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Creativity and Strategic Innovation Management

Creativity and Strategic Innovation Management was the first book to integrate innovation management with both change management and creativity to form an innovative guide to survival in rapidly changing market conditions. Treating creativity as the process, and inno- vation the result, Goodman and Dingli emphasise the importance of a strategic approach to management through fostering creative processes.

Revised and updated for a second edition, this ground-breaking book now includes:

• A new section on contemporary themes in innovation management, such as the use of social media and sustainability.

• More coverage of entrepreneurship, ethics, diversity issues and the legal aspects of tech- nology and innovation management.

• More international cases and real-life examples.

The book is also supported by a range of new tutor support materials. This textbook is an ideal accompaniment to postgraduate courses on innovation manage-

ment and creativity management. The focused approach by Goodman and Dingli also makes it useful as supplementary reading on a range of courses from management of technology to strategic management.

Malcolm Goodman is Senior Teaching Fellow at Durham University, UK.

Sandra M. Dingli is Associate Professor at The Edward de Bono Institute for the Design & Development of Thinking at the University of Malta, Malta.

Creativity and Strategic Innovation Management Directions for Future Value in Changing Times

Second Edition

Malcolm Goodman and Sandra M. Dingli

Second edition published 2017 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

and by Routledge 711 Third Avenue, New York, NY 10017

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2017 Malcolm Goodman and Sandra M. Dingli

The right of Malcolm Goodman and Sandra M. Dingli to be identified as author of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

First edition published by Routledge 2013

British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data A catalog record for this book has been requested

ISBN: 978-1-138-67509-4 (hbk) ISBN: 978-1-138-67510-0 (pbk) ISBN: 978-1-315-56084-7 (ebk)

Typeset in Times New Roman by Swales & Willis Ltd, Exeter, Devon, UK

Visit the companion website: www.routledge.com/cw/goodman

Contents

List of figures xx List of tables xxii Preface xxiv Acknowledgements xxvi

PART I The challenge of changing times 1

1 The changing business environment 3

Learning objectives 3 Introduction 3 Context 4

What is change? 4 Understanding the causes of change 6

Socio-cultural forces 6 Economic forces 8 Technological trends 9 Environmental trends 10

Cause, effect and apprehension 11 Complexity and change 11

Key principles 11 Creating wealth 11 Factors of production 12 Creativity 13

What is creativity? 13 Consequences of the business paradigm shift 13 Types of change 14

Incremental change 14 Transitional change 14 Transformational change 15

Change drivers 15 Practice 16

vi Contents

Business paradigms 16 Marketing and management myopia 16 Least-cost production paradigm 16 Marketing paradigm 17 Customer-perceived value paradigm 17 Service dominant logic paradigm 18 Post-capitalist paradigm 18

Action 18 Backwards or forward into the future? 18 The challenge of change 18

Challenges of initiating change 19 Challenges of sustaining momentum 19 Challenges of system wide rethinking 19 Challenge to traditional management 19

Summary 20 Discussion questions 20 Case exercise 20

Nokia I: early success in the mobile phone industry 20 References 21 Selected YouTubes 23

2 Key business decisions 24

Learning objectives 24 Introduction 24 Context 25

Time frame decisions 25 Information overload 27 Shareholder, finance and government pressure 27 Shortening business life cycles 27

Feel or process? 28 Key principles 28

Business decision process 28 Rational model 30 Real world complications 31 Contingency approach 31 Concepts of efficiency and effectiveness 33 The S-curve 33 Three strategic approaches 34

Limpet strategy 34 Cautious strategy 34 Innovative strategy 35

Practice 35 Two key questions 35

Contents vii

Concept of customer-perceived value revisited 36 Managing bias 36

Action 37 Making decisions: blending knowledge with experience to achieve

know-how 37 Linking creativity, entrepreneurship and innovation 37 Summary 38 Discussion questions 38 Case exercise 38

Tyrell’s: when the chips are down raise a glass! 38 References 39 Selected YouTubes 41

3 Management revisited 42

Learning objectives 42 Introduction 42 Horse sense! 43 Context 43

Global business environment 43 Key principles 44

A divertimento 44 Defining management 45

Primary management processes 47 Redefining management action: control or lead? 48

Putting the emphasis on control: micromanagement/Theory X 48 Putting the emphasis on leadership: fundamental management

competencies 48 Management: quo vadis? 50

Practice 51 Essential management skills 51 Managing self and individuals 52 Managing groups 52 Managing an organisation 52

Ethical considerations 53 Broad management styles 53 Organisational development 54

Is there a correct style? 54 Japanese management approach 55

Japanese management culture 55 Japanese management techniques 55

Theory Z 55 Quality of Work Life (QWL): issues and strategies 57 Quality circles 57

viii Contents

Action 58 New skills for a new world 58

Summary 59 Discussion questions 59 Case exercise 59

SASOL: encouraging individual initiative and freedom 59 References 60 Selected YouTubes 61

PART II Innovation from theory to practice 63

4 Business creativity 65

Learning objectives 65 Introduction 65

Nasruddin 66 Context 67

What is creativity? 67 Definitions 67 Process 68

Generate ideas 68 Creative people 68 Strive for originality 68 Provide examples of their work 69

Key principles 70 Understanding thinking 70 Physiology of the brain 71

The working brain: a synaptic wonder 72 Practice 72

Contextual factors affecting personal creativity 72 Organisations and creativity 73 Expressing natural skills 73

Action 73 Assessing personal creative potential 73 Personal Creativity Audit 74 Personal creativity in action 74 Work environment and performance 75 Left-brain and right-brain thinking model 76

Learning skills 78 Introducing the total thinking model 78 Perception 79 Half-brained thinkers! 79

Creative thinking applications 80 Summary 80 Discussion questions 81 Exercises 81

Contents ix

Sexism 81 Beijing Express problem 81

References 82 Selected YouTubes 82 Appendix 4.1: Personal Creativity Audit (PCA) 83 Appendix 4.2: assessing PCA performance 84 Appendix 4.3: sexism 85 Appendix 4.4: Beijing Express problem solution 85 Appendix 4.5: priming illusion solution 85

5 Applied business creativity 86

Learning objectives 86 Introduction 86 Context 86

Challenge of change 86 Stimulating creative thinking 87 Creativity and intelligence 87

Key principles 88 The quick-fix approach 88 The creative problem-solving approach 88

Note-taking skills 88 Memory friendly information 89 Learning skills 89 Picture perspectives 90

Getting to grips with creative individual problem solving 90 Demonstration exercise: organising a perfect wedding 90

Practice 94 Building an introductory CPS toolkit 94

Action 95 CPS facilitation 95

Individual or personal CPS activity 95 Group CPS activity 95 Organisational CPS activity 95

Summary 95 Discussion questions 95 Case exercise 96

Toymaker I: from lone apprentice to master craftsperson 96 References 98 Selected YouTubes 99 Appendix 5.1: CPS toolbox notes 99

6 Business innovation 108

Learning objectives 108 Introduction 108 Context 108

Why innovate? 108

x Contents

What is innovation? 110 Strategic innovation management 111

Key principles 111 Commitment 111

Getting started 111 Innovation champions 112 Levels of innovation 113

Incremental innovation 113 Radical innovation 113 Architectural innovation 114 Technological innovation 114

Sources of ideas 115 Closed sources 115 Open sources 116

The innovation process 117 Phase 1: initial spark of creative activity 117 Phase 2: idea evaluation 117 Phase 3: invention 117 Phase 4: external and internal launch 118

Idea selection 118 Idea Funnel 118 Stage–Gate model 119 Intellectual capital 119

Knowledge and technology transfer 120 Practice 120

Harnessing systems thinking 120 Hard systems approach 120 Soft systems approach 121

Action 121 Private sector 121

Innovation in MNCs 121 Innovation in SMEs 122

Public sector 122 Innovation in NGOs 122 Innovation in charities 123 Innovation in state-funded organisations 123

Innovation bottlenecks 124 Lack of ‘time to think’ 124 Bureaucracy 125 Structure 125 Poor lateral communication 125 External talent 126 Financial constraints 126 Limiting paradigms 126 Inappropriate mental models 126 Limitations of traditional teaching and training 126

Summary 127

Contents xi

Discussion questions 127 Case exercise 127

Nokia II: out of the ashes of disaster grow the roses of success 127 References 129 Selected YouTubes 130

7 Organisational culture and climate 131

Learning objectives 131 Introduction 131 Context 131

Need for group (collective) creativity 131 Key principles 132

Management commitment 132 Managers and creativity 132 Management styles 133 Manager’s interests 133

Group behaviour 133 Group participation 133 Loyalty and group participation 135

Working in groups 136 Establishing group beliefs 136 Empowering groups to perform 136 Encouraging group members to interact 136 Attempting to understand interactions 137

Preparing for group activity 137 Leadership role 137 Group rewards 137 Group selection and initial briefing 137

Managing groups 138 Advantages 138 Disadvantages 138 Solo or team run? 139

Belbin’s Team Roles 139 Tuckman model 140 The MBTI inventory/Jung’s personality typologies 141 The KAI inventory 142

Practice 143 Empowering people 143

First task of a CPS facilitator 143 Second task of a CPS facilitator 144 Third task of a CPS facilitator 144

Process role of a CPS facilitator 144 Key process skills 144

Conflict in groups and teams 145 Action 145

xii Contents

Organisational culture and climate 145 Organisational attitude and commitment 146 Organisational philosophy 146 Organisational climate 146

Key factors for developing a climate that fosters innovation 148 Sustaining an organisational climate 150 Can climate and culture be assessed? 151 Ekvall’s Creative Climate Questionnaire 152 Isaksen’s Situational Outlook Questionnaire 152 Great Place to Work Institute 153 Workplace democracy 153

Summary 153 Discussion questions 154 Case exercise 154

Samsung: seeking a creative corporate culture 154 References 155 Selected YouTubes 156 Appendix 7.1: management traits assessment 157 Appendix 7.2: group CPS audit 157 Appendix 7.3: assessing group performance 158

8 Overcoming resistance: mindsets and paradigms 159

Learning objectives 159 Introduction 159 Context 159

The power of mindsets and paradigms 159 Key principles 162

Group mindsets 162 Organisational mindsets 162 Challenging mindsets 163 Psychological factor sets 163

Perception 163 Learning 164 Beliefs and attitudes 165

Creativity blockers 165 Perceptual blockages 166 Emotional blockages 167 Process skill blockages 167 Communication blockages 167 Environmental blockages 168 Cultural blockages 168

Practice 168 Obstacles to individual business creativity 168

Tiredness 168 Anxiety 169 Negativity 169

Contents xiii

Fear of failure 169 Fear of standing out from the crowd 169 Fear of challenging the rules 169 Fear of emotional things 169 Myopia 170

Obstacles to group business creativity 170 Common problems that challenge the effectiveness of hard

systems thinking 171 Diagnosis 171 Belief in measurement 171 Risk spots 171 Faith in management techniques 171

Action 172 Working with others 172 Viewing management problems 172 Fixed vs. growth mindsets 173 Nudges and wise interventions 174

Summary 174 Discussion questions 175 Case exercise 175

Rose Tree Garden Centre: growing confidence in creativity 175 References 176 Selected YouTubes 177

PART III Linking creativity to strategic innovation 179

9 Applied business innovation 181

Learning objectives 181 Introduction 181 Context 182

Innovation idea sources 182 Key principles 183

Closed innovation 183 Open innovation 183 Open-source software (OSS) 185

Advantages of OSS 185 The impact of OSS 185

Practice 187 Closed innovation idea sources 187

Idea management systems 187 On-site creativity centres 189

Open innovation idea sources 189 Capturing ideas 190

External R&D agencies 190 Idea scouts and idea connectors 190

xiv Contents

Key personnel, technology transfer 190 Contractual arrangements 191

Developing ideas 192 Co-creation 192 Crowdsourcing 192 Social networking 195

Risk factors 195 Unpredictability vs. certain success 195

Action 196 Innovation networks 196 Innovation and entrepreneurship 197

Summary 198 Discussion questions 198 Case exercise 199

Toyota: an elegant search for innovative ideas 199 References 200 Selected YouTubes 201

10 Building a strategic managing innovation model 203

Learning objectives 203 Introduction 203 Context 205

Step 1: checking the now before thinking about the how 205 Rethinking time 206 Rethinking space 206 Rethinking mass 207

Linking the Einstein metaphor with strategic innovation 207 Step 2: conventional approach to strategic innovation 207

Content 208 Process 208 Tools 208

Step 3: basic processes of strategic innovation 208 Four key stages 208

Key principles 209 Step 4: innovation action plan 209

Practice 210 Step 5: reviewing the business 210

Challenging mindsets and paradigms 210 Step 6: reviewing the market 211

Deciding which customers to target 211 Challenging mindsets and paradigms 211

Step 7: reviewing the market offering 211 Challenging mindsets and paradigms 211

Contents xv

Step 8: creating customer-perceived value 212 Buyer experience cycle 212 The customer-perceived value matrix 213

Step 9: characteristics of strategically innovative organisations 214 Culture 214 Structure 214 Processes 215 Systems 215 People 215

Action 216 Step 10: purpose of strategic innovation 216 Step 11: transformation through strategic innovation 216 Step 12: holistic approach to strategic innovation management 217 Step 13: key issues of intent 218

Create purpose 218 Make innovation happen 218 Sustain model development 219

Final thoughts 219 Summary 219 Questions for discussion 220 Case exercise 220

Yamaha Motor Company: ‘Revs your Heart’ 220 References 222 Selected YouTubes 222

PART IV Strategic innovation in changing times 225

11 The importance of leadership 227

Learning objectives 227 Introduction 227 Context 229

Avoiding contextual myopia 229 Key principles 229

Leadership competencies 229 The difference between management and leadership 230

Qualities of a manager 230 Qualities of a leader 231 Comparison between managers and leaders 231

Leadership theories I: trait theories 232 Leadership theories II: behavioural theories 232 Leadership theories III: contingency theories 233 Leadership theories IV: emerging theories 234

xvi Contents

Charismatic leaders 234 Leadership characteristics 235

Visionary leaders 235 Transactional leaders 235

Contemporary leadership thinking 235 Courageous leadership 235 Leadership and management: are they mutually exclusive? 236

Practice 236 Assessing individual leadership skills audit 236 Assessing individual leadership skills audit interpretation 236

Action 238 Seizing the initiative 238 Leadership challenges 238 Leadership and innovation 238 The changing role of leadership 239

Summary 240 Discussion questions 241 Case exercise 241

African leaders: perspectives on leadership 241 References 243 Selected YouTubes 244 Appendix 11.1: assessing individual leadership skills

audit interpretation 245

12 Business social responsibility 246

Learning objectives 246 Introduction 246 Context 246

Business socialisation 246 Revival 246 Leading issues 248

Key principles 249 Definition of business social responsibility 249 Business ethics 249

Value of high ethical standards 249 Corporate social responsibility 250

Carroll’s pyramid 250 Generating and sharing social value 251

Well-being 251 Practice 252

Exploring the bottom line 252 People issues 253 Planet issues 254

Environmental responsibility 254 Resource sustainability 255 Circular economy 255

Contents xvii

Profit issues 255 Executive pay 255 Rank and file pay 256 Business profiteering 256 Effects of MNC profit strategies on SMEs 256

Action 257 Business solidarity: implementing CSR 257

Community 257 Workplace 257 Market place 258 Environment 258

Global recognition of BSR 259 Organisational approaches to CSR 260

Global or local? 260 A matter of attitude 260

Summary 261 Discussion questions 261 Case exercise 261

Molinos Rio de la Plata: championing BSR 261 References 263 Selected YouTubes 263

13 Organisational renewal for strategic innovation 265

Learning objectives 265 Introduction 265 Context 267

View from the boardroom 267 Key principles 267

Business game components 267 Benefactors 269 The risk paradox and casino market games 269 Bets, sweats and debts 269 Investment 269

Business game players 269 Multinational corporations 269 MNCs are gaining strength in Africa, Asia and South America 270 The importance of SMEs 270

Corporate game plays 271 Profit quest 271 Growth quest 271

Corporate game strategies 272 Operating paradigms 272

Three-way stretch model 272 Practice 273

Assessing organisational culture 273 Selecting an organisational style 275

xviii Contents

Inside or outside track? 275 Theory Z revisited 276 Theory WB approach 276 Managing change to boost well-being, creativity and innovation 278

Well-being 278 A new workplace democracy model 279

Disadvantages of workplace democracy 280 Action 282

Conventional planning practice 282 Reasons for pre-planning 282 Understand the people 283

Encouraging well-being 284 Understand the task 284 Understand the organisation 284 Develop plans 285 Pre-planning a culture change programme 285

Strategic approaches of Theory Y and Theory WB organisations 285 Importance of gaining and retaining trust 286

Summary 287 Discussion questions 287 Case exercise 288

Semco: a maverick approach to management 288 References 290 Selected YouTubes 291 Appendix 13.1: organisational creativity audit interpretation 291

14 Reflections 293

Learning objectives 293 Introduction 293 Context 293

Business trends 293 African trends 296

Instant availability 296 Responsible consumption 296 Transaction convenience 297 Gender equality 297 Improved online services 298

Asian trends 298 Network connections 298 Corporate social responsibility 299 Heritage appeal 299 Responsible business 300 The informal economy meets smartphone culture 301

European trends 301

Contents xix

The euro: a means not an end in itself 301 Connecting customers 302 Targeting Millennials 302 Importance of SMEs 302 Need for product and service innovation 302 Call for strategic innovation 302

South American trends 303 Immigration and integration 303 Urbanisation 303 Marketing to the time poor 304 Co-creating customer-perceived value 304 Digital opportunities for SMEs 304

Key principles 305 Management and organisation 305

Key trends 306 Organisational culture 306

Theory WB model 306 Determinants of organisational culture 307

Leadership 307 Emergence of multiple layered leadership 307 Key trends 307

Creativity and innovation 308 Growing importance of creativity and innovation 308 Group creativity and self-management 308

The pursuit of happiness 308 Practice 309

Revisiting the practices of wealth creators 309 Economic system 309 Environment 310 Society 310

Action 311 The trumpet sounds 311

Summary 311 Discussion questions 311 Case exercise 311

Toymaker II 311 References 314

Epilogue 315 Academic index 317 Subject index 320

Figures

1.1 Explaining the changing business environment 4 1.2 Russian dolls 5 1.3 Business environment changes 7 1.4 Business cycle troughs and peaks 9 2.1 Exploring key business decisions 25 2.2 Business decision process 28 2.3 The S-curve: a comparison between an established and a new technology 33 3.1 Exploring management 43 3.2 Putting the emphasis on leadership 49 4.1 Overview of business creativity 66 4.2 Lateral view of cerebrum, cerebellum 71 4.3 Activities that entail personal creativity 74 4.4 Individual response patterns 76 4.5 What do you see at first? 80 4.6 Personal creativity assessment spectrum 84 5.1 Exploring new skills 87 5.2 Planning the perfect wedding mind map 1 92 5.3 Planning the perfect wedding mind map 2 92 5.4 Planning the perfect wedding mind map 3 93 6.1 Exploring business innovation 109 6.2 The innovation process phases 116 6.3 Idea Funnel 118 6.4 A simple Stage–Gate system 119 7.1 Seeking a suitable organisation environment 132 7.2 Manager’s interests 134 7.3 Group responses 134 7.4 Degrees of group participation 135 8.1 Overcoming mindsets and paradigms 160 8.2 Assumptions becoming mindsets 163 8.3 A matter of perception 164 8.4 Common individual CPS blockages 166 8.5 The Nine Dot test 166 9.1 Exploring innovation idea sources 182

Figures xxi

9.2 Boudreau and Lakmani (2013) crowdsourcing classification 193 10.1 Building a strategic innovation model 204 10.2 13-step model 205 10.3 Rethinking space, time and mass 206 10.4 Traditional strategic factor set 207 10.5 Four key stages of the strategic innovation process 209 10.6 Buyer experience cycle 212 10.7 Organisational structure to support strategic innovation 215 11.1 Exploring leadership 228 12.1 Exploring business social responsibility 247 12.2 Carroll’s Pyramid 251 12.3 Bottom line issues? 252 12.4 A call to action? 257 13.1 Organisational renewal for strategic innovation management 266 13.2 The three-way stretch 273 13.3 Organisational style matrix 275 13.4 Structure of a Theory WB organisation 277 14.1 Overview of reflections 294 14.2 Circular economy 295 E.1 Creativity and innovation management toolkit 316

Tables

1.1 Key general forces affecting businesses in developed economies 6 1.2 The factors of production 12 3.1 Student seminar survey I 44 3.2 Student seminar survey II 44 3.3 Major management activities 48 3.4 Basic individual management skills 52 3.5 Summary guidelines for group managers 52 3.6 Summary guidelines for top management 53 3.7 Main management styles 54 3.8 McGregor’s assumptions leading to Theories X and Y 54 3.9 Japanese management culture 55 3.10 Comparison and contrast of Theories X, Y and Z 57 3.11 Examples of Theory Z organisations 58 4.1 Exploring logical and creative thinking 77 4.2 Cortical hemispheres 77 4.3 Personal Creativity Audit 83 4.4 Personal Creativity Audit coding 84 5.1 Illustration of some generated ideas for this exercise 91 5.2 Introductory CPS toolkit 94 5.3 Useful problem evaluation tools 100 5.4 Useful idea generation and development tools 102 5.5 Advantage/disadvantage assessment 106 6.1 Characteristics of incremental and radical innovation 114 7.1 Management styles 133 7.2 The Belbin roles 139 7.3 Jung’s personality typologies 141 7.4 Key factors in Ekvall’s Creative Climate Questionnaire 152 8.1 Individual CPS blockages 169 8.2 CPS difficulties: an empirical sounding 170 8.3 Leading CPS difficulties identified in the literature 170 9.1 Closed vs. open innovation principles 184 9.2 Closed and open innovation rationale and suitability 184 9.3 Closed innovation idea sources 188

Tables xxiii

9.4 Open innovation idea sources 190 9.5 Innovation networks 197 10.1 Matching conventional factor sets with Einstein’s variables 208 10.2 Reviewing the business 210 10.3 Deciding which customers to target 211 10.4 Reviewing the market offering 211 10.5 Customer-perceived value map matrix 213 11.1 Differences between managers and leaders 230 11.2 Leadership attributes 231 11.3 Personal qualities of leaders 232 11.4 Leadership skills status audit 237 13.1 Major business games 268 13.2 Key game activities 272 13.3 Organisational Creativity Audit 274 13.4 Theory Y and Theory WB organisations 281 13.5 Approaches of Theory Y and Theory WB organisations 286

Preface

Introduction This is the second edition of Creativity and Strategic Innovation Management. Business people and those who study business live in times of rapid and discontinuous changes in the business environment that have been triggered by a complex set of factors. Businesses that used to operate on safe ground now experience periodic and violent shifts and after- shocks in their environment. These shocks have been intermittent for some time but since the beginning of the twenty-first century have been happening at an increasing rate. The threat posed by climate change, denied by a large part of the business community for far too long, the financial crises of 2008, military conflicts, political swings, persistent wars, floods of refugees, the unexpected decision of the UK to leave the EU have combined to seriously challenge all those concerned with wealth generation and distribution. Then there is the com- petition to beat.

It is clear that it is time for businesses to seriously review the ways they have tradi- tionally operated and to start to do things differently. Einstein emphasised that ‘To raise new questions, new possibilities, to regard old problems from a new angle, requires creative imagination and marks real advance in science.’ But how? The second edition seeks to offer some help by addressing the following themes in relation to a practical typology, namely:

Key themes Framework

Management/Leadership Context Creativity/Innovation Key principles Organisational culture to support innovation Practice Business social responsibility and management of change Action

The text’s main aim is to stimulate thinking about these themes and their interaction with the Framework topics to provide guidance as to how businesses can achieve and sustain inno- vation by adopting a holistic approach to creativity and strategic innovation management. Examples in each chapter have largely been selected from the continents of Africa, Asia, Europe and South America as the literature is awash with U.S. illustrations.

In many cases the words organisation and company or corporation can be read just as business activity. Where it makes sense to distinguish between them, this should be apparent in the text.

The major themes covered apply generally to multinational corporations (MNCs), small and medium sized enterprises (SMEs), non-governmental organisations (NGOs) and chari- ties. Clearly specific issues such as size, financial strength and organisational fluidity can present exceptions to this.

Preface xxv

It is recommended that to grasp the intricacies and complexities necessary to obtain an overview of the task facing modern businesses it is best to read the text sequentially. However, each chapter is free standing. The argument is presented in four Parts:

• Part I: The challenge of changing times (Chapters 1–3). • Part II: Innovation from theory to practice (Chapters 4–8). • Part III: Linking creativity to strategic innovation (Chapters 9–10). • Part IV: Strategic innovation in changing times (Chapters 11–14).

To gain the most from the flow of the argument an open mind is necessary. Readers are invited to explore the exercises and audits featured in the text in an open spirit. Each chapter contains an exercise or case study and a selection of YouTubes to encourage the enquiring mind. The text is also supported by a website.

The challenge of changing times A surprising number of people confuse creativity and innovation. Creativity is necessary for innovation but not sufficient. It provides the sparks, the ideas that are progressed and actioned by investment in innovation. Change is a constant factor of life and impacts on all businesses. Human nature can welcome it or resist it. Most employees accept that incremental changes are necessary for the business of wealth creation but fewer welcome major change in their lives. Those at the helm of businesses large and small are traditionally conservative and risk averse. As the argument presented in the text clearly shows it is time for the business com- munity to review and redesign its approach to wealth creation activity. This requires a new acceptance and spread of ethical practices, management and leadership, creative thinking, with a medium- to long-term perspective.

Business creativity techniques are fun and rewarding but are skills that need to be encour- aged rather than resisted by top management and employees. A selection of basic tools are introduced in Chapters 4 and 5 which have been successfully applied in businesses. Whilst digital and IT sources can greatly assist creativity and innovation, they are no guarantee of success. They are not piecemeal quick fixes that can be actioned by tapping a keyboard or screen. A full commitment is required for a strategic approach.

It is time for business practitioners and students to step up to the challenge. Readers are invited to explore new organisational and management approaches. ‘Our doubts are traitors, and make us lose the good we oft might win. By fearing to attempt’ (Shakespeare, Measure for Measure) for ‘fortune brings in some boats that are not steer’d’ (Shakespeare, Cymbeline).

Acknowledgements

Thanks are due to the following people for their contributions to the second edition: Abi Goodman for the artwork, Andrew Jeffrey for the epigraphs at the beginning of each chapter and for the Toymaker II case study, Jill Goodman for proofreading and copy cor- rection. Thanks are also due to Sandra Dingli of the University of Malta and Asif Majid of Sheffield Hallam University for associate interest. Finally, thanks are due to the editorial staff at Routledge for their professionalism in managing the technical issues associated with this edition.

Malcolm Goodman Durham University

Part I

The challenge of changing times

1 The changing business environment

Can anything that is useful be accomplished without change? (Emperor Marcus Aurelius)

If I have seen further it is by standing on the shoulders of giants. (Isaac Newton)

Learning objectives This chapter explores:

• The importance of the changing global business environment. • The factors that have caused it and the major types of change. • Management response paradigms and their suitability to today’s global business

environment. • The challenges that contemporary organisations face.

Introduction Organisations of all kinds, large and small, private and public are experiencing profound changes in their business environment during the opening decades of the twenty-first century. Many organisations are being affected by rapidly changing business environments. Natural resources and energy supplies are becoming more expensive and advances in technology have resulted in the rapid expansion of virtual markets. Changes in the economic fortunes of individual nation states and their consequent social and political ramifications, together with an emerging shift in global power dynamics as developing economies rival established ones, have all presented organisations with the necessity of seriously reviewing their established modus operandi.

Chapter 1 sets the scene and provides an overview of the complexity of the shifting sands of the business environment. This establishes a platform for the text which addresses the equally complex matter of how organisations should identify, innovate and develop new ways of operating that are in tune with the challenges they face. (See Figure 1.1.)

4 The challenge of changing times

Context

What is change?

Everything and everyone is exposed to change. It is a feature of the natural world and dictates the environment in which the human race exists. At a basic level change may be defined as ‘the movement away from a present state towards a future state’ (George and Jones, 2012).

A useful metaphor for change is a set of Russian dolls (Figure 1.2). The outer doll, which contains all the others, is the macro-environment that affects us all. The inner dolls can be taken to symbolise constituent or micro-environments that impact on our lives as results of political, economic, socio-cultural and technological factors. In the opening decades of the twenty-first century increasing concerns over the fate of the physical environment are being

Figure 1.1 Explaining the changing business environment.

The changing business environment 5

raised by many as global warming, land-use concerns, food provision and a rising world population are topics that feature daily in the world’s media.

The Concise Oxford English Dictionary (OED) defines change both as a noun and as a verb. Used as a noun change is defined as ‘becoming different’; ‘an alteration or modifica- tion (i.e. a change in someone’s facial expression)’ and ‘a new experience’. As a verb change is defined as something that concerns action, which ‘makes (something) different’. Change, then, is both about a state of being and about action to alter it.

The late twentieth century was a period of major social, economic and political changes. It was also a time in which there were big changes in knowledge – in how people see knowl- edge and how they use it. This period is now widely known as the beginning of the Knowledge Age – to distinguish it from the Industrial Age. The Knowledge Age is a new, advanced form of capitalism in which knowledge and ideas are the main source of economic growth (more important than land, labour, money, or other ‘tangible resources’). New patterns of work and new business practices have developed, and, as a result, new kinds of workers, with new and different skills, are required.

The macro-environmental factors that shape change can move in either small, almost imperceptible ways (incremental change) or in an explosive tsunami-like way and radically change the status quo in minutes. Change, whether incremental or radical (and people usually face a mixture of both) is a paradox of recorded history. Sometimes the environment changes positively and sometimes negatively. Theories about change have been exercising the human intellect for thousands of years. In that time there have been many explanations and stories about how change happens. Much of the recorded wisdom tells you what to do, but not neces- sarily how to do it. It provides both a challenge and a threat to human endeavour. Individuals and organisations that cope with the challenges brought about by change can be considered winners and those that fail to adjust their responses inevitably face a progressive and some- times sudden deterioration in their perceived well-being (McCalman et al., 2016, pp. 5–6).

Figure 1.2 Russian dolls.

6 The challenge of changing times

Understanding the causes of change

To respond effectively to rapid change, it is necessary to understand the underlying causes. There is a considerable volume of literature that shows that change has provided a major challenge to organisations since the Industrial Revolution (Grey, 2003). It is not something that is needed periodically; it is a business constant (Graetz et al., 2006). Specific changes in an organisation’s internal structure and external markets often derive from wider changes in society, economics or technology (Senior and Swailes, 2010). Change takes place both ‘out there’ in the tangible and physical world and ‘in here’ in the internal world of the human mind, with all its memories, thoughts and ideas. The world appears both ‘objective’ and ‘subjective’. A change project starts from the subjective, inside human imagination, and gradually works out into the reality of managing other people and organising things in the world (Table 1.1).

Socio-cultural forces

General trends in society politics and demography touch everyone. In recent years these have resulted in upsurges in the pensioner, youth and consumer markets; a shift in emphasis from community to a more individualistic society; increased interest in diversity (Roosevelt et al., 2001; Bohnet, 2016) and ageing populations. Markets and monetary flows can fluctu- ate, competitive ways can alter dramatically, and technology and innovation can fracture

Table 1.1 Key general forces affecting businesses in developed economies

Forces/trends Factors

Socio-cultural Ageing populations Growth of youth markets Trend toward individual centred society Diversity Rise of consumerism

Economic Present, recent and projected economic climate Business cycles More capital flows More countries linked to capitalism Emergence of China and India as major economic powers Slower domestic growth of developed economies Rising consumer debts Competitive threats Privatisation Fewer tariffs Globalisation

Economic Ages Shift from Industrial to Knowledge Age Pace of change

Technological Rapid advances in communication Rapid advances in information technology (IT) and IT networks Commoditisation Development of global networks

Environmental Global warming Dwindling finite resources, e.g. minerals and carbon fuels Ecological issues, e.g. carbon footprint Increase in immigration flows Increased government legislation, e.g. EU clean air dictates

The changing business environment 7

established patterns. Technological advance in the twenty-first century is accelerating and is expected to accelerate exponentially. In particular the revolution in IT is having a profound impact on the business environment and many companies are also facing increased chal- lenges from ecological and ethical forces (Figure 1.3).

Most managers in the developed economies accept that a diverse workforce is benefi- cial both to employees and organisations. Whilst cultural diversity is generally encouraged, gender diversity has tended to gain acceptance but is not always pursued with much vigour (Bohnet, 2016). In the less developed economies both cultural and gender diversity are often constrained by strong cultural attitudes and beliefs. Diversity bias is a complex problem that globally active organisations are seeking to address in order to develop a new mindset. As global businesses find that the going gets progressively more difficult they are giving more strategic attention to innovation. Successful diversity programmes break down stereotypes and enhance the creative process (Kurtzberg, 2005; Hewlett et al., 2013). Inherent diversity, however, is only half of the equation. Leaders also need acquired diversity to establish a cul- ture in which all employees feel free to contribute ideas (Roosevelt et al., 2001).

People all over the world are expecting more out of life. Despite the emergence of the global economy millions still live out their lives below the official United Nations breadline. Basic needs to sustain life such as food, water, shelter and security are yet to be met in many countries. The technological revolution that has launched the digital age is fuelling people’s wants for products and services that will improve their standard of living, but the onward march of global communications often frustrates people who now know about the availabil- ity of such things but find it difficult or are unable to afford them.

IKEA react to strong western buyer’s markets for home furnishings

IKEA have found that the demand for home furnishings in the developed western markets has nearly reached saturation. Despite this IKEA have a target of almost doubling sales by 2020; changes in customer buying activity was a spur to rethinking the way the com- pany conducts its business. IKEA has decided to concentrate on environmentally friendly business initiatives worldwide and to increase its penetration of the developing countries.

Source: Adapted from ‘We’ve hit peak home furnishings, says Ikea boss’, The Guardian, 18 January 2016, https://www.theguardian.com/business/2016/jan/18/weve-hit-peak-home- furnishings-says-ikea-boss-consumerism (accessed 29 November 2016).

Figure 1.3 Business environment changes. Note: Horizontal axis indicates the speed of transition from sellers’ to buyers’ market conditions.

8 The challenge of changing times

Economic forces

The tides of economics change imperceptibly and sometimes abruptly. Markets and mon- etary flows can fluctuate, competitive ways can alter dramatically, and technology and innovation can fracture established patterns. The global financial crisis of 2008 has had a major impact on the economies of both the developed and developing world. Many busi- nesses have been severely affected by the paradigm change from sellers’ markets to buyers’ markets. The former is characterised by demand for goods and services generally being in excess of the supply. This has been the case in many developed countries for several decades and be can described as ‘business management’s heaven’. The successful business response was to increase the volume of products and services placed on world markets to achieve a very profitable return. The latter, a buyers’ market, is characterised by the supply of goods and services being in excess of the demand. This can be imagined as ‘business management’s hell’, as competition is fierce and businesses need to be careful to meet the expectations of customers who have a wide choice of suppliers.

To achieve profitable business many organisations are following the trend of commoditi- sation together with the outsourcing of goods and services to achieve low market prices. This can result sometimes in their risking criticism in their domestic markets by tacitly accepting ethical practices that would not be regarded as acceptable in their home market.

Currently the global economy is slowing down and at the time of writing the International Monetary Fund have called upon states to increase public investment or risk derailing recovery. Severe downside risks face the world economy due to China’s rebalancing, lower commodity prices, the collapse in the price of oil (which fell to $28 a barrel in January 2016) and a pessimistic view of the fortunes of some countries in the emerging world. Globalisation causes economies to become increasingly interconnected. This has resulted in a greater level of interdependency, which leads to greater volatility, uncertainty and complexity.

Unilever prepares for tougher global market conditions

To counter growth potential opportunities in the buyers’ markets of the developed economies Unilever expanded into emerging markets such as China, Brazil and Russia. However, these once booming markets are experiencing fall-backs in their growth per- formances. China’s growth is slowing, Brazil is in recession and Russia is struggling under western sanctions. Stock prices and the oil price have tumbled since the start of 2016, triggering fears that the world economy is entering a recessionary phase.

Source: ‘Unilever Chief anticipates year of crises as stock markets falter’, The Guardian, 19 February 2016; ‘Unilever warns of “tougher” 2016’, BBC News, 19 January 2016.

One remedy for indebted countries is to check and reduce high levels of indebtedness. Whilst the banking fraternity loudly claim that countries should admire their special cognitive skills, Daniel Kahneman (2011), winner of the Nobel Economics prize, dramatically exploded this as cognitive illusion. The probability of successful trading he found largely to be governed purely by chance as with rolling dice.

BUSINESS CYCLES

According to Parkin and Bade (2011) a business cycle is the periodic but irregular up-and- down movement in economic activity, measured in terms of real gross national product

The changing business environment 9

(GNP) and other macroeconomic variables. They argue that a business cycle is not a regular, predictable or repeating phenomenon like the swing of a clock’s pendulum. Its timing is random and, to a large extent unpredictable. A business cycle is identified as a sequence of four phases:

1 Contraction (a slowdown in the pace of economic activity). 2 Trough (the lower turning point of a business cycle, where a contraction turns into

an expansion). 3 Expansion (a speed up in the pace of economic activity). 4 Peak (the upper turning point of a business cycle).

A recession occurs if a contraction is severe enough. A deep trough is called a slump or a depression (Figure 1.4).

Business cycles, according to the International Encyclopaedia of Economics, refer to ‘time periods of rising prices, employment, and output that are followed by declines in these macro-economic quantities’. There are two streams in business cycle research, one generat- ing ‘theory-based cycles’ and another generating ‘data-based cycles’. The first stream of research establishes theories which attempt to explain why and how business cycles arise in an economic system. The second stream of literature is more focused on methods of identify- ing, measuring and describing the business cycles. Scholars from this stream, notably those in the National Bureau of Economic Research (NBER) and the Economic Cycle Research Institute (ECRI), argue that properly understanding business cycles relies first on collecting and studying observable data.

Technological trends

The development of digital technology has quickened the emergence of the Knowledge Age at the expense of the Industrial Age. Computer controlled systems have revolutionised manu- facturing and service industries. Knowledge Age worker-citizens need to be able to locate, assess and represent new information quickly. They need to be able to communicate this to others, and to be able to work productively in collaborations with others. They need to be adaptable, creative and innovative, and to be able to understand things at a ‘systems’ or ‘big picture’ level. Most importantly, they need to think and learn for themselves. Digitisation is also shaping social attitudes and choices through the popularity of social networking

Figure 1.4 Business cycle troughs and peaks.

10 The challenge of changing times

platforms such as Facebook and Twitter, which, together with sites such as YouTube enable organisations to get closer to discovering customers’ perceived value expectations. The pur- chasing patterns of supermarkets and IKEA have transformed the face of retailing with deep impact across the global economy. Facebook, Google and Twitter have transformed global advertising and Amazon has transformed the book trade. The music industry has been revolu- tionised as digitisation has changed the way people collect and listen to music. The explosive trend toward increasing digitisation has disrupted and transformed most business activities and the pace of change continues to disrupt world markets as digital technology becomes cheaper and the process of miniaturisation continues. Advances in the development of digital technology are also boosting the rate at which new discoveries are occurring, ranging from spectacular discoveries in space and the application of new micro techniques in the medical profession.

Environmental trends

Many companies are also facing increased challenges from ecological and ethical forces (Wetherly and Otter, 2011). The world environment is under pressure from climate change, which is being intensified by excessive carbon emissions by both the developed and rapidly developing economies. The key questions here are:

• How fast will the climate change? • How fundamentally will it change? • How will it impact on organisations? • How will natural resources be restored?

Barclays: out of Africa

The story of Barclays’ supposed failure in Africa has as much to do with Barclays as it does with Africa as a continent. Even though Barclays has maintained a presence in Africa for more than a century, the bank was very slow in taking up the fresh opportu- nities that presented themselves in the past decade.

Barclays was not as nimble as other banks, such as Standard Bank, Ecobank or GT Bank, which have been snapping up opportunities in Africa. It was bogged down by the internal bureaucracy of tying up all its assets in a merger with South Africa’s ABSA bank in order to create Barclays Africa.

That process began in 2005, and is yet to be fully completed, and both banks have retained their separate identities thus far.

Sources: Mbele, ‘Why is Britain’s Barclays Bank pulling out of Africa?’, BBC, Africa Business Report, 1 March, 2016; Treanor, J., ‘Barclays plans sell-off of African operations’, The Guardian, 26 February 2016.

New sources of energy will need to be found as fossil fuels are depleted. Globalisation causes economies to become increasingly interconnected. The ecological voice calls for the natural environment to be cleaned up and responsibly managed. The combination and interaction of these forces explains why so many businesses have experienced a sudden change in their real-time operating environments at an increasing pace since the turn of the millennium.

The changing business environment 11

These new external conditions have severely challenged both private sector MNCs and SMEs as well as public sector organisations. Turpin (2015), whilst recognising the impor- tance of the forces in Table 1.1, emphasises the challenges that these forces bring to all businesses. The fortunes of economies and businesses are acutely affected by the dynamic shifts in the ages of economic history and the ability of economists’ theories and practices to guide national economic policies. In the midst of the turbulence the profession itself has cried ‘mea culpa’ (Conway, 2010).

Cause, effect and apprehension

Change is everywhere in business, and people do not appear to be very happy about it. But it is not just nostalgia or laziness that cause the negative reaction. Change is rarely managed well. What do managers get wrong about change? There is quite a long list:

• They underestimate how long it will take people to accept change. • They fail to recognise how difficult it is to spread the message that change may be neces-

sary or unavoidable. • They do not understand what change feels like beyond the boardroom or their own office. • If they are successful in getting the organisation to accept the need for change, they forget

to explain that the new direction or mission may change again and possibly quite soon.

The UK Cabinet Office made a set of predictions on the forthcoming business decade. It foresees the real emergence of a UK ‘e-economy’ with faster, nimbler firms driven by tech- nology and large companies shrinking to more manageable scales. The report, called: ‘2020 vision’, highlights the emergence of a much greater dependency on IT and mobile commerce by 2020, as access points and connection speeds increase exponentially and entrepreneurs seek to tap further into the low overheads that virtual business offers. This new Industrial Revolution is on its way and will continue to be fuelled by the growth in technology that has been taking place since the development of the PC in the early 1980s and is now driven by smartphones, tablets and mobile commerce.

Although access to funding remains a major issue for SMEs, in order to grow within the current economy, it is essential that smaller businesses embrace the digital opportunities available to reach and connect with their customers online. The good news is that digital marketing is not as complicated or expensive as some maintain.

Complexity and change

The interaction, convergence and acceleration of the four major forces of change summarised in Table 1.1 generate complexity in national, international and global markets. Globalisation causes economies to become increasingly interconnected. This has resulted in a greater level of interdependency, which leads to greater volatility, uncertainty and complexity.

Key principles

Creating wealth

In an era affected by turbulent and far reaching change in the business environment, wise companies and organisations will refocus their view of business from a tendency to emphasise costs and prices to one that places a greater significance on successfully meeting consumers’

12 The challenge of changing times

perceived values. In other words, they discover, develop and provide what consumers want instead of assuming that the least-cost production paradigm should dominate their activities.

The pursuit of profit, and by implication corporate wealth, is seen by many to be influenced by standard economic theory. It is the art of successfully combining traditional economic factors of production, land, labour and capital. Whilst this provides a sensible direction to modern corporate activity, it needs to be expanded to include a philosophy and a functional expertise that can foster and deliver innovative solutions to the growing customer prefer- ence for products and services that meet their perceived values rather than for standardised offerings. This calls for the inclusion of creativity as a key factor of production. This is gener- ally accepted as critical in Europe and North America but less so in Africa, Asia and South America where a risk averse culture is more common.

IBM’s Institute for Business Value survey found that Chief Executive Officers (CEOs) identify ‘creativity’ as the most important leadership competency for the successful enter- prise of the future (IBM, 2010).

Factors of production

The term ‘factors of production’ relates to the key variables that, according to conventional economics, go into making goods and services. Table 1.2 presents a brief summary of the three conventionally accepted factors plus additional ones that are particularly relevant in the twenty-first century business environment.

The Nomura Institute of Japan has an interesting and different view of the key factors of production and classifies four areas of economic activity:

1 agricultural 2 industrial 3 informational . . . and now through the evolution of technology 4 creative: constant innovation.

Table 1.2 The factors of production

Factor Description

Land Refers to physical land and other natural resources, e.g. the land that a building is constructed on, oil that is extracted from under the seas, the land, forests and fish reserves. Providers of land receive rent.

Labour Refers to physical and mental effort, e.g. stacking shelves in a supermarket, or calculating the final financial accounts of a company. Providers of labour receive wages.

Capital Exists at two levels. First, financial capital. More importantly, this is used to purchase physical capital that goes into making other things. Physical capital consists of machinery, equipment, tools, etc. Providers of capital receive interest.

Enterprise Is the skill of combining the other factors of production. Entrepreneurs are the risk takers that set up and run business enterprises. Entrepreneurs receive profit.

Creativity Creativity is a core competency for leaders and managers and one of the best ways to set companies apart from the competition. Corporate creativity is characterised by the ability to perceive the world in new ways, to find hidden patterns, to make connections between seemingly unrelated phenomena and to generate solutions. Generating fresh solutions to problems, and the ability to create new market offerings, processes for a changing market, are part of the intellectual capital that give a company its competitive edge (Bilton, 2007; Bilton and Cummins, 2010). Creativity is a crucial part of the innovation equation.

The changing business environment 13

Dean and Kretshmer (2007) argue that in most developed economies economic and social relations are undergoing radical change, expressed in concepts such as ‘knowledge economy’, ‘weightless economy’, ‘post-industrial society’ or ‘information society’. Ideas, inventions and innovations are becoming of major importance as companies strive to find their way in highly competitive global markets. Intellectual capital has come of age and the literature suggests the arrival of a distinct new factor of production – human or creative capital – that replaces or supplements the traditional view of land, labour and capital as the key factors for generating wealth (Erickson and Rothberg, 2000; Erickson and Nerdrum, 2001; Rivett and Kline, 2000). Ideas can be regarded as a form of capital that can be exploited in post-production economies and should be valued by wise organisations (Bowman and Swart, 2007). In addition to the growing importance of creativity to the developed economies, developing countries are competing on creativity as well as cost and this will dynamically change business everywhere (The Economist, 2010).

Creativity

Organisations that are determined to develop a strategic approach to innovation need to facil- itate and sustain cultures that encourage creativity in order to generate ideas (Bowman and Swart, 2007). A steady flow of ideas feeds the invention and innovation process.

What is creativity?

• It is not a form of magic that only certain individuals can perform. • It is open to all who are prepared to experiment in thinking ‘out of the box’ to produce

new, novel or original ideas and solutions (Goodman, 1995).

According to the IBM 2010 Global CEO Study, which surveyed 1,500 CEOs from 60 countries and 33 industries worldwide, CEOs believe that, ‘more than rigour, manage- ment discipline, integrity or even vision – successfully navigating an increasingly complex world will require creativity. The effects of rising complexity calls for CEOs and their teams to lead with bold creativity, connect with customers in imaginative ways and design their operations for speed and flexibility to position their organisations for twenty-first century success’ (IBM, 2010). Findings from the survey led IBM to define creativity as ‘the ability to come up with something new that is useful’. To succeed individuals and organisations need to embrace creativity and innovation at every level.

Consequences of the business paradigm shift

The consequences of this paradigm change are profound and are summarised below:

• There is more competition. • Customers therefore have a choice of provider/supplier. • This tends to result in them demanding more for their money (as they see it). • This results in on-costs to hard pressed providers/suppliers. • Leading to a new business definition of value – it is now heavily influenced by buyers

and has resulted in the evolution of the concept of consumer-perceived value (Kotler et al., 2016) as a key determinant of business success.

14 The challenge of changing times

• This increases the importance of the marketing approach to business and stresses the importance of innovation if organisations are to prosper in their operations.

• Wise organisations seriously pay more than lip service to research and development (R&D) and ring-fence or at least defend it from pressures to reduce R&D budgets.

Types of change

Change can be either continuous and mainly incremental or discontinuous. When it bursts into the business arena it is characterised by sudden shifts in strategy, structure or culture, and typically all three (Balogun et al., 2016). An example is provided by the privatisation of publicly owned utilities.

Change, whether incremental or radical, is inevitable in an organisation. Change in social systems, in particular the formal organisation, may be defined as a planned or unplanned response to pressures and forces from the natural environment and mostly the activities of people. Managers are constantly challenged to respond to threats and opportunities in their organisation’s environment. In order to meet these challenges, they must often change, adapt or even completely transform their organisations. To manage these organisational changes, theorists have found it instructive to categorise change. The three types of change that occur most frequently in organisations are incremental, transitional and transformational (Anderson and Anderson, 2010).

Incremental change

Incremental change or ‘first-order’ change is essentially about adaptation and assumes that organisations adjust to relatively minor variations in their operations automatically without having to face any serious challenges. This mode of change is small and gradual and is easily operated by individuals, groups and managers. Some writers argue that all change, short of life or death, is incremental and so should draw a gradual response (Fox-Wolfgramm et al., 1998). However, the market that most firms face today is becoming more global with greater and more diverse competition. Because of this, a firm must quickly, efficiently and com- pletely target its methods for meeting the fundamental requirement for change innovation.

If a company decided to improve its processes, methods or performance standards, this would be considered more of a developmental change. Companies are continually process- ing developmental change to some degree in order to stay competitive. This type of change should cause little stress to current employees as long as the rationale for the new process is clearly conveyed and they are trained in the new techniques. When major change is required, such as the decision to close a division, employees may be more likely to accept the change if the company attempts to implement developmental change as the first step in streamlining the business. The employees could see that the company attempted different strategies before determining that closing the division was the only option.

Transitional change

This describes the progress changes an organisation makes as it journeys from the realisation that change is happening and that new and usually radical responses (Laughlin, 1991) must be implemented over a defined period of time. Transitional change involves a fundamen- tal change in behaviour, attitude and belief so that people meet environmental challenges. Transitions are a core part of the dynamic of organisational change. Transitional change is

The changing business environment 15

more intrusive than developmental change as it replaces existing processes or procedures with something that is completely new to the company. The period when the old process is being dismantled and the new process is being implemented is called the transitional phase. A corporate reorganisation, merger, acquisition, creating new products or services, and implementing new technology are examples of transitional change. Transitional change may not require a significant shift in culture or behaviour but it is more challenging to implement than developmental change, as the future of the organisation is unknown when the transfor- mation begins.

Because the outcome of transitional change is unknown employees may feel that their jobs are unstable and their own personal insecurities may increase. Training in the new procedures should be commenced at each stage of the new process. This will allow employees to feel that they are actively involved and engaged in the change. As their level of engagement in the new procedure increases, their resistance to change may decrease. Management needs to be cognisant of the impact and stress these changes will have on their employees. The company should continue to inform the employees of their status and offer support in helping them deal with the personal adjustments they will be forced to make.

Transformational change

Transformational change implies radical change with the aim of improving service quality and/or reducing costs. It develops new and different ways of working. Transformational change requires strong leadership. For a transformational change project to succeed it has to be a leader’s top priority. Transformational change occurs after the transition period. It may involve both developmental and transitional change. It is common for transitional and transformational change to occur in tandem. When companies are faced with the emergence of radically different technologies, significant changes in supply and demand, unexpected competition, lack of revenue or other major shifts in how they do business, developmental or transitional change may not offer the company the solution it needs to stay competitive. Instead of methodically implementing new processes, the company may be forced to drastically transform itself.

Change drivers

Change has a multitude of causes that present challenges as everyone seeks to sustain and improve their standard of living. A good place to start when seeking to understand what is happening in organisations is to study the drivers of change and how people feel about them. Ask people to brainstorm the change drivers which they think are important. Then encourage them to rank them, discuss them and express their fears about them.

During the Newspaper Association of America and American Society of News Editors ‘Capital Conference’ in 2008 senior executives from Dow Corning, Eastman Kodak and Procter & Gamble discussed their respective company’s responses to contextual change. The six key points on which they were all agreed were:

1 The need for a crisis or some kind of ‘burning platform’ to motivate transformational change.

2 A clear vision and strategy that allows room for iteration. 3 A recognition that transformation is a multi-year journey. 4 A need to put the customer or consumer in the centre of the transformation equation.

16 The challenge of changing times

5 The critical importance of demonstrating to sceptics that different actions can lead to different results.

6 The need to over-communicate to employees, customers, stakeholders and shareholders.

Many wonder: what will the world be like in 2050? Arup (the global designers, planners, engineers, consultants and technical specialists and designers) developed a research-based Drivers of Change toolkit to help their business and clients identify the leading factors that will affect the world in the future. The tools help the user to ask the right questions in order to plan effectively for the future. It investigates themes including: energy, waste, climate change, water, demographics, urbanisation and poverty. The publication was devised by Arup’s Foresight, Incubation and Innovation team. Drivers of Change serve not only as a vibrant, visual record of research, but also as a tool for developing business strategy, brain- storming and education (Luebkeman, 2009).

Practice

Business paradigms

Marketing and management myopia

As peoples’ standard of living increases and as world markets change from sellers’ to buyers’ markets so firms and organisations need to seek a new balance between the often-competing approaches of market effectiveness (provide what consumers want) and market efficiency (with due regard to the wise use of funds and scarce resources). This places a great deal of importance on organisations to be realistic, accepting the desirability of adopting a marketing philosophy as they fashion suitable functional initiatives to meet the challenges of fiercely competitive markets. Ignoring the importance of this philosophy is highly dangerous. It is no good for providers to present to the market a product or service that has been efficiently supplied if it fails to meet the expectations of customers.

As world markets have been heavily challenged by the forces of change discussed in this chapter organisations that fail to place the concept of market effectiveness before that of mar- ket efficiency are in reality living in past sellers’ markets – a world that is fast disappearing.

Least-cost production paradigm

The least-cost production paradigm is closely associated with the concept of market effi- ciency and makes a great deal of sense when trading organisations are exposed to sellers’ markets. Producing as much as possible as cheaply as possible generally results in highly profitable rewards. If the private sector is enjoying a steady and reliable flow of revenue and profit, this usually leads to a strong tax-take by national and local authorities which provides considerable resources for public sector spending.

Once private sector markets start to experience the paradigm change from sellers’ to buyers’ markets, increasing pressure is placed on tax yields, which in turn places a strain on public sector budgets. If the state or local authorities have inflated their spending during favourable sellers’ markets or as part of a strategy to win votes overall, national indebtedness can increase alarmingly. Matters assume an even greater concern if the merchant banking fraternity have over-reached themselves. Financial crisis results and periods of austerity set in as organisations struggle to reduce their indebtedness.

The changing business environment 17

In such times as these there is a strong tendency for the concept of efficiency – highly focused attention to cutting costs – to dominate decisions.

Marketing paradigm

At some point in its development, every industry can be considered a growth industry, based on the apparent superiority of its product. But in case after case, industries have fallen under the shadow of mismanagement. The emphasis is usually on selling, not marketing. This is a mistake, since selling focuses on the needs of the seller, whilst mar- keting concentrates on the needs of the buyer. In a widely quoted article Levitt (2004) argues ‘the history of every dead and dying “growth” industry shows a self-deceiving cycle of bountiful expansion and undetected decay’. But, as he illustrates, memories are short. The railway serves as an example of an industry whose failure to grow is due to a limited market view. Those behind the railway are in trouble not because the need for passenger transportation has declined or even because cars, airplanes, and other modes of transport have filled that need. Rather, the industry is failing because those behind it assumed they were in the railway business rather than the transportation business. They were railway oriented instead of transportation oriented, product oriented instead of customer oriented. For companies to ensure continued evolution, they must define their industries broadly to take advantage of growth opportunities. They must ascertain and act on their customers’ needs and desires, not bank on the presumed longevity of their products. In short, the best way for a firm to be lucky is to make its own luck. An organisation must learn to think of itself not as producing goods or services but as doing the things that will make people want to do business with it. In every case, the chief executive is responsible for creating an environment that reflects this mission.

When sellers’ markets get weaker so the concept of market effectiveness becomes of greater importance to the private sector. Companies need to place an ever-increasing emphasis on providing the right market offerings for their markets (Grönroos, 1994). Often this results in increased expenditure, as consumers usually want more for their money, at a time when firms’ finances are under a great deal of strain. To continue to provide the ‘usual package’ whilst ignoring increasingly difficult trading conditions is a dangerous practice.

Public sector organisations also find that they are required to meet high ‘fit for purpose’ values and that, as their income stream comes under increased pressure, they are faced with stiffer and stiffer challenges.

Customer-perceived value paradigm

The customer-perceived value paradigm (CPV) (as argued by Grönroos, 1996; Yang and Peterson, 2004; Chien-Hsin et al., 2005; Grönroos and Ravald, 2011; Kotler et al., 2016) is a consequence of the movement from sellers’ to buyers’ markets. Customers want more value, as they perceive it, from private sector providers. They usually continue to expect at least the same level and quality of services to be provided by public sector authorities. Essentially, CPV is defined as customer-perceived quality (CPQ), what customers’ expect to experience, relative to customer-perceived price (CPP), what they are prepared to pay for it. Whilst buyers’ preferences in the private sector are significantly affected by the offerings of competitors, in the case of the public sector they are imposed by the degree or lack of degree of available public funds. In essence the customer takes what is provided, which cost issues usually determine.

