Organising for Innovation

- Technology Management, MIB 5 London

Melissa, Ishfaque & Mark

18 November 2009
Size of Firm
Advantages and Disadvantages

Large Firm Small Firm

• Easy Financing • Flexible structures
• Spread fixed costs of leading to enhanced
R&D. creativity

• Greater global reach. • Higher Success Rate

• Learning effects. • More effective

Incentive Structure
• Risk.
Size of Firm
Ability to Innovate

Large Firm Small Firm

• Efficiency decreases. • More flexible.
• Less nimble and • Easy monitoring.
responsive to change. • selection of projects.
• Shorter development
cycles.
Size of Firm
Ability to Innovate

Hybrid Firm
• Breaking into sub-
units.
• Advantages of the
small and big firms.
Structural Dimensions
Affects a Firms propensity to Innovate

Standardisation Formalisation
• Uniformity • Degree of use of rules,
• Advantages: procedures and written
Predictable Quarterly documentation.
Earnings • Advantages: Smooth
• Disadvantages: Can Running of Large MNC
limit innovation. • Disadvantages: Rigid
firm, Limits Creativity
Structural Dimensions
Affects a Firms propensity to Innovate

Centralisation Decentralisation
R&D
Division
Division

R&D R&D
Division Division
Division Division
HQ .
HQ
R&D

Division Division
Division Division
R&D R&D
Structural Dimensions
Affects a Firms Propensity to Innovate

Centralisation Decentralisation
• Maximisation of • Enables development
economies of scale. of new products.
• More Coordinated • Disadvantages: Risk,
• Top Management have redundancy.
Control
Mechanistic vs Organic Structures
Efficiency or Flexibility...

Mechanistic Organic
• Blend of Formalisation • Free Flowing Structure
and Standardisation • Entrepreneurial
• Suited to Large Volume Environment
Low Margin Setting • Little Standardisation
• Not Suitable for or Formalisation
Innovation
Efficiency or Flexibility
Striking the balance...

Efficiency Flexibility
Efficiency or Flexibility
Striking the balance...

Economies of Scale i l it y
Control Fl exib

e nc y
E ffici
Efficiency or Flexibility
Striking the balance...

Effic
iency Innovation
Creativity
Flexi
bility
 Efficiency or Flexibility
Striking the balance...

• Modular Manufacturing
o Flexible Manufacturing Systems (Sony)
o Standardised Components (PCs)
• Loosely Coupled Organisations
o Embedded Coordination (Open Standards)
o IT Enabling Advanced Coordination (B-2 Bomber)
! Transparency
! Lower Searching Costs
! Monitoring

• Flexibility Leads to Specialisation

“ Ambidextrous Organisation - a firm that
can achieve both short term efficiency
and long term innovation”
- Bartlett & Ghoshal
70/20/10
- Eric Schmidt, Google CEO
 Managing Innovation Across Borders

Centre for Global Local for Local

• All Innovation occurs • R&D tailored for
at a central hub individual markets
• Advantages: Tightly • Advantages: Locally
Coordinated, Responsive,
Specialisation Customised Innovation
• Disadvantages: Slow • Disadvantages:
Response to Local Duplication of Tasks,
Demands Reinventing the Wheel
 Managing Innovation Across Borders

Locally Leveraged Globally Linked

• Transfer Local • Decentralised structure
innovations to other but each division is
divisions given with a global
• Advantages: Take task.
advantage of diverse • Advantages: Capture
talent pool broad talent pool
whilst maintaining
global perspective
“ Companies should adopt a transnational
approach to innovation - increasing
effectiveness of global innovation whilst
increasing efficiency of local innovation.”
- Bartlett & Ghoshal
Thank You
Group: Melissa, Ishfaque & Mark