GLOBAL PERTER DRUCKER CHALLENGE 2015
Managing Oneself in the
digital age
Practicing Opportunity Recognition Within a
High Value Manufacturing Industry
Oda Ellingsen
Part I - Introduction and Context
Complexity
As multinational organizations grow large in size and product portfolio range, the complexity is
evident. The velocity at which new technology are developed and introduced to the market are rapid
and accelerating. To compete in an ever fast changing competitive environment organizations have
to continuously learn, change and adapt. Diversification over time requires dynamic capabilities and
complexity adds additional requirements to the agility, responsiveness and flexibility of processes. As
new incremental and more radical and even disruptive innovations are available there is a
continuous need to bridge the gap and cross the chasm between invention and commercialization.
Evidence form recent years in the global market of manufacturing capabilities reveal that the global
knowledge base is increasing and organizations ability to building fortresses with high barriers of
entry are being dispersed and companies need to provide transient competitive advantage (McGrath,
2013). Simon (1991) introduces bounded rationality as a term for an optimal choice given the
information available; hence implying that decision making within a complex context with high
information asymmetry will be even more bounded. To achieve agility and flexibility there is great
potential in applying product architecture in the development stage of new products. Benefits of
modularity and scalability can retain lower level of variance and reduce complexity.
The sum of local knowledge
I work for a multinational manufacturing company that through acquisitions of several smaller and
family owned companies have entered the marine business in the late 90’s. These small Norwegian
companies’ core capabilities were stemming from close collaboration and openly sharing of
knowledge. The Norwegian maritime cluster with more than 22 000 employees and a turnover of 55
billion NOK is the most vertically complete industry cluster in Norway (Reve & Sasson, 2012). The
cluster delivers knowledge intensive, high technology, and complete solutions to the global market of
vessels within the offshore, merchant and oil & gas industry. In the nascent maritime industry in
Norway the shipyards produced boats used for fishery. Local individuals established their small
workshops on their headlands repairing and building fish boats. But when the oil industry sprung
after the discovery of oil in Norway in 1969 the shipyards developed into a niche marked and the
small workshops developed into big workplaces delivering highly specialized and technological
complex products to a global market. As the region rapidly became market leaders there were
oceans of opportunities and good conditions for start-up companies. A well quoted statement from
one of the most influential individuals contributing to this development, Idar Ulstein, demonstrates
this; we collaborate when we can and compete when we have to. Within the cluster this is also
recognized as a truth and casual effect of the competitive advantages this region have had since the
early 70’s within the global maritime market. In the field of strategic management this notion has in
the past decades received rapidly increasing attention as the phenomena of coopetition, how
companies collaborate and compete at the same time.
The acquisition now represent new global pipelines to global state of the art knowledge and this
again represent a significant opportunity and source for knowledge and competitive advantage.
However the increase in complexity requires thoroughly chosen and grounded strategies to win right.
High Value Manufacturing and Industry 4.0
High value manufacturing is the utilization of new disruptive manufacturing capabilities and this
industry has characteristics such as; high cost base, high degree of knowledge creation, abstraction
and absorptive capacity, advanced capabilities and technology, and need agile and flexible processes.
High value manufacturing industries can be found several places around the world, and the maritime
cluster in Norway is one of them. These industries are typically networks of many companies
delivering to markets with similar customer requirements, or are geographical delimited, have
known capabilities and proven past history, they compete locally for the best skill and this have
driven cost. With the recent drop in oil price and current market situation this calls for cost
reduction, elimination of cost of non-quality and non-value-adding activities and shorter time to
market.
There are signs of a need for a paradigm shift within the high value manufacturing industry in order
to sustain its competitive position. According to a German report there is a new industrial revolution
called Industry 4.0 (Kagermann et al., 2013) which is referring to the utilization of smart robots, smart
machines, cyber-physical systems to solve complexity issues derived from high variance in product
due to customization and the level of technically complexity of the products. The products have also
become large in physical size and the size of series volume is low, and they are engineered to order.
Our customers competitive advantage in the offshore market have been to always offer the best,
most technically advanced and expensive equipment to their customers. Now with the dramatic fall
in oil-price that seem to be more sustained then what first expected the investment resilience have
increased in the offshore market. As a result the focus has shifted to cost control and requires more
creative and new solutions both to the offshore market and to explore opportunities in new and
nascent markets to secure profits.
To sustain competitive and innovative over time companies have to develop and adapt new
technology and production processes (Tushman and Nadler, 1986). Implementation of these new
production processes and new technology have been of significant and determinant character for
companies to develop and adapt to new requirements. Today companies need to develop efficient,
effective and flexible integrated cross functional manufacturing processes and practices.
The focus in the industry has long been on lean principles and has in recent years also been applied
on other functions in an organization other than the production and supply chain like product
development and management. One principle in the lean tool-kit is the notion of right first time.
What happens if this principle is applied in R&D without caution where things tend to go wrong and
should go wrong? What happens to learning? It is evident that there is a need for fast learning cycles
and the ability to fail fast and effective capabilities for test and validate. The traditional R&D stage
gate model is applied in order to control and handle risk. However if the front end phase have not
been open and the learning cycles rapid enough, there is a high risk of early selecting the wrong
solution and ending up doing parallel activities and missing out on the synergetic effects.
Hobday argued in 1998 that there were a neglected area of innovation study, namely the creation
and development of high cost, complexity products and systems, and this claim appear to remain
valid. High value manufacturing and industry 4.0, still need humans and it represents a potential
pitfall to believe that robots can “do it all”, especially when it comes to knowledge creation and
organizational learning. One thing outsourcing has taught us is that moving and absorbing knowledge
is not a one to one relationship, and complexity adds difficulties to the knowledge transfer.