18 The challenge of changing times

Service dominant logic paradigm

Over the course of the last three decades many marketing authors have argued the case for a new view of marketing that stresses the importance of moving away from the product- centred view (Grönroos, 1994; Gummesson, 1994; Pine and Gilmore, 1998). Vargo and Lusch (2004) have developed the concept of service dominant logic (S-D logic). This places the emphasis firmly on the concept of effectiveness and argues that product and services must be integrated to provide an effective experience for a buyer who has a wide choice of providers.

In many respects the CPV paradigm and the S-D logic paradigm are opposite sides of the same coin. The CPV approach emphasises the importance to providers and buyers of offer- ing the right package (tangible and intangible attributes, i.e. product and service attributes) necessary to attract custom in buyers’ markets. The S-D logic approach stresses the impor- tance of service. Whilst this is important, if a customer receives an impressive service from a provider but for a poor quality product, the CPV will be low.

Post-capitalist paradigm

‘Paradigm shift’, ‘open society’, ‘post-capitalist society’, ‘re-framing’, ‘changing minds’ and ‘lateral thinking’ are some of today’s current catchphrases to describe the transformation of thinking necessary to deal with the changing world. The fashionable currency of these buzzwords indicates the opening up of new grounds in thinking. It is envisaged that as the digital world takes hold we are moving from an era of scarcity of physical goods to one of an abundance of information goods (Mason, 2015). The new paradigm has the potential to create a more socially just and environmentally sustainable way of living. It is imperative to re-invent our thinking processes, because the world, to which our thinking is directed, is constantly reinventing itself.

Action

Backwards or forwards into the future?

When confronted with the challenges of discontinuous change organisational management face two basic decisions. The first is simply to ignore it, walk away and hope that returning swallows in spring will once again restore the good times. As many managers in organisa- tions rose through the ranks in the softer business conditions of sellers’ markets they lack the foresight and the skills to change the ‘company way’. If the forces of discontinuous change intensify, this response pattern inevitably leads to disappointing organisational performance and ultimately catastrophic failure.

The second decision is to accept the new reality and seek to change the way the organisa- tion operates. This means coming to terms with complex management challenges. It means being willing to learn new responses.

The challenge of change

In The Dance of Change: The Challenges to Sustaining Momentum in Learning Organizations, Senge et al. (1999) identify 10 challenges of change and group them into three categories:

The changing business environment 19

1 challenges of initiating change; 2 challenges of sustaining momentum; and 3 challenges of system wide redesign and rethinking.

The 10 items amount to what the authors call ‘the conditions of the environment that regulate growth’.

Challenges of initiating change

1 ‘We don’t have time for this stuff!’ People who are involved in a pilot group to initiate a change effort need enough control over their schedules to give their work the time that it needs.

2 ‘We have no help!’ Members of a pilot group need enough support, coaching and resources to be able to learn and to do their work effectively.

3 ‘This stuff isn’t relevant.’ There need to be people who can make the case for change – who can connect the development of new skills to the real work of the business.

4 ‘They’re not walking the talk!’ A critical test for any change effort: the correlation between espoused values and actual behaviour.

Challenges of sustaining momentum

1 ‘This stuff is . . .’ Personal fear and anxiety – concerns about vulnerability and inad- equacy – lead members of a pilot group to question a change effort.

2 ‘This stuff isn’t working!’ Change efforts run into measurement problems: Early results don’t meet expectations, or traditional metrics don’t calibrate to a pilot group’s efforts.

3 ‘They’re acting like a cult!’ A pilot group falls prey to arrogance, dividing the company into ‘believers’ and ‘nonbelievers’.

Challenges of system wide rethinking

1 ‘They . . . never let us do this stuff.’ The pilot group wants more autonomy; ‘the powers that be’ don’t want to lose control.

2 ‘We keep reinventing the wheel.’ Instead of building on previous successes, each group finds that it has to start from scratch.

3 ‘Where are we going?’ The larger strategy and purpose of a change effort may be obscured by day-to-day activity. Big question: Can the organisation achieve a new definition of success?

Challenge to traditional management

Organisations will no longer be shaped by management hierarchy, but by societal changes, globalisation and technological developments. These forces cannot be accurately predicted. The key challenge for leaders is to innovate and transform their businesses to be adaptable to these forces, whilst maintaining the integrity of the business as usual (Chan, 2013).

20 The challenge of changing times

Summary This chapter has opened the text with a discussion of how change affects the fortunes of busi- ness organisations and warns of the dangers of management and marketing myopia. Senior management of MNCs as well as SME entrepreneurs need to be alert to the dangers of busi- ness environmental trends and to respond swiftly. The current and foreseeable discontinuous change that is impacting on business organisations emphasises the importance of continually reappraising the business environment. This presents them with a severe set of challenges if they are to grow their businesses successfully. As this text will argue in subsequent chap- ters, business creativity and innovation are vital for the successful management of change (Andropoulos and Dawson, 2014).

Discussion questions 1 Why does change present such a problem to organisations these days? 2 What causes change? 3 What is creativity and why is it important in times of discontinuous change? 4 Briefly describe the main types of change. 5 What is the customer-perceived value paradigm and why is it important in strong buyers’

markets?

Case exercise

Nokia I: early success in the mobile phone industry

Nokia is a multinational communications and information company that was founded in Finland in 1865 and for 57 years was primarily engaged in forestry-related products includ- ing electricity generation. In 1922 it formed a joint partnership with the Finnish Cable Works and Finnish Rubber Works and in 1967 the three companies merged to form the new Nokia Corporation; a conglomerate active in the rubber, forestry, cable, electricity and electronics industries. During the 1970s Nokia became increasingly involved in the electronics industry and in the 1990s focused its operations on the communications business.

In the first decade of the twenty-first century Nokia was a dominant force in the newly emerging mobile phone market and became a major contributor to the growth of the Finnish economy. By 2007 Nokia had become a world leader in the mobile phone industry, peaking with its 3310 model. Over the next seven years sales fell away alarmingly, despite a pro- gramme of continuous innovation that extended battery life, and in 2014 Microsoft acquired the company’s mobile phone business. The effect in Finland was devastating and thousands of employees lost their jobs and unemployment escalated to over 14 per cent. However, though devastated, the rump of the company lived on to fight another day.

What went wrong? Nokia was not a technological laggard and invested heavily in R&D, developed a

smartphone in 1996 and had built a prototype touch screen Internet-enabled phone by the end of the decade. The company was essentially a hardware operation that underestimated the importance of specially designed software that would run on smartphones. In contrast, Apple saw hardware and software as equally important. In essence, the senior manage- ment at Nokia failed to realise that smartphones would become dominant. At the time Nokia was an established global brand that was achieving healthy profits from its mobile

The changing business environment 21

phone business. A late decision to develop its own smartphone operating system resulted in teething problems and so in 2011 Nokia embraced the Windows phone. However, the company’s smartphones failed to live up to consumer expectations and the Nokia brand lost its appeal.

Questions

1 What were the causes of change in the mobile phone industry? 2 Why did Nokia’s senior management fail to spot to them? 3 Explain briefly how the Nokia brand lost its consumer appeal? 4 Briefly research the demise of Blackberry. What parallels are there with the Nokia case?

Sources: BBC News, 18 March, 10 July 2016; The Financial Times, 19 April 2016; Cheng, R. ‘Farewell Nokia: The rise and fall of a mobile pioneer’, CNET, 25 April 2014, http://www.cnet.com/uk/news/farewell-nokia-the-rise-and-fall-of-a-mobile-pioneer/ (accessed 15 July 2016).

YouTube

‘How Did Nokia Fail?’, https://www.youtube.com/results?search_query=Nokia.

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London, Sage. Balogun, J., Hope Hailey, V. and Gustafason, S. (2016) Exploring Strategic Change, 4th edn, Harlow,

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Chichester, Wiley. Bohnet, I. (2016) What Works: Gender Equality by Design, Cambridge, MA, Belknap Press of Harvard

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izing customer-perceived value’, International Journal of Service Industry Management, Vol.16, Issue 4, pp. 318–36.

Conway, A. (2010) (alias Wollensky, J.) ‘Wanted: The right sort of genius’, Modern Power Systems, 1 December, http://www.modernpowersystems.com/features/featurewanted-the-right-sort-of-genius/ (accessed 30 November 2016).

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Erickson, G. S. and Rothberg, H. N. (2000) ‘Intellectual capital and competitiveness’, Competitive Review, Vol. 10, Issue 2, pp. 192–8.

Erickson, T. and Nerdrum, L. (2001) ‘Intellectual capital: A human capital perspective’, Journal of Intellectual Capital, Vol. 2, Issue 2, pp. 127–35.

22 The challenge of changing times

Fox-Wolfgramm, S. J., Boal, K. B. and Hunt, J. G. (1998) ‘Organizational adaptation to institutional change: A comparative study of first-order change in prospector and defender banks’, Administrative Science Quarterly, Vol. 43, pp. 87–126.

George, J. and Jones, G. (2012) Understanding and Managing Organizational Behaviour, Student Value Edition, Boston, MA, Addison-Wesley.

Goodman, M. R. V. (1995) Creative Management, Harlow, Pearson. Graetz, F., Rimmer, M. and Lawrence, M. (2006) Managing Organisational Change, 2nd Australian

edn, Brisbane, Wiley. Grey, C. (2003)‘The fetish of change’, Tamara: Journal of Critical Postmodern Organization Science,

Vol. 2, Issue 2, pp. 1–19. See also Grey, C. ( 2013 ) A Very Short, Fairly Interesting and Reasonably Cheap Book about Organisations, 3rd edn, London, Sage.

Grönroos, C. (1994) ‘From scientific management to service management’, International Journal of Service Industry Management, Vol. 5, Issue 1, pp. 5–16.

Grönroos, C. (1996) ‘Relationship marketing: Strategic and tactical implications’, Management Decision, Vol. 34, Issue 3, pp. 5–10.

Grönroos, C. and Ravald, A. (2011) ‘Service as business logic: Implications for value creation and marketing’, Journal of Service Management, Vol. 22, Issue 1, pp. 5–22.

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Hewlett, S. A., Marshall, M. and Sherbin, L. (2013) How diversity can drive innovation, Harvard Business Review, December, https://hbr.org/2013/12/how-diversity-can-drive-innovation (6 June 2016).

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Levitt, T. (2004) ‘Marketing myopia’, Harvard Business Review, Vol. 82, Issue 7/8 (July–August), pp. 138–49.

Luebkeman, C. (2009) ‘Drivers of change’, Appropriate Technology, Vol. 36, Issue 4 (December), pp. 67–8.

Mason, P. (2015) Post Capitalism: A Guide to Our Future, London, Penguin. Kindle edition. McCalman, J., Paton, R. A. and Siebert, S. (2016) Change Management: A Guide to Effective

Implementation, 3rd edn, London, Sage. Parkin, M. and Bade, R. (2011) Foundations of Economics, 5th edn, Harlow, Pearson Education. Pine, II, B. J. and Gilmore, J. H. (1998) ‘Welcome to the experience economy’, Harvard Business

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The changing business environment 23

The Economist (2010) ‘Developing countries are competing on creativity as well as cost. That will change business everywhere’, 15 April.

Turpin, D. (2015) ‘Three megatrends that will affect everybody’s business, enabling factors’, Innovation Management, Sept 29, http://www.innovationmanagement.se/2015/09/29/three-megatrends-that- will-affect-everybodys-business/.

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Selected YouTubes ‘Excelling in Global Business Environment’, https://www.youtube.com/watch?v=Xmvo 2mm58m8.

‘Introduction to Global Business Environment’, https://www.youtube.com/watch?v=zW QW17Q4TYs.

‘The Only Constant in Business is Change’, https://www.youtube.com/results?search_query= What+is+change.

‘Paradigm Shift in Today’s Business World!’, https://www.youtube.com/watch?v=3Zsq oaTbP-w.

‘The Key Challenges of a Global Manager’, https://www.youtube.com/watch?v=Q4yJ_ Xb25GU.

2 Key business decisions

The man who is denied the opportunity of taking decisions of importance begins to regard as important the decisions he is allowed to take.

(C. Northcote Parkinson, 1958)

Whenever you see a successful business someone once made a courageous decision. (Peter. F. Drucker)

Learning objectives This chapter explores:

1 Time frame decisions. 2 Business decision process modelling. 3 Three strategic business decision approaches. 4 Managing bias. 5 Making decisions. 6 Linking creativity, entrepreneurship and innovation.

Introduction A basic definition of business decisions would imply that they simply involve choosing among alternative responses. However, a fundamental shift in the underlying state of the business environment challenges organisations to respond in one of two ways. The first is to do little in terms of their fundamental approach in the hope of riding out the storm. If the complex disturbances in the business environment are incremental, a contextual recovery may well provide the prospect of a business recovery. However, if the disturbances amount – as explained in the previous chapter – to a major environmental paradigm shift, organisations need to re-evaluate their operations. In most cases this will involve considering a mix of incremental and radical response changes.

Whilst study of the S-curve (see Figure 2.2) provides a conceptual understanding as to what business decisions are needed, the following concepts address the necessary responses. The concept of business effectiveness addresses the need to do the right thing in the new business environment. The concept of efficiency addresses issues concerned with the wise use of funds and resources. Radical responses address the changes that will be needed and sustained to meet environmental challenges. This will demand a committed approach to

Key business decisions 25

thinking outside the previous sellers’ market paradigm box (business creativity) to secure effective and efficient business practice in order to foster the growth of innovation and entrepreneurship. (See Figure 2.1.)

Context

Time frame decisions

Organisations have never faced a more turbulent, complex or changing environment than they do today, whether in social, political, economic, technological or ecological terms. Customers are more demanding; product life cycles are shorter; technologies are constantly changing. Managers must continuously scan the competitive environment. All of us have to make decisions every day. Some are relatively straightforward and simple; others are quite complex. A business decision can be defined as a purposeful selection from among a set of alternatives in the light of a given task objective.

Decision making is not a separate function of management but is intertwined with other functions, such as planning, coordinating and controlling. Taylor (2012) identifies four key types of business decisions:

Figure 2.1 Exploring key business decisions.

26 The challenge of changing times

1 Strategic decisions: These are ‘those high value, low volume decisions that guide the overall direction of the company’. Given their often one-off, unique nature, these deci- sions are not candidates for decision management systems because they lack the key characteristic of repeatability. An example of a strategic decision is the need to become a customer-centric enterprise.

2 Tactical decisions: These types of decisions are typically made by non-senior man- agement and knowledge workers. Taylor characterises them as having ‘medium value’, which is not meant to undercut their value to the business in any way. Like strategic decisions, tactical decisions involve reviewing and analysing data from multiple sources. Unlike strategic decisions, tactical decisions are often made on a regular basis employing a similar analysis and therefore can be candidates for decision management systems. For example, decisions related to price discounting policies are tactical decisions.

3 Operational decisions: Taylor describes these as decisions that have ‘lower individual value and typically relate to a single customer or a single transaction’. However, these ‘lower value’ decisions should not be discounted because when you add up the thou- sands, sometimes millions and billions, of operational decisions made every year in organisations, their collective worth can out-value important strategic decisions. Taylor described them as the day-to-day, ‘run-the-business’ decisions – e.g. decisions that determine which credit facilities to approve, which products to make available for online purchasing, which product to offer what customer, etc. These are highly repeatable deci- sions and therefore excellent candidates for decision management systems. The decision of what discount to offer which customers is an operational decision that can be auto- mated for real time responsiveness across multiple channels.

4 Micro decisions: A subset of operational decisions, micro decisions are more person- alised decisions. According to Taylor, ‘often an operational decision is repeated for all customers, with the decision being based only on the data available for the particu- lar interaction or transaction concerned. A micro decision, in contrast, uses everything known or predictable about a customer to make a unique decision just for them.’ The key difference is a more specific focus on information – taking into account a customer’s buying history and making a unique offer based on that history. So, deciding to offer a customer a unique product based on past preferences and buying behaviour is an exam- ple of a micro decision.

Business decision making in a predominantly buyers’ market environment is difficult. Three macro-level elements (Friga and Chapas, 2008), clearly differentiate decision making today, namely:

1 information overload 2 shareholder, finance and government pressure 3 shortening business life-cycle times.

All decisions are about problems and these are evident at three levels:

1 Macrocontext draws attention to global environmental trends, the state of buyers’ markets. 2 Mesocontext attends to organisational cultures and structure. 3 Microcontext addresses the immediate decision environment – the organisation’s

employees, staff, board of directors, and so on.

Key business decisions 27

Information overload

The abundance of information and the complexity of modern search tools yield a flood of data that can easily overwhelm individual decision makers. Essential information (provided by a useful business intelligence system which covers both contextual issues: the state of the mar- ket and competitive business intelligence) is needed in buyers’ markets if management are to take perceptive tactical and strategic decisions (Vasilopoulos, 2010). Managers can quite easily become confused with too much information unless they are trained in knowledge management skills. Data is data and true decision-making expertise is about the effective use of information in addressing management problems.

Business decisions: the need to harness big data

Data plays a critical role in how companies operate and this will only increase in the future. Marketing needs data in order to understand past, current and future customer trends, whilst procurement uses information to reduce costs and manage suppliers. Sales relies on its data to understand its pipeline and where deals are in the sales cycle, whilst support and post-sales need to keep track of exactly what a customer is doing after they have purchased. These data sets need to be consolidated to enable companies to respond proactively in today’s buyers’ markets.

Individual tasks such as getting the data in the first place and keeping each data set up to date can be problematic on their own. However, the responsibility for how this data is used and manipulated across different parts of an organisation is an important task. Making key business decisions based on big data can make all the difference between success and failure. This requires linking up traditional reporting and budg- eting activities with the new analytics and business intelligence capabilities that are available for sales, marketing, operations and human resources.

With competition in the market remaining fierce, company performance depends on strong product and service offerings, supported by efficient IT processes and marketing effectively. However, all of this is underpinned by being able to collect, understand and use data as a strategic asset.

Source: Adapted from Peters, B. ‘Chief data officers may hold the key to business growth in 2014’, The Guardian, Media and Tech Network, 13 January 2014.

Shareholder, finance and government pressure

The rise and expectations of worldwide capital markets has led to a relentless drive to achieve short-term financial results, often at the expense of longer-term considerations. In the private sector the pursuit of growth at any cost has resulted in the demise of many companies. Small and medium sized enterprises (SMEs) are experiencing tighter and tighter payback deadlines from financial institutions. Public sector organisations are increasingly expected to maintain services in the light of funding cuts.

Shortening business life cycles

The time-to-market and overall business cycles have shortened to a level unimaginable in the closing decades of the twentieth century. Individuals alone and in meetings have to

28 The challenge of changing times

make decisions at an ever increasing pace. These decisions can so easily be made on the basis of precedent and leave organisations floundering as the accustomed and expected results fail to materialise.

Feel or process?

In relatively unchallenging times, such as the long period of sellers’ markets that was in evidence for much of the last half of the twentieth century, many key decisions were made in a relatively casual manner, as the success of such interventions stood a high chance of success. Many low-risk decisions were often taken by feel with a tendency to be largely influ- enced by financial factors (the concept of effectiveness as discussed below). Decisions with a higher level of risk and commitment have usually been made by the application of process techniques. Difficult decisions usually involve much more than ‘off the cuff’ responses and typically involve such issues as:

• Uncertainty – many essential facts may be unknown. • Complexity – demanding attention be given to several inter-related factors. • High-risk consequences – impact of the decision may be of crucial significance. • Alternatives – each possesses its own set of uncertainties and consequences. • Interpersonal issues – which are difficult to predict.

With these difficulties in mind it is wise to make complex decisions by using clear process techniques that usually lead to consistent, high-quality results. A selection of some of the most popular are addressed in the following section. In many cases in today’s turbulent busi- ness environments it is pertinent to combine both ‘feel’ and ‘process’ techniques.

Key principles

Business decision process

Business decision making in today’s sellers’ markets is difficult. Except in the case of simple problems, it involves more than just selecting a response from a number of alternatives. It requires the application of a process that may take time initially, but which will speed up

Figure 2.2 Business decision process.

Key business decisions 29

with experience. Many organisations suffer from a lack of systematic decision making. The decision-making process can be explained clearly to staff, sponsors and stakeholders. People tend to be happier to implement decisions when they have participated in them. The vignette box features the data analysis approach taken by Larsen-Toubrou, a large and progressive Indian engineering multinational corporation (MNC).

Figure 2.2 presents an example of a typical seven-step approach to business decision making.

Larsen-Toubrou (L-T) business data analysis

Technical Services’ Data Analysis capability enables the product engineering function to make decisions about several things, including: purpose of the operation, part design characteristics, specifications and tolerances of parts, materials, manufac- turing process design, setup and tooling, working conditions, material handling, plant layout and workplace design. Knowing the specifics of the who, what, when, where, why and how of product manufacturing assists in the development of an optimum manufacturing method.

• Data cleaning: High-quality data is necessary to make correct timely business deci- sions. L-T Technology Services’ Data Cleaning models ensure the data is accurate and conforms to pre-set business rules of the customer. Consistency, complete- ness, accuracy and uniformity of data is important, as data could be gathered from different sources, regions and parties, and forwarded to a central processing team. By careful auditing of data and control over data gathering workflows, integrity of data can be assured.

• Data mining: Discovering patterns in large data sets involving methods that combine artificial intelligence, machine learning, statistics and database sys- tems is critical to product engineering decision making. The overall goal of L-T Technology Services’ Data Mining technique is to extract information from a data set and transform it into an understandable structure for further use.

• Data Digitisation: L-T Technology Services’ Data Digitisation service offers an efficient complete, cost-effective paper-to-electronic solution that enables the stor- age of data using metadata and schema that facilitates easy discovery.

• Segmentation and clustering. • Trend pattern recognition.

Source: Larsen-Toubrou.

Step 1 concerns a clear identification of the problem and addresses the issue of the current situation and the desired one (Nagurney et al., 2002). For example, in the case of a family decision, say to purchase a new TV, the main task is to acquire one that works. In contrast, managers in organisations face a more complex task. Key factors in the purchase of a new machine tool (Sayer, 2002) would include the following issues:

• expected financial return • technical excellence • compatibility with existing production facilities and staff.

30 The challenge of changing times

Step 2 follows once the problem has been framed clearly and concerns the decision criteria that would influence the selection of a suitable purchase. Families, for example, might seek to obtain a new TV set that was technically up to date, had a clear, flat digital screen and appealing design. Managers intent on purchasing a machine tool would also be interested in the technical support, training and engineering support provided by the machine tool company (Figueira and Ray, 2002).

Step 3 addresses the issue that not all the identified decision criteria are of equal impor- tance and so indicates preferences by allocating weights to decision criteria. In the case of the family TV set, for example, a strong preference might be placed on picture quality ahead of design. Managers may exhibit a strong preference for a branded provider of machine tools whose products they have been happy with in the past.

Step 4 involves listing alternatives that might be capable of solving the problem. The individual replacing the family TV draws up a list of selected brands that meet the family’s purchase criteria. Management, whilst expressing a strong preference for one machine tool manufacturer, decide to evaluate this provider’s product against the pos- sible competitive products (Fazlollahi and Vahidov, 2001).

Step 5 can be termed analysis of alternatives and is where our potential imaginary family seeking a new TV and the organisational management team intent on the purchase of a new machine tool evaluate the list of possible alternatives. In both cases, though most likely in the case of the machine tool purchase, our potential buyers score the selected providers’ products’ key criteria attributes, say on a scale of 1 to 10.

Step 6 follows and is where the key decision makers for both the domestic TV and the machine tool select a provider.

Step 7 is the stage when purchases are made.

Finally, buyers, whether consumer or business-to-business, seek a satisfactory in-use pur- chase experience. Our imaginary family will assess the customer-perceived value they experience with their chosen TV and this will significantly influence their future buying decisions. An organisation purchasing a machine tool will carry out an overall evaluation of all aspects of the contribution of the purchase to their business.

Rational model

Individual or organisational decision making is assumed to be rational when those involved make consistent and value-maximising selections within specified criteria (DeYoung, 2002).

Rationality is the use of scientific reasoning and logical arguments to arrive at decisions (Burns, 2009). As widely applied, the scientific method is analytical (rather than synthetic), positivist and reductionist. The rational or scientific model allows for both evolutionary and revolutionary change, as well as exploitive and explorative contexts and overcomes the obstacles impacting on objectivity (see previous section on ‘Feel or process?’). It is objective and theoretically free from the imposition of large egos and bureaucratic thinking (Friga and Chapas, 2008).

A business decision maker who was completely rational would be totally objective and logi- cal in all stages of the decision-making process described above. Davenport and Harri (2010) present a best practice guide to using analytics as a tool for leaders at every organisational

Key business decisions 31

level to drive their companies towards better decision making. However, in the predominantly sellers’ market conditions that characterise developed economies today, the degree of outcome surety that the rational model demands rarely exists. This is because the precise result of every business decision alternative is unknown. Therefore, managers can only seek to assign prob- abilities to the likely success of their decisions. The conventional wisdom as expounded by adherents to the scientific method is well suited to the natural and exact sciences but unsuited to management charged with business decision making in highly competitive buyers’ markets. A more appropriate input to decision-making processes is grounded theory or what Kaplan (1998) termed innovation action research.

In the real world this results in the need to assess the degree of risk attached to deci- sions. There is a gap between business education and management on the ground (Shlomo et al., 2008). Faced with this difficulty decision makers need to blend their rational approach to well-framed problem statements with an ability to think ‘outside the box’ and harness the benefits that creativity can bring (Stebbins, 2010). Many scoff when consultants recom- mend this and often reject such an illogical approach out of hand. However, if the existing responses fail to deliver in the current buyers’ market environments then it makes sense to explore new ways of thinking. Creativity can help managers generate ideas and interven- tions that are different from those of the past (mainly sellers’ markets) but relevant to the challenges provided by buyers’ markets. It can help greatly by enabling managers taking decisions to identify all viable alternatives. The management literature is replete with the suc- cesses of reductionist research. However, it is incomplete because it does not place sufficient attention on the process of generating high and consistent levels of customer-perceived value offering alternatives in today’s highly competitive buyers’ markets (Goodman, 1995).

Real world complications

Every day most of us make decisions that are far from being rational. Economists have their model of the Rational Man (homo economicus) and lawyers have a similar concept known in the UK as ‘the man on the Clapham omnibus’. In real life we all make decisions which are irrational in this sense. We make decisions on the basis of incomplete information and largely on the basis of intuition rather than scientific processes. At its best such behaviour is rational within the parameters of a simplified model that captures the essential features of the problem needing a business decision (Kuhberger et al., 2001; Mintzberg and Westley, 2001; Dane, 2007; McKinsey Quarterly, 2010; Kandelwal and Tanje, 2010).

Contingency approach

The contingency approach posits the view that there is not necessarily a ‘one-best-way’ of managing and making business decisions. It maintains that the structures and practices of an organisation, and therefore its performance, are dependent (i.e. contingent) on the context that it faces. The main contingencies – situational variables – identified by its proponents are environmental uncertainty and dependence, technology and organisation size (Burns, 2009).

The contingency approach appeals to the ‘if – then’ formula and constitutes a break with the ‘one-best-way rational approach’ often favoured by organisations. Ambos and Schelgelmilch (2007) collected data from 134 German multinational companies’ research and development (R&D) units and found that the contingency approaches returned better results than the more traditional rational ones. Research by Bradshaw (2009) found that a number of contingency factors were likely to be relevant for effective non-profit organisations and their boards.

32 The challenge of changing times

Although all boards must fulfil certain critical roles and responsibilities, strategic choices could be made about adopting different governance configurations or patterns. These choices could be meaningfully informed by understanding organisational contingencies such as age, size, structure and strategy – and, even more importantly, by external contingencies and environmental dimensions, such as degree of stability and complexity. Bradshaw’s research extends or layers contingency thinking beyond its traditional focus on an alignment between the external environment and the organisation’s structure to focus as well on the alignment of the organisation’s governance configuration with its structure and environment.

Ambos and Schelgelmilch focus on control mechanisms used by MNCs to manage their extra-national R&D units. Drawing on the literature of both organisational power and con- tingency theory, their study develops and empirically tests a set of hypotheses aimed at explaining how headquarters control their overseas R&D units. Data collected from 134 R&D units of German MNCs serve to test the hypotheses. Results highlight the importance of the units’ R&D mandate and its interdependence in explaining control mechanisms. Moreover, they indicate a relatively weak predictive power of political approaches compared to contingency approaches.

Sillince (2005) argues that attempts to adapt structure to contingencies will be unsuc- cessful unless there is also rhetorical congruence, which has two parts. First, rhetorical congruence exists if rhetoric is appropriate to contingencies. For example, decentralisation aimed at increasing local initiative will lead to more requests by headquarters for advice from subsidiaries. Second, it exists if the various rhetorical processes are in balance with one another.

When important projects fail, the investigation is often focused on the engineering and technical reasons for the failure. That was the case in NASA’s Mars Climate Orbiter (MCO) that was lost in space after completing its nine-month journey to Mars. Yet in many cases, the root cause of the failure is not technical but managerial. Often the problem is rooted in management’s failure to select the right approach to the specific project. The evolving field of project management contingency theory provides an opportunity to re-examine the concept of fit between project characteristics and project management, and offers deeper insights on why projects fail. Sauser et al. (2009) show that project management contingency theory can indeed provide new insights for a deeper understanding of project failure. Furthermore, it suggests implications for a richer upfront analysis of a project’s unique characteristics of uncertainty and risk, as well as additional directions of research. Such research may help establish new and different conceptions on project success and failure beyond the traditional success factors, and subsequently develop more refined contingency frameworks. The results of such research may enable future project managers to rely less on heuristics and possibly lead to a new application of ‘project management design’.

Despite its popularity and potential, the field of Enterprise Resource Planning (ERP) adoption and implementation is littered with remarkable failures (Morton and Hu, 2008). Though many contributing factors have been cited in the literature, some argue that the inte- grated nature of ERP systems, which generally require an organisation to adopt standardised business processes reflected in the design of the software, is a key factor contributing to these failures. The integration and standardisation imposed by most ERP systems may not be suitable for all types of organisations. The ‘fit’ between the characteristics of the adopt- ing organisation and the standardised business process design embedded in the ERP system affects the likelihood of success or failure. This chapter uses the structural contingency the- ory to identify a set of dimensions of organisational structure and ERP system characteristics that can be used to gauge the degree of fit, thus providing some insights into successful

Key business decisions 33

ERP implementations. Propositions are developed based on analyses regarding the success of ERP implementations in different types of organisations. These propositions also pro- vide directions for future research that might lead to prescriptive guidelines for managers of organisations contemplating implementing ERP systems.

Concepts of efficiency and effectiveness

The concepts of efficiency and effectiveness provide important guidance for business decision makers. Efficiency is essentially about bearing in mind the resource implications of pos- sible alternative solutions. Good business decisions take into account more than short-term considerations wherever possible and relevant. As with buying decisions, buying cheap can result in buying dear if the pressures of the moment saddle the organisation with a problem solution that fails in the medium term and so calls for more funds to solve. Another practice to be considered very carefully by wise business managers in the public sector is the overuse of Private Finance Initiatives. This may seem to be expedient in the short term, as it appears to be less of a strain on the Public Sector Borrowing Account, but can heavily mortgage the future. Perhaps, a classic case of ‘backwards into the future’.

The concept of effectiveness stresses the importance of achieving an optimum solution to a business problem. No half measures but a considered attempt to do what is necessary to fix a problem.

A balanced approach to these concepts should result in a sound business decision. The argument is essentially simple but it is both surprising and alarming that research around the world shows that many CEOs and managers have a poor track record with their business decisions (Finkelstein et al., 2009).

The S-curve

Business decisions concerning the pursuit of innovation are either incremental or radical in nature and are subject inevitably to practical constraints. The progress of successful innova- tions can usefully be examined with reference to an S-shaped curve as depicted in Figure 2.3.

The curve is plotted in a two-dimensional plane and shows how the performance of a technology in terms of the concepts of market effectiveness and efficiency change over time.

Figure 2.3 The S-curve: a comparison between an established and a new technology. Source: M. R.V. Goodman, Durham University.

34 The challenge of changing times

The horizontal axis summarises how an innovation develops in terms of time and investment. The vertical axis reflects some key dimensions of product performance or cost competitive- ness. As evident from Figure 2.3 the pace of innovation changes with time. Most decisions tend to become incremental and progressively more and more costly.

When rival technology emerges many view it as being inferior to existing technology (position T1). Growing pains may be obvious for all to see and so many competitors may not identify it as a real threat. Most customers are also unsure about the value offered by the inno- vation and so pay it scant regard. As time passes and after further investment, the teething troubles associated with the innovation are addressed and manufacturing costs begin to fall. At point T2 the innovation matches the perceived value of established technology and starts to return a superior level of performance. The scenario outlined above has three important lessons for decision makers:

1 Businesses seeking to protect their positions with established technology increasingly face difficult decisions – the limpet strategy.

2 Pioneers in one generation of technology are not necessarily leaders in the next – the cautious strategy.

3 Businesses seeking to exploit innovations enjoy several advantages – innovative entre- preneurial strategy.

Three strategic approaches

Limpet strategy

Companies that cling on to established technologies tend to be challenged by three options:

(a) Totally adopt new technology and abandon established technology. (b) Retain their existing exploitation of established technology and attempt to raise standards

of performance by means of incremental investment. (c) Retain their existing interest in established technology but begin to invest in innovative

technology to obtain the best of both worlds.

Option (a) is the most difficult to sustain and involves moving on to a new S-curve. It is also potentially the most dangerous decision to make. Option (b) means sticking with established technology that usually attracts incremental business decisions to maintain the effective life of the innovation. Over time these decisions make only marginal differences and organi- sations have to contemplate making radical decisions in order to move to a new S-curve. Option (c) seems to make the most sense in times of discontinuous change, as it enables an organisation to phase in new technology whilst continuing to benefit as long as possible from established technology.

Cautious strategy

There are several examples of organisations whose established technology lost out to new and innovative technologies. When desktop computers took off the then-dominant computer manufacturer, Digital Equipment Corporation (DEC), displaced IBM as market leader. Swiss watch manufacturers lost out to East Asian competition with the introduction of innova- tive battery-driven quartz watches. The well-respected Encyclopaedia Britannica that ran

Key business decisions 35

to 30-plus printed volumes gave way to innovative software packages such as Microsoft’s Encarta, which in turn was superseded by Internet-based encyclopaedias such as Wikipedia.

In March 2016 Barclays Bank announced that it was pulling out of Africa and decided to sell its 60 per cent stake in its African business, as management had lost its way and had been disappointed at the growth of the African economies

Innovative strategy

Several companies that have become household names started as small operations. Apple emerged from a garage. Hewlett-Packard, DEC, Intel, Microsoft, Dell and eBay also began in this way.

New processes, tools and practices are being introduced into software companies at an increasing rate. With each new advance in technology, software managers need to consider not only whether it is time to change the technologies currently used, but also whether an evolutionary change is sufficient or if a revolutionary change is required (Nikula et al., 2010).

Spotting potentially lucrative market trends and opportunities requires senior manage- ment to adopt an entrepreneurial approach to developing their product/service portfolios.

Practice

Eisai spots a lucrative market trend

Eisai Co. Ltd. is a Japanese pharmaceutical company based in Tokyo employing circa 10,000 employees.

In 2014, the Eisai Group carried out proactive investments for future growth. In particular they found that opportunities for significant growth were imminent in the fields of dementia and cancer treatment. In regards to the field of dementia treatment, it is promoting the development of next-generation treatments for Alzheimer’s, which builds on its original and multifaceted approach based on the knowledge, experience and expertise accumulated by the company in more than 30 years of drug discovery activities in the field. Meanwhile, in the field of oncology, following the launch of the in-house developed Halaven, the company launched in February 2015 another in- house discovery, Lenvima, in the United States. In the future, this agent will be made available to patients in Japan, Europe and other parts of the world so that Eisai may contribute to the enhancement of benefits to patients.

Source: http://www.eisai.com/company/message.html (accessed 7 June 2016).

Two key questions

1 Can the challenges of business environmental change be managed successfully? 2 Should the organisation reappraise and alter the way it does things?

The first question is the hang-on-and-do-nothing strategy often argued on the basis that every downturn in an organisation’s business is always followed by an upturn. It is just a matter of making a minor or major financial adjustment, depending on the nature of the problem. Some consultants refer to this option as the ‘coherence theory of truth’. However, in times of discontinuous change it is usually disastrous.

36 The challenge of changing times

The second question makes more sense in today’s business environment but is far more difficult for top management to achieve and calls for a real match between professional competence and rank. Sadly, many organisations are led by management that honed their skills in a previous era (sellers’ markets) or religiously follow the dictates of the estab- lished organisational culture. Whilst a rising executive may look through the glass clearly, political pressure – real and imagined – seems so easily to frustrate talent and results in the executive following the company ways, even it if means looking through a glass darkly.

Concept of customer-perceived value revisited

A crucial consequence of the business environmental paradigm change (see Chapter 1) has been a transformation in the concept of value. In sellers’ market conditions value was essen- tially regarded by many businesses as being about cost reduction and production expansion, effectively placing a heavy stress on the concept of efficiency. In buyers’ market conditions value is first a matter of providing what customers perceive to have value. This places the concept of effectiveness before that of efficiency. The implication of this is profound, as it pre- sents a severe challenge to the least-cost production approach to management. Yesterday’s business solutions cannot now automatically become the default decisions. If CEOs and sen- ior management are to become proactive and seek new ways of conducting their businesses many consultants will confirm that a major problem resides in their attitudes, mindsets and paradigms. Biased argument is awash in organisations as they try to maintain the status quo by management myopia or through the deception that often results from biased thinking.

Managing bias

Before managers make key business decisions they should strive to avoid bias by responding to the following questions (Kahneman et al., 2011).

Questions that decision makers should ask:

1 Is there any reason to suspect motivated errors? 2 Is the decision maker too emotionally involved with the issue? 3 Any dissenting opinions (group).

Questions that decision makers should ask the team making recommendations:

4 Is the decision overemphasised by salient analogies? (What has happened in the past.) 5 Have all credible alternatives been considered? 6 If the decision had to be made again what information would be needed and can some of

it be acquired now? 7 Where did the justifying numbers come from? 8 Is a halo effect apparent? Charisma . . . 9 Is the decision maker overly attached to past decisions?

Questions focused on evaluating the proposal:

10 Is the case overly optimistic? 11 Is the worst-case scenario bad enough? 12 Is the decision maker overtly cautious?

Key business decisions 37

Whilst key business decisions are ultimately the responsibility of top management, involving staff groups in the decision-making process has the following distinct advantages:

• facilitates the analysis of information; • generates more alternative solutions; • leads to an increased acceptance of the final top management business decisions.

The downside factors are:

• Group participation is inherently time consuming. • Groups can be heavily influenced by dominant minorities. • ‘Groupthink’ (Janis, 1982) can cloud issues if the group feels threatened by possible

solutions to the business problems being discussed.

Action

Making decisions: blending knowledge with experience to achieve know-how

• Identify the real problem – what is the gap between what is happening and what should be happening?

• Analyse possible causes of problems and decide on most likely cause – collect evidence for and against each possible cause. ‘Score’ each cause.

• Brainstorm possible (apply creative thinking) solutions to the problem. • Evaluate alternatives and decide on the most sensible (rational or creative response). • Score each identified solution against key criteria (cost, people, time, etc.) and select the

solution with the highest score. • Anticipate what could go wrong. Draw up a ‘Plan B’. • Implement the decision. Who does what with what resources and when?

Linking creativity, entrepreneurship and innovation If organisations are to become innovative they need to be courageous in their business deci- sions. This requires a new entrepreneurial creative thinking approach (see Chapter 4) and a willingness to encourage, fund, develop and implement innovative business decisions. Managers will need to become entrepreneurs if they are to strike the right balance between the concepts of efficiency and effectiveness in their targeted markets.

Many in business life have a vague or ill-defined understanding of the terms creativity, entrepreneurship and innovation. Creativity forms the lead topic in Chapter 4 but can be taken for now to mean ‘thinking outside the box’ or being original. Entrepreneurship is about applying creativity and foresight to identify commercial opportunities. Innovation is to do with fashioning new ideas to improve methods, to design and develop new products and services that contain appropriate levels of customer-perceived value.

Especially in times of discontinuous change, CEOs and senior managers need to ensure that their organisations are performing successfully. Doing what they have always done – if it is done efficiently – is not sufficient unless it is contextually effective. As Drucker has warned, ‘The enterprise that does not innovate inevitably ages and declines.’ To face today’s business world with confidence managers must understand the linkage between creativity, entrepreneurship and innovation.

38 The challenge of changing times

Summary An organised and systematic decision-making process usually leads to better decisions. Without a well-defined process that includes both the analytical and feel approaches manag- ers are in danger of making decisions that are based on insufficient information, analysis and interpretation. Many variables affect the final impact of business decisions. However, if man- agers establish strong foundations for decision making, generate good alternatives, evaluate these alternatives rigorously and then check their decision-making process, they will improve the quality of their decisions. The current business environment demands sound business decision making. It is not a time to shrink from this executive responsibility.

Discussion questions 1 What effect do shortening business cycles have on business decision makers? 2 Explain why so many successful businesses continue to be characterised by managers

who make courageous business decisions. 3 Why might a total reliance on the rational/analytical approach to making business deci-

sions be inadvisable in times of discontinuous change? 4 Explain why the concepts of effectiveness and efficiency are so important for business

decision makers. 5 How might managers avoid bias in their business decisions?

Case exercise

Tyrell’s: when the chips are down raise a glass!

The gourmet Tyrrell’s crisps brand was founded in the UK in 2002 by struggling potato farmer and entrepreneur William Chase. The product was a huge success, reconnecting snack foods with homegrown produce. The business expanded its market into Europe and later into the US and received numerous awards for the taste and quality of its crisps, in England as well as internationally.

Chase had a long-running dispute with Tesco over stocking his potatoes, and so refused to sell them any supplies of Tyrrell’s crisps. His previous farming business had collapsed when the large supermarkets, led by Tesco, began sourcing produce from overseas to push down costs. Instead he cultivated relationships with farm shops and delicatessens.

In April 2008, Chase sold a majority stake for £30 million to Langholm Capital. After Langholm took over, they dropped the existing distribution chain, and focused on large supermarkets including Tesco; they then dropped Chase as a supplier of potatoes when they found they could get them cheaper elsewhere.

Chase used the £30 million from the sale of his stake in Tyrrell’s to set up a potato farm near Hereford and built a distillery and started production of Chase Potato Vodka, using his own farmed potatoes. Researching the spirits industry Chase discovered that vodka could be made from any fermented agricultural base, distilled to around 40 per cent alcohol by volume (ABV). Theoretically vodka could be distilled from anything that contains starch or sugars such as bananas or beetroots. To contain costs most vodka distillers use cereals rather than grains, as many believe that this did not affect the taste. The team at Chase, however, believe that using potatoes improves the taste considerably; they use starchy varieties such as Lady Rosetta and Golden Wonder – the same as they used for crisps, in fact, as they have a high dry-matter content they make a quality vodka. Chase Vodka ships in excess of 5,000 bottles

Key business decisions 39

a week, each retailing at £38 and the product was named best in the world at the 2010 San Francisco World Spirits competition.

The company explored the possibility of distilling gin and decided to produce two types of gin using their own grown ingredients: one using its potato-vodka base, then flavoured with juniper buds as well as berries; and one using its cider-apple vodka base, flavoured with Herefordshire- grown botanicals including Bramley apples, elderflower and hops to produce unique tasting gins. The company sells its £40 a bottle spirits in upmarket outlets such as the supermarkets Waitrose and Booths and the company is wary of dealing with the supermarket giants who often treat spirits as loss leaders. To expand the business Chase offer tours of the distillery, warehouses and barns and guests are welcome to stay at the nearby family owned bed and breakfast hotel.

The original Tyrell’s snacks company business was sold by Langholm Capital in 2013 for £100m to Investcorp, a Bahrain-based luxury brands investor.

Sources: Neate, R. (2013) ‘Tyrells crisp firm makes a packet in £100m sale’, The Guardian, 1 August 2013; Williams, H. (2015) ‘The family behind the Tyrells crisps brand has found a new use for its potatoes – artisan vodka’, The Independent, 15 March, http://chasedistillery. co.uk (accessed 5 May 2016).

Questions

1 Was farmer William Chase’s decision to set up Tyrell’s based on an ‘off the cuff’ basis and what critical issues might he have missed or given insufficient attention?

2 Was the decision to establish the crisp business an incremental or a radical innovation? How might the seven-step approach to business decision making have led him to antici- pate the probability that Langholm Capital would supply supermarkets and then cease to buy his potatoes?

3 How would you describe the decision to distil two types of gin in the vodka distillery? Was it a limpet, cautious or innovative strategy?

4 How did Chase link creativity, entrepreneurship and innovation after setting-up the dis- tillery business?

Sources: chasedistellery.co.uk; The Daily Telegraph, 3 July 2011; The Guardian, 21 July 2011; The Independent, 14 March 2015; BBC, 8 February 2016.

YouTubes

‘Tyrells, Our Story from Seed to Chip’, https://www.youtube.com/watch?v=0ctzr-i8v9o.

‘Inside the Factory 3: The Crisp Makers’, https://www.youtube.com/watch?v=0ctzr-i8v9o.

‘UK Spuds Yield “World’s Best Vodka”’, https://www.youtube.com/watch?v=l6ubCM DguBA.

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Bradshaw, P. (2009) ‘A contingency approach to nonprofit governance’, Nonprofit Management and Leadership, Fall, Vol. 20, Issue 1, pp. 61–81.

Burns, B. (2009) Managing Change, 4th edn, Harlow, Prentice Hall.

40 The challenge of changing times

Dane, E. (2007) ‘Exploring intuition and its role in management decision taking’, Academy of Management Review, Vol. 9, Issue 4, pp. 28–33.

Davenport, T. H. and Harri, J. G. (2010) ‘Leading the way towards better business insights’, Strategic HR Review, Vol. 9, Issue 4, pp. 28–33.

DeYoung, R. (2002) ‘Practical-theoretical approach in the application of theory models of organiza- tional behavior’, Journal of American Academy of Business, March, pp. 361–3.

Fazlollahi, B. and Vahidov, R. (2001) ‘A method for generation of alternatives by decision support systems’, Journal of Management Information Systems, Vol. 18, Issue 2, Fall, pp. 229–50.

Figueira, J. and Ray, B. (2002) ‘Determining the weights of criteria in the Electre type methods with a revised Simos’ procedure’, European Journal of Operational Research, Vol. 139, June, pp. 317–26.

Finkelstein, S, Whithead, A. and Campbell J. (2009) ‘Think again: Why good leaders make bad deci- sions’, Business Strategy Review, Vol. 20, Issue 2, pp. 62–6.

Friga, P. N. and Chapas, R. B. (2008) ‘Make better business decisions’, Research Technology Management, July/August, Vol. 51, Issue 4, pp. 8–16.

Goodman, M. R. V. (1995) Creative Management, Harlow, Prentice Hall. Janis, I. L. (1982) Groupthink, Boston, MA, Houghton Mifflin. Kahneman, D., Lovallo, D. and Sibony, O. (2011) ‘Before you make that big decision’, Harvard

Business Review, April, Kindle edition. Kandelwal, P. and Tanje, A. (2010) ‘Intuitive decision making in management’, Indian Journal of

Industrial Relations, July, Vol. 46, Issue 1, pp. 150–6. Kaplan, R. (1998) ‘Innovation action research: Creating new management theory and practice’, Journal

of Management Accounting Research, Vol. 10, pp. 89–118. Kuhberger, A., Komunska, D. and Perner, J. (2001) ‘The dysjunction effect: Does it exist for two-

step gambles?’ Organizational Behaviour and Human Decision Processes, Vol. 85, Issue 2, July, pp. 250–64.

McKinsey Quarterly (2010) ‘How we do it: Three executives reflect on strategic decision making’, Cover article, Issue 2, pp. 46–57.

Mintzberg, H. and Westley, F. (2001) ‘Decision making: It’s not what you think’, MIT Sloan Management Review, Vol. 42, Issue 3, Spring, pp. 89–93.

Morton, N. A. and Hu, Q. (2008) ‘Implications of the fit between organizational structure and ERP: A structural contingency theory perspective’, International Journal of Information Management, Oct, Vol. 28, Issue 5, pp. 391–402.

Nagurney, A., Dong, J. and Mokhtarian, P. I. (2002) ‘Multicriteria Network Equilibrium modelling with variable weights for decision-making in the Information Age with applications to telecommut- ing and teleshopping’, Journal of Economic Dynamics and Control, Vol. 26, Issue 9/10, August, pp. 1629–50.

Nikula, U., Jurvanen, C., Gotel, O. and Gause, D. (2010) ‘Empirical validation of the Classic Change Curve on a software technology change project’, Information and Software Technology, Vol. 52, Issue 6, pp. 680–96.

Sauser, B. J., Reilly, R. R. and Shenhar, A. S. J. (2009) ‘Why projects fail? How contingency theory can provide new insights: A comparative analysis of NASA’s Mars Climate Orbiter loss’, International Journal of Project Management, October, Vol. 27, Issue 7, pp. 665–79.

Sayer, J. (2002) ‘Problem-solving success tips’, Business and Economic Review, April/June, pp. 23–4. Shlomo, M., Srinivas, P. and Seshadri, D.V.R. (2008) ‘Bridging the chasm between management edu-

cation research, and practice: Moving towards the “grounded theory” approach’, The Journal for Decision Makers, January–March, Vol. 33, Issue 1, pp. 1–18.

Sillince, J. A. A. (2005) ‘A contingency theory of rhetorical congruence’, Academy of Management Review, July, Vol. 30, Issue 3, pp. 608–21.

Stebbins, L. H. (2010) ‘Development of reality system theory’, Journal of Business and Economic Research, April, Vol. 8, Issue 4, pp. 1–22.

Key business decisions 41

Taylor, J. (2012) A Practical Guide to Using Business Rules and Predictive Analytics, Boston, MA, Pearson.

Vasilopoulos, A. (2010) ‘Development of a competitive business intelligence system’, Proceeding of the Northeast Business & Economics Association, Morristown, NJ, Montclair State University, pp. 614–18.

Selected YouTubes ‘Making Better Business Decisions’, https://www.youtube.com/watch?v=fjWl5cBswbg.

‘How Companies Can Make Better Decisions, Faster’, https://www.youtube.com/watch?v= pbxpg6D4Hk8.

‘Moment of Truth – Business Ethics and Better Decision Making’, https://www.youtube.com/ watch?v=7chfmZ469lE.

‘Business Decision Management (BDM) and Business Process Management (BPM)’, https:// www.youtube.com/watch?v=7chfmZ469lE.

‘How Perceived Value Is Created’, https://www.youtube.com/watch?v=tocNXtRD8H4.

‘Linking Creativity, Innovation and Entrepreneurship’, https://www.youtube.com/watch? v=xPO1fOR9B68.

3 Management revisited

A good manager is best when people barely know that he exists. Not so good when people obey and acclaim him. Worse when they despise him.

(Lao Tzu)

If you want to manage somebody, manage yourself. Do that well and you’ll be ready to stop managing and start leading.

(Anon)

Learning objectives This chapter explores:

1 Defining management. 2 Primary management processes. 3 Redefining management action – control or lead. 4 Essential management skills. 5 Organisational styles (Theories X and Y). 6 The Japanese approach to management (Theory Z).

Introduction Setting out to ‘do things differently’ in order to take business decisions that are both effective and efficient in the use of resources calls for a re-evaluation of current response (management) practice. This chapter presents some common theoretical models of man- agement and stresses the importance of defining it so that it can be understood by every individual in an organisation and applied to all their tasks. Many recognise that manage- ment practice needs to change, but few organisations have a working definition of what management should do. This is a serious weakness that severely hampers well-intentioned executive effort to boost business creativity and strategic innovation. Thought needs to be focused on ‘doing’. Therefore the term ‘managing’ needs to be codified and communicated to individuals. This chapter presents ideas to assist organisations to avoid ‘management myopia’. (See Figure 3.1.)

Management revisited 43

Horse sense!

Literally, the word ‘management’ comes from the French ‘manège’ (Italian ‘maneggio’), which derives from dressage exercises to train a horse in obedience and deportment in order to perform better than the competition. In this scenario the rider is firmly in the saddle and can urge or nag his mount by exercising persuasion, cracking the whip or using spurs. Managers in organisations can be likened to riders as they also find themselves in a competitive envi- ronment. Like the rider they employ a set of process skills to cajole and encourage people to assist them to complete tasks effectively and efficiently.

Context

Global business environment

Dressage trainers have to train and prepare their horses and riders to perform in whatever kind of competitive environment they meet. Similarly, managers need to acquire a skill set to

Figure 3.1 Exploring management.

44 The challenge of changing times

enable them to operate in real world conditions. The business environment is their stage and in common with the horse rider they have to successfully conquer both the contextual arena and the competition. Keen novice riders can approach specialists and seek to be taught how to become successful in dressage competitions. The necessary skill sets both for the horse and the rider are known and codified.

Key principles

A divertimento

Leaving the dressage metaphor aside, learning the basic skills of management can present quite a challenge. Most know what is usually meant by the term ‘management’ but relatively few can answer these questions:

• What skills are necessary to master individual effort? • What skills are necessary to coordinate and control the efforts of others? • What skills are required to manage organisations?

When individuals wish to learn to drive they naturally want to know what this involves. In most countries it is necessary to pass a driving test with both a cognitive and a practical com- ponent. All driving schools can describe in detail what has to be learnt and assessed. If this was not the case, learning the necessary skills would be very difficult. What is more, imagine what it would be like for an individual wishing to learn how to qualify to drive if every person spoken to said something different needed to be learnt and examined.

As seen in the previous chapter, if individuals and organisations want to change the way they operate then they will need to have a common understanding of management. Strange as it may seem few organisations have a standard definition that is known by all ‘on board’. If this were the case in the UK navy then operations would be a disaster. Is management just a broad set of magical skills that enable people to get things done individually or collectively, efficiently and effectively? Part science and/or part art? How can an honest enquirer learn the key skills?

A group of students were asked in a seminar at Durham to list in five minutes the words they thought best identified the key skills a manager should command. Tables 3.1 and 3.2 present a summary of the results.

Table 3.1 Student seminar survey I

Definition of management

Getting things done by others

Table 3.2 Student seminar survey II

Skills Focus Performance

IT Context Individual Communication Task Group People skills Resources Organisation Leadership Professional

Management revisited 45

The general understanding was that management had something to do with getting things done by others. However, no agreed statement emerged as to how this might be achieved.

The students were then asked to see if their parents who were managers or had experienced management could define it. When they reported a week later the consensus was close to their earlier expressed understanding. Neither the students or their parents identified management as being about behaviour. The results of this small experiment were alarming as most are exposed to management activity (good, indifferent and bad) on a daily basis. Management, like marketing, seems to be in the ether. Marketing can be defined; it is both a philosophy and a set of action skills. Management, curiously, does not have a widely accepted definition. This is a real problem when business responses need to change to cope with the challenges of a highly volatile business environment.

The seminar attracted the interest of both students and most parents who were embar- rassed at not being able to define management in a practical way. Both parties delved into management texts, but many were frustrated at the lack of depth of skill exposi- tion and the relevance of broad definitions for expressing action in real-time conditions. Many asked whether business schools would have the answer. Several parents who had attended these organisations rated them very poorly on the practical skills. One parent remarked ‘the school I attended spoke a lot about management but I was distressed to see that they hardly ever practised it’. Scholarship does have a place in the evolutionary definition of management and some schools are engaging with practitioners to sharpen their practical understanding (Hughes et al., 2011). Schein advocates getting alongside managers through a process he terms ‘humble enquiry’ to better understand their world and so be in a better position to blend academic and practitioner thinking on management (in Lambrechts et al., 2011).

Private moments of doubt and fear come even to managers who have spent years on the job. Any number of events can trigger them: an initiative going poorly, a lukewarm perfor- mance review, a daunting new assignment.

As the balance of economic power swings inexorably towards the East and bearing in mind recurrent economic crises, Western managers could learn much from Eastern manage- ment approaches (Ming-Jer and Miller, 2010). The world is looking for fresh ideas and new perspectives. Business reality has transformed from ‘West leads East’ to ‘West meets East’. A thriving Chinese business culture represents not only a source of economic partnership but also a potential fount of managerial wisdom that can help renew Western economies. Unfortunately, the cultural distance between East and West makes Chinese examples too dif- ferent, and at times inappropriate, for Western firms to emulate. ‘Chinese’ thinking, with its emphasis on balance and self–other integration, offers the promise to bridge global divides and facilitates the formation of global-minded executives.

Defining management

For a noun that is in common parlance, ‘management’ is surprisingly difficult to explain. Many business people call themselves managers. So what is a manager? Some would say that a manager is a manager. Or perhaps a manager is someone who is in a management position. Then some regard management as a rank or badge and dream about rising in an organisa- tion through the management hierarchy to achieve high corporate office. Perhaps some light can be shed on the matter by considering what managers do. The verb ‘managing’ suggests coping or perhaps contriving to accomplish something by the thoughtful choice of certain responses. If this is the case then any individual can be a manager, as we all have a personal

46 The challenge of changing times

responsibility to cope with the problems of everyday life. The key words here are thoughtful, choice, problems and responsibility.

