovation plans?
What are the main characteristics of strategically innovative companies?
Case exercise
Yamaha Motor Company: ‘Revs your Heart’
In October 2015 at the Tokyo Motor Show Hiroyuki Yanagi, President, CEO and
Representative Director of Yamaha Motor Co., Ltd, announced that the company planned to
invest $1.1 billion to accelerate new growth strategies. He aimed to achieve a 2 trillion yen
turnover within three years and an overall operating profit of 10 per cent. This would require
the addition of at least one new business area such as cars, three-wheelers or robots. Currently
the main interests of the company lie in its activities in engines and electric motors, body
engineering in motorcycles and marine vessels, control systems, and manufacturing engineering technology. Innovation in these core areas will drive both incremental and radical
new products and services as the company evolves and develops its technologies. Evolution
is very important to Yamaha, and it is constantly trying to create powerful new combinations
based on these four areas, including power sources and technologies. Such combinations
include motorcycles and engines, motorcycles and electric motors, and three-wheelers in
new frames or new bodies with motorcycle engines.
PAS, the world’s first electrically power-assisted bicycle, is another innovation created by
Yamaha Motor in the early 1990s, when the Japanese market was developing environmental
consciousness. As restrictions and regulations were increasingly surrounding the motorcycle
market, the company’s engineers were motivated to create a new type of mobility combining human and electric power in a solution that does not require licences or helmets. Twenty
years later, almost a half million units are still sold annually in Japan and almost 1 million
units in Europe. It is especially popular in Germany and the Netherlands.
Despite the uncertainties in global markets Yamaha Motor’s sales have been better than
most Japanese companies. In developed markets, this growth can be explained by the yen,
which is much weaker now compared to previous years. About 60 per cent of the company’s
business comes from emerging economies, while 40 per cent comes from advanced economies, similar to most Japanese automobile manufacturers. Yamaha Motor has grown its
market share in both advanced and emerging economies. In the last three years, the company
has gained significant market share in advanced economies, especially the United States and
Europe, largely due to its range of best-selling models in the big motorcycle category.
Production volumes declined a little in 2015 due to the general economic slowdown in
most emerging markets. Production in Asia and mainland China declined almost 10 per cent.
Yet in spite of generally declining production, sales grew in other advanced economies, due
to increased sales of premium motorcycles. In Asia, customers are stepping up to high-end
motorcycles, so that’s why their sales were up even though volume was down.
In the past three years the company has restructured the business by improving products
and reducing costs. In addition, it was successful in motorcycle racing, such as MotoGP.
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The company’s 2015–18 strategic plan assumes that growth in emerging economies will
remain sluggish for the next two to three years, meaning that business in these regions will be
slow. At the same time, advanced markets are expected to remain strong enough to overcome
the emerging markets and enable the company to achieve the same level of global profits as
in its last trading year. By 2018 sales are targeted to reach 2 to 3 trillion yen and deliver at
least a 9 per cent operating profit.
Yamaha is proud to be a ‘Kando’ – or excitement – creating company and it is pursuing a
number of CSR programmes to realise its vision, which is to provide ‘Kando’ to its customers. Although Yamaha Motor and Yamaha Corporation are independent corporate entities,
they are united by ‘one passion’, which is to be unique both in the music and transportation
industries. They share the same brand charter and a common commitment to passion, innovation and quality, and for the creation of Kando.
Kando in Japanese refers to an emotional feeling that people have when they experience
something that exceeds their expectations. If the experience just meets their expectations,
then it doesn’t draw an emotional response. The experience must surpass their expectations
to draw the emotional response of Kando. That is their brand and what it says about Yamaha.
Yamaha Motor’s 2015–18 strategic plan allocates 130 billion yen for new growth strategies. Four themes have been identified for new growth.
1
2
3
4
Personal mobility – through bicycles, motorcycles, scooters, multi-wheelers, recreational vehicles and compact four-wheelers, all featuring the ‘unique style of Yamaha’.
Marine business – Yamaha is the leading brand in the world in the marine market. The
marine business currently accounts for sales of almost 300 billion yen and 20 per cent
operating profit, which is a unique business model.
Solutions business, which includes robotics, surface mounters and unmanned systems,
such as drones.
Foundational technology development.
In the growing personal mobility market the company is now advancing research on compact
four-wheelers and multi-wheelers, such as twin-front-wheel systems. In the marine business,
where Yamaha Motor already has solid market leadership and strong engine know-how, it is
developing more integrated controls for total boat systems, as well as advanced on-board IT
systems to further improve performance and customer experiences.
In the marine business the company plans to expand its operations as a system supplier
offering not only engines but also boat packaging, boat control systems, IT systems, and
marine-life value.
The company’s hallmark motorcycle business only delivers a 6 per cent operating profit
compared to 20 per cent in its marine business. It is a market where there is growing competition from Honda and Suzuki. In Japan, there is a need to continue restructuring the business,
as it is still importing most of its motorcycles and scooters from Taiwan, which leaves it
vulnerable to currency fluctuations. As the Taiwanese currency is linked to the U.S. dollar,
importing items from Taiwan turns out to be very expensive, since the dollar is very strong
and the yen is weak against the dollar. In Europe, there are new emissions regulations, called
Euro 4, which will require additional expenditure on R&D to further upgrade the emissions
performance of products.
Artificial intelligence (AI) and robotics offer considerable growth potential to the large
automobile and motor companies. At the Tokyo Motor Show in 2016 Yamaha presented
the ‘Motobot’ robotics and automated systems it has developed and embedded in its new
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Linking creativity to strategic innovation
products. It is working with Stanford University to develop autonomous motorcycle-riding
robots. The aim is to gain technological expertise and know-how in this field and then apply
this to develop rider-support systems.
Additionally, the company aims to implement more automation within the machineoperation process, which is reflected in the specification of its flagship super sports model.
The new model features ultra-high-performance technology and highly advanced control
systems with its rider-support system. The plan is to introduce this concept and technology
across the full Yamaha range of motorcycles.
Currently the U.S. market represents about 20 to 25 per cent of Yamaha’s global sales.
The United States is a special market for Yamaha Motor. In Europe, 80 per cent of business
comes from motorcycles, but in the United States, business comes from a variety of segments.
The U.S. marine market is the biggest in the world and offers high volume and high sales.
The U.S. motorcycle market also offers high business volume based on large motorcycles.
Recreational vehicles, such as All-Terrain Vehicles (ATVs) and Recreational Off-highway
Vehicles (ROVs), are another substantial market for Yamaha Motor in the United States.
As global competition intensifies it is becoming essential for Yamaha to improve its local
logistics and marketing activity as well as becoming more active in its business social responsibility programmes.
Source: Yamaha Motor Company.
Task
Read the case brief and apply the 14-step strategic innovation management model featured in
this chapter. Make brief notes under each of the 14 step heads and then write a brief report to
Yamaha’s CEO with your recommendations for developing the company’s management of
strategic innovation in the U.S. market.
YouTubes
‘Yamaha Motor Global’, https://www.youtube.com/channel/UCEe7dmonT8QIBwbd2l9gxIA.
‘Yamaha 50th Anniversary’, https://www.youtube.com/watch?v=RvNjf_WNNvo.
References
Birkinshaw, J., Hamel, G. and Mol, M. J. (2008) ‘Management innovation’, Academy of Management
Review, Vol. 33, Issue 4, pp. 825–45.
Davis, S. M. (1987) Future Perfect, Reading, MA, Addison Wesley Longman.
Hamel, G. and Prahalad, C. K. (1989) ‘Strategic intent’, Harvard Business Review, May–June,
Vol. 67, Issue 3. pp. 63–78.
Lorenz, H. A. and Lorentz, H. A. (2012) The Einstein Theory of Relativity, Houston, TX, WLC.
Pisano, G. P. (2015) ‘You need an innovation strategy’, Harvard Business Review, June, pp. 44–54.
Selected YouTubes
‘Strategy Tools for Business Model Innovation’, https://www.youtube.com/watch?v=rNN
2bAV9Qqg.
‘Business Model Innovation’, https://www.youtube.com/watch?v=B4ZSGQW0UMI.
Building a strategic managing innovation model
223
‘A New Approach to Innovation Management’, https://www.youtube.com/watch?v=soe0_
0hSwtE.
‘What Is Innovation Management?’, https://www.youtube.com/watch?v=lxtaDlHZtg4.
‘The Five Myths of Innovation’, https://www.youtube.com/watch?v=a5sbXE77p0I.
‘“Innovative” Companies: Not Walking the Talk’, https://www.youtube.com/watch?v=
FVLxdjVX58s.
‘The DNA of the World’s Most Innovative Companies’, https://www.youtube.com/watch?
v=TtsM9VGNlII.
Part IV
Strategic innovation in
changing times
11 The importance of leadership
A leader is a dealer in hope.
(Napoleon Bonaparte)
I prefer the talents of action . . . to all the speculations of those mere dreamers of another
existence.
(Lord Byron, Letter to Annabella Milbanke)
Learning objectives
This chapter explores:
1
2
3
4
5
6
Avoiding contextual myopia.
Leadership competencies.
Differences between management and leadership.
Main leadership theories.
Assessing leadership skills.
Leadership challenges.
Introduction
Most organisations are challenged by the necessity of dealing with the impact and consequences of the paradigm change in the business environment discussed in Part I. This
generally amounts to recognising and facing up to the need for change and having the resolution to take decisions that break with the modus operandi of the past. Management have
a tendency to regard preserving the status quo as an important part of their mission and in
so doing may wittingly or unwittingly develop an unrealistic view of real-world conditions.
This attitude will result in failure to take the right mix of business decisions and can produce
a state of management confusion and myopia. How do leaders resolve the inevitable tensions
between ethical dilemmas and economic self-interest? How does a leader’s desire for control
balance with the requirement to empower employees (Rickards, 2012)?
It has long been recognised that management tends to be associated in many organisations with the concept of efficiency. Managers are people who do things right according to
the established organisational culture. However, leadership has more to do with the concept
of effectiveness; doing the right thing in the light of real-world conditions. This requires an
adventurous approach that identifies the need to discover a new vision for the organisation,
the determination to communicate this to staff and the collective energy and commitment to
design and energise action that will result in success. The foresight and action necessary is,
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Strategic innovation in changing times
therefore, better encapsulated by the concept of leadership (Adair, 2009). Leadership can
be felt throughout an organisation and gives pace and energy to the work and empowers the
workforce. Empowerment is the collective effect of leadership (Thompson, 2006).
This chapter discusses the important characteristics of leadership and the key tasks it
is called to perform. Practical material (including an audit and a checklist) is included to
encourage readers to think through the practical implications of leadership. It should be noted
that an organisation’s determination and commitment to leadership activity does not render
traditional controlling management activities redundant. Both leadership and conventional
management activity are needed. It is the balance of these responses that underpins a positive
approach to operating an organisation in modern times. (See Figure 11.1.)
One curious student posed the question in a seminar class ‘What exactly is a leader?’
Reduced to basics a leader is someone others choose to follow whether or not they have a
choice in the matter. A leader is characterised by both action and trust (Castaldo et al., 2010).
Such leaders provide action and direction at a time of crisis and are immediately trusted.
Leaders are also people who others with time to think and judge also choose to follow. They
energise groups (Robert et al., 2009). In the UK navy ratings have been heard to quip ‘I’ll
follow the man who is a leader but I won’t follow the bleeder who thinks that he is a leader’.
So if there is time for people to form opinions about a leader, attractive personality traits are
important but not necessarily the basis of success.
Figure 11.1 Exploring leadership.
The importance of leadership 229
Returning to the student’s question, a leader appears to be someone who is recognised either
immediately or over time as a person who enables individuals, groups and organisations to
respond in a beneficial way within the constraints of a given environment. Within the context of an
organisation this implies a sensible alignment between the needs of individuals and groups and the
expressed purpose (vision) of the organisation. Traditionally leaders have often been regarded as
the boss at the top. Today, a fundamental shift is underway in the work of corporate leaders as they
seek to create and sustain employee achievement and high levels of staff morale. It is a shift from a
command and control style to one where the leader creates the conditions under which an ambition
can be achieved (Gill, 2011). Thus the answer to the student’s question posed earlier is: leaders are
people who are able to influence others and in organisations possess managerial authority.
Context
Avoiding contextual myopia
Leaders need to assume responsibility for both successes and failures. According to Beer
et al. (1990) they share three characteristics:
1
2
3
They harbour a strong and persistent belief that facing up to the challenges of the business environment is essential.
They communicate their conviction in the form of a creditable and compelling vision.
They have the skills and organisational know-how to implement their vision.
Key principles
Leadership competencies
Much has been written, both in academic articles and books, about the topic of leadership.
For today’s student of leadership much of this material can appear repetitive. What should
an aspiring business leader read? A useful response to this question might perhaps be what is
most meaningful to them in their operating environment. This reduces the library of material
to that which is grounded in practice. This text has focused on the work of Bennis and Nanus
(1985) who examined the behaviour and characteristics of 90 leaders. They concluded that
they possess four vital competencies:
1
2
3
4
Management of attention – the vision of the leaders commanded the attention and commitment of those who worked for and with them in attempting to achieve it.
Management of meaning – the leaders were skilled communicators, able to cut through
complexity in order to frame issues in simple images and language. They were excellent
distillers of information.
Management of trust – ‘Trust is essential to all organizations.’ For the leaders trust was
expressed through consistency of purpose and in their dealings with colleagues and
others. Even though people sometimes disagreed with what they said or did, the leaders
were admired for their consistency of purpose.
Management of self – the leaders were adept at identifying and fully using their strengths;
and accepting and seeking to develop areas of weakness.
Leadership skills do develop naturally in some and can also be learnt by a manager willing
to make the effort, but they are fundamentally different from management. To survive in
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Strategic innovation in changing times
the twenty-first century a new generation of leaders is needed. When considering leadership
in the business world the temptation is to view it as a battle field (Tzu, 2009). Good leaders
in current times require attitudes and behaviours which both attract and relate to humanity.
The difference between management and leadership
The distinction is an important one. According to Drucker (2001) ‘Management is doing
things right: leadership is doing the right thing.’ Leaders conquer the context (Kotter,
1990) – the volatile, turbulent, ambiguous surroundings that sometimes seem to conspire
against us and will surely suffocate us if we let them – while managers surrender to it. The
fundamental differences between the two are illustrated in Table 11.1.
Leaders, whether good or bad, inspire trust in the people they engage and with whom
they interact. Leadership is about behaviour first and skills second. With this in mind both
Jesus and Colonel Gadaffi were leaders. Good business leaders do not threaten or kill their
employees but rather create operating conditions in which others are encouraged to give
of their best. In this sense leadership is primarily about behaviour that exhibits a positive
regard and is not coercive. It involves management functions but their use is conditioned
by humanitarian concern for their staff. Good business leaders earn the trust of their people
by consistently ensuring that their behavioural attitudes are apparent and do not become
submerged by management processes.
Qualities of a manager
A manager is considered a copy of the leader, responsible for communicating the rules and
philosophies of the company to individual employees and insuring that they abide by them.
For a manager, his or her relationships with employees are determined by a hierarchical management system, and rarely through personal ones. They are responsible for maintaining the
day-to-day operations of the company so the cogs of the operation stay well oiled. Managers
are generally more concerned with the quarterly bottom line, and will often make decisions
based on these calculations. Good managers are often considered ‘good soldiers’ in that they
rarely question the decisions of the higher echelons of the company, and only serve to enforce
the execution of its policies.
Table 11.1 Differences between managers and leaders
Managers
Leaders
Administer
Copy
Maintain
Focus on systems and structure
Rely on control
Inclined to take short-term view
Ask how and when
Eye on the bottom line
Accept the status quo
Classic good soldier
Do things right
Innovate
Originate
Develop
Focus on people
Inspire trust
Inclined to take longer-time view
Ask what and why
Eye on the horizon
Challenge the status quo
Are their own person
Do the right things
The importance of leadership 231
Qualities of a leader
In contrast, a leader focuses on interpersonal relationships with other important contacts in
other companies, as well as promoting promising individuals within the company to foster
innovation. A leader bases his or her decisions on reports from department heads to assess
the entire company’s situation and future strategies. A true leader will also be willing to
ignore the company’s quarterly bottom line for several quarters – much to the chagrin of
shareholders – and make investments for a long-range growth perspective. A leader is considered a ‘fearless innovator’ in that he or she challenges the status quo and is unafraid to
take high risks in search of high rewards, for customers, employees and shareholders alike.
(See Table 11.2.)
The importance of leadership in business life has been recognised for years but it assumes
an especial relevance in modern buyers’ market environments where the worldview held by
leaders needs to be realistic (Jones, 2010). This poses a number of questions such as:
••
••
••
••
••
••
••
••
••
What are the necessary behavioural leadership attitudes/qualities?
Are real leaders born and not made?
Can leadership be learnt?
Is it primarily a matter of behaviour?
Is it largely a matter of contingency?
Is it purely charisma?
Is it visionary?
What are the contemporary leadership issues?
What is the essence of leadership?
Comparison between managers and leaders
It is said that a manager asks ‘how’ and ‘when’, whereas a leader asks ‘what’ and why’.
In many professions, managers and leaders assume the same role. However, if a leader of
a business simply manages a company – rather than challenging its true potential – then it
will likely fall behind its industry peers. Likewise, if managers overstep their bounds and
attempt to revolt against the company, they may soon find themselves out of a job. In some
cases, where micromanagement is essential to maximise efficiency, nurture skills and keep
employees organised, strong managers are an absolute necessity to prevent high turnover
rates and the ‘brain drain’ of a skilled workforce. A good leader will also stay in the front
line of battle, and be familiar with every aspect of the company, leading through inspiration
rather than coercing through hierarchical control. A perfect manager who attains the status
Table 11.2 Leadership attributes
Characteristic
Example
Administrative
Authoritarian
Democratic
Innovative
Inspirational
Moral
Philanthropic
Technical
Civil servants
Military
Ricardo Semler, Semco
Jørgen Vig Knudsstorp, LEGO
Richard Branson, Virgin Group
Religious leader
Strive Masiyiwa, Econet
James Dyson, Dyson
232
Strategic innovation in changing times
of a true leader will be able to lead people effectively and draw on the correct strengths and
knowledge of every key individual in the company. Many managers will struggle for their
entire careers and never attain this, but a skilled few will evolve into true leaders. The following sections address these issues.
Leadership theories I: trait theories
Table 11.3 presents a set of personal qualities commonly believed to be exhibited by good
leaders.
In the early 1940s, often as part of the Second World War effort, theorists tried to
isolate the key characteristics or traits of good leaders. However, isolating important
traits is one thing, observing their success in different situations (contexts) is another.
From the late 1940s through to the mid-1960s theorists turned their attention to studying
behavioural styles.
Presenting a rather different view Board and Fritzon (2005) carried out some psychological research and tested 39 senior managers and CEOs from leading British companies, then
compared the findings with a sample drawn from a prison. Business leaders returned results
that were more alarming than the prisoners, many of whom were diagnosed with psychopathic disorders! The dominant traits they exhibited were:
••
••
••
••
••
••
skill in flattering and manipulating powerful people;
egocentricity;
strong sense of entitlement;
readiness to exploit others;
lack of empathy;
lack of social conscience.
Leadership theories II: behavioural theories
In a new attempt to isolate the essence of leadership, theorists identified common leadership styles. Autocratic leaders tended to centralise all authority, dictate work procedures,
make unilateral decisions, manage by email and limit and/or severely govern employee participation. On the other hand, democratic leaders involved employees in decision making,
delegated authority, encouraged participation in the choice of work methods and goals and
relied on feedback to coach employees. It is, perhaps, best to view these extremes as opposite
ends of a continuum, as many organisations will exhibit a mix of these styles.
In 1984 Blake and Mouton advocated a two dimensional view of leadership that explored
the inter-relationship between a leadership style that exhibited ‘concern for people’ and
Table 11.3 Personal qualities of leaders
Integrity
Confidence
Honesty
Humility
Courage
Commitment
Sincerity
Passion
Positivity
Wisdom
Determination
Compassion
Sensitivity
Creativity
The importance of leadership 233
‘concern for production’. Their ultimate conclusion was that in most cases a team-based
management approach was most effective in all situations.
The quest to fully explain leadership in terms of behaviour has generally significantly
failed to explain on a consistent basis the relationship between patterns of leadership behaviour and successful situational performance.
Leadership theories III: contingency theories
If leadership is seen as a ‘doing’ or responding activity, it was of little surprise that theorists
next began to focus on situational factors. Pinning these down reliably has also proved to be
problematic but four approaches have emerged that can claim to be more reliable than most.
The Fiedler (1967) contingency model focuses on the belief that an individual’s basic leadership style is a key factor in leadership success. To isolate the key determinant leadership
characteristics Fiedler designed a questionnaire (least-preferred co-worker questionnaire)
that was really an extension of the approach taken by trait theorists.
An approach to understanding leadership that has enjoyed a better reputation for consistency is the path-goal theory developed by House (1971). This contingency model asserts
that the leader’s job is to assist individuals to attain their goals by providing the necessary
direction and support. This involves matching the environmental variables with the leader’s
evaluation of the personal characteristics of the individuals under his/her charge.
Hersey and Blanchard (1974) developed a Situational Leadership model that proposed
four leadership styles – telling, selling, participating and delegating. Which style is selected
by the leader depends on the observed capabilities of individuals. As response styles improve
so the leader reduces the degree of control over and involvement with employees.
Evidence to date does not endorse any of these contingency theories as reliable explanations of leadership success. The Hersey and Blanchard model does possess an intuitive
appeal but as with the other theories covered it should be exercised with caution. Larson and
Vinberg (2010) researched the dimension of leadership behaviour theory and its relationship
to effectiveness, productivity, health satisfaction and job satisfaction and concluded that successful leadership behaviour includes both universal and contingency elements.
Fiedler contingency model
According to Fiedler effectiveness and leadership depend on a number of factors,
including the situations and the personal characteristics of the leader. The model identifies three key factors, as follows.
Make-up of the group
It is not just the nature and the atmosphere within the group, but also the relationship
between the leader and the group that determine the leadership style. Fiedler poses that
an interaction takes place when the leader fully trusts his/her employees; they will then
adopt a loyal and cooperative attitude. Vice versa, a leader will trust employees when
they prove themselves in favour of the company. This group dynamic may also have a
negative impact requiring a leader to be authoritarian.
(continued)
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Strategic innovation in changing times
(continued)
Nature of the task
The leadership style of the leader depends on the nature of the task. Clear tasks that
employees can perform routinely require less supervision than tasks that have to be
adjusted and explained time and again.
Power of the leader
The formal power of the leader is determined by hierarchical position on the one hand
and by knowledge and competencies on the other. However, the personal authority
resulting from personal confidence and employees’ trust will be decisive for effective
leadership performance.
Given that personality (task-orientation and people-orientation) is reasonably stable, the Fiedler contingency model suggests that the situation should be adapted to such
an extent that it suits the leader. The Fiedler contingency model refers to this as job
engineering. Furthermore, training of groups is seen as a method to improve the nature
of the relationship within the group.
Source: Fiedler, F. (1964); Van Vilet, V. (2013), Fiedler Contingency Model, http://www.
toolshero.com/leadership/fiedler-contingency-model (accessed 15 August 2016).
Leadership theories IV: emerging theories
Theorising is one thing but successful application is another. To answer the question of
what works in the real world three emerging approaches – charismatic leadership, visionary leadership and transactional versus transformational leadership – have assumed
increasing interest.
Charismatic leaders
Charismatic leaders are self-assured, possess a clear vision of the future, are articulate, are
skilled communicators (Michaelis et al., 2009; De Vries et al., 2010) and have a strong
belief in their vision. They are prepared, if necessary, to adopt unconventional actions.
They challenge the status quo. They are sensitive to the environment. They are prepared to
think outside the box and to pursue business creativity and strategic innovation approaches.
The leader’s job is not to be the source of ideas but to encourage and champion ideas.
Leaders must tap the imagination of employees at all ranks and ask inspiring questions.
They also need to help their organisations incorporate diverse perspectives, which spur
creative insights and facilitate creative collaboration by, for instance, harnessing new technologies (Amabile and Khaire, 2008). Advocates of charismatic leadership have argued
that the leader–follower value congruence plays a central role in the development of charismatic relationships; however, few studies have tested this proposition. Hayibor et al.
(2011) found strong support for the hypothesis that perceived value congruence between
leaders (CEOs) and their followers (members of their top management teams) is positively
related to follower perceptions of the degree of charisma and liking possessed by the leader
(Rowold and Borgmann, 2014).
The importance of leadership 235
Leadership characteristics
Visionary leaders
Visionary leaders possess exceptionally clear communication skills (Thomas, 2009; Zeffane
et al., 2011) and can explain in clear terms both the rationale for a vision and what the required
actions are to manifest it both to their own staff and to all relevant third-party interests.
Transactional leaders
Transactional leaders communicate their vision clearly and develop a working environment
that assists employees to motivate themselves in order to realise the vision. They also clarify
the roles and tasks that are required to do so. Transformational leaders convince followers
that it makes sense and is in their own best interests to work in support of the organisational
change plan (Hoffman et al., 2011). This generally secures a firmer ‘buy-in’ and thus higher
quality team performance.
Contemporary leadership thinking
As most team-sports players will confirm, good leaders gain in recognition and popularity if
they are sensitive to team development issues. They tune in to the aspirations and tensions
evident in teams and fine-tune their leadership skills accordingly. They represent their team
to other interested third parties, act as trouble-shooters, resolve conflicts and act as coaches.
Captaining or leading a team is a demanding occupation and calls for a high level of emotional
intelligence. This involves mastering the key components of emotional intelligence –
self-awareness, self-management, self-motivation, empathy and well-honed social skills.
In troublesome times leaders should be willing to be seen and to guide their people. However,
when the going gets tough many display a lack of coverage to wrestle with real issues. They distance themselves from disturbing events, blame others and are frozen by indecision. As Winston
Churchill is accredited as declaring in the dark days of the Second World War, ‘Courage is what
it takes to stand up and speak; courage is also what it takes to sit down and listen.’
