Сourse

«Technology Entrepreneurship»

Olga A. Shvetsova

Module 1
Fundamentals of Technology entrepreneurship in
global content

Lecture Notes
 Tutor: Olga A. Shvetsova
ADDRESS:
Chungnam Province (31254), Republic of
Korea (South Korea) +82-10-99969553,
E-MAIL: vshvetsova57@gmail.com,
Social Media:
https://www.linkedin.com/in/olga-
shvetsova-453270172/

ACADEMIC AFFILIATIONS AND TITLE: Assistant Professor, PhD, School of

Industrial Management, Korea University of Technology and Education
BIOGRAPHY: Assistant Professor at Korea University of Technology and
Education (South Korea) since 2016.
She was born in 1982 in Saint-Petersburg City (Russia). She graduated Saint-
Petersburg State University of Economics (Russia) in 2004. In 2011 she got PhD there in
the field of International business.
In 2004 she started her career in industrial companies and continued it at
Universities since 2009.
Since 2014 she actively provides guest lectures in EU and makes research review
in some professional societies (IEEE, IBIMA). She published more than 25 research
papers and 5 academic books in the fields of international business, high-tech marketing,
innovation management and global HRM. She is reviewer of different papers.
Olga A. Shvetsova won “Best Teaching” award in 2017 and “Best PhD Scientist”
in 2015.

Module abstract: This module is focused on theoretical and practical bases of

technology entrepreneurship in diverse markets. Authors analyze different approaches of
technology trajectories and organizational development in technology-based
environment. Innovation is discussed as core competence of technology
entrepreneurship. Authors analyse different approaches of innovative organization
building. The entrepreneurial perspective and technology business fundamentals are
discussed. The main idea of this module is understanding main trends and basic concepts
of technology entrepreneurship in fast changing markets.

*
KOREA UNIVERSITY of TECHNOLOGY and EDUCATION
 Сontents
Topic 1. The Entrepreneurial Perspective ............................................................. 4
1. Major trajectories of Technology entrepreneurship .................................... 4
2. Risk-management in Technology entrepreneurship................................... 8
3. Myths and Facts About Innovation. .......................................................... 10
Topic 2. Innovation as a core business process ................................................. 13
1. The Extensive Guide to Business Processes .......................................... 13
2. Drivers of competence approach development ........................................ 14
Topic 3. Establishing an Innovative Organization ............................................... 16
1. Ten Suggestions for Including Key Employees ........................................ 16
2. Organizational design of innovative companies ....................................... 17
References ......................................................................................................... 20

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 Topic 1. The Entrepreneurial Perspective
1. Major trajectories of Technology entrepreneurship
A. Global cooperation on anything is a challenge in itself. The disparate
interests, intentions, and abilities of all the world's nations to come together and find a
path forward is daunting to even consider. Technological globalization is speeded in large
part by technological diffusion, the spread of technology across borders. In these
countries, far fewer people have the training and skills to take advantage of new
technology, let alone access it.
The main reason why international cooperation is important is simple: nations are
a human abstraction. The world is one and if you pollute in your country all the world
would be affected, so there is no way to avoid that we have a common resource: this very
planet. A Good Example of Global Cooperation. When something terrible happens to you,
you will accept any help. In the case of natural disasters, it is the same. Countries donate
food and medication when earthquakes, fires, tsunamis or floods happen. Cooperation is
important because it allows people and groups to work together to achieve a common
goal or derive mutual benefits. Cooperation exists at many levels and takes place
between individuals and organizations as well as between states and countries.
Countries have to cooperate with each other to reach a common welfare - it is
better than isolation. Countries should not isolate themselves from world but instead
engage other countries. Nowadays, there is no country that can provide all goods and
services to its population living by itself.
The concept of globalization of innovation is the zip between two fundamental
phenomena of modern economies: the increased international integration of economic
activities and the raising importance of knowledge in economic processes (fig. 1).