The ideal individual manager then assumes responsibility for coping with his or her own problems by a process (management) that includes thinking, understanding and the deliberate selection (choice) of appropriate responses. Managers think and managers act, but our think- ing and our choice of response may not always be strictly rational. We often exercise our judgement largely on intuitive grounds or through habitual responses. At the same time we are not always well organised and so may adopt a reactive rather than proactive individual management style.

However, we are social beings and much of our life involves interacting with other peo- ple. Few individuals are an island. Managing our individual affairs frequently involves a responsibility to manage others – for example, parents assume the responsibility for manag- ing the early lives of their offspring. When we are at work we are all individual managers, in the sense described above, but usually find ourselves in some positions where we are expected to manage others.

The term management can be viewed from a number of perspectives viz:

• The organisation and coordination of the activities of an enterprise in accordance with certain policies and in achievement of defined objectives, namely the process of being managed or managing.

Management is often included as a factor of production along with machines, materials, and money. According to the management guru Peter Drucker (1909–2005), the basic task of management is twofold: marketing and innovation. Modern management owes its ori- gin to the sixteenth-century enquiry into low-efficiency and failures of certain enterprises, conducted by the English statesman Sir Thomas More (1478–1535). As a discipline, manage- ment consists of a set of functional skills.

• The executives who have the power and responsibility to make decisions to administer business and public organisations.

The size of management can range from one person in a small organisation to hundreds or thousands of managers in multinational corporations. In large organisations the board of directors formulate policy which is then implemented by the CEO. Some business analysts and financiers accord the highest importance to the quality and experience of the managers in evaluating an organisation’s performance.

• Leading a team to achieve planned objectives. • A corporate rank in an organisation.

The term management thus refers to both a title (position in an organisation) and to a set of functional skills. Ideally both these descriptors should be effectively combined in the performances of managers. However, this is not always the case, as some adopt a mindset of entitlement in the rank and demonstrate poor functional skills. There are many of these in important positions in organisations having been promoted during easier business conditions (sellers’ markets) or as a reward for long or loyal service. Others possess considerable func- tional skills that have been developed over the years but have failed to update their skill sets. This would logically imply that several organisations might have executives in powerful and

Management revisited 47

important positions that are insufficiently skilled to cope effectively with modern business life. Worst still they may actually restrict the contributions of younger staff for fear of being professionally embarrassed. This ‘what I have I hold’ approach to management is in a way a natural human response but not a professional one. It can lead managers and their organisa- tions to become myopic and blaming external events such as the European immigrant crises, casino banking, or the weather, for their problems.

Clearly, external or contextual events do impact on business life and require the right application of necessary functional skills. Here it is useful to picture the task facing a learner driver. To be successful our driver has to pass both a cognitive and a practical test and apply skill that is appropriate for the road conditions. Managers too should constantly update their cognitive skills and learn to cope with contextual problems by constantly practising and refining their expertise. Crashing a vehicle and claiming that the accident was caused by rain is bad driving and unprofessional.

Primary management processes

Much of the academic literature declares that the main functional skills of management fol- low the five management principles described by Fayol (1916):

• planning (mission/strategy planning, objective setting); • organising (time, work and decision-making); • leading (setting direction, aligning the team, motivating and inspiring); • controlling (correcting errors, disciplining, appraising); • achieving (putting it all together and getting things done effectively and efficiently).

For managers to be both effective and efficient in practising Fayol’s basic set of functional skills they need to acquire and become proficient in:

• Conceptual skills – the ability to analyse and evaluate complex situations. • Interpersonal skills – the ability to relate and work with people individually and in

groups. • Technical skills – the ability to apply required technical expertise. • Political skills – the ability to liaise successfully with other managers in the organisa-

tion and to build professional networks – a task that has benefited greatly from social networking sites such as Facebook, LinkedIn and Twitter.

The above cluster of functional and general skills form a template for assessing managerial competencies (Agut and Grau, 2002).

Management involves people and thrives on interaction, it is relational and most people like being treated respectfully as an individual (Table 3.3). This seems at first an obvious point to make but with the increasing dominance of information and communications tech- nology (ICT) and the use of smartphones in modern business, people are losing face-to-face interaction through excessive electronic management by email and text. There is growing interest amongst the most progressive organisations in the principles of humanistic manage- ment (Spitzeck, 2011). It is sometimes said, by people who have not really looked into the matter, that the humanistic approach is too soft and too people-oriented. However, humanis- tic consultants always emphasise the importance of doing justice to the task as well as to the people involved.

48 The challenge of changing times

Redefining management action: control or lead?

Putting the emphasis on control: micromanagement/Theory X

Many managers needlessly operate in a hierarchical way and over-manage, over-scrutinise, and over-frustrate employees. Such meddlesome bosses now are called micromanagers. A micromanager can be much more than just a nuisance in today’s complex organisation. Bothersome bosses who second guess every decision a subordinate makes, fret about the font size of the latest progress report or inspect all of their employees’ emails not only frustrate and demoralise their harassed workers, but seriously damage the productivity of the organi- sation and, over the long run, may jeopardise the organisation’s survival. Unfortunately, micromanagement is a fact of management life. Micromanagement has been practised and recognised well before it was labelled as an organisational pathology. In 1946, Peter Drucker called for a ‘democracy of management’ whereby organisations need to decentralise and del- egate more decision-making authority to employees. In 1960, Douglas McGregor described a Theory X manager as one possessing many of the characteristics of the modern microman- ager, ‘one who is poor at delegating but one who believes he delegates well’ (White, 2010).

Putting the emphasis on leadership: fundamental management competencies

A practical approach to learning how to practise management skills is indicated in Figure 3.2. Essentially it concerns working with people and in this context leadership is of paramount impor- tance. This is true whether management takes place at the individual, group or organisational level. Anyone who cannot motivate themselves will find it difficult to convincingly lead others. Self-discipline and determination are essential aspects of personal motivation. Evident and con- tinuous leadership skills result in effective and efficient group teamwork and motivation levels.

Table 3.3 Major management activities

Management function Management activities

Planning Forecasting Developing objectives Programming Scheduling Budgeting Developing procedures Developing policies

Organising Developing organisational structure Delegating Developing relationships

Leading Decision making Communicating Motivating Selecting Developing people

Controlling Developing performance Measuring performance Correcting performance

Management revisited 49

Figure 3.2 Putting the emphasis on leadership.

Sports Direct: example of a Theory X company

The founder of the UK quoted company Sports Direct has been forced to admit that his management team practised an autocratic style. Workers in the firm’s Derbyshire ware- house were paid below the minimum wage and were fined 15 minutes’ pay for every one minute they were late. Furthermore an undercover investigation by The Guardian in 2015 found that workers had been subjected to rigorous searches and surveillance.

The Unite union revealed to a committee of MPs that the company operated a cul- ture of fear. Union officials said the Derbyshire distribution centre operated a ‘strike system’ for misdemeanours where staff were given ‘a strike’ for things such as spend- ing too long in the toilet, excessive chatting or taking a day off sick. If an employee had six strikes, they were automatically dismissed.

(continued)

50 The challenge of changing times

‘When you have people under that much fear they come into work ill and that creates a significant health and safety risk’, said Steve Turner, assistant general secre- tary of Unite.

In one case, he said an employee had given birth in a toilet at the warehouse, due to fear of losing her job if she called in sick. He said workers had likened the condi- tions to a ‘gulag’, or ‘labour camp’ and described the conditions as ‘nineteenth-century working practices’.

The founder defended the disciplinary system, saying it was necessary, had to be executed correctly and claimed that the firm’s operation style had resulted from rapid growth. The chief investment officer at Royal London Asset Management commented that there had been significant corporate governance failings amongst the warehouse management. The founder pledged to review and change some management practices within 90 days. However, the public naming and shaming of his leadership seemed to have had only a moderate impact. He left the hearing declaring ‘I’m not Father Christmas, I’m not saying I’ll make the world wonderful’.

Source: BBC News, 7 June 2016.

The next priority is to apply a clearly understood managing method. This involves delegation, which is an important skill that is often abused. Sound delegation entails:

• clearly communicating a task to an individual or group; • clearly explaining any necessary skills; • keeping an eye on the individual or group as the task is tackled.

Walking away after a muddled communication of the task and then blaming an individual or group if things go wrong is too commonly evident. This approach is not delegation but abdication and is a totally destructive management practice. The other basic management method skills include setting targets and assessing performance truthfully and as positively as possible.

Dynamic managers constantly seek ways to increase efficiency. This requires giving attention to effective and efficient ways of running meetings, time and stress management. The contemporary business environment usually requires people in management positions to display and encourage creative thinking (see Chapter 4). This is necessary because many of the traditional models and practices can lose their edge and effectiveness. In addition, wise organisations re-evaluate their vision and study the impact of the consequences of the busi- ness paradigm change from sellers’ to buyers’ market conditions (see Chapter 1).

Management: quo vadis?

Many see management mainly as a position that is a statement of authority. The decades of sellers’ markets encouraged ‘top-down’ activity. Managers on behalf of owners, pub- lic boards or shareholders ran organisations. Apart from owners of SMEs, authority for the larger private sector and public enterprises resided in distant bodies, many of which did

(continued)

Management revisited 51

not take part in the day-to-day running. Technical advances in communication and com- puterisation have had a substantial effect on management practice. Whilst few would deny the benefits this has brought, many would recognise the creeping depersonalisation that has resulted from the escalation in many organisations of management by email and text.

In sellers’ markets control was everything and management didn’t like surprises. Organisations (and hence people) could be run automatically and management became obsessive with detailed planning and reporting systems. However, as every weather fore- caster knows, such practice can be illusory, as to measure is not necessarily to control. Sound managers will keep their eyes on the road all the time – they do when they drive their com- pany cars – if they fail to do this in times of shifting environmental paradigms, they run a real danger of becoming myopic.

As the decade progresses traditional hierarchical management structures are giving way to network models. Least-cost supply chains are being replaced by value chains. The enti- tlement culture is dying. There are no more jobs for life. The role of management needs to be seen in a new way so that people are seen as the most important resource that organisa- tions command and not merely names on a payroll and an expendable resource. Responsible organisations will find ways to affirm this perception and discover how to value and recharge their staff.

Management need to accept that responses and experiences that stood them well in yes- terday’s world may not be best for today. New thinking is required and an acceptance that it is essential for managers to be prepared and to do something about introducing different attitudes and operating cultures. Of course it is best to keep what is seen to be good prac- tice in current conditions, but those in authority also need to encourage themselves and their staff to learn new skills. To this end wise organisations are increasingly investing in knowledge management, recognising that an organisation’s value derives from knowledge, know-how, and intellectual capital and competencies. The short-termism that is often all too evident is being increasingly challenged, as the present and the future are seen not to be separate but as being intertwined. Business creativity is needed as never before to help organisations become positively differentiated, but is often hampered in its execution by the mindset that management is essentially about operational and control matters.

Practice

Essential management skills

The divertimento in the ‘Key principles’ section of this chapter posed three questions to assist aspiring and existing managers to equip themselves with essential skills to enable them to practice successfully in the current environment:

• What skills are necessary to master individual effort? • What skills are necessary to coordinate and control the efforts of others? • What skills are required to manage organisations?

The following three sections draw from interviews with practitioners and from academic material and argument presented in this chapter to provide a guide to individual, group and organisational managers.

52 The challenge of changing times

Managing self and individuals

Table 3.4 Basic individual management skills

Management skill set Specific skills Tasks

Contextual awareness Identify business context 1 Sellers’ market 2 Buyers’ market

Creative thinking Creative problem solving See Chapters 4 and 5 Organising self Task scheduling 1 Make a list of tasks

2 Identify the tasks that are essential for effective performance – active tasks

3 Identify those tasks that are essentially reactive

4 Establish priorities in the light of: (a) importance (b) urgency

5 Schedule sufficient time for active tasks tasks and allow time for reactive tasks

Managing groups

Table 3.5 presents a set of guidelines for those charged with the responsibility of managing others. Sound self-management skills must be evident before attempting to manage others. Managers should be seen to be active, effective and efficient by their staff and management colleagues.

Managing an organisation

Top managers should follow the guidelines outlined in Tables 3.5 and 3.6. CEOs are advised to make selecting the members of a senior management team among their first priorities, to

Table 3.5 Summary guidelines for group managers

Management skill set Specific skills Tasks

Contextual awareness Identify business environment

Information search

1 Sellers’ market 2 Buyers’ market

Interpretation Creative thinking Creative problem solving Organising other

people Delegation 1 Which task?

2 Who does it? 3 Brief people and train them 4 Establish priorities 5 Inform others 6 Be available for advice 7 Check progress 8 Support staff at all time

From management to managing or leading

Leadership Managers should be leaders – leadership is about discovering answers to questions others have yet to contemplate not about repeating someone else’s answers

Management revisited 53

make sure that such teams focus on a set of priorities where their group decision making is essential and to address the group dynamics of their team (Kruyt et al., 2011). CEOs also need to take care to see that talented executives do not hold back for fear of exposing the limitations of those in leadership positions (DeLong and DeLong, 2011).

Ethical considerations As business becomes increasingly competitive organisations can, sometimes without realis- ing it, slip into management actions that are ethically questionable. Research on business ethics communication and behaviour indicates a relatively clear, positive link between open workplace dialogue about ethical issues and ethical conduct. Empirical research by Trapp (2011) revealed that discussing ethical issues was influenced by two main factors: employee conceptualisations of business ethics and the level of inter-collegial trust, credibility and con- fidence. An evident and lasting high level of trust in an organisation is an important influence on motivation. In addition, socially responsible management pay due to regard to minimising any harmful effects of their operations on the internal and external environment as well as pursuing a less than cynical CSR policy.

Broad management styles

The way in which managers behave determines the way in which individuals and groups will behave towards them. So much of a manager’s job is concerned with acquiring and fine-tuning a set of interactive skills. The main styles open to a manager are summarised in Table 3.7.

Table 3.6 Summary guidelines for top management

Management skill set Specific skills Tasks

Contextual awareness

Identify business environment

Information search

1 Sellers’ market 2 Buyers’ market Interpretation

Creative thinking Creative problem solving

See Chapter 4 – good top management do not attempt to manage creativity, they manage for creativity, by providing a work environment and culture that allows creativity to flourish

Top managing for creativity means taking most of what we know about management, standing it on its head and putting the concept of effectiveness before that of efficiency

Avoiding management myopia

Revelations 1 Exercise vision 2 Declare mission 3 Prepare corporate plan and set goals 4 Define responsibilities 5 Set standards 6 Agree tasks

Establish a creative culture

Prepare organisation for change

Empower individuals and groups

Ethical operation Corporate Social Responsibility (CSR)

Operate ethically and with regard to CSR

54 The challenge of changing times

Organisational development

Is there a correct style?

It is difficult to answer this question purely in terms of the style categorisations summarised in Table 3.7. The emerging and accelerating impact of contextual trends (see Chapter 1) from the 1960s onwards lead to debate about the future role of management’s attitudes and per- ceptions towards subordinates and the style of organisations. The work of McGregor (1960) codified observed managers’ views in terms of two assumption sets that he termed Theory X and Theory Y.

Table 3.7 Main management styles

Style Feature Action

Autocratic Used to retain control Helps complete urgent tasks or where there is a high element of risk

Likes to tell people what to do May lead to lack of creativity No consultation May trigger resistance

Can damage staff and organisational culture Democratic Fosters staff participation Gains team commitment

Shares information with staff Slow decision making but gains staff support Staff can take part in decisions Motivates staff and builds loyalty

Laissez faire Little direction from manager OK for highly trained experts Staff free to make decisions May lead to chaos without suitable control

Requires regular feedback Paternalistic Similar to the autocratic style

but with caring attitude Staff may feel valued but frustrated Little scope for staff to make decisions

Table 3.8 McGregor’s assumptions leading to Theories X and Y

Theory X assumptions

1 People have an inherent dislike of work and will avoid it if possible 2 So most people will need to be coerced, controlled, directed and threatened with punishment to

persuade them to put in enough effort to meet organisational objectives 3 Most people prefer to be directed, wish to avoid responsibility, have little ambition and want

security above everything else

Theory Y assumptions

1 Putting effort into physical and mental work is as natural as recreation or rest 2 External control and the threat of punishment are not the only ways of motivating staff to meet

organisational objectives. People will exercise self-management to achieve objectives to which they are committed

3 Such commitment is a function of the reward associated with the achievement of agreed objectives

4 Most people learn, under suitable organisational cultures, to accept and welcome responsibility 5 The ability to think creatively in the solution of workplace problems is widely found in people 6 Under most prevalent broad management styles the capacity of people to fulfil their potential is

only partially utilised

Management revisited 55

Japanese management approach

Japanese management culture

McGregor’s main aim was to emphasise the importance of abandoning the limiting assumptions of Theory X to release individual, group and organisational creativity. The next step that boosted this was the emergence of the impact of the Japanese management culture (see Table 3.9) on Western management thinking.

Japanese management techniques

Three broad strands merged in the development of Japanese management technique:

1 Theory Z 2 Quality of Work Life (QWL) 3 Quality Circles.

Theory Z

Ouchi’s Theory Z proposed a new set of assumptions that should be incorporated into man- agement thinking and organisational development that focused on:

• increasing employee loyalty to the company; • providing a job for life; • placing a strong emphasis on the well-being of employees both in the workplace and at home.

Theory Z presented an opportunity for organisations to benefit from:

• a humanist approach to management; • a hybrid approach that combines Japanese philosophy with Western management practice; • placing a large amount of trust with workers; and • assumed that workers if empowered will display sound teamwork and organisational

loyalty.

Table 3.9 Japanese management culture

Attitude Action

Service to the public Provision of high-quality goods and services at reasonable prices

Fairness and honesty To be practised in all business dealings and personal contact

Teamwork for the common cause Abilities and skills will be pooled based on mutual trust and respect

Uniting effort for improvement Continuous intent to improve corporate and personal performance

Courtesy and humility Determination to be cordial and modest and respect the rights and needs of others

Observance of environment Accept responsibility for preserving and improving the physical and social environment

56 The challenge of changing times

The characteristics of Theory Z are:

1 Long-term employment and job security (Shushinkuyo). • New employees are recruited directly from school rather than in an open job market. • An exchange commitment between the employer and the employee (compact). • The employer must be prepared to make sacrifices for the employee to ensure life-

long loyalty and commitment. 2 New employees are recruited directly from school rather than in an open job market.

• The entire workforce is held responsible for failure to achieve corporate targets. • The fault of one is the fault of all. • Trust is a key essence in ensuring that teams meet their objectives and goals.

3 An exchange commitment between the employer and the employee (compact). • Employees are briefed on what needs to be done but not specifically told how to do it. • Assumes that every employee will use their intellect, skills and creativity to accom-

plish their task. • Despite minimal supervision, strict Key Performance Indicators (KPI) must be met.

4 Collective decision-making. • All decision making in Japanese companies is a group process. • Ringi System of decision making.

{{ Newawashi (Tree Root): preliminary and informal sounding out of the employ- ees’ ideas about a proposed course of action or project.

{{ Ringi Seido (Proposal, Decisions, Action): a formal process that provides the opportunity for equal ranking managers or employees of a group within a com- pany to partake in an individual’s idea.

5 Slow evaluation and promotion. • The longer that an employee stays, the more chance of getting promoted. • A major motivation for an employee to stay in a company. • Japanese employees generally stay an average of 7 to 10 years in a company before

being promoted. • Affirms the company’s commitment to the employees for lifetime employment.

6 Moderately specialised careers. • Traditional Japanese career paths are more non-specialised, allowing employees to

rotate roles and jobs on a frequent basis. • American career paths are more geared towards ‘mastery of craft/specialisation’

allowing little or no crossing between functional roles. • A type Z career path is the ‘middle of the road’, where employees are allowed to

rotate roles but on a less frequent basis. 7 Concern for total person, including their family (Holistic Concern).

• The Japanese strongly believe that problems at home will affect work performance. • Employees and their families are seen as one entity. • Companies usually offer many benefits such as family allowances, insurance, housing

assistance and other benefits for the employee and their family.

Management revisited 57

Quality of Work Life (QWL): issues and strategies

• Pay and stability of employees. • Job security. • Occupational stress. • Sufficient resources. • Self-managed work teams. • Participative management. • Promotion opportunities. • Recognition. • Organisation health programmes. • Alternative work arrangements – work at home, flexitime, part-time employment, etc.

Quality Circles

Quality Circles were originally associated with Japanese management and manufacturing techniques and are one of the employee participation methods. They imply the develop- ment of skills, capabilities, confidence and creativity through a cumulative process of education, training, work experience and participation. This requires the creation of facil- itative organisational cultures and workplace conditions. Quality Circles have emerged as a mechanism to develop and utilise the potential of people for improvement quality and productivity.

Table 3.10 Comparison and contrast of Theories X, Y and Z

Management concept

McGregor Theory X and Y

Ouchi Theory Z

Motivation Either being unwilling or unmotivated to work, or being self-motivated towards work. Threats and disciplinary action are thought to be used more effectively in this situation, although monetary rewards can also be a prime motivator to make Theory X workers produce more

Believes that people are innately self-motivated to not only do their work, but also are loyal towards the company, and want to make the company succeed

Leadership Theory X leaders would be more authoritarian, while Theory Y leaders would be more participative. But in both cases it seems that the managers would still retain a great deal of control

Theory Z managers would have to have a great deal of trust that their workers could make sound decisions. This type of leader is more likely to act as a coach, and let the workers make most of the decisions

Conflict This type of manager might be more likely to exercise a great deal of power-based conflict resolution style, especially with the Theory Z workers. Theory Y workers might be given the opportunity to exert negotiating strategies to solve their own differences

Conflict in the Theory Z arena would involve a great deal of discussion, collaboration and negotiation. The workers would be the ones solving the conflicts, while the managers would play more of a third-party arbitrator role

58 The challenge of changing times

Action

New skills for a new world

Private moments of doubt and fear come even to managers who have spent years on the job. Any number of events can trigger them: an initiative going poorly, a lukewarm perfor- mance review, a daunting new assignment. Hill and Lineback (2011) have long studied the question of how managers grow and advance. Their experience brings them to a simple but troubling observation: Most bosses reach a certain level of proficiency and stay there – short of what they could and should be. Why? Because they stop working on themselves. Hill and Lineback offer three imperatives for managers who seek to avoid this stagnation:

1 Manage yourself – who you are as a person, the beliefs and values that drive your actions, and especially how you connect with others all matter to the people you most influence.

2 Manage your network – effective managers know that they cannot avoid conflict and competition among organisational groups; they build and nurture on-going relationships by practising a democratic approach.

3 Manage your team – team members need to know what’s required of them collectively and individually and what the team’s values, norms and standards are. Allow teams to make mistakes and praise them when they do good things.

According to a McKinsey Quarterly Report (Dobbs et al., 2014), the collision of techno- logical disruption, rapid emerging-markets growth and a widespread ageing population is upending long-held assumptions that underpin strategy setting, decision making and management. Increasingly managers at all levels will be required to do much more than just implement the plans declared by top management. They will be expected to define problems facing their organisations in a rapidly changing and increasingly complex world and to communicate this to top management. Information search and interpretation will continue to be key skills and full-time technology workers could be displaced globally by smart machines.

The convergence of IT and materials science will stimulate innovation that will change how, where and why natural resources are used. Capturing these resource-technology oppor- tunities will challenge existing management approaches.

Table 3.11 Examples of Theory Z organisations

Organisation Theory Z

Dangote cement (Morocco)  Happy, training and consultancy (UK) * John Lewis retail (UK)  Nikon, optics (Japan)  Komatsu (Asia)  Oticon, hearing aids (Denmark)  Semco, engineering (Brazil) * East African Brewers (Kenya)  Soantrach (Algeria)  SOSOL (South Africa) 

Note: Companies marked * are examples of Theory WB organisations (see Chapter 13).

Management revisited 59

Summary Management is both a rank in an organisation and a set of skills that can be practised at the individual, group and top management (organisational) levels. Good managers learn first to manage themselves successfully before attempting to lead others. They encourage, facilitate and sustain effective and efficient team-working toward a common vision.

Discussion questions 1 Explain what is meant by the term management. 2 What is the difference between the concept of efficiency and the concept of effectiveness? 3 Describe the five primary management processes. 4 What are the basic guidelines for managing self or an individual? 5 What are the basic guidelines for managing groups? 6 What are the main tasks of top management? 7 Study the websites of the organisations listed in Table 3.11. What distinguishes a Theory

Z organisation from a Theory Y organisation?

Case exercise

SASOL: encouraging individual initiative and freedom

SASOL is a South African-based international integrated chemicals and energy company, founded in 1950, that leverages technologies and the expertise of their 30,400 people work- ing in 36 countries. The company develops and markets technologies, and builds and operates world-scale facilities to produce a range of high-value products, including liquid fuels, chem- icals and low-carbon electricity. SASOL has been a consistent investor in capital projects, skill development and technological research and development to pioneer innovation for over six decades. As market needs and stakeholder expectations have changed, so too have their methods, facilities and products, to deliver sustainable long-term shareholder value.

Vision, values and goals

The company’s corporate vision is to grow profitably, sustainably and inclusively, while delivering value to stakeholders through technology and the talent of their people in the energy and chemical markets in Southern Africa and worldwide. SASOL’s goal is to be recognised as a company that delivers long-term value to its shareholders, employees and stakeholders. The company’s six shared values define what they stand for as an organisation:

• Safety: a commitment to safety in all that they do. • People: the creation of a caring, engaged and enabled work environment that recognises

both individual and team contributions in pursuit of high performance. • Integrity: act consistently on a set of values, ethical standards and principles. • Accountability: take ownership of behaviour and responsibility to perform both indi-

vidually and in teams. • Stakeholder focus: serve stakeholders through quality products, service solutions and

value creation. • Excellence in all they do: delivering what they promise and adding value beyond cus-

tomers’ expectations.

60 The challenge of changing times

SASOL’s culture

The company’s culture is characterised by a dynamic, entrepreneurial and creative work- place. People are encouraged to use their initiative and take risks. Leadership is visionary, innovative and risk-oriented. The organisation is committed to experimentation and innova- tion. A strong emphasis is placed on the importance of the company being at the leading edge of incremental and radical innovation. Readiness for change and meeting new chal- lenges is important. The long-term emphasis is on rapid growth and acquiring new resources. Success means producing unique and original products and services. The SASOL organisa- tion encourages individual initiative and freedom.

Questions

1 Which of the management styles featured in Table 3.7 best describes SASOL? What are your reasons for your choice?

2 What theory model best describes SASOL? 3 How, in your opinion, might SASOL take steps to ensure that its R&D and general

innovative activity, in contrast to Nokia’s mobile phone business, is soundly market oriented?

4 What lessons might SASOL learn from the Japanese approach to businesses that were inspired and followed the work of Ouchi?

YouTubes

‘Sasol: A Leading International Integrated Energy and Chemical Company’, https://www. youtube.com/watch?v=ekTmCXI4WVw.

‘Sasol’s Commitment to Sustainable Development’, https://www.youtube.com/watch?v= YQ4Z8Wkh2YY.

References Agut, S. and Grau, R. (2002) ‘Managerial competency needs and training requests: The case of the

Spanish tourist industry’, Human Resource Development Quarterly, Vol. 13, Issue 1, Spring, pp. 31–51.

DeLong, T. and DeLong, S. (2011) ‘Managing yourself: The paradox of excellence’, Harvard Business Review, April, Kindle edition.

Dobbs, R., Ramawamy, S., Stephenson, E. and Vigueri, S. P. (2014) ‘Management intuition for the next 50 years’, McKinsey Quarterly, September, pp. 1–3.

Fayol, H. (1916) Industrial and General Administration, Paris, Dunod. Hill, L. A. and Lineback, K. (2011) ‘Are you a good boss: Or a great one?’ Harvard Business Review,

January/February, Vol. 89, Issue 1/2, pp. 124–31. Hughes, T., Bence, D., Grisoni, L., O’Regan, N. and Wornham, D. (2011) ‘Scholarship that mat-

ters: Academic–practitioner engagement in business and management’, Academy of Management Learning & Education, March, Vol. 10, Issue 1, pp. 40–57.

Kruyt, M., Malan, J. and Tuffield, R. (2011) ‘Three steps to building a better top team’, McKinsey Quarterly, Issue 1, pp. 113–17.

Lambrechts, F. J., Bouwen, R., Grieten, S., Huybrechts, J. P. and Schein, E. H. (2011) ‘Learning to help through humble inquiry and implications for management research, practice, and education: An interview with Edgar H. Schein’, Academy of Management Learning & Education, March, Vol. 10, Issue 1, pp. 131–47.

Management revisited 61

McGregor, D. (1960) The Human Side of Enterprise Annotated Edition, New York, NY, McGraw-Hill. Ming-Jer, C. and Miller, D. (2010) ‘West meets East: Toward an ambicultural approach to manage-

ment’, Academy of Management Perspectives, November, Vol. 24, Issue 4, pp. 17–24. Mintzberg, H. (1973) The Nature of Managerial Work, New York, NY, Harper Row. Spitzeck, H. (2011) ‘An integrated model of humanistic management’, Journal of Business Ethics,

March, Vol. 99, Issue 1, pp. 51–62. Trapp, L. N. (2011) ‘Staff attitudes to talking openly about ethical dilemmas: The role of business eth-

ics conceptions and trust’, Journal of Business Ethics, November, Vol. 103, Issue 4, pp. 543–52. White, R. D., Jr. (2010) ‘The micromanagement disease: Symptoms, diagnosis, and cure’, Public

Personnel Management, Spring, Vol. 39, Issue 1, pp. 71–6.

Selected YouTubes Definition of management – ‘Creativity, Innovation and Entrepreneurship: Glenn Gaudette at TEDxWPI’, https://www.youtube.com/watch?v=xPO1fOR9B68.

‘Management Basic Concepts: The Four Functions of Management’, https://www.youtube. com/watch?v=eSXP7VgGcz0.

‘What’s Your Management Style?’, https://www.youtube.com/watch?v=HLemo0kQh0s.

‘Akio Morita: Comparing Japanese and American Business Practices’, https://www.youtube. com/watch?v=b5t4ceerkhg.

‘Douglas McGregor Theory X & Y’, https://www.youtube.com/watch?v=57jNs3EwBQE.

‘Theory Z’, https://www.youtube.com/watch?v=YQo4UXsJHhA.

Part II

Innovation from theory to practice

4 Business creativity

It’s an old maxim of mine that when you have excluded the impossible, whatever remains, however improbable, must be the truth.

(Sir Arthur Conan Doyle)

Discovery consists of seeing what everybody has seen and thinking what nobody thought. (Albert von Szent-Györgyi)

Learning objectives This chapter explores:

1 What is creativity? 2 Understanding thinking. 3 Contextual factors affecting personal creativity. 4 Assessing personal creativity potential. 5 Left-brain and right-brain thinking model. 6 Introducing the total thinking model.

Introduction The challenges organisations face as a result of the business environmental paradigm change discussed in Part I call for fresh thinking. The portfolio of management responses that was both effective and efficient in the era of sellers’ markets (collectively referred to as the least-cost production/supply paradigm) need to be revised in order to respond suc- cessfully to the different problems posed by buyers’ markets. In most cases this requires a radical change in thinking. This is the essence of business creativity and the process starts with a review of thinking at the individual level. The chapter explores the process of think- ing by describing the physiology of the brain and discussing how the process of thinking occurs. Once the fundamentals of thinking have been explored the next task is to apply the key principles to the individual’s problem-solving practice. This requires both mental flex- ibility and a tolerance of ambiguity and is a fundamentally a personal journey of discovery. Practical exercises are included to assist individuals to realise the need to evaluate their thinking approach to business problems. (See Figure 4.1.)

66 Innovation from theory to practice

Nasruddin

Mulla Nasruddin was once attempting to repair something, without apparent success, when an onlooker asked scornfully, ‘Do you know what you’re doing?’

Nasruddin replied, ‘No, that’s why I’m doing it.’ The field of creativity research is rich with examples from the lives of remarkable indi-

viduals, but lacks an accepted framework for approaching the many issues that arise when trying to make more general sense of the data. To produce such a framework is an important aim of this chapter.

Figure 4.1 Overview of business creativity.

Business creativity 67

Context

What is creativity?

Creativity is a natural gift and part of the wholeness (gestalt) of every individual. It can and should be encouraged. This offers the individual the opportunity to derive more satisfaction from life. Understanding creativity is difficult if we strive to define it in rules and try to put it in a box. By its very nature it is unpredictable, unique, infectious and real. Most, except- ing those with closed minds, can quickly appreciate it when they see it. True creativity has a beauty of its own that often defies logical explanation. So are civilisations all over the world in danger of losing their way by attempting to justify creativity? Can it be bottled, concen- trated in a pill and swallowed? Is it possible to control it by logic alone? Or is it a mysterious force that seems to bless us in puzzling, usually joyful, ways?

Creativity is a unique force that distinguishes the higher orders of fauna, such as homo sapiens from the rest of creation. Other creatures are capable of expressing creativity and creative thought. Squirrels, for example, can do amazing things in pursuit of food. Humans, however, are generally accepted to be the most advanced form of life. So the way in which humans think would seem to hold promise if we are to appreciate human creativity and fully achieve our individual potential to express it. The next section explains how the human brain works. Prepare to be surprised.

Definitions

Creativity has been defined as the generation of new ideas by approaching problems or existing practices in innovative or imaginative ways. It is stated that creativity involves re-examining assumptions and reinterpreting facts, ideas and past experience. It is also reported that a growing interest in creativity as a source of competitive advantage has developed in recent years (Business & Management Dictionary, 2007; Banks et al., 2002; Dundon, 2002). It is an imaginative process with outcomes that are original and of value. One way to find out more about creativity is to ask people about their conception of a creative person. Whether they are lay people or experts in a field, people have implicit the- ories about what it means to be creative. They usually identify personality and cognitive elements such as:

• connects ideas; • sees similarities and differences; • is flexible; • has aesthetic taste; • is unorthodox; • is curious, inquisitive; • questions accepted ways of doing things.

Another way to tease out the governing conditions of creativity is to look at paradigm case examples of what the most creative people do. Much research has gone into trying to under- stand creativity by looking at the way creative minds work (Gardner, 1997). By studying exemplars of creativity such as world-famous writers, artists or inventors one might find a set of necessary and sufficient conditions which defined their creativity. We then might want to try to recreate those conditions in our homes, schools, businesses and community. All have the mental resources to be creative (see Chapter 5).

68 Innovation from theory to practice

Process

Research into the habits of creative people reveals certain common characteristics. They:

• generate ideas; • are flexible in their thinking, experiment and seek variation; • strive for originality; • provide examples of their work.

Generate ideas

Creative people tend to have lots of ideas. They do not limit their thinking to a few ideas; they want more ideas and better ideas. The more they have the greater the likelihood that some of them will work. Some ideas will go wrong. As Edison, the inventor of the telephone said, he needed 100 ideas for he knew that 99 of them might be wrong. Inside the oyster of an idea may be a pearl. Creative people do not discard ideas simply because they seem at first to be a bit odd or unworkable. Output of ideas spurs further ideas, each of which may have an unexpected potential. Creative people are rarely half-hearted. They make an effort to keep thinking, to become absorbed, immersed and fascinated in the subject in hand for the ideas to flood in. When Tolstoy was writing a novel he said he ‘knew’ all his fictional characters inside out because he had thought so much and generated so many ideas about them.

Creative people

Creative people are able to overcome the mental blocks to their thinking through being flex- ible and divergent. Some of these blocks include the tendency to think that:

• there is only one right way to do things; • we know all there is to know; • it is wrong to experiment with new ideas.

Being creative means not having to be stuck with one idea, one approach and one way of doing things. It is having the ability to move from a known way to a new way, being willing to change your ideas or views if you need to. Creative people have a thirst for knowledge. They use imagination to play with ideas. They are willing to experiment. The French mathematician Poincaré said: ‘Experiment is the sole source of truth.’ It is also the source of all creativity. Creative people are curious, open-minded and have the confidence to try new ideas.

Strive for originality

Creative people strive for originality by thinking of novel ideas, finding new solutions to problems or creating their own unique ways or plans for doing things. They extend their thinking through a process of elaboration. They are willing to improve on an original idea, so that what they add improves on or takes further the original idea. Elaboration is shown in the number and quality of different ideas used to add on to the original idea, expand- ing on existing knowledge, extending an idea to make it more complex or build a unique feature into a given situation. They try alternatives and don’t give up easily. They have ‘stickability’ – they know that creativity often requires a tremendous struggle for a vision

Business creativity 69

to be realised. The painter Turner said: ‘My paintings bring me nothing but pain. The real- ity is so immeasurably below the conception.’

Provide examples of their work

Creative people work hard and continually to improve ideas and solutions, by making gradual alterations and refinements to their works. Contrary to the mythology surrounding creativity, few works of creative excellence are produced with a single stroke of brilliance or in a frenzy of rapid activity (Breen, 2004). Here is Beethoven describing his way of working:

I carry my thoughts with me for a long time, often for a very long time before writing them down . . . I change many things, discard others and try again until I am satisfied; then, in my head, I begin to elaborate the work . . . the underlying idea never deserts me. It rises, it grows. I hear and see the image in front of me from every angle.

(Gruber and Wallace, 1999)

Newton claimed that what enabled him to make discoveries in mathematics and science was his ability to concentrate intently on a problem for hours, days and weeks on end. Research shows that experts in any creative field take about 10 years of practice before they produce a masterwork (Sternberg and Lubart, 1999). Creative excellence in any field seems to require long-term interest and investment of effort (Sternberg, 2006).

The problem with studying paradigm cases of creative people who have excelled in their field is that they are vulnerable to paradigm shift (Kuhn, 1975). Thus the analysis may fit well with the works of preceding artists who were imbued with a reverence for the tradition they were working in, but it may not fit the works of revolutionary creative thinkers. The old ways of study may not fit new technologies. We cannot reinvent the future by copying the traditions of the past. Creative people can learn from a past tradition but need to move beyond that tradition to achieve the most creative expression of their ideas. They need to move into new paradigms, new ways of thinking.

Most acknowledge that creativity exists. Many can name a creative person, alive or dead, though it is amazing how many people seem to think that creativity and the afterlife go together! This chapter asserts that all individuals are naturally creative and that this is by design and not an accident of birth. Of course, some are more creative than others. However, we all have tremendous potential. The curious thing is that many of us keep our creativity under wraps. Perhaps this is because many of us find it easier this way. Many individuals and groups seem to radiate a latent hostility toward creative people. This makes about as much sense as this text trying to convince you that you do not exist!

Curiously, when Western wealth-creation activities were primarily facing a supply gap, the pearl of great price was not creativity or innovation but compliance. The pursuit of order portends a strong attraction to many ‒ usually those doing the ordering ‒ and is necessary for some of the adventures of life. If it becomes the norm ‒ the way things are done at all times ‒ it restricts the creative force. Practised to excess it can sometimes lead to a dangerous myopic condition. As the forces of change are ‘neutralised’ or managed for administrative convenience and short-term advantage so the real, long-term cost becomes staggering. Suddenly in a series of unstoppable shifts the contextual factors impacting on wealth creation undeniably enter a period of explosive change. The result is a dangerous crisis that frequently does not play the game by the rules. As instability is met by complacency, living standards are threatened. What is needed is a new management approach that is contextually aware.

In such a predicament we can place our trust in man’s ingenuity, but only if it is given sufficient space.

70 Innovation from theory to practice

Creative people in business in Africa, Asia, Europe and South America

Africa

Richard Brasher – CEO of Pick n Pay for continued supply of affordable food for all customers is motivated by the three principles of consumer sovereignty, doing good is good business and maximising business efficiency.

Yasmin Belo-Osagle ‒ developed female entrepreneurs across Africa.

Asia

Amit Agarwal – the former assistant to Amazon’s CEO, Jeff Bezo, established a domi- nant foothold for Amazon in India.

Jean Liu – president of Didi Kuaidi, daughter of the founder of Lenovo, built China’s largest car-sharing and taxi business.

Europe

Maria Grazia Chiuri – reinvigorated the Rome-based Valentino brand together with co-creative director Pierpaolo Piccioli.

South America

Maria Claudia-Laccutre ‒ president of ProColumbia, rebranded the government agency that promotes non-traditional Columbian exports, foreign investment and international tourism.

Carlos Mario Rodriguez – completed a crossbreeding of Starbucks first-ever hybrid of a high-producing coffee plant that is rust resistant.

Sources: FastCompany, ‘Most creative people 2015 and 2016’; pick n pay website, http://www. picknpay.co.za/about-us-introduction.

Ordinary individuals just need to believe that it can happen. A vital first step is for an indi- vidual to rediscover their own creativity. It is hoped that this chapter will help many honest enquirers.

Key principles

Understanding thinking

To realise the full potential of our brains it is helpful to briefly explore how the physiology works before assessing our creative thinking potential.

Business creativity 71

Physiology of the brain

By any account the human brain is an incredible machine. It controls all the activities and reactions of the body and is the centre of emotion, memory and personality. Whereas the heart is the functional centre, it is the pump that circulates our blood; it is the brain, the organic computer that is the true expression of life. Whereas the heart enables us to be, the brain enables us to live. It is made up of millions of very small cells called neurons. The average individual has over ten thousand million of them (Encyclopaedia Britannica, 2006). They are two categories of cells: those that carry information to and from the body via the spinal cord and those that cross-connect the constituent parts of the brain. Basically there are three key parts to the brain: the cerebrum, the cerebellum and brain stem or medulla oblongata, as shown in Figure 4.2.

The brain is the coordinator of the nervous system and controls most of our conscious and unconscious actions. The cerebrum is the largest and most highly developed part of the brain and on inspection looks a little like a walnut. It consists of two approximately equal halves or lobes called the cerebral hemispheres. In humans this part of the brain is so large that it has had to be wrinkled, like a walnut, to fit into our shells or skulls. The surface of the cerebrum is referred to as the cerebral cortex or grey matter. Below the cerebral cortex is the white matter that is a mass of nerve fibres connecting the cortex with the body and other parts of the brain. Information flows into the brain from the body by a process known as sensation. Messages come from the skin, muscles, eyes, ears, nose and other sense organs by the sensory nerves. The brain processes the information and then sends out responses along the motor nerves to the muscles of the body that control all the body movements. Different areas of the cortex control different parts of the body. Curiously, the left side of the brain controls the right side of the body and vice versa, with the centre brain somehow coordinat- ing this activity.

The cortex is the place that determines our awareness of the environment around us. The eyes look at the world and the ears listen, but it is the cortex that sees, hears and understands. It decides what responses to trigger having evaluated the external stimuli. This is where trust or suspicion is determined and it is the centre of our creativity. The cerebellum is below the cerebrum (see Figure 4.2) and assists the cerebral cortex by providing fine control of intricate movements, such as walking, writing and driving. The medulla oblongata, or brain stem, connects the cerebrum and cerebellum to the spinal cord and so to the rest of the body. This part of the brain provides a largely automatic control of the body’s internal organs.

Figure 4.2 Lateral view of cerebrum, cerebellum.

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The working brain: a synaptic wonder

Each brain cell or neuron is structurally independent. In other words, they do not come into contact with each other. They communicate with other cells by a subtle interchange of com- plex electrochemical signals, which is a process known as contiguity and was first advanced by the Spanish scientist Ramon y Cajal in 1889. Each neuron has three distinct components: the cell body or soma; the main nerve fibre or axon, which is the main exit of information transmitted by the cell; and a number of receiving branches or dendrites. Dendrites and axons range in size from a millimetre to one and a half metres in length. All along their length are little acorn-like shapes called dendritic spines or synaptic buttons that contain chemical material that provide the means for connections to be made between brain cells. This occurs when an electrical impulse travels through the liquid filled space between two adjacent cells and connects their synaptic buttons.

The amount of activity going on in the brain is incredible. It can usefully be likened to the amount of traffic through a busy electronic telephone exchange. Incoming messages are auto- matically connected to a multitude of cells as the brain processes the input stimuli to produce a suitable response or outcome. This is the product of a complex evaluation procedure that coordinates the contributions of thousands of individual brain cells and produces a distinct electromagnetic routing or pathway that is known as a memory trace. If the same or similar stimuli or enquiry is repeated, the brain automatically energises the memory traces it formed, thus speeding up the response time. This is the essence of learning. As each brain cell is capable of directing information to as many as 10,000 other brain cells in the same instant, the problem-solving potential at the individual’s disposal is virtually infinite.

Practice

Contextual factors affecting personal creativity

Anyone is capable of responding creatively. The issue is to what end and how often. Of course, some will be naturally more creative than others. Figure 4.3 illustrates some of the ways that ordinary everyday people exhibit creativity. The degree to which personal creativ- ity occurs depends on a complex set of environmental or contextual factors. Social pressures, such as the pressure to conform to group norms, can either encourage or discourage creativity depending on the value placed on such activity by the dominant social rules. Technology can trigger creativity when a new and accepted (wanted) application suddenly appears. A useful example of this is provided by the development of the electric toothbrush that took off after the technology behind rechargeable batteries was perfected. Economic factors too can play their part, as many on low budgets know when they ‘make a penny do the work of a pound’. Finally, political factors can influence creative responses. Examples of this include a variety of novel ways of ‘getting round’ ‒ legally and otherwise ‒ existing and proposed legislation. Take some time out and think of a handful of examples!

Whilst creativity will occur, to some degree, even when it is discouraged and opposed by organisations in society, its incidence increases if it is actively encouraged. This coaxing has to occur at two distinct levels: that of the individual and that of the social groups/organisations to which the individual belongs. An adult, like a child, needs to feel safe if he or she is to play creatively. Heightened tension and emotional pressure are bad for creativity. The individual has to experience a satisfactory level of safety and to trust the personnel around him or her. No trust, little creativity.

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Organisations and creativity

Organisations cannot respond creatively. What they can do, though, is to actively encour- age their individuals. Thus the incidence of creative activity is contextually governed by the degree of group and/or organisational support. At the individual level the vibes that are in the air have to be convincing. Corporate motherhood statements and other forms of ‘chin music’ are to no avail unless the ‘place feels right’. When this is the case then the people will invoke the processes and creative responses will occur.

Expressing natural skills

Whilst it is true that all individuals possess creativity ‒ it’s a gift of nature ‒ most of us fail to make the most of it. As creativity is a dynamic phenomenon, a force, we cannot learn to effectively improve our use of it by only studying the literature. If we realistically wish to develop our creativity skills then we must be prepared to have a go. The first major chal- lenge facing many individuals is to overcome their shyness and apprehension and let the genie out of the bottle. Starting with the knowledge that all individuals are creative is both reassuring and challenging. It provides comfort in that most of us are aware of our creative achievements, no matter what private beliefs we may harbour about their frequency, strength or durability. It presents a challenge in that most will readily accept that any skill can be developed by sustained exercise.

Car drivers have to overcome inhibitions and agree to take their first driving lesson. Then, despite the possibility of a few shocks and surprises, they need the resolution to see a driving tuition programme through and then to present themselves for examination. If successful, most drivers then cease to put a lot of sustained effort into improving their general driving skills. Experience on the open road does develop their driving skills in some respects but also leaves them prey to developing bad habits. Most, for example, fail to continuously update their knowledge of the Highway Code. In short, many of us become lazy. We are easily satisfied with a relatively low level of achievement. Some of us later rue this, when a sudden challenge to our skill response leaves us wanting. As the environment on the roads is constantly changing we would be wise to keep our relative skill level high. Frequently the problems we face are the result of someone else’s failings. Thus, to survive on today’s roads we need to be continuously updating both our own driv- ing skills and learning how to cope with the mistakes of others. Passing the driving test and just driving is not sufficient. Likewise, making do with our natural creativity skill level is not enough.

Action

Assessing personal creative potential

If we are intent on discovering what we can do to improve our creativity, it is helpful to start by getting a measure as to where we are now. This can be achieved, to some extent, by recourse to an appropriate audit or inventory. An improvement programme can then build on this apparent skill level. It is important to realise that such ‘tests’ are not infallible measures of our creative performance. They merely confirm that we are creative and provide some indicative evidence of the use to which we consciously put creative skills. A subsequent run- ning of the selected audit should then provide evidence of development.

74 Innovation from theory to practice

There are a number of tests widely available that can help us to get a picture of our pre- sent level of creative activity. However, few were designed exclusively to reflect creative responses. Most are intended to reveal other personal characteristics such as psychological type (Myers-Briggs and McCaulley, 1988), personality (16PF, see http://similarminds.com/ cattel-16-factor.html (accessed 15 June 2016)) and learning styles (Kolb, 1984; Honey and Mumford, 1985; Pritchard, 2014) or team working attributes (Belbin, 1981). One (Kirton, 1987) was developed to measure creative style.

Personal Creativity Audit

The Personal Creativity Audit (PCA) was developed at Durham University to provide evi- dence that individuals are creative and to give an indication of an individual’s tendency to use creativity skills in daily situations. Appendices 4.1 and 4.2 contain the PCA together with responses and scoring instructions. For any such inventory to be useful it has to be capable of measuring what it is intended to measure and to be reliable in the responses that it elicits from respondents. However, some people will inevitably try to read the algorithm to delib- erately register high scores rather than complete the inventory with a view to seeing what it says about them. Despite these reservations such inventories can provide a snapshot that can be illuminating.

Personal creativity in action

How do you think you can help yourself to release more of your natural creativity? Take a short break and try to jot down at least five ideas.

Figure 4.3 Activities that entail personal creativity.

Business creativity 75

Here are a few exercises and ideas to help you develop your own creative thinking.

• How many potential uses can you think of for an ordinary paper clip? • Irrespective of how good an artist you judge yourself to be, grab a piece of paper

(A4 size is ideal) and try and draw a quick head and shoulders sketch of yourself. Now choose a hat from the options below.

{{ Mexican hat {{ Top hat {{ Cloth cap {{ Deerstalker {{ Chef’s hat

Now draw your chosen hat on your head and shoulders. Why did you choose the hat you did? Express your reasons in a short sentence. Would you have preferred to have chosen one of the other hats? If so, which one and

why did you pass it by? If it was because you had doubts as to whether you could draw it have a go right now.

How many uses can you think of for an ordinary builder’s brick?

Now ponder on the following:

According to all the laws of aerodynamics, a bumblebee cannot possibly fly. The bumble bee does not know this, so it goes ahead and flies anyway (Anonymous).

When in doubt, make a fool of yourself. There is a microscopically thin line between being brilliantly creative and acting like the most gigantic idiot on earth. So what the hell, leap (Heimal, 1983).

• Play a track of your favourite music. How would you:

{{ Briefly describe it with words? {{ With pictures? {{ Can you hum it unaccompanied?

• Look out of the window and focus for half a minute on an object.

Now close your eyes. Think of something that has been troubling you today. Think about the object . . . make any connections? Get any good ideas? If not, try again, and you too can experience the Eureka effect!

Work environment and performance

No matter how we look at individual responses there is little doubt that the organisational work environment has a direct effect on performance. The role models, paradigms, reward systems, management culture, peer pressures, official and unofficial and psychological con- tracts all act to encourage some responses and to discourage others. This places – as will be explored in Chapters 5 and 7, a considerable responsibility on individuals who seek to work in teams. Figure 4.4 summarises four response sets that have been discovered in research work in England. If an individual is working in an environment where the management

76 Innovation from theory to practice

are highly concerned about their own interests and render poor regard to the individual’s interest, this is likely to result in programmed, robotic responses from the member of staff. This situation is typified by people going through the motions to earn their corn and is unlikely to encourage a creative attitude to the job. On the other hand, where management are concerned with the personal wishes of their staff this will trigger a reciprocal response from the individuals and will provide the opportunity for highly creative responses.

However, if these responses are not continuously encouraged and action is seen to result, this can lead, sadly, to situations where the individual becomes disenchanted. If this occurs then the goose that laid the golden egg is effectively killed and the individual will slip into the damped innovation quartile and possibly to the robot quartile.

Whilst there is merit in an individual taking stock and seeking to discover a position on an audit such as KAI (n.d.), MBTI (n.d.) or LSI (Duff and Duffy, 2002), it must be remembered that these inventories only provide, at best, some indicative information. This must then be closely vetted for its contextual relevance – most people appear to be different at home from the way they are at work. Most psychometric tests carry error propensities resulting from a variety of factors such as environmental/contextual issues, test procedures and classification typologies, and so on. Furthermore, some individuals may be discouraged by the results of such inventories and so withdraw into their shells, especially if they perceive that manage- ment are not very interested in them. Others may, unless carefully advised, believe that core behaviours and responses cannot be changed. Whilst this is true for the broad personality characteristics that tend to be set in the first 20 years of life, it is not true for several learnt behavioural responses that can be changed. Individuals can choose to change many of their behavioural responses such as learning and skill styles.

Left-brain and right-brain thinking model

Have you ever heard people say that they tend to be more of a right-brain or left-brain thinker? From books to television programmes, you’ve probably heard the phrase mentioned numerous times or perhaps you’ve even taken an online test to determine which type best describes you. In right-handed people it is thought that the left-brain lobe is the centre of

Figure 4.4 Individual response patterns.

Business creativity 77

deductive logical thinking with the right lobe being the centre of creative thought. The pat- tern is reversed for left-handed people. The theory was first publicised by the American psychologist R. W. Sperry who was awarded the Noble Prize in 1981.

Clearly, it is desirable to gain insight into how we can maximise our thinking potential. We need both critical and creative thinking, both analysis and synthesis, both the parts and the whole to be effective in our thinking. We need reason and intuition, order and adventure. We need creative thinking to generate the new, but critical thinking to judge it. The techno- logical world enables us to access knowledge in abundance, but creativity is in short supply. Many have sought to differentiate these two kinds of thinking Table 4.1 presents a summary of the most commonly found distinctions.

According to the American psychologist R. W. Sperry, the two hemispheres of the cortex appeared to control separate, distinct intellectual enquiries (see Table 4.2).

The right hemisphere appeared to be active in the processing of the following:

• rhythm • spatial awareness • gestalt (wholeness) • imagination • colour • dimension.

Table 4.1 Exploring logical and creative thinking

Logical left-brain thinking Creative right-brain thinking

Analytic Generative Convergent Divergent Vertical Lateral Probability Possibility Judgement Suspended judgement Hypothesis testing Hypothesis forming Objective Subjective Single solution Possibility of several solutions Closed Open-ended Linear Associative Quantitative Qualitative Logical Intuitive Yes but . . . Yes and . . .

Table 4.2 Cortical hemispheres

Left-brain functions Right-brain functions

Written language Insight Number skills 3-D forms Reasoning Art awareness Spoken language Imagination Scientific skills Music awareness Right-hand control Left-hand control

78 Innovation from theory to practice

The left hemisphere, by contrast seemed to process an equally important but different pattern of memory traces covering a variety of learnt skills including:

• language • logic • quantitative ability • sequential ability • linear ability • analytical ability.

Generally speaking, the left side of the brain tends to control many aspects of language and logic, while the right side tends to handle spatial information and visual comprehension. However, recent research has shown that the brain is not as dichotomous as once thought. Today, neuroscientists know that the two sides of the brain collaborate to perform a broad variety of tasks. The left-brain and right-brain theory has been over-generalised by popular psychology and self-help texts but has its place in helping people to understand their respec- tive thinking strengths and weaknesses.

Learning skills

When the range of skills – the ability to cut, develop and maintain complex memory trace sets – of both cortical hemispheres are combined, the individual has a dazzling potential to develop his or her thinking. The equipment is there for us to generate an amazing array of responses. The degree to which we are able to do this is a function of our thinking skills and our determination to improve them.

Many of us regard thinking as a natural skill and tend to get lazy in our approaches to information processing and problem solving. Effective thinkers take care of their grey matter as an athlete takes care of his physical skills. To do our best we need to look after our brains. If we look at the incredible human machine in computer terms, as a unit of hardware, then we can work towards getting the maximum from it by paying attention to how we put it to use. Thinking can be likened to the sustained development of software. The quality of output produced by computers is directly related to the quality of the input (in terms of clarity – the what); the method of processing it (software – the how); and the performance specifica- tion of the machine (individual ability). Whilst it is true that each individual has a different potential in terms of what can be achieved, as some are just cleverer than others, many of us can improve our thinking performance by making the best use of our potential. This can be achieved by thinking about thinking to select the most appropriate approach to solving a particular problem. Many of us try to get our brains to give us an instant answer or quick fix. We turn on our hardware and use the software already installed. If this can find the required collection of memory traces then this represents our thinking. Whilst this is probably in order for familiar problems this rather mechanistic or programmed approach will not serve us too well with rather more complex and or infrequent problems. This requires total as opposed to partial thinking.

Introducing the total thinking model

Total thinking, it is posited, occurs when we seek to focus the full power of our brain on a problem. This means using the potential of both hemispheres of the cortex described

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above. Strange as it may seem, many peoples around the world choose to develop the skills in the left hemisphere to a higher level than those of the right hemisphere. This produces an over dependence on logic as a key response to stimuli and the associated tendency to try to think in terms of programmed patterns. Overdependence on such partial thinking can result from personal choice or from a perception that the intuitive, emotive and ‘arty’ skills such as colour, design, imagination, movement and sound are in general not the way to behave in public. This is curious as many of us actually take part in activities that utilise these skills in public as well as paying to view other people performing! Obviously there has been some sustained conditioning here that over time has resulted in the development of certain traditions or paradigms that preclude the regular adoption in our public lives of many right-brain skills.