Courageous leadership
A courageous leader reads reality (context); thinks through the principles needed to respond
effectively (practice) and is prepared to do something (action). Whilst many are affected by
rising workplace stress and keep their head down to survive, courageous leaders are prepared
to challenge the way things are done. The vignette below summarises the leading traits of
courageous leaders (Reardon, 2007; Hybels, 2012).
Key traits of courageous leaders
Courageous leaders:
1
2
meet reality and address the truth of the situation and are prepared to communicate
bad news;
are prepared to say what needs to be said and challenge comfort zones and fears;
(continued)
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Strategic innovation in changing times
(continued)
3
4
5
6
consult key employees and seek appropriate responses to meet situational threats
and performance issues;
resist analysis paralysis and mindsets designed to protect the status quo and envision a better way forward;
take responsibility and act;
trust in team-working and suspend any temptation to take all the credit for successful interventions.
Leadership and management: are they mutually exclusive?
Any organisation or business needs people who are good at both leadership and management
if they are going to succeed. With good management and poor leadership they will be able to
execute everything very well, but will be doing so without a consistent direction and overall
strategy. With good leadership and poor management a company will have the goals and
inspiration succeed, but no one to execute the plan on how to get there.
Emphasis needs to be placed equally on both areas if an organisation wants to thrive. The
trouble in many organisations is that many executives feel it is good to have control. They
become addicted to power – and that is what can kill companies. Good leaders habitually talk
of ‘we’ rather than ‘I’.
Good leaders and good managers are not often the same person; the few people that excel
at both tend to be overwhelmingly successful in achieving their goals. Management and
leadership skills are in some ways at opposite extremes: short vs. long term, big picture vs.
detail oriented, etc. It can be very difficult to excel at both. Often organisations that succeed
have a mix of individuals, some who excel at leadership and some who excel at management.
While it’s good for anyone to clearly understand whether they excel at management or
leadership, being aware of the characteristics of both is important. Just knowing what it
takes to be a good leader can make someone more aware of his or her self even if they know
they tend to be an excellent manager. Understanding the differences between leadership and
management can ensure a person sees where they can improve and what else they should be
thinking about, and not assume they are excellent at both. Ultimately this can make both a
better leader and a better manager.
Practice
Assessing individual leadership skills audit
Captaining or leading a team is a demanding occupation and calls for a high level of emotional
intelligence. This involves mastering the key components of emotional intelligence – selfawareness, self-management, self-motivation, empathy and well-honed social skills.
Assessing individual leadership skills audit interpretation
When you have completed the audit in Table 11.4 add up your scores and refer to
Appendix 11.1.
Table 11.4 Leadership skills status audit
Statement
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Total
I ignore employees’ small mistakes and
focus on more important matters.
I can take criticism without losing my
temper
I am relaxed and calm at work and in the
company of others
I am a confident person
I am careful not to let personal relationships
prejudice professional ones
I am forward in praising my team when
they do well
I am seen to be fair in my evaluation of
matters and situations
I convey confidence to my team
I am approachable and a good listener
I am concerned to hear about and help with
individuals’ problems
I am respectful of the views and opinions of
people both below and above my level
in the organisation
I am regarded by my team as someone who
can create the conditions for high levels
of group and personal motivation
I take care to delegate authority
I demonstrate impartiality in respect of
colour, religion, nationality or gender
I ‘roll-up’ my sleeves and help out my team
I choose between speed and perfection
when necessary
I distinguish between what is urgent and
what is important
I demonstrate that I am a creative person
who is willing and able to think ‘outside
the box’
I encourage all staff to be creative and
innovative and welcome their ideas
I take care to see that my staff receive
appropriate training
I am a confident and effective
representative of my organisation to
insiders and outsiders
I generate high levels of trust in my team
and with outsiders
I keep an ‘open door’ and listen to my
staff and others whilst being careful to
distinguish between what is urgent and
what can be seen to later
I keep my promises with my team and
others, e.g. to give my time to helping
with non-urgent matters
Never
Occasionally Frequently Always
(score 1) (score 2)
(score 3)
(score 4)
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Strategic innovation in changing times
Action
Seizing the initiative
Good leaders seize the initiative and by their example create the conditions in which individuals and groups motivate themselves. They possess know-when and know-how. They make
decisions with due regard to context, time, task and their followers. They are action-oriented
individuals. Increasingly, management and leadership are seen as being inextricably linked.
It is one thing for a leader to advance a grand vision: but this is redundant unless the vision
is managed into real achievement. Inspiration leaders according to DeVries et al. (2010) go
beyond narrow definitions. They have an ability to excite people in their organisations.
Leadership challenges
The development and maintenance of leadership skills should assume great importance if
organisational CEOs and managers are to meet the contextual changes and disturbances evident in the business environment successfully. Essentially, existing and potential leaders
need to be able to meet the following challenges:
••
Individual challenges:
{{
{{
{{
{{
••
Group challenges:
{{
{{
{{
••
balancing the concepts of effectiveness and efficiency;
learning from others;
gaining experience;
preparing to lead.
forming a team;
delegating tasks;
communicating clearly.
Organisational challenges:
{{
{{
{{
{{
the importance of establishing a realistic vision;
the changing role of organisational leadership;
corporate leaders deliver more than just financial returns; they also build enduring
institutions by balancing public interest with financial returns (Kanter, 2011);
CEOs must expand their investments to include employee empowerment, valuesbased leadership and related societal actions.
Leadership and innovation
Leaders have a mindset that enables them to cope with the challenges that the business environment presents. They take tactical decisions and rally their troops to deal with short-term
problems that upset the smooth daily running of their businesses activities. Gifted leaders
also possess the ability to detect trends that will challenge their organisations. Most identify
innovation as being of paramount importance to secure their business future in the light of
accelerated change in today’s global business environment. Whilst some identify leaders as
gifted tacticians, the best are also skilful strategists and realise that to successfully make a
difference requires a disciplined strategic approach to managing innovation.
The importance of leadership 239
Whilst incremental innovation usually results as organisations shape their businesses in
the light of market experience, radical innovation requires a strategic approach. This necessitates the adoption of a holistic attitude to pioneering innovation in business processes,
distribution, value chains, business models and even, as this text argues, in the functions of
management. Senior executives need to display a collective leadership that creates a climate
that actively encourages the development of internal and external networks to emerge and
flourish. In addition, they can take explicit steps to foster an innovation culture based on trust
among employees. Employees need to understand that their ideas are valued, trust that it is
safe to express them, and oversee risk collectively, together with their managers. In short a
Theory WB culture as described in Chapter 13.
The changing role of leadership
The leader’s role has changed and become more complex and, arguably, even more critical
to an organisation’s success. Leaders must:
1
2
3
4
5
6
ensure that high performance-levels are achieved and sustained;
handle complexity and ambiguity;
enjoy leading the change process;
ensure that the organisation and its processes are constantly developed to deliver the
strategy and required performance;
constantly act in the belief that, in leadership, trust between superiors and subordinates
plays a quintessential role – see Kovač and Jesenko’s (2010) article on the results of their
empirical research completed in Slovenia.
an important trend since the 1990s is the increasing belief that leadership is a shared process, rather than an individual skill set, that is spread through networks of people (Pearce
and Sims, 2006; Wang et al., 2014).
These are highly demanding tasks and skills. Developing leaders with the capacity to learn,
adapt, coach, support and inspire others is a critical challenge for major companies. Meeting
the challenge requires commitment, investment and creativity.
Ricardo Semler
Ricardo Semler is the CEO and majority owner of Semco Partners, a Brazilian company
that is known for its achievements in changing a traditional family Theory X management approach to a vibrant industrial democracy that champions employee well-being.
Semco employs over 3,000 and under Semler has evolved a corporate model that is
founded on democratic employee leadership. He believes that the key to management
is to get rid of managers. The key to getting work done on time is to stop wearing a
watch and the best way to invest corporate profits is to give them to the employees. The
purpose of work is not to make money. The purpose of work is to make the workers,
whether rank and file or top executives, feel good about life.
Source: Semler, R. (1994) Maverick, New York, NY, Random House.
240
Strategic innovation in changing times
In a business world that presents organisations with multi-faceted and emerging challenges that require complex and innovative solutions there is a growing need for a
collective leadership environment. This may sound obvious but it is an important determinant for success or failure and calls for top management’s holistic commitment to
encourage the growth of multi-level leadership. The concept of collective leadership will
take time to morph. It will need to live side-by-side with the current individual leadership paradigm for a while but the need for it and the power in it will become clearer
and more compelling. Wise (individual) leaders will do well right now to encourage the
foundational processes that will assure their organisations are prepared to thrive as collectively led entities.
Summary
In the light of the challenges facing many organisations’ operating environments it is essential for those in positions of authority to practice real leadership skills. This chapter has
presented much for leaders to think about as, hopefully, they seek to hone their skills.
A Poor Leader fails to engage convincingly with people and performs ineffectively. A
Command Leader achieves an effective performance but largely on the basis of vested
authority; a person to be obeyed but not one who engages with people. The best ‘leaders’
(Inspirational Leaders) are those who are readily acknowledged and trusted by their followers. Lastly, leaders who are seen to be high on engagement but low on effectiveness (Social
Animals) are often characterised by being essentially ‘all talk and little do’.
Ideal leaders consistently communicate well with their staff (engagement); display sound
contextual vision; harness professional skills to get the job done (effectiveness) and are generally highly rated by their staff.
Changing times call for changing responses. Whilst sound management practices
(see Chapter 3) are clearly required so too are strong leadership practices. Too much
management (especially when it becomes micromanagement) and the desire for control
that this often implies is dangerous and can be fatal in times of discontinuous change,
when organisations are confronted and challenged by a new and sometimes hostile
environment. In such conditions creative responses, rather than academic or rule-based
approaches, are required. Sound leaders can deal with the unexpected, hold people
together, stand firm in times of trial and display an acute awareness of real-world contextual reality.
Discussion questions
1
2
3
4
5
6
What key competences define a leader?
How do leaders differ from managers?
Some believe that certain individuals are born leaders and that others can never be seen
as leaders. How would you argue against this assertion?
Leadership is about action in response to contextual challenges and involves others.
How do you rate as a leader in the light of the audit in this chapter? How might you
increase your leadership skills?
How would you define trust and why is it so important for leaders to command?
The importance of leadership 241
7
8
Name an example of a Poor Leader, a Command Leader, an Inspirational Leader and a
Social Animal that you remember meeting.
Can creativity and innovation be managed or should it be a multi-level leadership
function? Discuss.
Case exercise
African leaders: perspectives on leadership
Africa’s economic growth remained resilient in 2015. Real gross domestic product (GDP)
grew by an average of 3.6 per cent, higher than the global average growth of 3.1 per cent
and more than double that of the euro area. At this growth rate, Africa remained the second
fastest growing economy in the world (after emerging Asia), and several African countries were among the world’s fastest growing countries. The OECD forecast that Africa’s
economic growth would gradually pick up during 2016–17, predicated on expanding SME
activity and on a recovery in the world economy and a gradual rise in commodity prices.
African businesses, large and small, can learn from viewing the careers of top business
leaders in the region.
Study the profile briefs on Manu Chadarin, Brian Joffe, Naushed Merlai and Onsi Sawiris,
and respond to the questions posed at the end of the piece.
Manu Chandaria, Chairman, Comcraft Group
(nationality: Kenyan)
East Africa’s most venerable business leader is chairman of the Comcraft Group, a $2 billion
industrial behemoth that produces steel, plastics and aluminium products from manufacturing facilities in 45 countries – 16 of which are in Africa. Total workforce: over 40,000
people. He has been hailed as one of Kenya’s leading industrialists and Kenya’s biggest philanthropist. His Chandaria Foundation is active in over seven countries, and has given away
millions to causes in education, health and the arts.
Brian Joffe, CEO, Bidvest Group (nationality: South African)
Joffe is the founder and successful CEO of Bidvest a large South African conglomerate that
contains over 300 companies and 117,000 employees. He has an eye for discerning where
money can be made and is a forceful negotiator. His early career saw him acquire a 50 per
cent share in a pet food business for R49,000, buying out his partner after a year, expanding
the business and then selling the company for $1 million. After a four-year sojourn in the
United States he returned to South Africa in 1982. Having sounded out the business scene
and wheeled and dealed for six years he formed the Bidvest Group in 1988 building it into a
highly diversified group. He developed a decentralised company enabling business units to
manage their own affairs.
Though a big wholesale and distribution group operating in the areas of commercial
and industrial products, electrical products, financial services, freight management, office
and print solutions, outsourced hard and soft services, and automotive retailing the business is run with the determination and commitment evident in a small business enterprise.
242
Strategic innovation in changing times
The company believes in a philosophy of empowering people, building relationships and
improving lives. Entrepreneurship, incentivisation, decentralised management and communication are the keys to the company’s success. The organisation believes and practices
transparency, accountability, integrity, excellence and innovation in all business dealings.
Skilled in the business of acquisitions the Bidvest Group turns ordinary companies into
extraordinary performers, delivering strong and consistent shareholder returns in the process. In April 2016 the company reported a trading profit of R5.1 billion up 11.8 per cent
on the previous year. The secret of Joffre’s success as a business leader is reckoned to be
his vision and his ability to identify opportunities that others fail to see.
Naushad Merali, Chairman, Sameer Group (nationality: Kenyan)
In 2000, the Kenyan-Asian tycoon partnered with French media giant Vivendi to found
Kencell, a Kenyan mobile phone service provider, which he later sold off to Celtel and Bharti
Airtel. He still owns 5 per cent of Bharti Airtel’s operations in Kenya, and serves as chairman
of the board. But the bulk of his power and fortune comes from his ownership of one of East
Africa’s largest conglomerates – the $2 billion (annual turnover) Sameer Group, which owns
some of the most prominent companies in Kenya’s financial services, construction, agriculture, energy and ICT sectors. Merali is chairman of the group.
Merali is a firm believer in team working and the empowerment of employees, and
supports training programmes to build their careers. In his companies he is a committed philanthropist and his Zarina and Naushad Merali Foundation supports hospitals
and needy schools. Merali has been quoted as saying that ‘nothing is impossible if you
believe in it’ and that ‘TEA – Trust, Efficiency, Attitude in a nutshell summarise success
of every business’.
Onsi Sawiris, Founder, Orascom Group (nationality: Egyptian)
Sawiris is the patriarch of Egypt’s wealthiest family and founder of Orascom Construction
Industries. In 1971, the Egyptian government nationalised Onsi Sawiris’ first construction
business. Undeterred, he went on to build Orascom Construction Industries, the flagship
company of the Orascom Group that has interests in telecoms, infrastructure, hotels and tourism. His three sons – Naguib, Samih and Nassef – run all the companies.
Sawiris’s success has resulted from his vision to invest in the future, and to spot an opportunity and seize it. He was the first to spot the potential of the arrival of the telecommunications
business in Africa. Determined to play a part in boosting Egypt’s future competitiveness he
established the Onsi Sawiris Scholarship Programme that fully supports Egyptian students
studying in top U.S. universities. He also has a heart for people and supports several causes
including one that involves the purchase of a Greek island where he wants to build accommodation and a future for migrants and refugees.
Questions
1
2
Evaluate these top business leaders in the light of Tables 11.1 and 11.2.
What can be learned from their careers and how do they meet the leadership challenges
and perceptions featured in this chapter?
The importance of leadership 243
3
4
Explain how the acronym TEA provides a useful business leadership lesson.
What do the leaders have in common?
Sources: OECD African Economic Outlook report 2016; Forbes profiles, 2014–16; The
World Folio (2016), 16 July.
YouTubes
‘ALD Interview with Manu Chandaria’, https://www.youtube.com/watch?v=sA0ASUh
LTcE.
‘Brian Joffe: CEO of the Bidvest Group’, https://www.youtube.com/watch?v= rp6F_
ddLLvI.
‘Behind the Scenes with Naushad Merali’, https://www.youtube.com/watch?v=185yw-r08Y.
‘The Quiet Millionaire’, https://www.youtube.com/watch?v=eWSvmpnNsAM.
References
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Books.
Amabile, T. M. and Khaire, M. (2008) ‘Creativity and the role of the leader’, Harvard Business Review,
October, Vol. 86, Issue 10, pp. 100–9.
Beer, M., Eisenstat, R. A. and Spector, B. (1990) The Critical Path to Corporate Renewal, Boston, MA,
Harvard Business Publishing.
Bennis, W. and Nanus, B. (1985) Leaders: The Strategies for Taking Charge, New York, NY, Harper
Row.
Blake, R. R. and Mouton, J. S. (1984) The Managerial Grid, Houston, TX, Gulf Publishing.
Board, B. and Fritzon, K. (2005) ‘Disordered personalities at work’, Psychology, Crime and Law,
Vol. 11, pp. 17–32.
Castaldo, S., Premazzi, K. and Zerbini, F. (2010) ‘The meaning(s) of trust: A content analysis of
the diverse conceptualizations of trust in scholarly research in business relationships’, Journal of
Business Ethics, November, Vol. 96, Issue 4, pp. 657–68.
De Vries, R. F., Bakker-Pieper, A. and Oostenveld, W. (2010) ‘Leadership = communication? The
relations of leaders’ communication styles with leadership styles, knowledge sharing and leadership
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Drucker, P. F. (2001) The Essential Drucker, Oxford, Butterworth Heinemann.
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Gill, R. (2011) Theory and Practice of Leadership, 2nd edn, London, Sage.
Hayibor, S., Agle, B., Sears, G., Sonnenfeld, J. and Ward, A. (2011) ‘Congruence and charismatic
leadership in CEO–top manager relationships: An empirical investigation’, Journal of Business
Ethics, August, Vol. 102, Issue 2, pp. 237–54.
Hersey, P. and Blanchard, K. H. (1974) ‘So you want to know your leadership style’, Training and
Development Journal, February, pp. 1–15.
Hoffman, B. J., Bynum, B. H., Piccolo, R. F. and Sutton, A.W. (2011) ‘Person–organisational value
congruence: How transformational leaders Influence work group effectiveness’, Academy of
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244
Strategic innovation in changing times
House, R. H. (1971) ‘A path goal theory of leader effectiveness’, Administrative Science Quarterly,
September, pp. 321–38.
Hybels, B. (2012) Courageous Leadership, Grand Rapids, MI, Zondervan.
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Kovač, J. and Jesenko, M. (2010) ‘The connection between trust and leadership styles in Slovene
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Selected YouTubes
‘The Key Challenges of a Global Manager’, https://www.youtube.com/watch?v=Q4yJ_
Xb25GU.
‘People Management Skills: 7 Leadership Competencies’, https://www.youtube.com/
watch?v=KBivHOWlAeo.
‘John Maxwell The 5 Levels of Leadership’, https://www.youtube.com/watch?v=aPwXeg
8ThWI.
‘Management and Leadership: Is There a Difference?’, https://www.youtube.com/watch?
v=RcBzlBFIkfA.
‘The Rarest Commodity Is Leadership without Ego’, https://www.youtube.com/watch?v=
UQrPVmcgJJk.
The importance of leadership 245
‘Ten Theories of Leadership in Five Minutes’, https://www.youtube.com/watch?v=XKUPD
UDOBVo&list=PL8iJtmN_DqqdUTtT1GOsG8rXovLbOzF7l.
‘If You Don’t Understand People You Don’t Understand Business’, https://www.youtube.
com/watch?v=XKUPDUDOBVo&list=PL8iJtmN_DqqdUTtT1GOsG8rXovLbOzF7l.
Appendix 11.1: assessing individual leadership skills audit interpretation
Score
Interpretation
32–50
Your leadership skills are weak and you have probably lost the respect and trust of your
team and other work colleagues. Review the individual statement scores and study this
chapter to stimulate your thinking as to how you could improve your overall rating
You are performing reasonably well but there is scope for improvement. Study the
statement scores where you recorded a 1 or 2 and think about how you can improve
your performance
You are a first-class leader; now seek to improve your overall audit score
51–75
7 –100
12 Business social responsibility
Business is part of society, not outside it.
(Niall Fitzgerald, former CEO of Unilever)
It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our
responsibilities.
(J. C. Stamp, Economist)
Learning objectives
This chapter explores:
1
2
3
4
5
6
7
8
The importance and leading issues of business social responsibility.
Defining and addressing key business ethics issues.
Defining and addressing key corporate social responsibility issues.
The importance of the concept of well-being.
Exploring the triple bottom line.
Practical business social responsibility.
Global recognition of business social responsibility.
Organisational approaches to business social responsibility.
Introduction
This chapter is about business social responsibility (BSR), which we define as being an
integrated management activity that incorporates business ethics and corporate social responsibility (CSR). (See Figure 12.1.)
Context
Business socialisation
Revival
The Millennium Survey covered 25,000 people in 23 countries and six continents. It found
that the public responsibilities of businesses should increase and was more important in the
Business social responsibility 247
Figure 12.1 Exploring business social responsibility.
opinion weighting factors than corporate branding or financial performance. It was seen as
an expanding discipline that covered charity and community donations, and labour practices,
business ethics and environmental issues.
Social concern about the responsibility of business is increasing under pressure from the
interest of mainstream organisations and social networking. Charities and NGOs are increasingly turning their attention to business ethics and CSR publicity.
248
Strategic innovation in changing times
Leading issues
BSR addresses important issues concerning human rights, work place standards and environment
concerns.
Human rights
UN Declaration of Human Rights Principles
In 1948 the Universal Declaration of Human Rights (UDR) was adopted by the United
Nations. At present there are over 460 translations, which are available in HTML
or PDF format. A summary prepared by the People’s Movement for Human Rights
Learning cites 30 articles and clearly states that:
••
••
••
••
Human rights are universal, indivisible, interconnected and interrelated.
They are with equality and without discrimination for all women and men, youth
and children.
Democracy must be a delivery system of human rights.
All must know, own, organise, plan and act guided by human rights as a way of
life.
The UDR is a statement of a moral code for all those who influence the lives of
others. Since 1948 numerous wars have been fought between nations in the sad history
of human conflict. MNCs often appear to be guided by a military approach to their
business despite the trend away in the developed world from Theory X to Theory Y and
Theory Z modus operandi. The developing world in many cases falls short of meeting
the UDR standards and as a result people are exploited. All too often this is overlooked
by Western organisations as they chase cheap supply sources.
Source: http://www.etc-graz.at/typo3/fileadmin/user_upload/ETC-Hauptseite/Menschenrechte_
lernen/POOL/UDHR_Short_version.pdf (accessed 7 July 2016).
Corporations can have enormously detrimental effects on the environment. Oil spills
are some of the most conspicuous examples, but industries as varied as chemical manufacturing, mining, agriculture and fishing can do permanent damage to local ecosystems.
Climate change can also be attributed in large part to corporations. While their responsibility
is hard to untangle from that of the consumers who demand electricity and transportation, it
is difficult to deny that many corporations have profited from the deterioration of the global
environment.
In many cases, harm to the environment and harm to vulnerable communities go hand in
hand: indigenous groups in the Amazon rainforest, for example, have been decimated and
even wiped out, both intentionally and unintentionally, in order to make room for logging,
cattle ranching, gold mining, oil and gas drilling, and hydroelectric power generation.
In light of this often dark legacy, some areas of corporate culture have begun to embrace a
philosophy that balances the pursuit of profit with a commitment to ethical conduct. Google’s
slogan sums up the idea of CSR nicely: ‘Don‘t be evil.’
Business social responsibility 249
Key principles
Definition of business social responsibility
This texts defines BSR as being an interactive mix of business ethics and CSR.
Business ethics
Business ethics is the study of proper business policies and practices regarding potentially
controversial issues, such as corporate governance, insider trading, bribery, discrimination,
CSR and fiduciary responsibilities. Most businesses seek to balance the need to serve people
and planet on one side, and achieve shareholder satisfaction on the other. But is trading off
profits against ethics an outmoded approach incapable of solving the big problems of climate
change, population growth, resource depletion, etc., which is a short-term fix at best? How
can businesses contend with the pressures of the short term while being part of a necessary
transformation in the long term?
Building on this a high set of ethics in the conduct of business provides benefits to everyone. Ethics are not only a guide to making decisions, but also the criteria on which the public
judge organisations. In business, this is critical, because how people view a business is the
basis of building trust.
Value of high ethical standards
Personal ethics form as individuals are influenced by the people and the environment that surround them. There are ethical views that apply to people all around the world, while others are
more personal, and apply only to individuals and businesses (Cavalieri, 2007). Over time, your
ethical views can change as you’re exposed to different situations and environments. In a business, ethics have very positive benefits. The reasons for having high ethical standards include:
••
••
••
••
••
a higher morale within your employees and the organisation;
it helps to attract new customers;
it builds higher customer loyalty;
it reduces the risk of negative press or backlash caused by doing ‘the wrong’ things;
it helps to make a positive impact on the community.
If you want to run a sustainable business, having a high set of ethics is critical, and there
can be serious consequences if poor ethical decisions are made. Regardless of whether you
believe good business ethics contribute to profits or not, poor ethics will have a major impact
on your bottom line. Without standards you have misinformed, misguided and bad decisions
being made, which can cause financial loss or injury to other people, or the business. Many
legal cases are raised because of people seeking compensation for their losses as a result of
business people making unethical decisions.
Pachamama Alliance
Pachamama Alliance is an organisation that seeks to instil social responsibility in the
industrialised or ‘modern’ world. Our partnership between the indigenous Ecuadorian
tribe, the Achuar, began when they recognised the imminent threat of oil drilling in
(continued)
250
Strategic innovation in changing times
(continued)
their home. This tribe, hidden deep in the Amazon forest, has inhabited this area for
thousands of years and is at risk of total destruction.
The goal of the Pachamama Alliance is to restore a sense of active decision making to the people and companies of the modern world. Currently, the Achuar and
their home are in danger because of our addiction to crude oil. This addiction is
the result of a faulty system of beliefs that disregards the environment, its inhabitants, and the consequences of our actions. A change in this universal mentality is
imperative if the Achuar are to survive this threat; in order to do so pandemic social
responsibility is essential.
Source: http://www.pachamama.org/social-justice/social-responsibility-and-ethics (accessed 2
July 2016).