Fig. 1 Main types of cooperation in global innovation networks 1

1 Source: Behn, Robert D. 1993. The myth of managerial luck: Success from an unlikely place. Governing (November): 68.

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 Cooperative strategy refers to a planning strategy in which two or more firms work
together in order to achieve a common objective. Several companies apply cooperative
strategies to increase their profits through cooperation with other companies that stop
being competitors.
A cooperative strategy gives a company advantages, specially to companies that
have a lack of competitiveness, know how or resources. This strategy gives to the
company the possibility to fulfill the lack of competitiveness.
Cooperative strategy also offers access to new and wider market to companies
and the possibility of learning through cooperation. Cooperative strategy has been
recently applied by companies that want to open their markets and have a liberalist vision
of negotiation through cooperation.
1. Strategic alliance
The main way to apply cooperative strategies are through strategic alliances in
which firms use their resources and knowledge to create a competitive advantage. There
are three types of strategic alliances.
1.1 Equity strategic alliance
In this type of strategic alliance, each company owns a part of the venture that they
created, it is important to mention that every part must be equal to be considered an
equity strategic alliance. Using this strategic alliance each of the parts share all the
benefits but also all the risks. In 2013 Fly Emirates made an Equity Strategy Alliance with
Jet Airways both companies made an investment of $379 million in order that each
company can get benefits of this alliance.
1.2 Nonequity strategic alliance
Nonequity strategic alliance refers to a type of cooperation wherein two or more
companies establish a contractual relation which specifies that each company will share
their resources and knowledge to achieve competitive advantage. In this case
cooperation is not totally equal because each company will share only the resources that
are convenient and this could cause that a company lose more than the others. Geringer
and Herbert in 1989 made a nonequity strategic alliance that did not work because of the
concept because each company chose how much to contribute, and in many cases this
means that companies would not take risks, and this affects the alliance.
1.3 Develop strategic alliances
Companies develop strategic alliances for different reasons:
Firms create strategic alliances because it has a lack of resources or knowledge
to achieve their objectives:
• Cooperative behavior gives a company values that cannot be achieved
independently.
• Reach stakeholders’ interests to reduce uncertainty inside the company.
• Strategic alliances can lead to new sources of revenues.
• Cooperation can improve the image of the company.
Alliances can improve the capabilities of the company to respond to the changes
of the market and changes in the ways of production.
Strategic alliances offer opportunities to the company to acquire knowledge and
experience.
2. Joint venture

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 A joint venture is a shared equity firm wherein the participant commits the same
quantity of resources, this means that this legally independent new company share
resources, capabilities and risks to achieve a competitive advantage. An example of a
joint venture is the case of Facebook and Skype in 2011 that sign a Strategic Alliance
that gave Facebook economic benefits and let Microsoft to open its market and move
forward the social network market.
B. Team-building. Project teams need to have the right combination of skills,
abilities and personality types to achieve collaborative tension. Teams can be
formulated in a variety of ways. The most common method is at the discretion
of a senior member of the organization.
Teams can be divided into four main groups:
• project teams,
• self-managed teams,
• virtual teams, and
• operational teams.
What type of team you have depends on its purpose, location, and organizational
structure. Each type of team comes with its unique set of strengths and weaknesses. In
order to fully utilize your team, you first need to understand where each type of teams
works the best.
Innovation stems from creativity, but fostering creativity requires a certain amount
of structure. Getting the balance between creativity and structure right is key to building
a successful innovation team. The following tips can be used to help an existing
innovation team become more successful, or to build one from scat:
1. Select a Team Leader
While innovation thrives when individuals are empowered to think creatively, the
process of harnessing that creativity for commercial purposes can benefit from proper
guidance. To get the most out of your innovation teams, appointing a single leader is
typically considered optimal. This allows rapid decision making and clear guidance as to
the team’s direction, both of which are essential for maximizing your team’s ability to
foster innovation.
2. Emphasize Open Communication
It’s difficult for the sum of an innovation team’s efforts to be greater than that of its
individual parts if the team members don’t communicate effectively with one another. To
avoid this dynamic, free and open communication between team members should be
emphasized. Many innovations result from the commingling of ideas from a number of
different individuals – communication is essential to enabling this process.
3. Provide an Environment That Supports Creativity
While the creativity necessary to foster innovation can benefit from a certain level
of structure, too much regimentation can be counterproductive. To provide an
environment that helps maximize the team’s creativity, steps such as the following can
be taken:
Give team members some scheduling leeway to provide them with the time to
thoroughly consider various options for innovating. Provide your innovation team
members with unstructured time to unwind and relax, allowing their creative energy to