Perception

Priming illusion

1000

20

30

1000

1030

1000

20

________

Add up the row of numbers out loud. What is your answer? Do it again? Most people get the wrong answer! Only look in the appendices after you have tried to this exercise.

Half-brained thinkers!

Both hemispheres of the cortex provide potentially powerful problem-solving power. In reality, all individuals will display a degree of total thinking in their private and pro- fessional lives, as they are people. The issue is the degree. In most cases it is small, as individuals tend to select a thinking style that is usually highly biased to the left hemi- sphere, so in terms of degree are predominantly partial thinkers. Gifted artistic individuals can exhibit the reverse pattern. Both will fail to achieve the benefits that flow from a better-balanced use of total thinking. In many respects such people could, with tongue in cheek, be accused of half-brained thinking! Perfection, defined as a completely balanced total thinking approach to life, is very difficult to achieve. However, as the positive benefits from minor gains in our use of both left- and right-brained thinking are so immense we are all capable of developing our problem-solving performance. The question is whether we choose to do so.

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Creative thinking applications

The following are some of the ways creative thinking can be used:

• To foster a more innovative, forward thinking culture able to respond to rapid changes in the marketplace.

• To support the development of a new, more effective innovation strategy. • To enable leaders to solve persistent problems. • To help an older more traditional organisation shake off bureaucracy and shift to a more

flexible, responsive, innovative culture. • To help develop creative thinking approaches in project work teams faced with solving

new business challenges. • To respond to the impact of technology on business processes.

The ability to demonstrate creative thinking is much in demand by companies and many may wonder just how do I, an ordinary person, develop the ability to demonstrate prowess. See the outline notes on the CPS toolbox featured in the appendix to Chapter 5.

Summary This chapter has revisited thinking. In the current business environment, individuals, groups and organisations need to sharpen their thinking skills. Whilst core knowledge (general or specific) is necessary, in times of discontinuous change it requires special thinking skills if it is

Figure 4.5 What do you see at first?

Business creativity 81

to result in discoveries that are truly innovative. Total thinking is a process that enables the full power of people’s brains to be applied to problems that result from the challenges presented by a dynamic and competitive business environment. Success cannot now be assumed to result by steadfastly using yesterday’s processes and theories. The business world requires managers to develop a new way of doing things. This chapter has sought to show how thinking can be boosted if individuals, groups and top management personnel can learn to make use of both left- and right-brain thinking. This will enable them to discover a new expertise for today’s challenging business context. Chapter 5 seeks to equip you with a set of practical thinking tools.

Discussion questions 1 How would you explain what creativity is to a fellow student or work colleague? 2 Name three living creative business people. 3 Why is meant by the term total thinking? 4 What is the difference between logical thinking and creative thinking?

Exercises

Sexism

List as many examples of gender discrimination in the workplace as you can. See Appendix 4.3 for the top 10!

YouTube

‘Sexism Coverage Steals the Show at 2016 Olympics’ https://www.youtube.com/watch? v=eUhf-Jyy1_Y.

Beijing Express problem

Instructions

See if you can solve the problem posed below. Proceed as follows:

1 Try to solve the problem in 10 minutes maximum. If you feel that you have discovered the answer turn to Appendix 4.4 to check if you have been successful.

2 Now find a friend or colleague and see if they can solve the problem in 10 minutes maximum. If they declare the wrong answer explain how you worked out the correct solution.

Brief

• Four spies in trench coats sat in four facing seats. • They travelled the Beijing Express. • With two by the window and two by the aisle. • The arrangement was strange, as you’ve guessed. • The British spy sat on Mr B’s left. • Mr. A had a tan coloured coat. • The spy dressed in olive was on the German’s right.

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• Mr. C was the only cigar smoking man. • Mr. D was across from the American spy. • The Russian, in Khaki, had a scarf around his throat. • The British spy stared out of the window on his left.

SO WHO WAS THE SPY IN THE RUST COLOURED COAT?

References Banks, M., Calvey, D., Owen, J. and Russell, D. (2002) ‘Where the art is: Defining and managing

creativity in new media SMEs’, Creativity & Innovation Management, December, Vol. 11, Issue 4, pp. 255–64.

Belbin, M. (1981) Management Teams: Why they Succeed or Fail, Oxford, Heinemann. Breen, W. (2004) ‘The 6 Myths of Creativity’, Fast Company, December, Issue 89, pp. 75–8. Business & Management Dictionary (2007) London, Bloomsbury Business Library. Duff, A. and Duffy, T. (2002) ‘Psychometric properties of Honey & Mumford’s Learning Style

Questionnaire’, Personality and Individual Differences, 5 July, Vol. 33, Issue 1, pp. 147–63. Dundon, E. (2002) Seeds of Innovation, American Marketing Association, Chapter 1, ‘Believe in creativity’. Encyclopaedia Britannica (2006) 15th edn, Chicago, IL, Encyclopaedia Inc. Gardner, H. (1997) Extraordinary Minds: Portraits of Four Exceptional Individuals and an Examination

of Our Own Extraordinariness, New York, NY, Basic Books. Gruber, H. E. and Wallace D. B. (1999) ‘The case study method and evolving systems approach

for understanding unique creative people at work’, in Heppell, S. (ed.), Handbook of Creativity, Cambridge, Cambridge University Press.

Heimel, C. (1983) ‘Lower Manhattan survival tactics’, Village Voice, Vol. 13, p. 26. Honey, P. and Mumford, A. (1985) The Manual of Learning Styles, Maidenhead, Peter Honey

Publications. KAI (n.d.) Kirton Adaptation Index, http://www.kaicentre.com (accessed 16 November 2016). Kirton, M. J. (1987) Adaption-Innovation Theory (KAI) – Manual, 2nd edn, Hatfield, Occupational

Research Centre. Kolb, D. (1984) ‘Problem management: Learning from experience’, in Srvastra, S. and Associates

(eds.), The Executive Mind, London, Jossey Bass. Kuhn, T. (1975) The Structure of Scientific Revolutions, Chicago, IL, University of Chicago Press. MBTI (n.d.) Myers-Briggs Type Indicator, http://www.myersbriggs.org/my-mbti-personality-type/

mbti-basics/ (accessed 16 November 2016). Myers-Briggs, and McCaulley, M. H. (1988) Myers-Briggs Type Indicator, Palo Alto, CA, Consulting

Psychology Press. Pritchard, A. (2014) Ways of R.J Sternberg (2006), ‘The nature of creativity’, Creativity Research

Journal, Vol. 18, Issue 1, Jan., pp. 87–98. Sternberg, R. J. and Lubart T. I (1999) ‘The concept of creativity: Prospects and paradigms’, in

Sternberg, R. J. (ed.), Handbook of Creativity, Cambridge: Cambridge University Press.

Selected YouTubes ‘What Is Creativity?’, https://www.youtube.com/watch?v=By-lJdS6ofQ. ‘The Brain’, https://www.youtube.com/watch?v=kMKc8nfPATI. ‘Can You Solve the Chameleon Riddle?’, https://www.youtube.com/watch?v=IRC7_Uv72iI. ‘Left Brain vs Brain Education’, https://www.youtube.com/watch?v=XxSmOOaXrHk. ‘Balance Logical & Creative Thinking’, https://www.youtube.com/results?search_query= Logical+vs+Creative+thinking.

Business creativity 83

‘How to Use the Brain More Effectively’, https://www.youtube.com/watch?v=BXJDJ8rqjLY.

‘How to Use a Mind Map’, https://www.youtube.com/watch?v=L0XzZCd2tPE.

Appendix 4.1: Personal Creativity Audit (PCA)

Instructions

1 Copy the questionnaire before attempting the audit. 2 Answer the questions honestly and as quickly as you can by placing a tick in the box that

most closely matches your characteristics. 3 Do not confer with others as you are completing the audit exercise.

Table 4.3 Personal Creativity Audit

Question Never Sometimes Fairly often Regularly

1 Do you remember your dreams as images? 2 How often do you make time for hobbies? 3 How often do you read? 4 Do you like to stick to the rules? 5 Do you listen to others’ ideas? 6 Do you inspire others? 7 How often do you show a sense of

humour? 8 Do you take part in sporting activity? 9 Are you a perfectionist? 10 Are you an optimist? 11 Do you have any ideas of your own? 12 Are you courteous? 13 How often do you hum or sing? 14 Are you predictable? 15 Do you like exercising administrative

(rank) authority? 16 Are you a good listener? 17 Are you a resourceful person? 18 Do you tend to work on one idea at a

time? 19 Do you welcome change? 20 Do you have many original ideas? 21 Do you actively promote them? 22 Are you a loner? 23 Do you like organisations with lots of

rules and identified procedures? 24 Are you self-motivated? 25 Are you a good problem solver? 26 Are you good at improvisation? 27 Do you prefer to adapt the ideas of

others? 28 Do you challenge rules if you think that

they are silly? 29 If people oppose your ideas do you give

up promoting them? 30 Do you use metaphors when

communicating key points?

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Appendix 4.2: assessing PCA performance

Instructions

1 Circle the Descriptor you selected (i.e. Never, Sometimes, Fairly Often or Regularly) in the table below.

2 Next add up your overall score and place it on the creative spectrum in Figure 4.6.

Table 4.4 Personal Creativity Audit coding

Question Never Sometimes Fairly Often Regularly

1 1 2 3 4 2 1 2 3 4 3 1 2 3 4 4 2 4 3 1 5 1 2 3 3 6 1 2 3 4 7 1 2 3 4 8 1 2 3 4 9 1 2 3 4 10 1 2 3 4 11 1 2 3 4 12 1 2 3 4 13 1 2 3 4 14 4 3 2 1 15 4 3 2 1 16 1 2 3 4 17 1 2 3 4 18 4 3 2 1 19 1 2 3 4 20 1 2 3 4 21 1 2 3 4 22 4 3 2 1 23 4 3 2 1 24 1 2 3 4 25 1 2 3 4 26 1 2 3 4 27 4 3 2 1 28 1 2 3 4 29 4 3 2 1 30 1 2 3 4

Figure 4.6 Personal creativity assessment spectrum.

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Appendix 4.3: sexism Findings of Stylist magazine survey

1 Being expected to make the tea – 43 per cent. 2 Enduring sexual innuendos – 38 per cent. 3 Having appearance/clothing commented on – 33 per cent. 4 Being accused of being pre-menstrual/menstrual – 29 per cent. 5 Being presumed less competent than male colleagues – 27 per cent. 6 Been joked about in a sexist way – 24 per cent. 7 Being paid less than male colleagues for the same job – 19 per cent. 8 Being presumed to be more junior than they are – 18 per cent. 9 Being spoken over/patronised in meetings – 18 per cent. 10 Being expected to keep the office tidy – 17 per cent.

Source: Matharu, H., ‘The top 10 sexist things that happen to women at work’, Independent, News/Business,17 September 2015.

Appendix 4.4: Beijing Express problem solution The British spy has the rust coloured coat.

Appendix 4.5: priming illusion solution The answer is 4100.

5 Applied business creativity

Genius is one per cent inspiration and ninety-nine per cent perspiration. (Thomas Edison)

You can’t solve a problem with the same thinking that’s creating the problem. (Albert Einstein)

Learning objectives This chapter explores:

1 Management options when addressing the challenges of change. 2 Stimulating creativity. 3 The link between creativity and intelligence. 4 The creative problem-solving approach. 5 Building an introductory CPS toolkit. 6 Facilitating CPS activity.

Introduction This is essentially a practical chapter. Having made the case for a new approach to think- ing, individuals are presented with a programme to assist them in acquiring the necessary knowledge and developing expertise by applying it to problem solving. The chapter helps readers by presenting a Gateway Personal Creative Thinking Toolbox and encourages them to develop this in accordance with their respective needs. (See Figure 5.1.)

Context

Challenge of change

A more competitive business environment presents top management with two clear options (see Chapter 2).

1 Ride out the storms and hope for a better tomorrow. 2 Realise the need to do things differently.

The second option places a heavy stress on the need in the private sector to deliver customer-perceived value and in the public sector best value solutions. In both cases there is a need to acquire and practice new thinking skills.

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Stimulating creative thinking

To think creatively individuals have to really believe that they enjoy the freedom to think in ways different from the accepted norms. For this to happen regularly individuals should be given a succession of positive challenges and be constantly encouraged to perform to the best of their abil- ities. ‘Carrot and stick’, excessively autocratic management styles tend to cause creative output to die away to residual levels. This reductionist approach in the management of creativity is the opposite of what is needed when organisations are battling for business in crowded markets. To achieve a consistent market edge creative thinking must be released and continuously supported.

Creativity and intelligence

Many people strongly associate creative thinking with intelligence. Like many things in life, this is both true and false. Research into this question has not come up with any conclusive proof that intelligent people per se are generally more creative than individuals who would not see themselves as being intelligent. Then what is meant by intelligence? There is a body of evidence that suggests that creative people tend to have high intelligence quotients (IQs), but not all people with high IQs are creative. Many of the psychometric profiles that have

Figure 5.1 Exploring new skills.

88 Innovation from theory to practice

been constructed have often been built from data that has been recorded from tests that were originally intended to measure IQ levels. Several, notably Torrance (1988), Kim et al. (2010), Benedek et al. (2014), have tried to devise and validate tests (Sullivan and Ford, 2010) that can accurately detect and measure the presence or otherwise of creativity.

Creativity tests are typically divided into four main components:

1 divergent thinking 2 convergent thinking 3 artistic assessments 4 self-assessments.

Divergent thinking is the ability to consciously generate new ideas that branch out to many possible solutions for a given problem. These solutions or responses are then scored on four components:

(a) Originality – statistical infrequency of response. (b) Fluency – number of responses. (c) Flexibility – the degree of difference of the responses, in other words do they come from

a single domain or multiple domains. (d) Elaboration – the amount of detail of the response.

Convergent thinking is the ability to focus on the single correct solution to a problem. In creativity, convergent thinking often requires taking a novel approach to the problem, seeing the problem from a different perspective or making a unique association between parts of the problem. These solutions are scored either correct or incorrect (Mednick, 2009).

Artistic assessments are the evaluations of an artistic product (e.g. painting, story, poem, musical composition, collage, drawing). Evaluations are typically made by two or more judges who must be in near agreement on the creativity of the product.

Self-assessments are the individual’s responses to the amount of creativity each person believes they exhibit.

Key principles

The quick-fix approach

Many of us regard thinking as a natural skill and tend to get lazy in our approaches to infor- mation processing and problem solving. Many of us try to get our brains to give us an instant answer or quick fix. We turn on our hardware and use the software already installed. If this can find the required collection of memory traces then this represents our thinking. Whilst this is probably in order for familiar problems, this rather mechanistic or programmed approach will not serve us too well with rather more complex and or infrequent problems. This requires total as opposed to partial thinking.

The creative problem-solving approach

Note-taking skills

A problem that many of us face, whether at home or at work, is how to study efficiently. The student who has to summarise key information from articles and texts in a form that is

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user-friendly for memorising and understanding; the individual at work who has to write a brief summary report for management on a complex subject. In both cases creative problem solving (CPS) has a lot to offer. Note taking can be a long and painstaking exercise which can easily become frustrating when an individual later returns to his or her notes only to find that the pas- sage of time has made them difficult to use. In common with Buzan and Buzan (2009), years of observing students reveals that there would appear to be three main styles of note taking:

1 Narrative – writing all selected information in narrative form. 2 Listing – recording interesting ideas as they occur. 3 Outline – seeking to arrange the material in a hierarchical sequence.

The narrative style demands a lot of writing and may be useful to those who are anxious to convince themselves that they really understand some taxing argument or theory. Generally speaking this style demands much recording effort and can be difficult to summarise for the purpose of revision or in order to write an essay or report. The listing style certainly saves on paper and on time but may just produce copious columns of material that become difficult to handle later. The outline style is better, as the use of main and subheadings provide both order and visual variety for the brain.

However, such predominantly left-brain presentation, even if all three styles are com- bined, often results in the brain having to work hard to understand the key points. Many individuals find it difficult to make sense of such notes and may well have to devote a lot of time in getting to grips with the material. This is because the brain basically gets bored, as these styles of note making only effectively stimulate the left brain and almost ignore the right brain. For efficient brain activity – learning and thinking – to occur, the missing stimuli are essential, especially for recall and argument. Sadly, many individuals make notes in a format that is almost guaranteed to bore the brain into wandering off in an effort to find something interesting to do.

Memory friendly information

To study effectively it is necessary to input information in the correct format for the brain to process. This means taking notes and using total thinking (Jones, 2015). For example, we can produce better notes if we seek to:

• use as few words as possible; • use analogies, metaphors; • use diagrams, sketches; • use colour for picking out key words and in marking key sections of diagrams; • summarise notes, once prepared, in a predominantly picture style such as mind maps.

Learning skills

For learning, as opposed to note taking, try using the capabilities of the right brain by the following measures:

• Converting important pieces of factual information into ghost lyrics to well-known tunes and then do some humming. For example, if you were trying to remember Ohm’s law consider setting it to the tune of the ‘Rain in Spain’ from Lerner and Lowe’s musical My Fair Lady. (The unit of resistance is the Ohm!) Record it, play it back for the rhythm.

90 Innovation from theory to practice

• Selecting words that have a rhythmic flow rather than formal language. This is a tech- nique that is often used by schoolchildren when they are swotting for exams. Here are a couple of examples. {{ Remembering trigonometry formulae:

{� tan = opp/adj or ‘toads over act’ {� sin = opp/hyp or ‘snakes only hiss’ {� cos = adj/hyp or ‘cats always howl’.

{{ Remembering the names and order of the planets: {� ‘My vet Eric munched jam sandwiches usually near Paris.’ (Mercury, Venus,

Earth, Mars, Jupiter, Saturn, Uranus, Neptune and Pluto). • Playing music, to your taste, in the background as you study. This text was written to a

mixture of classical, light and pop background music.

Picture perspectives

Picture perspectives

You can also seek to produce material that appeals to the visual skills of the brain. For example:

• summary charts • mind maps • picture books • picture charts • broadsheets • designs.

See Appendix 5.1 for coverage of basic CPS picture tools.

Put them up on the walls of your study. The brain works best when it is well stimulated. This incredible machine is a true multimedia device. Try to provide sufficient stimuli to keep your brain interested and entertained. Then even the most potentially boring of tasks assumes a different hue. Escape from the grey world of predominantly left-brain note-taking styles.

Getting to grips with creative individual problem solving

Organisations must be continuously creative to survive and thrive in today’s highly competi- tive, rapidly changing environment. A century of creativity research has produced several descriptive models of creativity and hundreds of prescriptions for interventions that demon- strably improve creativity. This section is based on an adaptation of the Nominal Group Technique first expounded by Delbecq et al. (1973), Rikards (1990) and VanGundy (1988).

Demonstration exercise: organising a perfect wedding

To illustrate how CPS can assist in personal problem solving (PPS), imagine that you wish to formulate some ideas for discussion with your family to plan for the big day. A useful CPS

Applied business creativity 91

template to adopt to begin with is a simple, but powerful, three-stage approach (after Kolb, 1984 and Kreitner, 1980):

1 Problem evaluation – what is the problem? 2 Idea generation – process for generating and selecting ideas. 3 Implementation– converting thinking into action.

The Nominal Group Technique involves six basic steps:

(a) private brainstorming (b) round robin collection of ideas (c) consideration of each idea (d) preliminary selection of ideas (e) consideration of chosen ideas (f) final choice.

PROBLEM EVALUATION

In this case the problem is known, but it is good practice to state it, in as few words as pos- sible, in a formal problem statement: planning the perfect wedding.

IDEA GENERATION

Now generate some ideas using an adaptation of the Nominal Group Technique.

(a) Private brainstorming

This is a widespread and popular process for generating ideas and the rules are widely known:

• List spontaneous thoughts – do not exercise any judgement. • Write down everything, however trivial it may seem at first. • Aim to record as many ideas as possible. • Use ideas you have written down to stimulate other ideas. • Collect up your ideas on a flipchart.

A period of about five minutes is usually enough for this step.

(b) Round robin

Transfer your ideas to Post-It notes. Write out a separate Post-It slip for each idea (see Figure 5.2).

Table 5.1 Illustration of some generated ideas for this exercise

Venue Choir Best man

Reception Music Ring Guest list Bridesmaids Pageboys Seating plan Organ Church bells Bouquets Food Drink Adults Children Teenagers

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(c) Mind mapping

Next record your problem evaluation statement on a Post-It note and place at random all your Post-It notes on a suitable flat surface such as a wall or the floor (see Figure 5.3).

(d) Consider each idea and cluster

Once your Post-It notes are in place examine them closely and look for further ideas. Then rearrange the notes into clusters of closely connected ideas (see Figure 5.3). According to Tassoul and Buijs (2007) it is about expanding knowledge, about con- necting ideas, and connecting ideas to problem statements, functionalities, values and

Figure 5.2 Planning the perfect wedding mind map 1.

Figure 5.3 Planning the perfect wedding mind map 2.

Applied business creativity 93

consequences. It is about building a shared understanding, in other words about ‘making sense’. It is an essential creative activity in the development of concepts and, although different from a more freewheeling divergent phase, can be as creative and maybe even more so. Object clustering is mainly aimed at categorising ideas into an over-viewable set of groups of ideas that appear to make sense (see Figure 5.3). The Post-It notes are particularly useful, as they provide the facility to move ideas around and to experiment.

(e) Analogy

Now if you should need to generate some more ideas, select a tangible item at random, such as a picture, the view from the window, an outside tree. You may like to keep a pack of picture post cards of famous paintings, views or steam engines! Or perhaps you may find that listening to your favourite music helps. Explore your multimedia brain! Often you can jump straight from this stimulus and think of new ideas. For example, looking out of the window, you may notice that it is raining and then get the idea of mak- ing sure that a supply of umbrellas are available for the wedding day! (See the expanded mind map in Figure 5.4.)

(f) Reversal

Selecting ideas and inverting them often suggests additional useful ideas. Imagine the worst possible wedding. For example, the best man fails to turn up, the bride’s car breaks down, one of the bridesmaids is sick over her dress. Now simply invert and place on a Post-It note, and add to the mind map. It is a simple technique but it works!

(g) Shaping

Now study the Post-It notes on your wall or table-top and do some further clustering if necessary. Spend some time looking at the complete pattern that has evolved. Look at the problem statement again. Is there anything else that you would like to add?

Figure 5.4 Planning the perfect wedding mind map 3.

94 Innovation from theory to practice

(h) Preliminary selection and consideration of ideas

At this stage choose the most important matters and mark them with a red dot. For exam- ple, booking the church, settling on a venue for the reception. Now spend a few minutes writing out some brief guideline notes on your preliminary selection. For example, list some possible places in which to hold the reception, who you need to invite.

(i) Time-out

Comparatively few problems really have to be ‘solved’ on the spot. Try to take time out to think about your notes. Many things that worry us are processed by the subcon- scious mind overnight when hopefully the conscious, worrying, mind is resting. Often gentle messages to our conscious minds, first thing in the morning contain real pearls of wisdom (Notebook).

Practice

Building an introductory CPS toolkit

Table 5.2 presents a creative problem-solving (CPS) starter toolbox. Pick a problem of your own and first try all the tools in sequential order. Begin in Stage 1 by spending some time getting a clear statement of your problem, i.e. an effective diagnosis (Okes, 2010).

Then resist any temptation to come to an immediate answer (the quick-fix approach) and in Stage 2 generate as many ideas as you can. Many have found it helpful to collect ideas on Post-It notes. These facilitate the construction of mind maps and provide a picture, which appeals to the right-brain functions. Use the tools as described in the perfect wedding exam- ple to come up with as many ideas as you can.

Stage 3, implementation starts with the application of a simple selection technique such as the use of coloured sticker dots to pick out very good ideas (green sticker dot) and good ideas (blue sticker dot) for the problem under investigation. Finally, an idea is selected as the best – usually the one with the most green dots.

Table 5.2 Introductory CPS toolkit

Function stages Action tool

1 Problem evaluation State problem in as few words as possible 2 Idea generation Private brainstorming

Round robin Mind mapping Clustering Analogy Reversal Shaping Time-out Notebook

3 Implementation Stage 1 – Selection • Colour coding • Intuition • Advantages/disadvantages

Stage 2 – Final choice

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Action

CPS facilitation

CPS is necessary in all three dimensions of management, i.e. individual, group and organisational.

Individual or personal CPS activity

The sequence in which individuals approach CPS is important. Considerable care should be taken in Stage 1 to ensure that the problem being tackled is clearly stated. The CPS tools that are used in Stage 2 can be used in the sequence they appear in Table 5.1 or some variation in the running order may be appropriate. It may, for example, be suitable to start with Reversal rather than Personal brainstorming. The key action point here is to mix the tools to generate ideas. Using sticky notes is helpful, as it enables the individual to construct a mind map of the ideas and then to Cluster and Shape it to see the big picture and apply a selection technique in Stage 3. The exercise should be carried out at speed with the individual moving smoothly between the Stage 2 tools.

Group CPS activity

This process is similar to that for an individual CPS session with the following differences. Preferably a trained CPS facilitator should act as moderator. The maximum number of par- ticipants should be kept to five or six and each should be encouraged to contribute and not to indulge in idle chatter. As with individual CPS, sessions should be fast paced with the facilitator moving smoothly through the tools of Table 5.1.

Organisational CPS activity

At top or senior management level a trained facilitator is essential and participants must enter into the spirit of CPS and especially resist any temptation to harness their functional skills to present a prescriptive solution rather than play along and generate ideas.

Summary If managers at the individual, group or organisational level are to do things differently to suc- cessfully meet the challenges of the current business environment there must be a willingness to both accept and to learn new ways of thinking. As Einstein has written ‘You can’t solve the problem with the same thinking that’s creating the problem’. Mastering CPS requires time and determination. To learn anything other than the stuff you find in books, you need to be able to experiment, to make mistakes, to accept feedback and to try again. It doesn’t matter whether you are learning to ride a bike or starting a new career, the cycle of experiment, feed- back and new experiment is always there. Be bold and have ago at some CPS.

Discussion questions 1 A curious enquirer has asked, ‘Is intelligence both a necessary and sufficient condition

for acting creatively?’ How would you frame your answer? 2 What are the four main components of creativity tests?

96 Innovation from theory to practice

3 Name the three main styles of note taking. 4 List the three stages of CPS process. 5 What are the basic steps of the Nominal Group Technique? 6 Explain how CPS activity can be applied to individual, group and top management.

Case exercise

Toymaker I: from lone apprentice to master craftsperson

From what to . . . help!

You are invited to picture a doting father who wants to give his daughter an extra special birthday present. However, he is of modest means and cannot afford to go to the local toyshop and purchase something nice. Faced with this problem he thinks of giving up his intention to buy a special present. This leaves him inwardly unhappy and ill at ease. He knows that this is not a solution that he can accept and so decides to dwell on the problem overnight. As the morning light streams into his room he awakes with a jolt and realises that he wants to build a doll’s house for his daughter. Excited, he begins to think about such a project and experi- ences difficulty in picturing the finished article. Driven by a force that he cannot understand he gets up, sighs and feels a strong urge to open the bedroom curtains. As the full glory of the morning sun is revealed he blinks his eyes and looks over the garden below. The first thing that he notices is that his lawn is twice as high as his neighbour’s; he shrugs his shoulders and commits himself to wrestling once more with the elderly and rather moody hover mower. To avoid the sun’s rays, he looks sideways across his garden and suddenly realises that his eyes have come to rest on the new house that has just been built down the road. In a flash he is convinced that he wants to build a model of this house. Happy in his discovery of what he will build, he goes downstairs for breakfast. As he leaves the bright light in his bedroom and enters the relative darkness of the hall he becomes depressed. He is worried as to how he is going to build the doll’s house in time.

Aware of a very strong inner motivation, he looks for inspiration in his cornflake bowl. A few soggy flakes stare back at him from the bottom of the bowl and, intrigued, he stares back and is suddenly aware that his daughter would really like a doll’s house with a thatched roof.

Getting started

After breakfast our man rushes out, gets into his car and reverses into the world. ‘Backwards into the future’ again he sighs as he speeds off down the road to buy a set of carpentry tools. A short while later he is back and proudly unpacks his new toolbox and tools. Picking up each tool, he imagines just what he could do if he could handle them as professionally as an expert. This is both exciting and almost immediately depressing. He feels nervous and exposed and now somewhat out of pocket but firmly decides to banish all self-doubt and go for it. Mastering a new skill set may be difficult but then so was learning to play the piano and how to drive. A cold shiver runs down his spine as he recalls that it took him 10 years to learn how to play the piano! Oh, well, wrong example for he passed his driving test after 10 lessons. Mm, he thinks, just 15 days to go.

That evening the garage light shines late into the night as he tries out his new tools. Some are easy to handle but others claim bits of his fingers as he struggles to come to terms with them. Spurred on by his determination to build the doll’s house he enthusiastically assaults

Applied business creativity 97

a piece of plywood only to find that it bends one way then the other and then jumps off his workbench and clouts him over the head. Cross at this unreasonable behaviour and in a crazy attempt to release his fretsaw blade from the offending plywood board he bashes it with his hammer. The board takes off again and smashes into his lamp, knocking it off the bench to the sound of shattering glass. Suddenly he is in the dark again. As his eyes refocus to the subdued light from the street lamp he realises that he will have to stop rushing at things and work within his capabilities. Imagination, top marks; tools, pretty good; technical proficiency with the tools, pretty basic. The thought of giving up once more flashes across his mind. No way, he thinks, for this is a task that he is going to complete and on time!

Assessing the situation

‘In a word, depressing’, he thinks, as he feels the pain from his bleeding and bruised fingers. There is something strangely informative about the semi-darkness in his garage. It seems to describe how he feels – a pale shade of grey instead of light, bright and active. So he decides to lighten up the garage with a tin or two of white emulsion and to fix up a couple of fluores- cent lights. That will lighten up the environment, he thinks. However, it will cost money and he knows he will have to plead his case with his wife for some extra cash for, as luck would have it, the current month is one when all the bills seem to come in. He remains quietly deter- mined to argue the case for some of the scarce household disposable income; he knows that this is going to challenge the existing order of things.

In the half-light of his garage he begins to think about the whole business of combining ideas, tools and rather basic technique and is pleased to discover that he can build a dolls’ house as long as he works within the constraints of his limitations. Abandoning the idea of making a scaled down replica of the house down the road, he resolves to design a simpler structure that will be within his capabilities. Hearing the dawn chorus he resolves to leave things for the time being, take some time out and have a cup of coffee.

Staring into his cup as he stirs his coffee he searches for inspiration. Soggy cornflakes gave him an idea yesterday morning; perhaps his coffee will now. After a minute with nothing of any note happening he begins to be discouraged. Perhaps he should give it up. After all, one night working in the garage has resulted in very little to show for his pains except of course his injured fingers. Finding himself thinking about the story of Archimedes in his bath, he suddenly shouts eureka! followed by aha! The circular move- ment of his coffee has led him to see that he will go round and round and make little progress unless he learns from the lessons of the night. He ponders on this for a while. Well, the tools are up to the job. His revised task seems sensible but his technical ability is still suspect. However, if he learns from his mistakes in handling the tools: rushing ahead before reading the instructions in the DIY carpentry book he has purchased with his tool set but which lies on his workbench. Keen to follow this line of thought he opens his diary and starts to list the lessons that he has learnt that night.

A creative workshop

Two days later our father returns to the task of making a doll’s house, having successfully obtained sufficient resources to brighten up his garage and install some effective lighting. As he settles down to work he disciplined himself into starting with a brief quiet time and resolves not to charge into his work. He remembers his childhood days when grand projects always seemed fun, when they were tackled in a relaxed playful spirit rather than as a chore.

98 Innovation from theory to practice

Play was fun; chores were boring. To add to the new environment in the garage he has brought in his iPad loaded with some of his favourite music. Now to work . . . no, just a min- ute. What did I learn from my experiences in the garage earlier in the week? Mm!

Three hours later much has been accomplished. The tools seem friendlier. The structure, though simple, is starting to emerge and he feels at peace with himself. So he decides to take time out and go to bed. He falls asleep almost as soon as his head hits the pillow but he can see the finished article in full colour and is sure that his daughter will be very pleased.

Master class

Ten years later our father has become a master toymaker and has achieved considerable fame throughout the country for his one-off and low-volume designs. It seems amazing but it is true. He has acquired a reputation for both his quality build and his designs; has left his old job in a solicitor’s office and is now running his own business. Lucy, a keen young reporter, stops by, determined to find out how such creative people function. Content in his sense of fulfilment he is quite happy to talk to her.

He explains how he had started and describes a couple of nights in his garage a decade ago. As the conversation develops, the reporter can see clearly that his first dolls’ house has been a significant event in his life. (The creative techniques that fired his imagination are described and then summarised in a picture of a dolls’ house with a thatched roof.) The master’s main guides are:

1 A determination to prevent himself from restricting the flow of his and his staff’s crea- tive energies by the provision of a stimulating environment.

2 A fascination in learning new skills and the patience to master them. 3 The ability to stop and quickly select the best tools for the job rather than be trapped in

the repetitive boredom of always using the same techniques. 4 A determination to regularly think about the quality of how he and his staff work as well

as what they work on. He is concerned to ensure that working practices are adapted to suit the needs of his markets rather than become enshrined in company mindsets.

5 Valuing the work of all his staff, encouraging them to work to the best of their capabili- ties when under pressure and to develop their creative skills.

6 Encouraging his staff to adopt a free rein in their design work, to practice total thinking unashamedly.

7 To build a climate of security and trust so that all feel free at all times to question the status quo in a positive way.

8 To seek inspiration from the natural world.

Task

Study the master’s main guides above. Then select a problem of your own that needs managing. Which of the eight guides would you use and why?

References Benedek, M., Jauk, E., Sommer, M., Aroendasy, M. and Neubauer, A. C. (2014) ‘Intelligence, crea-

tivity, and cognitive control: The common and differential involvement of executive functions in intelligence and creativity’, Intelligence, September, Vol. 46, pp. 73–83.

Buzan, T. and Buzan, B. (2009) The Mind-Map Book, London, BBC Books.

Applied business creativity 99

Delbecq A. L., Van de Ven, A. H. and Gustafson, D. H. (1975) Group Techniques for Program Planning, Glenview, IL, Scott, Foresman.

Eberle, R. E. (1972) ‘Developing imagination through scamper’, The Journal of Creative Behaviour, September, Vol. 6, Issue 3, pp. 199–203.

Jones, B. (2015) Note Taking: 10 Simple Steps To Effective Note Taking, Walford, Ross-on-Wye, HRD Publishing.

Kim, K. H., Cramond, B. and VanTassel-Baska, J. (2010) ‘The relationship between creativity and Intelligence’, in Kaufman, J. C. and Sternberg, R. J. (eds), The Cambridge Handbook of Creativity, Cambridge, Cambridge University Press.

Kolb, D. (1984) Experiential Learning, Englewood Cliffs, NJ, Prentice Hall. Kreitner, R. (1980) Management: A Problem-Solving Process, Boston, MA, Houghton Mifflin. Mednick, S. (2009) ‘Be a better problem solver – Get more REM sleep’, Machine Design, Vol. 81,

Issue 13, p. 44. Mitroff, I. I. (2008) ‘Knowing: How we know is as important as what we know’, Journal of Business

Strategy, Vol. 29, Issue 3, pp. 13–22. Morgan, G. (1997) Imaginization, London, Sage. Okes, D. (2010) ‘Common problems with basic problem solving’, Quality, September, Vol. 49, Issue

9, pp. 36–40. Osborn, A. E. (1979) Applied Imagination, 3rd rev. edn, New York, NY, Scribner’s. Rikards, T. (1990) Creativity and Problem Solving at Work, Aldershot, Gower. Sullivan, D. M. and Ford, C. M. (2010) ‘The alignment of measures and constructs in organizational

research: The case of testing measurement models of creativity’, Journal of Business & Psychology, September, Vol. 25, Issue 3, pp. 505–21.

Tassoul, M. and Buijs, J. (2007) ‘Clustering: An essential step from diverging to converging’, Creativity & Innovation Management, March, Vol. 16, Issue 1, pp. 16–26.

Torrance, E. P. (1988) ‘The nature of creativity as manifest in its testing’, in Sternberg, R. J. (ed.), The Nature of Creativity: Contemporary Psychological Perspectives, Cambridge, Cambridge Univer- sity Press.

VanGundy, A. B. (1988) Techniques of Structured Problem Solving, 2nd edn, New York, NY, VanNostrand Reinhold.

Selected YouTubes ‘Paul Sloane: Creativity and Lateral Thinking in Business’, https://www.youtube.com/ watch?v=5RCb_zkKXWU. ‘Only 3% of People Pass this Creative Test, Can You?’, https://www.youtube.com/watch?v= aH2ll5bwpKw. ‘Edward de Bono Six Thinking Hats’, https://www.youtube.com/watch?v=_5DK8XPUEaU. ‘Edward de Bono on Creative Thinking’, https://www.youtube.com/watch?v=UjSjZOjNIJg. ‘Facilitating Creative Thinking’, https://www.youtube.com/watch?v=eq056i4tJx0.

Appendix 5.1: CPS toolbox notes

Introduction

Several authors, philosophers and teachers have contributed to the invention and recording of CPS tools. Skilled workmen and workwomen read about, try and collect their own selec- tion of tools to facilitate their real-life situations. The CPS toolbox in this appendix is one of Malcolm Goodman’s and draws on contributions from many – some known (see references), some unknown and some honed through experience – and it is hoped that it will stimulate readers to experiment and develop their own set of CPS tools.

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CPS stage 1: problem evaluation

Table 5.3 Useful problem evaluation tools

CPS tool Notes

Five Ws and H Sometimes known as ‘Kipling’s Questions’ see below How to . . . Do something to tackle the issue Stakeholder analysis Who are the important third parties? Why? Can things be left the way they are? What are the reasons for doing

something? Is the problem short term or long term? Important or trivial?

Five Ws and H (Kipling’s questions)

This tool uses the main interrogatives of the English language: Who? What? When? Why? and Where? and can be supplemented with the How to? question. Each member of the problem-solving group is asked to write down the six questions and then apply them to the problem statement.

Kipling’s questions

• Who is involved in this matter? Who is interested? • What is it all about? What is the matter? What went wrong? • When did this happen? When must the problem be solved? • Why did this happen? • Where did it happen? • How did this come about?

This is a simple but surprisingly powerful tool that enables creative problem-solving groups to define a problem at several levels of abstraction. The tool has four-cycle steps:

1 Read the problem statement as originally defined. 2 Question why you want to do what is in the problem statement. 3 Redefine the answer in the form of a new problem statement.

Repeat as many times as is sensible (step 4). Then agree a new problem statement. Here is an example:

Question and redefine

• Question: Why do we want to go on holiday? • Answer: To get a break from daily life. • Redefine: In what ways might we get a break from daily life?

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• Question: Why do we want to get a break from daily life? • Answer: To relax and recover from the stress of everyday life. • Redefine: In what way might we relax and recover?

• Question: Why do we want to relax and recover? • Answer: To recharge our batteries. • Redefine: In what ways might we charge up our batteries?

How to . . .

The advantage of the format of this question and the way in which it is used is that it wel- comes all ideas irrespective of whether the group intends to adopt the suggested solution. Thus practical constraints do not deter thinking. Suppose that the group was faced with the problem of a cracked furnace. They might ask the questions below.

How to tool

• How can we get the furnace going? • How can we stop it from causing so much trouble to our operations? • How can we get it properly relined? • How can we best project manage the job? • How can we avoid this problem in future?

Stakeholder analysis

In both personal and group CPS exercises the problem and the potential outcomes are often of interest to other parties. This can be addressed in a variety of ways so feel free to experiment. You might like to try the sequence below.

Stakeholder analysis tool

1 Problem owner states the problem. 2 Individual or group carries out a personal brainstorm. 3 Problem owner or facilitator performs a round robin and gathers ideas. 4 Problem owner or facilitator collects information on a mind map.

Wishful thinking

This is a useful technique to a help groups to break out of the constraints imposed by con- ventional approaches to problem solving and work practices. There are four steps involved.

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1 State the problems. 2 Now tell the group to imagine that anything is possible. 3 Ask them to state what they would like to see happen. 4 Get them to relate this back to the problem statement.

If you need to, repeat steps 3 and 4.

Stage 2: idea generation and development

Dealing with stuckness

Sometimes it is hard to generate ideas for progressing problems when groups find that con- ventional tools such as brainstorming, checklists and so on do not produce any good results. When this occurs it can cause a facilitator to panic. Fortunately there is a group of imagina- tive CPS tools that can come to the rescue (Table 5.4).

ANALOGY

This tool encourages you to take a break from the problem statement and to try to see the problem in a different scenario.

• Place a writing pad (A4 ideal) and a sharp pencil to hand. • Relax, breathe in and out slowly for a few seconds, then close your eyes for a minute or so.

Table 5.4 Useful idea generation and development tools

CPS tool Notes

Analogy Useful reorientation tool to gain a fresh perspective Attribute listing Reductionist approach Checklists Useful but can become monotonous. Cut and connect! Fun tool but surprisingly useful as an ice-breaker Imagineering Seeking practical solutions through the free-flow of creative thinking • Passive tools

{{ Relaxation {{ Sounds inspirational

• Active {{ Computer-based tools {{ Drawing {{ Therapeutic

Metaphors A surprisingly powerful technique Reversal What is the worst thing that can happen? Scamper Proprietary kit of tools Time out Taking a break from the problem to refresh minds Windows Looking outside to stimulate the flow of ideas

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• Now think of your favourite hobby (e.g. listening to pop music) or sport (cricket, foot- ball, hockey, rugby, tennis) or your last summer holiday, or your last trip to London or a recent long-distance trip. Concentrate on your experience and attempt to picture the scene in as much detail as you can. Picture the sky, the background and the foreground, listen for any sound, see if you can detect any movement.

• Now open your eyes and summarise what you have ‘seen’ on your A4 pad, trying to use drawing, sketches and symbols as far as you can.

• Then relate the material on your pad back to the CPS problem statement.

ATTRIBUTE LISTING

This tool entails reducing the problem statement to its prime components and auditing the characteristics of each identified part. This can be extended through a number of sub- component rounds if necessary. The ultimate objective is to discover what is really needed to do the job and whether the existing components can be put together in another, more efficient, way that directly addresses the problem statement. A more complex version of this tool, morphological analysis, is often used in the development of new products, ser- vices and systems. It is a powerful though time-consuming tool, and has resulted in some spectacular successes in high-technology industries.

CHECKLISTS

These can be useful for personal CPS but can easily become monotonous if used in group CPS sessions. Essentially they are stepping stones that can prove useful to define a path to approach a problem statement. It’s what you do on each stepping stone that is important. They can be useful in the same way that a motorist, for example, may use a road atlas to find the way. Coping with what happens on the way is an entirely different proposition.

CUT AND CONNECT!

Try this one! Get a selection of old magazines and give each member of the CPS group a pair of scissors. Ask them to cut out five pictures each, show them to the group and the facilitator then encourages the group to relate, say six pictures, back to the problem statement.

IMAGINEERING

The deliberate selection of imagery tools to stimulate ideas has assumed the title of ‘Imagineering’ (Morgan, 1997). Einstein stated that ‘Imagination is more important than knowledge’. Imagination raises new questions, new possibilities, to regard old problems from a new perspective. For ease of explanation the nine imagery tools included in the intro- ductory CPS toolkit have been divided into two categories: passive and active.

Two passive tools are particularly useful:

1 Relaxation. 2 Sounds inspirational.

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Relaxation – all CPS sessions should begin with a quiet time of relaxation. Too hasty a use of CPS tools will result in a temptation for individuals and the group to directly seek a pre- scriptive response to the problem statement. Facilitators can avoid this tendency by helping groups to relax by encouraging them to:

• Take a few deep breaths – three or four is usually enough. • Relax all their muscles to ease tensions from their faces, arms, legs, neck and torso. • Close their eyes and to imagine the tension flowing out of their bodies.

Sounds Inspirational – sound is a powerful and emotive medium. So too is nature. Good recordings can capture the natural world in great clarity and depth. Many facilitators find it helpful to have soothing classical music playing in the background. The following composers have been found to be particularly evocative:

• Beethoven – Symphony no. 6 (‘The Pastoral’); • Copland – ‘El Salon Mexico’; • Grofe – ‘Grand Canyon Suite’; • Handel – ‘Water Music’, ‘Fireworks’; • Mozart – Piano Concerto no. 21; • Smetena – ‘River Moldau’; • Vivaldi – ‘The Four Seasons’.

Active tools that are worth trying include: computer-based methods, drawing and therapeutic exercises.

Computer-based methods – specialist problem-solving software can be useful for individual CPS activity. Both idea generating and mind mapping software deserve a place in a CPS toolkit. However, as with most software packages, in the final analysis:

• Each problem statement is unique and, especially with group CPS sessions, requires a skilled facilitator who will select suitable tools.

• Computers should serve rather than control a CPS session. • Many people experience problems in correctly using software and these can com-

pletely take over a CPS session and dissipate creative effort.

Drawing – this group of tools switches the traditional emphasis on verbal to graphical skills. Given a free hand to draw a problem on paper, individuals or groups are presented with an entirely new perspective that avoids the tendency to get trapped in convergent logical cognitive memory traces. Here are a couple of the simpler tools that are useful for group CPS sessions.

• Picture – a ‘user-friendly’ tool that helps to get idea generation going. There are three stages:

1 Write the problem statement on a flip chart. 2 Instruct the group to read the statement and ask them translate the words into

diagrams, sketches and pictures on a new flip chart. 3 Discuss the second flip chart in the light of the first flip chart.

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• Picture book – this tool is suitable for individual or group CPS sessions. There are seven stages: 1 Convert a problem statement into a simple picture format. 2 Generate ideas to progress the problem and express them in picture format. 3 The facilitator then asks each individual to name a way the problem (i.e. what

needs to be done) can be progressed and to express this as a diagram, mind map or sketch.

4 The individual ‘pictures’ of how the problem can be tackled are then shown to the group.

5 The facilitator requests the group to select the best ‘picture/s’ and sticks them on a wall with Blu-tack.

6 The group then choose the best ‘picture’ and proceed to carry out a partial revi- sion if necessary.

7 The facilitator draws the final ‘picture’ as the group would like to see it.

Individuals do not have to be gifted artists for this tool to work. If the facilitator meets with some diffidence a good way to encourage participation is by giving each member of the group a sheet of picture stickers.

Therapeutic – a number of tools are available:

• Guided imagery – well-regarded short scenarios are available on tape that should sensitively be read by the facilitator.

• Selection – generating a flow of ideas is an important process in any CPS session. To progress effectively there comes a point when an individual or facilitator needs to relate and assess the ideas in the light of the problem statement and to select the most promis- ing ideas for CPS Stage 3, the realisation stage. Four tools are particularly useful: 1 Colour code – for quick and easy selections give every group member a supply

of blue and green stickers. Then ask them to mark the best ideas with a green sticker and the second best with a blue sticker. The ideas with the most green stickers emerge as the most promising to apply to the problem statement.

2 Creative evaluation – this is a ranking tool that can be used after colour code and assigns numbers to the leading ideas as follows: {{ 1 represents a simple idea (requires little time and money); {{ 2 represents a hard idea (requires more time and money); {{ 3 represents a difficult idea (requires the most time and money).

The ideas are then referred to senior management for consideration and evaluation.

1 Reporter – this is a quick converging tool that usually produces a positive response. The facilitator simply informs the group that a journalist is arriving soon (20 minutes seems to work well) and needs to be given a one-page sum- mary of the selected options.

2 Advantage/disadvantage – after colour code, issue all participants in the group with a selection matrix and ask them to privately evaluate all the green ideas in the light of the criteria indicated in the matrix. Table 5.5 presents an example of this tool in a group CPS session concerned with finding a suitable hotel for a one-day CPS workshop.

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METAPHORS

Metaphors are a fascinating source of inspiration for a creative manager (Morgan, 1997). We hear them virtually every day as sports commentators, politicians and ordinary folk use them to make powerful points about groups in such expressions as ‘first past the post’; their moves always break down ‘in the box’; ‘have we missed the boat?’ List the metaphors that you habitually hear when you are involved in group activity at work.

REVERSAL

For some strange reason, and nobody quite knows why, it is often possible to generate good ideas using the tool of reversal. The procedure is simple: just reverse the problem statement, note the ideas that flow and then select the best ideas and reverse them. For example, if the problem statement is ‘How can we improve our ability to innovate?’ reverse it to read ‘How can we really make a mess of innovation?’ Now be mischievous and generate ideas. Then reverse the best ones and you will probably be amazed at the results.

SCAMPER

This is a variation of Osborn’s 1957 (Osborn, 1979) checklist rearranged by Eberle (1972).

S Substitute – who else? Alternative inputs/outputs, people.

C Combine – blend different approaches, ideas, use, cross-functional teams, cost centres, etc.

A Adapt – what else is similar to this? What other ideas seem to fit this problem? What precedents are there? Who else had this problem recently?

M Magnify/minify – what needs to be added? Time, resources, product/service features, and promotional messages, etc./What needs to be reduced, saved, omitted, simplified, etc.

P Put to other uses – how else could this product/service be used? Who else may want it? Where else might it be used?

E Eliminate/elaborate – what needs to be scrapped? How can this be made user- friendlier? How can things be simplified? What savings can be made? What needs to be developed? Can we manage with existing supply/logistic arrangements?

R Rearrange/reverse – What other ways can we find/develop to do this?

How can consequences be reversed?

Table 5.5 Advantage/disadvantage assessment

Criteria Advantages Disadvantages

Location * Ease of access * Parking * Conference facilities * Reputation of venue *

Applied business creativity 107 TIMEOUT

Take time out – leave the room, take a break, go for a brief walk then re-address the problem statement.

WINDOW GAZING

Ask the group to look out of a window or around the room and then ask them to select and focus on an object. Instruct them to close their eyes, count to 10 and remember the object in as much detail as they can. Then ask them to think of the problem statement and open their eyes, and there is a good chance that they will have generated some relevant ideas.

CPS Stage 3: realisation planning

Once a CPS session has generated realistic ideas (What can be done) it is important before too much of the momentum is lost that some action is planned to achieve implementation (How to respond to the problem statement). It is wise at this stage for group members to discuss possible objections to their ideas and comfort zones using a tool popularly known as bullet proofing.

(For further information, contact AJM Management Development +44 1246 520655.)

6 Business innovation

But innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realised something that shoots holes in how we’ve been thinking about a problem.

(Steve Jobs)

Innovation is the specific instrument of entrepreneurship . . . the act that endows resources with a new capacity to create wealth.

(Peter F. Drucker)

Learning objectives This chapter explores:

1 The purpose of innovation. 2 The strategic approach to innovation. 3 The role of ‘innovation champions’. 4 Levels of innovation. 5 The innovation process phases. 6 Idea selection. 7 Application of systems thinking. 8 Innovation process problems.

Introduction In the business world, creativity manifests itself as innovation. An IBM survey in 2010 of over 1,500 CEOs reported that creativity was seen as the most important aspect of leadership needed to face the challenges presented by fiercely competitive global markets. Another sur- vey by Adobe Systems in 2012 in three continents found that 80 per cent identified creativity as a vital driver of economic growth. On the basis of this understanding CEOs can approach the task of generating innovation through internal activity, external activity (commonly referred to as open innovation) or by a combination of both initiatives. (See Figure 6.1.)

Context

Why innovate?

If customers were predictable, if markets were stable and competitors relatively inactive in their commitment to innovation, and if technology was steady, innovation would not be

Business innovation 109

Figure 6.1 Exploring business innovation.

of critical importance. All the evidence shows that global markets are being impacted by escalating rates of change. As markets in the developed economies approach saturation, com- panies increasingly worry about the damage this may do to their finances as competitors fight fiercely for the remaining market demand. Executives at the helm of companies large and small are faced with the challenge of securing their fortunes of their businesses. Clearly there is a need to do something different to keep current customers loyal and to attract new ones. Soon heads start turning to innovation to rescue their fortunes. What companies and entrepreneurs sometimes forget is that the purpose of innovation is not simply to make new,

110 Innovation from theory to practice

improved products and services; it is to deliver solutions and experiences that have cost sav- ing or revenue potential.

Innovation, like creativity discussed earlier in the text (see Chapters 4 and 5), promises a potential solution but to many there is considerable confusion as to what it actually involves. Is it about:

• Lowering the cost of current products and services? • Dropping prices? • Trusting in modern digital marketing techniques to boost sales? • Pondering the question what do our present customers want? • Discovering how the business might appeal to competitors’ customers?

Is it simply a matter of tweaking present market offerings seeking to add incremental attrac- tion to customers? Or might it be best to ask customers what they want? Then perhaps just exporting to underdeveloped economies and trusting this to restore growth potential can solve problems.

Current contextual change forces (see Chapter 1) are making it difficult for companies to solve their problems through heavy advertising spends alone. Revenues are falling or profit targets are going to be missed and the reverberations will cause disconcerting waves in financial circles. So many organisations are increasingly seeking to counter the impact of the uncertainty caused by change by recognising that a serious and strategic pursuit of innovation is the route to obtaining long lasting profits.

What is innovation?

The word innovation is derived from the Latin innovare, which translates as ‘to make new, alter’ and defined by the Concise Oxford Dictionary as being concerned with bringing in new methods and ideas. These can be absolutely new in the sense that they have never been aired or practised before or are new to a particular organisation. The innovation can refer to a new system, device, policy, programme or customer-perceived value offering (product/service). Innovation is a key driver for added value, increased competitiveness, growth and profitabil- ity. The successful and effective application of an innovation process involves designing and cultivating a climate and culture that is conducive to innovation (see Chapter 7). This takes time and money to realise. Faced with undue concern about their profit potential and soft buyers’ markets many companies have failed to invest in new product development (NPD) to a sufficient degree for years. They have regarded spending on NPD as a cost rather than an investment. Some have favoured the instant solution of acquiring other companies with a view to diversifying or taking out a competitor. Is sufficient strategic attention paid to the operating issues involved? Issues that relate to:

• process, service and product innovation; • systems service and product innovation; • systems thinking and innovation.

Innovation raises questions about what companies are doing to generate ideas, invest in pro- totype inventions and the processes that are needed to convert inventions into new products/ services that have customer-perceived value. True innovation results in a significant positive change to internal processes and procedures and to the provision of significant new customer

Business innovation 111

experiences. The outcome of successful positive differentiation is new growth. In a social context, innovation helps create new methods for alliance creation, joint venturing, flexible work hours and creation of buyers’ purchasing power.

Strategic innovation management

Strategic innovation is a holistic organisational intent to invest in a multi-functional approach that brings together all its creative assets, capabilities and disciplines to develop new growth opportunities. In a world that is changing rapidly and in unpredictable ways, strategic innovation becomes vital to adapt to change.

Evidently, the term ‘strategic innovation’ implies a connection between innovation and strategy, such that strategic innovation realises corporate strategy. Porter (1985), who is widely credited for providing a fresh look on corporate strategy, argues that firms may pursue three different generic strategies:

1 Cost-leadership – producing a product at a lower relative price than competitors while meeting basic customer needs.

2 Differentiation – producing a unique product meeting a unique set of needs sold at a higher relative price. Examples of successful differentiation include Apple’s iPad. Today, the tablet market boasts many competitors offering technical specifications that are comparable and sometimes superior to the iPad. However, the iPad beats competi- tion on user-friendliness, a key differentiator. Steve Jobs, much like Leonardo da Vinci who once claimed that ‘simplicity is the ultimate sophistication’, is reported to have asked his teams to ‘simplify, simplify, simplify’ the iPad. Today, consumers are willing to pay a higher relative price for a product that is easier to use than competing products. Thus, strategic innovation, in the case of differentiation, means finding ways to optimise a specific set of differentiators that are most relevant to a specific set of needs. Thus, when Apple is developing new ways to increase user-friendliness they are pursuing strategic innovation.

3 Focus – strategic innovation, in the case of a focus strategy, refers to innovations that better meet the specific needs of the targeted segment.

Key principles

Commitment

Getting started

Given that an organisation has made a holistic commitment to innovation, it is critical for all those involved in new product development or internal and external systems improve- ment that they hold firm to the belief that the prime aim is to create meaning and value for people. Marketing is essentially about making people aware of the perceived value an organisation creates.

Innovation is about creating this perceived value or customer affinity. The starting point is the internal or external customer (Drucker, 1973). Apple’s Steve Jobs did not start with the idea of the product but rather by thinking about whom it was for and what mattered to them. Similarly, Checkland (1981) developed his soft system methodology (SSM) to help managers solve complex qualitative human issues as sellers’ markets morphed into buyers’

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markets. It is affinity that is earned, not attention that is bought, that generates growth now. It is a growth mindset (Dweck, 2008).

Innovation champions

Traditional innovation champions are known to be responsible for leading and sponsoring innovations in both medium and large organisations. They have sometimes been known as product or technology champions but increasingly this has expanded to include those pro- moting new processes or business models, etc. The person can be a champion in a division, at board or senior management level or someone informally working in the organisation that wants great ideas to succeed. Innovation champions can be found in small, medium or larger organisations that are highly enterprising and highly innovative. They are good at creating new ideas and inventions but also at making them happen. Innovation champions are some- times called corporate intrapreneurs as they generate new businesses and internal corporate ventures and potential spin-off companies. Innovation champions can also be found in SMEs. The owner/entrepreneur has a different role from the innovation champions described above. Their job is to promote the innovation throughout the firm at a top-down level rather than bottom up.