Corporate social responsibility
CSR refers to a company’s activities to assess and take responsibility for its effects on environmental and social well-being. The term generally applies to efforts that go beyond what
may be required by regulators or environmental protection groups. CSR may also be referred
to as ‘corporate citizenship’ and can involve incurring short-term costs that do not provide an
immediate financial benefit to the company, but instead promote positive social and environmental change. Bowen (2013) defines it as ‘obligations . . . to pursue those policies, to make
decisions, or follow those actions which are desirable in terms of the objectives and values of
society’. Moon (2008) defines it as ‘policies and practices of corporations that reflect business responsibility for some of the wider social good’.
Carroll’s pyramid
The concept of the CSR Pyramid, proposed by Carroll (1999), divides business obligations
into four levels, explaining requirements of obligations in each level, as well as their importance (Figure 12.2).
••
••
••
••
Economic responsibility is considered to be a core responsibility of a business and relates
to profit maximisation. Economic responsibility is mainly self-regulatory in a way that if
a business entity neglects or fails to meet its economic responsibilities it is just a matter
of time before the business fails.
Legal responsibility relates to adhering to rules and regulations of the respective government. Meeting legal responsibilities is critically important for businesses.
Ethical responsibilities for a business entity relate to certain commitments that go beyond
basic economic and legal requirements for a business entity. Ethical responsibilities are
usually expected by organisational stakeholders, but typically there are few, if any, government laws and regulations to enforce these responsibilities. However, each case is different
and there might be instances where governments may interfere in relation to ethical issues.
Philanthropic responsibility is understandably placed at the highest level of responsibilities because it is not generally expected and mainly initiated for advertisement and public
relations purposes. Philanthropic acts engaged in by businesses may include sizable donations to various causes or local communities, or contributing to society in other ways.
Business social responsibility 251
Figure 12.2 Carroll’s Pyramid.
Although Carroll’s CSR Pyramid is widely considered to be a substantial contribution to
the development of the field of CSR, it has been criticised by various authors. Hockerts
et al. (2008) criticise this framework by arguing that there is no need to represent CSR as a
hierarchy. In other words, according to Hockerts et al. (2008), unlike Maslow’s Hierarchy of
Needs, in Carroll’s CSR Pyramid there are weak or no relationships between CSR activities
involved in each level.
Generating and sharing social value
Businesses have been criticised as a major cause of social, environmental and economic
problems. Companies are widely thought to be prospering at the expense of their communities. Companies could bring business and society back together if they redefined their
purpose to create and share social value – generating economic value in a way that also
produces value for society by addressing its challenges. A shared value approach would
reconnects company success with social progress (Porter and Kramer, 2011).
Well-being
According to the New Economics Foundation (NEF) a successful society is one where
business activity delivers high levels of sustainable well-being for all its citizens. NEF has
been researching well-being – how people experience their lives and flourish – for over a
decade. Well-being plays a central role in creating flourishing societies. Focussing on wellbeing at work can benefit societies by helping working individuals to feel happy, competent
and satisfied in their roles. The evidence shows that people who achieve good standards of
well-being at work are likely to be more creative, more loyal, more productive and provide
better customer satisfaction than those with poor levels of well-being at work.
For decades, organisations have tried to foster these qualities through employee engagement strategies but engaging employees is just one part of the story. Improving well-being at
work requires a more rounded approach that focuses on helping employees to:
Strategic innovation in changing times
252
••
••
••
••
strengthen their personal resources;
flourish and take pride in their roles within the organisational system;
function to the best of their abilities, both as individuals and in collaboration with their
colleagues;
have a positive overall experience of work.
NEF’s ‘Wellbeing at Work’ report
NEF’s ‘Wellbeing at Work’ report concludes that:
••
••
••
••
••
••
••
••
Getting the right work–life balance is an effective way of avoiding stress at work.
It is possible to maximise overall organisational wellbeing through a re-evaluation
of how salaries are distributed among employees.
Organisations can adopt certain approaches towards job security that help their
staff achieve higher levels of job satisfaction.
Working with employees to ensure they have a sense that their job is achievable
can lead to greater job satisfaction, as well as higher levels of morale.
Management behaviour seems to be highly important, with some management
styles more successful than others at strengthening wellbeing at work.
Creating a safe working environment and a sense of the social value of the work of
the organisation, may increase employees’ feelings of job satisfaction.
Good levels of job-fit and skill-use, and opportunities to develop new skills, can
create high levels of employee satisfaction.
Helping employees to take greater control over their work can lead to better performance and greater job satisfaction.
Source: NEF (2014).
Practice
Exploring the bottom line
Figure 12.3 Bottom line issues?
Business social responsibility 253
In the twenty-first century, sustainability isn’t optional it’s essential for business success.
By making the case for sustainability as a fundamental business practice, The Triple Bottom
Line (Elkington, 1997) became an instant classic when first published. It showed a generation
of business leaders how to find their companies’ sustainability sweet spots where profitability
merges seamlessly with the common good. One problem with the triple bottom line is that the
three separate accounts cannot easily be combined (Edgeman et al., 2015). It is difficult to
measure the planet and people accounts in the same terms as profits – that is, in terms of cash.
Put in a more friendly way triple bottom line is about ‘People, Planet and Profits’. This
concept recognises that a company cannot be judged by financial performance alone.
Furthermore, it also recognises that the three legs are linked. It is not sufficient, however, just
to talk about triple bottom line as a ‘nice, warm, fuzzy’ concept. For those of us who see this
concept as the way of the future it is also necessary to ‘walk the talk’.
People issues
This text argues that organisations should encourage people to generate ideas and evaluate
them in terms of business goals and then invest resources to develop innovative customerperceived value products and service packages. As the pace of competition increases companies need to innovate consistently and should treat their employees as they would members
of their own family – that is, with respect. Sadly many organisations still, while upholding
the importance of treating employees as they would be done by, nevertheless turn the other
cheek and conduct business with domestic and foreign organisations that fail to meet basic
worker standards in the pursuit of profit.
The same money and influence that enable large companies to inflict damage on people and
the environment allows them to effect positive change. At its simplest, a corporation can give
money to charity. Companies can also use their influence to pressure governments and other
companies to treat people and resources more ethically. Companies can invest in local communities in order to offset the negative impact their operations might have. A natural resources
firm that begins to operate in a poor community might build a school, offer medical services or
improve irrigation and sanitation equipment. Businesses also practice social responsibility by
donating to national and local charities. Whether it involves giving money or time, businesses
have a lot of resources that can benefit charities and local community programmes.
Diamond industry
The diamond industry, for example, has come under fire for benefiting from injustices
along its supply chain. ‘Blood diamonds’ or ‘conflict diamonds’ are diamonds which
have been sourced from war zones, where rebel groups will often fund their campaigns
through mining, frequently using forced – often child – labour.
Such situations have arisen in Angola, Liberia, Ivory Coast, Mozambique, Zimbabwe,
the Democratic Republic of the Congo and Congo-Brazzaville. International consumer
and NGO pressure has caused diamond companies to scrutinise their supply chain, and
has reduced the number of diamonds reaching the market from conflict zones.
Source: Investopedia, http://www.investopedia.com/terms/c/corp-social-responsibility.asp (accessed
20 June 2016).
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Strategic innovation in changing times
Planet issues
Environmental responsibility
Companies can have enormously detrimental effects on the environment. Oil spills are some
of the most conspicuous examples, but industries as varied as chemical manufacturing, mining, agriculture and fishing can do permanent damage to local ecosystems. There is mounting
evidence that the planet is warming. According to NASA melting ice sheets are changing the
way the earth wobbles on its axis and this highlights how real and profoundly large an impact
humans are having on the planet. While the responsibility of corporations is hard to untangle
from that of the consumers who demand electricity and transportation, it is difficult to deny that
many corporations have profited from the deterioration of the global environment (Klein, 2015).
Businesses and investors were instrumental in shaping the Paris climate conference in
December 2015 (COP21) agreement. Delegates attended in great numbers and 195 countries
pledged trillions, promised support for clean energy, a carbon floor price, responsible policy
and more, all to be implemented by 2020. Will this agreement deliver the transition to the low
carbon economy and in time? Or will cheap oil and the government withdrawal of support for
renewables and clean tech throw spanners in the works?
The same money and influence that enable large companies to inflict damage on people
and the environment allow them to effect positive change. At its simplest, a corporation
can give money to charity. Companies can also use their influence to pressure governments
and other companies to treat people and resources more ethically. Companies can invest
in local communities in order to offset the negative impact their operations might have.
A natural resources firm that begins to operate in a poor community might build a school,
offer medical services or improve irrigation and sanitation equipment.
According to many, and elegantly discussed by Klein, there are at base two key issues;
the rapidly emerging need to preserve the environment and the attitude of many corporations
and states in regard to honouring the terms of COP21. The evidence of the problem can be
clearly seen with the acceptance by many of the importance of recycling resources but the
muted response to the serious and possible terminal influence of climate change. In this
respect many global corporations run the risk of receiving the fate of the dinosaurs. Sadly
for mankind, politicians and corporate management are often in denial on the impact of
climate change as they adopt lukewarm policies that hardly skim the problem. In the end, of
course, in this war between corporate management and climate scientists it is the latter that
will prevail, but by that time it may be too late. Business is a necessary activity and it can be
pursued with due regard to the well-being of communities rather than rewarding shareholders and private individuals.
As politicians and corporations continue to talk down the importance of climate change
their inaction brings us ever closer to global disaster. The three main pillars of the present
neo-liberal age – privatisation of public bodies, deregulation of the corporate and banking sectors and the lowering of income and corporate taxes, paid for by cuts to public spending – are
incompatible with the steps that society should be taking to reduce damage to the environment.
Effect of the global export of industrial agriculture
The rapid globalisation of agricultural systems since the turn of the century has been a
major cause of increases in greenhouse gas emissions. Whilst consumers in developed
countries can now buy seasonal vegetables and fruit all the year round the energy cost
Business social responsibility 255
of this is substantial. Container ships, jumbo jets and diesel trucks all burn massive
amounts of carbon fuels.
Source: Shryman, S. (2000) ‘Trade, agriculture, and climate change: How agricultural trade policies fuel climate change’, Institute for Agriculture and Trade Policy, November, p. 1.
Resource sustainability
A company might invest in R&D in sustainable technologies, even though the project might
not immediately lead to increased profitability. In recent years, supply chains have emerged
as a central focus of CSR. Company X’s management might make extraordinary efforts to
hire, foster and empower a diverse workforce. They might offer generous paid maternity
and paternity leave. They might sponsor after-school programmes in crime-affected neighbourhoods, fund the clean-up of local river systems and put pressure on elected officials to
consider the needs of all citizens rather than simply seeking political expediency. None of
that would change the fact that they source their raw materials, albeit indirectly, from outfits
that use slave labour.
For years the economic model of ‘extractivism’ has depleted the natural resources of
both developed and under-developed countries as evermore raw materials were removed
and used to gain income and to produce added value products. The model is the opposite of
stewardship and unless countered by renewal and restoration policies will continue to blight
the planet.
Circular economy
The contemporary economy is based on the fast obsolescence of many of the things we buy.
Tablet computers, mobile phones and other gadgets enjoy reduced shelf lives. This leads to
a serious inefficiency in the way we manage the earth’s scarce resources (Wijkman, 2015).
It results in increased pollution with its concomitant damage to the eco-system. Increasingly
the business world is accepting seriously that resources need to be better managed.
The concept of the circular economy is one that has great potential, as it is restorative
and regenerative by design. It addresses three key issues that underpin a circular economy:
renewable energy, energy efficiency and the efficient use of raw materials. Successful transition to the desperately needed circular economy will require radical and committed business
leadership.
Profit issues
Executive pay
As business becomes progressively more and more challenging because of the exponential growth of buyers’ markets, increasing strain is being placed on the ability of
companies to generate acceptable profit performances. This has led to a belief that what
is needed is top executive talent. As a result there has been an escalation in executive pay
salaries and awards. What is not so clear is what constitutes top talent and there is a growing suspicion that many boards may offer exaggerated payment packages in order to gain
corporate prestige and, perhaps, more cynically to boost their own salaries. In the first
half of 2016 the media reported the dissatisfaction of shareholders to the decisions of a
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Strategic innovation in changing times
number of UK boards to the granting of substantial awards to their CEOs. At a time when
the many businesses are practising austerity policies it is hardly surprising that eyebrows
were raised in society at large.
Rank and file pay
In difficult business climates it is usually the rank and file employees at the sharp edges of
business activity who suffer most. Senior management press for cost economies outside the
boardroom but rarely take a hit themselves. This damages morale throughout an organisation
and some boards compound the negativity by granting themselves bonuses for their success
in reducing costs! A variant of wage/salary freezes (or reductions) for middle management is
the growing tendency to offer zero hours contracts or pay rank and file staff a lower rate than
the national minimum standard.
Business profiteering
Whilst few would deny that making money (at least breaking even) is a crucial role of companies, it is regrettable when private business owners decide to extract money from their
businesses for themselves and fail to see that pension funds are protected. Despite such
behaviour being legal, if a company is privately owned, it presents the cynical and unacceptable face of capitalism, as does the use of tax havens to maximise profits. Other practices such
as minimum wage policies and low contributions to environmental and social improvement
funds are also deplorable. Society in the UK was rocked in 2015 when British Home Stores,
a well-known high street store, was sold for £1 and a year later went into liquidation with a
huge hole in its pension provision.
Effects of MNC profit strategies on SMEs
As the traditional heavy industries such as chemical, coal mining, and iron and steel, that once
were the backbone of the UK economy, have drifted abroad the country has become heavily
dependent on the role of SME’s. This has been further emphasised by the sale of much of the
UK’s manufacturing industry to foreign ownership where vital decisions affecting the wellbeing of UK people are taken in foreign boardrooms. The situation has been compounded by
the migration of several UK-owned MNCs to overseas countries. This has led to falling tax
receipts and a creeping realisation that government spending will in future not be a key support of living standards that it has been since the end of the Second World War.
The SME sector already employs more people than the MNC sector and is now very much
the spine of the UK economy but is severely hampered by business strategies practised by
some MNCs that exploit their market power. Examples are provided by the time many SMEs
find themselves waiting for payment, by continuous pressure to reduce SME supply prices
and by the policies of some service MNCs such as banking and energy companies.
All SMEs need money services, energy availability, fast Internet connections and fairly
priced assurance and insurance policies. All around the country these services are subject to
widely varying availability. Many MNCs, have adopted a mindset that is driven by a cost
reduction mantra that results in the centralisation of key services. Banks, which are highly
centralised in the UK having over the years acquired local banks, are now closing branches,
reducing the number of available cash machines and forcing SMEs, as well as private citizens, to switch to Internet banking. Such centralisation may save money for the banks but
it loses the specialist understanding of the factors influencing local businesses that used to
Business social responsibility 257
support SME start-ups and investment capital requests. The banks that like to be recognised
by the general public and SMEs as local service institutions have largely abandoned this role
in favour of aggressive corporate cost reduction and profit policies.
Action
Business solidarity: implementing CSR
A successful society is one where economic activity delivers high levels of sustainable
well-being for all its citizens. Practical matters which determined organisations can address
include community, workplace, market place and environment issues. CSR should not be
regarded as just another source of pressure or as a passing fad. As customers, employees and
suppliers – indeed, society more broadly – place increasing importance on CSR, some business leaders have started to look at it as a creative opportunity to fundamentally strengthen
their businesses while contributing to society at the same time. They view CSR as central to
their overall strategies, helping them to creatively address key business issues (Figure 12.4).
Community
CSR programmes are popular amongst SMEs as many have a limited local reach. Activities
of MNCs sometimes attract suspicion, as it can seem that their prime motive is to gain tax-free
or promotional advantage. Sustained MNC commitments to community projects demonstrate
a firm solidarity. Key areas of activity include: education, local environment, and sponsorship of SME conferences and events.
Workplace
Good organisations seek to provide an excellent working environment for their employees.
In most developed economies working conditions normally meet at least basic acceptable
standards. This is not the case for many SME and MNC employees labouring in many underdeveloped economies where regulatory legislation is either absent or generally ignored.
Figure 12.4 A call to action?
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Strategic innovation in changing times
Market place
CSR programmes typically feature upstream (supply chain) and downstream (marketing)
activities. In the under-developed world the price of labour is cheap, which allows SMEs and
MNCs to offer labour-intensive customer support.
Environment
There has been extensive and growing environmental regulation concerning the use of
natural resources such as forestry and water. Responsible MNCs are concerned with
the impact of their operations on natural resources and the by-products of their activities. Some, however, are tempted to gain cost advantages by turning a blind eye to the
exploitive activities of their overseas subsidiaries. When such cases come to light there
is typically an international outcry. Review meetings are held but in many cases little
progress results.
Toxic chemicals in outdoor products of leading brands
Greenpeace Environment group has called on outdoor clothing companies to phase out
PFCs, which have been linked to reproductive and developmental problems.
Forty products – including bags, jackets, trousers, tents and sleeping bags – from
leading outdoor brands were tested and it was found that 36 contained hazardous perfluorinated (PFC) compounds. PFCs are chemicals used to make surfaces repel water
and oil. They do not occur naturally, do not degrade, many last indefinitely in the environment, and are eliminated very slowly from humans and other animals.
Source: Slezak, M. (2016) The Guardian, 24 January.
Anglo American: basic principles of good citizenship
Anglo American plc owns and operates a range of businesses which, by virtue of their
nature, scale and location, have the potential for significant positive and negative social
impacts on host communities and relevant labour sending areas (hereafter referred to
as ‘associated’ communities).
The overall conduct of Anglo American businesses and the values and standards that
guide us are set out in ‘Good Citizenship: Our Business Principles’. In addressing interactions with our employees and associated communities, these Principles are based, as a
minimum, upon a vision of Zero Harm. We are also committed, however, to supporting
our employees in developing their potential, and to enhancing the opportunities available
to, and capacities of, the communities in which we operate.
Our approach to social issues is based primarily upon seeking to leverage our core
business impacts, including in areas like human resources, procurement and contractor
management, in such a way as to enhance our development outcomes; in addition to
conventional social investment.
Source: Anglo American (2009) SOC_000001 Issue 1, April.
Business social responsibility 259
The big challenge for companies is how to develop an approach that can realise their ambitions. However, some innovative companies have managed to overcome this hurdle, with
smart partnering emerging as one way to create value for both the business and society simultaneously. Smart partnering focuses on key areas of impact between business and society and
develops creative solutions that draw on the complementary capabilities of both to address
major challenges that affect each partner.
Addressing rural distribution challenges in India
More than 70 per cent of India’s population resides in rural villages scattered over large
geographic areas with very low per capita consumption rates. For multinationals, the
cost of reaching and serving these rural markets is significant, as typical urban distribution approaches do not work. Hindustan Unilever Limited’s (HUL) Project Shakti
overcame these challenges by actively understanding critical societal and organisational
needs. HUL partnered with three self-help groups, whose members were appointed as
Shakti entrepreneurs in chosen villages.
Source: Hindustan Unilever Limited.
United Nations Global Compact (UNGC) principles
The ten principles of the UNGC (United Nations Global Compact) are as follows:
1 Support and respect the protection of internationally proclaimed human rights.
2 Avoid being complicit in human rights abuses.
(Labour rights (derived from the International Labour Organisation and Rights of
Work).)
3 Uphold the freedom of association and the effective recognition of the right to
collective bargaining.
4 Elimination of all forms of forced and compulsory labour.
5 The effective abolition of child labour.
6 The elimination of discrimination in respect of employment and occupation.
(The environment (derived from the Rio Declaration on Environment and
Development).)
7 Support a precautionary approach to environmental challenges.
8 Initiatives to promote greater environmental responsibility.
9 Encourage the development and diffusion of environmentally friendly technologies.
(Anti-corruption (derived for the UN Convention against Corruption).)
10 Work against corruption in all its forms, including extortion and bribery.
Source: Derived from the UN Convention on Human Rights.
Global recognition of BSR
The UNGC is a call to companies to align strategies and operations with universal principles
on human rights, labour, environment and anti-corruption, and take action that advances
societal goals.
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Strategic innovation in changing times
Organisational approaches to CSR
Global or local?
In most cases it is best if MNCs locally fine-tune their corporate approaches to CSR, which
in theory makes them more responsive and closer to the needs of local society. Many MNCs
have become more corporate and centrally oriented and so run the danger of seeking to superimpose a central culture on local operations. Unilever has gained a favourable reputation for
its CSR activities by delegating a great deal of autonomy to local managers.
In the case of companies that trade mainly in their home market a greater CSR impact can
be achieved if their activities are integrated. Marks & Spencer provides a salient example.
Marks & Spencer
UK food and clothing retailer Marks & Spencer has integrated its sustainability activities in its Plan A. It aims to integrate five sustainability goals:
••
••
••
••
••
to become carbon neutral;
to cease sending operational waste to landfill;
to extend sustainable sourcing;
to be a fair trade partner and set new standards in ethical trading;
to help customers and employees live a healthier lifestyle.
Source: Marks & Spencer PLC.
A matter of attitude
Today, a shift has occurred in the way people conceptualise CSR. For decades, corporate business
models have been assumed to be necessarily harmful to certain communities and resources. The
intention was therefore to mitigate or reverse the damage inherent in doing business. Now many
entrepreneurs consider profit and social-environmental benefit to be inextricable (Rakotomavo,
2012). Few tech start-ups pitch their ideas without describing how they will change the world for
the better. Social media platforms believe they will facilitate democracy and the free exchange
of information; renewable energy companies believe they will make money by selling sustainable solutions; sharing economy apps believe they will cut down on the waste and inefficiency
of a post-war economy myopically geared toward the individual consumer.
To be sure, some companies may engage in green-washing, or feigning interest in CSR.
Companies may tout window-dressing contributions to ‘the greater good’ while engaging
in morally questionable or inherently unsustainable conduct in the background. Google’s
‘Don’t be evil’ slogan can seem hypocritical when viewed in terms of the company’s collaboration with repressive regimes, not to mention the questionable practice of compiling reams
of personal data on every customer.
Some think CSR is an oxymoron. Others see CSR as a distraction of a different sort, that
is, from the lawful pursuit of profits. To them, a corporation’s sole responsibility is to generate returns for its shareholders, not to try to save the world or to fret over its own impact.
Laws and regulations must be followed in all jurisdictions in which the company operates,
but management should not go beyond that, as that could hurt its bottom line and violate its
Business social responsibility 261
duties to the owners. Some counter that this concern is misplaced, since responsible initiatives can increase brand loyalty and therefore profits. This may become increasingly true
as ethical consumer culture gains wider acceptance and metrics enable the return on CSR
expenditure to be evaluated (Daza, 2009).
A few cynical executives will inevitably try to portray themselves as responsible when
they are decidedly not. And for some critics, nothing short of a massive overhaul of the world
system will suffice. The truth is that many large corporations are devoting real time and
money to environmental sustainability programs and various social welfare initiatives. These
activities should be encouraged but, at the same time, continually questioned and reassessed.
In 2010, the International Organisation for Standardisation released ISO 26000, a set of
voluntary standards meant to help companies implement CSR.
Summary
Business activity is essential for the human well-being but needs to be conducted ethically
in solidarity with society and the environment. The chapter addresses important and pressing
issues that are evident in much of current business practice. It is important for those corporations and governments to counter the harmful effects of business practice. Life is about more
than generating profits to please shareholders whilst knowingly exploiting employees and
paying scant regard to the impact on local or distant environments. Climate change is real and
not something to be conveniently dismissed if it raises issues concerning corporate activity.
Wilful blindness is cynical, insults human rights and damages the environment. The chapter
has reviewed the impact of CSR in relation to people, planet and business issues.
Discussion questions
1
2
3
4
5
6
7
8
Why do you think that all businesses should adopt high ethical standards?
How does Carroll’s Pyramid assist the key aspects of CSR?
Name two MNCs that appear practically to be genuinely aware of the on-going importance of CSR and two that seem to be seeing CSR as short-term marketing public
relations activity.
Briefly explain the concept of the triple bottom line.
How are the activities of some MNCs damaging the finances of SMEs?
What is meant by the concept of well-being?
How might MNCs present the acceptable face of capitalism?
How might marketing executives and advertising agencies advance the CSR cause?
Case exercise
Molinos Rio de la Plata: championing BSR
Business ethics in South America, as in many other countries, combine the positive (values,
honesty, transparency, respect) and negative (corruption, fraud, bribery, inside information,
human rights violations, lack of punishment). There are clear rules and laws about correct
and ethically sound business behaviour, but few regions in these countries enforce compliance. Complicity and connivance in business are so common that in general the South
American public profoundly distrusts business and government. Citizens, politicians and
business leaders seem to be confused by the concept of ethics and even more sceptical when
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this concept is related to business. Too often, public speeches and discussions of business
ethics are more oratorical and superficial than they are serious and indicative of a strong commitment to moral values.
Molinos is Argentina’s largest branded food processing company, which employs circa
5,000 people and is based in Buenos Aires. Molinos produces a wide range of packaged
foods for domestic consumption, including bottled oil, margarine, pasta, pre-mixes, packaged flours, yerba mate, rice, cold cuts and frozen foods.
The company’s mission is to generate value for shareholders, clients, employees, consumers and the community at large and its vision is to become the leading food company in the
region, known for its reliability, innovation and growth. Molinos bases its corporate philosophy on the following principles:
1
2
3
4
5
6
7
8
9
Ethics and credibility in business relations and management.
Clear communications.
Professional and personal development of their employees in a working environment
based on motivation and innovation.
Environmental protection.
The health and safety of employees.
Continual improvement in the quality of their management.
Team work.
Learning from their mistakes.
Leadership based on knowledge and setting examples.
The corporation takes its responsibility to operate ethically seriously and has established
a channel that employees and associates can use to report any action that is opposed to its
principles. The Ethics Hotline is a confidential toll-free number and the company also sponsors a website that is run by a third party that associates can use to report any misconduct of
company employees.
A committed and responsible approach is taken to corporate sustainability issues and
the company takes a strategic approach to health and welfare, community and human
development and to care for the environment. The aim of the Health and Welfare Molinos
Commitment Programme is to provide healthcare professionals with valid, scientific and reliable information about nutritional facts, advantages and benefits of the company’s products.