6
recharge, schedule group brainstorming sessions where team members can bounce
ideas off each other.
4. Seek Diverse Skill-Sets
Innovation teams that don’t include members with a variety of skillsets can suffer
from a lack of depth in their approach to new ideas as well as the phenomenon of
groupthink, where an idea gains hold of the whole group even if it not particularly helpful
or even accurate. When team members possess diverse skillsets, it increases the
chances that the team as a whole will be challenged to look at things in different ways
and consider different approaches to solving problems.
5. Establish Goals and Review Progress
When it comes to establishing goals, innovation teams may find it difficult to pin
down exact objectives, given the uncertainty involved in the creation of new products or
processes. However, this should not be used as an excuse to avoid setting goals at all.
While the goals set for an innovation team may not detail exactly what the team will
produce, they should serve to specify generally what the team is trying to accomplish.
6. Schedule Team Building Events to Foster Camaraderie (fig. 2).

Fig. 2. Stages of team-building in technology entrepreneurship 2

To promote your innovation team’s ability to work well together, take steps to build
camaraderie among team members. Team building events can take a variety of forms,
including:
• Off-site meetings
• Brainstorming sessions
• Social events (ballgames, artistic events, etc.)
• Teamwork exercises.

2 Source: Maslow, Abraham H. 1943. A theory of human motivation. Psychological Review 50

(July): 370-96.

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 C. Value creation. In management, business value is an informal term that
includes all forms of value that determine the health and well-being of the firm in the long
run. Business value expands concept of value of the firm beyond economic value (also
known as economic profit, economic value added, and shareholder value) to include other
forms of value such as employee value, customer value, supplier value, channel partner
value, alliance partner value, managerial value, and societal value. Many of these forms
of value are not directly measured in monetary terms.
Business value often embraces intangible assets not necessarily attributable to
any stakeholder group. Examples include intellectual capital and a firm's business model.
The balanced scorecard methodology is one of the most popular methods for measuring
and managing business value.
Various factors affect the business value impact of Information Technology (IT).
The most important factor is the alignment between IT and business processes,
organization structure, and strategy. At the highest levels, this alignment is achieved
through proper integration of enterprise architecture, business architecture, process
design, organization design, and performance metrics.
At the level of computing and communications infrastructure, the following
performance factors constrain and partially determine IT capabilities:
• Usability
• Functionality
• Availability
• Reliability, recoverability
• Performance (throughput, response time, predictability, capacity, etc.)
• Security
• Agility.
The term value-driven design was devised to describe the approach to planning
business change (especially systems) based on the incremental improvements to
business value - this is seen clearly in agile software development, where the goals of
each iteration of product delivery are prioritized on what delivers highest business value
drives.
Value innovation is a process in which a company introduces new technologies or
upgrades that are designed to achieve both product differentiation and low costs.
To determine the value of a tech firm, project, or entrepreneurial idea, we have to
distinguish two components: 1) the economic value of the organization without any
disruptive innovations, and 2) the economic value of any innovations that may exist. The
sum of these two components is the total value of the entity.
In our current environment, innovation for nonprofits can carry a risk perception
that is often unsettling. This is the time, however, when innovation can provide the most
value to organizations through diversifying their revenue streams, eliminating the struggle
with funding. Now is your chance to pursue new solutions, such as earned revenue
possibilities, and position your organization for success. You can turn uncertainty into
opportunity by integrating innovation into your organization’s practices.