Innovation champions according to Tellis (2013) need to be properly supported and given structured responsibilities, goals and resources if they are to flourish. His research into innovation stories, which covered over 100 years of inventions and 66 markets created by innovators, identified four characteristics they share:

1 Champions have a vision for the future mass market. Innovation champions are able to see subtle signs about the direction in which the market is evolving and identify its unmet needs ahead of the competition. They have a unique worldview and they are not content to follow the groupthink of their industry or profession.

2 Champions are mavericks and dissenters. Their vision is unique, and they are stubbornly committed to it, despite what other executives and experts may say. Such resistance and ridicule is a major reason why innovation champions often leave their organisations to develop their idea on their own or within an organisation that will give them the respon- sibilities and resources they need to bring it to life.

3 Innovation champions have the conviction to persist against heavy odds. New ideas face many obstacles in today’s organisations, including a non-existent market for the idea, resistance from entrenched interests, an inability to demonstrate their idea’s future potential and setbacks in production, manufacturing or testing of new product concepts. ‘Champions have the motivation and passion to overcome these obstacles and persist with the vision they believe holds the promise of success’, Tellis explains.

4 Champions are willing to take extraordinary risks to bring their ideas to fruition, and are able to instil this trait in their teams. Tellis cites Bezos of Amazon and Zuckerberg of Facebook as examples of champions who were able to withstand tremendous pressure to stay the course, often over many years, to transform their compelling visions into reality.

To support innovation champions companies need to cultivate them across the organisa- tion by identifying and mentoring them early in their careers. Google’s Associate Product Manager programme is a case in point. To innovate successfully to stay ahead of its com- petition Google not only needs to attract the best talent and train them to be relentlessly innovative, it must also create a culture that empowers people.

Business innovation 113

Levels of innovation

Incremental innovation

Disruptive innovation (Pisano, 2015) requires a new business model but not necessarily a technological breakthrough. For that reason, it also challenges, or disrupts, the business models of other companies. For example, Google’s Android operating system for mobile devices potentially disrupts companies like Apple and Microsoft, not because of any large technical difference but because of its business model: Android is given away free; the operating systems of Apple and Microsoft are not.

Camera industry

Have you ever made improvements to existing technologies, processes, products or services? That’s incremental innovation and is the most common form of innovation today. However, incremental innovation often only produces incremental growth.

Radical innovation entails high uncertainty with high risks, and the potential, though not guaranteed, for high returns.

To illustrate the difference between incremental and radical innovation think about the camera industry. Kodak led the industry for years, developing new and improved products based on traditional film. However, these were all incremental innovations based on the same technology. The radical innovation in this industry was the develop- ment of digital imaging. This revolutionised the industry and the way people captured, stored and used images. Smartphones are now threatening the digital camera industry.

Radical innovation

Radical innovation is the polar opposite of disruptive innovation. The challenge here is purely technological. The emergence of genetic engineering and biotechnology in the 1970s and 1980s as an approach to drug discovery is an example. Established pharmaceutical com- panies with decades of experience in chemically synthesised drugs faced a major hurdle in building competences in molecular biology. But drugs derived from biotechnology were a good fit with the companies’ business models, which called for heavy investment in R&D, funded by a few high-margin products.

Toyota and innovation

Whether it be alternative energy sources, interconnected traffic and safety systems, human assisting robots or new modes of personal transport, Toyota is constantly focused on developing for the future. Through improvements of conventional technology, as well as pioneering efforts in the application of new technologies, Toyota is taking great steps to develop eco-cars which will help the progress toward a low carbon society.

Source: Toyota website: http://www.toyota-global.com/innovation/ (accessed 15 May 2016).

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Architectural innovation

This combines technological and business model disruptions (Pisano, 2015). An example is digital photography. For companies such as Kodak and Polaroid, entering the digital world meant mastering completely new competences in solid-state electronics, camera design, software and display technology. It also meant finding a way to earn profits from cameras rather than from ‘disposables’ (film, paper, processing chemicals and services). As one might imagine, architectural innovations are the most challenging for incumbents to pursue.

Technological innovation

Technological innovations are usually associated with product and process innovation, whereas non-technological innovations are generally associated with organisational and marketing innovations. Technological and non-technological innovations are highly inter- connected. The commercialisation of technological product innovations often requires the development of new marketing methods. Similarly, a new production technique will typically increase productivity only if is supported by changes in the organisation. The majority of innovative firms (both large firms and SMEs) introduce technological inno- vations (i.e. process and product innovations), as well as non-technological innovation (i.e. marketing and organisational innovations).

The pace of technological innovation is accelerating rapidly as modern computers can review massive amounts of data in milliseconds and are developing the ability to learn 24 × 7 × 365 without being programmed (OECD, 2015). The pace of learning will soon exceed our ability to understand and use it and we will have to surrender responsibility for analysing data, trialling models and running scenarios. We live in the advent of the machine learning age and the biggest business impacts today lie in social, mobile, annalistic, cloud (SMAC) and related Internet of Things (IoT) technologies. A wave of tsunami proportions is appearing on the horizon and gathering speed every day. Experts anticipate a second wave after 2020 as present technological research and adaptations become available for commercial exploitation.

Apple watch Apple is exceedingly secretive when it comes to releasing early information about pro- jects under development but its hiring strategy and patent filings provide strong clues.

Table 6.1 Characteristics of incremental and radical innovation

Incremental innovation Radical innovation

Exploits existing technology Explores new technology Low uncertainty High uncertainty Focuses on cost or feature improvements

in existing products or services, processes, marketing or business model

Focuses on processes, products or services with unprecedented perceived value attributes

Improves competitiveness with current and new markets or industries

Creates a dramatic change that transforms existing markets or industries, or creates new ones

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Wrist-mounted devices

The design and human interface teams at Apple spent two years thinking about what a wrist-mounted device could add to peoples’ lives and how the new digital technol- ogy could be made to be user-friendly. The watch delivers high functionality but also a positive personal user experience that prioritises information according to the wearer’s reaction to it. For example, after notifying the user that a text message has been received, the ‘Short Look’ feature either displays the message or leaves it unread, depending on how the wearer keeps their wrists aloft.

Virtual reality

Headsets that immerse the user in video and audio have attracted the Apple CEO’s interest. However companies, such as Facebook, are already active in this market.

Augmented reality (AR)

The superimpositioning of virtual data in to real scenes, or augmented reality, is the con- cept behind the PokemonGo craze and Apple may be featuring AR in future iPhones.

TV content and channels

Apple is believed to be working on launching its own TV service through its Apple TV set-top box.

Cars

Apple is known to be working on a car under the code name Project Titan.

Sources: Pierce, D. (2015) ‘iPhone killer: The secret history of the Apple Watch’, Wired, www. wired.com/2015/04/the-apple-watch/; The Observer, 30 July 2016.

Sources of ideas

Closed sources

Until the early twenty-first century, most innovation was closed. That is, it occurred within the boundaries of an organisation and was performed by the company’s own employees within its internal R&D function. This model was based on a number of assumptions that have changed radically in today’s marketplace. The paradigm of closed innovation asserts that successful innovation requires control and ownership of intellectual property. A com- pany should control the creation and management of ideas. The practice of closed innovation goes back to the beginning of the twentieth century when universities and governments were not involved in the commercial application of science. Some companies therefore decided to run their own R&D units. Their entire NPD cycle was then integrated within the company where innovation was performed in a ‘closed’ and self-sufficient way.

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An African innovation: Mellowcabs

Mellowcabs are high-tech electric pedicabs manufactured from recycled materials. These vehicles primarily provide first and last mile public transport in urban areas, thereby filling the gap for commuters who need micro transport within a 3 km radius. Mellowcabs have the ability to provide more than 100 km of transport per day and feature cutting edge technologies like regenerative braking, hydrogen fuel cells, illu- minated body panels, human powered charging and on-board tablet computers which feature Mellowcab’s own proprietary software with augmented reality facility, geo- activation advertising and full social media integration features. The Mellowcab was developed in South Africa by Neil du Preez.

Source: Forbes, February 2014, http://www.forbes.com/sites/mfonobongnsehe/2014/02/13/seven- innovative-products-from-africa-you-should-know/#203c722b107b (accessed 15 May 2016).

The period between the end of the Second World War and the mid-1980s was the era of closed innovation and internal R&D. Many R&D departments of private companies were at the leading edge of scientific research. The setup of internal R&D was perceived as a strong barrier for potential new competitors, as large investments had to be made to be able to com- pete. Often, closed innovation paradigms are set equal to the ‘Not Invented Here’ syndrome sometimes referred to by decision makers: everything coming from outside is suspicious and unreliable. Chapter 9 discusses the major closed innovation practices and stresses that in the prevalent business world wise companies combine both methods of finding suitable ideas to develop, process and commercialise promising innovations (see Chapter 9, Figure 9.1).

Open sources

Recently, growing attention has been devoted to the concept of ‘Open Innovation’, in academia as well as in practice. Chesbrough, who coined the term ‘Open Innovation’ describes in his book Open Innovation: The New Imperative for Creating and Profiting from Technology (2003) how companies have shifted from so-called closed innovation processes towards a more open way of innovating. As a result, companies have started to look for other ways to increase the efficiency and effectiveness of their innovation processes. For instance, they actively search for new technologies and ideas outside the firm, but also cooperate with suppliers and competitors, in order to create customer value. Another important aspect is the further development or out-licensing of ideas and technologies that do not fit the strategy of the company. See Chapter 9 for a discussion of the open sourcing of ideas.

Figure 6.2 The innovation process phases.

Source: M. R.V. Goodman, Durham University.

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The innovation process

Phase 1: initial spark of creative activity

Phase 1 of an innovation process features two inspirational creative acts:

• Generation of ideas by asking the question ‘is there a better way to . . . ’ by observing and seeking inspiration from different cultures or organisations.

• Selection of the best idea/s to progress to address either a clearly expressed need, for example a transparent baby’s potty to answer every parent’s question – ‘have you been yet?’ Or the sudden realisation that an idea generated by chance is the perfect answer to a problem, as in, for example, the case of non-drip paint.

Fashion fun: mismatched clothing

LittleMissMatched started with a very simple mission: Build a girls’ clothing brand that is fun, inspires creativity, embraces individual style and celebrates self-expression.

In the LittleMissMatched World, matching is mundane, but mixing patterns and col- ours is monumentally cool. The girls’ clothing line started with colourful girls’ socks sold in packs of three, then the company realised that there was a whole world of girls who share their passion for showing their creativity and self-expression through their clothes. The LittleMissMatched line was expanded and now includes bold girls’ cloth- ing and beauty accessories, colourful bedding, sporty arm and leg warmers, backpacks, handbags and slippers.

Source: http://littlemissmatched.com/about-us (accessed 15 May 2016).

Phase 2: idea evaluation

Phase 2 is concerned with testing a selected idea to decide whether it is advisable to invest more time and resources to develop it further into a proposal. The key questions are:

• Effectiveness – does the idea meet a need for which there is or is likely to be a demand? • Relevance – does the idea lie within the compass of the company or organisational strategy? • Know-how – does the idea fit the company/organisation’s business and technical

competencies? • Efficiency – is it sensible for the organisation to invest resources to further develop the

idea and is it likely to offer a competitive advantage?

If the answers to these questions are positive, the innovation process enters Phase 3.

Phase 3: invention

Phase 3 is concerned with developing the selected idea into a form that can be implemented, that is, a new customer-perceived value package offered to pre-researched customers or introduced within the parent organisation – for example a new administrative procedure.

If the answers to these questions are positive the innovation process enters Phase 4.

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Phase 4: external and internal launch

This phase covers the external introduction of the fully developed idea, that is, new product roll out. In the case of internal introductions the idea is practically adopted.

Phase 1 is essentially about the practical expression of creativity. Phases 2, 3 and 4 are essen- tially about innovation. Creativity also plays a critical part as the idea progresses from an original spark to a final entity.

Idea selection

Sometimes successful innovations result from serendipity as an organisation hits the jackpot with little regard to sound practice. This is said to have been the case with the decision to launch the original Walkman. The Sony CEO had a hunch it was a winner. In most cases, however, it is prudent to pay considerable attention to picking the right ideas to move into the invention and innovation phases. Curiously, many organisations that are serious innovation players are not hampered by a lack of ideas but rather a lack of noticing the ideas they have already (Burkis, 2013) and an ability to be realistic about their potential. Two well-known filter models are the Idea Funnel and Stage–Gate systems.

Idea Funnel

Ideas that emerge successfully from Phase 1 should be screened to reveal those with the greatest potential and with an acceptable degree of risk. It may sound negative at first but it is sensible policy for organisations to isolate and kill all the ideas that are unlikely to pass all the innovation phases. Though sometimes brutal, this releases time and resources for promising ideas.

The Idea Funnel has a wide entrance to receive ideas that successfully complete Phase 1. The ideas are then subjected to periodic test criteria and only those that pass move toward the neck of the funnel, toward Phase 4 launch programmes. However, the Idea Funnel is a

Figure 6.3 Idea Funnel.

Source: M. R. V. Goodman, Durham University.

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simple model and there is a danger that it could result in many embarrassing and/or expensive innovation failures as the model is critically dependent on the quality of the decisions taken at each checkpoint in the funnel.

Stage–Gate model

The model (after Grönlund et al., 2010), which was traditionally applied in manufacturing industries, segments the innovation process into sequential stages. The model consists of an alternating series of development periods and assessment ‘gates’ that evaluate the chances of an idea passing through all four phases of an innovation programme. Some have claimed that the model is too simplistic and linear for today’s business environment. The Idea Funnel and Stage–Gate models are only as good as the decisions that are made (Sethi and Iqbal, 2008). Use of modern systems thinking can greatly strengthen the quality of the ‘go, no-go’ decision deliberations as the basic model does enable the incorporation of IT and dynamic elements, such as learning, strategy, iteration, feedback, agility, flexibility and adjustments. Metrics for evaluation, agility, flexibility, feedback and adjustment should and can be incor- porated into the innovation process regardless of the model which is selected. The successful application of an innovation process builds on the unique capabilities of an organisation and on its strengths.

Intellectual capital

Collective knowledge (whether or not documented) of the individuals in an organisation or society, can be used to produce wealth, multiply output of physical assets, gain competitive advantage, and/or to enhance value of other types of capital. Intellectual capital is now begin- ning to be classified as a true capital cost because:

• investment in and replacement of people is similar to investment in machines and plants; and

• expenses incurred in education and training to maintain the shelf life of intellectual assets are equivalent to depreciation costs of physical assets.

Intellectual capital includes customer capital, human capital, intellectual property and structural capital.

Figure 6.4 A simple Stage–Gate system. Source: M. R.V. Goodman, Durham University.

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Knowledge and technology transfer

Knowledge transfer (KT) is a term used to encompass a very broad range of activities to support mutually beneficial collaborations between universities, businesses and the public sector, and involves the transfer of tangible and intellectual property, expertise, learning and skills between academia and the non-academic community. It is recognised by gov- ernment and funders as an important return on investment in academic research, one that provides a significant driving force for enhancing economic growth and societal well-being. For academics, KT can be a way of gaining new perspectives on possible directions and approaches for research. This two-way exchange element of KT is at the heart of successful and sustainable collaboration.

InnovationKT (Innovation through Knowledge Transfer) is an initiative to promote and raise the profile of knowledge transfer and innovation, and provide publication opportunities for all those involved in the discipline.

KT can be defined as the means by which expertise, knowledge, skills and capabilities are transferred from the knowledge-base (for example, a university or college, a research centre or a research technology organisation) to those in need of that knowledge (for example a company, social enterprise or not-for-profit organisation).

Hence, KT involves the application and commercialisation of skills and expertise pos- sessed by higher education and its purpose is to catalyse and facilitate innovation. Examples of KT mechanisms and paradigms include, but are not limited to:

• the UK Technology Strategy Board (TSB) Knowledge Transfer Partnership (KTP) product;

• spin-out companies; • incubators and entrepreneur schemes; • university–industry contracts and consultancy; • licensing of university-originated intellectual property; • other modes of KT and technology transfer, e.g. work-based learning projects; • the knowledge transfer, knowledge origination and knowledge exchange process; • innovation, open innovation and the generation of new ideas.

Practice

Harnessing systems thinking

Given the occurrence in most problem situations of both technical and human dimensions, a hybrid of scientific, hard systems and soft systems methodologies will give the best solu- tion. The soft systems approach will ensure that the human dimension is incorporated at an early stage in the process and that all groups of people are involved in developing a solution. Within this soft systems overview, hard systems and scientific techniques can be used to optimise aspects of the solution (Kirk, 1995).

Hard systems approach

Hard system approaches are heavily dependent on the core beliefs of the rational-analytical thinking school. They assume that a manager’s goals are both rational and well communi- cated, that problems can be identified easily and clearly and that organisations can be run

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successfully by management techniques. Cause and effect are mapped to provide managers with ‘fix it’ models that can be realised easily. Best theory and practice seek to:

• reduce uncertainty by rationalisation; • predict the future – to anticipate customer needs and adopt a strategic approach to

innovation; • prepare for the future – to discover and select winning innovations; • generate ideas, select the winning ones and proceed quickly to develop them into proto-

types (inventions) and trigger implementation processes; • develop an ideal solution.

Hard systems are appropriate if the innovation task is clear, the systems are mechanistic, and the relationships between the component processes follow known paths that can be addressed independently of an organisation’s core strategy. However, many of the problems that face management charged with responsibility to generate successful innovation are difficult to define, fuzzy and messy.

Soft systems approach

The highly competitive global markets that are challenging organisations today are con- cerned massively with the need to understand external customer values and internal process improvements. Qualitative human factors are of paramount importance and as stakehold- ers interpret their needs differently there is no objective reality. The SSM pioneered by Checkland is a quantitative technique that can be used for applying systems thinking to non- systemic situations. It is a way of dealing with problem situations in which there is a high social, political and human activity component. Thus increasingly creative and intuitive (or soft) approaches to innovation are required to address the ‘what’ shall we do question as well as the ‘how’ should we do it question of hard systems thinking. For most organisations there is no one perfect answer. Best theory and practice seek to:

• understand the perceptions of critical internal and external customers through a variety of so-called right-brain problem solving techniques (see Chapter 4);

• build a learning organisation culture that interacts with closed and open idea sourcing.

Action

Private sector

Innovation in MNCs

The ability of MNCs to leverage their innovation competencies across globally dispersed subsidiaries is an increasingly valuable source of competitive advantage (Mudambi et al., 2007). When MNCs turn to foreign subsidiaries’ R&D to develop innovations questions arise regarding the most effective organisational structures for global innovation. Although organisational cultures that satisfy the needs for self-determination and teamwork have long been considered intrinsic motivators in home markets, a pressing concern for many MNCs is how to energise and assimilate innovation in overseas subsidiaries. This text argues the case

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for the adoption of a holistic approach to innovation that draws on the strengths of national cultures that meet the practise standards of Theory Y or Z management approaches (see Chapter 3) but preferably those of Theory WB organisations (see Chapter 13).

Innovation in SMEs

SMEs are driving most economies, but not all are enjoying the benefits of innovation, either through lack of knowledge or a perceived lack of time. Recent research by Bain (Bain & Company and Institute of International Finance, 2013) found that two-thirds of organisations highlighted innovation as a priority, yet fewer than 25 per cent thought their company was an effective innovator. From adopting cloud computing to digitising holiday requests, there are myriad ways companies can move into the twenty-first century.

Many SMEs are family businesses and several prefer the traditional paper-based means of managing and are often uncertain about seriously adopting digital technology. Due to their size and straightforward management structure SMEs can be quicker on their feet to explore and exploit innovation than their MNC rivals. Gaining an understanding on how to use digital technology and systems in pursuit of their business goals will give SMEs a considerable fillip, as they will be able to benefit from making smart marketing, productivity and resourcing decisions.

SMEs, as MNCs, face real risks in fiercely competitive national and global markets. If they can get over any inhibitions they may have about networking with other SMEs and MNCs they can gain significantly from open innovation initiatives. Research by Van de Vrand et al. (2009) and Lichtenthaler (2008) has shown that the international competitiveness of SMEs is highly dependent on the cumulative effects and interrelationship between two key internal components – R&D capacity and managerial structure and competencies – coupled with two external factors – open innovation practices and the ability of the firm to attract government grants for R&D and technological development (Wynarczyk, 2013).

Public sector

It is evident that non-governmental organisations (NGOs), charities, state-funded entities and public organisations operate in an environment that differs from that of private organisa- tions. The latter generally focus on profitability in a context where competitive forces play a key role, which does not generally apply to the former. Although not much has to date been published on innovation related to NGOs, charities, state-funded entities and public organisa- tions, it is relevant to discuss the role which innovation may play (or has the potential to play) and the differences in focus that emerge in these types of organisation.

Innovation in NGOs

Innovation is a buzzword throughout development circles from large institutional grant making organisations to grassroots NGOs working in some of the poorest places on earth. Innovation is more often than not a necessity for NGOs with strictly limited funds and resources which are yet trying to conquer huge development challenges. Many NGOs are forced to think differently and creatively about how to utilise their resources and environ- ment just to survive.

Increasingly, innovation is something that is inescapable for most NGOs and especially those keen to secure grant-based project funding. The huge majority of grant funding

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opportunities from Newcastle to New Delhi demand that applicant NGOs demonstrate that their proposed projects are innovative in one way or another. Whether it is the delivery or services, communications techniques, donor support or the application of technology, most people within NGOs understand why grant makers are so keen to support innovative pro- jects. They need to continue to think and do things differently to try and improve the world, but innovation is also an increasingly common source of frustration for grant writers and project developers. Often NGOs have successful projects that are proven, highly effective and in demand, yet funders often won’t support them unless new innovative elements are introduced to modify the project. This can be difficult and challenging for NGOs and can often compromise otherwise excellent projects that are simply in need of more funding and little else.

Innovation in charities

Charities are generally considered to be non-profit organisations, independent from govern- ment, run by volunteers, often with a distinctive legal position and tax status, dedicated to improving the welfare of others. Charities are regulated in a number of countries and require registration. This leads to their having to follow a strict set of legal and financial procedures which may increase regulation and bureaucracy but which allows for increased trust, trans- parency and higher standards of operation. Although there is some overlap between NGOs and charities, since both operate as non-profit organisations, charities focus on philanthropic goals with activities generally directed towards the public interest or the common good with clear perceived benefits for humanity.

Many of the factors concerning NGOs and innovation could be relevant for charities in their attempts to raise funds, increase the pool of donors, improve their image in the media, campaign for their cause, organise events, operate effectively and regulate their affairs in a transparent and efficient manner. Top charities are finding innovative ways of fundraising from a data-driven gaming website to social psychology and mobile giving.

Innovation in state-funded organisations

State-funded entities contribute to innovation through research, funding programmes and the implementation of government policy related to innovation. Whether an innovation will be a success is uncertain and it can take longer than traditional banks or venture capitalists are will- ing to wait. The European Commission in Europe regularly calls for projects on specific topics to be funded and these generally require the participation of universities, research institutes and, at times, private organisations. Dissemination of the knowledge acquired as a result of research and collaboration plays a key role in the success of European projects selected for funding under the various calls, with the subsequent publication of reports, journal articles and books which are publicly available. Government may fund entities to promote research that is theoretical and not necessarily related to market forces, the latter being generally undertaken by private research institutions or R&D laboratories in private organisations.

The research undertaken may, however, eventually have applications for commercial gain and this may be achieved through the creation of alliances with strategic partners. This is one way to overcome the restraints that may occur with private funding of research, where confi- dentiality is often imposed due to fear of competition from rival organisations. This may lead towards more collaborative initiatives where both private organisations and government- funded entities such as university or research laboratories share information and knowledge.

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Government procurement plays a key role where innovation is concerned, as govern- ments could be considered as ‘lead users’ capable of making substantial purchases. When properly managed, innovative procurement can have a positive effect on innovation related to technological advancement, it may define product quality and standards, and may lead to increased interoperability. Through placing orders for large quantities of products, govern- ments can be instrumental in encouraging innovation by influencing the suppliers that are selected to deliver the goods. Large orders could act as an incentive for suppliers to focus on more innovative products or services due to the financial benefits that follow from the award of a large tender. This could provide incentives for increased private investment in R&D, particularly since governments have the power to set standards and to certify technologies as being reliable and promising.

Innovation bottlenecks

Effective innovation management may often encounter a number of obstacles and a prior understanding of these is essential. Strategies can then be designed to diminish the effects of the obstacles that are encountered. Some of the main barriers to organisational innovation are:

• the process of changing a corporate climate; • lack of time to think; • bureaucracy; • structure; • poor lateral communication; • external talent; • financial constraints; • limiting paradigms; • inappropriate mental modes; • limitations of traditional teaching and training.

One of the most difficult challenges is the process of changing a climate or corporate attitudes. This requires an imaginative, consistent, persistent and integrated programme of work aimed at modifying people’s personal attitudes towards risk taking and sustain- ing flexible mind-frames. Organisations that take innovation seriously should emphasise the importance of developing an all-embracing climate where ideas can be generated, communicated, evaluated and implemented (see Chapter 7).

Lack of ‘time to think’

Managers generally do not allow subordinates to waste their time on non-productive activi- ties. Creativity requires a certain amount of time to think and the absence of slack can act as a barrier to the successful implementation of the whole innovation process. Organisations that allow employees a certain level of slack are in a better position to generate ideas and identify valuable innovations. Google, for example, reputedly allows its employees to spend 80 per cent of their time on core projects and 20 per cent on innovation activities related to their personal interests and passions, much of which results in efforts towards increased innovation.

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Bureaucracy

Although bureaucracy is important in organisations as it creates necessary controls, organ- isations sometimes introduce bureaucracy under the misguided notion that it is a way of ensuring administrative effectiveness and productivity. One cannot expect employees to gen- erate ideas directed against procedures that are accepted as unchanging. Management may take steps to neutralise the effect of bureaucracy such as:

• eliminating irrelevant or inexplicable forms of bureaucracy; • promoting the overriding role of innovation at all levels (specific instructions which

explain the circumstances in which creative behaviour must override administrative rules must be clearly outlined);

• periodically reviewing the reasons behind bureaucratic procedures.

Structure

Small organisations seldom have major organisational problems. They may function extremely well without a formal structure. The manager knows precisely what is going on and can respond to needs or take decisions in a pragmatic way. Provided the manager has the right attitude towards other people’s ideas, the organisation can benefit from a relaxed and informal flow of ideas and the implementation of innovations. Some large organisations restructure their hierarchy in an attempt to create better communication channels and subse- quently increase the potential for innovation. This is often done by dividing the organisation into smaller autonomous divisions. It is important to keep in mind the fact that structural changes should not be authorised until:

• the impact of such changes has been thoroughly explored; and • strategic planning is in place to mitigate the possible undesirable impact of any changes

to organisational structure.

Poor lateral communication

Communication is a key element for the successful implementation of an idea management system in an organisation. Effective communication implies both cooperation and purpose with the aim of achieving a successful outcome. Open channels of communication mitigate against the possibility of insecurity, suspicion and lack of motivation, particularly where innovation and the change which it brings in its wake are concerned. Factors which may obstruct lateral communication include:

• manipulative practices on the part of management such as holding back information, excessive secrecy or reluctance to communicate;

• conflicting objectives amongst departments or sections within the organisation; • difference of attitudes, values and beliefs which give rise to incompatibility where

communication is concerned; • inadequate training which is essential for staff to become better aware (and better

understand) the value of innovation and its practices for the organisation.

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External talent

A serious barrier to the development of a climate in which innovation can be successfully managed is the notion that progress may only be achieved through the importation of exter- nal talent. This tends to give rise to feelings of humiliation, insecurity and a subsequent lack of confidence. It may also demotivate those individuals who feel they should have had the opportunity to be considered for a position which is offered to a person external to the organisation. Another possible consequence is the adoption of a status quo attitude where employees may feel it is safer not to take the initiative since any newcomer may just be a flash in the pan to be eventually replaced by another.

Financial constraints

It is well known that financial departments are never very forthcoming when resources are required, particularly for innovative projects. Some individuals may take offence at having their ‘brilliant’ ideas evaluated in financial terms. Innovation requires an element of financial risk and those who control the organisation’s finances should recognise the advantages of innovation: to do things differently, better, cheaper or more aesthetically, for the well-being of the organisation. Too tight financial control on ‘creatives’ is not conducive to successful innovation, which needs a full resource support.

Limiting paradigms

This involves a mental ‘lock-in’, a way of thinking which is directed in favour of estab- lished and well-known ways of doing things and which includes theories, values and beliefs. Paradigms are similar to mindsets or worldviews. Paradigms may often operate at a subcon- scious level and cannot always be easily brought to awareness. It is as a result of paradigms or mindsets that new ideas or new systems are often initially rejected. It is only human to rationalise our actions and to avoid the discomfort which innovative change may bring about. Paradigms may block the innovation process through constraints that limit thoughts, beliefs, perceptions and action.

Inappropriate mental models

This barrier is closely related to the previous one. Mental models operate at a conscious level and include fixed ideas on how, for example, business models, such as a specific revenue model, should operate. This gives rise to inflexibility, as there is the mistaken assumption that the models by which the organisation operates are the best, regardless of context. We are, how- ever, living in a scenario where models may shift like sand and where new business models are being applied in efforts to make organisations increasingly sustainable from a social, economic and environmental perspective. Although existing mental models may have worked in the past, there is no guarantee that they will continue to do so. Adapting mental models in an attempt to make them more agile, flexible and adaptive to complexity and change is therefore necessary.

Limitations of traditional teaching and training

Traditional methods of teaching and training are no longer applicable in today’s sce- nario where young people (often known as Generation Y or ‘digital natives’) are raised

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on fast interactive multiplayer online games and where they generally require a series of challenges in order for their imaginations to be fired and their motivation to be increased. Baby boomers (those born around the 1950s) also need to move beyond traditional meth- ods of training; if they stick to tried and tested routines they risk being totally ineffectual. Communication plays a key role in teaching and training; however, it is to be acknowledged that the best way to learn is not through theory, explanations or mere understanding – rather, it is through experience that transferrable skill sets may be built. There is no point in, for example, reading a manual if you wish to learn how to drive an F1 racing car or play tennis. The only way to build such a skill is through experience, through trial and error and through regular practice.

Identifying the barriers which create bottlenecks and which act to inhibit the implementa- tion of innovation management systems is the first step to overcoming them. Once they are identified, a strategy may be formulated and steps taken for the barriers to be challenged and eliminated.

Summary Business innovation is the practical application of business creativity that results in a process, product or service outcome that has perceived value. To positively differentiate themselves organisations need to continually seek to increase productivity and customer appeal. This requires a holistic commitment by management to take a strategic approach to managing innovation. Innovation champions should be encouraged at all levels of an organisation to foster and develop the generation of suitable ideas that have the potential to make a differ- ence. Innovation can result in incremental radical, architectural and technical advantages. Strategic innovation involves four phases that require a balanced hard and soft systems input. The dedicated application of creative thinking to perceived business problems inevitably causes disturbance to organisational operations resulting in obstacles that management must have the determination to tackle.

Discussion questions 1 What is innovation and why is it important to private and public sector organisations? 2 Briefly explain the role of an ‘innovation champion’. 3 What are the characteristics of incremental and radical innovation? 4 What do you understand by the term ‘architectural innovation’? 5 What is systems thinking? How does it help the innovation process? 6 How do organisations process innovation programmes? 7 What are the main innovation development bottlenecks?

Case exercise

Nokia II: out of the ashes of disaster grow the roses of success*

*Sherman Brothers, ‘The Roses Of Success’, from the 1968 film Chitty Chitty Bang Bang.

When Nokia sold its mobile phone business to Microsoft for $7.2 billion in 2014 there was widespread despair in Finland. There was high unemployment in the greater Helsinki area and a country’s as well as a company’s pride had been tarnished. To achieve and

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support its technical breakthrough in the mobile phone market Nokia had invested heavily in R&D. Falling sales and profitability that resulted in the off-loading of the phone left a rump of gifted technological talent. A business wake revealed that the company’s failure was not due solely to its lack of technical expertise but rather to senior management’s mindset that sustained success depended on hardware innovation. They failed to see that in a rapidly developing technological market consumers expected R&D expenditure to result in products that they wanted to buy. This meant that software development was important to support its phones. They also underestimated the increasing importance of smartphones.

When the dust had settled after the sale of the phone business, Nokia’s management set about rebuilding the company by focusing on the lucrative telecommunications infrastructure market providing high-end networking gear and software to telecommunications companies and Internet service providers. In 2016 they purchased a strong competitor Alcatel-Lucent for $16.6 billion. Nokia’s non-consumer electronics business has thrived. The company has more than 100,000 employees working on telecommunications infrastructure and achieved a profit of €1.5 billion in 2015.

Though bruised by its failure in the mobile phone business, the company has continued its interest in electronics and its Technologies division makes an Android-based tablet for the Chinese market. The acquisition for €170 million, also in 2016, of the French digital health company Withings signalled Nokia’s ambition to get back into consumer electronics. Nokia’s Technical division is also pursuing a strong interest in virtual reality (VR) focusing on the development of a leading edge VR camera to incorporate in a high specification VR headset.

Still dreaming of its past success in the mobile phone industry Nokia licensed its brand name to a new Finnish company founded by former Nokia executives in 2015. The com- pany, Global HMD, plans to use the Nokia brand name to market Android-based phones and tablets. Ironically, Microsoft’s acquisition of the Nokia mobile phone business did not prove a success. They retired the Nokia brand and wrote the deal sale off as a massive loss. In 2016 they off-loaded their ‘feature phone line’ (known in the business as ‘dumbphones’ to distinguish them from smartphones) to Foxconn’s FIH subsidiary for $350 million, which has agreed to build the new Nokia phone for HMD.

Sources: Finley, K. (2016) ‘Nokia is plotting a big comeback to the phone business’, Wired, 18 May; Lane, E. ‘Nokia: Life after the fall of mobile phone giant’, Business reporter, BBC World Service, 18 March; Hern, A. (2016) ‘Nokia returns to the phone market as Microsoft sells brand’, The Guardian, 18 May; Lee, D. (2016) ‘Nokia no longer the butt of technical jokes’, North America technology reporter, BBC, 18 May.

Questions1

1 How have Nokia combined Porter’s three generic strategies of cost leadership, differen- tiation and focus?

2 How might the Nokia’s brand name once more become a leading light in consumer elec- tronics?

3 What lessons from Nokia’s original mobile phone business should it and HMD be care- ful to note regarding the balance between incremental and radical innovation?

4 What radical innovations are Nokia pursuing?

Business innovation 129

YouTubes

‘Nokia Looks to Make Mobile Comeback, but Faces Fierce Competition with Apple’, https:// www.youtube.com/watch?v=1YTvwJJOAyc.

‘Nokia Lumia Augmented Reality Case Study’, https://www.youtube.com/watch?v=bV4 UT3r7vfk.

‘Introducing Noke OZO: The New Virtual Reality Camera from Nokia’, https://www. youtube.com/watch?v=HuYpOBp1Q-M.

‘Wild Dolphins VR/360 Degree Video Experience’, https://www.youtube.com/watch?v= BbT_e8lWWdo.

Note 1 Conduct some brief Internet research to build and frame responses.

References Bain & Company and Institute of International Finance. (2013) Restoring Financing and Growth to

Europe’s SMEs, Boston, MA, Bain & Company. Burkis, D. (2013) ‘Innovation isn’t an idea problem’, Harvard Business Review, 23 July, https://hbr.

org/2013/07/innovation-isnt-an-idea-proble (accessed August 2015). Checkland, P. (1981) Systems Thinking, Systems Practice, Hoboken, NJ, Wiley. Chesbrough, H. W. (2003) Open Innovation: The New Imperative for Creating and Profiting from

Technology, Boston, MA, Harvard Business School Press. Drucker, P. (1973) Management: Tasks, Responsibilities, Practices, New York, NY, Harper & Row. Dweck, C. (2008) Mindset: The New Psychology of Success, New York, NY, Ballantine Books. Galliers R. D. and Currie, W. (eds) (2011) Soft Methodology, The Oxford Handbook of Management

Systems: Critical Perspectives and New Directions, New York, NY, Oxford University Press. Goodman, M. R. V. (1995) Creative Management, Hemel Hempstead, Prentice Hall International (UK)

Limited, Chapter 6. Grönlund , J., Sjödin, D. R, and Frishammar, J. (2010) ‘Open innovation and the stage–gate process:

A revised model for new product development’, California Management Review, Spring, Vol. 52, Issue 3, pp. 106–31.

Kirk, D. (1995) ‘Hard and soft systems: A common paradigm for operational management’, International Journal of Contemporary Hospitality Management, Vol. 7, Issue 5, pp. 13–16.

Lichtenthaler, U. (2008) ‘Opening up strategic technology planning: Extended roadmaps and func- tional markets’, Management Decision, Vol. 46, Issue 1, pp. 77–91.

Mudambi, R., Mudambi, S. and Navarra, P. (2007) ‘Global innovation in MNCs: The effects of subsiduary self-determination and teamwork’, Product Innovation Management, Vol. 24, pp. 442–55.

OECD. (2015) ‘Innovation today’, in The Innovation Imperative: Contributing to Productivity, Growth and Well-Being, Paris, OECD Publishing.

Pisano, G. P. (2015) ‘You need an innovation strategy’, Harvard Business Review, June, pp. 44–54. Porter, M. E. (1985) Competitive Advantage, New York, NY, Free Press. Sethi, R. and Iqbal, Z. (2008) ‘Stage–gate controls, learning failure, and adverse effect on novel new

products’, Journal of Marketing, January, Vol. 72, Issue 1, pp. 118–34. Tellis, G. J. (2013) Unrelenting Innovation, San Francisco, CA, Jossey Bass. Van de Vrande, V., de Jong, J.P., Vanhaverbeke, W. and de Rochemont, M. (2009) ‘Open innovation in

SMEs: Trends, motives and management challenges’, Technovation, Vol. 29, pp. 423–37.

130 Innovation from theory to practice

Wynarczyk, P. (2013) ‘Open Innovation in SMEs: A dynamic approach to modern entrepreneurship in the twenty-first century’, Journal of Small Business and Enterprise Development, Vol. 20, Issue 2, pp. 258–78.

Selected YouTubes ‘Innovation 5 Step Process’, https://www.youtube.com/watch?v=N70RK3_zXhc.

‘Strategic Innovation: Design Thinking in Business’, https://www.youtube.com/watch?v= nmkGNXfYmYw.

‘Tellis on Empowering Innovation Champions Within Firm’, https://www.youtube.com/ watch?v=NYfX2-wS9xc.

‘Will Mitchell on Innovation at Three Levels: The Nokia Case at Tilburg University’, https:// www.youtube.com/watch?v=zP9R4LkjEXw.

‘Systems Thinking and Evaluation’, https://www.youtube.com/watch?v=2vojPksdbtI.

7 Organisational culture and climate

We must cultivate our garden. (Voltaire, Candide)

Cultivate simplicity. (Charles Lamb)

Learning objectives This chapter explores:

1 Management acceptance and encouragement of business creativity. 2 Understanding group dynamics and performance. 3 Building teams – with reference to Belbin, MBTI and KAI inventories. 4 Empowering groups – tasks of a creative problem-solving facilitator. 5 Dealing with conflict in groups and teams. 6 Concepts of organisational culture and climate. 7 Establishing and assessing a climate that fosters innovation.

Introduction Learning the fundamental skills of business creativity and innovation is one thing; putting them into regular practice is another and in most cases requires an attitude change. For indi- viduals and groups attention needs to be given to a number of working environment factors that concern organisational cultures and climates. This chapter first reviews what is needed to encourage personal and group creativity before discussing what changes need to be made to traditional organisational structures. (See Figure 7.1.)

Context

Need for group (collective) creativity

Many organisations are experiencing pronounced operating difficulties as a result of con- textual changes in their business environments and some are already facing a crisis. After several decades of sellers’ market conditions organisations are being buffeted by social cul- tural, economic, technological and environmental factors, as discussed in Chapter 1. Added to this competition is getting fiercer and more difficult to beat.

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Key principles

Management commitment

Managers and creativity

If managers are to make a real commitment to learning creativity techniques they need to welcome creative responses and then champion them. This will involve developing individual

Figure 7.1 Seeking a suitable organisational environment.

Organisational culture and climate 133

and personal relationships with their staff. Whilst there always have been managers in organi- sational life with powerful interpersonal skills, many have been tempted to play the detached corporate game. If individual members of staff are to practice creative responses they will need to trust their managers.

Management styles

This will depend not on the individual manager’s perception of themselves but rather on the collective perception of employees. Food for thought! If you are a manager respond, on a separate sheet of paper, to the brief questionnaire in Table 7.1 by ticking the appro- priate column. Now turn to Appendix 7.1 and score your responses. Would you be happy for your staff to complete this questionnaire? Do you think that they would broadly agree with your perceptions?

Manager’s interests

Figure 7.2 presents a matrix that looks at individual staff and managers’ interests. The ideal situation is when the interest of the manager and the individual is high. This is the high-trust quadrant and will enable the manager to cultivate creative responses and excellence. The quadrant below, high/medium trust is when the individual is convinced of the manager’s personal support but doubts if the manager really values the support of the individual. The quadrant to the left is where the interests of both are low. This produces mutual indifference. Finally, the quadrant above this is where the manager’s interest is high and the individual member of staff’s is low. This results in low trust, if any, as the individual assumes the worst.

Group behaviour

Group participation

Man is a social animal and thus most of what we do as individuals has an effect on other people. Similarly what other individuals and groups do has an effect on us, either consciously or unconsciously. We are all prone to modify our behaviour, whether we are in the company of a single individual or a group. The degree to which we modify our responses is directly related to what we believe the expected behaviour pattern is (the group norm) and the mag- nitude of the threat that we perceive in the social transaction. In the company of some people we are at ease whilst the company of others leaves us fidgety and nervous. Generally speak- ing behaviour breeds behaviour – how other people behave towards us determines the way that we behave towards them.

Table 7.1 Management styles

Behaviour trait High High/medium Medium/low Low

Approachable Honest Supportive Fair Open dealing Communicative

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In the course of our everyday lives most of us belong to several different groups. Each of these groups assumes a collective individuality and personality and we choose whether or not to adapt our behaviour accordingly. In our private lives we tune our responses toward domestic stimuli and often feel quite at home in the social groups we choose. Traditional professional groups, on the other hand, are usually regarded as being different, as many are deeply suspicious of the ‘rat race’ culture. Thus our responses tend to be carefully considered and can become programmed to fit the observed hab- its of the group. This can and does place a damper on individual creativity as people seek the non-controversial comfort of the group viewpoint. Figure 7.3 shows how our individual responses change from unchecked spontaneity (high tendency for creativity) to controlled norms (low tendency for creativity) depending on the degree of ‘ease’ or comfort the group culture provides.

Movement from high comfort individual behaviour to conditioned low comfort group behaviour is critically dependent on individuals’ trust expectations. If this is consistently high, individuals will tend to adopt common behaviour patterns and the group will function as a cohesive and united team. Everyone will pull together and the collective purpose (vision)

Figure 7.2 Manager’s interests.

Figure 7.3 Group responses.

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of all will boost performance. Close identity with a group or team generates a collective loyalty or supra individuality that in the right context can be highly creative. If this is missing in groups then the collective individuality loses its dynamism and simply becomes a label – individuals go through the motions. They play the notes but the tune is flat.

Loyalty and group participation

Individuals choose the degree to which they are prepared to relax in a group culture (i.e. within a set of recognised and accepted norms or behaviour patterns). When loyalty is high and the degree of participative membership is low (see Figure 7.4) individuals can be said to be displaying dutiful adherence. In this case the vision or the purpose of the group is accepted but there is little enthusiasm for joining in to further the cause. This appears to be the behaviour pattern adopted by many towards such groups as local churches, chari- ties, and so forth. If both loyalty and degree of membership are low then individuals are practising nominal adherence. Such ‘take it or leave it’ attitudes rarely result in much creative output. This response is neatly captured by the words of President Kennedy who invited Americans in his inaugural speech to ‘ask not what your country can do for you but rather what you can do for your country’. When group loyalty is low and group member- ship high, individuals will tend to see their inputs as being merely professional adherence. This behaviour pattern produces prescribed results characterised by a tendency to do just enough to meet expected job requirements but is often rule-bound and robotic. When the contextual stimuli are both complex and fast changing, professional groups need to dis- play both a high degree of loyalty and participative membership. This is termed inspired adherence and can be seen in the daily work of many teachers, preachers, researchers, and health and social workers whose loyalty to their clientele is often stronger than their loyalty to the organisation.

Figure 7.4 Degrees of group participation. Source: M. R. V. Goodman, Durham University.

136 Innovation from theory to practice

Working in groups

Individuals are managers, as they make decisions relating about what behavioural actions they are going to select in response to contextual stimuli. Managing group responses is a totally different matter. As most training films point out, individuals need to learn how to manage themselves before they seek to manage groups. Individuals who are poorly focused will only confuse themselves. If they are exposed to groups their confusion will be com- pounded. This inevitably leads to them becoming isolated in the group and often regarded with disrespect and scorn. Primitive attempts to pull rank to get their own way just result in inadequate and poorly supported group responses.

Every aspiring group manager should be aware of the basics of group dynamics before practising working with groups. Naive managers who just blunder in will cause severe dam- age to professional group relationships. They are like over-hasty drivers who attempt to change gear without first depressing the clutch. Similarly, power managers who attempt to get their own way by hoodwinking groups will soon be found out and then found lacking. The resultant damage this approach does to groups can be devastating and long lasting.

Responsible group managers should pay heed to:

• establishing group beliefs; • empowering groups to perform; • encouraging group members to interact; • attempting to understand interactions and group belief systems.

Establishing group beliefs

The group must have a constructive purpose or vision. This needs to be effectively commu- nicated to all group members. When groups are formed to look at problems that are complex and messy, wise managers invite group members to discuss the initial brief to achieve a con- sensus understanding of what is involved and what progress options can be explored.

Empowering groups to perform

Avoid threatening individuals or deliberately forming subgroups under the manager’s control to check or thwart progress. Divide-and-rule policies are sometimes legitimate ploys but only in exceptional circumstances. Frequent use of such tactics is a trait of the guerrilla manager – a person who is easily recognised by a tendency to have an exaggerated opinion of their own talents that is not validated by the group.

Encouraging group members to interact

Interaction is the mechanism that builds and sustains the belief system of a group. Interactions involve the mutual sharing of a situation between two or more people, so that each of them benefits from the experience and has their belief system strengthened. Sensitive managers will be aware that interactions need not necessarily mean the same to all those who are involved. People are individuals and will have differing perceptions of the real meaning of what happened. Recognise this as a human trait and remember to summarise deliberations

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at regular intervals – in any case a good convergent creative problem-solving technique. As evidence of this, try asking each person what they thought of their group meeting – you can expect a variety of answers!

Attempting to understand interactions

Responsible managers should endeavour to discover why one group clearly works more effectively than another that is apparently equally resourced. Why are the individuals who work in one section off-putting and difficult to talk to, while those in another section are happy and willing to help? Often it is because of the influence of one individual or a small subgroup of people who exert a strong influence on the rest of the group. This common occurrence is caused by the nature of the interaction within the group. Individuals who inter- act frequently tend to be the ones who influence the development of the group.

Preparing for group activity

Leadership role

Much has been written about the leadership role of the manager (Adair, 1987 [1983, 1985]; Carneli et al., 2012). If the intention is to focus the total thinking potential of the group, in the expectation of finding a suitable agreed solution to a messy problem, the role of leader assumes a special significance. In this instance the traditional military task-oriented com- mand approach needs to give way to a softer, more subtle, steering role that enables the group to perform to high standards. This is a highly skilled function that facilitates rather than dictates a response from the group. It is an enabling role that can be described as creative facilitation (see also Chapter 11).

Group rewards

Man does not necessarily live by bread alone. Whilst the level of remuneration will always remain important to an individual, it is not the only reward that most individuals expect. If an individual is respected by group peers this acts as a powerful motivator. If managers join groups as team members and not as members of the corporate aristocracy this will generate high com- fort behaviour in the group and is likely to encourage creative responses. Most individuals will warm to this approach, as it is often in marked contrast to the expected authoritarian behaviour. Soon the group will become more like a team that displays high levels of trust and appreciation of the contributions of its members. If managers can achieve this and it may take some sustained action, then a real corporate family culture will develop and individual group members will positively identify with the group. The resultant mutual appreciation and respect is, for many, a highly valued experience. This high level of mutual internal support will soon attract external attention and further enhance the kudos of group membership within the organisation.

Group selection and initial briefing

To minimise the potentially stultifying effect of deeply entrenched mindsets, creative facili- tators should assemble unstructured groups. The choice of individual group members itself is a subtle task that balances technical expertise with cross-functional objectivity. Nominated individuals should then be invited to attend a briefing meeting that is designed to:

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• inform them why they have been chosen for the exercise in question; • assure them that they are all equally valued; • tell them how the creative facilitator will operate; • tell them what they can expect to get out of the process.

Managing groups

Every individual is a manager and regularly accepts and accomplishes a variety of tasks. Many may legitimately feel that they are the best person for an important job and opening up the matter to group creative problem solving is not a very attractive option, as it will lead to a lower performance standard and introduce the additional complexity of managing others. So does it always make sense to use groups?

Advantages

If a group is defined as consisting of more than one person then clearly more than one mind can be focused on the problem, which should lead to a greater concentration of total think- ing. This has real advantages if the problem is difficult. In any case even under traditional management practice, groups can potentially offer the following advantages to the lone manager:

• A mix of skills and experiences. • The potential to generate more ideas than a lone individual. • A division of task responsibility. • Members can bullet proof each other’s arguments, thus cutting down the risk of the

adoption of faulty or suspect solutions. • The stimulation that results from personal interaction can lead to improved ideas or

solutions.

Disadvantages

Whilst there are obvious benefits to be obtained from working in groups it is interesting to note that even the smallest of groups – basic partnerships – often seem to generate opera- tional difficulties. How many such difficult partnerships can you recall? Start your train of thought with Gilbert and Sullivan, Sir Tim Rice and Sir Andrew Lloyd Webber, etc. On the other hand, some groups have been found to be disastrous for the following reasons:

• Members were too similar in character and functional speciality. • Group discussion was poorly managed and failed to harness potential group strengths. • There were too many members – 10 to 12 is probably the optimum number. • The group developed what Janis (1982) referred to as group think – ‘a determination

of mental efficiency, reality testing and moral judgement that results from in-group pressures’.

• There was a tendency for certain members to dominate group discussion. • Too many tended to wander off the point. • There was poor use of CPS skills. • There was an overhasty desire to find a solution at any cost. • There was a failure to identify expertise lying within the group. • There was deliberate restriction of key information.

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A skilled creative facilitator can directly address all these disadvantages as long as the organisational management are supportive. However, when pressed to achieve something quickly, many individuals seriously consider doing the job themselves. This can become such a strong personal behavioural norm that it can potentially threaten the acceptance of the group manager by his or her staff. A suspicion arises that their manager does not trust them with important tasks and assignments and this inevitably dampens enthusiasm and the standard of group performance.

Solo or team run?

Clearly it is impossible for group managers under pressure to do everything. Delegating authority for important tasks remains a difficult challenge for many managers. If the con- textual stimuli are well known the solution to the problem is often straightforward and may simply entail a subordinate following a clearly defined problem-solving sequence. However, if the contextual stimuli are complex and changing rapidly, a group may better address the problem under examination. The decision to go it alone or to take the problem to a group is one of the most taxing that managers have to make. The key element here is mutual trust. If this is not evident then interactions will be severely limited in what they can accomplish. The interactive process of management becomes more difficult when the contextual stimuli are complex. This is often the time when managers need to open up to their staff. If their style in more stable times has been autocratic they will need to set about securing a democratic style and this may take some time. Often the problem is that time is not available. If the underlying contextual stimuli are changing rapidly managing successfully may mean abandoning tradi- tional mindsets and intricate management models and risking real-time action. Theory often lags behind practice. Indeed it often manifests itself as the codification of previous practice. Rapidly changing stimuli call for a new style of practice; the creative management response that encourages creativity and innovation (Goodman, 1995).

Belbin’s Team Roles

In a study first published in the mid-1970s that addressed the release of creativity in suc- cessful teams, Belbin (1981) suggested that there were a number of finite and limited roles ‘adopted naturally by the various personality-types found among managers’ (Adair, 1987 [1983, 1985]). These team roles are presented in Table 7.2. This inventory produces well- balanced teams and looks to the people-oriented Chairperson to keep the group together and moving in the right direction, the task-oriented Shaper to see that the job is achieved, and the Plant to provide the creative spark. The other five roles are supportive ones once the people, task and ideas inputs have been addressed.

Table 7.2 The Belbin roles

Role Description

Chairperson Good with people Shaper Good at getting things done Plant Good at generating ideas Resource Investigator Good at finding out what is needed Monitor Evaluator Good at measuring progress and performance Team Worker Good at supporting and helping the group Implementer Good at working for the organisation Completer/Finisher Good at attending to detail to get the job done

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These are, in turn, split into three role groups:

1 action-oriented 2 people-oriented 3 thought-oriented.

Action-oriented roles:

• Shapers are dynamic and energetic – they tend to challenge teams to improve and to maintain focus and momentum.

• Implementers are disciplined and task-oriented – they get things done through planning an implementable strategy.

• Completers (or Finishers) pay attention to detail and stick to deadlines to ensure a pro- ject is completed thoroughly and on time to the highest standards possible.

People-oriented roles:

• Chairpersons take on the role of leader – they delegate tasks and guide team members to achieve specific goals.

• Team workers provide support to ensure effective teamwork – they are good negotiators who give priority to team cohesion.

• Resource investigators are enthusiastic team members and good networkers who explore options and negotiate for resources to help the team to accomplish its goals.

Thought-oriented roles:

• Plants are creative innovators who have good ideas but who prefer to work on their own. • Monitors (or evaluators) critically assess and evaluate other peoples’ ideas in an objec-

tive and impartial manner before taking decisions. • Completer/Finishers are experts who are in possession of the specialist knowledge

which is required for the attainment of the group project or task.

Although Belbin’s model provides clearly stated roles for team members, what happens in real life is often more complex as individuals’ skill and attributes may overlap from one role to another. This may depend on context and team dynamics. Research confirms that all individuals and groups have their own specific role mix and so every team has a unique team culture and climate (Mostert, 2015). Some team members may move easily from one role to another when the conditions that constitute the group change, such as when new members join the group or when a new group is formed (Bell, 2013).

Tuckman model

Another model of team development first developed by Tuckman in 1965 is the Forming, Storming, Norming and Performing model (Bonebright, 2010). During the forming phase, people get to know each other, relationships and trust are built, and implicit or explicit rules are formulated. The four stages demonstrate how a team develops, faces up to challenges, gets down to action and delivers results. Another final phase is sometimes added. This is the Mourning or Adjourning stage, when the team goes through the process of disbanding.

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During this stage, personal conclusions are formed and steps may be taken to deal with the stress of splitting up the team, which is often a consequence of the project coming to an end.

One of the main advantages of utilising teams is the synergy which emerges as a result of the accumulation of the skills and attributes of team members. Team sports, such as football (soccer), where one player may be better in defence, another at attack and another at scoring goals, provides an interesting analogy. Although each player is assigned a specific role, the outcome of the collaboration and the role assignment is based on individual strengths and is likely to lead to increased synergy and success.

Effective teams may provide valuable input to the innovation management process, par- ticularly if attention is paid to the manner in which the team is constructed and how it evolves and develops over time. Teams may, moreover, build, collaborate with and support internal and external sources of ideas, networks and relationships.

The MBTI inventory/Jung’s personality typologies

The Swiss psychologist Jung, though an early follower of Freud, advocated that behaviour was influenced by drives other than purely sexual ones. He studied the differences between people and developed a set of typologies that reflected whether individual personalities were characterised by a tendency toward introversion or extroversion. He described eight basic scales (see Table 7.3).

1 Extroverts (E) tend to look outward and focus on an outer world of people and things. They prefer to communicate verbally rather than in writing and tend to prefer action and variety.

2 Introverts (I), on the other hand, prefer to focus more on their inner world and they can appear to be timid and shy.

3 Sensing (S) types prefer to work with what is given and so appear as practical people that have an eye for detail and prefer proven methods.

4 Intuitive (N) individuals can look beyond their senses and harness their imagination in order to see new possibilities and are not too bothered with points of detail.

For each of the four preference scales Jung identified two opposite preferences (making 16 personality types in total). Thinking types rely heavily on their powers of reason and are good at sizing up situations. Feeling types, on the other hand, pay an especial regard to the impact of their behaviour on others. Judgers have a strong liking for order, control and organisation. Lastly, Perceivers prefer to react and adapt to the moment and thus appear more flexible (see Myers-Briggs, 1987).