Initiatives running in the Community and Human Development programme include the Eat
Tasty, Eat Healthy activity, which encourages a healthy diet among fifth grade students, parents and teachers from primary schools close to the company’s sites. Other social activities
funded include foodbanks, community sport and educational programmes.
Molinos actively pursues initiatives to improve and sustain the environment by means of
the company’s Environmental Care programmes, which cover logistics, energy and fuel projects to reduce harmful emissions in addition to initiatives to reduce raw material and water
usage. A continuous effort is made to design packaging that generates less waste, can be easily recycled and has the least potential negative impact on the environment.
Questions
1
2
Does Molinos’s corporate philosophy clearly states its approach to business practice?
What is the company doing to boost resource sustainability and to mininise negative
effects on the environment?
Business social responsibility 263
3
4
In what ways does Molinos act to improve and share social value in Argentina?
Would you like to work for them? Briefly explain your decision.
Source: Molinos website, http://www.molinos.com.ar/ (accessed 8 August 2016); Wikipedia,
https://en.wikipedia.org/wiki/Molinos_R%C3%ADo_de_la_Plata (accessed 8 August 2016).
YouTube
‘Molinos Rio De La Plata, Un Gigante Que Se Come Todo’, https://www.youtube.com/
watch?v=FgSwmBiexCQ.
References
Bowen, H. R. (2013) Social Responsibilities of the Businessman, Iowa City, University of Iowa
Press.
Carroll, A. B. (1999 ) ‘Corporate social responsibility’, Business Society, Vol. 38, Issue 3. pp. 268–95.
Cavalieri, E. (2007) ‘Ethics and corporate responsibility’, Symphonya, Emerging Issues in
Management, Issue 2 (online management journal), http://www.unimib.it/upload/gestioneFiles/
Symphonya/2007,issue2/cavalierieng22007.pdf (accessed 14 August 2016).
Daza, J. R. P. (2009) ‘A valuation model for corporate social responsibility’, Social Responsibility
Journal, Vol. 5, Issue 3, pp. 284–99.
Edgeman, R., Eskildsen, J. and Neely, A. (2015) ‘Translating triple top line strategy into triple bottom
line performance’, Measuring Business Excellence, Vol. 19, Issue 1, http://www.emeraldinsight.
com/doi/full/10.1108/MBE-12-2014-0054 (accessed 30 November 2016).
Elkington, J. (1997) Cannibals With Forks: The Triple Bottom Line of 21st Century Business, Oxford,
Capstone.
Hockerts, K., Casanova, L., Gradillas, M., Sloan, P. and Jensen, E. (2008) ‘An overview of CSR practices response benchmarking report’, INSEAD Working Papers Collection, 67, pp. 1–50.
Klein, N. (2015) This Changes Everything, London, Penguin Books.
Moon, S. (2008) ‘Corporate environmental behaviours in voluntary programs: Does timing matter?’,
Social Science Quarterly, Vol. 89, Issue 5, pp. 1102–20.
NEF (2014) ‘Our work: Wellbeing’, http://donate.neweconomics.org/issues/entry/well-being (accessed
30 November 2016).
Porter, M. E. and Kramer, M. R. (2011) ‘The big idea: Creating shared value’, Harvard Business
Review, January–February, pp. 62–77.
Rakotomavo, M. T. J. (2012) ‘Corporate investment in social responsibility versus dividends?’, Social
Responsibility Journal, Vol. 8, Issue 2, pp. 199–207.
Savitz, A. W. and Weber, K. (2013) Triple Bottom Line: How Today‘s Best-Run Companies Are
Achieving Economic, Social and Environmental Success – and How You Can Too, San Francisco,
CA, Jossey-Bass.
Wijkman, A. (2015) ‘Circular economy could bring 70 per cent cut in carbon emissions by 2030’,
Guardian, 15 April.
Selected YouTubes
‘Rethinking Business: Join the Circular Revolution’, https://www.youtube.com/watch?v=
vH2UFUzhXbA.
‘Social Responsibility and Business Ethics’, https://www.youtube.com/watch?v=MzLEy
ED-xUs.
‘Business Ethics’, https://www.youtube.com/watch?v=y9VAY6HJ2R4.
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‘Corporate Social Responsibility, State Bank of India’, https://www.youtube.com/watch?
v=VifQfC3PsYE.
‘Re-thinking Corporate Social Responsibility’, https://www.youtube.com/watch?v=jga4
s0Ei7Zs.
‘The Social Responsibilty of Business’, https://www.youtube.com/watch?v=Z5KZhm
19EO0.
‘What Is Economic Well-Being?’, https://www.youtube.com/watch?v=zpd-1vkSleQ.
‘Deepak Chopra on Economic Well-Being and Happiness’, https://www.youtube.com/watch?
v=pGB2iTIeOSQ.
‘What Is the Triple Bottom Line? John Elkington’, https://www.youtube.com/watch?
v=l5MPOuhmpmk.
‘Triple Bottom Line and Sustainability: The Science of Good Business’, https://www.you
tube.com/watch?v=2f5m-jBf81Q.
‘Sustainability at Shell: Responsible Means . . . ’, https://www.youtube.com/watch?v=
yr6DjeiSIgY.
13 Organisational renewal for strategic
innovation
The order is
Rapidly fading
And the first one now
Will later be last
For the times they are a-changin’
(Bob Dylan)
People often resist change for reasons that make good sense to them, even if those reasons
don’t correspond to organizational goals. So it is crucial to recognize, reward, and celebrate
accomplishments.
(Rosabeth Moss Kanter)
Learning objectives
This chapter explores:
1
2
3
4
5
6
7
The impact of contextual change.
The traditional business game.
Corporate games.
Business ethics.
The evolution of organisational structures.
The challenge of change and selecting an organisational style.
The importance of organisational culture and achieving employee trust.
Introduction
This chapter opens with a contextual focus from the boardroom, explores the key principles
and strategic approaches of senior management and warns of the chaos that can result from
top management’s too distant view of real-time activity. A major theme of this text is the
importance of applying business activity to boost the well-being of society and not to mainly
seek strategies that maximise profits at the cost of society. The pursuit of well-being and
profits are not mutually exclusive goals and possible ways of achieving both are suggested
by revisiting the Theory Z approach and its extension and development in the proposed
Theory WB approach introduced in the text. Successful management activity to secure morally acceptable profits and well-being in today’s business climate, and hence real and lasting
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Strategic innovation in changing times
creativity and innovation, requires senior management to seriously address real corporate
culture reform and to gain and build trust amongst corporate game players and society. It is
hoped that this text will act as strong stimulant to the creation and more equitable distribution
of wealth in a world where business players are often blind to the need to boost creativity and
innovation and exercise due regard to preserving the environment. (See Figure 13.1.)
Figure 13.1 Organisational renewal for strategic innovation management.
Organisational renewal for strategic innovation 267
Context
View from the boardroom
The financial crisis of 2008 sent shock waves across the globe. Almost a decade later
national economies are striving to recover confidence. The North American economy has
grown stronger under the presidency of Barack Obama though several observers are concerned as to how business confidence will fare following the 2016 presidential election.
South America in the shadow of the U.S. economy is showing signs of recovery but has been
hit by weak raw material and oil prices. Europe is displaying very little or no growth with the
exception of the UK, which is still to regain pre financial crisis growth achievement levels.
In June 2016 the UK held a referendum to discover if the country wanted to remain in the
European Union (EU), which resulted in the electorate deciding to leave. This triggered a
period of uncertainty in the global marketplace. The African economies have experienced a
check to their rate of growth due to the impact of droughts and political instability. Asia is
dominated by the economies of China, India and Japan and all three are experiencing low
growth rates.
The business environment is difficult in many countries and business observers and players are looking out of their boardroom windows at an unclear and uncertain world. At such
times throughout economic history academics, CEOs and their advisers are questioning their
current operations and responses. Some dismiss the necessity to change their modus operandi and seek to ride out economic storms and business setbacks in the belief that every
business cycle downturn is followed by an upturn. This is essentially a myopic view and has
been termed ‘wilful blindness’. Others increasingly believe that it is time to re-evaluate their
visions and missions or risk further business decline.
The challenges caused by change are affecting all business players – MNCs, NGOs and
SMEs – and pose the following questions:
1
2
3
4
5
How appropriate are the operating paradigms, goals and present game plans?
What is the approach to respecting the environment, trusting their employees, and conducting CSR programmes to demonstrate their commitment to social solidarity?
How might organisational structures evolve to encourage creativity, innovation and to
build trust and subsidiarity?
Does governance/ownership aid or restrict operations and performance?
Are business financial matters (gratuities, payments and rewards) conducted transparently?
A useful place to seek answers to these questions is to review the business game chest.
Key principles
Business game components
A broad set of business game components are summarised in Table 13.1, which it is hoped
will stimulate thought on the most appropriate selection for the players in today’s difficult
national and global markets.
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Strategic innovation in changing times
Table 13.1 Major business games
Game
Summary description
Money
•• The role of financial institutions (stock markets,
shareholders etc.)
•• Risk taking paradox
•• Betting for reward
•• Generate profits for distribution and/or investment
in business activities
•• Weaken both national and international competition
•• Seek monopoly positions
•• Plan to achieve growth
•• Modernist view
•• Post-modernist view
•• Post-capitalist view
•• Short-term
•• Medium-term
•• Long-term
•• Ethics
•• Environment
•• Social responsibility
•• Diversity
•• Learning
•• Cost
•• Marketing
•• Service
•• Customer-perceived value
•• Well-being
•• Theory X
•• Theory Y
•• Theory Z
•• Theory WB
•• Autocratic
•• Democratic
•• Laissez faire
•• Paternalistic
•• Creativity
•• Innovation
•• Change management
Corporate
Strategy
Corporate responsibilities
Business orientation
Leadership style
Management style
Attitudes to
The Western, essentially North American, dominant game, is market fundamentalism,
which is the pursuit of profits under the dynamic of market forces. In the EU the approach
is softer, as more concern is generally given to the impact of strict adherence to this
laissez faire doctrine on people and society. African-owned businesses largely follow
market fundamentalism while in Asia there has been a weakening of this approach.
Particularly noteworthy is the distinctive business style of several MNCs in India that
have tempered their exclusive pursuit of profits in favour of furthering a social mission
policy (Capelli et al., 2010). Several major Japanese companies have long practised
Theory Z approaches. Chinese businesses broadly follow the typical U.S. business style
(Theory X or Theory Y).
Organisational renewal for strategic innovation 269
Benefactors
The Western game style is essentially geared toward rewarding shareholders whose paper
investments rise and fall on stock exchanges. Companies are required by law to run their
business activities in order to generate returns that are acceptable to shareholders rather than
their workforces.
The risk paradox and casino market games
CEOs are charged with the responsibility of exercising vision in their businesses and some
are prepared to be more open to taking risks to seek competitive advantages than others.
To grow many MNCs and SMEs need to be able to borrow from the banks to fund investment programmes. Banks are traditionally risk averse and are wary in their agreement to
lend money. This can severely check the investment plans of SMEs in particular who need
to expand their businesses and convince the banks of their ability to achieve and sustain a
strong ‘bottom line’. Banks and financial institutions, in contrast, are quite happy to play the
property and financial markets and at times can overplay their hands causing financial chaos.
Despite some tightening in regulation since the financial crisis of 2008, market players are
still able to find legal wriggle room to speculate wildly in search of amassing profits.
Bets, sweats and debts
Gambling has long been attractive to many and the industry has grown at a rapid rate in the
last decade. Betting shops are to be found in most high streets; TV screens are flooded every
night with gambling advertisements, which also appear on the shirts of sports people and in
social media. Offstage and in the background the banks continue to play their casino games.
A lottery culture has emerged and loan sharks prey on struggling members of society.
Investment
As technology accelerates exponentially, businesses will need to give careful consideration
to keeping pace with highly competitive market demands. This is essential if they are to sustain growth by supplying customer-perceived value packages to increasingly sophisticated
customers.
Business game players
The main players in the national and international business games are MNCs, SMEs, NGOs,
charities and governments in a direct or indirect mode.
Multinational corporations
An MNC is a parent company that engages in foreign production through its affiliates located
in several countries, exercises direct or indirect control over the policies of its affiliates and
implements transnational business strategies in production, marketing, finance and staffing
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Strategic innovation in changing times
in a way that transcends national boundaries. In other words, MNCs exhibit no loyalty to the
country in which they are incorporated. They tend to be headed by CEOs who exhibit diverse
loyalties: they are slaves to financial institutions and closely tied to shareholders and employees.
Others, sad to say, are self-seeking mercenaries who in the worst cases damage their companies. Over the past century Europe has seen its economic might shrink. Overtaken by
American and later Chinese and Indian firms in many industries, the economies of the old
world have struggled to keep up.
MNCs are gaining strength in Africa, Asia and South America
MNCs are gaining strength in Asia and the rate of growth in China is particularly phenomenal and in 2015 accounted for 50 per cent of Asia’s top MNCs. India followed some distance
behind as did South Korea. In South America companies like Embraer, Cemex, Telmex,
Gerdau and JBS have grown rapidly leading commentators to coin the term multilatinas to
describe globally trading South American MNCs.
The importance of SMEs
SMEs are the backbone of Europe’s economy. They represent 99 per cent of all businesses in
the EU. In the past five years, they have created around 85 per cent of new jobs and provided
two-thirds of total private sector employment in the EU. The European Commission considers SMEs and entrepreneurship as key to ensuring economic growth, innovation, job creation
and social integration in the EU.
Today African SMEs create around 80 per cent of the region’s employment, establishing
a new middle class and fuelling demand for new goods and services. The scale of this transformation should not be underestimated. The International Monetary Fund (IMF’s) Regional
Economic Outlook for Sub-Saharan Africa, released in April 2015, says: ‘Over the next 20
years . . . sub-Saharan Africa will become the main source of new entrants in to the global
labour force.’ This is an emerging Africa that is absolutely determined to succeed. As a follow up to their bold commitment to infrastructure investment, African governments have
now turned to entrepreneurs to support future growth.
Asia’s SMEs need finance to help them grow into dynamic, internationally competitive
companies. This is key to strong sustainable growth in Asia as the world recovers from the
recent global economic slowdown, according to the Asian Development Bank. Asia has millions of SMEs but few of them are able to grow to the point where they can innovate or be
part of the global supply chain. ‘To do this, they need more growth capital and opportunities
to access various financing channels’, said Noritaka Akamatsu, Senior Advisor in ADB’s
Sustainable Development and Climate Change Department, which produced the report.
The current economic setting in most Latin American countries suggests that, if the SME
sector does not perform well during the next couple of decades, overall economic performance
will also be unsatisfactory, especially in the areas of employment creation and income distribution. No other major sector has the potential to generate a large amount of adequate-income
jobs. Experience of other countries has proven that this sector can play a central contributing
role, under proper conditions and with adequate support. Various types of evidence from the
countries of the region suggest that considerable potential is present in their SME sectors.
But both experiences elsewhere and economic logic imply that a strong and coherent support system will be necessary if that potential is to be reasonably fulfilled. Such a system has
been notoriously absent in most Latin American countries in the past. Countries which fail to
Organisational renewal for strategic innovation 271
rectify this lack may suffer serious social and economic consequences. The parallels between
the economies of many Latin American countries and various others around the developing
world (e.g. South Africa, Philippines) both in economic structure, recent growth performance
and level of inequality, suggest that many of the conclusions applicable to Latin America are
relevant elsewhere as well.
Corporate game plays
Profit quest
Most MNCs are seeking to generate profitable returns for private and institutional shareholders, and SMEs to meet their owners’ needs. To be successful and profitable in contemporary
national and global markets requires businesses to successfully obtain and sustain a competitive edge. Profits can then be used to reward investors and/or to fund investment in existing
and new business opportunities.
Growth quest
The need to achieve growth is espoused by many MNC CEOs, government ministers and
business commentators. Many SMEs would also like to build successful businesses. There is
a degree of confusion about what is meant by growth. Government ministers stress the importance of growing national economies to boost business confidence in international financial
markets and claim this boosts national living standards. But is this always the case? MNCs
keep a constant eye on the performance of their shares on the world’s leading stock markets.
It is clearly important for national economies to fend off stagnation in times of economic downturns that can damage the fortunes of the best-run economies. Balancing the
books is seen by many politicians as being the main policy to reduce the cost of borrowing
in the financial markets. Interest payments can assume overbearing levels if governments
are spending too much. However, what is not always clear to governments is the need to
balance the needs of good housekeeping with social justice. Allowing market forces to
cripple an important national industry is ethically questionable if it results from dumping by strong international competitors. The UK government’s treatment of the UK steel
industry provides an acute warning of the dangers of such policies. Its short-term view
will cripple the livelihoods of many and will result in escalating social welfare costs.
Governments should carefully balance the need to manage economies for the good of
its citizens rather than maintain a doctrinaire view of market forces and run the risk of
hurting many to benefit the few. This requires careful consideration in order to temper
political dogma with social justice.
MNCs also face severe pressure in the developed world when their domestic markets
approach saturation. This results in an added emphasis on expanding into other countries
and continents and especially into the under-developed world. If undue regard is not given to
supporting domestic industry, corporations can prosper at the expense of their own national
economies. Once again there is a pressing need for dogma to be balanced with due consideration for domestic operations.
SMEs account for most of the economic activity in both the developed and underdeveloped world. Governments need to fine-tune their economic and political actions to
boost their ability to prosper. A common problem SMEs experience is the reluctance of
MNCs to pay ethical prices for their output and to pay them promptly.
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Strategic innovation in changing times
Table 13.2 Key game activities
Business activity set
Description
Operating activities
Investing activities
Financing business activities
Cash flow from operating activities
Business activities that are capitalised over more than a year
Sources of funds, private, public to support business activities
Corporate game strategies
Running any business organisation whether in the private or public sector, whether it is an
MNC, SME, NGO or charity involves three basic business activity sets (Table 13.2).
Business managers can take a short-term view, a long-term view or a mixture of both
views. In the developed countries there is a tendency for companies to take a short-term to
medium term-approach. Investment decisions for long-term projects occur in the public sector but private sector projects in many MNCs are subject to financial market pressures.
Operating paradigms
The main operating business game paradigms at present are (see Chapter 3):
••
••
••
••
••
least-cost production;
marketing orientation;
customer-perceived value orientation;
service dominant logic;
post capitalism – seeking a better balance between market fundamentalism and climate
change.
Three-way stretch model
As described by Goodman, the scenario develops as follows. Top management (directors and
senior managers) sense, in the face of falling sales and mounting costs, that business is difficult. If they judge this to be a temporary blip in the expected (i.e. familiar) course of events
they may decide to keep a stiff upper lip and retreat to the boardroom and executive offices.
For fear of panicking the organisation, they may resort to a policy of restricting communication and/or over-using familiar hard systems tools so as to be seen to be doing something.
Meanwhile, middle management try to hold back the tide and make repeated entreaties for
help to both senior and junior colleagues. In the worse cases, top management retreat completely and middle managers find that they are placed under pressure by the rank and file to
act decisively in the threatening conditions. This they may feel unable to do before receiving
the active or tacit approval of the top management. If this response to contextual change pressures continues for long, huge fissures will start to open up in the organisational hierarchy
that will threaten its very existence.
Top management will be locked in the boardroom, middle management in their offices
and the rank and file (junior managers, supervisors, workers) will be calling mass meetings.
This may seem a little far-fetched to many readers, but let’s look a little more closely at what
is happening. Figure 13.2 illustrates the fundamental point. The onset of chaos has distorted
the organisation so that it is in the process of breaking into three sub-organisations, each
concerned about the dangers to the original organisation.
Organisational renewal for strategic innovation 273
Figure 13.2 The three-way stretch.
The original organisation, represented by the shaded rectangle in the figure, has been pulled
into the hatched polygon. Top management are conspicuous by their absence and communication with middle management and the rank and file is poor, if it exists at all. Middle
management are concerned for their jobs and are trying to extract some direction from the
top. The rank and file are very worried about their positions and are getting increasingly frustrated as they see the organisation disintegrating.
Since the dawn of history it has been known that a house that is divided will fall. If the organisation above is to survive, top management have to regain control, unite the house and change
their modus operandi. In unstable conditions, with contextual stimuli changing rapidly, a predominantly hard systems approach will probably be difficult to justify. What is needed is a new
way of doing things. The old corporate mindsets must give way to a new set that will emphasise
softer systems and acknowledge the value of human capital. To effect real change, top management will have to consult openly with individuals and begin to build a new climate of trust.
Practice
Assessing organisation culture
Chapter 7 discussed the key factors that organisations should consider if they are determined to create the right operating conditions in which creativity and innovation will thrive.
This requires a new holistic approach to learning at individual, group and organisational
levels. Chapters 4 and 5 contained audits to assess the creativity quotients of individuals and
groups respectively. A critical part of any pre-planning for change is to obtain a picture of
an organisation’s disposition toward any desired adoption of a new culture that is as accurate
as possible. To adopt business creativity as a major driver within their organisations CEOs
need to sound out their senior management on the six key themes that have emerged from the
argument in this text, namely:
274
1
2
3
4
5
6
Strategic innovation in changing times
context
management/leadership
creative response
individual empowerment
group empowerment
organisational empowerment.
You are invited to take the Organisational Creativity Audit presented in Table 13.3. You
will probably find it useful to photocopy it. Tick the boxes that best describe your views and
refrain from consulting with others as you complete the audit. Now turn to Appendix 13.1 for
the interpretation of your responses.
Table 13.3 Organisational Creativity Audit
Questions
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
We are a supply oriented organisation
We have a working definition of management that
is communicated to all our people
We are aware of business creativity
We encourage individual creativity
We support group working
We value our people
We are service oriented
We organise tailor-made training programmes for
our people
We understand what business creativity is all
about
We practise open communication
We provide suitable training for groups
We try to make the organisational culture serve
the people rather than make the people serve the
culture
We are a domestic organisation and do not look
for business abroad
We believe it best to run our organisation on hard
systems thinking
We are prepared to evaluate new ways of
management thinking
We try to provide secure employment for our
people
We encourage and provide time for business
creativity group work
We are seriously influenced by contextual factors
We believe that customers are more important
than our organisational culture
We encourage and provide space for CPS activity
We cultivate a trust culture
We train people to facilitate groups
We are a Learning Organisation
We don’t know what the market (or our internal
colleagues) think of us
We operate a democratic management style
Agree
strongly
Agree
Disagree
Disagree
strongly
Organisational renewal for strategic innovation 275
26 We are running or have recently run a major
organisational change programme
27 We spend as little as we can on the work
environment
28 We reward individual and group achievements
29 We tolerate mistakes
30 We expect loyalty upwards and downwards
Selecting an organisational style
Whilst this text argues for businesses both large and small, public and private, to adopt
an organisation style that reflects the importance of managing employees in a culture that
stimulates creativity and innovation, it is impossible to describe in detail a one-style-fits-all
organisational style blueprint. Figure 13.3 summarises the main organisational styles discussed in this text and strongly argues for business to seek to adopt the underlying philosophy
and practices of Theory WB organisations. Inevitably there will be the need at times for
strong action that will mirror some of the cut and thrust activities of Theory X organisations.
Readers are invited to study this figure and the Semco case study (and, for those working
in organisations, their own culture experience) and to superimpose a circle on the matrix that
maps the apparent organisational style which will be a mix of all the quadrants of the matrix.
Inside or outside track?
Relative well-being
Opinion is divided as to the best way of approaching a change programme. Some, such as Lord
Sharman, a former Chairman of KPMG International, believe that ‘companies can change
only from the inside’ (BBC, 2005). Others hold the view that to avoid the danger of top management myopia it is best to retain outside consultants to help them think, help them do and to
do it for them. Whilst the first two interventions are fine the third would surrender ownership
of the change initiative. Top and senior management must visibly own change programmes.
It is generally best not to regard the inside/outside issue as being a mutually exclusive decision. If it is viewed in the light of a continuum then top management can select an appropriate
blend – drive the exercise internally but harness external expertise when and where necessary.
High
Theory WB
Theory Z
Low
Theory Y
Theory X
High
Low
Relative empowerment
Figure 13.3 Organisational style matrix.
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Strategic innovation in changing times
Theory Z revisited
Theory Z or adhocracy is the opposite of the power-command hierarchical approach
(Theory X) and is provided by self-management. Many in top management dismiss this
alternative prematurely because they believe that it will lead to anarchy. This is misguided,
as bureaucratic and self-management styles should not be seen as mutually exclusive. They
represent opposite ends of a continuum and the task of top management is to find the right
blend for their organisation.
The self-management style (Hamel, 2011) encourages the development of trust, teamworking and high morale. It resembles in many ways the operating style of a professional
orchestra where performance standards are gained by the strong vision, mission and commitment of all the players. The advantages of its adoption include:
••
••
••
••
••
••
••
••
lower costs – absence of traditional and hierarchical managers reduces wage costs;
savings can be used to reward staff and invest in growth;
encourages collegiality and internal loyalty, as people discover the benefits of working
in teams where all have equal status;
encourages initiative – people become pro-active and open to new ways of thinking and
strive to increase their personal and reputational capital;
long-stay loyalty – few leave to join other organisations;
increased expertise – as with the individual players in an orchestra people are highly
motivated to maintain high-quality work standards and to continually develop their skill
sets;
sharper decisions – to avoid the three-way stretch phenomenon;
increased flexibility – orchestras can play more than one piece and perform in more than
one location. The team can meet and deal more effectively with sudden surprises and
challenges.
Nay-sayers might point out that self-management has a number of drawbacks:
••
••
••
Expectations – people have to perform to high standards and accept group judgement
on their achievements. If both of these become lax then the self-management model can
foster mediocrity.
Pool progress issues – the absence of a hierarchy can make it difficult for people to progress to positions of greater responsibility. However, a swimming pool presents a flat
surface but contains a depth continuum from shallow to deep.
Joining experience – team-based collegiate system can be daunting to new people but
also more accommodating, as it is in everyone’s interest that new people contribute as
quickly as possible.
