Altinez-ga:
Your premise that corporate structure may be related to an
enterprise’s ability to sustain innovation, either product innovation
or other types, is compelling. Although it didn’t drive my research,
I have to admit to having an initial bias toward agreeing with your
specific concern that a move towards a highly convergent, centralized
organization would weaken an enterprise like 3M’s ability to sustain
real innovation. In doing the research for this question, my initial
bias (and your concern) seems to have some justification.
Innovation is a “hot” topic in business theory. Product innovation is
an area in which 3M has a long and successful history. There are a
number of other areas of innovation that are seen as real assets for a
corporation, as well – especially in a time when change is so
prevalent. The ability to innovate business processes, as well as
business products, is an especially important area. As such, there
are a number of sources of information and study on innovation
capability.
The ability to successfully innovate gives a business a clear
advantage over those that do not share that ability. Therefore, a
great deal of research has gone into determining the aids and barriers
to innovation with corporations. Corporate structure is only one,
although it is a powerful one.
Your question actually hints at an interesting concept that seems to
be taking hold among those that study and advise companies about
innovation-related issues. You mention that 3M is moving away from an
organic structure, which relates strongly to a growing concept that
the “machine age” is giving way to the “biology age”. Companies used
to thrive by replicating a machine – well-oiled, regular, predictable.
However, the vastly higher volatility of today’s marketplace demands
that companies become more “organic” – more able to respond and adapt
to their environment. Machine vs. Garden is a common comparison.
Later in my answer, I’ll highlight a paper which summarized a recent
conference on just that distinction, and the implications for
innovation. (IMR: Innovation Leadership and Governance).
BASF
Probably the closest situation to the current 3M shift is the 2001
“Fit for the Future” re-organization of BASF – a company with many
similarities to 3M, including a history of innovation, although not
nearly as “radical” a culture as 3M. Their reorganization seems to
consolidate down to fewer major business units, and offers similar
rationale to that presented by 3M.
A BASF presentation to analysts:
www.basf.de/basf/img/corporate/investor/quartal1_02/GS_Oakley.pdf
The BASF site hosts this review of the re-structuring:
www.basf.com/static/OpenMarket/Xcelerate/Preview_cid-1007646349378_pubid-974236850984_c-Article.html
Texdata.com (A technical site for the textile industry) described the
shift here:
http://www.texdata.com/aspneu/infohtml.asp?ID=500&L=I
The major difference between the 3M shift and the BASF reorganization
may be the tenor of the change. While publicly, both are citing
similar aims (getting decisions closer to the customer, consolidating
business units, etc.) the BASF reorganization seems to be a move
towards greater Decentralization – and towards a greater focus on
innovation – not the feeling of greater bureaucracy that you describe
at 3M in your question.
http://www.chemicalnewsflash.de/en/news/270201/news4.htm
Granted, this website is sponsored by BASF…. But the site claims to
have full editorial autonomy:
“BASF is the sponsor of Chemical Newsflash. F.A.Z.-Institut has sole
and full editorial control over the content of Chemical Newsflash.”
In fact, it's very difficult to find an organization that (at least
admittedly) is shifting *towards* centralized, bureaucratic control.
(To be fair, 3M does not do so in its public statements, either.)
However, current organizational design research and guidance seems to
point companies in the exact opposite direction.
CENTER FOR BUSINESS INNOVATION
One rich source of information about corporate innovation is, not
surprisingly, the Center for Business Innovation . It’s a research
group of Cap Gemini Ernst & Young Consulting. The Center has a number
of papers available for download – listed in their publications page:
http://www.cbi.cgey.com/cgi-bin/pubs.plx?sort=topic
The first compelling paper you might look at within the CBI site might
be:
Evolving Adaptive Organizations
http://www.cbi.cgey.com/pub/docs/Evolving_Adaptive_Organizations.pdf
(The paper is actually a subset of a larger, but very interesting,
combination of articles, which are all found in:
Perspectives on Business Innovation Issue 4: Growing the Adaptive
Enterprise
http://www.cbi.cgey.com/pub/docs/Journal_Issue_4.pdf )
It begins with an interesting illustration – where the US Marines
(arguably a very hierarchical, centrally controlled organization) are
actually experimenting with moving away from that type of centralized
organization. The article begins with: “The Marines realize, as do
many progressive companies, that in an environment characterized by
uncertainty, a rigid, hierarchical organizational structure can
inhibit important characteristics such as flexibility and
adaptability.”
MOST ironically, it cites 3M as a highly successful model of just the
kind of organic, adaptive, agile organization the article promotes.
It says “3M also does not follow the traditional approach to
organizational design. 3M consistently achieves its goal of having 15
percent of its revenue come from new products by providing managers
with the latitude to move from one business unit or laboratory to
another without bureaucratic obstruction. Project groups, operating
with few constraints from the formal organization, come together to
accomplish a task and disband when their work is completed.”