2. Risk-management in Technology entrepreneurship

Risk management is the identification, evaluation, and prioritization of risks
(defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated
and economical application of resources to minimize, monitor, and control the probability
8
or impact of unfortunate events or to maximize the realization of opportunities. Risks can
come from various sources including uncertainty in financial markets, threats from project
failures (at any phase in design, development, production, or sustainment life-cycles),
legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from
an adversary, or events of uncertain or unpredictable root-cause. There are two types of
events i.e. negative events can be classified as risks while positive events are classified
as opportunities. Several risk management standards have been developed including the
Project Management Institute, the National Institute of Standards and Technology,
actuarial societies, and ISO standards. Methods, definitions and goals vary widely
according to whether the risk management method is in the context of project
management, security, engineering, industrial processes, financial portfolios, actuarial
assessments, or public health and safety. Strategies to manage threats (uncertainties
with negative consequences) typically include avoiding the threat, reducing the negative
effect or probability of the threat, transferring all or part of the threat to another party, and
even retaining some or all of the potential or actual consequences of a particular threat,
and the opposites for opportunities (uncertain future states with benefits).
Certain aspects of many of the risk management standards have come under
criticism for having no measurable improvement on risk; whereas the confidence in
estimates and decisions seem to increase. For example, one study found that one in six
IT projects were "black swans" with gigantic overruns (cost overruns averaged 200%, and
schedule overruns 70%).
Risk-management methods consist of the following elements, performed, more or
less, in the following order:
• identify the threats
• assess the vulnerability of critical assets to specific threats
• determine the risk (i.e. the expected likelihood and consequences of specific
types of attacks on specific assets)
• identify ways to reduce those risks
• prioritize risk reduction measures.
The International Organization for Standardization (ISO) identifies the following
principles of risk management:
Risk management should:
1. create value – resources expended to mitigate risk should be less than the
consequence of inaction
2. be an integral part of organizational processes
3. be part of decision making process
4. explicitly address uncertainty and assumptions
5. be a systematic and structured process
6. be based on the best available information
7. be tailorable
8. take human factors into account
9. be transparent and inclusive
10. be dynamic, iterative and responsive to change
11. be capable of continual improvement and enhancement
12. be continually or periodically re-assessed 3.

3 https://www.iso.org/obp/ui/#iso:std:iso:31000:ed-1:v1:en
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 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 (fig. 1). When
managers engage in the process of brainstorming how to minimize innovation risk, they
generally do so under a flawed decision model or imperfect context. As a result, a number
of innovation failures do not necessarily stem from the innovation itself but from the
process used to determine how the innovation is introduced.
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 (fig 3).
A recent Harvard Business Review article addresses critical elements of
innovation risk by offering five basic rules for managing them:
1. Recognize that a model exists and needs to be developed for judging risk
and return,
2. Every innovation model has its own set of limitations,
3. Expect the unknowns,
4. Obtain intimate knowledge and understanding of the user,
5. Consider the infrastructure the innovation will be placed in.

Fig. 3 Global environment of risk-management 4

3. Myths and Facts About Innovation.

The innovation process describes the path of translating new and/or existing
knowledge into marketable solutions. Companies that pursue a successful innovation

4 Source: S., Jeschke, 2015, Engineering Education for Industry 4.0.

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process have something decisive that puts them ahead of others - they have designed
the path of an idea from generation, through development, to market entry. A holistic
innovation process is geared to the innovation goals and thus creates a clear framework
that structures and systematically implements the development of new products, services
and business models. Before this can happen, however, within the company, it must be
clear what is meant by the process itself.
The innovation process defines the management of an idea from the strategic
search to the successful market launch and its transfer to the operative management.
The process is the heart of innovation management, whereby it makes sense to
understand innovation goals as superordinate components of an innovation process and
to align the process with the goals. The decision for certain innovation goals in turn marks
the starting point of the innovation process and defines the process steps derived from it
(idea generation, concept, development, etc.). The innovation structure anchors the
innovation process in the organization. At LEAD Innovation, when we deal with the
innovation process in a company, the second part of a functioning innovation process is
the structure, in addition to the process in the narrower sense.
The innovation structure provides an innovation process with responsibilities. It is
therefore about the vessel for the innovation process and asks the following questions.
Who is looking for ideas? Who decides on their follow-up? Who develops ideas
further? Which ideas are followed up within the established R&D structures, and which
ideas require different development teams due to the type and degree of innovation?
Which hierarchical levels must be included in the different development stages?
With the right approaches for the individual stages of the innovation process, the
ideal implementation takes place according to the trio process method structure. The tools
Innovation Roadmap, LEAD user Method, LEAD Transfer and agile innovation
management are helpful here.
The innovation process creates a clear framework that structures and
systematically implements the development of new products, services or business
models. We will show you which components an innovation process should contain and
how they interact.
Objectives and perfection as a process component
The presentation of an innovation process usually begins with the generation of
ideas and ends with the market launch. In practice, however, it has proven useful to
understand innovation goals as a superordinate component of an innovation process and
to align the process with the goals.
Thus, the innovation process does not only start with the generation of ideas, but
also with the definition of the innovation goals. In coordination with the corporate strategy,
the individual goals should be clearly defined: Which types of innovation are aimed for?
What is the focus? How high should the degree of innovation be? How many innovations
are targeted, and in which areas?
The decision to strive for certain innovation goals marks the starting point of the
innovation process and defines the derived strategies and process steps (idea
generation, concept, development, etc.) (table 1).