Theory WB approach
The Theory WB approach proposed by Goodman places an even greater emphasis on the
value of employees and their welfare and well-being than the Theory Z approach. Ricardo
Semler at Semco inherited a Theory X style SME from his father, which he rejected in favour
of a Theory WB model. So effective has this approach proved that now Semco has grown
to become a well-respected MNC. Several organisations have attempted to copy the Semco
style of operation but with limited success. The Semco model works, as Ricardo Semler is
Organisational renewal for strategic innovation 277
Figure 13.4 Structure of a Theory WB organisation.
a charismatic leader and part owner of the company. Adopting the self-management social
democratic Theory WB style in an existing public MNC requires a determined effort by
management to massively overhaul and reshape their corporate structure. Organisations need
to fully sign up to becoming a just culture that encourages employee involvement where
employees do not get punished for criticising managers and for making mistakes. Courageous
leadership is required to accept that organisations function most effectively if important specialist day-to-day decision-making is performed in small strategic business units (SBU).
Evidence shows that an effective SBU should employ a maximum of 150. For large MNCs
this requires top management to adopt a network structure as illustrated in Figure 13.4.
High-cost investment decisions can be referred to central HQ. Systems can be designed to
accommodate the key principles of the Theory WB approach if there is a sufficient determination by top management to grow a culture in which honesty levels (peer-to-peer) need to be
clear and open. Such organisations have to change from hierarchical fiefdoms to democratic
organisations that place a high value on the well-being of workers.
Semco
Semco was created in the 1950s as a company manufacturing centrifuges for the vegetable oils industry. Over the years, the company has modernised by expanding its
range and investing in other businesses, moving heavily into the services area always
in association and partnership with world leaders.
(continued)
278
Strategic innovation in changing times
(continued)
After successfully developing several businesses in the environmental consultancy
area, facilities management, real estate consultancy, inventory services and mobile
maintenance services, Semco Group is currently market leader in the industrial equipment area and solutions for postal and document management.
In addition to these companies, Semco also manages a foundation which mentors
and catalyses educational, cultural, environmental and strategic projects.
A company based on innovation, Semco does not follow the standards of other companies with a predefined hierarchy and excessive formality. At Semco, people work
with substantial freedom, without formalities and with a lot of respect. Everybody is
treated equally, from high-ranking executives to the lowest ranked employees. This
means the work of each person is given its true importance and everybody is happier
at work.
Source: Semco; Semler (1994b).
Managing change to boost well-being, creativity and innovation
Well-being
During last 25 years technological development has accelerated the globalisation process,
which has caused dramatic changes within and across organisations (Krainz, 2015). Business
performance is varying, complex, global and changing faster than ever before. Over the
same period social expectations have changed; changes have affected customers, partners
and employees as well. In order to succeed in the global market, organisations need to integrate well-being at work to reinforce their competitiveness. Well-being plays a central role
in creating flourishing businesses and societies. Focusing on well-being at work can benefit
societies by helping working individuals to feel happy, competent and satisfied in their roles.
The evidence shows that people who achieve good standards of well-being at work are likely
to be more creative, more loyal, more productive and provide better customer satisfaction.
For decades organisations have tried to foster these qualities through employee engagement strategies but engaging employees is just one part of the story. Improving well-being at
work requires a more rounded approach that focuses on helping employees to:
••
••
••
••
strengthen their personal resources;
flourish and take pride in their roles within the organisational system;
function to the best of their abilities, both as individuals and in collaboration with their
colleagues;
have a positive overall experience of work.
The ‘Wellbeing at work’ report (Jeffrey et al., 2014) summarises the strongest evidence on
the factors that influence well-being at work, along with possible implications for employers.
The key findings are:
••
••
••
A good work-life balance reduces employee stress levels.
Job security and greater personal control helps motivate others.
Companies benefit from promoting well-being through increased staff loyalty, creativity
and productivity.
Organisational renewal for strategic innovation 279
The University of Cambridge has established the Wellbeing Institute (WBI), a cross-disciplinary
initiative that promotes research in the science of well-being, and its integration into firstrate evidence-based practice and policy. As a centre for the scientific study of well-being,
the WBI’s aim is to make major contributions to the development of new knowledge and its
application in enhancing the lives of individuals and of the institutions and communities in
which they live and work. Well-being at Work (WAW) continues to increase in importance
for employees and employers and across countries. While there are different definitions of
what the concept entails, within the EU one useful definition acknowledges that well-being
is ‘a summative concept that characterises the quality of working lives, and it is a major
determinant of productivity at the individual, enterprise and societal levels’. The relevance
of the concept is heightened further as the work environment continues to change assisted by
increasing migration (especially from less developed to more developed countries), globalisation, the development of new technologies, the move from manufacturing to service-based
economies, the ageing workforce and population, an increase in the number of women in the
workforce and the transformation of work patterns; these factors have led to a workforce for
which psychosocial risks have increased in priority.
Holistic approach to well-being
Osram, in the Czech Republic, has developed a holistic and comprehensive approach
to well-being for employees by relying on several measures. It concentrates on skill
development and improvements of health and well-being that aim to improve the quality of work, and these have positively impacted on voluntary staff turnover. Osram also
takes into consideration the balance between work and family life in order to support
family members working in Osram (e.g. time schedule of work shifts according to their
needs, support in getting transport to work). The company has also implemented health
promotion activities at the workplace.
Omnitel, based in Lithuania, places great emphasis on dialogue with employees,
discussion of the goals and values of the company and participation in decision making. Omnitel has implemented various methods of communication with employees.
It has attempted to establish a favourable environment for the family and developed
initiatives to help balance work and family commitments. Omnitel is committed to
providing its employees with opportunities to have good living conditions. One of the
key measures is that each of the company’s employees receives a welfare package. As
knowledge and professionalism are two of Omnitel’s valuable resources, the company
focuses on continuous staff training.
Source: Schulte and Vainio (2010).
A new workplace democracy model
Theory WB proposed in this text is a new workplace democracy model and a well-being
manifesto that should be incorporated into management thinking and organisational development. It focuses on:
••
••
trusting a company’s destiny to its employees;
treating its employees as responsible adults;
280
••
••
Strategic innovation in changing times
encouraging employees’ self-expression and self-management;
placing a strong emphasis on the well-being of employees both in the workplace and at
home.
Well-being manifesto
It is hoped that business can be conducted with an attitude and in a style that reflects
the points that have been explored in this text to increase the well-being of all and not
just the privileged few at the expense of the majority.
W Wealth generated for individuals and society by faire trading practice.
E Equitable distribution of wealth, end to pursuit of tax evasion.
L Leadership that respects employees, society and the environment.
L Learning to master total thinking skills needed to foster innovation.
B Behaviour that displays high ethical standards and exhibits transparency.
E Enterprise approach to make a difference in a highly competitive world.
I
Imagination – willingness to foster and support creativity in the workplace.
N New approach to business activity that is sensitive to climate change.
G Global outlook that respects local and foreign cultures.
Source: AJM Management Development.
The Theory WB approach proposed by Goodman in this text incorporates the principles of the
Well-being Manifesto summarised in the vignette above. Table 13.4 contrasts this approach
with typical Theory Y approaches. Readers are invited to think through these descriptions
and select which type of organisation they would prefer to experience. Every organisation is
unique and most people recognise that treating others in a manner that would be acceptable to
them is a fair condition for human interaction. The tragedy is that this underlying principle is
often forgotten by organisations that encourage or tacitly accept power-command leadership
styles. As commented previously in this chapter there is no one detailed organisational style
that is suitable for universal application and as with Theory Y styles there can be problems
with new workplace democracy models such as Theory WB. Perhaps the main problem with
the naysayers of democratic structures is a reluctance to really give them a go.
Disadvantages of workplace democracy
Workplace democracy means allowing employees to have a strong voice in the direction and
decisions within organisations (Kokkinidis, 2012). It has become increasingly popular in
the early twenty-first century as businesses have encouraged participative management and
emphasised employees as major assets. Despite its prevalence, workplace democracy does
present some challenges and disadvantages:
••
Delayed Decisions: workplace diversity can take many forms. At its extreme, employees
may take part in virtually all decisions. This can delay responses to urgent situations and
lead to more time spent on decision making than in taking action and producing results.
The more voices involved in the decision process, the longer the delays and the more
difficult it is to come to a resolution that works for all involved.
Organisational renewal for strategic innovation 281
Table 13.4 Theory Y and Theory WB organisations
Management
concept
Typical Western approach
Theory Y
Wellbeing approach
Theory WB
Structure
Leadership
Hierarchical /autocratic
Power-command; telling and
yelling!
Directed
Democratic
Devolved to working units. Willing
and doing
Self-management
Several, e.g. Finance, HR, IT,
Marketing, etc.
Restricted by top management
Minimal, most functions performed by
unit workers
Completely open, company plans and
financial information available to
all employees
Interviews and selection carried out by
work unit personnel
Determined by unit work groups
Job functions fluid, not fixed job
descriptions
Determined by individual employees
Flexible, even including working at
home
Assessed by work unit peers, including
managers
Base pay self-set with unit employee
participation
Personal incentives
Profit-sharing
Smaller risk of strikes – strikers not
penalised
Last step in a conflict situation after
efforts to turn situation into a
learning experience
Resolutions sought in working units
Employee
power
HQ support
functions
Communication
Recruitment
Training
Job titles
Career plans
Attendance
hours
Performance
Pay
Strikes
Dismissal
Conflicts
Decision
making
Work place
environment
Philosophy/
values
••
Interviews and selection carried
out by central HR
Organised by central HR
Fixed job descriptions
Largely determined by HR
Mainly inflexible but some
flexibility
Assessed in the main by line
managers
Base pay determined largely by
central HR/Finance
Personal incentives
Profit-sharing
Tendency for strikes – strikers
may be penalised
Line manager/central HR
function.
Resolution procedures can range
from exploratory with a view
to solve or can be dismissive
Undertaken largely by line,
middle and top management.
Specific offices, toilets, dining
rooms, and relaxation areas
for management personnel.
Separate parking places, etc.
Mission and vision on paper and
walls. Purpose: to reward
shareholder and favoured
personnel, e.g. CEO bonuses
Decentralised to working groups.
Major decisions ratified with senior
managers
No environmental perks. Preference
for open workspaces. Relaxation
areas open to all
Mission and values in employees’
minds. Purpose: to make work
fulfilling, enjoyable and to foster
the well-being of all employees
Strong Employee Power: workplace democracy is intended to create an environment
where employees have a recognised and influential voice. In some industries employees
form unions to ensure their voice is heard. The risk for employers is that a democratic
workplace may go too far if employees demand authority to go along with their opinions. This can create a potentially harmful imbalance of power that leads to ineffective
decisions or inner conflict that takes away from company focus.
282
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Strategic innovation in changing times
Cultural Tension: when employees have input, tension can arise within the ranks. Employees
may find that their opinions conflict on various topics. This may go against a culture where
teamwork and collaboration are emphasised. Some companies implement segmented teams
and specific roles for employees to share their opinions to avoid these types of issues.
However, the more democratic the workplace, the more difficult it can be to get employees
and leaders to agree on what to do unless there is a strong corporate culture.
Action
Conventional planning practice
Managers, whether individual, group or top management, are charged with the fundamental
tasks of deciding where they should be going and how they should get there. This has parallels with the everyday decisions that a car driver needs to make. The planned approach
tradition for a metaphorical car journey would assume that the destination was known and
that to all intents and purposes there would be few questions to answer concerning choice
of route and likely causes of delay. To many managers the sellers’ market environment (see
Chapter 1) posed few dangerous contextual challenges. Markets were there for the taking.
Making money called for sound financial and supply skills in the main.
In such a climate many were keen on planning. Governments, corporations and public
sector organisations were relatively flush with funds and the act of planning functional activity in a virtually given scenario was seen as sound practice. Planning took off in a big way
in many organisations and assumed massive complexity. Hard systems approaches delivered
the goods and all was well until performances fell short of expected levels. Potentially threatening contextual disturbances were increasingly affecting levels of achievement. Suddenly
rigid planning fell short. Management could no longer expect an easy drive and had to review
their assumptions.
To a degree organisational plans can be fine-tuned to take into account intermittent and
relatively minor contextual changes in the business environment. However, if the disturbances to the expected conditions escalate and become more serious then organisations have
to change their plans radically.
Reasons for pre-planning
All businesses (whether private, public, small or large) should spend time thinking about
their organisations before determining their overall objectives. This pre-planning stage is
essential for later effective and efficient decision-making. Key matters for a CEO to consider
include:
••
••
••
Does the organisation have effective and respected leaders?
Can these leaders create the right operational conditions for their people to motivate
themselves?
Can the organisational culture be changed?
Ignoring or paying scant regard to the pre-planning phase is a major cause of the failure of
change initiatives.
Organisational renewal for strategic innovation 283
Understand the people
Unlike managing oneself, managing others demands interacting with others. A paradox that
is evident in many organisations is that top management distance themselves from middle
managers and the rank and file. Some still maintain their own separate dining and relaxation
rooms. People know about the top managers and read about their successes in house publications but rarely meet them. Over the last 10 years there has been a declining use of the
telephone and more communication by email, which tends to be impersonal. People can feel
that the organisation merely gives them a payroll number, and regards them as a cost, or a
digit. The trend toward the depersonalisation of staff is like a cancer that threatens business
creativity.
People need to be treated as individuals who deserve and will thrive in a culture that
values their contributions in the workplace. Organisational mindsets can turn the daily experiences of staff into a mechanical and boring experience. Many organisations become steeped
in mindsets that have developed over the years during better times. Three common ones are
corporate ethos, bureaucracy and process. Or put another way, ‘the way we do things here’.
People look to the top of an organisation to undertake a positive and interactive lead in any
change programme that can be accepted as having a good chance of success.
Many organisations discover that their modus operandi can frustrate change and render it difficult if not impossible for staff to actively contribute to a change programme
and realise their potential. A change in culture is required that must begin with the
demonstrable enthusiasm and involvement of top management. Once achieved it is quite
common for them to realise that a great proportion of their management had been promoted because of their technical expertise (or good connections) rather than the ability
to manage people.
So the first step for top management is to develop managers’ understanding of:
••
••
••
••
••
••
how people work;
what motivates them;
what demotivates them;
how teams are run;
how teams are led;
dynamics of team leadership.
It helps if CEOs can define management in practical terms (see Chapter 3) for communication to all employees. Sadly, few companies can do this effectively and as a result
team briefings and actions can lose their impact. Teams represent a dominant approach to
getting work done in a business environment. Creativity enables teams to solve problems
and leverage opportunities through the integration of divergent thoughts and perspectives.
Research indicates that a collaborative culture, which affects how team members interact and work together, is a critical antecedent of team creativity (Barczak et al., 2010).
Understanding people is of crucial importance in most business contexts and ultimately is
the key to success. Few people go to work wanting to do a bad job. It is what they experience at work that prevents them giving of their best. A realistic culture change programme
must address those barriers that get in the way of people performing well as individuals
and in teams.
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Strategic innovation in changing times
Encouraging well-being
The New Economics Foundation (NEF) has developed a set of evidence-based actions (‘Five
Ways to Well-being’) which promote people’s well-being from evidence gathered in the UK government’s ‘Foresight Project on Mental Capital and Wellbeing’. The project, published in 2008,
drew on state-of-the-art research about mental capital and mental well-being through life. It asked
NEF to develop the ‘Five Ways to Well-being’ to communicate its key findings. The ‘Five Ways’
have been used in many different ways, for example to get people to start thinking about wellbeing, to develop organisational strategy, to measure impact, to assess need for staff development
and to help people to incorporate more well-being promoting activities into their lives.
Understand the task
Responsible top management need to demonstrate that they understand the real position of
their organisation. This means for many facing the major challenge of embarking on a change
programme that it is not merely an attempt at a quick fix but rather a determined attempt to
steer their organisation into clear blue water. This raises an important selection point for
CEOs. Top management personnel should be supportive and active in a change initiative and
not try to derail it. This challenges some age-old practices of appointing people to top positions because they are family or went to the same school. Policies of entitlement have in the
past been and still are a leading cause of contemporary business failures. Boards of directors
need to be involved in effectively guiding organisational change while protecting the interests of an organisation’s stakeholders (Fields, 2007).
Successful change programmes need to be planned across a declared time frame that,
depending on the organisation and business activity area, may take several years. Typically
change programmes can pass through three distinct stages:
1
2
3
Developmental change: typified by an audit of company skills and interests with a view
to dropping those with a limited future; developing promising existing ones and preparing for the acquisition of new ones necessary for the success of the business.
Transitional change: the programmed dropping of failing programmes and the introduction of potentially successful ones.
Transformational change: the completion of the original change initiative.
It is not a question of just flicking a switch. CEOs if at all possible should remain in post as
the organisation progresses through the change programme. Too many leave too soon for
another post and by so doing can seriously undermine the programme. Depending on the size
and complexity of an organisation a change programme can take five years or more to complete. An example that comes to mind is provided by the Norsk Hydro aluminium smelter at
Karmoy in Norway, where the company engaged all the staff and associated interests including union personnel in a change initiative that strongly featured business creativity activities.
Understand the organisation
The existing hierarchy and culture may not present too many impediments to the usual business operations but may restrict and frustrate an attempt to introduce a new, radical, modus
operandi. Top management will probably have to give serious consideration to introducing a
flatter, downsized, strictly non-hierarchical structure to encourage a TEAM culture (Together
Everyone Achieves More).
Organisational renewal for strategic innovation 285
Develop plans
Whilst the strategic implications of managing change are the responsibility of senior
management, it is important that the functional implications are delegated throughout the
management structure to enable all employees to play a part. The TEAM approach to a
change initiative involving functional planning is a significant motivator. Considerable preplanning needs to precede the detailed development of organisational change initiatives.
Beer and Nohria’s (2000) findings that organisational change was rarely successful were
corroborated by examining the experiences of organisations in the UK. Argyris and Schon
(1996) held the opinion that organisations found it hard to change because they built in
special systems and defences that prevented them from learning and questioning their basic
beliefs and assumptions. McGreevy (2009) found that empirical evidence seems to indicate
that where the circumstances are right change can work provided the necessary conditions
are met, namely:
••
••
••
••
••
••
••
objectives of the change process aligned with organisational objectives;
commitment from the top of the organisation to ensure that resources are available to
manage the change effectively;
commutations – explaining why the change is necessary;
participation;
applied project management;
taking a measured approach to the roll out of the change programme;
progress monitoring of results using metrics such as the balanced scorecard.
Pre-planning a culture change programme
CEOs need to ensure that the values and energy of the organisation can cope with a major
change initiative. It requires a committed attitude to stand a realistic chance of changing
an organisation’s culture. Mintzberg (1994) stresses the importance of managers engaging
with people and leading them on a journey, seeing to it that everyone has a part to play. This
results in a build-up of enthusiasm, which leads to effective team working.
Preparing for change will lead to a greater probability of success. There is resistance to
change in organisations, brought about largely by the fear of the unknown. Handled correctly, using known and tested change management techniques, change can be brought about
successfully, achieving set goals and objectives and to budget. A compelling case needs to
be established as a key part of the project definition, as the more people agree at the outset
that the objectives of a change initiative are necessary, the more they are likely to support
any change. The outcome, impact and benefits should also be defined, taking care not to
over-emphasise the process of change over the impact on those involved. Any organisation operating in today’s uncertain economic climate needs to know how to manage change
in order to survive. It needs to react quickly to the global revolution, while at a local and
national level keeping up with new technology and competition. This viewpoint provides
these organisations with a conscious approach to getting ready for change, which is likely to
lead to a greater probability of success (Edmonds, 2011).
Strategic approaches of Theory Y and Theory WB organisations
Adopting the Theory WB approach requires management to rethink their strategic approaches.
Table 13.5 provides an indication of the nature of these challenges.
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Table 13.5 Approaches of Theory Y and Theory WB organisations
Activity
Theory Y
Theory WB
Strategy
Set by top management
Supply logistics
Suppliers selected on the basis of least
cost and/or reliability
Centralised. Controlled by hierarchical
management structure that exercise
tight budgetary control
Responsibility of internal employees,
e.g. new product/service
development. Produce and sell
approach. External activity such
as open innovation and acquisition
initiatives
Centralised, and target driven.
Tendency of being set in stone so
danger if contextual conditions
change
Set by top management but not always
communicated well to the rank
and file. Top management do
not always abide by the ethical
company codes when tempted to
chase corporate or personal shortterm advantage
Ranges from genuine intent to
increase well-being to cynical
marketing initiatives
Centralised responsibility. Often
conservative approach and skin
deep. Danger of ‘three-way stretch’
Set by self-managing employees in
each working unit. Major changes
of direction cleared with top
management
Suppliers chosen on the basis of fit for
purpose and personal relationships
Devolved to working units who
exercise their own budgetary
control
Usually driven by internal recognition
of unit and customer needs. Able
to innovate internal procedures
and tasks. Fit for purpose and
provides perceived value to
internal or external customers
Driven by what is needed at work unit
level. Sense and respond approach
Purchasing
Innovation
Planning
Ethics
CSR
Change
management
Ethical codes well known by
employees and accepted as vital to
maintain integrity
Open communication results in each
work unit being the keeper of the
collective conscience
Working units agree on the right thing
to do
Occurs organically as unit employees
strive to ‘move with the times’
Importance of gaining and retaining trust
Trust is of paramount importance to individuals and groups (Castaldo et al., 2010). It implies
a high level of positive regard of leaders for their employees. It can take a long time to build
up and can be lost in the blinking of an eye if a business leader is clumsy or inconsiderate
in dealing with people. It demands a just society and a close attention to vitally important
values such as integrity, competence, consistency, loyalty and openness. Integrity concerns a
leader’s honesty and truthfulness. Competence refers to their theoretical and practical ability
(or know-how). Consistency relates to a leader’s reliability – his/her track record in dealing
with challenging situations. Loyalty relates to the leader’s determination to support his/her
charges through thick and thin. Openness relates to transparent communication behaviour
and a determination to tell employees how it is.
ICT has in many organisations introduced a remote leadership practice. Robert et al.
(2009) and Zeffane et al. (2011) found that the use of ICT increased the perceived risk of
team failure and therefore reduced the likelihood that team members would engage in future
Organisational renewal for strategic innovation 287
trusting behaviours. Regular and reliable face-to-face communication is a vital determinant
of lasting levels of trust.
In building a just culture that generates a high level of employee performance and loyalty one success factor is committed and sustained courageous leadership. Another is a
lasting commitment to employee well-being. In a sense, these success factors represent the
‘technique’ of building trust and if they fail or are found wanting a Theory WB organisation will waste away (rust) and will be in danger of reverting to market fundamentalism
(Theory X).
Summary
The purpose of this chapter was to present topics of vital concern to all those involved in the
business activities that are intended to generate successful activity in today’s global business environment. There is a mounting degree of evidence that indicates that the conduct of
business needs to be rethought and reformed in the light of pressing business social responsibility and environmental issues. Business activity is necessary to support the well-being of
everyone in society. What is needed is a more humane approach to business that will energise employees to become productive innovators. This, of course, requires top executives to
cultivate organisational cultures and climates that encourage innovation. The leadership of
organisations needs to change from styles that can be termed ‘pride and prejudice’ (Theory
X) to styles that exhibit ‘sense and sensibility’ (Theory Z and Theory WB). Many might
initially dismiss this as a blueprint for making a disaster and is a MAD proposition. This
text counters by arguing that business is in need of a strategic approach to innovation that
in many cases will require organisations to change the way they operate and adopt a holistic
TEAM approach. This too may at first be seen as MAD. On reflection, it is hoped that this
will be accepted as ethically sound and will make a difference to the generation and sharing
of wealth in society.
Discussion questions
1
2
3
4
5
6
7
8
What are the dangers of the market fundamentalist hierarchical power-command
approach to business?
Can change be managed or do management approaches need to be changed? Can organisations successfully conduct change programmes from an internal perspective? Address
these questions and prepare a brief report for an imaginary corporate CEO.
Increasingly business commentators in the media hold the view that the tendency for
many corporations to rigidly pursue a market fundamentalist approach will result in the
collapse of their organisations. Why do you think that they hold this view?
Why is the concept of well-being receiving increased interest amongst responsible capitalist corporations?
What are the dangers illustrated in the ‘three-way stretch model’?
Why is pre-planning an important stage in organisational change initiatives? What are
the main understandings that need to be addressed?
Why is it important for CEOs to gain and retain the trust of their employees?
Why might running MNCs with a responsible SME approach hold considerable
potential?
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Strategic innovation in changing times
Case exercise
Semco: a maverick approach to management
Semco is a Brazilian company that has gained attention owing to its radical form of industrial
democracy. However, this was not always so. The company was founded in 1952 by Antonio
Semler and specialised in the manufacturing of marine pumps. His son, Ricardo, assumed
control of the company in 1980. Horrified at the hierarchical and patriarchical style of his
father Ricardo Semler was determined to apply a totally different philosophy. His time at
Harvard Business School had left him questioning conventional management wisdom. He
was determined to put his trust in his employees not subject them to a power-command way
of managing. His first major action on succeeding his father was to dismiss 75 per cent of
the senior executives to clear the ground to introduce his vision of a democratic organisation.
Ricardo Semler established a company culture that is based on three fundamental values:
1
2
3
Democracy
Profit sharing
Information transparency.
He felt that people should enjoy going to work and to be free to express their talents. Ricardo
Semler was convinced that it was a waste for employees to find themselves trapped in a
boring workplace life that fostered mediocrity. Semco is a company that has no official corporate structure and not even a fixed CEO – this job rotates. Common sense team working
is a key strength and has been refined over the years by the creation of a workplace culture
that provides a climate of well-being for all its people. The guiding hand of Ricardo Semler
is reflected in his central philosophy that stresses that every company should trust its future
to its employees and they should be treated as responsible adults and not as children who are
told what to do.
Ricardo Semler firmly believes that if people are treated with respect they will give of
their best. Accordingly, rule books were torn up and employees released to form a working
environment where they are self-governed and self-managed. Semco’s management structure
has been reduced from 12 layers to just three and all employees have one of just four titles:
••
••
••
••
Counsellors – who coordinate general policy and direction.
Partners – who run business units.