In your question, you asked if other companies had undertaken similar
restructuring – and the effect on their innovation. Interestingly,
the CBI published a set of papers in which one of the main articles
outlined three examples where companies did the exact opposite –
re-organized the other direction, specifically to support innovation.
http://www.cbi.cgey.com/pub/docs/Journal_Issue_8.pdf
This is a large paper, but it contains a very interesting and relevant
set of articles. (It also mentions 3M – presumably the’old’ 3M - as a
successful model of an innovator – pg 78.)
Another paper discusses the “Enterprise of the Future”. One of the
compelling arguments in the article is the idea that a single
vertically integrated corporation will be at an innovation
disadvantage over networks of connected enterprises.:
“Journey to the Enterprise of the Future”
http://www.cbi.cgey.com/pub/docs/Journey_to_the_Enterprise.pdf
Another CGI paper summarized the results of an important conference
which compared “machines” to “gardens”, concluding that some elements
of each are important. It’s called IMR: Innovation Leadership &
Governance –
http://www.cbi.cgey.com/research/current-work/connected-innovation/attachments/20010711-083735.pdf
Some of other papers that are especially interesting include a paper
which discusses organizational culture and effective knowledge
management (a key to productive innovation) is:
Building the Knowledge-Based Organization: How culture drives
knowledge behaviors:
http://www.cbi.cgey.com/pub/docs/CultureDrivesBehavior.PDF
FURTHER RESEARCH
Other sources, outside of CBI, certainly exist to shed more light on
the interaction between corporate structure and innovation capacity.
One interesting article, written by faculty from the economics
departments of Stanford and the London School of Economics finds
different structures actually seem to support different types of
innovation – where “the bureaucracy can work well when prior
knowledge is good ( for example, in the case of the aerospace industry
where the relevant physics principles were well understood from the
outset), but does not work when prior knowledge is bad (in the case of
the computer industry where the necessary principles of computer
science and solid state physics were developed simultaneously with or
even after the earlier generations of electronic computing machines)”
http://216.239.51.100/search?q=cache:E3oIBbs-ussC:elsa.berkeley.edu/~yqian/90-2.pdf+centralized+innovation&hl=en&ie=UTF-8
or, in PDF format:
http://elsa.berkeley.edu/~yqian/90-2.pdf
MIT’s Sloan Business School is currently presenting an executive
seminar on “Building, Leading and Sustaining the Innovative
Organization” They present a picture very much unlike the shift
towards centralized bureaucracy you’re describing at 3M.
http://www.sloan.execseminars.com/?seminar=inn&do=learn
Another interesting source of guidance can be found at the website of
Ten3:
They have a guidance piece called “Building a Sustainable Innovation
Organization - a CEO Guide”
http://www.1000ventures.com/business_guide/innovation_aweorg.html
And another called:
“Innovation System: the Six Core Elements, their Behavior &
Interaction”
http://www.1000ventures.com/business_guide/innovation_system.html
Both are short, but instructive guides to building effect
innovation-promoting processes and structures within organizations.
3M PRESS COVERAGE
Some articles have begun to appear in the press about the 3M
re-organization:
Minneapolis/St. Paul Business Journal
http://twincities.bizjournals.com/twincities/stories/2002/09/23/daily45.html
One particularly interesting article from Business Week actually
touches on the issue of the effect on innovation and creativity that
the reorganization might have. It has McNerney giving assurances that
he understands the issues, and that he believes the entrepreneurial
spirit is crucial for 3M’s success.
Here’s an excerpt:
“McNerney's new course also runs the risk of stifling 3M's hallmark
creativity. He and his lieutenants are already specifying where
research and development dollars are spent and establishing uniform
performance standards across 3M. That runs counter to its tradition of
giving individual business chiefs free rein. "The most important thing
about 3M--the single most important thing--is you get to do things
your own way," says Ronald O. Baukol, executive vice-president for
international operations and a 33-year veteran. 3M old-timers
generally back McNerney, conceding that money wasn't always wisely
spent. McNerney says he understands the balancing act: "My job is to
add scale in a fast-moving, entrepreneurial environment. If I end up
killing that entrepreneurial spirit. I will have failed."
http://www.businessweek.com/magazine/content/02_03/b3766083.htm
A related article has a detailed Q&A with McNerney:
http://www.businessweek.com/magazine/content/02_03/b3766086.htm
OVERALL OBSERVATION
It’s hard to find examples of organizations that re-organize away from
self-managing, team-based, multi-skilled approaches. In fact, a quick
review of consulting case studies from firms which help organizations
re-organize shows a clear trend in the opposite direction.:
http://www.restructassoc.com/clients_past.shtml
(RAI – Restructuring Associates, inc.)
This has been a very interesting question, with an insightful
underlying premise. If you have any questions, or need any further
clarification, just ask I’ve enjoyed working on the question. |
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