Table 7.3 Jung’s personality typologies

Extroversion Looking outward Introversion Looking inward Sensing Manipulating facts according to established procedures Thinking Application of logic and analysis in decision making Judging Tendency to be organised and controlled Intuition Using imagination and refusing to be submerged by detail Feeling Reacting to personal preferences (own and others) and value sets Perceiving Tendency to be spontaneous and flexible

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The 16 types described are not intended to be predictive but to assist individuals to recog- nise their own and others’ gifts. The assessment procedure selects the highest score on each of the four scales as being the dominant characteristic of the individual. So, for example, a person who scores 10 for extroversion and 13 for introversion would be classified by the MBTI inventory as being introverted. As with the KAI inventory, environmental factors can distort the results.

The KAI inventory

Kirton’s KAI inventory (Kirton, 1987) seeks to assess individuals’ response styles in terms of their characteristic approaches to decision making. His adaption-innovation theory places individuals on a continuum from highly adaptive to highly innovative.

Adaptive individuals are seen as those who like to do things better within the same per- sonal, group and organisational standard practices or mindsets. They prefer not to rock the boat. They are less radical in their approach than innovators and so their failures tend to be less damaging to their reputation. They easily work with others. Innovators, on the other hand, approach problems from an entirely different perspective. They tend to escape from mindsets that surround the problem, the workplace and look for inspiration by exploring the problem in another environmental setting. They reconstruct the problem and tend to produce less conventional solutions. They often find it difficult to work with others and many see them as being abrasive and insensitive.

The KAI continuum ranges from 46 (extreme adaptor) to 145 (extreme innovator) with a mean of 90. A difference of 10 points between individuals can lead to communication dif- ficulties. The inventory seeks to measure an individual’s response to three subscales:

O Originality, which has a range from 13 to 65 and a mean of 39. Innovators with a high score tend to produce a proliferation of ideas, whether needed or not and tend to adopt a radical style.

E Efficiency, which has a range from 7 to 35 and a mean of 21.

R Conformity, which has a range from 12 to 60.

The question remains what is it measuring? The way individuals respond to the KAI inventory is influenced by the key stimulants they experience in their total living environment (domestic and professional). As much of Kirton’s work was researched within an organisational context the organisation itself will significantly affect the KAI score. Individuals will be more inclined to work within the accepted mindsets in tight cultures than in freer environments. Whilst it is undeniable that the KAI inventory does reveal some interesting information about individuals it also says quite a lot about the organisations in which they work.

High-trust managers, groups and organisations are more likely to encourage, what Kirton terms, innovative responses than restrictive cultures. It can therefore be difficult to determine what the characteristic style is. Is it that of the individual? That of the organisation? That of the individual within the organisation? There is a danger with the KAI inventory that organi- sations may see it as a way of classifying individuals according to their perceived level of creativity. Despite Kirton’s efforts to prevent this – as he does argue that creativity can be exhibited at both ends of his continuum – many users of his inventory probably do associate active creativity with a high KAI score.

Organisational culture and climate 143

Practice

Empowering people

First task of a CPS facilitator

As Chapter 4 demonstrated, individuals need to step off the familiar stepping stones (memory traces) of their everyday lives and express a willingness to try a different path. The first task of a creative facilitator is to stimulate individuals to become curious about creative thinking. The creative force is omnipresent but not always obviously active in the behaviour of individuals. As individuals can choose their behaviour, they can choose to harness their natural creativity to any challenge in life. So it is a matter of choice to get going with the force, rather than specific know-how, and this choice factor is heav- ily dependent on dominant contextual factors such as organisational climate, culture and working environment.

To foster creative thinking the championing individual needs to create a local climate in the work organisation that, first, upholds the favourable psychological dimensions, as, for example, described in the research of Ekvall and Ekvall (1983) of the Swedish Council for Management and Work Life Issues in Stockholm:

• The need to issue a challenge to employees. • To grant them the freedom, at least at regular intervals, to exercise their own initiative

on problems – to do their own thing. This is a powerful motivator. • To support CPS as a bona fide workplace activity. • To trust individuals to deliver an answer or set of options to the what problem without

feeling that the method (the how) has to be proven beforehand. A purely cognitive expla- nation of creativity is not possible, as its presence is critically dependent on contextual stimuli (Goodman, 1995). Thus, it cannot be modelled and repeated. It may, and usually does, throw light on complex issues, but it cannot be switched on and off like a street- light. It is not a standard single solution to a problem. A streetlight is a static object with a single intensity light. Creativity is a spontaneous flash that can be regular or intermit- tent in frequency and can also vary in its illumination (obviousness) to others.

• To acknowledge that real-life stimuli are dynamic and so, therefore, should be the response patterns of individuals, groups and organisations. The construction of individ- ual and organisational patterns, rules and mindsets that are too tight, in a bid to capture the cognitive understanding of control, is always a dangerous practice – particularly in times of rapidly changing stimuli.

• The acceptance that playfulness is a legitimate creative trait and not a childish, gimmick activity.

• The openness both to permit and then debate the effectiveness of various CPS tools and techniques.

• The recognition that conflicts occur in groups, will need to be sensitively managed, but can be a powerful stimulant to creative activity.

• The realisation that quickly changing stimuli cannot always be accommodated by low risk responses. New challenges always will put pressure on precedent. New memory traces have to be fashioned.

• The realisation that teams can only function well in crises if there is mutual respect.

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Second task of a CPS facilitator

Second, the aspiring creative facilitator needs to give careful attention to the visual climate or environment. This entails:

• Taking a positive lead – in the creation of a new climate. • Getting self and others trained as creative facilitators. • Seeing that a suitable room is available, that is light and airy, with uncluttered walls,

informal physical layout (chairs in circles rather than rows), good table tops, preferably brightly painted with some carefully chosen stimulants placed on shelves and walls (e.g. plants, interesting shapes, pictures, audio/visual facility, etc.).

• Seeing that the room is well stocked with vital materials (such as, Blu-Tack, paper (A4, and it is useful to have a supply of A3 sheets too), marker pens, flip chart/s, Post-It notes, clipboards and notebooks) encouraging individuals and groups to use the room.

Third task of a CPS facilitator

Third, it is important for would be creative managers to take the plunge themselves and lead by example:

• Perhaps the first task here is to generate a supportive atmosphere in the established physical setting by purposefully signalling to your work groups that you really mean business. Convey that you have a genuine desire for the group to solve real problems and expect to see some action.

• Be prepared to give it a sustained go for at least a year and to be prepared to meet and manage any criticism from other parts of the organisation.

• Encourage the formation of small groups (seven is about right) and balance the group members in terms of functional and general skill and length of service. Resist any early temptation to invite senior executives to attend. Wait until you have sorted out early teething troubles and when the group is ready to include senior management.

• Encourage all group members to contribute. Discourage any tendency for any one indi- vidual to assert too great an influence on the group. Keep the group together and resist the formation of splinter groups.

• Inform the group that you are looking for the interplay of three main roles in the meet- ings of the Creative Group Problem Solving Team.

(a) a problem owner; (b) up to five additional assists or helpers; and (c) a creative facilitator – a responsibility you should be prepared to take on initially

yourself – who is responsible for keeping the group on a creativity path and for introducing suitable CPS tools.

Process role of a CPS facilitator

Key process skills

The role of creative facilitator is a vital one and calls for an understanding of the basics of group dynamics and a familiarity with simple CPS tools and techniques. It is important to:

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• Practice both divergent and convergent thinking modes. This is a subtle task that requires the application of the total thinking concept. If the group gets stuck, it is the responsibility of the creative facilitator to prompt some CPS excursions to get the group back on track.

• Mix periods of heavy disciplined thinking with periods of light and zany thinking. • Watch the quality of the group’s performance. Be flexible. It is better to have several

short bursts of energetic activity than to persevere with long sluggish sessions. Most people’s performance starts to wane when they get tired and hungry.

• After each session ask each group member to write down on a Post-It note what they liked about the session and one thing that could be improved.

• End each session by thanking people for their involvement and announce the date and time of the next session.

Conflict in groups and teams

Conflict and tension may arise in teams, especially in circumstances when strong person- alities clash, when communication amongst team members is ineffective or when tasks assigned to individual team members are not sensitively distributed. Team leaders should be constantly aware of this and eliminate possible tension by exercising empathy, listening skills and encouraging participation.

Since conflict may arise as a result of divergent opinions, attitudes or decisions, team members may be trained in skills such as the Six Thinking Hats (de Bono, 2009), which allow for ‘parallel thinking’, a method which may be used for planning, decision making, generating ideas and conflict resolution. Training in mediation or in conflict resolution skills develops increased acceptance of individual differences, together with an appreciation of the richness of divergent opinions and personalities. Sometimes a decision to reach a compro- mise may be taken and sometimes negotiation skills may be sufficient for the conflict to be resolved.

The team’s perception of conflict may be challenged and shifted from a threat to an oppor- tunity. Constructive conflict may give rise to a healthy competitive climate with outcomes which may surpass initial expectations. Achieving a balance between resolving conflict and drawing out positive competitive elements, which may result from conflict, is not an easy task. It is important for team members to recognise and deal with any destructive elements which may arise and to appreciate, respect and understand the value of diverse perspec- tives. Although conflict often arises as a result of differences of opinion, values or attitudes, diversity in the manner in which a team is constituted is one of the main factors which adds dynamism to teams.

Action

Organisational culture and climate

The concepts of culture and climate are often confused in the literature. Climate refers to the environmental factors (physical and psychological) within an organisation and includes, communication, trust, feedback and reward. Culture, on the other hand, involves the norms, values, beliefs and traditions of an organisation, which are often incorporated into the mis- sion and vision statements and which constitute the philosophy and behaviour of the people who make up the organisation.

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Organisational attitude and commitment

Top management both inherit and fashion the attitude that an organisation takes to creativity and innovation. Some place importance in fostering and sustaining creativity and innovation. Others occasionally show interest, usually in the good times, when they are happy to com- mit resources to encouraging them. Others essentially prefer to base their actions strongly on the least-cost production paradigm. In reality all organisations can be said to innovate to some degree. Incremental and radical innovation initiatives should not be seen as mutually exclusive. Continuous or incremental improvements to organisational activity are generally accepted as being an essential part of general management activity. Radical innovation may result from a flash of inspiration; however, consistently successful innovation requires a stra- tegic approach to managing innovation.

Senior management who regard innovation as important will carefully evaluate their busi- ness environments. In relatively static environments organisations are likely to be strongly focused on running their concerns efficiently in the short term. Most organisations, however, are faced with more dynamic and changing business contextual pressures and need to adopt a strong innovative orientation. This will necessitate ensuring that their strategy and structure are carefully tuned to the development of an organisational climate and culture that facilitates business creativity and innovation.

Organisational philosophy

Bower defines ‘company philosophy’ as:

the basic beliefs that people in the business are expected to hold and be guided by – informal, unwritten guidelines on how people should perform and conduct themselves. Once such a philosophy crystallizes it becomes a powerful force indeed. When one person tells another ‘That’s not the way we do things around here,’ the advice had better be heeded.

(Kotter and Rathegeber, 2016)

Expected patterns of behaviour are developed, either through leadership or through trial and error, until they evolve into ‘a set of laws or guidelines that gradually become established’ (Kotter and Rathegeber, 2016).

John Lewis: how far does the ownership of a firm shape its culture?

That was the question behind the experiment started by John Spedan Lewis with his family’s retail business in 1929, aiming to align managers and managed and laying the foundations for the UK’s most famous employee-owned company – the John Lewis Partnership.

Organisational climate

Interest in the literature and amongst practitioners in the link between organisational climate, culture and performance is gaining momentum. However, as yet there is no consensus agreement even on their definitions and, to compound the difficulty in examining these variables, they are dynamic and interact with each other. Climate and culture are sometimes used synonymously.

Organisational culture and climate 147

Empirical research does reveal that there is a significantly positive connection between climate and organisational performance (Turnipseed, 1988; Kangis, 2000).

Generally speaking organisational climate refers to the environmental variables (physical and psychological) within an organisation and includes:

• communication • trust • feedback • reward factors.

East African Brewers, Kenya

East African Brewers is Kenya’s largest brewer. The company produces, markets, dis- tributes and sells an extensive portfolio of alcoholic beverages including its flagship beer brand, Tusker Beer, and spirits such as Baileys, Smirnoff and Black Label. The company also produces and distributes soft drinks such as Alvaro and Malta Guinness in Kenya, Uganda and Tanzania. At the heart of their business are core values that show them to be an employer of choice for talented and ambitious people. Their values are brought to life by their guiding purpose – to celebrate life every day, everywhere, which permeates their work.

The company is committed to the professional and personal development of employ- ees by offering and creating a variety of opportunities and to maintaining a diverse workforce where the different contributions made by employees, through their differ- ent personalities, experiences and perspectives, creates a stimulating and rewarding working environment. A diverse cultural workplace environment gives the company a deeper insight into consumer needs and enhances relationships with their stakeholders.

Source: Adapted from https://www.eabl.com/careers/life-at-eabl (accessed 1 March 2016).

Isaksen (2007) defines climate ‘as the recurring patterns of behaviour, attitudes and feel- ings that characterise life in the organisation’. Expanding this he describes a psychological climate that refers to ‘the intrapersonal perception of the patterns of behaviour, attitudes and feelings as experienced by the individual’. Finally, he identifies an organisational climate that comprises the aggregation of the psychological climate and involves ‘the objectively shared perceptions that characterise life within a defined work unit or in the larger organisation’.

Organisational climate is determined essentially by the interaction between physical and psychological factors. People need to like going to work. Organisations that place a strong emphasis on innovation (e.g. Semco (Semler, 1994) and Happy Ltd. (Stewart, 2012) ensure that the physical working environment is conducive to creativity and innovation. Offices and meeting rooms are carefully designed to provide essential support services with attention also being paid to providing a stimulating environment.

Careful attention also needs to be afforded to developing a stimulating psychological cli- mate for small as well as large businesses (Manning, 2010). People at all levels need to be seen as being important to the operation of the organisation if it is to work effectively and efficiently as a team. As this text argues, it is vitally important for an organisation to build a climate

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of trust that enables staff to firmly believe that they work for a just and supportive concern. This results in an esprit de corps that is apparent to both internal and external customers.

Whilst attention to the physical and psychological determinants of organisational climate is necessary to stimulate creativity and innovation, friction and conflict will occur. Good teams respect both their peers and leaders. A degree of conflict can be a good thing and can provide stimulation as long as it is well managed and all parties believe that justice in the workplace is seen to be even-handed.

Isaksen (2007) argues that ‘group problem solving, decision-making, communication and coordination’ are ‘organisational processes’, while ‘psychological’ processes include ‘learn- ing, individual problem solving, creating, motivating and committing’. Collectively, these influence the performance of employees, teams and the organisation as a whole.

Key factors for developing a climate that fosters innovation

Seven key factors are of crucial importance in developing a climate that fosters innovation:

1 structure 2 leading individuals and teams 3 vertical and lateral communication 4 trust 5 motivation 6 rewards and recognition 7 training and staff development.

STRUCTURE

The organisational structure influences the creative climate in an organisation. As discussed in Chapter 10 there is no magic formula for an ideal structure which may be applied. Organisations should assess their situation to ensure that the organisational structure is designed to enable the flow of communication and to be in line with its desired goals and outcomes.

LEADING INDIVIDUALS AND TEAMS

The key individuals in the innovation process can be described as innovation champions, idea scouts and idea connectors and are important elements to consider where climate is concerned. Innovation champions play a key role in maintaining and sustaining the motivation of employ- ees where idea generation and communication are concerned. Idea scouts scan the external environment for feasible innovative ideas which ensure that the organisation maintains and sustains momentum. Idea connectors create internal and external networks to be able to iden- tify the right person who has the power to act to connect to specific ideas. Teams are also an important element and are constituted on the basis of the members talent and skills. Teams work on new product development and on various stages of the innovation process.

VERTICAL AND LATERAL COMMUNICATION

An appropriate communication strategy, with a two-way flow of communication (both vertical and horizontal), is essential for the creation of the right climate for innovation. Ideas, sug- gestions, feedback and plans related to change should be effectively communicated to all

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concerned. Communication concerning planned changes should include all relevant stake- holders. The information which flows through communication may be used to create a feedback loop through which adjustments to the system may be flexibly applied whenever the need arises.

TRUST

Employees trust each other in a climate which is conducive to successful innovation and where the sharing of ideas is facilitated. Trust enables social cohesion, engagement, com- mitment and allegiance to the values and beliefs of the organisation. It acts to increase confidence, self-esteem and honest communication and to mitigate fear of failure. The belief that what is good for the organisation is good for the individual is based on the construction of a trustful relationship.

MOTIVATION

Motivation is linked to communication, feedback, rewards and recognition. Employees feel motivated if they know they have access to the right person with whom they may exchange their ideas and discuss issues. Challenging tasks which are assigned to the right people act as motivating forces. Feedback is important, as it evokes a sense of participation and belonging. Employees are motivated if they feel that their efforts are being acknowledged, appreciated and rewarded. Emphasis on motivation as an integral element for a successful climate results in an increased commitment by employees towards the organisation and reduced resistance to and fear of change.

REWARDS AND RECOGNITION

Leadership that is committed to nurturing a creative environment understands the motivating elements involved in rewarding employees for their efforts. Intrinsic rewards are generally considered to be more valuable than bonuses or monetary rewards. These include recognition and acknowledgement and positive reinforcement demonstrated through approval and genu- ine appreciation, and benefits which could include an increase in status or the assignment of a challenge or task which carries particular significance (such as representing the organisation at an important event or being assigned to a work-related trip overseas) and possible perks. Innovation may be self-rewarding, since the innovator may be perceived by other employees and management as an ‘expert’ with an enhanced reputation.

When employees own a stake in a company it can create a positive culture. Employee ownership is the fastest growing form of business ownership. An increasing number of busi- ness owners planning retirement are arranging for their employees to take over ownership of their firm, and entrepreneurs creating new businesses are seeing the advantages that employee ownership can bring for business growth. Employee ownership takes this to a new level, by involving everyone in the ownership of a significant part of the business, often a majority or 100 per cent. Companies such as John Lewis are longstanding pioneers.

These companies tend to have a positive culture and committed employees (according to Edinburgh Napier University, 80 per cent of staff of employee-owned companies would recommend them as places to work), but employee ownership is not about creating a warm feeling in a comfortable place. Like every other business, they operate in a highly competi- tive environment and will only survive through financial success. When carefully structured

150 Innovation from theory to practice

and managed, employee ownership can help a business achieve excellence and strong profit levels, sharing those rewards with everyone who has helped create them. Employees can become owners directly, by personally holding shares in their company, or indirectly, through an employee trust.

Being an owner does not make every employer a manager: like any successful company, one owned by employees will need a professional and effective management team. But its managers are far more likely to be paddling with the flow, supported by staff who are commit- ted to their company’s success because they have a stake in it. It differs from a cooperative, which tends to be owned by its users and/or its employees. An employee-owned business is solely owned by its employees.

TRAINING AND STAFF DEVELOPMENT

This should be an on-going practice as opposed to one-off training sessions where the skills and knowledge learnt may be forgotten in a short period of time. Employees require train- ing in soft skills which include idea generation methods, communication skills, opportunity recognition, risk taking and leadership skills. Skills need to be practised over a period of time in order for them to be developed and applied. Follow up training sessions to elicit feedback and to reinforce the skills learnt enables the sustaining of the benefits received during the training session.

Sustaining an organisational climate

This is not an easy task. It requires continuous monitoring, feedback, evaluation and assess- ment. Successes should be celebrated and disappointments investigated with a positive focus on the lessons to be learnt by individuals and groups. Culture is a social concept that is trans- mitted from person to person. It is adaptive as opposed to static, and it may change when necessary to address the challenges or needs which it faces. Culture is social and it is visible in relationships, rather than in individuals, as it comes about as a product of people sharing agreed norms, values and beliefs. Organisations are composed of people and, just as social groups assume a social culture, so do organisations adopt a culture of their own.

Many would agree in principle that organisations would solve their problems if they were to develop working atmospheres or cultures which consistently featured trust and teamwork; this is fine as far as it goes. It represents a start but what it does not do is to address the thorny problem of how can an organisation change its culture. Jacques (1952) developed a definition of organisational culture which covers, first, the dominant corporate style or operating fashion:

The culture of the factory is its customary and traditional way of thinking and of doing things, which is shared to a greater or lesser degree by all its members, and which new members must learn, and at least partially accept, in order to be accepted into service in the firm.

This is followed by a description of supportive behaviours:

Culture in this sense covers a wide range of behaviour: the methods of production; job skills and technical knowledge; attitudes towards discipline and punishment; the customs and habits of managerial behaviour; the objectives of the concern; its way of doing busi- ness; the methods of payment; the values placed on different types of work; beliefs in democratic living and joint consultation; and the less conscious conventions and taboos.

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Organisations, like individuals, develop their own ‘personality’ (or ‘character’) which are fashioned over time by the factors described in the vignette below. Managing organisational cultures is a dynamic process as they shift incrementally in response to internal and external changes (Watkins, 2013).

Organisational personality factors

• The organisation’s unique history, including tradition, that moves from the past to the present and on to the future.

• The behaviour of the people who make up the organisation, who share the culture, and for whom it becomes a way of life.

• Norms, ideology, ideals, values and accepted ways of doing things. • Identity, which includes image, branding, symbols, rituals, traditions, dress code,

myths and reputation. • Functional and dynamic elements, including the way problems are solved and the

manner in which the organisation adapts to the environment. • Mental elements, including learned habits and social controls.

Shared values are at the centre of organisational culture. These include perceptions, beliefs and ideology. These values persist over time, regardless of changes in the membership of the group. They are manifest in the behaviour of people in the organisation and through expressions which include symbols, language, ideology, beliefs, rituals, traditions, myths and products. Employees who join an organisation feel they need to learn how they are meant to act, what they are supposed to do, how they are supposed to do it and how they can expect others to act. This is a response to a felt need for acceptance, security, stability, safety and to avoid embarrassment.

Learning to adapt to and absorb the culture of an organisation may come about through:

• formal or informal induction training; • shadowing another employee; • modelling the behaviour of others; • trial and error; • intuitively; • through direct instructions.

As the behavioural norms, basic assumptions and values which form part of the organisa- tional culture are absorbed by new employees, they learn what the expected ways to behave are and how they should expect others to behave.

Can climate and culture be assessed?

Cameron and Quinn (1999) devised the Organisational Culture Assessment Instrument (OCAI), which investigates the current, and the desired organisational culture. The OCAI has been used extensively and it claims to be both valid and reliable. It is in the form of a questionnaire, with six groups of questions and four alternative answers to the questions.

It is not easy to assess the climate and culture in an organisation. Although quite a few tools are available which claim to measure creativity and innovation within an organisation,

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to date there is no one tool which is considered reliable and valid for assessing either organisational climate or culture. Culture is more difficult to assess than climate. Ekvall (1996) and Isaksen (2007) both agree that it is very difficult to change the norms, atti- tudes and beliefs which constitute organisational culture. They both recommend focus on the organisational climate, as this would allow for the required changes to behaviour and attitude which could, in turn, have some effect on the organisational culture. Assessing the climate or culture in an organisation is a useful exercise, as it brings out the strengths and weaknesses and draws attention to areas where improvement is required through intervention.

Ekvall’s Creative Climate Questionnaire

Ekvall developed the Creative Climate Questionnaire (CCQ) in 1990. This is a 50-item questionnaire which covers ten dimensions of five items each. The 10 factors which Ekvall identifies, which are based on theoretical and applied research and experience are shown in Table 7.4. Ekvall maintains that this instrument is an organisational measure and not an individual measure, as respondents are asked to contribute by taking on the position of an observer of life in the organisation.

Isaksen’s Situational Outlook Questionnaire

Isaksen’s (2007) paper reports on research conducted with organisational leaders which is based on case studies and which describes the use of the Situational Outlook Questionnaire (SOQ). This tool, which is also used for assessing organisational climate, is based on Ekvall’s early work and is quite similar to his questionnaire. Nine climate dimensions are addressed through the delivery of a questionnaire which has 33 questions.

Table 7.4 Key factors in Ekvall’s Creative Climate Questionnaire

Factor Description

1 Challenge This involves meaningfulness and job satisfaction which motivates people to invest additional energy in the tasks they assume

2 Freedom This relates to independent behaviour where information is shared and issues discussed in a free and open manner

3 Idea support New ideas are communicated and discussed in a constructive and positive atmosphere where possibilities for testing new ideas are created

4 Trust/openness Initiatives are taken and ideas and opinions communicated without fear of failure and communication is open and honest

5 Dynamism Life in the organisation is dynamic and lively with new things happening in a lively way

6 Playfulness A comfortable and relaxed environment where jokes are shared and where laughter is often experienced

7 Debates People are keen to discuss and debate their ideas, viewpoints may clash, diversity of thought and forceful arguments are prevalent

8 Conflicts Personal and emotional tension is present, gossip, slander, plots and traps are prevalent

9 Risk taking Uncertainty is tolerated, opportunities are taken up and experimentation is encouraged

10 Idea time Slack time for discussing, testing and developing new ideas

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Great Place to Work Institute

Great Place to Work (GPW) is the global authority on building, sustaining and recognising high-trust organisational cultures. The Great Place to Work Trust Model is built on 25 years of research and data collected through the institute’s Trust Index Employee Survey, which is taken by millions of employees annually worldwide. The Great Place to Work Institute believes in changing the quality of work life for all employees throughout the world. As pio- neers of this social movement, they encourage all those who wish to create their own great workplaces. Clients include Diageo, Samsung and Walkers.

Workplace democracy

Workplace democracy is generally understood as the application of democratic practices, such as voting, debate and participatory decision-making systems, to the workplace. At one extreme lie small firms and charities that have embraced pure, direct democracy. Some claim that this is unwieldy in any but the smallest firms, since more time would be spent decid- ing than doing. At the other extreme lie firms where executives follow recent management fads and exhort employees to practise self-management and ‘feel like owners’. In the 1990s, the idea was co-opted by organisational development and management studies and under- went a change: workplace democracy, which mostly meant limited participation, became a managerial tool to boost employees’ motivation and efficiency and so contribute to entrepre- neurial success. In the last few years, however, the ideal of workplace democracy has become increasingly attractive (Pausch, 2014).

Generally speaking, an enterprise can be run in a top-down manner or a bottom-up approach. In a top-down approach, input as well as decision making is the exclusive task of managers. In a bottom-up and emergent approach, employees can provide input for deci- sions, which are still made by managers. Only a democratic approach includes all employees in all stages of the decision-making process (van der Vliet, 2012). The general assumption of organisational development is that a bottom-up approach would be more effective than an old-fashioned top-down approach. It holds that entrepreneurial strategy needs to be a fluid and an on-going process with inputs from all people concerned.

Summary For organisations to successfully innovate it is essential for top management to adopt a holis- tic attitude and climate that encourages business creativity and innovation. Most people work in groups or relate closely to them so organisations need to empower their employees by ensuring all in management or leadership positions understand the basics of group dynam- ics. Whilst innovations can result from an individual having a flash of inspiration most result from dedicated team working. The role of trained CPS facilitators can smooth the process of idea generation and development and can be useful in dealing with individual and group conflict situations. Important factors that need to be addressed to develop and sustain a sup- portive corporate climate are flagged, the most important of which is the full commitment of top management to the cause. Businesses that take a democratic workplace approach to pur- suing their objectives have built cultures and climates that foster innovation. Whilst this can be easier for an SME to develop it is not impossible for larger organisations such as MNCs if a determined effort is made by top management to redesign their corporations to accom- modate employee and group self-management activity.

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Discussion questions 1 How can management styles encourage individual and group creativity on-site and off-site? 2 How can managers facilitate group performance? 3 What are the process roles of creative problem-solving facilitators? 4 How can individual and group conflict be managed? 5 What is meant by organisational culture and climate? 6 What are the key factors for developing a climate that fosters innovation? 7 How can culture and climate be assessed?

Case exercise

Samsung: seeking a creative corporate culture

As its smartphone sales stutter and a generational leadership succession looms, Samsung Electronics is under pressure to reinvent itself – to be more innovative, but not to lose the rigour and focus that made it a global powerhouse. Following a heart attack in the spring of 2016, Chairman Lee Kun-Lee has been succeeded by his son and heir-apparent, the Harvard- educated Jay Y. Lee. ‘The company is in a Catch-22 situation when it comes to changing its culture,’ said Jay Subhash, a former senior product manager who left Samsung in April. ‘It desperately needs to adopt a culture that fosters openness, creativity and innovation. However, doing so would jeopardise its greatest existing cultural asset, its militaristic hierar- chy, which enables it to operate at lightning speed to outpace the competition.’

The company has for some time believed that it needed to seek a creative corporate culture and in 2007 approached the American Great Place to Work (GPW) Institute to compile a confidence index survey of its domestic and overseas workforces. Based on the GPW analy- sis results, each division and department prepare and implement improvement plans to build a GPW by filling the gaps in the five survey categories (trust, respect, fairness, pride and solidarity). Also, 400 GPW officers supervise and implement corporate culture improvement activities at each workplace.

Based on the belief that sharing best practices is one of the most effective ways to build the GPW, Samsung Electronics operates a separate GPW portal within its intranet and publishes the GPW magazine to share best practices of improving corporate culture and GPW-related information. In particular, the semiconductor and LCD business divisions hold GPW Awards to encourage pertinent departments and employees to share their GPW activities and perfor- mances annually.

Samsung wants to speed up the change of its internal culture to make the 300,000-per- son company operate more like a start-up. Executives have pledged to move the company away from its traditional corporate structure to a more open working environment. Changes will include holding more online internal discussions and reducing extraneous meetings; cutting down the levels of staff hierarchy; and reducing overtime and encouraging employ- ees to spend their weekends with family or pursuing professional education opportunities. Samsung, which has been criticised for its infamously rigid working culture, is hoping that the cultural shift will help it to encourage creativity and to speed up innovation.

These corporate changes come at the same time as Samsung has said it’s attempting to change from being a hardware manufacturer to a software leader. Software, as with Nokia, has always been secondary to Samsung. Now the company is actively seeking to acquire software companies, including those focused on artificial intelligence. At the same time, while Samsung’s smartphone shipments still dominate the global market, it has seen a steady decline in global market share during the period 2011–15.

Organisational culture and climate 155

Samsung has long emphasised the need for creativity while hiring more foreign talent, as it operates in increasingly diverse markets. Along with relaxed rules on work hours, it stresses a ‘Work Smart’ philosophy to reduce unnecessary time spent at the office. While it’s hoped a looser environment will help stir new ideas, some insiders say progress is slow against what is often described as an entrenched culture of rigid, top-down management. ‘Samsung’s doing some soul searching right now, it’s asking itself “who am I, and what should I do next?”’ said Chang Sea-Jin, a business professor at Korea Advanced Institute of Science and Technology.

In the long term, the company needs to become global and open. Giving employees more autonomy requires a new culture and shared leadership approach. For a national culture that is heavily influenced by a Confucian conformist culture the company faces powerful social mindsets. Confucianism is a culture that has deep respect for age. Hierarchy is very important and this poses problems if employees feel that new ideas could be interpreted as challeng- ing their boss. Senior management are aware of this potential constraint and determined to overcome it, whilst also preserving the respect that the Confucian cultural code expects, have established a Creative Lab programme. This permits individuals or in teams take a year to develop an idea if it is deemed worthy of pursuit. Samsung says it had some 14,000 ideas last year through this programme and other company initiatives.

Though widely respected in Korea, Samsung has a reputation for imposing a heavy work- load and limiting personal time. This runs counter to its declared aim of accepting the need to provide space and time to boost creativity and innovation and to improve the work–life balance for its employees. The original Theory X management style has morphed into a Theory Y style over the years but now needs to morph again into a Theory Z approach. The succession of a new Chairman provides an opportunity for a new style of leadership that will speed the transition to a fully fledged Theory Z organisation.

Questions

1 How can individual managers encourage creative thinking in Samsung? 2 How can individual managers reconcile their need to champion employee’s ideas and

respectfully deal with any conflict that may arise from Confucian values? 3 How is the company assessing its progress toward developing a new culture and climate

that supports creativity and innovation?

YouTubes

‘How BIG Is Samson?’ https://www.youtube.com/watch?v=6Afpey7Eldo.

‘The Best of Corporate Culture’ https://www.youtube.com/watch?v=XzkflxO82O4.

‘Why Work at Samsung?’ https://www.youtube.com/watch?v=9Gg_tQ8FVeA.

Sources: Korea Times, 13 October 2015; Reuters, 16 March 2016; Samsung website, http:// www.samsung.com (accessed 30 November 2016).

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Management Decision, Vol. 38, Issue 8, pp. 531–40. Kirton, M. J. (1987) Adaption-Innovation Theory (KAI) – Manual, Hatfield, Occupational Research Centre. Kotter, J . and Rathgeber, H. (2016) That’s Not How We Do It Here!, New York, NY, Penguin. Manning, R. I. (2010) ‘Development of the psychological climate for small busineses’, Journal of New

Business Ideas and Trends, Vol. 8, Issue 1, pp. 50–65. Mostert, N. M. (2015) ‘Belbin – the way forward for innovation teams’, Journal of Creativity and

Business Innovation, Vol 1, pp. 35–48. Myers-Briggs (1987) Type Indicator Report Form, Palo Alto, CA, Consulting Psychologist’s Press. Pausch, M. (2014) ‘Workplace democracy: From democratic ideal to a managerial tool and back’, The

Innovation Journal: The Public Sector Innovation Journal, Vol. 19, Issue 1, pp. 1–14. Semler, R. (1994) Maverick: The Success Story Behind the World’s Most Unusual Workplace, London,

Random House. Stewart, H. (2012) The Happy Manifesto: Make Your Organization a Great Workplace, London,

Kogan Page. Turnipseed, D. L. (1988) ‘An integrated interactive model of organisational climate, culture and effec-

tiveness’, Leadership & Organization Development Journal, Vol. 9, Issue 5, pp. 17–21. van der Vliet, M. (2012) ‘An alternative organizational model: Workplace democracy’, master’s the-

sis, Department of Organization and Strategy, Faculty of Economics and Business Administration, Tilburg University, Tilburg, The Netherlands.

Watkins, M. D. (2013) ‘What is organizational culture? And why should we care?’, Harvard Business Review Press, May, https://hbr.org/2013/05/what-is-organizational-culture.

Selected YouTubes ‘Understanding Group Dynamics’, https://www.youtube.com/watch?v=gl_0bGD5Jv8.

‘Belbin’s Theory on Team Dynamics’, https://www.youtube.com/watch?v=gl_0bGD5Jv8.

‘Tuckman’s Model: Fight Right!’, https://www.youtube.com/watch?v=MNgzjYb02JM.

‘Conflict Resolution’, https://www.youtube.com/watch?v=KY5TWVz5ZDU.

‘What Is Corporate Culture?’, https://www.youtube.com/watch?v=gficoigz1xs.

‘The Best of Corporate Culture’, https://www.youtube.com/watch?v=XzkflxO82O4.

‘Organizational Climate’, https://www.youtube.com/watch?v=MfHKW4txFts.

‘From Desire to Disciple: Creating a Culture of Innovation in Our Workplaces’, https://www. youtube.com/watch?v=a_pHGbL5138.

Organisational culture and climate 157

Appendix 7.1: management traits assessment

Behaviour trait High (score 4)

High/medium (score 3)

Medium/low (score 2)

Low (score 1)

Approachable Honest Supportive Fair Open dealing Communicative Total

Note: The higher your total scores the better! Do reflect on your individual behaviour trait scores.

Appendix 7.2: group CPS audit

Question Never Sometimes Fairly often Regularly

1 Are the group’s members at ease with one another? 2 Do individual members participate? 3 Does the group always know what it is supposed to

achieve? 4 Is the group closely facilitated? 5 Is the group empowered to achieve? 6 Do group members interact well with each other? 7 Is their work acknowledged by a manager? 8 Do group members socialise after work? 9 Are their efforts visibly rewarded? 10 Are they optimistic? 11 Does the group generate many ideas of its own? 12 Is the group membership well balanced? 13 Can the group spirit be described as ‘one for all

and all for one’? 14 Is the group’s achievement predictable? 15 Is the group’s expertise fully utilised? 16 Is the group’s work appreciated by the

organisation? 17 Has the group assumed an identity of its own? 18 Does it use CPS tools and techniques? 19 Is change welcomed? 20 Does the group like meeting? 21 Does the group use Imagineering (right-brain) tools? 22 Does the group work well? 23 Are group members highly motivated? 24 Does the group reach decisions by consensus? 25 Does the group deal with conflict effectively and

efficiently? 26 Does the group get easily distracted? 27 Does the group prefer to adapt the ideas of others? 28 Does the group challenge rules if they think that

they are silly? 29 When the going gets tough does the group stick

together? 30 Does the group have a tendency to wander off the

point?

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Appendix 7.3: assessing group performance

Question Never Sometimes Fairly often Regularly

1 1 2 3 4 2 1 2 3 4 3 1 2 3 4 4 4 3 2 1 5 1 2 3 4 6 1 2 3 4 7 1 2 3 4 8 1 2 3 4 9 1 2 3 4 10 1 2 3 4 11 1 2 3 4 12 1 2 3 4 13 1 2 3 4 14 4 3 2 1 15 1 2 3 4 16 1 2 3 4 17 1 2 3 4 18 1 2 3 4 19 1 2 3 4 20 1 2 3 4 21 1 2 3 4 22 1 2 3 4 23 1 2 3 4 24 1 2 3 4 25 1 2 3 4 26 4 3 2 1 27 4 3 2 1 28 1 2 3 4 29 4 3 2 1 30 4 3 2 1

8 Overcoming resistance Mindsets and paradigms

The innovator makes enemies of all those who prospered under the old order and only luke-warm support from those who would prosper under the new.

(Machievelli, The Prince)

We can’t solve problems by using the same kind of thinking we used when we created them. (Albert Einstein)

Learning objectives This chapter explores:

1 The power of mindsets and paradigms in the operations of business organisations. 2 The role of thinking pattern sets. 3 How group and organisational mindsets interact. 4 The role of psychological factor sets in shaping perceptions. 5 How these perceptions can act as blockages to individual and organisational business

creativity.

Introduction Many individuals, groups and organisations appreciate the need to adopt a fresh approach to meeting the complex challenges of modern buyers’ markets. However, successfully converting this ‘wish’ to practical achievement is often frustrated and sometimes killed by the destructive power of individual, group and organisational mindsets and paradigms. Resistance to practising business creativity skills and to successfully managing innovation and entrepreneurial skills is common. Commitment to learning new methods of problem solving requires both a dedication and a time commitment. The chapter explores the destruc- tive power of this resistance and explains how steps can be taken to overcome many of the frequently experienced creativity blockers. (See Figure 8.1.)

Context

The power of mindsets and paradigms

In their Handbook for Creative Team Leaders, Rickards and Moger (1999) include Charles Handy’s gruesome metaphor of the boiled frog to dramatically illustrate the power of mind- sets. Handy noticed that if a frog is placed in water that is at a comfortable temperature it is

160 Innovation from theory to practice

Figure 8.1 Overcoming mindsets and paradigms.

quite calm. If the temperature is raised gradually the frog shows no sign of discomfort until, well before the water boils, the frog dies. If a frog is dropped into water that is very hot or close to boiling it will attempt to jump out as the sudden realisation of impending danger trig- gers a reaction. This metaphor shows how human mindsets may be blind to mounting threats until a sudden shock causes people to realise the seriousness of their situation.

Overcoming resistance 161

Mindsets are defined by the Concise Oxford Dictionary as ‘fixed opinions or states of mind that are formed by earlier events’. They are mental attitudes that influence the ways individuals interpret and respond to experienced real-time conditions. As manag- ers are placed under sustained pressure to perform in a rapidly changing wealth-creating environment how they think in chaotic uncomfortable conditions is attracting increasing attention. This is determined by a complex pattern of mental input factors including personal, group and organisational influences. At the individual level thinking patterns that fashion behaviour are determined by four key factor sets: cultural, social, personal and psychological.

1 Cultural factor sets include the dominant cultural and social class factors that surround an individual from birth.

2 Social factor sets encompass an array of influences such as preferred reference groups, family expectations, and so forth.

3 Personal factor sets describe a complex collection of variables that shape individuals’ thinking and value choices, such as age, life-style, economic status and personality, etc.

4 Psychological factor sets address the key variables that determine individuals’ percep- tions, learning patterns, and the way that they acquire beliefs and attitudes. These factor sets integrate to form a complex system (personal mindset) that governs the general/ habitual thinking patterns of individuals.

Clashing ideologies

Two mindsets can be found in the boardrooms of many organisations that seem to be mutually exclusive.

The first is the belief that the business of business is business. This is the view held by many established Anglo-Saxon economies. This view contends that the sole pur- pose of management is to create shareholder value and that social issues are not a major concern of corporate management.

The second mindset stresses the importance of corporate social responsibility and argues that business activity should actively reflect social issues and that these are not peripheral activities but central to business practice.

This text argues that these mindsets should not be taken as mutually exclusive and that corporate mindsets should reflect a balanced approach that combines the goal of generating shareholder value with that of social contracts to nurture and build the long- term development of the market infrastructures in which they operate.

Source: Davis, I. ( 2005) ‘The biggest contract’, The Economist, May.

When individuals are viewed in group situations further complexity arises. By definition a group is a collection of individuals all with their own unique collection of factor sets. Harmonising their behaviour is cognitively a highly complex task. The imposition of linear causality – for example, the belief that the way to get individuals to work together, is to stick them together, give them something to do and then determine their reward on how much they accomplish in a given period of time – is a mechanistic approach to management that will inevitably constrain individual performance. At its most extreme this reduces individuals to units of input, and unless they have private reasons for accepting this (because there is lit- tle if any alternative employment) most individuals will tend to go through the motions and

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do the minimum that is necessary to earn their bread. Others, though severely repressed by insensitive management, will for their own satisfaction – perhaps to stay sane – put in some extra effort to innovate somehow.

Key principles

Group mindsets

A group of individuals is by definition a collection of individual mindsets. The cognitive and motor behaviour that people perform in the course of pursuing a goal can induce a mind- set that persists to influence the strategy they use to attain very different goals in unrelated situations (Wyer and Xu, 2010). Individuals also change their behaviour patterns when they interact with others. Behaviour breeds behaviour. The degree to which behaviour choices are changed is governed by a complex set of factors that include perceived trust, motivation and so on. (Individuals tend to naturally release more creative effort at home than in the work place where the sensed group and/or organisational climate – contextual stimuli – makes them more at ease.) A new group mindset emerges that is separate from and additional to each individual’s personal mindset. The nature of this is conditioned by the perceived level of trust in the group. In short, more personal trust produces more collective or group trust and potentially greater creativity.

Chapter 7 discussed the basics of group dynamics and the leading factors that commonly arrest group performance. Individuals can be encouraged to express themselves in groups and this is a key skill of an effective traditional manager. Sustained high group performance requires sensitive management skills that seek to enable or release it rather than impose it. If external stimuli make a group’s task more and more difficult to achieve then effective managers will know that they have a real problem. Months of sound management practice can dissipate into chaos, falling morale and disillusionment if a group manager is tempted to go for a quick (often linear) fix to appease some organisational authority. The credibility – and thus success – of an enabling manager can take months to achieve but can be lost in less than a minute. Group managers under pressure should be given open encouragement by their organisations to audit their own skills, and be given the opportunity to improve key compe- tencies and to acquire new ones that are relevant to the prosecution of their responsibilities. They should not be required to perform in new and changing contextual situations by being expected to use management tools and techniques that were designed for quite different days. Nor should they be hindered by beliefs and attitudes that were formed to serve the needs of former times.

Organisational mindsets

So a manager who is responsible to his staff/group (is loyal) will have to find an approach that harmonises all the constituent mindsets. This is further complicated by his or her need to exercise responsibility to the organisation (Pina e Cunha et al., 2001), which will possess yet another collection of mindsets. Managing effectively in a chaotic context will often place the manager where it is very difficult to win. The organisational mindsets may insist that things are done in certain ways because that is how they have always been done. To suggest anything different smacks of disloyalty. Most of us at some time or another have been reprimanded for an unconventional approach to a problem by the sharp retort, ‘We don’t do things this way here’. Organisations like individuals are jealous guardians of their beliefs and attitudes.

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Again, individuals may dislike some organisational ways that perhaps owe their origin to sunnier days and over the years have become enshrined in corporate mindsets. Frustration abounds when individuals realise that these organisational mindsets are blocking their efforts to solve today’s complex problems. Then there are the work groups. These often present real problems, as they tend to be caught between the individual and corporate mindsets.

To any manager, and especially a potential creative manager, warring mindsets pose a really difficult challenge. To make matters worse, they are self-perpetuating and self- reinforcing mechanisms that are capable of flying high over current contexts whilst attempt- ing to understand and manage them with the tools and techniques that originated in the past (see Figure 8.2).

Challenging mindsets

It is therefore quite understandable for managers to spend much time agonising over how much they can challenge an organisational mindset if they honestly believe that it is restrain- ing problem-solving activity. Some managers, in the belief that most problems are temporary and organisational mindsets are permanent, sacrifice the pressures of the contextual reality to those of history. In turbulent times these responses can severely damage individual and group morale and hence achievement levels.

Psychological factor sets

Some useful light can be thrown on understanding individual, group and organisational mindsets by taking a brief look at the psychological factor sets whilst, for the time being, treating the cultural, social and personal factor sets as hygiene factors (Hertzberg, 1987). The key psychological factors are: perception, learning, and beliefs and attitudes.

Perception

When individuals and groups are exposed to external contextual stimuli they either accept that the stimuli are real and so seek to respond positively to the challenges this brings, or they

Figure 8.2 Assumptions becoming mindsets.

164 Innovation from theory to practice

modify this reality (Figure 8.3). One modification is to distort the reality so that it becomes agreeable or comfortable. An alternative modification is to reject the current stimuli alto- gether and to retain older, more comfortable, perceptions. Once individuals and groups have made their respective selections they need to collect and collate information that will assist them to interpret fully the meaning of the contextual factors and so be able to think about their positions. As individuals and groups tend to be closer to contextual reality than organi- sations they are often aware earlier of the need to move away from the virtual reality that many organisations display. This means that they are often ready to think about alternative courses of action before their organisations. So why try and change organisations from the top down? In essence an organisation is the shared view of its members and so can be seen as a single collective mind (Mitroff, 1984). The private response activities of individuals and groups will be characterised by changes in behaviour resulting from a careful consideration of the changing stimuli. This is the learning factor.

Learning

A willingness to modify and sometimes abandon old ways makes sense for private groups, for they are custodians of their own future. Stay in one place too long and the social world passes you by. Organisations, on the other hand, are frequently characterised by entrenched mindsets and so seek to maintain the comfort of their status quo when everything else around them is changing rapidly. This stiff-upper-lip approach can be quite valid if the

Figure 8.3 A matter of perception. Do you see a white triangle even though there are no edges or contours? Does the triangle appear whiter than the white background?

Overcoming resistance 165

change dynamics are purely temporary and confidence expects the good old times to return soon. If the change dynamics are not temporary this failure to acknowledge the real state of the environment can be suicidal.

Beliefs and attitudes

Organisations can so envelop themselves with mindsets and paradigms that they effectively lose sight of their operating environment. Solid successes in previous times may well have led to the construction of immense bureaucracies whose job is often interpreted as being to maintain this status quo at all costs. Sometimes whole organisations can become the prisoner of myopic thinking and overzealous administrators. Forms, regulations, statistics and other measures are designed to keep the organisation happy. If powerful cliques feel that the real news is just unacceptable then some will attempt to blow it away by altering the measuring system so that it says what they want it to say. This is an acute version of distorted percep- tion but it is more common than many would like to admit. Supposedly a sign outside Albert Einstein’s door read: ‘Not everything that counts can be counted, and not everything that is counted, counts.’ We must not get hypnotised into relying solely on the power mindset of research, numbers, data and facts – we must continue to trust in and recognise the invaluable quality of creativity in energising business activity (Berliner, 2015).

Of course, there are many fine organisations that capture the wind of change and use it to create wealth, but, sadly, many fail to perceive accurately the seriousness of their contextual positions until very late in the day. No over-harsh criticism of administrators is intended, for their services are required. However, they are needed to support management not to subsume it or to place it in chains. Administrators should serve organisations and not dominate them. Organisations that allow their administrations to escalate in the good times later discover that they are still employing large numbers of administrators when times become less prosperous. Some even continue to expand their administrative departments even when operating condi- tions are waning.

Consultancy work has given first-hand awareness of many vastly inflated administrative empires that in some cases outnumber the productive headcounts in organisations. As operat- ing environments become harsher, most organisations are faced with more and more complex problems that require more than basic rational-analytical thinking and the common tendency to oversubscribe to linear causality models. Today’s ‘borderless world’ is a complex place that is increasingly characterised by complex systems. To understand these systems, manag- ers need to become acquainted with systems thinking. There is mounting evidence to suggest that how managers think about problems and their organisations is directly related to their ability to achieve responses (Senge, 1990). The next sections provide an overview of hard and soft systems thinking.

Creativity blockers

Expecting resistance to change and planning for it from the start will allow managers to effectively cope with objections. Understanding the most common reasons people object to change gives a manager the opportunity to plan a strategy to address these factors.

The key six blockages to personal creativity commonly identified in the literature (e.g. Osborn, 1963; Kreitner, 1980) are as shown in Figure 8.4.

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Perceptual blockages

These blockages arise from the way that we have learnt (instruction and experience) to adapt to the stimuli that surround us in the world as we see it. Habitual responses can lead us to miss other, perhaps contextually more suitable, responses. For example:

• Seeing only what we expect to see, failure to really understand contextual stimuli – driving in fog! (Figure 8.5.)

• Stereotyping – tendency to jump to conclusions too quickly. • Eyes down – propensity to tunnel vision. • Mistaking cause and effect – if there turns out not to be a hotel room for an invited guest

and we assume that is the hotel’s fault when in reality our secretary forgot to make a reservation, our search for solutions will be misdirected. The fact that there is no room for our guest is an effect of the problem not the cause.

Figure 8.4 Common individual CPS blockages.

Figure 8.5 The Nine Dot test.

Overcoming resistance 167

Emotional blockages

These blockages are evident when we deliberately suppress an idea or course of action because we perceive that it will be unpopular with our peer group and do not want to risk their scorn. Or, perhaps, when we come up with an idea that is different (such as, for exam- ple, an Imagineering (Morgan, 1997) approach) and we do not want to look ridiculous in the eyes of our fellows. For instance:

• Fear of making mistakes or looking silly. • Racing away – rushing in too quickly may result in the wrong problem being solved or

the right problem but with the wrong CPS approach. • Playing it safe and avoiding anxiety – a common response in individuals who are uncer-

tain of how much support they will receive from the group or organisation. • Awaiting instruction – related to the above cause, and tends to be found in rule-bound

organisations. • Sloppy response – tends to be found in situations where the problem is routine and the

overall motivation of the staff is low.

Process skill blockages

These are caused by a basic lack of technique. This can all too easily arise when we have been used to existing in fairly stable operational conditions where real problems and challenges are few and far between. For example:

• Lack of knowledge in problem-solving process. • Lack of creative thinking – a reluctance to use creative thinking. • Too heavy a reliance on logical skills – wanting to write the proof before the problem

is solved. • Snatching at the problem – failure to apply methodical convergent/divergent tracking

points. • Lack of sufficient contextual information, poor or the wrong problem statement and poor

CPS ability. • Lack of understanding of the facts – shooting in the dark.

Communication blockages

These occur when we are unable to communicate in a suitable style for our voice to be heard and understood by those charged with tackling the problem in question. Examples are as follows:

• Failure to couch the problem and its proposed solution in suitable terms. General man- agement will not comprehend functional jargon. Not all concerned outside publics will understand the organisational ‘speak’.

• Difficulty in explaining the situation to others, as it is sometimes unconsciously cloaked in jargon and/or organisational ‘speak’. The safe default is to explain things clearly and simply.

• Failure to justify recommendations. • Failure to capture the attention of vital parties owing to weak presentation skills. • Autocratic, argumentative styles that annoy people.

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Environmental blockages

These often crop up to distract us from getting to grips with a problem and frequently result from unexpected or seasonal increases in our workload. For example:

• Management culture – the impact of organisational mindsets. • Comfort factors – poor facilities (everything from toilets to coffee and tea provision) can

dampen enthusiasm and quality of response. • Ambivalent attitude of key contacts in the organisation. • Monotony – need-to-know management causes people to get bored. • Absence of kaizen – people are more responsive if they know that they are expected to

look continually for better ways of doing things.

Cultural blockages

This set of blockages impact on us as a result of of personal, group, organisational and national cultures. For example, some managers feel that the Creative Management style is too open and risky and may harbour the latent opinion that staff are to be instructed and not consulted! Instances are as follows:

• Religious acceptance of the status quo. • Resistance to major change. • Distrust of illogical ‘right-brain’ and total thinking skills. • Belief that humour is for private life only. • Reluctance to work in teams – everyone-for-himself mentality does not foster coopera-

tive effort. • Lack of vision. • Work environment • Socio-cultural factors • Emotional charge. • Communication factors. • Perception issues. • Participation issues.

Practice

Obstacles to individual business creativity

After a creativity workshop in Durham, delegates were asked to brainstorm the main obsta- cles, as they saw them, to introducing creative personal problem solving (CPPS) into the lives of their colleagues at work. They were also asked to suggest ways that these obstacles might be overcome. Table 8.1 summarises the results.

Tiredness

Many exhibited a reluctance to put in the necessary time to learn a new skill. Home was seen as a place to relax and that did not include thinking about being creative! Work was identified

Overcoming resistance 169

with pressure – paper and politics that made people tire quickly and reduced their enthusiasm to attempt anything new. Invariably the workplace was seen as a mechanistic culture where some pulled the levers and the others ‘did their bit’.

Anxiety

Experienced at work, was often transferred after working hours to home life. Many found it difficult to relax away from work and free their minds to attempt anything new.

Negativity

The harsh economic climate of the North East led many to adopt a pessimistic outlook on life. Often frustration with the performance of ‘the management’ or the euphemistic ‘they’ seemed to produce a pronounced negative culture.

Fear of failure

This occurred frequently and was cited by individuals working in both large and small organ- isations. Many in this group did not realise that it was possible to practise creativity at home in a safe environment (Kennedy, 2011; Storm and Angello, 2010).

Fear of standing out from the crowd

Several delegates were tempted but reluctant to speak out for fear of the consequences, pre- ferring to keep their heads down.

Fear of challenging the rules

Unsure of how managers might react to suggestions to do things differently, many opted to keep quiet.

Fear of emotional things

Many delegates felt that they would risk emotional responses if they advocated total thinking practices.

Table 8.1 Individual CPS blockages

Obstacle Advice

Tiredness Get a good night’s sleep Anxiety Relax Negativity Be positive Fear of failure Trust your intuition Fear of standing out from the crowd Stand your ground Fear of challenging the rules Rules should help, not hinder Fear of emotional things Realise that total thinking makes sense Myopia Wake up!

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Myopia

Many thought that top management were not in tune with the real world faced by the front line personnel and felt that signalling this would result in hostile management reactions.

Obstacles to group business creativity

Some weeks after, delegates on a creativity workshop in Durham were requested to report what they saw as the main barriers to introducing CPS to individuals in their organisation; another set of delegates on a creativity workshop were asked to indicate what they saw as the main blockages to introducing CPS successfully. Table 8.2 summarises the results. On the other hand, blockages commonly identified in the literature on CPS – basically stemming from a poor understanding of how to manage groups – are summarised in Table 8.3.

Table 8.2 CPS difficulties: an empirical sounding

Obstacle Advice

Negative attitudes Quietly get on and try some CPS tools and techniques without feeling it necessary to explain the how involved and produce some good results

Politics Stand your ground; argue to be judged on results – seeing, rather than telling, encourages believing

Fear of exposing poor team work of others

Operate tactfully. Tackle problems; don’t evangelise the CPS cause

Myopia Calmly explain the contextual factors affecting the problem to all group participants

Concern over problem choice Select non-complex do-able issues at first Low creativity Need for guidance of a skilled CPS facilitator Lack of trust Do your best to earn it Poor problem-solving skills Introduce and demonstrate some basic tools Unclear aims Develop a problem statement to clarify Reward structure viewed as

unfair Indicate your understanding and seek to influence

the system

Table 8.3 Leading CPS difficulties identified in the literature

Obstacle Advice

Lack of vision Inform group of what is involved and seek their collective ownership of it

Poor participation Encourage individuals to contribute – provide a safe environment; avoid power driving the group

Poor interaction Get the group to talk amongst themselves as well as to you; promote a ‘one for all and all for one’ philosophy

Lack of trust Up to the facilitator to dispel Poor reward Requires the facilitator to use imagination – successful group behaviour

has to be recognised in some way. People do not live by bread alone Starting too soon Facilitator needs to carefully guide the group and to resist people

looking for pre-conceived answers rather than generate ideas Confused focus Facilitator should steer the group to converge and diverge ideas at

suitable intervals

Overcoming resistance 171

Common problems that challenge the effectiveness of hard systems thinking

Diagnosis

A tenet that is open to question, especially in times of accelerating change, is that indi- viduals, groups and organisations are able to diagnose key problems correctly. Frequently it is organisations, rather than groups or individuals, that have the greatest difficulty in obtaining accurate problem diagnoses, as their collective thinking can be confused and distorted by their corporate milieu of mindsets. Some organisations like to believe that they never really have serious problems for these only confront other, and in their eyes usually badly run, organisations. This mindset has variations, such as a strong confidence in the power of rational-analytical thinking to solve almost anything, and the belief that all problems have happened before so may confidently be considered as temporary irri- tants that will soon be gone.