Co-ordinators – the first level of management.
Associates – everyone else.
Support staff were reduced by 75 per cent. Employees are expected to meet and greet their
own guests and be their own secretaries. Though an enjoyable place to work, Semco does
not offer anyone a job for life. Every six months, all Semco managers are evaluated by the
people they manage. Before they are hired every manager is interviewed by the people with
whom they will be working. Company offices are open plan and barriers to communication
removed. This transparency even extends to a full disclosure to all employees of the company’s finances. Staff are even offered training courses so that they can understand the figures!
Ricardo Semler abolished formal business plans and forward planning diversifying the
business through a looser ‘feel’ approach. The SBUs, which are termed manufacturing cells,
are self-governing and defined by product, market or machine, but always include people
Organisational renewal for strategic innovation 289
responsible for sales, marketing and production. SBU committees meet regularly with senior
management to discuss all work-related issues and policies. Semco has replaced the original
pyramid hierarchy with a flat organisational network that consists of three circles. The central circle has six counsellors, the middle circle contains the partners and the third circle the
coordinators and associates.
In a small business unit, everyone knows what everyone else is doing – and how they
contribute. Employees are encouraged to move on to another job within Semco every two to
five years. It stops them becoming trapped in a job and encourages the development of new
skills. Every two years or so employees are encouraged to take two months’ leave to learn
new skills. White collar staff are expected to work wherever they think fit and blue collar
factory workers set their own hours of work in consultation with their immediate work group.
Employees are free to question company decisions and are permitted to strike without any
adverse repercussions.
Remuneration is set by employees as they decide how to manage funds. The percentage
of company profits to be distributed to the workforce is negotiated by them and they are
empowered to decide how best to apportion the money in their business cell work committees. At Semco, each division has a separate profit sharing programme through which, twice
a year, 23 per cent of the after-tax profit on each division income statement is given to three
employees elected by the workers of that division. Usually the money is divided equally
amongst cell workers.
Employees are also encouraged to set up their own businesses, often with the company’s
help, and supply Semco as well as other companies as part of the well-being philosophy of
the company.
The manufacturing company has diversified and prospered under Ricardo Semler and has
grown into a group containing several companies, from real estate to industrial equipment, to
document management and to consultancy, to education and to tourism. Semco’s profitable
transformation from a Theory X style to a Theory WB democratic culture proves, according
to Ricardo Semler, that ‘worker involvement doesn’t mean that bosses lose power’, but that
an organisation rids itself of ‘the blind irrational authoritarianism that diminishes productivity’. Annual employee turnover is only 1 per cent.
For years Ricardo Semler had harboured a dream of founding a school based on his democratic philosophy and principles. Bothered by the rigidity of conventional school teaching
he established his Lumiar Schools for children up to 14 years of age (http://lumiar.org.br/
index.php/a-escola/?lang=en); the schools are designed to promote democratic education that
encourages freedom and self-knowledge.
Sources: Semler (1994a, 1994b, 2003).
Questions
1
2
3
‘The key to management is to get rid of managers’ (Ricardo Semler). Discuss.
Ricardo Semler has abandoned business plans, future projections as well as job descriptions, permanent positions, and many of the top executive approvals formerly needed to
accomplish tasks. So how does his company succeed?
Why do both Brian Joffee of Bidvest (see case study in Chapter 11) and Ricardo Semler
place such a strong emphasis on running their businesses as if they were a collection of
SMEs?
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Strategic innovation in changing times
YouTubes
‘Innovative School: Lumiar-Brazil’, https://www.youtube.com/watch?v=XzuhoTDPoBU.
References
Argyris, C. and Schön, D. A. (1996) ‘Organisational learning II: Theory’, Asia Pacific Journal of
Human Resources, Vol. 36, Issue 1, pp 107–9.
Barczak, G., Lassk, F. and Mulki, J. (2010) ‘Antecedents of creativity: An examination of team emotional intelligence, team trust and collaborative culture’, Creativity and Innovation Management,
Vol. 19, Issue 4, pp. 332–45.
Beer, M. and Nohria, N. (2000) ‘Cracking the code of change’, Harvard Business Review, May–June,
pp. 133–41.
Capelli, P., Singh, H., Singh, J. and Useem, M. (2010) ‘The India way: Lessons for the US’, Academy
of Management Perspectives, May, Vol. 24, Issue 2, pp. 6–24.
Castaldo, S., Premazzi, K. and Zerbini, F. (2010) ‘The meaning(s) of trust, a content analysis of the
diverse conceptualizations of trust in scholarly research in business relationships’, Journal of
Business Ethics, November, Vol. 96, Issue 4, pp. 657–68.
Edmonds, J. (2011) ‘Managing successful change’, Industrial and Commercial Training, Vol. 43, Issue
6, pp. 349–53.
Fields, D. (2007) ‘Governance in permanent whitewater: The board’s role in planning and implementing organisational change’, Corporate Governance: An International Review, Vol. 14, Issue 2,
pp. 334–44.
Hamel, G. (2011) ‘First, let’s fire all the managers’, Harvard Business Review, December, Vol. 89,
Issue 12, pp. 48–60.
Jeffrey, K., Abdaliah, S. and Michaelson, J. (2014) ‘Wellbeing at work’, New Economics, Foundation,
http://neweconomics.org/wellbeing-at-work/?lost=true&_sf_s=+publications+++well+being+at+w
ork.
Kokkinidis, G. (2012) ‘In search of workplace democracy’, International Journal of Social Policy, Vol.
32, Issue 3/4, pp. 233–356.
Krainz, K. K. (2015) ‘Enhancing wellbeing of employees through corporate social responsibility context’, Megatrend Review, Vol. 12, Issue 2, pp. 137–54.
McGreevy, M. (2009) ‘Why change works sometimes’, Industrial and Commercial Training, Vol. 41,
Issue 6, pp. 305–13.
Mintzberg, H. (1994) ‘The fall and rise of strategic planning’, Harvard Business School Review,
January–February, pp. 107–14.
Robert, L. F., Jr., Zolin, R. and Hartman, J. L. (2009) ‘The central role of communication in developing
trust and its effects on employees involvement’, Journal of Business Communication, July, Vol. 46,
Issue 3, pp. 287–310.
Schulte, P. and Vainio, H. (2010) ‘Wellbeing at work: Overview and perspective’, Scandinavian
Journal of Work, Environment and Health, Vol. 36, Issue 5, pp. 422–9.
Semler, R. (1994a) ‘Why my former employees still work for me’, Harvard Business Review, January–
February, https://hbr.org/1994/01/why-my-former-employees-still-work-for-me.
Semler, R. (1994b) Maverick, New York, NY, Random House.
Semler, R. (2003) The Seven Day Weekend, London, Arrow Books.
Organisational renewal for strategic innovation 291
Semler, R., Dimenstein, G. and Neilsen, E. H. (2004) No School Classroom, Brazil, Papirus Editora.
Zeffane, R., Tipu, S. A. and Ryan, J. C. (2011) ‘Communication, commitment and trust: Exploring the
traid’, International Journal of Business & Management, June, Vol. 6, Issue 6, pp. 77–87.
Selected YouTubes
‘What Is Change Management?’, https://www.youtube.com/results?search_query=What+is+
change.
‘Ways to Build Trust in the Workplace’, https://www.youtube.com/watch?v=IjisUrs4ws8.
‘Organizational Identity and Culture in the Context of Managed Change: Transformation in
the Carlsberg Group 2009–2013’, https://www.youtube.com/watch?v=8uw13q5yFHQ.
‘McGregor’s Theory X and Y’, https://www.youtube.com/watch?v=NK8-LhqF4N0.
‘Theory Z’, https://www.youtube.com/watch?v=-ijrHlXE9JU.
Appendix 13.1: organisational creativity audit interpretation
Organisational Creativity Factor Analysis (OCFA): context-related factors
Statement
1
7
13
18
Agree
Agree Disagree Disagree
strongly
strongly
We are supply oriented
We are service oriented
We are a domestic organisation and do not look for
business abroad
We are seriously influenced by contextual factors
OCFA: management-related factors
Statement
2
8
14
19
25
We have a working definition of management that
is communicated to all our people
We organise tailor-made training programmes for
our people
We believe it best to run our organisation on hard
systems thinking
We believe that our customers are more important
than our organisational culture
We operate an open management style
Agree
strongly
Agree
Disagree
Disagree
strongly
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Strategic innovation in changing times
OCFA: creativity-related factors
Statement
3
9
15
20
26
Agree
strongly
Agree
Disagree
Disagree
strongly
Agree
Disagree
Disagree
strongly
We are aware of business creativity
We understand what business creativity is all about
We are prepared to evaluate new ways of
management thinking
We encourage and provide space for creative
problem-solving activity
We are running or have recently run a major
organisational change programme
OCFA: individual empowerment factors
Statement
4
10
16
21
25
Agree
strongly
We encourage individual creativity
We practise open communication
We try to provide secure employment for our people
We cultivate a trust culture
We spend as little as we can on the work environment
OCFA: group empowerment factors
Statement
Agree
strongly
Agree
Disagree
Disagree
strongly
5 We support group working
11 We provide suitable training for groups
17 We encourage and provide time for business
creativity group work
22 We train people to facilitate groups
28 We reward individual and group achievements
OCFA: organisational empowerment factors
Statement
6 We value our people as we do our family friends
12 We try to make the organisational culture serve the people
rather than make the people serve the organisation
23 We are a Learning Organisation
29 We tolerate innovation mistakes
25 We expect loyalty upwards and downwards
Agree
Agree Disagree Disagree
strongly
strongly
14 Reflections
Whatever you do or dream you can do – begin it. Boldness has genius and power and
magic in it.
(J. W. Goethe)
Talking isn’t doing. It is a kind of good deed to say well; and yet words are not deeds.
(Shakespeare, Henry VIII)
Learning objectives
This chapter explores:
1
2
3
4
5
6
7
Noteworthy contextual business trends in Africa, Asia, Europe and South America.
Key leadership trends.
Key organisational trends.
Growing importance of creativity and innovation.
The pursuit of happiness.
The need for business to face up to the impact of wealth creation activity on the environment and society.
The importance of revisiting acceptable ethical and moral attitudes in the business
practice.
Introduction
This is the closing chapter of this text and it is hoped that it challenges readers to think
through the key points raised on the journey though Chapters 1 to 13. (See Figure 14.1.)
Context
Business trends
Chapter 1 discussed the array of contextual changes that are impacting on the business
world. These have coalesced to produce a challenging climate for organisations both
large and small. The world is now perceived as a ‘global village’. The four continents
Figure 14.1 Overview of reflections.
Reflections 295
that are featured in this text (Africa, Asia, Europe and South America) are all seeking
ways to boost their national economies. As the developed economies face increasing
competition from the major under-developed countries (Brazil, Russia, India, China) and
their satellites the business world is faced with the impact of the rate of technological
advance. The digital megatrend has brought together the world as one big community
boosted by the powerful globalisation megatrend (Kekic, 2012) that is characterised by
highly competitive markets.
As the pace of business development accelerates many businesses are experiencing buyers’ markets in which the supply of goods and services exceed the demand. To survive and
prosper companies increasingly have to turn to innovation as a major driver of growth with
the same urgency that attached to the mergers and acquisitions in the 1990s.
Business activity occurs in a world that is rapidly running out of non-renewable resources.
An example is carbon-based, organically derived fuel. The original organic material, with
the aid of heat and pressure, becomes a fuel such as oil or gas. Earth and metal ores, fossil
fuels (coal, petroleum, natural gas) and groundwater in certain aquifers are all considered
non-renewable resources, though individual elements are almost always conserved. In
contrast, resources such as timber (when harvested sustainably) and wind (used to power
energy conversion systems) are considered renewable resources largely because their localised replenishment can occur within time frames meaningful to humans. Land and water are
becoming short and both are becoming more polluted. Another increasingly important example is rare earth, which is used in smartphones, hybrid vehicles, missile systems, medical
devices and other electronic products. In future society will have to function in a closed-loop
or circular economy.
Added to all these trends are the complex darkening clouds of climate change and pollution that have been addressed by Naomi Klein (2014) in her important book This Changes
Everything. She blends together the science, psychology, geopolitics, economics, ethics and
activism that encompass these dangerous trends.
Figure 14.2 Circular economy.
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Strategic innovation in changing times
African trends
Instant availability
Despite being the least developed of the four continents, global communication and foreign
investment is fuelling consumer demand in Africa. Upwardly mobile Africans regard the
ready availability of goods and services not available to the masses to be a status symbol.
Kenyan government and Grundfos
ATMs provide clean water on tap. June 2015 saw Danish water engineering company Grundfos and the Kenyan government collaborate to launch ATM-style water
dispensers in Nairobi. The ATMs require a smart card system to provide water to slum
residents and are designed to provide an alternative to traditional sources of water.
Users insert a smart card (which can be topped up at kiosks or via cellphone), and then
specify how much water they’d like, before it’s dispensed from a pipe below the ATM.
Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).
Like Kenya’s ATM water dispensers, investing in clever tools that allow users to flaunt their
new service provider is vital. Other beneficial strategies include instilling ‘barriers to entry’
that aspiring consumers will covet, like ‘smartphone over feature phone’ compatibility, or
pre-required user skill-sets/know-how, such as WeChat familiarity.
Responsible consumption
Many Africans have long realised that emulating models of growth hijacked from the West
may not be the answer. Now they are looking for new models of growth – with a renewed
confidence in themselves and a new sense of urgency. Most Africans no longer rely on governments to facilitate a better country. Indeed, 58 per cent of Africans believe that corruption
on the continent is getting worse (Transparency International/Afrobarometer, 2015). Instead,
they are looking to brands and entrepreneurs to support them. Increasingly aware of the
negative and damaging impacts of ‘third world consumerism’, the black market and a lack
of individual discipline, conscientious individuals will welcome brands that use responsible
consumption to encourage or even enforce good behaviour and improved well-being.
SureSlim: chocolate flyer encourages weight-loss
In July 2015, South Africa-based weight-loss programme SureSlim produced a flyer
made out of 100 per cent pure milk chocolate to attract new customers. The chocolate
flyer was distributed across the country, offering people 20 per cent off the weight-loss
programme if they brought the uneaten flyer to a SureSlim store. Another chance was
given to those who gave into temptation, by giving customers 1 per cent discount for
every block of chocolate they hadn’t eaten.
Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).
Reflections 297
Transaction convenience
As disposable incomes grow for many Africans, the financial services infrastructure gap
is becoming even more apparent. These consumers are realising that they are being held
back by their inability to transact easily with brands and businesses around the world
and online. This is creating a heightened demand for newer and more innovative forms
of payment. Innovative companies won’t imitate outdated models or wait for the powers
that be to lead the way. Instead, they will implement convenience payment strategies
of their own and in the process will attract loyal, happy and (most importantly) paying
customers.
Vodacom, MTN, Cell C and Telkom South Africa
Telecoms networks allow donations of cellphone data for protesting students
A website enabling members of the public to pay for bundles of cellphone data on behalf
of South African students involved in a protest was set up in October 2015. Donations
covering the cost of 100 MB data bundles from various operators could be made through
the website, using online banking or via Bitcoin, with prices starting at ZAR 19 (around
US$1.40). An initiative to support students involved in #FeesMustFall – a movement
fighting hikes in university fees in South Africa – students could also use the website to
request a donation.
Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).
Africa is a late adopter in the banking sector. Ghana, for example, only introduced deposit
ATMs in 2013. However, this can be advantageous. In the same way that Africa leapfrogged
the laptop and went straight to the cellphone there are many opportunities to do the same with
outdated transaction methods.
Gender equality
Whilst women in the EU and beyond continue to fight for their rights Africans are fast
closing – if not overcoming – the West’s gender gap. Until recently, acknowledging
women in Africa remained an institutional affair. Now, businesses across the continent
are actively responding to the call to bring women to the forefront of society.
Gender reforms will mark the convergence of three key growth areas of African female
empowerment:
1
2
3
Gender equality through ongoing training and skills building initiatives.
Expansion of women employees in the traditional male-dominated industries.
Increase in the availability of innovative new goods and services for women.
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Pink Taxi: female only taxi-service launches in Egypt
September 2015 saw the arrival of Pink Taxi in Egypt. The taxi service caters exclusively for female passengers and is run solely by female drivers. The company’s
founder states that the service caters to the need for safer transportation for women in
the country. Cabs are available to order in advance via phone, online or using the Pink
Taxi mobile app. Prices for a ride start from EG£35.
Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).
Improved online services
With rising connectivity and adoption of smartphones, Africa’s disorganised consumer landscape will be developed to provide a systematic roadmap to assist consumers to buy online
and offline. Africans are used to the instant information that the Internet provides, however,
the informal economy and institutional services have largely stayed offline, lagging behind
in the adoption of more automated, instantly accessible, informative and democratic services.
The result is an increased chance of poor service quality, lack of safety guarantees and little
accountability.
Kaymu: online retailer’s Lagos hub facilitates transactions
between local buyers and offline sellers
October 2015 saw Nigerian ecommerce platform Kaymu open the Kaymu Village: a
physical space in Lagos bringing small businesses and local entrepreneurs together
with buyers. The space allows customers who cannot complete e-payments to make
purchases, and will provide support, resources and marketing to sellers. Nigeria has
around 67 million Internet users among a population of 180 million.
Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).
Asian trends
Network connections
Asia is the world’s social capital and socially inclined consumers will connect with strangers
and individuals in their extended network for mutual benefits, to get things done and create
shared value. The idea of tapping into personal connections to achieve a goal is age-old in
Asia and connectivity is allowing consumers to reach even more people, despite distance and
differences, to maximise resources and create shared value.
Additionally, the prevalence of social media means attitudes towards connecting with
strangers are now more relaxed. The growth of the sharing economy and the transparency
culture that the Internet allows (from peer reviews to verified information) means many consumers now have fewer reservations when engaging in transactions with strangers.
Reflections 299
Airfrov: platform connects travellers to shoppers
Airfrov is a Singapore-based platform that pairs frequent travellers with luggage space
to spare with shoppers who want to buy specific products from overseas but don’t have
the luxury to travel for it. Through Airfrov, shoppers can enjoy their favourite products
more frequently, and without the exorbitant shipping fees, while buyers get to make a
little profit in exchange for filling the empty spaces in their suitcase.
For Singapore’s SG50 Independence Day celebrations in August 2015, Airfrov
launched a promotion allowing overseas Singaporeans in selected cities in the UK,
China, Taiwan, Hong Kong and Japan to request traditional products unavailable in
their current residences.
Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).
Corporate social responsibility
The Sharing Economy meets the future of CSR in Asia. In a world of transparent information flow, being responsible (both socially and environmentally) is now a hygiene factor for
brands and businesses. But what’s next for CSR in Asia? As the relationship between MNCs
and consumers becomes increasingly democratised, boundaries will continue to blur. MNCs
should consider utilising idle capacity and embedding value into resources that would usually get wasted – all for the good of society. Showing ‘human’ values via a social media
presence and a brand personality is no longer enough. Consumers demand real action from
companies to show that they really care. Meanwhile, the sharing economy has re-shaped consumer expectations around access to resources. Now this expectation is being transferred to
companies. If consumers can share resources and create shared value, why can’t companies
do so too?
K Raheja Corp: mall-generated electricity provides rural
villages with light
Announced in April 2015, The Escalator Project is an initiative from K Raheja Corp
providing rural homes with electric lights. The Indian real estate group provided 50
homes with lamps using rechargeable batteries which could be charged via dynamos
in escalators at the K Raheja Corp-owned InOrbit Mall. Charged batteries are swapped
each week, in order to ensure a consistent supply of light.
Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).
Heritage appeal
Preserving tradition is very popular in Asia. On the one hand, consumers are concerned
that the wave of globalisation and Westernisation that is sweeping across Asia will erode
traditional values and cultural heritage. They increasingly crave authenticity and a sense of
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identity, desiring to stand out in a world where standard company offerings are marketed
from Shanghai to Surabaya. On the other hand, in an era where almost anything can be delivered at the push of a button, consumers do not want the hassle and inconvenience that often
comes with preserving tradition. Mature consumers are also more open towards new and
liberal ideas that push the boundaries of tradition.
Smart companies are addressing this gap by reinventing tradition to remain relevant in
today’s lifestyle – by adding layers of convenience, embedding it seamlessly into modern
living, making it fun, and more.
Eveready: battery brand revives the ancient art of
illuminated story-telling
Eveready’s Book of Play is inspired by Wayang Kulit, the Malaysian tradition of using
light and shadow to tell stories. Bringing the stories to life when illuminated with a
flashlight, the battery brand’s bedtime story book was designed to bring families closer
together. Around 30,000 copies of The Eveready Book of Play were distributed to
1,000 stores across Malaysia.
Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).
Responsible business
Some issues, such as smoking and littering, are so deep-seated in Asian societies that consumers have long since accepted them as the norm. Now, consumers are looking to companies to
stand for something other than only making money, and to take a more active role in solving
society’s issues. Businesses are increasingly turning to shock methods to jar consumers into
action. Many social and environmental problems are complex, and so deeply ingrained that
people have long since given up trying to solve them. Also, jaded consumers are bombarded
by a tide of messages and calls-to-action.
Thai Health Promotion Board: anti-tobacco posters printed
with ink made from smokers’ lungs
In 2015 the Thai Health Promotion Foundation unveiled ‘The Message from the Lungs’:
an anti-tobacco campaign featuring posters printed with ink made from smokers’ donated
lungs. The Foundation worked with Chulalongkorn University’s Faculty of Medicine to
extract tar from smokers’ lungs and turn it into ink. Posters were printed with the resulting ink and displayed in public spaces to encourage smokers to quit. As a result of the
campaign participation in smoking cessation programmes increased by 500 per cent.
Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).
Reflections 301
The informal economy meets smartphone culture
The informal economy – providing informal, decentralised and cash-based services – has
always thrived in Asia. Although consumers are now used to the instant information that the
Internet provides, the informal economy has mostly stayed offline. However, with growing
connectivity, expectations as to what is available online are always broadening. Consumers
are now demanding the same ease of information when it comes to informal service providers. An important consequence of the informal economy’s decentralised nature is a lack
of quality and safety guarantees. New connected platforms that organise and manage these
informal service providers bring with them the culture of reviews, ratings and transparency.
Consumers are embracing this new assurance with open arms.
Go-Jek: on-demand motorbike taxi app adds beauty,
cleaning and moving services
Go-Jek are unlicensed motorcycle taxis that are a popular mode of public transport in
Indonesia. October 2015 Go-Jek added new in-app services. Go-Glam offers on-demand
access to beauticians, Go-Box offers house and office moving services, and Go-Clean
offers home and office cleaning. Go-Jek transformed the informal marketplace when it
launched in January 2015; the service operates in Jakarta with over 2,500 drivers.
Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).
European trends
The euro: a means not an end in itself
The Eurozone is in crisis and is suffering from a long period of stagnation. Prosperity in
terms of GDP (adjusted for inflation) was only marginally higher in 2015 than it was in 2007
and many countries have been depressed for years (Eurostat, Code: tsdec100, accessed 17
August 2016). Employment prospects are bleak in the Eurozone with unemployment over 10
per cent since 2009. The creators of the single currency failed to realise the implications that
this would have on the Europe’s economic and political diversity and national aspirations.
Although the founders of the euro had great expectations that it would substantially improve
the national fortunes of its members essentially it was a political initiative designed over time
to build a united European state.
The decision of the UK electorate to leave the EU has caused a disturbance of earthquake
proportions leaving the members of the EU with a massive challenge. The bell is tolling and
politicians will need to revisit immediate post-war dreams of forging a united economic and
political Europe to see whether it is worth the cost. Brexit has lit a democratic fuse that may
lead to EU member states voting to abandoned the dream. The Eurozone was intended to
bring greater well-being but is in reality just a means to an end. If well managed and backed
up by sound business decisions, it can still bring greater prosperity for all but, if not, it will
depress living standards (Stiglitz, 2016).
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Connecting customers
The Connection Economy rewards value created by building relationships and creating
connections, rather than building assets by industrialism. This means the most valuable companies will connect buyer to seller, or consumer to content. Regardless of their sector of
activity, all European businesses have the chance to take advantage of this development.
The Internet can play an essential part in accelerating growth, not just for selling products
or services online, but also for finding raw materials and external providers at the best price.
A social media presence is key to this. Over 900 million people use social media today.
Companies and brands have a great opportunity to reach them in innovative ways.
Targeting Millennials
The largest group of individuals, according to the Census Bureau is people in their 20s
(80 million). This group, often categorised as Millennials, now represents the largest customer and employee segment. They are also soon to be the largest business owner segment.
From 1947 to 2010, Baby Boomers represented the largest segment of the population.
Importance of SMEs
SMEs are seen as important for the region’s growth and development.
Need for product and service innovation
Basic commodity products will continue to see margins erode. Attention to developing a
corporate culture of customer service and strategic innovation management to meet customer
expectations will enable companies to grow and sustain their profitability.
Waitrose targets expats
Waitrose, the premium UK supermarket owned by the John Lewis Partnership, has
struck a deal to offer 2,000 own-label products through the online retailer British
Corner Shop to more than 138 countries. The decision to sell overseas will allow the
company to target expats and faster growing countries, particularly in the developing
world.
Source: The Independent (2016) i@news.co.uk, 5 July.
Call for strategic innovation
Basic commodity products will continue to see margins erode. Strategic attention to developing a corporate culture of customer service and strategic innovation management to meet
customer expectations will enable companies to grow and sustain their profitability.
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South American trends
Immigration and integration
As the complex refugee crisis playing out in Europe impacts South America, immigrants have
been welcomed, adding to the influx of those who have applied for asylum in recent years. As
a result, the region has become even more diverse, increasing tolerance for diversity. In August
2015, for example, Mexican citizens started a petition at Change.org to pressure the Mexican
government to give asylum to refugees from Syria. Integration is the key word for the region.
Helping Hand: Brazilian app provides information for new arrivals
In May 2015, a group of students created Helping Hand, an app that tracks institutions
around Brazil that offer support to refugees and immigrants. The app provides information on how to find and engage with key institutions such as schools, NGOs, charities
and government agencies.
Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).
