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Organizing for Innovation (Size (PRO LARGE SIZE (better able to obtain…
Organizing for Innovation
Size
PRO LARGE SIZE
better able to obtain financing
better able to spread costs of R&D over large volume
greater economies of scale and learning effects
taking on large scale or risky projects
CONS
R&D efficiency might decrease due to loss of managerial control
large firms have more bureaucratic inertia
mire strategic commitments tie firm to current techs
Small firms often considered more flexible and entrepreneurial
Many big firms have found ways of "feeling small"
break overall firm into subunits
can utilize different culture and controls in different units
Structural Dimensions of the Firm
Formalization
degree to which the firm uses rules and procedures to structure the behavior of employees
can substitute for managerial oversight, but can also make firm rigid
Standardization
the degree to which activities are performed in an uniform manner
facilitates smooth and reliable outcomes , but can stifle innovation
Centralization
degree to which decision making authority is kept at top levels of the firm OR the degree ti which activities are performed at a central location
Centralized authority ensures project match firm-wide objectives, and may be better at making bold changes in overall direction
Centralized activities avoid redundancy , maximize economies of scale and facilitate firm-wide deployment of innovations
But, centralized authority and activities might not tap diverse skills and resources, and projects may not closely fit needs of divisions or markets
Some firms have both - centralized and decentralized R&D activities
Mechanistic vs. Organic Structures
Mechanistic
have high formalization and standardization
good for operational efficiency, reliability
minimizes variation -> may stifle creativity
Organic
have low formalization and standardization; described as "free flowing"
encourages creativity and experimentation
may yield low consistency and reliability in manufacturing
Size vs. Structure
many advantages and disadvantages of firm size are actually due to structural dimensions of formalization, standardization and centralization
large firms typically make greater use of formalization and standardization because of challenges of oversight
The Ambidextrous Organization: The best of both worlds?
some divisions (e.g. R&D, new product lines) may be small and organic
other divisions (e.g. manufacturing , mature product lines) may be larger and more mechanistic
can also alternate through different structures o ver time
Modularity & Loosely Coupled Products
Modularity
refers to the degree to which a systems components can be separated and recombined
products may be modular at user level (e.g. IKEA shelving systems), manufacturing Leven (e.g. Sony's Walkman), or other levels
a standard interface enables components to be combined easily
modularity can enable many different configurations to be achieved from a given set of components
Loose.y-Coupled Organizational Structures
modular products can enable (though do not necessitate) the use od modular organizations - more typically termed "loosely coupled" organizational forms
in loosely coupled orgasm activities are not tightly integrated; they achieve coordination through adherence to shared objectives and standards
lddd nerf got integration enables firms to pursue more flexible configurations; may specialize in a few activities and outsource others
results in a network of loosely connected firms or divisions of firms
may not be good when very close coordination is needed, or when there is high potential for conflict
Managing Innovation across borders
Centralization versus decentralization is a particularly important issue for multinational firms
foreign markets offer diverse resources and have diverse needs
innovation tailored to local markets might not be leveraged into other markets
customization might make them poor fit for other markets
divisions may be reluctant to share their innovations
other divisions may have "not invented here" syndrome
four strategies of multinational innovation
Center-for-global: all R&D activities centralized in a single hub
tight coordination, economies of scale, avoids redundancy, develops core competencies, standardizes and complements innovations throughout firm
Local-for-local
each division does own R&D for local market
accesses diverse resources, customizes products for local needs
locally leveraged: each division does own R&D, but firm attempts to leverage most creative ideas across company
accesses diverse resources, customizes products for local needs, improve diffusion of innovation throughout firm and markets
globally linked: decentralized R&D labs but each plays a different role in firm's strategy and are coordinated centrally
accesses diverse resources, improve diffusion of innovation throughout firm and markets, may help develop core competencies
transnational approach: resources and skills anywhere in the firm can be leveraged to exploit opportunities om any geographic market: Requires:
Reciprocal interdependence among divisions
Strong integrating mechanisms such as personell rotation , division-planning teams, etc.
Balance in organizational identity between national brands and global image