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 Table 1. Myths and facts about innovation 5

Myths (may change Facts (may change over time, depending e.g. on results from research on
over time) innovation)
Innovation may be about anything, from products to processes, as long as it
creates a success in the market by doing something new. You can innovate
through e.g.
• Selling new inventions successfully, or products that are improved in key
It relates only to
areas
technology
• Selling products in new ways, or through new channels (process
innovation)
• Finding new market for your products (market innovation)
• Introducing products and concepts from other industries
While ideas often start in R&D, they also often stop there. The challenge is to
It is research and
integrate R&D initiatives and analysis with product development and commercial
development
success.
Creativity is the art of thinking differently, and may lead to new ideas. Innovation
It is best done as spin
is a systemic discipline for acting on new ideas to create value. Creative people
offs & new business
do help, but it requires a team – and sometimes a sustained effort for years – to
units
bring an innovation to completion.
It is only about
Innovation is far more often about the discipline and competencies necessary to
something
grow small ideas big.
revolutionary
Innovation is an One of the most important ingredients of innovation is teamwork, whether in
individual effort research communities or as a cross functional development project.
Innovation is In today’s businesses, goods quickly become commodities. Because of this
primarily about there is a need to pursue innovation in services, processes, whole business
“products” (goods) concepts and strategies and so change the rules of the game.
Leadership, culture and process are a three-legged stool for success. While an
A good process is innovation process is important, there is also a strong need for motivation,
90% of the battle funding, vision, support, organisational culture and a leadership that “walks the
talk”.
We need good This is probably true and will not drive innovation. Innovation is not about good
methodology for ideas. It is about driving the very best ideas to market success through an
evaluating ideas optimal commercialisation process.
Sometimes it may be. However, as long-term financial performance is
It is costly associated with doing innovation, change and new ideas are essential
ingredients in the recipe for success.
Though price is a driver, customers are increasingly demanding innovation. As
Customers want less
they experience innovations, in e.g. banking and online transactions, their needs
expensive products
become more complex. Customers must be continually satisfied for them to
not innovations
remain loyal.
The rate at which competitors copy and re-modify a product is alarming. Some
companies have two types of teams, one to work on improving a current product,
It is about brand new
and the other to develop a new one even before competitors copy existing
things
versions. The question is no longer “Should we innovate?” but rather “How fast
can we innovate?”.
In an ever more complex world, what used to work doesn’t anymore. All products
We know what works have a life cycle and we need to change to improved versions to avoid the
original becoming a thing of the past.