Urbanisation
Urbanisation is accelerating in South America faster than anywhere else in the world.
According to the UN, 90 per cent of Brazil and the rest of the Southern Cone’s (Argentina,
Chile and Uruguay) population will live in cities by 2020. By 2050, 89 per cent of all South
Americans will be urban-dwellers. This will trigger growth opportunities in the region’s
cities. It will also place more stress on infrastructure, including roads and other forms of
transport. As a result many are moving away from using their cars. The percentage of drivers
who have cars and use their vehicles every day or almost every day in São Paulo has fallen
from 56 per cent in 2014 to 45 per cent in 2015.
Dafiti and Biko: app rewards cyclists with virtual currency
In November 2015, the ecommerce platform Dafiti partnered with Colombian application Biko, a platform that aims to improve mobility problems and pollution by
encouraging the use of bicycles. The tool provides a map showing bike paths, parking
lots, and obstacles on the roads, among other information that may be of interest to
bikers. When users of the app ride 1 kilometre they earn a ‘Biko’ (the app’s virtual currency), which they can spend with partner retailers, including Dafiti.
Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).
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Marketing to the time poor
South America’s professional, urban middle classes are experiencing higher incomes, longer
working hours and an explosion in the consumer choices available to them. One result of
the convergence of these three powerful forces is that consumers across the region have
never felt more time-pressed. Companies that make it a priority to be there as and when
needed, offer services at the touch of a button and reduce waiting times to zero (or as close
as humanly possible!) will be rewarded.
Musiglota: app teaches English through song
April 2015 saw the launch of Musiglota, a Chilean app that teaches English through
song. Available for smartphones and tablets, Musiglota includes an interactive music
player that shows song lyrics and translations in real time. To train ‘listening’ and
‘speaking’, the app also has the option to ‘read’ each sentence of the music. The software also generates a ‘micro class’ for each played song, with exercises and interactive
activities, which can be played individually or taught by a teacher in a classroom.
Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).
Co-creating customer-perceived value
South Americans are big users of social media and the Internet and have demonstrated a keen
interest in joining with companies in the development of new products and services.
São Paulo’s supermarkets: discounts offered to customers
who bring their own shopping bags
June 2015 saw supermarkets across São Paulo offer customers the option of receiving
discounted groceries in exchange for using their own shopping bags. Customers who
chose to receive discounted goods had the option of receiving BRL0.03 (US$0.01) for
every five products purchased, or a discount for every BRL30 (US$9.50) spent.
Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).
Digital opportunities for SMEs
According to the International Labour Organisation (ILO), micro and small businesses are
the engine of job creation in South America. There has been a huge growth in micro and
small businesses. People who were once employees of big companies started their own businesses, and many entered the informal economy. Careful attention to web design will make
these companies easy to find on the Internet.
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Lupe: Argentinian app connects beauty consultants to customers
Launched in Argentina in October 2015, Lupe is a free app that lets consumers find and
engage with local hairdressers and beauticians, select services, book appointments at
home or in salons and pay for services.
Natura: brand partnership helps consultants get in touch with customers
Brazil-based cosmetics company Natura equipped its 1.3 million direct sales consultants with a chip from Claro Telecom and mobile payment machines from e-payment
service Pag Seguro. The partnership gave Natura consultants free data to interact with
potential customers via the Natura app, and allowed consultants to accept payments
with debit and credit cards.
Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).
Key principles
Management and organisation
Most established businesses are inherently conservative and feel uncomfortable in times of
discontinuous change. They try, especially MNCs, to manage the squalls of the business
world. Soon they realise that a different management approach is required. Consultants are
recruited by some to recommend a quick fix or an acceptable solution that eases their modus
operandi. Short-term thinking that seeks to shore up poor performance is common and often
results in crises that threaten their existence. ‘For the times they are a-changin’’ and it is time
for boldness.
To raise new questions, new possibilities, to regard old problems from anew angle,
requires creative imagination and marks real advance in science.
(Einstein)
Many CEOs of MNCs, whilst personally recognising the need to forge a new way of doing
things, are constrained by the Western business paradigm requirement to generate and sustain a steady return for their shareholders. Only the brave step out and become focused on
the understanding of the necessity to forge a new organisation. Old ways can die hard and it
takes courage and determination for CEOs used to traditional management practice to take
on the task of rebuilding their organisations to make them fit for purpose. As it becomes
increasingly evident that new ways of organising business activity is necessary, wise companies will see and respond to the need to design new organisational models. Shared culture,
designing a work environment that engages people, and constructing a new model of leadership and career development.
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Prophesy becomes reality 25 years later, but who is listening?
We are leaving the age of organised organisations and moving into an era where
the ability to understand, facilitate, and encourage processes of self-organisation
has become a key competence.
(Morgan, 1993)
A studied view from the boardroom will reveal important response trends that require top
management to deconstruct hierarchical business models and to construct models that reflect
a determination to move away from top-down power command styles toward more democratic styles that reflect the values of their own family and society.
Key trends
1 To fully accept that business activity is now carried out in a highly competitive global
market.
2 To realise that the best way forward in crowded market places is by being determined to
make a difference by paying serious attention to innovation.
3 The need to actively develop and sustain a shared transparent culture, designing a work
environment that engages people to be creative and innovative, and constructing a new
model of leadership and career development.
4 To value their employees and to build a culture that seeks to address their well-being.
5 A requirement to fully recognise the importance of the digital revolution and to fully
accept the necessity to converse with their customers via channels such as the Internet
and social media.
6 The need to review their business strategies in the light of these trends and to give greater
attention to the medium and longer-term horizons.
7 To accept their responsibilities to act morally and ethically in their relations with their
own employees, suppliers, workers and to exercise corporate social responsibility and
solidarity in the societies that they impact.
8 To adopt democratic, flatter networking structures that support the activities of networks
of teams to generate and sustain innovation.
9 To consider the social impact of over centralising activities to gain cost economies and
to exercise subsidiarity toward their customers. Banks, for example, should pay more
attention to the financial needs of local businesses.
10 To exercise responsibility to the ways in which their activities impact on the environment.
Organisational culture
Theory WB model
The purpose of this text has been to present, by means of a model (Theory WB) the determinants of organisational culture which influence creativity and innovation. The literature
reveals that a model based on the open systems theory can offer a holistic approach in
describing organisational culture. The relationship between creativity, innovation and culture
has been discussed in this context (Martins and Terblanche, 2003).
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Determinants of organisational culture
In the light of Theory WB, the determinants of organisational culture were identified. The
determinants are strategy, structure, support mechanisms, transparent leadership and management that encourage individual and group creativity and innovation within an open
communication climate.
Leadership
Emergence of multiple layered leadership
The story of the last 50 years has essentially been about the individual. It began with discoveries about what makes a good leader and was followed by the development of practices that
helped leaders to learn effective leadership skills. However, in the last decade this model has
become less effective owing to the complexities of the new business environment in which it
is not possible for any one individual to define and solve problems. Leadership is becoming
more distributed and will increasingly be as much about tapping into the leadership skills of
those within organisations as it is about a single visionary, decision maker and communicator. This idea is not new as organisations’ project and SBU groups come to terms with what it
means to be self-organising teams and will highlight the value of everyone stepping up to the
role of leader. In addition, the idea of leading for the purpose of developing loyal and trusted
relationships is going to be the focus of team building.
Key trends
1 Leadership is more than getting people to perform for the benefit of the bottom line by
means of Theory X, or Theory Y approaches. It is about connecting with them and valuing their skills and talents by practising a Theory Z approach or better still being more
concerned with their well-being, with a Theory WB approach.
2 Leaders are selected, recognised and evaluated for their ability to sincerely tap into the
human experience and talent of the people they represent.
3 The intrinsic value of understanding others in order to establish meaningful relationships
among team members, particularly those internal employees who may be physically distant.
4 Working effectively with people who are external to the organisation such as
non-employee associates, suppliers, open sourcing contacts, customers, other key stakeholders and third parties.
5 Leaders need to be transparent and loyal to earn the trust of the people they work with
and avoid any temptation to compromise individuals or work groups.
6 Today’s leaders must be aware of diversity issues and comfortable in working with individuals no matter what their colour, culture, gender, nationality or race.
7 Organisations will need to develop multi-level leadership systems and delegate authority
to business units and rank and file employees.
8 Senior leaders, for example board executives, will need to develop clear and open lines
of communication.
9 There is a growing conviction that talented leaders learn their skills through direct onthe-job experience.
10 Training and development requirements should be influenced by consideration of what
is needed in the workplace (some innovative organisations encourage individuals to
request suitable training courses) rather than prescribed in standard boot-camp training
packages by central human resource departments.
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Creativity and innovation
Growing importance of creativity and innovation
The rapidity of ICTs and economic development raise a whole new set of challenges.
Creativity is becoming the basis for successful professional activities, as it spurs innovation
and ensures that problems are solved efficiently (Samašonok and Leškienė-Hussey, 2015). It
is important to realise that creativity and innovation are different. Creativity refers to generating new and novel ideas. Innovation refers to the application of an idea and, in many cases,
is a collaborative enterprise.
Group creativity and self-management
The team has become the basic organisational unit of development and innovation work and
an understanding of creativity at the collective level is crucial for long-term sustainability
(Backström and Söderberg, 2016). This text takes a process perspective and understands
group creativity as emerging from the interaction among group members. It is about the possibility to enable the emergence of self-management, thereby increasing group creativity. In
group creative problem-solving (GCPS) sessions ideation occurs freely and can be observed
and used by other group members. A work process structured according to the GCPS model
increases self-organisation as well as the creativity of the group.
The pursuit of happiness
As the Semco case exercise in the previous chapter has shown, employees can find happiness
at work. Most want to work in organisations where people come first, yet most experience
workplaces that depress. The work environment fails to inspire. Jobs can be repetitive, dull
and make people feel like machines. Many are apprehensive of organisational politics and
some in these unstable times fear for their jobs.
Progressive organisations realise the benefits that a happy workforce can bring to the conduct of their businesses and some now employ Chief Happiness Officers. Unhappy workers
are typically found in organisations where they have little opportunity to express themselves
and exercise some degree of self-management. Happiness is excellent for business. A cheerful worker, Davies (2015) finds, is as much as 12 per cent more productive. What capitalism
used to regard with suspicion – feeling, friendship, creativity, moral responsibility – have all
now been co-opted for the purpose of maximising profits. What is not always apparent is top
management’s realisation that happiness is an end in itself and not a means of power, wealth
and status.
The facilitation of self-fulfilment is at the heart of the matter. Happiness is about individual
well-being. It is about feeling valued and respected. It is about trust. It derives from the ethical
practice of virtue as explored down the ages from Aristotle and Aquinas to Hegel and Marx.
Happiness is about the contentment that comes from being treated well in the workplace. It
stems from a corporate culture that respects all and fosters a team spirit. Perhaps it is usefully summed up by the phrase, ‘do as you would be done by’. Cynics might argue that this
demands taking a family approach to running businesses – something that only SMEs or privately owned corporations can achieve. Good examples here are provided by Henry Stewart’s
(2012) Happy Ltd. and Ricardo Semler’s (1994) Semco. The belief or prejudice that leads
many to declare that this approach will never work in MNCs is countermanded by Ford with
Reflections 309
its Team Ford culture pioneered by Mulally (Hoffman, 2012) and Google’s commitment to
spreading morale and empathy with its ‘jolly good fellow’ philosophy headed by the corporation’s guru Chade-Meng Tan. The concept of well-being is essentially about a sustained
attitude and intent to develop a supportive, transparent and loyal environment that reflects
family rather than digital values. Aristotle called it politics. Shame that this noble philosophy
has displayed the unacceptable face of capitalism in a large part of business life.
Practice
Revisiting the practices of wealth creators
All the chapters in this book have addressed key topics set in the framework of context, key
principles, practice and action. This chapter urges wealth creators and governments to reassess their key principles in the light of the forces governing reality in the 2010s and beyond.
As principles underpin responses to contextual change they should be revised and refined to
meet the real needs of people. All communities in the wealth creation process, corporations,
financial institutions and governments, should be working together to improve everybody’s
well-being.
As businesses enter the last half of the decade the playing fields present major challenges,
many of which have been apparent since the 1990s, to all participants. Political shifts, the
pulse of rising nationalism and terrorism are evident in several countries. Top management
will have to contend with a variety of issues that can no longer be paid lip-service and placed
in the long grass. Some of the most pressing are briefly summarised below.
Economic system
The celebrated Cambridge economist Chang (2010) has exploded important myths that many
policy makers consciously or unwittingly regard as truths such as:
••
••
••
••
••
••
••
Free markets exist, are good for business and raise living standards everywhere.
Globalisation is making the world more prosperous.
Global companies need have no national roots.
Poor countries are more entrepreneurial than rich ones.
Higher paid managers produce better results.
The USA has the highest standard of living in the world.
Financial markets are rational (Cassidy, 2010).
Furthermore, he asserts that economists and politicians have become mesmerised by the
spurious harmony of virtual mathematical models, and failed to see mounting instability in
the real world and in particular were blind to the dangers of an unregulated financial system.
In June 2016 the global economy was taken by surprise by the UK electorate’s decision to
leave the EU.
As key influences on economic performance, banks, economists, financial experts and
politicians have all been found wanting. Directing his fire at economists Chang writes that
‘Economics as has been practised in the last three decades, has been positively harmful to
most people.’ He recognises the failings of centrally planned economies, and describes capitalism as ‘the worst economic system except for all the others’. At the same time he is
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confident that it can be reformed to prevent crises like the 2008 meltdown and the disturbing
waves of the Brexit decision. Making markets more transparent is not enough. ‘If we are
really serious about preventing another crisis like the 2008 meltdown,’ Chang writes, ‘we
should simply ban complex financial instruments, unless they can be unambiguously shown
to benefit society in the long run.’
As long as economic policies are heavily influenced by financial pressure groups there
is little chance of reforming mindsets that favour financial products such as financial derivatives and casino banking. Many executives of Western global MNCs may be under the
illusion that the Anglo Saxon model of capitalism is the best system and give insufficient
heed to the different models in China, India and Russia. Capitalism is not only about creating
wealth, it is also about power. The truth is that Western power is on the wane and that of the
under-developed countries is rising.
The purpose of capitalism should be to increase the well-being of the peoples of nation
states, not favour the fortunate few at the expense of the majority. Too great a degree of
self-interest by business professionals will ultimately undermine and destroy societies. Best
capitalist policies do not reduce public expenditure, damage national economic infrastructures and impose heavy burdens on the less fortunate population.
Austerity programmes are damaging. Reducing national debt impacts negatively on
demand in an economy which in turn results in falling output and GDP. This is why the Greek
economy is shrinking faster than its national debt. Austerity is a self-defeating strategy. If
governments want to revive their economies, they need to spend more than they receive in
taxes. The argument that the books must be balanced is in essence about reducing the size
of the welfare state and re-designing the economy along the lines of the U.S. model. Such a
course is damaging to efforts to address the well-being of individuals. The UK welfare state
does need to be reformed, as living conditions have changed since its origins in the 1950s
and 1960s. People are living longer and there are fewer young people to fund it. It is not just
to ridicule welfare expenditure as offering an opportunity for people to opt out of productive
work. Those who raise this argument should try living on reduced state welfare payment.
Environment
The physical environment is of paramount importance to all. Carefree human degradation
of the space in which we live must be checked. Wanton extractivism is an environmental
disaster. Naomi Klein’s This Changes Everything (2015) says everything. Life is about the
interface between wealth generation whether by a capitalist or a planned economic system.
Sense rather than denial needs to prevail.
Society
Working towards achieving well-being for all in society should be a major purpose of wealth
creating activity. Corporate attention should address social needs as well as those of business
owners and shareholders. Business success needs to respect society and be seen to be justly
gained. Regulation to safeguard social values rather than deregulation is necessary but not
sufficient. What is called for is a revision of the value of human life and an abandonment of
business activity that exploits people. In itself increased regulation will never succeed, as
powerful corporations will always find legal loopholes. Rather, a return to family values is
required. Wealth creation activity should reflect social solidarity and subsidiarity. In short,
the necessity for many corporations and organisations to change their ways as argued in this
text should be preceded by a new and just revision of ethical values.
Reflections 311
Action
The trumpet sounds
Business and society must recognise that it is time to pause and rethink where we are all going,
to check major social and environmental abuse and to work for the common good. Wealth
creation requires business activity and it is time ‘to walk the talk’ – ‘Talking isn’t doing. It is
a kind of good deed to say well; and yet words are not deeds’ (Shakespeare, Henry VIII). A
boost is needed to the contribution of creativity and innovation to future wealth creation that is
dependent on a reassessment of corporate and organisational values and practice.
The Toymaker story provides an illustration of a different approach to business which
makes a difference. In reality, the progress from Theory X to Theory WB management styles
is one that in many cases will take time. Most organisations reflect a mix of Theory X, Y, Z
and WB values. It is possible, as companies such as East African Breweries, Happy, Semco
and Toyota have shown, to make a difference by achieving more socially and environmentally responsible positions on the Theory X to Theory WB continuum. What is required is a
pragmatic reality-based way of thinking (Cassidy, 2010).
Summary
This concluding chapter summarises some important key trends that challenge business practitioners. Societies need to create wealth in order to improve the well-being and happiness
of their populations. The practices that generate wealth are often disrespectful of the environment and society. Managers need to become leaders and to be wary of attempting to run
businesses by numbers. The focus should be on everyone and not just the privileged few.
Ethical standards of legal business behaviour are in need of being recast. Climate change
is real and action must be taken to reduce carbon footprints and irresponsible extractivism.
The world is at a pivotal point and in need of champions to lead in a way that pays heed to
solidarity, subsidiarity and a realisation that scarce resources and finance should be used to
raise the well-being of society.
Discussion questions
1
2
3
The closing case raises several issues that are of prime importance for today. How might
a theory X business reform to morph into a Theory Y organisation?
Some say that only small businesses can achieve Theory WB status. Explain, with reference to examples, why this contention is wrong.
Capitalism, like communism, if practised to extreme contains a toxin that will do untold
damage to the well-being of society. Why do you think this view is attracting increasing
interest in the latter years of the second decade of the twenty-first century?
Case exercise
Toymaker II
After the end
Was he still The Toymaker? This is the question which troubled him most at 3.00 am. In some
ways it was a relief not to be involved anymore. Not to have business managers telling him
312
Strategic innovation in changing times
about the bottom line or the inbox filling with red exclamation marks. Not to have to give
those empty speeches in front of the giant projection of his face. Not to have to pretend that
the new exciting product was a new exciting product rather than the same plastic junk from
last year but in a different colour. His family had told him that he should take a step back and
now he had been dragged back from the edge.
It was difficult to construct what had happened; he knew it felt like being on a downward
spiral helter-skelter. They had needed some money, an advisor had said float the company.
It was from that point that he had begun to drown. There was a need for profits, to cut costs.
To stretch the supply line, to outsource, to financially innovate. There were phone calls and
meetings and offices and expansion plans. Something strange happened to time. Some meetings seemed to go by in a blur, others stretched out for hours; when he went home it seemed
like his wife and daughter lived in another time zone. He was out of joint, the family were
at a far distance but other things were too close. At some meetings he would find himself
focusing on a speaker’s ears, or slight hand twitches. He began to feel heavier and heavier,
imagining that gravity was sending him a message. Finally it was over, a sweaty handshake,
a done deal, his image and rights sold to a volume producer. The company pulled back from
the edge, the pension fund saved, a good deal for everyone. He felt as if he’d sold himself,
now what was left? Spend some time with the family? Why couldn’t he sleep?
The alarm clock woke him with a start. His daughter was home for the holidays, making
breakfast. The radio was tuned to a news programme so that he could catch the odd headline,
‘Flash Flood’, ‘Hottest Day on Record’, ‘Boy Drowned’.
Turning towards the kettle his daughter said, ‘I found something last night.’ He did not
answer. ‘I put it together in the living room.’ He went through. There in front of the fireplace
was the doll’s house. That first one from over 20 years ago. His daughter came through, ‘You
remember? How excited I was?’ The walls were scratched. He knelt down and opened it up.
The hinges were a bit wonky but still worked. Inside, the rooms were all there. ‘I spent last
night putting the furniture back in. The lights work.’ He started to cry.
Begin again
It was when they were thinking about his name that the idea crystallised. No, the lawyer
explained calmly, he couldn’t use the name Toymaker. The name was a registered trademark
which he had sold for a large sum of money.
‘I can’t be the Toymaker,’ he said to his daughter as they worked together in the shed on
another doll’s house for his granddaughter. ‘Do you remember that interview?’ asked his
daughter, hammering in a small nail to a wall section, ‘I remember standing in the kitchen.
You were so happy.’ ‘Yes,’ he replied, ‘I was The Toymaker!’
They continued working, the only sound an occasional chink. The shed was dark, the
workbenches lit by spotlights. That was the way he liked it, always had, since the early days
when he had the time to himself. He looked over at his daughter, carefully hammering. It was
great to have someone else with him. He thought about all the toys his company had made,
that had been exported all over the world.
He suddenly blurted, ‘That’s it. We add an S.’
‘Ouch’ – his daughter had hit her hand and looked up frowning. ‘Sorry. I’ve got it.’
He went round the shed looking for paper, ‘Get me a pen.’ He found a large roll of old
wallpaper and started drawing.
TOYMAKERS
Reflections 313
The multinational competitor didn’t see the need to spend money fighting one man’s eccentric wishes so there was no legal wrangle about the name to hold him back and they had given
him enough money to do what he wanted. The simple solution had occurred when he realised
that he didn’t need to be the Toymaker, he didn’t need to be to be whole and alone. It was the
solution that should have occurred to him years ago but the old way of running the company
had held him back.
What was the main problem that he had faced? Yes, he had sold products, many acclaimed
toys but did he really know how children used them? How could he? He was in head office,
looking at feedback reports or videos of lab experiments. Then there was the problem of
worldwide distribution. How did a toy translate across different cultures? Was he exporting
his idea of play? Then there were the images of bits of plastic in landfill. Broken toys with
no further use and always the pressure to make toys which would break so that his company
could sell more. Then the secrecy, in case a competitor stole an idea.
The S was most important. His new company would be plural. It would invite everyone
to be a toymaker. People looked at him like he was crazy as he described a new type of toy
company. It would be set up as a series of workshops. Each workshop would have seven toymakers and they would service a particular geographical area. The workshops would be open
to the public for people to come in and play or make suggestions. Toys would be rented out
with a toy diary and returned when no longer needed so that someone else could use them.
Because the toys were rented they would be repairable either by the users or by returning to
the store. Once someone was employed as a toymaker they would be involved in decision
making about change or expansion. They would use rapid prototyping to experiment with
designs. There would be no need for secrecy, as the secret of success would be high quality
and flexibility based upon local knowledge.
A new vision
After the funeral his daughter gave interviews. They all wanted to know about his legacy, how
he had done it. This made her uncomfortable. He wouldn’t have seen it that way. The only way
she could answer was to point at TOYMAKERS. Growth had happened slowly but the company
had been robust and had coped with everything a changing world had thrown at it, gradually
spreading around the globe. One of the key things was loyalty; she felt as if TOYMAKERS
were a family, that any part of the company would help another part. Yet, each workshop was so
different. Some were in hi-tech factories, some on cabins by beaches. Some took hold in slums,
some in smart gentrified districts. Some were set in glorious parkland, others down back alleys.
She thought about how difficult it had been. How her father had to give up control. How
she saw him gradually learning to let the other toymakers make decisions. How he held back,
let himself be outvoted in decision making. How many times he had almost fallen off a precipice but how TOYMAKERS survived through loyalty from staff and customers. The children
using the toys knew they were better and could point to where they came from and serving
local areas meant the makers could be flexible with price point and toy type. Large-scale
manufacturers were facing massive challenges due to competitive automation and looming
resource constraints but continued to look at each other for ideas whilst TOYMAKERS took
a different open and honest path.
She thought of the quote from Einstein on her father’s desk, ‘Logic will take you from
A to Z; imagination will take you everywhere.’
Source: A. Jeffrey.
314
Strategic innovation in changing times
References
Backström, T. and Söderberg, T. (2016) ‘Self-organisation and group creativity’, Journal of Creativity
and Business Innovation, Vol. 2, Issue 1, pp. 65–79.
Cassidy, J. (2010) How Markets Fail, London, Allen Lane, Penguin Books.
Chang, H-J. (2010) 23 Things They Don’t Tell You About Capitalism, London, Penguin.
Davies, W. (2015) The Happiness Industry, London, Verso.
Hoffman, B. G. (2012) American Icon: Alan Mulally and the Fight to Save Ford Motor Company,
New York, NY, Crown Business.
Kekic, L. (2012) ‘Globalization to remain concentrated in Asia’, CNBC.com.
Klein, N. (2015) This Changes Everything, London, Penguin Books.
Martins, E. C. and Terblanche, F. (2003) ‘Building organisational culture that stimulates creativity and
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Morgan, G. (1997) Imaginization, Thousand Oaks, CA, Sage.
Samašonok, K. and Leškienė-Hussey, B. (2015) ‘Creativity development: Theoretical and practical
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Semler, R. (1994) Maverick, New York, NY, Random House.
Stewart, H. (2012) The Happy Manifesto, London, Kogan Page.
Stiglitz, J. (2016) The Euro and Its Threat to the Future of Europe, London, Penguin.
Transparency International (2015) ‘People and corruption: Africa 2015 global corruption barometer’,
Berlin/Johannesburg, Transparency International and Afrobarometer.
Epilogue
In 14 chapters the text has explored business creativity and strategic innovation.
Corporates sit in a boardroom
Having discussions with biscuits and views.
All turn away from impending doom,
(Look at the screen for Breaking News).
Leaders demand a rapid response.
Engineers draw up plans, try to amaze,
Note materials, make bids for finance,
Gather ideas and get the best appraised.
Elements brought are blasted off,
Catch at the meteor’s metal heart.
Hope turns to experiences as we graph
All our brains and brawn playing a special part.
Now they sit and map out a wider view:
Galaxies appear and have been set free.
Explorers set out to see the new,
Steer out beyond any fixed decree.