Belief in measurement

Another drawback in turbulent times is the tenet that all goals, decisions and important issues can be quantified and measured. This positivist contention has prompted many organisations to invest in sophisticated IT systems to produce vast wads of information. Whilst this has made many corporations ‘feel good’ it has also left many of them struggling to get to grips with all the data that their mainframe and networks provide. However, many organisational activities, such as operational and tactical matters, where the situations are clearly structured, can be capably handled by hard systems thinking.

Risk spots

Even in the best of times most organisations have risk hot spots in their operations that seem to continually resist the efforts of hard systems to control. Here chaos reigns and life is uncomfortable. Attempts to rationalise and programme these hot spots inevitably lead to disappointment and frustration. Some organisations find that their mindsets blind their vision so causing them to function in an imagined or virtual reality. When this occurs frustration mounts, as the chaos continues and managers tend to apportion blame for poor performance levels on the contextual factors. In stable times, when most of the organisation is functioning well (in equilibrium) the hot spots, though still irritating, can be carried along by the general positive momentum of the organisation. As fundamental changes in contextual stimuli cause chaos in the base operations and as the hot spots become more and more unstable, many managers must feel that life is very unfair. In this situation soft system thinking may be the most appropriate course of action.

Faith in management techniques

Finally, the belief that organisations can be steered into the future by traditional manage- ment techniques alone is a critical assumption especially in times of accelerating contextual change. Mechanistic planning is fine where the probability of being able to forecast the future accurately is high; when the reverse is the case managers need to form a clear picture of what makes sense in the new context.

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Action

Working with others

Most would agree that the potential output of several minds is greater than that of a single mind. Working with others obviously seems to make sense. However, in the often frantic activity of an average day, many managers probably attempt to progress far too many prob- lems under their own steam. Opening problems up to others makes sense, but is there time to call the necessary meetings? Or might there be some latent reluctance to do so, as the organi- sational culture may view that it is the manager’s job to solve problems?

When this occurs in organisations it tends to make individual managers reluctant to sepa- rate the what from the how in problem-solving activity. Some managers may even perceive working with others as a sign of weakness, preferring to take everything on themselves and working long and arduous hours. Such managerial supermen can find it very difficult to share problems with others, even though they may appreciate the logic of harnessing the talents of colleagues. Coping with pressure is a constant process for busy managers. As the problems come faster and faster and as the complexities increase, many managers must feel that they are running in order to stay in one spot. There inevitably comes a point when sheer workload convinces them to actively contemplate involving others.

Viewing management problems

Change, whether driven by cost, technical factors or the corporate organisation, can threaten the social culture and workplace norms. A desirable approach to successfully implementing change is to involve employees who have both a professional and personal stake in helping managers understand resistance to change (Eroke, 2014). Management problems can usually be viewed in the light of six key issues:

1 functional/technical skills; 2 general management processing skills; 3 cost constraints; 4 time constraints; 5 quality expectations; 6 climate change.

Most managers have a sound perspective on their functional/technical ability and experi- ence has equipped many with know-how in relation to cost, time and quality constraints. However, with climate change (Holtum, 2014) companies are skilled at doing straight-line extrapolations of current trends and adjusting accordingly. When there is an upward trend in, say, energy prices, they extrapolate it and take energy-saving action. When energy prices trend back downward, they extrapolate that trend linearly and tend to shelve energy-saving actions. From the perspective of most corporate executives, the greatest threat from climate change is not straight-line deterioration but rather a discontinuous and irreversible shift lurk- ing out in the future. As their operational environment becomes more and more chaotic, so greater emphasis needs to be placed on the realisation of the skill potential contained within groups and organisations. This contextual pressure is challenging many individual manage- ment styles and is promoting the cause for effective team working and the development of industry-specific scenarios.

Overcoming resistance 173

Whilst managers usually value talking to others about functional and technical skills, there is frequently a marked resistance to seek the thoughts of others on problem-processing mat- ters. The management how is often seen as a very private affair. There are immense gains to be made by opening up problems to groups. As the pressures on managers to perform to high standards in difficult conditions intensify, so many, hitherto private, managers will steel themselves to explore the dynamics of team working. Apart from organisational mindsets the major factor restraining many managers is probably a deep concern of losing control. There is no doubt that whilst opening up problems to others is beneficial and, if handled correctly, a creative joy, people can be difficult too. Individuals regularly need to check up on their inter- personal skills as it so easy gradually to slip back into an autocratic style in the heat of the moment. Then, as behaviour breeds behaviour, suspicions gain ground and the essential band of trust is damaged. Most team workers will allow the captain to have the occasional private moment and still respect his or her role. If this becomes the regular mode of behaviour, then teams will soon collapse in a regrettable climate of mutual suspicion and fear. Effective man- agers have to win through thick and thin. Collaborative team spirit is essential and of especial importance to CEOs (Ibarra and Hansen, 2011).

Fostering good group relations is not easy. It means giving people space to express them- selves. It means not being too judgemental too early and too negative in any criticism that you may make. It means being responsible to all your individuals, to groups and to the organ- isation. It means promoting ‘a one for all and all for one’ climate in place of ‘all for one and one for one’ approach. It means playing a considered and honourable political game when pressures threaten individual, group or organisational relationships. Politics was intended to be an honourable pursuit; it has only become an object of popular scorn because it has been conducted irresponsibly for private gain. However, private gain can be achieved both by responsible means as well as irresponsible means. The latter is unlikely to foster the growth of group creativity, the former will and, in the process, make a real hero of the manager.

So, many managers who are determined to become creative managers can expect to be apprehensive to begin with and need to be bold enough to re-examine their interpersonal skills and practical understanding of group dynamics. Apart from any individual contemplation that managers may care to make, a good way of sparking business creativity is to examine organi- sational mindsets, to call a meeting of key staff away from the work place and explain to them just why it is sensible to try something new (Capozzi et al., 2011). This is the value of a strong contextual approach. Different conditions require a different approach. Every sports person knows that and most others soon appreciate it too. Once the contextual argument has been put, concerned individuals should then open up to new problem-solving initiatives, then, as soon as possible, demonstrate some CPS action. Help from a fully trained creative facilitator is invaluable at this stage. Be careful of the temptation to do too much too soon.

Once underway, talk about experiences with various CPS tools and techniques amongst colleagues. Find others who are also in the process of getting to grips with CPS and compare notes. Set up a networking system to share knowledge and experience in the use of the CPS tools and techniques. This can be done using a variety of means, including face-to-face meet- ings, email and social networking (e.g. Facebook, LinkedIn and Twitter).

Fixed vs. growth mindsets

Those with a fixed mindset, a mental block that stops them from achieving something, will resist opportunities to learn and practice CPS techniques. Their main goal is to appear smart and capable and to avoid failure at all costs. When these people do fail, they view it as a direct

174 Innovation from theory to practice

measure of their competence and self-worth. People with a fixed mindset are often overly sensitive to appearing wrong or being judged.

According to the Stanford psychologist Carol Dweck (2008) people with a growth mind- set have another approach to life entirely. In this mindset, the hand you’re dealt is just the starting point for development. This growth mindset is based on the belief that your basic qualities are things you can cultivate through your efforts. Although people may differ in their initial talents and aptitudes, interests or temperaments – everyone can change and grow through application and experience.

Dweck has shown that praising people for being bright or talented nurtures the fixed mind- set, whereas focusing on their hard work and perseverance fosters a growth mindset. With a growth mindset, attitudes change and people believe change is possible and even necessary. They do not view failures as the end of the world but see them as opportunities for learning. They become comfortable with taking risks, and even seek out calculated risk opportunities. They want to challenge themselves to achieve something harder, stretch beyond their per- ceived limits, and go for things others might not think they are capable of achieving.

Nudges and wise interventions

Fixed and growth mindsets are now a common starting point for ‘wise psychological inter- ventions’ (WPIs). Psychologists believe that these are effective in unblocking mindsets caused by psychological barriers that keep people stuck in inflexible patterns of behav- iour. Superficially WPIs are like ‘nudges’ – external interventions designed to guide people towards desired behaviour choices. Though similar to nudges in spirit, WPIs are quite differ- ent in practice, based on making long-lasting changes to peoples’ thought processes rather than short-term changes to their environment. Managers should tread carefully. WPIs inevi- tably revive the fears that were expressed about nudges. Who decides who needs to be wised up? Will they be told what is happening to them, and how it is supposed to work, and how they might benefit? More importantly, can they opt out?

The use of psychological nudges to persuade people to become organ donors or to renew their car tax on time are clearly good examples of their use in society. Use of the more sophis- ticated psychological WPIs to help individuals to overcome blockages to creative thinking requires respectful experimentation. Three contextual factors are important elements of the creative process for helping managers overcome the challenge of resistance to adopting crea- tive thinking challenge. These are: the current business climate, leadership styles and team characteristics (Gibson and Shalley, 2014; Hon et al., 2004).

Summary Both organisations and management theory seem obsessed with creativity and a fixation with the new is accompanied by just as strong a rejection of that which is different. Muhr (2010) turns to the moral philosophy of Emmanuel Levinas (1981) to address this paradox and argues that pro- found novelty can only be accomplished in ethical encounters that nourish trust and confidence. Good managers do not attempt to manage creativity, they manage for creativity by providing a working environment and culture that allows creativity to flourish. This challenges all managers ‘to bring paradoxes, conflicts, and dilemmas out in the open, so that collectively we can be more intelligent than we can be individually’ (Senge, 1990). Finally, as Gosling and Mintzberg (2003) argue ‘imagine the mind-sets as threads and the manager as weaver. Effective performance means weaving each mindset over and under the others to create a fine, sturdy cloth’.

Overcoming resistance 175

Discussion questions 1 Briefly describe the thinking pattern factor sets. 2 Why do managers, whether individual, group or CEOs have to be wary of assumptions

in current buyers’ markets? 3 How can consideration of psychological factor sets assist managers to overcome resist-

ance of employees to new ways of thinking? 4 What are the leading blockages to individual creative thinking? 5 What are the leading blockages to group creative thinking? 6 Briefly discuss the common problems that challenge the effectiveness of hard systems

thinking in times of discontinuous change. 7 Name the five key issues that help to address management problems. 8 ‘“Assume” makes an “ass” out of “u” and “me”’ (Anon). Discuss.

Case exercise

Rose Tree Garden Centre: growing confidence in creativity

Rob Malin founded a family owned garden centre in north-east Derbyshire in 2010 with a combination of family savings and his redundancy pay. At first the business grew steadily and to the family’s surprise covered all its start-up expenses and returned a small but grow- ing profit. Suddenly in 2013 the firm’s fortunes stated to decline and in 2014 the business recorded a loss for the first time.

In July 2015 Rob Malin’s son Clive graduated from a northern business school where he obtained a first class MBA. As the family business faltered Rob expected Clive to take up a senior role in the garden centre. Clive agreed, as he was keen to apply as much as he could of the learning he had experienced on his MBA course. His father had worked for 40 years in an engineering company in South Yorkshire and had ended his career as the Production Director of a subsidiary company making high quality utility pipes for gas, oil and water logistics. The parent company disposed of the subsidiary in 2010 and shortly afterward Rob was made redundant. Rob, a finance specialist, was not always an easy man to work with, as, over the years, he had become single minded and autocratic in his management style. He saw his role as the boss and let everyone who worked in the business know it.

Clive quickly grasped the serious position of the garden centre and challenged his father to explain why he had suddenly rented space in the centre to a fancy goods firm and a garden pond company while Clive was away studying in 2014. Rob explained that he felt it made sense to cover expected difficulties in the main business that had been hit by poor weather in the previous year and by competition from a local farm shop that had diversified into the plant nursery business. When challenged on what logic he had applied to the selection of these start- up companies he became obviously embarrassed as he replied just ‘business feel, son’.

The family firm employed 20 full-time staff and a number of part-time staff on a seasonal basis to help with the spring, summer and Christmas business peaks. Trade was declining fast on the traditional side and both the fancy gift and garden pond companies were loss making. Clive, alarmed at the state of the business and at the way in which it was run decided to sum- mon all the staff to a meeting to discuss the firm’s position. To his father’s amazement he was determined to arrange the meeting in a local small hotel and to invite all employees that were on site plus seven guests.

Now that he had taken over the business from his father Clive was determined to run the business in a new way. He wanted to create a company climate in which all employees could

176 Innovation from theory to practice

feel that they were valued and in which they would enjoy working. Once everyone had seated themselves he outlined his vision for the company and emphatically declared that he wanted his staff to feel free to exercise their creativity. At first the assembly looked at him with puz- zled brows asking him to explain what he meant. ‘Things are not too good at present and we must all work together to fashion the future for the business.’

After presenting a brief review of the current position of the garden centre Clive called for some suggestions as to how the business could be developed. The sound of silence echoed around the room. Clive then invited all present to participate in a problem-solving exercise in which they were going to be encouraged to think creatively to come up with ideas that could potentially transform the business. Several looked puzzled and one well-respected senior employee asked what was on everyone’s mind . . . how?

Clive introduced his guest explaining that he was an experienced creative problem- solving facilitator, he left the front of the room and sat down amongst his employees. He had met Mark whilst at university and had been amazed at how he enthusiastically involved peo- ple in his sessions despite many claiming that they just were not naturally creative thinkers. He began by asking his audience why they felt that they were either not or only slightly crea- tive. This exposed a common set of creative thinking blockages (see Figure 8.4) or mindsets. Mark then proceeded to classify his audience into two groups (sceptics, open-minded) and gave every attendee a hand-out and invited them to think about where they thought they were on the matrix (Figure 8.4).

Clive returned to the front of the room and asked people to form groups of four before giving the floor back to Mark who asked his team of six CPS facilitators to run a 15-minute CPS session to assist the group members to generate ideas that in their belief held innovate potential. To the surprise of many several good ideas resulted and Clive informed everyone that his management team would consider the best ideas and report their conclusions to all staff. In closing the meeting he thanked everyone for taking part and was pleased that they had enjoyed the experience. He also expressed his determination to create a culture that encouraged positive attitudes that generated a climate of positive thinking that he hoped would change the behaviour of initial resistors and sceptics. He announced that everyone would receive training in CPS tools and techniques and that personnel would be sensitively encouraged to develop their CPS and team working skills.

Questions

1 How might Clive build on the meeting in the hotel and encourage individuals to cultivate growth mindsets?

2 How might Clive best deal with employees that harboured fixed mindsets? 3 Clive intended to change the way things were done at the Rose Tree Garden Centre, to

introduce a flatter organisational structure and to encourage all employees to practise both individual and group CPS in their everyday work when appropriate. What problems do you think he may face and how might he overcome them?

References Berliner, M. (2015) ‘Data, technology and creativity: New opportunities for marketers’, The Guardian,

25 August. Capozzi, M. M., Dye, R. and Howe, A. (2011) ‘Sparking creativity in teams: An executive’s guide’,

McKinsey Quarterly, April, pp. 74–81. Dweck, C. (2008) Mindset: The New Psychology of Success, New York, NY, Ballantine Books.

Overcoming resistance 177

Eroke, L. (2014) ‘Nigeria overcoming employees resistance to change’, This Day, 9 June, http://allaf- rica.com/stories/201406092097.html (accessed 6 June 2016).

Gibson, L. L. and Shalley, C. E. (2004) ‘A little creativity goes a long way: An examination of teams’ engagement in creative processes’, Journal of Management, August, Vol. 30, pp. 453–70.

Gosling, J. and Mintzberg, H. (2003) ‘The five minds of a manager’, Harvard Business Review, Vol. 81, Issue 11, pp. 54–63.

Hertzberg, F. I. (1987) ‘One more time: How do you motivate employees?’, Harvard Business Review, September/October, Vol. 65, Issue 5, pp. 109–20.

Holtum, C. (2014) ‘Top tips for overcoming short-termism’, Guardian, 22 January, https://www. theguardian.com/sustainable-business/overcoming-short-termism-top-tips.

Hon, A. H. Y., Bloom, M. and Crant, J. M. (2014) ‘Overcoming resistance to change and enhancing creative performance’, Journal of Management, Vol. 40, Issue 3, pp. 919–41.

Ibarra, H. and Hansen, M. T. (2011) ‘Are you a collaborative leader?’, Harvard Business Review, Kindle edition, July.

Kennedy, D. (2011) ‘Moving beyond uncertainty: Overcoming our resistance to change’, Leader to Leader, September, Issue 62, pp. 17–21.

Kreitner, R. (1980) Management: A Problem-Solving Process, Boston, MA, Houghton Mifflin. Levinas, E. (1981) Otherwise than Being, or, Beyond Essence (translated by A. Lingis), Pittsburgh, PA,

Duquesne University Press. Mitroff, I. I. (1984) Stakeholders of the Organizational Mind, San Francisco, CA, Jossey-Bass. Morgan, G. (1997) Imaginization, London, Thousand Oaks, Delhi, Sage. Muhr, S. L. (2010) ‘Ethical interruption and the creative process: A reflection on the new’, Culture &

Organization’, March, Vol. 16, Issue 1, pp. 73–86. Osborn, A. E. (1963) Applied Imagination, New York, NY, Scribner. Pina e Cunha, M., da Cunha, J. V. and Kamoche, K. (2001) ‘The age of emergence: Toward a new

organizational mindset’, SAM Advanced Management Journal, Summer, Vol. 66, Issue 3, pp. 25–31. Rickards, T. and Moger, S. (1999) Handbook for Creative Team Leaders, Aldershot, Gower. Senge, P. (1990) The Fifth Discipline, New York, NY, Doubleday. Storm, B. C. and Angello, G. (2010) ‘Overcoming fixation: Creative problem solving and retrieval-

induced forgetting psychological science’, Psychological Science, Vol. 21, Issue 9, pp. 1263–5. Wyer, R. S. and Xu, A. J. (2010) ‘The role of behavioral mind-sets in goal-directed activity: Conceptual

underpinnings and empirical evidence’, Journal of Consumer Psychology , April, Vol. 20, Issue 2, pp. 107–25.

Selected YouTubes ‘New Business of Paradigms’, https://www.youtube.com/watch?v=5uL2CXVTpp4.

‘Are You Open Minded? Three Ways to Break Thinking Patterns’, https://www.youtube.com/ watch?v=4vgl3v8rjj8.

‘Creative Thinking: How to Get Out of the Box and Generate Ideas’, https://www.youtube. com/watch?v=bEusrD8g-dM.

‘Game of Your Mind: What Is Perception?’, https://www.youtube.com/watch?v=5Tb_ pL47AVM.\

‘How to Solve Creative Blocks’, https://www.youtube.com/watch?v=WXJfwk4Mii0.

‘How to Make Problem Solving in Groups More Creative?’, https://www.youtube.com/ watch?v=KGod99-gGmE.

‘The Great Egg Drop: Extremely Creative, Fun Group Problem-Solving Initiative’, https:// www.youtube.com/watch?v=xubDVbVM_w0.

Part III

Linking creativity to strategic innovation

9 Applied business innovation

It is better to have enough ideas for some of them to be wrong, than to be always right by having no ideas at all.

(Edward de Bono)

Innovation distinguishes between a leader and a follower. (Steve Jobs)

Learning objectives This chapter explores:

1 The importance of generating ideas for innovation. 2 Reviewing ‘closed’ sources of ideas. 3 Exploring ‘open’ sources of ideas. 4 Reviewing the pros and cons of open source software. 5 The advantages of combining ‘closed’ and ‘open’ sourcing. 6 Balancing unpredictability of successful innovation with experienced success with exist-

ing process, product and service activity. 7 The importance of innovation and social networks. 8 Understanding the link between innovation and entrepreneurship.

Introduction Many organisations both large and small are not benefiting from innovation, either through lack of commitment to see it as an investment or to perceived lack of time. MNCs, worried by fading growth in traditional markets, are steadily realising that an active intent to dis- cover potentially profitable innovative products, processes and services requires a strategic approach. The main barriers to innovation for SMEs are availability of finance and the risk involved in developing radical innovation. This chapter explores the closed and open chan- nels available to both MNCs and SMEs as they seek to generate and develop innovative projects. (See Figure 9.1.)

182 Linking creativity to strategic innovation

Figure 9.1 Exploring innovation idea sources.

Context

Innovation idea sources

Closed innovation channels include ideas that emerge from internal operations, be they planned or the result of serendipity. Until the early twenty-first century, most innovation was closed. That is, it occurred within the boundaries of an organisation and was performed by the company’s own employees within its internal R&D function. This model is based on a number of assumptions that have changed radically in today’s marketplace.

Applied business innovation 183

Recently, growing attention has been devoted to the concept of open innovation, both in academia as well as in practice. Chesbrough (2003), who coined the term ‘open innovation’ describes how companies have shifted from so-called closed innovation processes towards a more open and inclusive way of innovating.

Open innovation has so far been studied mainly in high-tech MNCs. But its impact on the fortunes of SMEs can be transformational. Van de Vrande et al. (2009) researched Dutch SMEs and found that many were innovating through open innovation practices and had increasingly adopted such practices during the past seven years. In addition, they found no major differences between manufacturing and services industries, but medium- sized firms were on average more heavily involved in open innovation than their smaller counterparts. SMEs pursued open innovation primarily for market-related motives such as meeting customer demands, or keeping up with competitors. Their most important challenges relate to organisational and cultural issues as a consequence of dealing with increased external contacts.

Key principles

Closed innovation

Within the closed innovation paradigm, the process leading to innovation is completely controlled; all the intellectual property is developed internally and kept within the com- pany until the new product or service is released on the market or a new internal process is implemented. R&D activities are important because they potentially increase organisa- tions’ absorptive capacity, i.e. the capacity of firms to assimilate and apply new external knowledge. Internal or closed R&D activities are not only important in terms of their direct knowledge input into innovation processes, but also provide opportunities to nurture internal learning.

Several factors have led to the increasing abandonment of a total reliance on closed innovation (Chesbrough, 2003). First of all, the mobility and availability of highly edu- cated people has increased over the years. As a result, large amounts of knowledge exist outside the research laboratories of large companies. In addition, when employees change jobs they take their knowledge with them, resulting in knowledge flows between firms. Second, the availability of venture capital has increased significantly, which makes it possible for good and promising ideas and technologies to be further developed out- side the firm in specialist entrepreneurial research organisations and companies. Finally, other companies in a firm’s supply chain are playing an increasingly important role in the innovation process.

Open innovation

‘Open innovation’ is a term coined by Chesbrough (2003) and can be defined as: combin- ing internal and external ideas as well as internal and external paths to market to advance the development of new technologies. In the first place, the shift described above means that companies have to become aware of the increasing importance of open innovation. Not all good ideas are developed within their own company, and not all ideas should nec- essarily be further developed within the own firm’s boundaries. The table below further illustrates this:

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Table 9.1 Closed vs. open innovation principles

Closed innovation principles Open innovation principles

Recruit the smartest people in an organisation’s field

Harness the knowledge of people who work for other organisations

R&D is most profitable when kept in-house from start to finish

Appreciate the value of external R&D and maximise value by investing in supportive internal R&D

Conduct the best research in the industry Gather the best ideas irrespective of whether they were generated internally or externally

Generate top quality ideas Maximise profit potential by granting licences to users of an organisation’s innovations and negotiate licences with external organisations to use their intellectual capital

Maximise profits by controlling all innovation activity

Regard innovation activity as a managed investment activity

Source: Adapted from Chesbrough, 2003.

This means that within the organisation a shift takes place in the way people look at the com- pany and its environment. The involvement of other parties when developing new products, processes and technologies has significant advantages. Cooperation with other firms, sup- pliers, universities, and end-users delivers real added value. According to Rigby and Zook (2002), open market innovation has four distinct advantages:

1 Importing new ideas can help to multiply the building blocks of innovation. 2 Exporting ideas is a good way to attract and keep talent. 3 Exporting ideas provides companies with a real measure of an innovation’s true value. 4 Exporting and importing ideas helps companies develop their expertise.

How and when external knowledge is required and used is to a large extent determined by company’s business model, which describes how value can be created from innovations and which elements have to be sourced internally or externally.

Table 9.2 summarises the rationale and suitability of closed and open innovation processes.

Table 9.2 Closed and open innovation rationale and suitability

Closed innovation Open innovation

Rationale • Exploits known talent and knowledge

• Cost effectively expands an organisation’s talent base

• Keeps competitors at bay • Provides insight into customer attitudes, needs and concerns

• Protects intellectual property • Generates a broad section of ideas • Allows maximum control • Shares and so mitigates risk • Reduces time to market • Provides insight into the unique

features of an innovation Suitability • Innovation projects that involve a

high level of company expertise and intellectual property

• Projects that are low tech and more open

• Secret and large scale projects • Smaller scale modular open projects where secrecy is not important

• Examples: new weapons systems, new drugs

• Examples: consumer products, films, music

Applied business innovation 185

According to Wikhamn (2013) academic research since 2006 identifies nine trends of open practice:

• Industry penetration: from pioneers to mainstream. • R&D intensity: from high to low tech. • Size: from large firms to SMEs. • Processes: from stage–gate to probe-and-learn. • Structure: from standalone to alliances. • Universities: from ivory towers to knowledge brokers. • Processes: from amateurs to professionals. • Content: from products to services. • Intellectual property: from protection to a tradable good.

Open innovation is moving from the periphery of business life to the centre of managerial attention as the need to innovate becomes increasingly important.

Open-source software (OSS)

Advantages of OSS

Open-source is a term that refers to software development which is redistributed freely in which the copyright holder provides the right to study, change and distribute the software to anyone for any purpose (St. Laurent, 2004). The use of the word free refers to freedom and not price. Open source software can be available to download with no charge (e.g. Linux) or can be accessed by the purchase of low-cost licenses (e.g. Microsoft and Adobe, who sell limited low- cost versions to educational establishments). Leaving source code open has generated some of the most sophisticated developments in computer technology. OSS should be regarded as a useful infrastructure platform that everyone can use and a poor one for specialised applications. The absence of legally enforceable intellectual property claims promotes prosperity.

The challenge for organisations is to find the appropriate balance between OSS and propri- etary software to advance the generation of innovative ideas (Meeker, 2015). Organisations that focus on technology are particularly benefiting by combining OSS with proprietary software (purchased or developed in-house). Raymond (2001) used the metaphorical terms bazaar to describe the OSS approach in which the code is developed over the Internet in view of the public and cathedral to differentiate source code that is available with each software release, but code developed between releases is restricted to an exclusive group of software developers. Raymond asserts that more time is need to debug cathedral OSS as the working version of the code is only available to a few software developers.

The impact of OSS

The digital revolution has changed the landscape of the business world and has given rise to organisations that thrive on volunteers, peer production and collaboration. Google Chrome, Linux, Wikipedia, and many more are competing today with some of the best-financed and resourceful enterprises across the globe. Even some of the organisations that have a his- tory of opposing and deriding open source developments are now engaging in collaborations to create win-win situations. Microsoft is the biggest example. Its wholly owned subsidi- ary, Microsoft Open Technologies Group, follows a community-driven approach to create innovative solutions.

186 Linking creativity to strategic innovation

IBM is another big example and its engagement with the Apache web server project and Linux are well known. In 1999, IBM announced its support to the open source Linux project and since then has contributed considerable financial and technical resources to the Linux community. It played an instrumental role in establishing the Apache software foundation and the Linux development group. Not only did the IBM save millions that would have gone into developing its own operating system, it learned and mastered the workings of a new type of business model that was set to change the software industry forever.

Organisations and institutions across sectors are seeking new partnerships and to gain from the vast amount of unique skilled talents not available within the confines of their own companies. Initiatives like InnoCentive, Human Genome project, and MIT and Harvard University’s edX program offer platforms and opportunities for world-changing innovations.

The Internet has become a nucleus of global economic activity. More and more people today are making their living by selling bits and bytes. The cost of starting a web-based busi- ness is extremely low relative to starting a business that relies on physical channels. This low cost of bootstrapping a business combined with the creative nature of the Internet has encour- aged millions to launch their own ventures. The low cost of starting a web-based business has become possible primarily because of the availability of open source software and infrastruc- ture. The open source movement and its methodologies have contributed significantly to the business world and created ecosystems that have positively impacted all industries and billions of people across the globe. The movement has largely been fuelled by thousands of volunteers and organisations that contribute to these projects for a wide range of reasons, including:

• cost efficiency over proprietary software; • membership of community teams that vary in expertise, industry and ideas; • adaptation and integration of OSS and into many different technologies that can outpace

the development of proprietary software; • peer recognition; • career benefits as resumés become attractive to headhunters; • access to research funds for software development.

In a 2011 Wall Street Journal opinion piece, the venture capitalist Marc Andreessen famously said ‘software is eating the world’, meaning that software is invading and disrupting all parts of the economy. ‘More and more major businesses and industries,’ Andreessen wrote, ‘are being run on software and delivered as online services.’ The leaders in nearly every segment of the economy – from books, to telecommunications, to transportation, to retail, to financial services, to health care, to national defense – are or will soon be disruptive new software companies or incumbents that transform themselves into software companies. Software, in other words, is where Andreessen sees innovation is happening. Since that time, several others have amended – or, perhaps, extended –Andreessen’s quote, by pointing out ‘open source is eating software’ as it is a process that disrupts and transforms nearly all segments of software.

There are multiple lists to be found detailing the ways in which open source is besting – or ‘eating’ – proprietary offerings. But to understand the significance of this, it’s useful to return to Andreessen’s original argument. The key to his 2011 thesis is that ‘all of the technology required to transform industries through software finally works and can be widely delivered at global scale’. The very characteristics that are allowing software to ‘eat the world’ – a networked world enabling faster innovation, scalability, customisation, and collaboration – are the same characteristics that put open source ahead of proprietary. Open source means

Applied business innovation 187

quality, security and cost-effectiveness. Its main advantage is that it offers genuine interoper- ability to fully enable the networked world.

The Internet is the open source truly where innovation is happening. This claim is clearly recognised in the marketplace today. According to a recent survey on the future of open source, 78 per cent of companies in 2015 run part or all of their operations on open source, which is double of what it was in 2010. Sixty-four per cent of companies currently partici- pate in open source projects and 88 per cent expect their companies to increase contributions to open source projects in the next two to three years. Nearly 9 in 10 surveyed respondents said that open source greatly impacts the speed of innovation. Nearly as many say that open source improves margins and grows revenues.

Where does this leave the question of what policy makers should do? Strategies should be designed to encourage the uptake of open source. The first and most powerful step that policy makers can take is to use public procurement and public administration information and communications technology (ICT) programmes as means to bring government to where innovation is. Things like promoting the specification of open standards in procurement, and allowing and encouraging the participation of government ICT workers in external open source projects are key. Also, the creation or updating of government interoperability road- maps, such as the European Interoperability Framework that will provide needed guidance for public administrations.

Policy makers should also study and adopt the best practices of governments that have made significant progress in implementing open standards and promoting open source inter- nally. For example, in 2015 the UK government mandated the adoption of Open Document Format (ODF) in software purchases in all public administrations. Before that, in late 2012, the French government published a guideline urging the country’s public administrations to make a thorough and systematic review of free alternatives when building and revising ICT infrastructure and applications. They were also required to use the savings realised by using open source to develop expertise and engage upstream communities. While in the past pro- gressive government policies have been poorly implemented or not implemented at all, it’s imperative that these efforts continue given that open source is the future.

Given the broader, direct and indirect market impact of government, action will help to encourage other segments of the economy that are not up to speed. Beyond that, directly educating the public on the value of open standards and their importance in promoting inno- vation and avoiding supplier lock-in will help, as well. There is good example of leadership in this area in both the US and in Europe. Governments the world over recognise that the effective promotion of ICT in their economies is central to their competitiveness, growth, and prosperity. All too often, however, these policies are motivated out of fear, resulting in protectionist measures. Frequently they are designed for the realities of the past as opposed to the future. Innovation is the future and open source is where innovation is happening.

Practice

Closed innovation idea sources

Idea management systems

Table 9.3 summarises the main sources of ideas for closed innovation initiatives. Sometimes an employee or group may get a flash of inspiration and a novel idea with commercial poten- tial surfaces. Most successful innovations, however, are not the result of serendipity but are the

188 Linking creativity to strategic innovation

result of conscious effort, whether formal or informal, that attracts sufficient interest and funding. Suggestion schemes are to be found in many organisations and provide employees with an organ- ised system for submitting ideas. These are typically considered by dispassionate reviewers who accept or reject them depending on pre-established criteria from management.

Table 9.3 Closed innovation idea sources

Source Notes

Serendipity Ideas that are the result of flashes of inspiration Suggestion system Systematic collection of ideas from employees New knowledge Most radical innovations are the result of new knowledge In-house R&Ds Ideas that emerge from specialist research and development teams Benchmarking Seeking to match the perceived quality standards of competitors Reverse engineering Deconstructing competitors’ market offerings to assess costs,

processes, etc. needed to meet or beat them Continuous improvement

teams To find incremental ideas to improve costs and customer offerings

New venture teams Specialist groups charged with seeking new opportunities Incubator labs and specialist

innovation teams Specialist teams gathered to seek radical innovations

Customer and lead user reports

Provided data that can trigger incremental improvements

Empathetic design Anticipating customer needs before they reveal them Scenario planning Studying future industry and market trends to find radical

innovations

Whilst suggestion programmes typically encourage individuals to contribute ideas, continu- ous improvement initiatives are focused on inspiring team collaboration to improve design, product/service performance or to better process efficiency. Sometimes called Kaizen teams (kaizen is Japanese for continuous improvement) they are focused on incremental rather than substantial or radical improvements. Nevertheless, these often small and constant tweaks from rank and file employees have a significant bottom-line impact. Reverse engineering is a form of continuous improvement and involves the detailed study of design, production and marketing processes, and is aimed at securing cost and price parity with the competition. Sometimes known as benchmarking this practice is largely aimed at incremental innovations. Market research data derived from customer and lead user reports can trigger incremental innovation activity.

Traditional in-house research and development teams address the task of seeking ideas that can be developed into radical innovations. Some companies set up a specialist depart- ment to undertake this work. A variant of this approach is the establishment of company-wide cross-functional innovation teams staffed by employees who have demonstrated innovative skills and are charged with the responsibility of finding new ideas that have potential.

Some companies provide specific space and resources away from main workplaces and encour- age employees to form small specialist teams targeted at the speedy development and launch of new ventures. These are sometimes known as garages, incubator labs, innovation factories and skunkworks and are primarily directed to produce new knowledge based radical innovations.

The motivation to avoid future dangers is matched by the human need to create plans and move forward. These twin motivations can be very powerful and help to stimulate the fields of Futures Studies and Applied Foresight (Slaughter, 2004). Companies with an eye

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on the longer-term market potential, especially those who are dependent capital-intensive operations such as oil exploration and extraction, invest in scenario planning, a technique pio- neered by Shell in the 1960s (Wilkinson and Kupers, 2013). Scenario planning (sometimes called ‘scenario and contingency planning’) is a structured way for organisations to think about the future. A group of executives sets out to develop a small number of scenarios – stories about how the future might unfold and how this might affect an issue that confronts them. The issue could be a narrow one: whether to make a particular investment, for exam- ple. Should a supermarket put millions into more out-of-town megastores and their attendant car parks, or should it invest in secure websites and a fleet of vans to make door-to-door deliveries? Scenario planning draws on a wide range of disciplines and interests, including economics, psychology, politics and demographics.

Scenario planning: a guide to or a prediction of the future?

From the beginning, those engaged with Shell’s scenario practice maintained that scenarios are not predictions but can provide a deeper foundation of knowledge and self-awareness in approaching the future. They also felt that the ‘official’ view of the future – the business-as-usual outlook – both reflects an optimism bias and is based on the human tendency to see familiar patterns and be blind to the unexpected.

Source: Wilkinson and Kupers (2013).

Empathetic design is an anthropological technique for generating ideas whereby innova- tors observe how people use existing products and services in the field (Kelley and Kelley, 2014). Electrolux and IKEA study the way people use their kitchens. Harley-Davidson sends experts (engineers, marketing people, social anthropologists) to attend Harley Owners Group meetings. Proctor & Gamble observes how customers use products in real-life conditions. All seek to discover how they can help their existing and target customers.

On-site creativity centres

A powerful symbol of top management’s commitment to innovation is their willingness to invest in on-site creativity centres which provide an oasis for people to get away from the humdrum of daily life and spend time seeking inspiration. A creativity centre may con- tain periodicals, executive toys, pictures, art equipment, coffee machines, Post-It notes, comfortable seating, etc. to stimulate visitors’ creativity. Some organisations (e.g. 3M) require staff to spend a mandatory percentage of their time in such centres and target them to come up with both incremental and radical innovations that can be developed to full commercialisation.

Open innovation idea sources

An idea management system which includes ideas submitted by sources external to the organisation could also be adopted (Table 9.4). This may take the form of a proprietary or open source online platform or it may adopt the process of crowdsourcing. Idea scouts can be

190 Linking creativity to strategic innovation

used to scan the external environment for new ideas. This, however, is not sufficient, as the ideas need to be communicated to the right people who have the power to take action within the organisation.

Clearly seeking to find innovation ideas from both internal and external sources provides the opportunity to gather a richer harvest of ideas. Some companies prefer to surrender this to other companies and accept a follower role to a network leader organisation. Open innova- tion sourcing or, as it is commonly known, crowdsourcing is addressed below by means of three dominant themes: capturing ideas, business initiatives and developing ideas.

Table 9.4 Open innovation idea sources

Source Notes

External R&D agencies Research associations, interest groups, universities Idea scouts and idea

connectors Getting key ideas to key potential developers

Capture of key personnel from rival organisations, technology transfer

Competitive enticement – may get an organisation a bad name if practised excessively

Co-creation Involvement of external parties such as individuals, e.g. customers, in the formation of suitable ideas

Crowdsourcing Involving Internet communities to generate ideas Contractual arrangements Formal and legal methods of establishing partnerships – licensing,

acquisition, joint venture, strategic alliances Social networking Use of networks such as Facebook, LinkedIn and Twitter

Capturing ideas

External R&D agencies

The growing complexity and pace of industrial technological change is forcing firms to forge new alliances and to respond more efficiently to market changes. Developing cooperation skills and increasing innovativeness provides an opportunity for companies to compete suc- cessfully on both domestic and international markets.

Idea scouts and idea connectors

Combing the outside world for potentially useful innovation ideas is necessary but not enough. Managers must find ways to ensure the best new ideas reach those who can exploit them. Some do this via an ‘idea connector’ who links up the ‘idea scouts’ – people with well-developed knowledge and social networks outside their company but limited networks within it to the R&D engineers and others who can develop suggestions.

Key personnel, technology transfer

One way of obtaining innovative ideas that have potential is to poach key personnel from educational, government or competing organisations. Companies that are determined to give an instant boost to their open innovation activity keep a constant eye out for possible recruit- ment candidates and keep in touch with key expert agencies.

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Another is to seek the transfer of intellectual property, developed and generated some- where else by legal means such as licensing or franchising with a view to converting this technology into marketable goods and services.

Nordic Folkecenter for Renewable Energy

For many years Folkecenter has exported know-how around the globe. Farm biogas digesters, windmills and solar systems as well as integrated systems have been installed. Projects in Europe, Asia, Africa, North and South America are realised with know-how from Folkecenter, Thy, Denmark. The projects are completed in cooperation with local companies, NGOs or governmental authorities. This way renewable energy know-how is spread to several corners of the globe, to the benefits of the world society and future generations.

Source: Nordic Folkecenter, Hurup Thy, Denmark.

According to the Encyclopaedia of Management (2009) four varieties of technological trans- fer are commonly featured in business periodicals:

• International technology transfer: the transfer of technologies developed in one country to firms or other organisations in another country.

• North–South technology transfer: activities for the transfer of technologies from industrial nations (the North) to less-developed countries (the South), usually for the purpose of accelerating economic and industrial development in the poor nations of the world.

• Private technology transfer: the sale or other transfer of a technology from one company to another.

• Public–private technology transfer: the transfer of technology from universities or gov- ernment laboratories to companies.

Contractual arrangements

Once the organisation has at least started to establish ownership of the technology, there are several possible legal and/or contractual mechanisms for transferring technology from one organisation to another:

• Licensing: the exchange of access to a technology and perhaps associated skills from one company for a regular stream of cash flows from another.

• Cross-licensing: an agreement between two firms to allow each other use of or access to specific technologies owned by the firms.

• Strategic supplier agreement: a long-term supply contract, including guarantees of future purchases and greater integration of activity than a casual market relationship.

• Contract R&D: an agreement under which one company or organisation, which gener- ally specialises in research, conducts research in a specific area on behalf of a sponsoring firm.

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• Joint or cooperative R&D agreement: an agreement under which two or more companies agree to cooperate in a specific area of R&D or a specific project, coordinating research tasks across the partner firms and with sharing of research results.

• R&D cooperation or research joint venture: the establishment of a separate organisation, jointly owned by two or more companies, which conducts research on behalf of its owners.

• Research consortium: any organisation with multiple members formed to conduct joint research in a broad area, often in its own facilities and using personnel on loan from member firms and/or organisational business unit teams.

The choice of which mechanism to use in a particular technology transaction depends on many factors, including the stage of development for that technology, what the company receiving the technology is willing or able to pay, what technology or other assets it might be able to offer in place of money, the likely benefits of establishing a longer-lasting partnership between the organisations instead of a one-time transfer, and the exact legal status of owner- ship over that technology. For example, if a small firm simply wants to sell its technology to a large firm in exchange for money, it will probably choose to license the technology. If the small firm also wants access to the large firm’s complementary assets, such as its production facilities and distribution network, it will try to negotiate a more substantial and permanent relationship, such as an R&D contract or a cooperative R&D agreement.

Developing ideas

Once ideas have been captured they need to be fully defined and developed. Three popular ways of proceeding are co-creation, further crowdsourcing and social networking.

Co-creation

Essentially co-creation is the difference between people creating a great idea for an organi- sation and people working in an organisation to develop a successful innovation. Another practice subject to trade-offs is customer involvement in the innovation process. Advocates of ‘co-creation’ approaches argue that close collaboration with customers reveals insights that can lead to novel offerings (Ramaswamy and Gouillart, 2010). But others say that work- ing too closely with customers will blind you to opportunities for truly disruptive innovation (Christensen, 2003). Apple’s Steve Jobs was adamant that customers do not always know what they want – the reason he cited for eschewing market research. Companies such as Audi and Mars have embraced this practice and allow their brands to reflect customers’ personal values. Tapscott and Williams (2006) argued that the traditional ‘plan and push’ approach to innovation has been replaced by the ‘engage and co-create’ approach.

Crowdsourcing

Crowdsourcing is a term first defined by Howe (2006) meaning to generate ideas and to cre- ate consumer-generated marketing campaigns and involves inviting the Internet community to help create content, software or to raise funds in support of innovative projects. The devel- opment of Wikipedia is a classic example of crowdsourcing, as the project gave the crowd the ability to create the information on their own. The result was one of the most comprehen- sive encyclopaedias the world has ever known. Apple uses crowdsourcing to tap the brains of users and developers worldwide to generate innovative apps and supportive podcasts to enhance its products.

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It has a lot of merits: by inviting a vast number of people, most of whom an organisa- tion could probably not have found on their own, to address their challenges, they increase the probability of developing a quality novel solution. Research by Boudreau and Lakhani (2013) provides strong evidence that crowdsourcing can lead to faster, more efficient and more creative problem solving. Crowdsourcing tends to work best for highly modular sys- tems, in which different problem solvers can focus on specific components without worrying about others. Crowdsourcing can also be used to get designs for furniture, fashion, adver- tisements and videos, and product design. Just about anything that can be designed can be crowdsourced. The choice between a demand-pull and a supply-push approach involves weighing the trade-offs. If you choose the former, you risk missing out on technologies for which markets have not yet emerged. If companies choose the latter, they may create tech- nologies that never find a market.

Crowdsourcing can be applied in a variety of ways to gather ideas as well as resources and specialist skills to assist in the development of innovative projects. Boudreau and Lakhani classified crowdsourcing in four distinct categories (Figure 9.2):

• Crowd contests – an organisation identifies a specific problem and offers a financial reward and an invitation to submit solutions. These are particularly useful for solving design problems and are used widely by clothing firms such as H&M.

• Crowd collaborative communities – crowds are motivated by the desire to achieve rec- ognition and fame in a community of peers. In less than a decade Wikipedia transformed the reference market with its Internet-based organisational model.

• Crowd complementors – build on platforms developed by other companies. iTunes have added value to Apple’s mainstream iPod, iPhone , iPad and Mac product lines by access- ing software developers.

• Crowd labour markets – are spot markets that match buyers and sellers of services who require expertise to contribute to the development of innovation projects with skilled people on a services rendered contracts

Figure 9.2 Boudreau and Lakmani (2013) crowdsourcing classification.

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Crowdsourcing has often been criticised, particularly when it targets non-experts or people who are not well versed in relevant subjects, as it utilises the input of anyone who may be motivated to contribute ideas related to a particular issue, task, problem or question. There is debate, moreover, about whether the ‘crowds’ can actually exhibit ‘wisdom’.

The main advantages of crowdsourcing are:

• low cost; • payment is often by results or there may be none at all; • rapid process with relatively fast results; • possibility of tapping extensive talent – a broader range than exists in one organisation; • input involves tapping into potential or actual customer needs, desires or visions; • brand building through a sense of collaboration; • willingness of people to participate and to share ideas, locally and even more, globally; • satisfaction obtained through working with a relatively large number of people; • eliminates financial barriers to participation when organised online; • anonymity (when applicable) or ‘remote’ participation increases depth of participation

as people tend to reveal more when participating remotely and face-to-face; • may generate better results than internally commissioned research; • can handle a broad range of problems related to a variety of disciplines; • facilitates peer-to-peer collaboration when addressing customer support issues.

Some of the disadvantages include the following:

• quality of results may vary considerably; • can be used to exploit others by sourcing low-cost or free labour; • large-scale projects can be difficult to manage and time consuming; • risk of far too few participants, lack of interest or motivation; • language barriers; • lack of trust, as there is no contractual or non-disclosure agreement; • possibility of false, malicious or unethical input by participants.

Digital technology and the possibilities it offers to form and to collaborate has provided new opportunities for crowdsourcing. Large organisations often use web-based platforms to gen- erate ideas and solve problems.

P&G Connect + Develop (C+D)

P&G operates a web-based innovation platform to tap externally developed intellec- tual property to accelerate internal innovation and for sharing its internally developed assets and know-how to help others outside the company.

The idea of partnering externally to accelerate innovation is applied across the com- pany and around the world in all its brands. Within P&G, a global team dedicated to empowering C+D, searching for innovations, works with prospective partners to shep- herd breakthrough innovations through the company and into market.

Source: P&G dedicated website, http://www.pgconnectdevelop.com/home/pg_open_innovation.html.

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Dawson and Bynghall (2011) identified 22 platform categories of crowdsourcing that can be used to tap the creative potential of crowds. Six prominent ones are:

1 Distributed innovation platforms: to support innovation processes that cross-organisational boundaries (or take place outside an organisation).

2 Idea platforms: used within a company context to gather, filter and source idea. 3 Innovation prizes: challenges designed to catalyse new thinking and ingenuity, such as

Electrolux’s Design Lab. 4 Content markets: platforms where people can submit their work for people to purchase. 5 Prediction markets: gather opinions to predict the future, often based on ‘stock market-

type’ mechanisms, which provide a value of a particular prediction. Google uses predic- tion markets, using its employees to predict which of its innovations and new projects are most likely to be successful.

6 Competition platforms: used to gain expertise in fashion, graphic design and viral marketing.

In a world driven by innovation, those companies that can successfully tap the power of crowdsourcing to drive innovation will enjoy an immense advantage over those that stead- fastly depend on closed internal skills and ideas.

Social networking

Social networking is the practice of expanding the number of one’s business and/or social con- tacts by making connections through individuals. While social networking has gone on almost as long as societies themselves have existed, the unparalleled potential of the Internet to facilitate such connections is only now being fully recognised and exploited, through web-based groups established for that purpose. Based on the six degrees of separation concept (the idea that any two people on the planet could make contact through a chain of no more than five intermedi- aries), social networking establishes interconnected online communities (sometimes known as social graphs) that help people make contacts that would be good for them to know, but that they would be unlikely to have met otherwise. Depending on the social media platform, members may be able to contact any other member. In other cases, members can contact anyone they have a connection to, and subsequently anyone that contact has a connection to, and so on. Some ser- vices require members to have a pre-existing connection to contact other members. Social media sites include Facebook, Twitter, LinkedIn and Google and as the ownership of smartphones expands, social networking is becoming one of the fastest growing Internet activities.

Risk factors

Unpredictability vs. certain success

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 man- age these risks, uncertainty surrounding innovation continues to plague many unprepared innovators who jump too quickly into the market. When managers engage in the process of brainstorming how to minimise innovation risk, they generally do so under a flawed decision model or imperfect context. As a result, many innovation failures do not necessarily stem from the innovation itself but from the process used to determine how the innovation is introduced.

196 Linking creativity to strategic innovation

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.

A Harvard Business Review article (Merton, 2013) addresses critical elements of innova- tion risk by offering five basic rules for managing them.

Five rules to manage innovation risk

1 Recognise that a foundation of knowledge (model) exists and needs to be devel- oped for judging risk and return. This is a pre-step in that the team is setting up the context in which the innovation should be considered.

2 Every innovation model has its own set of limitations and will never be perfect. 3 Expect the unknowns. 4 Obtain intimate knowledge and understanding of the user. 5 Consider the infrastructure the innovation will be placed in. For example, the

infrastructure that the cloud has produced has altered many companies’ business models.

Innovation by its very nature is a risky business and may prove to be a disruptive process that requires attempting to know the unknown. Accepting this fact and having a strategy in place to mitigate risk is critical to being a successful innovator. Using these five rules, companies will be better equipped to tackle many of the risks related to innovations that go unaddressed. Risk assumption is non-sufficient, but it is an absolutely necessary condition.

Action Research from a variety of perspectives has argued that innovation no longer takes place within a single organisation, but rather is distributed across multiple stakeholders in a value network (Bogers and West, 2012). Innovation is almost never an either/or choice. As most companies have discovered, their innovation goals involve a complex mix of closed and open innovation that is uniquely tailored to their innovation objectives (Albats et al., 2016).

Innovation networks

The most valuable and complex technologies are increasingly innovated by networks that self-organise. Networks are those linked organisations (e.g. firms, universities, government agencies) that create, acquire, and integrate the diverse knowledge and skills required to invent complex technologies (e.g. aircraft, telecommunications equipment, biomass). In other words, innovation networks are organised around constant learning. Self-organisation refers to the capacity these networks have for combining and recombining these learned capabili- ties without centralised, detailed managerial guidance. The proliferation of self-organising innovation networks may be linked to many factors, but a key one seems to be increasing glo- balisation. Indeed, globalisation and self-organising networks may be coevolving. Changes in the organisation of the innovation process appear to have facilitated the broadening geo- graphical linkages of products, processes, and markets. At the same time, globalisation seems to induce cooperation among innovative organisations.

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As with many definitions, many people have defined the term ‘innovation networks’ in many ways and so far there is no agreed definition. Table 9.5 summarises the key compo- nents of innovation networks.

Table 9.5 Innovation networks

Innovation networks Innovation network functions

• Are all forms of organisations that serve the exchange of information, knowledge and resources

• Innovation activities are coordinated, legally independent organisations that pool their innovation initiatives

• Comprise at least two partners that help to deliver innovative solutions to identified problems

• The joint activities result in innovative processes, products and services

• Networks are based on confidence and stable cooperative relations

• Stable relations formed between organisations and (training and research institutions, etc.) result in advantages to all parties

In the light of intensified competition, technological complexity and institutional instability, firms are increasingly inclined to actively seek competitive advantage through innovation. Consequently, the survival, profitability and growth of organisations are in most industries intimately related to their innovative capabilities, i.e. the capacity to combine resources needed to generate novel and valuable products, processes, services, business models and organisational forms. Innovation is a social and interactive process in which collaboration and exchange of knowledge and information play crucial roles. Hemphälä and Magnusson (2012) focus on the way in which social networks contribute to innovation. They demonstrate that the characteristics of social networks have a major influence on the outcome of the innovation process. Dense or open networks support incremental or radical innovations, respectively. The implementation of open innovation instruments strengthens an organisation’s social capital, which is, in turn, positively related to firm performance (Rass et al., 2013).

Innovation and entrepreneurship

There is a close interrelationship between innovation and entrepreneurship. Innovation involves an entrepreneurial mindset, with the ability to recognise opportunities and be pre- pared to take risks. Entrepreneurship thrives on innovation as new enterprises or start-ups require the implementation of original products, services, processes or business models. Innovation involves elements related to invention together with an entrepreneurial mindset in order to create value. The term entrepreneurship is generally understood to refer to new company start-ups or as new business creations, while intrapreneurship refers to business development in existing organisations.

Entrepreneurship is important to policy makers and educators, as it is considered to be a source of job creation and an important accelerator for the growth of an economy. New enter- prises are a source of job creation with subsequent benefits for society and for the economy. Some organisations may have been reluctant to engage persons with entrepreneurial skills in the past because of the risks these persons could have posed (such as requiring constant chal- lenges, moving on to a competitor or adopting ideas from the organisation for a new start-up which they would establish as a competitor). However, things are changing. Organisations are increasingly appreciating the importance of a strong entrepreneurial approach to innova- tive activities and encouraging employees to become intrapreneurs.

198 Linking creativity to strategic innovation

Innovation, entrepreneurship and intrapreneurship are complementary processes that enhance organisational performance. According to Zhao (2005) they hold ‘the key to organi- sational sustainability in this period of rapid change and non-linear dynamics’. His three main propositions are:

• Innovation and entrepreneurship are complementary because innovation is the source of entrepreneurship and entrepreneurship allows innovation to flourish and helps to realise its economic value.

• Entrepreneurship uses innovation to expand business scope and boost growth. Therefore, entrepreneurship and innovation are dynamic and holistic processes that are not confined to the initial stage of a new venture.

• The development of entrepreneurship and innovation, and interaction between them for the successful commercialisation of innovation, require an organisational culture and a management style that are innovation-focused and supportive.

Skills for entrepreneurship and innovation

• The ability to search for and identify innovative opportunities. • A proactive attitude to the promotion of innovation through a strategic vision. • The ability to create a cultural environment that fosters innovation and entre-

preneurship. • The ability to develop effective plans to implement innovation and commercialisa-

tion procedures. • The ability to integrate research, design and market information to convert new

ideas and inventions into commercially viable innovations. • The ability to develop effective and realistic procedures for the evaluation of R&D

projects in terms of innovation, quality and commercial value.

Source: Zhao, 2005.

Summary Whilst any individual or group of employees can have a flash of inspiration, it is generally best for organisations to take a strategic approach to the generation of suitable ides for inno- vatory projects. Both ‘closed’ and ‘open’ sourcing provide potential, the greatest of which is obtained when the two methods are combined. Most organisations nowadays regard innova- tion as important for the future of their businesses. Top management that adopt a holistic and sustained approach to innovation are able to gain positive differentiation status as long as they are contextually aware and take positive steps to actively develop an organisational climate that supports innovative activities.

Discussion questions 1 Why it is important for companies to benefit from innovation? 2 What are ‘closed’ idea sources? Answer with a description and with two examples. 3 What is meant by the term ‘open sourcing’?

Applied business innovation 199

4 What are the advantages and disadvantages of OSS? 5 Why might a business opt to combine ‘closed’ and ‘open’ sources in its ideation and

innovation activities? 6 The pursuit of innovation is both costly and risky so why do businesses increasingly see

it as an important activity? 7 What is an intrapreneur?

Case exercise

Toyota: an elegant search for innovative ideas

Many hold Toyota in high regard for its culture that stresses the importance of innovation. Sakichi Toyoda founded the company as a handloom company in the last decade of the nineteenth century. In 1898, Toyoda created Japan’s first steam-powered loom and in 1924 the company invented an automatic loom. Four years later it developed a small petrol engine and in 1935 the company produced a prototype car. In 1937 the Toyoda family founded the Toyota Motor Company and having set up a factory adopted the concept of ‘Just In Time’ logistics in 1938.

The Toyota family have been continuously driven to cut costs by scrutinising the produc- tion, operational and logistical costs of the processes that supported the company. From its earliest days Toyota Motor Company has invested heavily in R&D to support innovation and now claims to implement a million new creative ideas every year. According to Matthew May, a senior University of Toyota advisor, and the author of Elegant Solution: Toyota’s Formula for Mastering Innovation (2007), this success results from an embedded culture of guiding principles and practice.

There are three guiding principles at Toyota and they create both the policy and the frame- work for innovation:

1 Ingenuity – a creative innovative mindset. 2 Pursuit of perfection – determination to innovate to achieve optimal solutions, for exam-

ple Lexus cars epitomise perfection. 3 Rhythm of fit – application of solutions to anticipated contextual and use problems, for

example, the development of hybrid technology.