5 Source: Based on work by Bjørn Are Davidsen (2004).

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 Topic 2. Innovation as a core business process
1. The Extensive Guide to Business Processes
Business processes are a frequently used term across industry verticals today,
and there’s also a lot of confusion regarding them. To provide some clarity, here is all the
information you’ll need regarding what they are, and why your business needs them.
A business process is a series of steps performed by a group of stakeholders to
achieve a concrete goal. Each step in a business process denotes a task that is assigned
to a participant. It is the fundamental building block for several related ideas such as
business process management, process automation, etc.
While there’s a deluge of things written and said about business process
management, sometimes it’s hard to think about them in both abstract and concrete
terms.
The need for and advantages of a business process are quite apparent in large
organizations. A process forms the lifeline for any business and helps it streamline
individual activities, making sure that resources are put to optimal use.
Key reasons to have well-defined business processes:
• Identify what tasks are important to your larger business goals;
• Improve efficiency;
• Streamline communication between people/functions/departments;
• Set approvals to ensure accountability and an optimum use of resources;
• Prevent chaos from creeping into your day-to-day operations;
• Standardize a set of procedures to complete tasks that really matter to your
business.
The 7 steps of business process lifecycle:
1. Define your goals
2. Plan and map your process
3. Set actions and assign stakeholders
4. Test the process
5. Implement the process
6. Monitor the results
7. Repeat
Step 1: Define your goals
What is the purpose of the process? Why was it created? How will you know if it is
successful?
Step 2: Plan and map your process
What are the strategies needed to achieve the goals? This is the broad roadmap
for the process.
Step 3: Set actions and assign stakeholders
Identify the individual tasks your teams and machines need to do in order to
execute the plan.
Step 4: Test the process
Run the process on a small scale to see how it performs. Observe any gaps and
make adjustments.
Step 5: Implement the process
Start running the process in a live environment. Properly communicate and train
all stakeholders.
Step 6: Monitor the results
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 Review the process and analyze its patterns. Document the process history.
Step 7: Repeat
If the process is able to achieve the goals set for it, replicate it for future processes.
A "core" business process is defined as the minimum individual tasks to be
accomplished to provide a certain level of consistency in output, without any consideration
to hardware, software, people, resource or performance. Enterprise operation is
conducted (conscious or unconsciously) by business processes. A core
business process is that which adds more value to a product or service. Core business
processes are normally linked to the business strategy, and are thus paramount for the
sustainability of the enterprise. A business process improvement effort will normally be
focused to enhance core business processes.

2. Drivers of competence approach development

The growing pace of technological change and globalization provided new

opportunities, and also highlighted the importance of aligning the working methods of
companies, government policies, education and training systems with today's skill needs,
and also the awareness of the need to outline a basic joint action plan that brings together
the authorities, business and the sphere of education. And although the education
systems remain deeply dependent on concrete realities, a common vision of the basic
principles and basic characteristics that will best cope with the difficulties and maximize
the possibilities of the Fourth Industrial Revolution appears.
The problem of the need to change the system of training the highest qualification
for an increasingly active technological order began to manifest itself relatively recently.
It must be admitted that most foreign universities in the industrialized countries have long
passed the practical implementation of such models as Lifelong Learning, Learning by
Doing, variation learning models and some others.
However, experience has shown that the existing educational system does not
keep pace with the changing needs of rapidly developing industrial production on the
basis of the emerging new technological order. This situation led to a conceptual
interpretation of approaches to the modernization of the training system, including higher
qualifications.
The engine of development of the competence model in global technological
environment was the next stage of the industrial revolution and a dynamic economy
based on high-tech industries.
Dynamic systems are quite popular in economic modeling. Types of processes
occurring in economic systems:
• Deterministic;
• Stochastic;
• Chaotic.
For the macro level, due to the actions of objective economic laws and regulatory
influences of the state, more characteristic deterministic processes. For the micro level -
stochastic (probabilistic). With the chaotic nature of the system of application of the
methods of economic dynamics studied, one can somewhat facilitate the study of the
object by determining the deterministic mechanism of its behavior. This, in turn, allows
you to reduce the uncertainty of the knowledge of the system. A dynamic system is a
system whose parameters explicitly or implicitly depend on time.
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 So, if for the behavior of the system the given functional equations, then they
include in explicit form variables related to different points in time. With a sufficiently large
number of observations and generalization of the phenomenon under investigation at a
higher level of the hierarchy, the deterministic component begins to prevail, and the
stochastic component becomes "noise" (table 2).