Readers are exhorted to ‘Steer out beyond any fixed decree’ and continue to explore the
concepts, models and techniques that the text has featured.
The closing figure summarises key points covered in the text. A realistic understanding of
context should stimulate a fresh approach to response and a redefinition of management that
is energised by committed and sustained leadership. Creative thinking and the empowerment
of employees to generate new ideas is the first major step toward strategically managing
innovation. The second concerns the development of an appropriate organisational strategy,
structure and a determined and sustained intent to develop a climate and culture that is conducive to successful innovation.
‘Our doubts are traitors, and make us lose the good we oft might win. By fearing to
attempt’ (Shakespeare, Measure for Measure) for ‘fortune brings in some boats that are not
steer’d’ (Shakespeare, Cymbeline).
Figure E.1 Creativity and innovation management toolkit.
Academic index
Adair, J. 137, 139, 228
Adobe Systems 108
Agut, S. and Grau, R. 47
Albats E., Podmentina, D., Dabrowska, J.
and Teplov, R. 196
Amabile, T. M. and Khaire, M. 234
Ambos, B. and Schelgelmilch, B. B. 31–2
Anderson, L. A. and Anderson, D. 14
Andropoulos, C. and Dawson, P. 20
Argyris, C. and Schon, D. A. 285
Backström, T. and Söderberg, T. 308
Bain & Company 122
Balogan, J., Hope Hailey, V. and
Gustafason, S. 14
Banks, M., Calvey, D., Owen, J. and
Russell, D. 67
Barczak, G., Lassk, F. and Lulki, J. 284
Beer, M., Eisenstat, R. A. and Spector, B. 229
Beer, M. and Nohria, N. 285
Belbin, M. 74, 139
Bell, G. 140
Benedek, M., Jauk, E., Sommer, M.,
Aroendasy, M. and Neubauer, A. C. 88
Bennis, W. and Nanus, B. 229
Berliner, M. 165
Bilton, C. 12
Bilton, C. and Cummings, S. 12
Birkinshaw, J., Hamel, G. and Mol, M. J. 209
Blake, R. R and Mouton, J. S. 232
Board, B. and Fritzon, K. 232
Bogers, M. and West, J. 196
Bohnet, I. 6,7
Bonebright, D. A. 140
Boudreau, K. J. and Lakhani, R. 193
Bowen, H. R. 250
Bowman, C. and Swart, J. 13
Bradshaw, P. 31–2
Breen, W. 69
Burkis, D. 118
Burns, B. 30–1
Buzan, T. and Buzan, B. 89
Cameron, K. and Quinn, R. 151
Capelli, P., Singh, H., Singh, J. and
Useem, M. 268
Capozzi, M. M., Dye, R. and Howe, A. 173
Carneli, A., Tishler, A. and Edmonson,
A. C. 137
Carroll, A. B. 250–1
Cassidy, J. 309, 311
Castaldo, S., Premazzi, K. and Zerbini, F. 228, 286
Cavalieri, E. 249
Chan, D. 19
Chang, H-J. 309
Checkland, P. 111
Chesbrough, H. W. 116, 183-4
Chien-Hsin, L., Sher, P. J. and Hsin-Yu, S. 17
Christensen, C. M. 192
Conway, A. 11
Dane, E. 31
Davenport, T. H. and Harri, J. G. 30
Davies, W. 308
Dawson, R. C. and Bynghall, S. 195
Daza, J. R. P 261
de Bono, E. 145
Dean, A. and Kretshmer, M. 13
Delbecq, A. L., Van de Ven, A. H. and
Gustafson, D. H. 90
DeLong, T. and DeLong, S., 53
De Vries, R. F., Bakker-Pieper, A. and
Ostenveld, W. 234, 238
DeYoung, R. 30
Dobbs, R., Ramaway, S., Stephenson, E. and
Vigueri, S. P. 58
Drucker, P. 112, 230
Duff, A. and Duffy, T. 76
Dundon, E. 67
Dweck, C. 112, 174
Eberle, R. E 106
The Economist 13
Edgeman, R., Eskildsen, J. and Neely, A. 253
Edmonds, J. 285
318
Academic index
Einstein, A. 205, 207
Ekvall, G. 152
Ekvall, G. A. and Ekvall, I. 143
Elkington, J. 253
Encyclopaedia Britannica 71
Encyclopaedia of Management 191
Erickson, G. S. and Rothberg, H. N. 13
Erickson, T. and Nerdrum, L. 13
Eroke, L. 172
Ibarra, H. and Hansen, M. T. 173
IBM 12–13, 109
Isaksen, S. G. 147–8, 152
Fayol, H. 47
Fazlollahi, B. and Vahidov, R. 30
Fiedler, F. E. 233
Fields, D. 284
Figuera, J. and Ray, B. 30
Finkelstein, S., Whithead, A. and Campbell, J. 33
Friga, P. N. and Chapas, R. B. 26, 30
Fox-Wolfgramm, S. J., Boal, K. B. and Hunt, J.
G. 14
Kahneman, D. 8
Kahneman, D., Lovallo, D. and Sibony, O. 36
Kandelwan, P. and Tanje, A. 31
Kangis, P. 147
Kantner, M. 238
Kaplan, R. 31
Kekic, L. 295
Kelley, T. and Kelley, D. 189
Kennedy, D. 169
Kim, K. H., Cramond, B. and VanTasssel-Baska,
J. 88
Kirk, D. 120
Kirton, M. J. 74, 142
Klein, N. 254, 310
Kokkinidis, G. 280
Kolb, D. 74, 91
Kotler, P., Keller, K. L., Brady, M., Goodman,
M. R. V. and Hansen, T, 13,15
Kotter, J. P. 230
Kotter, J. and Rathegeber, H. 146
Kovač, J. and Jensenko, M. 239
Krainz, K. K. 278
Kreitner, R. 91,165
Kruyt, M., Malan, J. and Tuffield, R. 53
Kuhberger, A., Komunska, D. and
Perner, J. 31
Kuhn, T. 69
Kurtzberg, T. R. 7
Gardner, H. 67
George, J. and Jones, G. 4
Gibson, L. L. and Shalley, C. E. 174
Gill, R. 229
Goodman, M. R. V. 13, 31, 139, 280
Gosling, J. and Mintzberg, H. 174
Graetz, F., Rimmer, M. and Lawrence, M. 6
Grey, C. 6
Grönlund, J. Sjödin, D. R. and Frishammar, J.
D. 119
Grönroos, C. 17–18
Grönroos, C. and Ravald, Q. 17
Gruber, H. E. and Wallace, D. B. 69
Gummesson, E. 18
Hamel, G. 276
Hamel, G. and Prahalad, C. K. 218
Hayibor, S., Agle, B., Sears, G., Sonnenfeld, J.
and Ward, A. 234
Heimal, C. 75
Hemphälä, J. and Magnusson, M. 197
Hersey, P. and Blanchard, K. H. 233
Hertzberg, F. I. 163
Hewlett, S. A., Marshall, M. and Sherbin, L. 7
Hill, L. A. and Lineback, K. 58
Hockerts, K., Casanova, L., Gradillas, M., Sloan,
P. and Jensen, E. 251
Hoffman, B. G. 309
Hoffman, B. J., Bynum, B. H, Piccolo, R. F and
Sutton, A. W. 235
Holtum, C. 172
Hon, A. H. Y., Bloom, M. and Crant, J. M. 174
Honey, P. and Mumford, A. 74
House, R. H. 233
Howe, J. 192
Hughes, T., Bence, D. Grisoni, L., O’Regan, N.
and Wornham, D. 45
Hybels, B. 236
Jacques, E. 150
Janis, I. L. 37
Jeffrey, K., Abdaliah, S. and Michaelson, J. 278
Jones, B. 89
Jones, M. 231
Lambrechts, F. J., Bouwen, R., Grieten, S.,
Huybrechts, J. P. and Schein, E. H. 54
Larson, J. and Vinberg, S. 233
Laughlin, R. C. 14
Levinas, E. 174
Levitt, T. 17
Lichtenthaler, U. 122
Lorentz, H. A. and Lorentz, H. A. 206
Luebkeman, C. 16
Manning, R. I. 147
Martins, E. C. and Terblanche, F. 306
Mason, P. 18
McCalman, J., Paton, R. A. and Siebert, S. 5
McGreevy, M. 285
McGregor, D. 54–5
Mednick, S. 88
Meeker, M. E. 185
Merton, R. C. 196
Academic index 319
Michaelis, B., Stigmaier, R. and Sonntag, K. 234
Ming-Jer, C. and Miller, D. 45
Mintzberg, H. 285
Mintzberg, H. and Westley, F. 31
Mitroff, I. I. 164
Moon, S. 250
Morgan, G. 103, 106, 167, 306
Morton, N. A. and Hu, Q. 32
Mostert, N. M. 140
Mudambi, R., Mudambi, S. and Navarra, P. 121
Muhr, S. L. 174
Myers-Briggs 141
Myers-Briggs and McCaulley, M. H. 74
Nagurney, A., Dong, J. and Mokhtarian, P. I. 29
NEF 251, 284
Nikula, U., Jurvanen, C., Gotel, O.
and Gause, D. 35
OECD 130, 243
Okes, D. 94
Osborn, A. E. 106, 165
Parkin, M. and Bade, R. 8
Pausch, M. 153
Pearce, C. L. and Sims, H. P. 239
Pina e Cunha, M., da Cunha, J.V. and Kamoche,
K. 162
Pine II, B. J and Gilmore, J. H. 18
Pisano, G. P. 113–14, 218
Porter, M. E. 111
Porter, M. E. and Kramer, M. R. 251
Prichard, A. 74
Ramaswamy, V. and Gouillart, F. 192
Rass, M., Dumbach, M., Danzinger, F.,
Bullinger, A. C. and Moeslin, K. M. 197
Raymond, E. S. 185
Reardon, K. K. 235
Rakotomavo, M. T. J. 260
Rickards, T. 90, 227
Rickards, T. and Moger, S. 159
Rigby, D. and Zook, C. 184
Rivett, K. G and Kline, D. 13
Robert, L. P., Jr Zolin, R. and Hartman, J. L. 286
Robert, L.P., Jr., Dennis, A. R. and Hung,
Y-T-C. 228
Roosevelt, T., Thomas, D. A., Ely, R. J. and
Meyerson, D. 6, 7
Rowold, J. and Borgmann, L. 234
Samašonok, K. and Leškiené-Hussey, B. 308
Sauser, B. J., Reilly, R. R. and
Shenhar, A. S. J. 32
Sayer, J. 29
Semler, R. 148, 239, 308
Senge, P. 165, 174
Senge, P., Kleiner, A., Roberts, C., Ross, R. G.
and Smith, B. 18
Senior, B. and Swailes, S. J. 6
Sethi, R. and Iqbal, Z. 119
Shlomo, M., Srinivas, P. and
Seshadri, D. V. R 31
Sillince, J. A. A. 32
Slaughter, R. A. 188
Spitzeck, H. 47
St. Laurent, A. M. 185
Stebbins, L. H. 31
Sternberg, R. J. 69
Sternberg, R. J. and Lubart, T. I. 69
Stewart, H. 147, 308
Stiglitz, J. 301
Storm, B. C. and Angello, G. 169
Sullivan, D. M. and Ford, C. M. 88
Tapscott, D. and Williams, W. 192
Tassoul, M. and Buijis, J. 92
Taylor, J. 25
Tellis, G. J. 112
Thomas, G. F., Zolin, R. and Hartman, J. L. 235
Thompson, N. 228
Torrance, E. P. 88
Transparency International 296
Trapp, L. N. 53
Turnipseed, D. L. 147
Turpin, D. 11
Tzu, S. 230
VanGundy, A. B. 90
Van der Vliet, M. 154
Van de Vrand, E., de Jong, J. P., Vanhaverbeke,
W. and de Rochemont, M. 122, 183
Vargo, S. L. and Lusch, R. F 18
Vasilopoulos, A. 27
Wang, M., Zhou, L. and Liu, S. 239
Watkins, M. D. 151
Wetherly, P. and Otter, D. 10
White, R. D. Jr. 48
Wikhamn, B. R. 15
Wijkman, A. 255
Wilkinson, A. and Kupers, R. 189
Wyer, R. S. and Xu, A. J. 162
Wynarczyk, P. 123
Yang, Z. and Peterson, R. T. 17
Zeffane, R., Tipu, S. A. and
Ryan, J. C. 235, 286
Zhao, F. 198
Subject index
Adobe Systems 108, 185
African leaders
Chandria, Manu, Kenya 241
Joffe, Brian, South Africa 241–2
Merali, Naushad, Kenya 242
Sawiris, Onsi, Egypt 242
age
digital 7
economic 6, 11
industrial 5, 9
knowledge 5, 9, 13
machine learning 114
Airfrov 299
Amazon 10, 70, 112, 206, 214
Android 113,128
Apple 20, 35, 111, 113–15, 192–3, 216
Asian Development Bank 270
Barclays 10, 35
Bezos, Jeff (Amazon) 112
bias
diversity 7
managing 22, 36–7, 79, 189
Bidvest Group, South Africa 241–2
brain, physiology 71–2
brain cells, neuron 72
brainstorm 15–16, 37, 91, 94–5, 101–2,
168, 195
cerebral hemispheres 71
cerebrum 71
left/right-brain, model 65, 76–9, 81, 89–90,
94, 121, 157, 168
Branson, Richard 231
business decisions
basic 18
bias 36
big data 27
business decision process 28–30
conflict 145
contingency approach 31–3
definition 24
ethics 249–50, 255–6
incremental 33–4
business decisions cont.
innovation 33–4, 219
leader 231–2, 238
levels 26
linking creativity, entrepreneurship and
innovation 37–7
making decisions 25, 31, 37–8, 46, 54, 56,
125, 136, 140, 228, 280
operational 26, 28–30, 33
radical 33–4
rational model 30–1
shareholder, finance and government
pressure 27
strategic 26–7
tactical 26–7
time frame decisions 25–6
well-being 256
business environment
global 43
paradigm shift 3–8, 11, 13, 20
responsibility 154, 258
trends 6, 10
business ethics 53, 246–7, 249–50, 261–2, 265,
268, 286, 295
business games
components 267–9
corporate game plays 271–2
corporate game strategies 272–3
players 269–71
business life cycles 6, 8–9, 25, 27–8
business paradigms
shift, consequences 13–14
customer-perceived value (CPV) paradigm
17–18, 36, 206, 210, 212–14, 217
least-cost production paradigm 12, 16–17, 36,
51, 65, 146, 256–7, 272, 286
marketing paradigm 16–17, 262
post-capitalist paradigm 18, 268
service dominant logic paradigm 18, 272
business social responsibility (BSR)
definition 246–8
global recognition 259–60
business trends see trends
Subject index 321
buyer experience cycle 212–14
buyers’ markets 8, 16–18, 110–11, 159
Cambridge University, WellBeing Institute
(WBI) 279
capital 12–13
capitalism 5
Conference 15
intellectual 13, 119
venture 123, 183, 186
Carroll’s Pyramid 251
change
causes 6–11
definition 4–6
drivers 15–16
change challenges
challenges of initiating change 19
challenges of sustaining momentum 19
challenges of system wide redesign and
rethinking 19
challenge to traditional management 19
change types 14–16
developmental 14–15, 284
discontinuous 14, 18, 20, 34–5, 37, 80, 172,
175, 240, 305
incremental 5, 14, 24, 33–4, 39, 110, 114,
151, 197, 209, 212, 218, 239
radical 5, 13–15, 24, 33–4, 39, 65, 114–15,
182, 197, 212, 239, 255, 282, 284
transformational 14–15, 183, 284
transitional 14–15, 284
co-creation 192
Comcraft Group, Kenya 241
Concise Oxford Dictionary 5, 110, 161
conflict 145, 235
Confucianism 155
corporate social responsibility (CSR) 246–7,
250–1
corporate social responsibility, implementation
257–61
creative problem solving (CPS)
facilitation 95
facilitator process skills 144–5
facilitator tasks 143–4
personal problem solving (PPS) process
demonstration 90–4
CPS tools
analogy 93
clustering 92–3
mind mapping 92
private brainstorming 91
reversal 93
round robin 91
selection 94
shaping 93
time-out 94
toolbox 99–107
toolkit, introductory 94
creative thinking
stimulating 87
creativity 12–13, 20
definition 67
group 131
intelligence 88–9
managers and creativity 132–3
personal, factors affecting 72
creativity audits
KAI inventory 142–3
Organisational Creativity Audit 273–5,
291–2
Personal Creativity Audit 74, 83–4, 88–9
creativity blockers
group 170
personal 165–8
personal, business 168–70
crowdsourcing 190, 192–5
deBono E. 181
Dafti and Biko 303
Dangote Cement, Morocco 58
Dell 35
diamond industry 253
Digital Equipment Corporation (DEC) 34–5
Dow Corning 15
Drucker 37, 46, 48, 108, 203
Dyson 231
East African Brewers 158, 47, 311
Eastman Kodak 15
eBay 35
Economic Cycle Research Institute
(ECRI) 9
efficiency and effectiveness, concepts 18, 24, 28,
33, 36–8, 53, 59, 116–17, 227, 238, 240
Einstein A. 159
Eisai 35
Electrolux 189
Enterprise Resource Planning (ERP) 32–3
entrepreneurship 37, 39, 197–8, 242, 270
environment
planet issues 254
circular economy 255, 295
environment regulation 258–9
environmental responsibility 254–55
resource sustainability 255
European Commission 123, 270
Eurozone 301
Eveready 300
Facebook 10, 47, 112, 115, 173, 190, 195
factors of production 12–13
Ford 309
Go-Jek 301
Goodman’s three way stretch model 272–3
Google 10, 112–13,124, 309
322
Subject index
groups
definition 161
Group Creative Problem Solving (GCPS)
audit 157–8
empowering 136, 143–5
establishing group beliefs 136
leadership role 137
managing groups 138–9
mindsets 162
participation 133–6
rewards 137
selection and briefing 137–8
working groups 136
Handy, Charles 159
Happy Ltd. 58, 147, 308, 311
happiness, pursuit 308–9
hard systems thinking, common problems 171
Harley-Davidson 189
Helping Hand 303
Hewlett-Packard 35
IBM 1–13, 34, 108, 186
ICT 287
idea
closed sources 115–16
co-creation 192
crowdsourcing 192–5
external R&D agencies 191
idea funnel 118–19
management systems 187–9
idea scouts and connectors 191
open sources 116, 189–95
open source software (OSS) 186
poaching personnel 190
selection 118
social networking 195
IKEA 7, 10, 189
information overload 27
innovation
architectural 114
bottlenecks 124–7
champions 112
definition 110
getting started 111–12
incremental and radical innovation 113–14
innovation and entrepreneurship 197–8
innovative strategy 35
need 109–10
networks 196–7
private sector 121–2
process 117–18
public sector 122–3
technological 114
innovation, idea sources
closed idea sources 188–9
open innovation sources 190–6
closed and open sources compared 182–5
innovation, idea sources cont.
open-source software (OSS) 185–8
risk factors 195–6
Intel 35
Japanese management approach 55–8
Quality Circles 57
Quality of Work Life 57
Theory Z 55–7
Jobs, Steve 107, 111, 181
John Lewis 58, 146, 149, 302
K Raheja Corp 299
Kaymu 298
Kenyan Government and Grundfos 296
knowledge transfer (KT) 120, 127, 190
Kodak 113–14
Komatsu 58
KPMG International 275
Larsen-Toubrou 29
leadership
assessing skills 236–7, 245
attributes 232
challenges 238
characteristics 235–6
charismatic 234
competencies 12, 229–30
courageous 235–6
defined 227–9
innovation 238–9
management/leadership, difference
230–2, 236
role change
qualities 231
transactional 235
visionary 235
leadership theories
behavioural 232–3
contemporary thinking 235–6
contingency 233–4
emerging 234
trait 232
trends 307
learning 164–5
age, machine learning 114
creativity techniques 132
essence 72
organisations 18, 121, 151
patterns 161
problem solving 159
skills 44, 48, 78, 89–90, 96, 98, 120
style 74–6
Lego 216
LinkedIn 47, 173, 190, 195
Linux 185–6
LittleMissMatched 117
Lupe 305
Subject index 323
management
basic decisions during times of discontinuous
change 18
challenge to traditional management 19
defining 43–51
essential/functional skills 47–50, 51–3
myopia 36, 42
problems, viewing 172–3
styles 53–4, 87, 133, 172
Theory WB 239, 265, 276–8, 281, 285–6,
287, 306–7, 311
Theory X 48, 57, 248, 287, 311
Theory Y 54, 57, 122, 248, 281, 285–6, 311
Theory Z 55–7, 122, 248, 265, 276, 311
traits assessment 157
Marks & Spencer 260
Mellowcabs 116
Metaphors 4, 44, 83, 89, 102, 106, 159–60, 185,
205, 207, 209, 282
methodology
Soft Systems Methodology (SSM) 111
Microsoft 35, 113
mindset
challenging 163, 210–11, 236
clashing 161
cost reduction 256
definition 161
entrenched 137, 139, 142, 164
entrepreneurial 197
factor sets 161–5
fixed and growth 173–4
group 162
growth 112
leaders 238
management 51, 128, 273
mindsets and paradigms 126
organisational 162–3, 168, 171, 173,
210, 283
overcoming 159–77
personal 161
power 159–62
social 155
Molinos Rio de la Plata 261–3
Musiglota 304
myopia
avoiding contextual 229
marketing and management 16, 20, 36, 42, 53,
169–70, 227, 275
National Bureau of Economic Research
(NBER) 9
New Economics Foundation (NEF) 251–2, 284
Nicon 58
Nokia 20–1, 127–8, 154
Nominal Group Technique 90–1
Nordic Folkecenter for Renewable
Energy 191
Norsk Hydro 284
Omnitel 279
Osram 279
Orascom Group, Egypt 242
organisation
assessing organisations culture and climate
145, 151, 273–82
organisation, attitude and commitment 146
organisational climate 147–51
Ekvall’s Creative Climate Questionnaire
(CCQ) 152
Great Place to Work (GPW) Trust
Model 153
Isaksen’s Situational Outlook Questionnaire
(SOQ) 15
Organisational Culture Assessment Instrument
(OCAI)
personality factors 151
philosophy 146
Oticon 58
Pachamama Alliance 249–50
people issues 253
perception 51, 79, 121, 126, 133, 136, 145–6,
151, 159, 163–4, 168, 235
Personal Creativity Problem Solving Audit 74,
83–4
perspectives, picture 90
Phillips 214
Pink Taxi 298
planning
conventional practice 282
development 285
pre-planning 282–3, 285
understand organisation 284
understanding people 283–4
understanding task 284
Polaroid 114
problem solving approaches
quick-fix 88
Creative Problem Solving (CPS) 88–9
Procter & Gamble 15, 194
profit issues
bottom line 253
business profiteering 256
executive pay
effects of MNC profit strategies on SMEs
256–7
rank and file pay 256
psychological factor sets 163–5
risk 12, 28, 31–2, 54, 60, 112–13, 118, 122, 124,
126–7, 138–9, 143, 150, 152, 171, 174,
181, 184, 195–9, 214–17, 231, 239, 249,
268–9
Sameer Group, Kenya 242
Samsung 154–5
Sasol 59
324
Subject index
SãoPaulo supermarkets 304
SCAMPER CPS tool 106
Scenario planning 189
S-curve 24, 33–4
sellers’ markets 8
Semco 58, 239, 276–8, 288–90, 308, 311
Semler, Ricardo, 239, 276, 308
Sharman, Lord 275
Shell 189
Soantrach 58
social networking 195
SOSOL 58
Sports Direct 49–51
Stage–Gate model 119
Starbucks 214
Stewart, Henry
strategic innovation
action plan 209–10
basic processes 208–9
characteristic of strategically innovative
organisations 214–16
conventional approach 207–8
creating customer-perceived
value 212–14
holistic approach 217–18
intent issues 218–19
management 111
model 205–19
purpose 216
reviewing the business 210
reviewing the market offering 211–12
transformation 217
strategy
basic questions 210
cautious 34
ideation 200, 216
limpet 34
innovative 34, 216–19, 268, 286
visualising 208
SureSlim 296
systems thinking
hard and soft systems 120–1
hard systems, common problems 171
team
building 129
business 13
conflict 129, 145, 148
creativity assessment 74
cross-functional 106, 137, 156, 188
Group Creativity Audit 157–8
loyalty 134–5
Personal Creativity Audit 74
interrogating 36
handling conflict 145
leading 46–7
learning style assessment 74
team cont.
managing 54, 59
operating, forming, norming and performing
Tuckman model 140–1
psychological audit, MBTI 141–2
response sets 75
roles Belbin 139–40
senior team selection 52–3
TEAM culture 48, 55–8, 284–5
Technology Strategy Board (TSB) 120
technology transfer arrangements
contract R&D 191
joint ventures 192
licensing, cross licensing 191
research consortium 192
strategic suppler agreement 191
Thai Health Promotion Board 300
thinking
convergent 88
divergent 88
Left –brain thinking 76–8
Right-brain thinking 76–8
Total thinking 78–9, 89
Toyota 113, 199–200, 311
trends
African 296–8
Asian 298–301
European 301–2
South American 303–4
business 20, 54, 293, 306
climate 295
creativity and innovation 185, 238, 308, 311
economic 6, 8
environmental 6,9, 10–11, 26–7
energy 172
happiness 308
leadership 307, 238
management 306
market 35, 188
organisational 293
political 295
social-cultural 6, 8
technological 6, 9, 295
trumpet sounds
economic system 309–10
environment 310
society 310
trust
employee/manager trust 133–5, 149
Twitter 10, 47, 124, 173, 190
Tyrell 38–9
Unilever 8, 246, 259–60
United Nations Global Compact (UNGC) 259
Virgin Group 216, 231
Vodacom/Telekom South Africa 297
Subject index 325
Waitrose 302
well-being 251–2, 278–80, 284
well-being Manifesto, Goodman 280
wilful blindness 261
work environment and
performance 75–6
working with others 172
workplace democracy 153, 279–82
Yamaha Motor Company 220–2
Zuckerburg, M. 112