Knowledge transfer between manufacturing and R&D are curtail for a manufacturing company’s
ability to innovate. There is no better antidote to offshoring than innovation. Understanding how we
as individuals learn and transfer knowledge; is understanding how organizations learn.
Part II - Managing Oneself in the digital age
Practicing Opportunity Recognition
I started my career on the shop floor in production operating manual machinery and computer
numerically controlled machinery and progressed to programming of machinery achieved a
certificate of apprentice as a CNC-operator. Later I took a B.Sc. within mechanical engineering and
product development before finishing a M.Sc. within industrial economics and technology
management at my University’s School of Entrepreneurship. Finishing my education I went back to
the same company I first started my career with and become a Design Engineer engineering rudders
to order for offshore and merchant vessels. I recently got the opportunity to pursuit an industrial PhD
on behalf of my company. My story is the one of exposure to multiple aspects of our products and
organization and different sources of insights, each addressing customer needs in their own way. This
exposure have enabled me to approach operational and strategic challenges with combinations of
several viewpoints and practicing opportunity recognition. During my time at the School of
Entrepreneurship we often discussed how successful entrepreneurs and intrapreneurs expose
themselves, more often than the less successful ones, for situations that offered opportunities. This
is one of my lessons learnt; opportunity recognition is a skill that can be developed and need
continuous practice.
Prepare for Adaption
Organizations need to practice effectuation and prepare for adaption. As one of my senior managers
put it:
“I believe in setting a target and letting the process develop as we go along, we bring in the
experts needed in those areas where we have identify that we do not have the sufficient skill.
Sometimes if the target is bold enough and carry the upper limit of risk we allow us to take,
we end up with some of our greatest innovations. Often, and most times, we do not produce
the intended result, however we end up with a new product that serves an need discovered
and developed in collaboration with the experts and customers throughout the process and
rapid feedback-loops. This is how we discovered our latest disruptive technology. This
technology will influence the product design, our processes, and requirements of our
manufacturing capabilities. From time to another I have decided to follow a stage gate model
and stopped my team when they have been practicing exploration beyond the current stage
readiness level, those are the decisions I mostly question.”
This anecdote underpins Peter Drucker recommendation of wasting as little effort as possible on
improving areas of low competence. In addition it tells the story of the opportunities risk offers and
how measurement influence behavior. Organizational capabilities are needed to explore for long
term growth and at the same time exploit for short-term profit, and these capabilities require
distinctly different skillset.
Provide others with meaning and passion
In the literature of strategic management there have been two separated streams of research, one is
devoted to how collaboration affects performance and the other is on how competition affects
performance. As companies today operate in networks and no longer merely dyadic relationships
there is a growing acknowledgment that companies perform both activities at the same time and
there is a need to understand how coopetition affects performance. In addition theory on networks
and alliances give reasoning for how companies can both create value and appropriate vale from
these forms of collaborative strategic alliances. They also provide opportunities and sources of
knowledge that can be developed into new technology and innovation and be exploited through
commercialization and industrialization. This access to knowledge can provide reduction of time to
market in the form of feedback loops with the aim to maximize speed, flexibility and cost efficiency.
Some issues with a resource based view is that it is path dependent, that core capabilities can
become core rigidities, not necessarily true that skill people are rare and valuable resources scares as
in the case of an industrial cluster, and it should clarify a distinction between rarity and absorption.
Basing future decision on past success is a ticking bomb, as; the only thing we know about the future
is that it is going to be different.
A knowledge based industries organization should be viewed as knowledge creation entities that
reshapes the environments and itself by applying its knowledge (Teece, 2013). Knowledge
management needs to contain meaning, motivation and a good portion of passion. The Norwegian
Crown Prince explained this in an excellent way; entrepreneurship is like surfing, you need passion,
then you have to wait and prepare for the wave to appear, and ride the wave when it hits.
We, the knowledge workers, need to bridge the ‘as it’ technology and ‘to be’ technology, no
automated system or robot will solve this challenge for us. Automation and utilization of robotics will
not kill manual and knowledge jobs, on the contrary, it will free human capital to take part in
practicing opportunity recognition and creative and passionate development of capabilities and
technology that addresses future challenges related to long-term competitive advantage and the
environment. The management role will be to lead in ways that enable the individual to best
contribute and collaborate. I’ll wrap up my essay with Desmond Tutu’s words; for we can only be
human together.
Resources
Hobday, M., (1998). Product complexity, innovation and industrial organisation. Research policy, 26(6), 689-710.
Kagermann, H., Wahlster, W., & Helbig, J., (2013). Securing the future of German manufacturing industry Recommendations for implementing the strategic initiative INDUSTRIE 4.0. Frankfurt. National Academy of Science and
Engineering.
McGrath, R. G., (2013). The end of competitive advantage: How to keep your strategy moving as fast as your business.
Harvard Business Review Press.
Reve, T., & Sasson, A., (2012). Et kunnskapsbasert Norge. Oslo: Universitetsforlaget.
Simon, H. A., (1991). Bounded Rationality and Organizational Learning Organization Science, Vol. 2, February, pp. 125-134.
Teece, D., (2013). "Nonaka’s Contribution to the Understanding of Knowledge Creation, Codification and Capture."
Towards Organizational Knowledge: The Pioneering Work of Ikujiro Nonaka (2013): 17-23.
Tushman, M., & Nadler, D., (1986). Organizing for innovation. California management review, 28(3), 74-92.