Table 2. The Organisational Step Change Route to an Innovative Competency in an Organization 6

Innovative Competencies Needed to

Organisational Steps Characteristics
make Step Change
Step 1: Commitment of leaders to innovative
Encouraging Innovation change is uncertain
Idea creation by brainstorming
No clear innovation strategy
Innovation is seen as difficult
No training and development for
innovation
Step 2: The need for innovation is Step 1 to Step 2
Fledgling Innovation understood Develop competency of leaders in
Effort Leaders become interested innovation
Business units responsible for Expose leaders to innovative cultures
innovation – so the process is
contained in functional silos
Step 3: First innovation successes Step 2 to Step 3
The Emergence of experienced Develop innovation competency
Coordination Leaders become engaged among all employees
Strategic plan includes innovation Develop a process view of innovation
Innovation begins to be seen as a
process
Step 4: Leaders sponsor innovation Step 3 to Step 4
Innovation seen as a Innovation is core to strategic aims Training and development is delivered
Leadership Function Clear innovation processes in place as a disciplined process
A culture of innovation emerges Review approaches to strategic
planning
Step 5: Business model adjusted to Step 4 to Step 5
Reputation for accommodate innovation Actively seek industry wide
Innovation Reflected in Collaborative innovation projects are cooperation
Reputation for Industry sought out Make the link between
Leadership Reputation for innovation adds to commercialization and innovation
company value clear

Source: M.L. Lengnick-Hall., C.A. Lengnick-Hall Human Resource Management in the Knowledge
6

Economy: New Challenges, New Roles, New Capabilities, San Francisco, CA: Berrett-Koehler, 2013

15
 Topic 3. Establishing an Innovative Organization

1. Ten Suggestions for Including Key Employees

An innovative organization includes all members of the organization in the job of
implementing and developing novel approaches toward the achievement of the strategic
aims of the organization. This process must include everyone who is engaged with the
company.
The Chief Executives commitment may, perhaps be taken as a given – since it will
most often be the case that the change being implemented is happening at her instigation.
It may be more difficult to get middle managers and first level supervisors committed!
And what about the front line workers whose efforts will be decisive in whether the change
happens or not. So the real questions in creating innovative organisations are:
• How can the leaders make the organisation innovative?
• How can these leaders get everyone in the organisation to pursue
innovative ways of achieving the organization's strategic aims?
• How can they get middle managers, key supervisors and frontline workers
all to act in the innovative way required?
In order for change to take place two circumstances need to be cultivated by senior
managers.
Circumstance 1: Key employees know that senior management is on their side –
there exists a psychological contract between them
The following suggestions are made so as to help achieve this circumstances
Suggestion 1: If key employees ask for a resource in order to help achieve the
change, senior leadership must be seen to deliver quickly.
Suggestion 2: When mistakes happen in search of the change being sought senior
managers must encourage learning and not condemn.
The next key circumstance that must be cultivated by senior managers is:
Circumstance 2: Key employees recognise and understand “the big picture”
The following suggestions are made so as to help achieve this circumstances:
Suggestion 3: Create and agree meaningful time bound objectives that are
relevant to the change being implemented. Ensure that everyone knows what these
objectives are and what their role is in achieving them.
Suggestion 4: Give people meaningful jobs – broaden out the tasks that they are
expected to fulfil and make sure that the contribution of the job to the change is well
understood not only by the job holder but also by people in related jobs.
Suggestion 5: Move people around in the organisation. Don’t let them become
stuck in one job for ever. This encourages learning and provides novelty and excitement
for bored key employees.
Suggestion 6: To encourage team work, design reward and bonus systems to be
team oriented and not driven by individual performance.
Suggestion 7: Flatten the organisation, remove unnecessary hierarchies. Organic
structures positively influence innovation and facilitate the flexibility, adaptation and cross
fertilisation needed to bring about change.
Suggestion 8: Break down functional silos. Have functions talk to each other and
aim for organising by key processes rather than by traditional function such as marketing,
finance or production.

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 Suggestion 9: Ensure that information flows freely through the organisation. Give
everyone the information that they need to do their job. Eliminate the hoarding of
information.
Suggestion 10: Keep everyone informed on the progress of the change or
innovation that they are contributing to. Encourage key employees to tell others about
their successes and contributions to the innovative environment.

2. Organizational design of innovative companies

Organizational design is a step-by-step methodology which identifies dysfunctional
aspects of work flow, procedures, structures and systems, realigns them to fit current
business realities/goals and then develops plans to implement the new changes. The
process focuses on improving both the technical and people side of the business.
For most companies, the design process leads to a more effective organization
design, significantly improved results (profitability, customer service, internal operations),
and employees who are empowered and committed to the business. The hallmark of the
design process is a comprehensive and holistic approach to organizational improvement
that touches all aspects of organizational life, so you can achieve:
1. Excellent customer service
2. Increased profitability
3. Reduced operating costs
4. Improved efficiency and cycle time
5. A culture of committed and engaged employees
6. A clear strategy for managing and growing your business
By design we ’ re talking about the integration of people with core business
processes, technology and systems. A well-designed organization ensures that the form
of the organization matches its purpose or strategy, meets the challenges posed by
business realities and significantly increases the likelihood that the collective efforts of
people will be successful.
As companies grow and the challenges in the external environment become more
complex, businesses processes, structures and systems that once worked become
barriers to efficiency, customer service, employee morale and financial profitability.
Organizations that don’t periodically renew themselves suffer from such symptoms as:
• Inefficient workflow with breakdowns and non-value-added steps
• Redundancies in effort (“we don’t have time to do things right, but do have time to
do them over”)
• Fragmented work with little regard for good of the whole (Production ships bad
parts to meet their quotas)
• Lack of knowledge and focus on the customer
• Silo mentality and turf battles
• Lack of ownership (“It’s not my job”)
• Cover up and blame rather than identifying and solving problems
• Delays in decision-making
• People don’t have information or authority to solve problems when and where they
occur
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 • Management, rather than the front line, is responsible for solving problems when
things go wrong
• It takes a long time to get something done
• Systems are ill-defined or reinforce wrong behaviors
• Mistrust between workers and management
People are organized into natural work groups which receive training in the new
design, team skills and start-up team building. New work roles are learned and new
relationships within and without the unit are established. Equipment and facilities are
rearranged. Reward systems, performance systems, information sharing, decision-
making and management systems are changed and adjusted. Some of this can be
accomplished quickly. Some may require more detail and be implemented over a longer
period of time.
Example:
A company within the aluminum industry. The company recognized they were
becoming bureaucratic and unresponsive to their customers’ needs. Following a period
of assessment of the strengths and weaknesses of the existing organization, they went
through a process of organizational redesign in which they organized their front office
functions to become more collaborative and customer focused. The diagrams below
illustrate, at a high level, this change (fig. 4).

Pre-design Workflow

Post-design Workflow

Fig. 4 Example of organizational design implementation 7

The first chart illustrates the tendency of most people within organizations to think
in terms of silos and organize people according to the similarity of their functions.

7 Source: J. Raven Education and Competencies Required in Modern Society. Higher Education
Review, vol. 15, 1982, pp. 47–57.

18
 The second chart illustrates how the company redefined structural boundaries to
become much more cross-functional on the front end of their business. They combined
people from a number of departments into teams that took full responsibility for managing
customer orders. The company was able to improve their total billings of a major product
line by 50% and increase their margins by 25%.
Of course, this chart greatly simplifies all of the design decisions which included
improvements in workflow and system support, and the role of leaders and other support
functions in the new organization. But this gives you an idea of the kinds of integration
and improved collaboration that can result from organizational design.
A strategic, carefully planned organizational structure helps a business run
effectively and efficiently. An ineffective structure can cause significant problems for a
company, including lost profits, rapid employee turnover and loss in productivity.
Management experts use the six basic elements of organizational structure to devise the
right plan for a specific company. These elements are: departmentalization, chain of
command, span of control, centralization or decentralization, work specialization and the
degree of formalization. Each of these elements affects how workers engage with each
other, management and their jobs in order to achieve the employer’s goals.

19
 References
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This course was developed with the support of the "Open
Polytech" educational project

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