Toyota operates a model known as the Idea Factory that is energised by the three guiding principles and a blend of closed and open innovation practice. Production activity is rig- idly controlled by the company’s Total Production System to meet its goal of producing the highest quality level, at the lowest cost and with the shortest lead-time. Since 1951 Toyota has operated its Creative Idea and Suggestion System (TCISS) to empower every employee to participate in improving product quality by inviting them to make informed suggestions on ways to improve the production process. Previously it had only been the privilege of upper management to make suggestions in that respect, but was now opened up to include employees at the sharp end of production arguably the ones most likely to highlight potential issues. Additional motivation was incorporated into the system with the presentation of an Individual Annual Award to honour excellent suggestions.

Training programmes were developed to sharpen employees’ skills at generating product ideas and key performance drivers such as quality, productivity and safety. These pro- grammes came to be known as activators, as they were developed to give employees a deeper understanding of their work. Key Toyota activators include:

200 Linking creativity to strategic innovation

• Poka-yoke or error proofing: this is a simple technique that is designed to help employ- ees to avoid making repetitive mistakes. It is an empowering and easy to learn method that helps people generate many ideas.

• 5S or rigorous housekeeping: these programmes help employees to become more pro- ductive. The five S’s are:

{{ seri (putting things in order); {{ seiton (arranging things efficiently); {{ seiso (preventing problems by exercising due diligence); {{ seiketsu (doing after-work maintenance and cleanup); {{ shitsuke (showing discipline, following the rules).

The culture that supports continuous innovation at Toyota results from an impressive appli- cation of the Japanese principle of kaizen. The company has empowered employees to encourage the free flow of creativity by systematically removing hierarchical barriers that often stifle innovation. For years Toyota has taken soundings of consumer experiences and this activity is growing rapidly since the advent of the digital revolution and the explosion of interest in social media. Innovation leads to evolution and this belief lies behind Toyota’s desire for customers and interested third parties to contribute ideas by means of crowdsourc- ing to improve and develop their products, services and environmental research.

Questions

• Why has Toyota been so successful in generating ideas over the years? • How might other companies learn from their success? • How might companies that are not historically dominated by a family culture that cham-

pions the generation of ideas develop a lasting ideation strategy? • To what extent do you think that Toyota will be prepared to contribute internally gener-

ated and developed technical and production process ideas to open source networks?

Source: Toyota website, http://www.toyota-global.com.

YouTubes

‘Toyota Motors: Building a Culture of Innovation and Sustainability in a Global Economy’, https://www.youtube.com/watch?v=QitwXzhtZ80.

Keynote Speech by President Akio Toyota at TOYOTA Investors Meeting 2015, https:// www.youtube.com/watch?v=m5RoMTh2yd8.

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Applied business innovation 201

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Raymond, E. S. (2001) ‘The cathedral and the bazaar’, cf. text and copyright at www.TUXEDO.ORG/- ESR/WRITINGD (accessed 7 April 2016).

Rigby, D. and Zook, C. (2002) ‘OpenMarket innovation’, Harvard Business Review, October, pp. 80–9.

St. Laurent, A. M. (2004) Understanding Open Source and Free Software Licensing, Sebastopol, CA, Oreilly Media, p. 4.

Slaughter, R. A. (2004) Beyond Dystopia, Routledge, Abingdon. Tapscott, D. and Williams, W. (2006) Wikinomics: How Mass Collaboration Changes Everything,

New York, NY, Portfolio. Van de Vrande, V., de Jong, J. P. J., Vanhaverbeke, W. and de Rochemont, M. (2009) ‘Open innova-

tion in SMEs: Trends, motives and management challenges’, Science Direct, Technovation, Vol. 29, pp. 423–37.

Wikhamn, B. R. (2013) ‘Two different perspectives on Open Innovation’, Creativity and Innovation Management, Vol. 22, Issue 4, pp. 375–89.

Wilkinson, A. and Kupers, R. (2013) ‘Living in the futures’, Harvard Business Review, May, pp. 118–27.

Zhao, F. (2005) ‘Exploring the synergy between entrepreneurship and innovation’, International Journal of Entrepreneurial Behaviour & Research, January, Vol. 11, Issue 1, pp. 25–41.

Selected YouTubes ‘Where Ideas Come From’, https://www.youtube.com/watch?v=NugRZGDbPFU.

‘Why Use Open Sources Software: The Benefits’, https://www.youtube.com/watch?v=fch 9WjHjAXI.

‘What Is Open Source Explained in LEGO’, https://www.youtube.com/watch?v=fch 9WjHjAXI.

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‘Why Success Is Not Predictable (Vince Ebert)’, https://www.youtube.com/watch?v=QC 8svQCxbT4.

‘Les McKeown on How to Make Your Business a Predictable Success’, https://www. youtube.com/watch?v=ZhEo6tj42g8.

‘Entrepreneurs and Innovation the Myth of the Idea’, https://www.youtube.com/watch? v=BeFjKXyMDug.

‘Rethinking Capitalism: Porter Explains Why Business Leaders Must Focus on Shared- Value Creating Products . . . ’, https://www.youtube.com/results?sp=SBTqAwA%253D&q= Rethinking+business+reality.

10 Building a strategic managing innovation model

Talking isn’t doing. It is a kind of good deed to say well; and yet words are not deeds. (Shakespeare, Henry VIII )

Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action.

(Peter. F. Drucker)

Learning objectives This chapter explores:

1 Rethinking reality. 2 What is wrong with the conventional approach to strategic management. 3 Taking a new approach to strategic innovation. 4 Reviewing the business, markets and market offerings, and creation of customer per-

ceived value. 5 Basic processes of strategic innovation. 6 Characteristics of strategically innovative companies. 7 Enabling strategic innovation.

Introduction This chapter addresses the need for the management of organisations to take a strategic approach to innovation if they wish to obtain and sustain a ‘market edge’ in the contemporary business context. If top management in organisations accept that innovation is an important concern for their business they need to regard expenditure on creativity and innovation as an investment item and not an activity that can be starved of resources when business fortunes are under pressure. In increasingly over-supplied domestic markets incremental innovation, whilst sound, is unlikely to result in radical or breakthrough innovations. Boards must realise that a holistic, rather than piecemeal, approach needs to be taken to innovation management. The pursuit of profitable innovations is potentially a risky activity. If a strategic approach is adopted then most innovation projects will result in a profitable return. However, some will fail and organisations must prepare to absorb the cost.

To play safe many organisations like to operate conventional strategic blueprints and apply conventional business school approaches. In under-supplied markets this does generate

204 Linking creativity to strategic innovation

a positive outcome. Such driving ‘by numbers’ does work and is both effective and efficient. In turbulent market conditions (buyers’ markets) this is often found to be wanting. New think- ing is required. The chapter explores (see Figure 10.1):

• What is wrong with conventional strategic approaches today. • What is meant by strategic innovation. • How to design and enable a strategic innovation management model.

Figure 10.1 Building a strategic innovation model.

Building a strategic managing innovation model 205

Context Figure 10.2 presents the 13 step strategic innovation model recommended in this text.

Step 1: checking the now before thinking about the how

Metaphors have a valuable capacity to help us see the wood from the trees. To see things and relationships that concern us from a different perspective. They enable us to reframe our thoughts and stimulate creativity – the core of innovation. Before presenting some thoughts that will assist in designing a strategic innovation model it is pertinent to spend a little time thinking about key relationships through the use of metaphor. Complex relationship sets can at first be confusing and a good metaphor can often clear the way and help us understand how concepts interact.

Einstein explored the interaction between mass, space and time in his celebrated research on relativity. In his book Future Perfect Davis wrote that the world is moving from a world dominated by Newton to a world dominated by Einstein (1987). A comparable change in the business world is the move from buyers’ (old world) markets to customers’ markets and the information age. In such conditions established ideas can become constraints that block crea- tive thinking and hence innovative projects. Take the case of watches. Wind-up mechanical analogue time pieces were challenged by a market drive led by Swatch that resulted in cus- tomer demand for fashion watches. Digital watches have changed the direction of the watch market, which in turn has been challenged by the abandonment of wrist watches in favour of mobile phones. In similar vein the fasteners have morphed from buttons, laces and zips to Velcro (Lorentz and Lorentz, 2012).

Most businesses are still based primarily on the equivalent of Newtonian physics. Can they be transformed with regard to their innovative efforts if they become more Einsteinian? Let’s spend a little time rethinking the relationship between mass, time and space in the business world.

Organisations and their structures are physically dissolving and diffusing across space and time as they decentralise, globalise and morph into flexible networking systems. They used to be defined on the basis of the old world focus of mass and tangibility. Organisations used

Figure 10.2 13-step model.

206 Linking creativity to strategic innovation

to be defined on the basis of where they were. Now they are increasingly to be found in the ether. Digital technology has created a new world where the emphasis is on information and the growth of diffuse interconnecting networks such as the Internet. Information is interest- ing from an Einsteinian point of view, as it does not have mass. (See Figure 10.3.)

Rethinking time

Time is an important factor in human life and of vital importance to companies and organi- sations. Time is money. Time-poor customers demand timely service. Let us consider how time affects the market offerings (product/services). Ever since the dawn of the industrial age successive technological advances, such as Just in Time, have speeded up mass production. Sophisticated networks and logistics quickly link customers and producers. Amazon can deliver books within hours to a customer’s door. Music can be instantly downloaded from the Internet. Fast food companies work hard to keep their promise. Instant bookings can be made for planes and trains. Instant transactions can be conducted with the banks. Airlines touch down and take off in record times to avoid heavy landing fees. Companies and organi- sations that are able to bring customer-perceived value (CPV) innovations speedily to market can gain real competitive advantage. High-tech companies find that their product/service life cycles are increasingly shrinking under competitive pressure. Life has become a 24-hour, seven-day a week phenomenon. Many now expect to be served instantly by suppliers.

Rethinking space

Life is lived in space and this, like time, is under pressure. Many are space-poor and live in small flats and houses and in ever more crowded locations. Small has become beautiful to many. Basic mass-market offerings, often the only choice in sellers’ markets, are giv- ing way to increased concentration on customising market offerings to individuals who place a premium on design and brand image. Restaurants and other leisure providers have to pay close attention to customer experience factors such as ambiance and service atten- tion. Technological items such as desktop computers are giving way to sophisticated mobile smartphones. Thinner wallets are on sale now as many have reduced their use of paper

Figure 10.3 Rethinking space, time and mass.

Building a strategic managing innovation model 207

currency in favour of conducting purchases with credit and debit cards. TV sets, smartphones, watches take up less space and/or are designed to multitask, reducing the need for people to purchase additional equipment. Many TVs now offer programme recording, mobile phones are equipped with sophisticated digital cameras, and digital watches can keep a running check on their owner’s health and use of time.

Rethinking mass

As well as time and space, market offerings are also being transformed by mass. Whilst many products are becoming smaller (taking up less space) they are also becoming smarter. Bookshelves and video cabinets are being replaced by cloud locations. Wikipedia has sig- nificantly reduced the potential for hardback encyclopaedias. Digital photographs and presentations can be viewed on tablet computers and smartphones thus substantially reduc- ing the demand for projection equipment. Cars are getting lighter, providing potential for improved engine performance and speed capability.

Linking the Einstein metaphor with strategic innovation

The main thrust of Einstein’s Theory of Relativity is commonly summed up in his E = MC2 formula where E represents kinetic energy, M, mass and C2, the speed of light. With a degree of licence the formula can be related to the factors impacting on time, space and mass in com- pany and organisational domains. Let’s redefine the components of the formula as follows:

E = Management expertise and enterprise M = Market offerings (product and service packages) C2 = speed of delivering innovative products to market. Next see if the conventional approach to strategy can help.

Step 2: conventional approach to strategic innovation

In the light of the previous section there appears to be lot wrong with conventional approaches to strategy with regard to the traditional strategic factor set of content, content and tools (Figure 10.4).

Figure 10.4 Traditional strategic factor set.

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Content

• Too much focus on best practices, operational effectiveness and incremental improve- ments in costs and profits.

• Too much imitation of competitor’s moves. • Too much holding onto strategic position. • Operational effectiveness is not strategy.

Process

• Strategy as adaptation of last year’s plan (no searching for new opportunities, differen- tiation and new growth).

• Planning being too formal and analytical. • Little if any creativity. • Validity of assumptions.

Tools

• Too analytical. • Focus on control. • Developed for a different purpose. • Conventional tools provide a snapshot of conventional wisdom.

The conventional factors can be matched with the adapted Einsteinian variables as shown in Table 10.1.

Table 10.1 Matching conventional factor sets with Einstein’s variables

Conventional strategic factor set Key adapted Einsteinian variables

Content Market offerings (M) Process Speed of commercialisation of innovations (C) Tools Management expertise and experience (E)

Step 3: basic processes of strategic innovation

Four key stages

The four key stages of the strategic innovation process (Figure 10.5) are:

1 visualising strategy 2 generating ideas 3 evaluating ideas 4 implementation.

VISUALISING STRATEGY

• Communicating the organisation’s vision and strategy for achieving it. • Describing the strategy.

Building a strategic managing innovation model 209

• Building a common picture and language, metaphors can be particularly powerful in this regard. Identifying possible areas of innovation; defining the kind of innova- tion that drives growth and helps meet strategic objectives. When senior executives ask for substantial innovation in the gathering of consumer insights, the delivery of services or the customer experience, for example, they communicate to employees the type of innovation they expect. In the absence of such direction, employees will come back with incremental and often familiar ideas.

GENERATING IDEAS

• Generating as many ideas as possible. • Using internal and external sources. • Taking people out of their workplace environment. • Invoking a variety of people and views.

EVALUATING IDEAS

• Applying a structured approach. • Encouraging strategic experimentation.

IMPLEMENTATION

• Addressing the barriers. • Demonstrating the need for change. • Involvement. • Communication. • Learning and acceptance of possible project failure. • Sense of urgency. • Adding innovation to the formal agenda at regular leadership meetings. This sends an

important signal to employees about the value management attaches to innovation.

Key principles

Step 4: innovation action plan

Strategic innovation is the planned creation of growth strategies, new product categories, ser- vices or business models that change the game and generate significant new perceived-value for consumers, customers and organisations (Birkinshaw et al., 2008).

Figure 10.5 Four key stages of the strategic innovation process.

210 Linking creativity to strategic innovation

Strategic innovation is a multi-functional approach that brings together all the creative assets, capabilities and disciplines of an organisation to produce breakthrough innovative ideas to drive business growth. In a world that is changing rapidly and in unpredictable ways, strategic inno- vation becomes vital in order to adapt to change. Strategic innovation is about innovating the strategy itself. It requires a substantial review of the real situation of the organisation and needs a willingness on the part of senior executives to sanction and foster a climate which encourages innovation. This usually involves a change in modus operandi and the provision of sufficient resources. Strategy involves answers to three basic questions that define a business:

1 Who are a company’s customers? 2 What CPV does the organisation provide? 3 What business model is best suited to the revised corporate mindset?

As such, approaching strategic innovation involves:

• reviewing the business; • reviewing the market; • reviewing the market offering; • re-examining how CPV is created and delivered; • redesigning basic processes of strategic innovation.

Practice

Step 5: reviewing the business

Table 10.2 Reviewing the business

Switch the strategic goal • From beating the competition to being different • Create awareness in the organisation

Challenge industry assumptions • Look across substitute industries • Look across strategic groups • Look at completely different industries and countries • Blur industry boundaries

Challenge assets and capabilities • Use current assets and skills or start again? • Mobilise hidden assets

Challenging mindsets and paradigms

• What are the main industry assumptions, relating to pricing, customers, products and services, delivery, etc.?

• Does the industry have a product-centric, customer-centric or competency-centric approach? What would a change in approach entail?

• Is the organisation constrained by the current assets and capabilities? • Do your major competitors possess the same or similar assets? • What are the organisation’s unique assets that cannot be easily imitated by competitors? • Do companies without these assets face a cost disadvantage in obtaining them? • Which of the company’s assets or capabilities are obsolete? • Which new assets does the organisation have to acquire to achieve a competitive advantage?

Building a strategic managing innovation model 211

Step 6: reviewing the market

Deciding which customers to target

Table 10.3 Deciding which customers to target

Existing New

Most profitable Less profitable Most satisfied Less satisfied Focus on differences Focus on commonalities Focus on finer segmentation Focus on de-segmentation Focus on attributes – preferred by customers Focus on circumstances – what is needed to do the job

Challenging mindsets and paradigms

• Who are the firm’s current customers? • What are their needs? • Why are they buying the company’s product or service? What jobs are customers trying

to do? • Which customer needs are the company actually meeting? • Are there customer segmentations with similar needs that the company is not serving? • Which customer needs can be serviced best with the company’s unique competencies? • Who is the real final customer? • How can existing assets and capabilities be leveraged? • Discover what customers really want rather than what they say they want.

Step 7: reviewing the market offering

Table 10.4 Reviewing the market offering

Focus on existing assets Start again, or use existing assets in a new way Single product or service Total solution, bundling Functional appeal Emotional and experiential appeal Specific buyers Chain of buyers Focus on market offering Focus on function to be met and the job to be done Build in new customer-perceived value features Raise, reduce, create, eliminate selectively

Challenging mindsets and paradigms

• Which of the company’s assets, capabilities and core competencies are truly unique? • Which of these does the customer value? • What are the customer’s needs and wants? What is the job that they are trying to do?

What is the problem that they are trying to solve? • What job can customers not get done? • How can the company build on core competencies to meet these needs more effectively? • Why are non-customers not buying the company’s market offerings? • Does the company welcome customer involvement in co-creation projects?

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• What trends are evident? (See Chapter 14.) • How might they change customer’s priorities? • What do companies in similar or different industries or countries offer? • How can the company serve less profitable needs in a profitable way? • What emotions does the company’s market offering evoke? • What alternative technologies might meet customer requirements?

Step 8: creating customer-perceived value

Buyer experience cycle

A new market offering has to appeal to customers by promising a high level of CPV at an acceptable price that will generate an acceptable return to the company. Market knowledge can be gathered from regular market research. Attention to the expectations of buyers with reference to the stages of the buyer experience model (Figure 10.6) will assist company’s innovation activity. Relatively straightforward incremental innovations should become obvi- ous quickly. Radical or breakthrough innovations usually take longer to emerge.

PURCHASE

• How long does it take to find a market offering? • Is the place of purchase attractive and accessible? • How secure is the buying environment? • How quickly can a purchase be made?

DELIVERY

• How long does delivery take? • How difficult is it to unpack the purchased item?

Figure 10.6 Buyer experience cycle.

Building a strategic managing innovation model 213 USE

• Is any training or expert assistance required? • Is the purchase item easy to store when not in use? • Does the purchase meet CPV expectations?

SUPPLEMENTS

• Are any other items and/or services needed (e.g. Internet security software to go with purchase of a new tablet) to gain full utility form the market offering?

• How costly are they?

MAINTENANCE

• Does the purchase require regular maintenance? • How easy is it to arrange this?

DISPOSAL

• Does use of the market offering create waste? • How easy is it to dispose of this waste?

The customer-perceived value matrix

Successful innovating companies expand the buyer experience cycle by adding researched attributes of CPV. Table 10.5, for purpose of illustration, adds five such attribute factors on the ‘x axis’.

Table 10.5 Customer-perceived value map matrix

Purchase Delivery Use Supplements Maintenance Disposal

Customer utility Customer

convenience Ease of use Packaging Prestige Environmental

friendliness

The ‘y-axis’ illustrates ways in which companies can deliver CPV attributes. Customer productivity attribute factors – helping customers do things faster, better or in easier ways. By placing a new market offering on one of the 36 spaces of the customer-perceived value map, companies can quickly see if/how the new innovation is positively differentiated over existing market offerings. Over and above highlighting opportunities for incremental innovations the CPV map is a valuable means of suggesting potential radical innovations (Table 10.5).

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CPV map positioning

Starbucks revolutionised the office-workers’ coffee break, traditionally coffee in delis or fast-food outlets. Competitors offered fast plus cheap coffee – in terms of the CPV map competitors focused on delivering productivity in the purchasing experience.

Starbucks, however, moved into a new space entirely; by opening chic coffee bars with an exotic mix of brews, the company injected fun and cachet into the coffee pur- chasing experience. They innovated in the fun and image attribute CPV factor space.

Same CPV factor at a new buyer decision stage:

Innovation through extending a CPV attribute to different parts of the customers’ buy- ing experience.

Amazon burst into the book retail business by offering a superior delivery service to that of conventional book shops by shipping purchases directly to customers within a few hours of registering their orders. In terms of the map this was productivity in the delivery sector of the CPV map.

New CPV factor at a new buyer stage:

Alto, a disposable fluorescent bulb manufactured by Phillips. Most bulb manufacturers competed to offer customers more productivity in use;

they did not pay attention to the fact that the bulbs had to be carried off to a special dis- posal facility because of their harmful mercury content. By creating a bulb that could be disposed of in an environmentally friendly way Phillips moved into a whole new CPV space – environmental friendliness in disposal.

Source: Goodman, M. R. V., Durham University.

Step 9: characteristics of strategically innovative organisations

Figure 10.7 shows an organisational structure that supports strategic innovation.

Culture

• Has a questioning attitude. • Rewards success and failure; is critical of inaction. • Tolerates mistakes. • Welcomes change. • Supports risk taking and change. • Supports teamwork and collaborations.

Structure

• Fast and flat. • Small units.

Building a strategic managing innovation model 215

• Encourages collaboration. • Autonomous teams at front line.

Processes

• Fast and unbureaucratic. • Decentralised decision making. • Support idea generation, experimentation and execution.

Systems

• Support the process of strategic innovation. • Enable collaboration • Reward risk taking and action. Set performance metrics and targets for innovation.

Leaders should think about two types of metrics: the financial (such as the percentage of total revenue from new market offerings) and the behavioural. What metrics, for exam- ple, would have the greatest effect on how people work? Leaders can also set metrics to change ingrained behavior, such as the ‘not invented here’ syndrome, by requiring 25 per cent of all ideas to come from external sources.

• Used to create relationships with customer.

People

• Four types of people drive innovation: inventors, entrepreneurs, extreme individual achievers in their fields (such as the arts, entertainment, or sports) and super mentors. Variety (internal and external).

• Collaboration. • Educated in regard to strategy and needed skills.

Figure 10.7 Organisational structure to support strategic innovation.

216 Linking creativity to strategic innovation

Action

Step 10: purpose of strategic innovation

The innovation strategy defines the role of innovation and sets the direction for innovation execution. However, the role of innovation in helping organisations achieve growth targets is often unclear and the revenue growth from innovation is insufficient, unless managed with great rigour. Many companies fail to develop and execute an innovation strategy.

It is important to develop a common understanding of the definition of the innovation strategy’s purpose. Is it about successfully commercialising new ideas, i.e. inventions with market impact? However, ‘new’ can have different meanings, ranging from new on the world market to new in one specific industry but already established in another industry, to new to a company or maybe even just new to some of us. The word ‘strategy’ implies taking action with a potentially large impact on the company, i.e. does not include simply a series of incre- mental product line extensions. Based on this understanding, the following are five factors that make up a sound innovation strategy:

1 It should be inspiring. 2 It should be ambitious and challenging. 3 The approach should morph closed and open ideation sources. 4 It should be within the capabilities of the organisation. 5 It should be iterative and capable of adaptation over time.

Organisations should:

• Allow time and space for creative thinking. • Encourage and motivate people to pursue ideas. • Use resources to start small-scale experiments. Just do it! • Encourage risk taking. • Challenge old habits and ways of doing things.

Step 11: transformation through strategic innovation

One of the most frequently asked questions is how companies can transform their organisa- tion to become more innovative and create a culture of continuous innovation that enables strategic renewal. A simple question but a big challenge that touches the fundamentals of why anyone would want to start a business. Businesses exist because of opportunity and this is why innovation is a key driver of business success. But what enables successful innova- tion? How can it be embedded in an innovation culture?

Many executives experience difficulty and disappointment in their ability to stimu- late innovation. What explains the gap between the leaders’ aspirations and execution? Starting to build an organisation in which innovation plays a central role is often far more frustrating than most executives ever imagine it to be. When people read or hear about successful companies that pursue one good opportunity after another they admire them and try to understand how they do it. The Apples and Googles of this world, the Legos and Virgins all have great stories to share and each is a worthwhile company to study. But benchmarking, copying or emulating doesn’t guarantee success; on the contrary, it

Building a strategic managing innovation model 217

often leads to disappointing results. If the ambition is a complete transformation of an organisation into one where innovation is at the core of what the company does then there are better ways. Sustaining innovation to create a flow of real market offerings that deliver CPV is even harder. There are no best-practice solutions to seed and cultivate innovation. The structures and processes that many leaders reflexively use to encourage it are necessary but not sufficient. People and corporate culture are the most important drivers of innovation. A disciplined rather than an ad hoc approach focusing on three people-management fundamentals has the potential to produce the building blocks of an innovative organisation.

1 Executives can formally integrate innovation into the strategic-management agenda of senior management. In this way, innovation can be encouraged but also managed, tracked and measured as a core element in a company’s growth aspirations.

2 Executives can make better use of existing (and often untapped) talent for innovation by creating the conditions that allow dynamic innovation networks to emerge and flourish.

3 Executives can take explicit steps to foster an innovation culture based on trust among employees. In such a culture, people understand that their ideas are valued, trust that it is safe to express those ideas and oversee risk collectively, together with their manag- ers. Such an environment can be more effective than monetary incentives in sustaining innovation.

This list of steps is not exhaustive. Still, given the limited time and means – as well as the short-term performance pressures that executives constantly face – pursuing innovation with anything other than existing talent and resources often is not an option. These three funda- mentals are a practical starting point to improve an organisation’s chances of stimulating and sustaining innovation where it matters most – among a company’s people.

Step 12: holistic approach to strategic innovation management

• Make innovation a central topic in leadership programmes. • Set aside capital budget for truly innovative projects. • Train creative problem-solving facilitators charged with supporting innovation through-

out the company. • Enrol all employees on courses in business innovation. • Install a business ‘innovation room’ in all business units and at company headquarters. • Include innovation as a significant component of employees’ bonus plans. • Schedule time in business review meetings to discuss business unit innovation performance. • Create an innovation pathway to review and fast track the most promising ideas. • Build an innovation portal to give people access to innovation tools and data and assist

them to input their ideas. • Develop a set of metrics to track innovation inputs, throughputs and outputs. • Allow time and space for creative thinking. • Encourage and motivate people to pursue ideas. • Resources should be used to start small-scale experiments. Just do it! • Encourage risk taking. • Challenge old habits and ways of doing things.

218 Linking creativity to strategic innovation

Step 13: key issues of intent

There are three key issues of intent that businesses should focus on to address this challenge:

1 create a clear purpose for the organisation; 2 use that purpose to make innovation happen from day one; and 3 take policy steps and commit to sustain strategic innovation processes.

Create purpose

Often companies state their ambition in numbers, e.g. market share, percentage growth, mar- gins, etc. However, the problem with numbers is they very seldom excite most of us unless we’re discussing world records!

Organisations need a clear vision and purpose (Hamel and Prahalad, 1989) that connect on a more emotional level, something that is engaging, exciting and provides a compelling reason and a clear direction to seek opportunity for the business. A purpose should describe what the company aspires to, an ambition should describe what it wants to achieve. Both should be clearly linked to opportunity because that is at the heart of why the company is in business. Also the ambition needs to be stated at the right level. All in management positions should continually ask does the company have a clear aspiration that stretches the imagination and stimulates innovation.

Innovation has become a core driver of growth, performance and valuation. Executives see innovation as the most important way for companies to accelerate the pace of change in today’s global business environment. Leading strategic thinkers are moving beyond a focus on traditional product and service categories to pioneer innovations in business processes, distribution, value chains, business models and even the functions of management. Strategy should be a clear and detailed statement of an organisation’s vision, ambition or future state. It provides direction and drives the organisation to make clear choices about where they will compete. This is why strategy and innovation are very closely linked (Pisano, 2015). Opportunity informs strategy and strategy drives choice on an ongoing basis about which opportunities to pursue and which to ignore.

Make innovation happen

Opportunity drives innovation whereas processes and organisational development (OD) ena- ble innovation to happen efficiently and repeatedly. It is necessary to design processes, and develop capability and the right organisational culture to support innovation in the longer term. But innovation is initially about generating excitement, about realising people’s ideas. It has the power to mobilise teams to focus on delivering something new and of value to the business. People generally do not get excited about processes and organisational design. Starting with that kills any momentum that may have been generated initially.

Instead, focus often tends to be on running innovation challenges that activate and execute company strategy. These challenges range from what could be termed early stage (broader opportunity areas that need to be explored) to late stage (specific ideas an organisation wants to realise), and from management innovation (new ways to organise, lead, coordinate or motivate) to practical (engaging the wider organisation or even beyond for ideas). So rather than solely focusing on a ‘breakthrough innovation’ which rarely comes right first time it is better to start innovating incrementally, building momentum, removing obvious roadblocks along the way and learn what works best in organisational circumstances. Designing a strate- gic innovation model should be an iterative process that is encouraged by top management.

Building a strategic managing innovation model 219

Sustain model development

If top management stress the importance of company strategy and innovation, this will build core beliefs that will ensure that what has been started is boosted to last and forms the basis of strategic renewal. Motivating individuals and teams with Innovation Challenges (capability building: learning by doing) are useful to start to develop and sustain a company’s strat- egy, build momentum and communicate real results to the business. Innovation Challenges are highly participative, engaging activities, which enable people to develop capability in organisations from day one. When teams work on innovation challenges they will learn and adopt new behaviours through specific tools and techniques and understand the principles that support them.

Systemic challenges (learning by doing) require systemic solutions and capability build- ing is but one element of that process, which also includes the sponsorship of appropriate training courses for employees. Other elements include portfolio management, innovation processes, organisational structures, metrics and leadership development. A committed policy to developing and sustaining strategic innovation is necessary to embed and scale innovation across an organisation.

In many organisations the top three ways managers spend time making decisions about innovation involve determining what types or strategies to focus on, who gets to work on the resulting projects and how to commercialise the fruits. Few spend time on targets, metrics and budgets for innovation. That is telling, since executives whose companies do have such targets and metrics feel the greatest confidence in their decisions.

Final thoughts

There are three essential questions and one challenging acceptance for executives in creating and implementing an innovation strategy:

• How is innovation expected to create value for customers and for the company? • How can we create a high-level plan for allocating resources to the different kinds of inno-

vation? Ultimately, where a company spends money, time, and effort is their strategy. • How can we manage trade-offs, as every function will naturally want to serve its

own interests? Only senior leaders can make the choices that are best for the whole company.

• Recognise that innovation strategies must evolve. Any strategy represents a hypothesis that is tested against the unfolding realities of markets, technologies, regulations, and competitors. Just as product designs must evolve to stay competitive, so too must inno- vation strategies. Like the process of innovation itself, an innovation strategy involves continual experimentation, learning and adaptation.

Summary It is hoped that this text will provide readers with an appreciation of the key principles asso- ciated with creativity and strategic innovation management. Just as the opening quote from Shakespeare’s Henry VIII declares, words are not enough unless followed by action. The 14-step prototype model described in this chapter is intended to act as a stimulus for readers to walk the talk and to gain practical experience in real time. Interpret the 14-step model in the light of the key characteristics of proven strategically innovative companies.

220 Linking creativity to strategic innovation

Questions for discussion 1 How do you check the now before addressing the how? 2 Why does the conventional approach to strategic innovation management so often disap-

point? 3 What is the buyer’s experience cycle and how can it help in the development of strategic

innovation plans? 4 What are the main characteristics of strategically innovative companies?

Case exercise

Yamaha Motor Company: ‘Revs your Heart’

In October 2015 at the Tokyo Motor Show Hiroyuki Yanagi, President, CEO and Representative Director of Yamaha Motor Co., Ltd, announced that the company planned to invest $1.1 billion to accelerate new growth strategies. He aimed to achieve a 2 trillion yen turnover within three years and an overall operating profit of 10 per cent. This would require the addition of at least one new business area such as cars, three-wheelers or robots. Currently the main interests of the company lie in its activities in engines and electric motors, body engineering in motorcycles and marine vessels, control systems, and manufacturing engi- neering technology. Innovation in these core areas will drive both incremental and radical new products and services as the company evolves and develops its technologies. Evolution is very important to Yamaha, and it is constantly trying to create powerful new combinations based on these four areas, including power sources and technologies. Such combinations include motorcycles and engines, motorcycles and electric motors, and three-wheelers in new frames or new bodies with motorcycle engines.

PAS, the world’s first electrically power-assisted bicycle, is another innovation created by Yamaha Motor in the early 1990s, when the Japanese market was developing environmental consciousness. As restrictions and regulations were increasingly surrounding the motorcycle market, the company’s engineers were motivated to create a new type of mobility combin- ing human and electric power in a solution that does not require licences or helmets. Twenty years later, almost a half million units are still sold annually in Japan and almost 1 million units in Europe. It is especially popular in Germany and the Netherlands.

Despite the uncertainties in global markets Yamaha Motor’s sales have been better than most Japanese companies. In developed markets, this growth can be explained by the yen, which is much weaker now compared to previous years. About 60 per cent of the company’s business comes from emerging economies, while 40 per cent comes from advanced econ- omies, similar to most Japanese automobile manufacturers. Yamaha Motor has grown its market share in both advanced and emerging economies. In the last three years, the company has gained significant market share in advanced economies, especially the United States and Europe, largely due to its range of best-selling models in the big motorcycle category.

Production volumes declined a little in 2015 due to the general economic slowdown in most emerging markets. Production in Asia and mainland China declined almost 10 per cent. Yet in spite of generally declining production, sales grew in other advanced economies, due to increased sales of premium motorcycles. In Asia, customers are stepping up to high-end motorcycles, so that’s why their sales were up even though volume was down.

In the past three years the company has restructured the business by improving products and reducing costs. In addition, it was successful in motorcycle racing, such as MotoGP.

Building a strategic managing innovation model 221

The company’s 2015–18 strategic plan assumes that growth in emerging economies will remain sluggish for the next two to three years, meaning that business in these regions will be slow. At the same time, advanced markets are expected to remain strong enough to overcome the emerging markets and enable the company to achieve the same level of global profits as in its last trading year. By 2018 sales are targeted to reach 2 to 3 trillion yen and deliver at least a 9 per cent operating profit.

Yamaha is proud to be a ‘Kando’ – or excitement – creating company and it is pursuing a number of CSR programmes to realise its vision, which is to provide ‘Kando’ to its custom- ers. Although Yamaha Motor and Yamaha Corporation are independent corporate entities, they are united by ‘one passion’, which is to be unique both in the music and transportation industries. They share the same brand charter and a common commitment to passion, innova- tion and quality, and for the creation of Kando.

Kando in Japanese refers to an emotional feeling that people have when they experience something that exceeds their expectations. If the experience just meets their expectations, then it doesn’t draw an emotional response. The experience must surpass their expectations to draw the emotional response of Kando. That is their brand and what it says about Yamaha.

Yamaha Motor’s 2015–18 strategic plan allocates 130 billion yen for new growth strate- gies. Four themes have been identified for new growth.

1 Personal mobility – through bicycles, motorcycles, scooters, multi-wheelers, recrea- tional vehicles and compact four-wheelers, all featuring the ‘unique style of Yamaha’.

2 Marine business – Yamaha is the leading brand in the world in the marine market. The marine business currently accounts for sales of almost 300 billion yen and 20 per cent operating profit, which is a unique business model.

3 Solutions business, which includes robotics, surface mounters and unmanned systems, such as drones.

4 Foundational technology development.

In the growing personal mobility market the company is now advancing research on compact four-wheelers and multi-wheelers, such as twin-front-wheel systems. In the marine business, where Yamaha Motor already has solid market leadership and strong engine know-how, it is developing more integrated controls for total boat systems, as well as advanced on-board IT systems to further improve performance and customer experiences.

In the marine business the company plans to expand its operations as a system supplier offering not only engines but also boat packaging, boat control systems, IT systems, and marine-life value.

The company’s hallmark motorcycle business only delivers a 6 per cent operating profit compared to 20 per cent in its marine business. It is a market where there is growing competi- tion from Honda and Suzuki. In Japan, there is a need to continue restructuring the business, as it is still importing most of its motorcycles and scooters from Taiwan, which leaves it vulnerable to currency fluctuations. As the Taiwanese currency is linked to the U.S. dollar, importing items from Taiwan turns out to be very expensive, since the dollar is very strong and the yen is weak against the dollar. In Europe, there are new emissions regulations, called Euro 4, which will require additional expenditure on R&D to further upgrade the emissions performance of products.

Artificial intelligence (AI) and robotics offer considerable growth potential to the large automobile and motor companies. At the Tokyo Motor Show in 2016 Yamaha presented the ‘Motobot’ robotics and automated systems it has developed and embedded in its new

222 Linking creativity to strategic innovation

products. It is working with Stanford University to develop autonomous motorcycle-riding robots. The aim is to gain technological expertise and know-how in this field and then apply this to develop rider-support systems.

Additionally, the company aims to implement more automation within the machine- operation process, which is reflected in the specification of its flagship super sports model. The new model features ultra-high-performance technology and highly advanced control systems with its rider-support system. The plan is to introduce this concept and technology across the full Yamaha range of motorcycles.

Currently the U.S. market represents about 20 to 25 per cent of Yamaha’s global sales. The United States is a special market for Yamaha Motor. In Europe, 80 per cent of business comes from motorcycles, but in the United States, business comes from a variety of segments. The U.S. marine market is the biggest in the world and offers high volume and high sales. The U.S. motorcycle market also offers high business volume based on large motorcycles. Recreational vehicles, such as All-Terrain Vehicles (ATVs) and Recreational Off-highway Vehicles (ROVs), are another substantial market for Yamaha Motor in the United States.

As global competition intensifies it is becoming essential for Yamaha to improve its local logistics and marketing activity as well as becoming more active in its business social respon- sibility programmes.

Source: Yamaha Motor Company.

Task

Read the case brief and apply the 14-step strategic innovation management model featured in this chapter. Make brief notes under each of the 14 step heads and then write a brief report to Yamaha’s CEO with your recommendations for developing the company’s management of strategic innovation in the U.S. market.

YouTubes

‘Yamaha Motor Global’, https://www.youtube.com/channel/UCEe7dmonT8QIBwbd2l9gxIA.

‘Yamaha 50th Anniversary’, https://www.youtube.com/watch?v=RvNjf_WNNvo.

References Birkinshaw, J., Hamel, G. and Mol, M. J. (2008) ‘Management innovation’, Academy of Management

Review, Vol. 33, Issue 4, pp. 825–45. Davis, S. M. (1987) Future Perfect, Reading, MA, Addison Wesley Longman. Hamel, G. and Prahalad, C. K. (1989) ‘Strategic intent’, Harvard Business Review, May–June,

Vol. 67, Issue 3. pp. 63–78. Lorenz, H. A. and Lorentz, H. A. (2012) The Einstein Theory of Relativity, Houston, TX, WLC. Pisano, G. P. (2015) ‘You need an innovation strategy’, Harvard Business Review, June, pp. 44–54.

Selected YouTubes ‘Strategy Tools for Business Model Innovation’, https://www.youtube.com/watch?v=rNN 2bAV9Qqg.

‘Business Model Innovation’, https://www.youtube.com/watch?v=B4ZSGQW0UMI.

Building a strategic managing innovation model 223

‘A New Approach to Innovation Management’, https://www.youtube.com/watch?v=soe0_ 0hSwtE.

‘What Is Innovation Management?’, https://www.youtube.com/watch?v=lxtaDlHZtg4.

‘The Five Myths of Innovation’, https://www.youtube.com/watch?v=a5sbXE77p0I.

‘“Innovative” Companies: Not Walking the Talk’, https://www.youtube.com/watch?v= FVLxdjVX58s.

‘The DNA of the World’s Most Innovative Companies’, https://www.youtube.com/watch? v=TtsM9VGNlII.

Part IV

Strategic innovation in changing times

11 The importance of leadership

A leader is a dealer in hope. (Napoleon Bonaparte)

I prefer the talents of action . . . to all the speculations of those mere dreamers of another existence.

(Lord Byron, Letter to Annabella Milbanke)

Learning objectives This chapter explores:

1 Avoiding contextual myopia. 2 Leadership competencies. 3 Differences between management and leadership. 4 Main leadership theories. 5 Assessing leadership skills. 6 Leadership challenges.

Introduction Most organisations are challenged by the necessity of dealing with the impact and con- sequences of the paradigm change in the business environment discussed in Part I. This generally amounts to recognising and facing up to the need for change and having the reso- lution to take decisions that break with the modus operandi of the past. Management have a tendency to regard preserving the status quo as an important part of their mission and in so doing may wittingly or unwittingly develop an unrealistic view of real-world conditions. This attitude will result in failure to take the right mix of business decisions and can produce a state of management confusion and myopia. How do leaders resolve the inevitable tensions between ethical dilemmas and economic self-interest? How does a leader’s desire for control balance with the requirement to empower employees (Rickards, 2012)?

It has long been recognised that management tends to be associated in many organisa- tions with the concept of efficiency. Managers are people who do things right according to the established organisational culture. However, leadership has more to do with the concept of effectiveness; doing the right thing in the light of real-world conditions. This requires an adventurous approach that identifies the need to discover a new vision for the organisation, the determination to communicate this to staff and the collective energy and commitment to design and energise action that will result in success. The foresight and action necessary is,

228 Strategic innovation in changing times

therefore, better encapsulated by the concept of leadership (Adair, 2009). Leadership can be felt throughout an organisation and gives pace and energy to the work and empowers the workforce. Empowerment is the collective effect of leadership (Thompson, 2006).

This chapter discusses the important characteristics of leadership and the key tasks it is called to perform. Practical material (including an audit and a checklist) is included to encourage readers to think through the practical implications of leadership. It should be noted that an organisation’s determination and commitment to leadership activity does not render traditional controlling management activities redundant. Both leadership and conventional management activity are needed. It is the balance of these responses that underpins a positive approach to operating an organisation in modern times. (See Figure 11.1.)

One curious student posed the question in a seminar class ‘What exactly is a leader?’ Reduced to basics a leader is someone others choose to follow whether or not they have a choice in the matter. A leader is characterised by both action and trust (Castaldo et al., 2010). Such leaders provide action and direction at a time of crisis and are immediately trusted. Leaders are also people who others with time to think and judge also choose to follow. They energise groups (Robert et al., 2009). In the UK navy ratings have been heard to quip ‘I’ll follow the man who is a leader but I won’t follow the bleeder who thinks that he is a leader’. So if there is time for people to form opinions about a leader, attractive personality traits are important but not necessarily the basis of success.

Figure 11.1 Exploring leadership.

The importance of leadership 229

Returning to the student’s question, a leader appears to be someone who is recognised either immediately or over time as a person who enables individuals, groups and organisations to respond in a beneficial way within the constraints of a given environment. Within the context of an organisation this implies a sensible alignment between the needs of individuals and groups and the expressed purpose (vision) of the organisation. Traditionally leaders have often been regarded as the boss at the top. Today, a fundamental shift is underway in the work of corporate leaders as they seek to create and sustain employee achievement and high levels of staff morale. It is a shift from a command and control style to one where the leader creates the conditions under which an ambition can be achieved (Gill, 2011). Thus the answer to the student’s question posed earlier is: leaders are people who are able to influence others and in organisations possess managerial authority.

Context

Avoiding contextual myopia

Leaders need to assume responsibility for both successes and failures. According to Beer et al. (1990) they share three characteristics:

1 They harbour a strong and persistent belief that facing up to the challenges of the busi- ness environment is essential.

2 They communicate their conviction in the form of a creditable and compelling vision. 3 They have the skills and organisational know-how to implement their vision.

Key principles

Leadership competencies

Much has been written, both in academic articles and books, about the topic of leadership. For today’s student of leadership much of this material can appear repetitive. What should an aspiring business leader read? A useful response to this question might perhaps be what is most meaningful to them in their operating environment. This reduces the library of material to that which is grounded in practice. This text has focused on the work of Bennis and Nanus (1985) who examined the behaviour and characteristics of 90 leaders. They concluded that they possess four vital competencies:

1 Management of attention – the vision of the leaders commanded the attention and com- mitment of those who worked for and with them in attempting to achieve it.

2 Management of meaning – the leaders were skilled communicators, able to cut through complexity in order to frame issues in simple images and language. They were excellent distillers of information.

3 Management of trust – ‘Trust is essential to all organizations.’ For the leaders trust was expressed through consistency of purpose and in their dealings with colleagues and others. Even though people sometimes disagreed with what they said or did, the leaders were admired for their consistency of purpose.

4 Management of self – the leaders were adept at identifying and fully using their strengths; and accepting and seeking to develop areas of weakness.

Leadership skills do develop naturally in some and can also be learnt by a manager willing to make the effort, but they are fundamentally different from management. To survive in

230 Strategic innovation in changing times

the twenty-first century a new generation of leaders is needed. When considering leadership in the business world the temptation is to view it as a battle field (Tzu, 2009). Good leaders in current times require attitudes and behaviours which both attract and relate to humanity.

The difference between management and leadership

The distinction is an important one. According to Drucker (2001) ‘Management is doing things right: leadership is doing the right thing.’ Leaders conquer the context (Kotter, 1990) – the volatile, turbulent, ambiguous surroundings that sometimes seem to conspire against us and will surely suffocate us if we let them – while managers surrender to it. The fundamental differences between the two are illustrated in Table 11.1.

Leaders, whether good or bad, inspire trust in the people they engage and with whom they interact. Leadership is about behaviour first and skills second. With this in mind both Jesus and Colonel Gadaffi were leaders. Good business leaders do not threaten or kill their employees but rather create operating conditions in which others are encouraged to give of their best. In this sense leadership is primarily about behaviour that exhibits a positive regard and is not coercive. It involves management functions but their use is conditioned by humanitarian concern for their staff. Good business leaders earn the trust of their people by consistently ensuring that their behavioural attitudes are apparent and do not become submerged by management processes.

Qualities of a manager

A manager is considered a copy of the leader, responsible for communicating the rules and philosophies of the company to individual employees and insuring that they abide by them. For a manager, his or her relationships with employees are determined by a hierarchical man- agement system, and rarely through personal ones. They are responsible for maintaining the day-to-day operations of the company so the cogs of the operation stay well oiled. Managers are generally more concerned with the quarterly bottom line, and will often make decisions based on these calculations. Good managers are often considered ‘good soldiers’ in that they rarely question the decisions of the higher echelons of the company, and only serve to enforce the execution of its policies.

Table 11.1 Differences between managers and leaders

Managers Leaders

Administer Innovate Copy Originate Maintain Develop Focus on systems and structure Focus on people Rely on control Inspire trust Inclined to take short-term view Inclined to take longer-time view Ask how and when Ask what and why Eye on the bottom line Eye on the horizon Accept the status quo Challenge the status quo Classic good soldier Are their own person Do things right Do the right things

The importance of leadership 231

Qualities of a leader

In contrast, a leader focuses on interpersonal relationships with other important contacts in other companies, as well as promoting promising individuals within the company to foster innovation. A leader bases his or her decisions on reports from department heads to assess the entire company’s situation and future strategies. A true leader will also be willing to ignore the company’s quarterly bottom line for several quarters – much to the chagrin of shareholders – and make investments for a long-range growth perspective. A leader is con- sidered a ‘fearless innovator’ in that he or she challenges the status quo and is unafraid to take high risks in search of high rewards, for customers, employees and shareholders alike. (See Table 11.2.)

The importance of leadership in business life has been recognised for years but it assumes an especial relevance in modern buyers’ market environments where the worldview held by leaders needs to be realistic (Jones, 2010). This poses a number of questions such as:

• What are the necessary behavioural leadership attitudes/qualities? • Are real leaders born and not made? • Can leadership be learnt? • Is it primarily a matter of behaviour? • Is it largely a matter of contingency? • Is it purely charisma? • Is it visionary? • What are the contemporary leadership issues? • What is the essence of leadership?

Comparison between managers and leaders

It is said that a manager asks ‘how’ and ‘when’, whereas a leader asks ‘what’ and why’. In many professions, managers and leaders assume the same role. However, if a leader of a business simply manages a company – rather than challenging its true potential – then it will likely fall behind its industry peers. Likewise, if managers overstep their bounds and attempt to revolt against the company, they may soon find themselves out of a job. In some cases, where micromanagement is essential to maximise efficiency, nurture skills and keep employees organised, strong managers are an absolute necessity to prevent high turnover rates and the ‘brain drain’ of a skilled workforce. A good leader will also stay in the front line of battle, and be familiar with every aspect of the company, leading through inspiration rather than coercing through hierarchical control. A perfect manager who attains the status

Table 11.2 Leadership attributes

Characteristic Example

Administrative Civil servants Authoritarian Military Democratic Ricardo Semler, Semco Innovative Jørgen Vig Knudsstorp, LEGO Inspirational Richard Branson, Virgin Group Moral Religious leader Philanthropic Strive Masiyiwa, Econet Technical James Dyson, Dyson

232 Strategic innovation in changing times

of a true leader will be able to lead people effectively and draw on the correct strengths and knowledge of every key individual in the company. Many managers will struggle for their entire careers and never attain this, but a skilled few will evolve into true leaders. The follow- ing sections address these issues.

Leadership theories I: trait theories

Table 11.3 presents a set of personal qualities commonly believed to be exhibited by good leaders.

In the early 1940s, often as part of the Second World War effort, theorists tried to isolate the key characteristics or traits of good leaders. However, isolating important traits is one thing, observing their success in different situations (contexts) is another. From the late 1940s through to the mid-1960s theorists turned their attention to studying behavioural styles.

Presenting a rather different view Board and Fritzon (2005) carried out some psychologi- cal research and tested 39 senior managers and CEOs from leading British companies, then compared the findings with a sample drawn from a prison. Business leaders returned results that were more alarming than the prisoners, many of whom were diagnosed with psycho- pathic disorders! The dominant traits they exhibited were:

• skill in flattering and manipulating powerful people; • egocentricity; • strong sense of entitlement; • readiness to exploit others; • lack of empathy; • lack of social conscience.

Leadership theories II: behavioural theories

In a new attempt to isolate the essence of leadership, theorists identified common leader- ship styles. Autocratic leaders tended to centralise all authority, dictate work procedures, make unilateral decisions, manage by email and limit and/or severely govern employee par- ticipation. On the other hand, democratic leaders involved employees in decision making, delegated authority, encouraged participation in the choice of work methods and goals and relied on feedback to coach employees. It is, perhaps, best to view these extremes as opposite ends of a continuum, as many organisations will exhibit a mix of these styles.

In 1984 Blake and Mouton advocated a two dimensional view of leadership that explored the inter-relationship between a leadership style that exhibited ‘concern for people’ and

Table 11.3 Personal qualities of leaders

Integrity Confidence

Honesty Positivity Humility Wisdom Courage Determination Commitment Compassion Sincerity Sensitivity Passion Creativity

The importance of leadership 233

‘concern for production’. Their ultimate conclusion was that in most cases a team-based management approach was most effective in all situations.

The quest to fully explain leadership in terms of behaviour has generally significantly failed to explain on a consistent basis the relationship between patterns of leadership behav- iour and successful situational performance.

Leadership theories III: contingency theories

If leadership is seen as a ‘doing’ or responding activity, it was of little surprise that theorists next began to focus on situational factors. Pinning these down reliably has also proved to be problematic but four approaches have emerged that can claim to be more reliable than most.

The Fiedler (1967) contingency model focuses on the belief that an individual’s basic lead- ership style is a key factor in leadership success. To isolate the key determinant leadership characteristics Fiedler designed a questionnaire (least-preferred co-worker questionnaire) that was really an extension of the approach taken by trait theorists.

An approach to understanding leadership that has enjoyed a better reputation for consist- ency is the path-goal theory developed by House (1971). This contingency model asserts that the leader’s job is to assist individuals to attain their goals by providing the necessary direction and support. This involves matching the environmental variables with the leader’s evaluation of the personal characteristics of the individuals under his/her charge.

Hersey and Blanchard (1974) developed a Situational Leadership model that proposed four leadership styles – telling, selling, participating and delegating. Which style is selected by the leader depends on the observed capabilities of individuals. As response styles improve so the leader reduces the degree of control over and involvement with employees.

Evidence to date does not endorse any of these contingency theories as reliable expla- nations of leadership success. The Hersey and Blanchard model does possess an intuitive appeal but as with the other theories covered it should be exercised with caution. Larson and Vinberg (2010) researched the dimension of leadership behaviour theory and its relationship to effectiveness, productivity, health satisfaction and job satisfaction and concluded that suc- cessful leadership behaviour includes both universal and contingency elements.

Fiedler contingency model

According to Fiedler effectiveness and leadership depend on a number of factors, including the situations and the personal characteristics of the leader. The model iden- tifies three key factors, as follows.

Make-up of the group

It is not just the nature and the atmosphere within the group, but also the relationship between the leader and the group that determine the leadership style. Fiedler poses that an interaction takes place when the leader fully trusts his/her employees; they will then adopt a loyal and cooperative attitude. Vice versa, a leader will trust employees when they prove themselves in favour of the company. This group dynamic may also have a negative impact requiring a leader to be authoritarian.

(continued)

234 Strategic innovation in changing times

Nature of the task

The leadership style of the leader depends on the nature of the task. Clear tasks that employees can perform routinely require less supervision than tasks that have to be adjusted and explained time and again.

Power of the leader

The formal power of the leader is determined by hierarchical position on the one hand and by knowledge and competencies on the other. However, the personal authority resulting from personal confidence and employees’ trust will be decisive for effective leadership performance.

Given that personality (task-orientation and people-orientation) is reasonably sta- ble, the Fiedler contingency model suggests that the situation should be adapted to such an extent that it suits the leader. The Fiedler contingency model refers to this as job engineering. Furthermore, training of groups is seen as a method to improve the nature of the relationship within the group.

Source: Fiedler, F. (1964); Van Vilet, V. (2013), Fiedler Contingency Model, http://www. toolshero.com/leadership/fiedler-contingency-model (accessed 15 August 2016).

Leadership theories IV: emerging theories

Theorising is one thing but successful application is another. To answer the question of what works in the real world three emerging approaches – charismatic leadership, vision- ary leadership and transactional versus transformational leadership – have assumed increasing interest.

Charismatic leaders

Charismatic leaders are self-assured, possess a clear vision of the future, are articulate, are skilled communicators (Michaelis et al., 2009; De Vries et al., 2010) and have a strong belief in their vision. They are prepared, if necessary, to adopt unconventional actions. They challenge the status quo. They are sensitive to the environment. They are prepared to think outside the box and to pursue business creativity and strategic innovation approaches. The leader’s job is not to be the source of ideas but to encourage and champion ideas. Leaders must tap the imagination of employees at all ranks and ask inspiring questions. They also need to help their organisations incorporate diverse perspectives, which spur creative insights and facilitate creative collaboration by, for instance, harnessing new tech- nologies (Amabile and Khaire, 2008). Advocates of charismatic leadership have argued that the leader–follower value congruence plays a central role in the development of char- ismatic relationships; however, few studies have tested this proposition. Hayibor et al. (2011) found strong support for the hypothesis that perceived value congruence between leaders (CEOs) and their followers (members of their top management teams) is positively related to follower perceptions of the degree of charisma and liking possessed by the leader (Rowold and Borgmann, 2014).

(continued)

The importance of leadership 235

Leadership characteristics

Visionary leaders

Visionary leaders possess exceptionally clear communication skills (Thomas, 2009; Zeffane et al., 2011) and can explain in clear terms both the rationale for a vision and what the required actions are to manifest it both to their own staff and to all relevant third-party interests.

Transactional leaders

Transactional leaders communicate their vision clearly and develop a working environment that assists employees to motivate themselves in order to realise the vision. They also clarify the roles and tasks that are required to do so. Transformational leaders convince followers that it makes sense and is in their own best interests to work in support of the organisational change plan (Hoffman et al., 2011). This generally secures a firmer ‘buy-in’ and thus higher quality team performance.

Contemporary leadership thinking

As most team-sports players will confirm, good leaders gain in recognition and popularity if they are sensitive to team development issues. They tune in to the aspirations and tensions evident in teams and fine-tune their leadership skills accordingly. They represent their team to other interested third parties, act as trouble-shooters, resolve conflicts and act as coaches. Captaining or leading a team is a demanding occupation and calls for a high level of emotional intelligence. This involves mastering the key components of emotional intelligence – self-awareness, self-management, self-motivation, empathy and well-honed social skills.

In troublesome times leaders should be willing to be seen and to guide their people. However, when the going gets tough many display a lack of coverage to wrestle with real issues. They dis- tance themselves from disturbing events, blame others and are frozen by indecision. As Winston Churchill is accredited as declaring in the dark days of the Second World War, ‘Courage is what it takes to stand up and speak; courage is also what it takes to sit down and listen.’

Courageous leadership

A courageous leader reads reality (context); thinks through the principles needed to respond effectively (practice) and is prepared to do something (action). Whilst many are affected by rising workplace stress and keep their head down to survive, courageous leaders are prepared to challenge the way things are done. The vignette below summarises the leading traits of courageous leaders (Reardon, 2007; Hybels, 2012).

Key traits of courageous leaders

Courageous leaders:

1 meet reality and address the truth of the situation and are prepared to communicate bad news;

2 are prepared to say what needs to be said and challenge comfort zones and fears;

(continued)

236 Strategic innovation in changing times

3 consult key employees and seek appropriate responses to meet situational threats and performance issues;

4 resist analysis paralysis and mindsets designed to protect the status quo and envi- sion a better way forward;

5 take responsibility and act; 6 trust in team-working and suspend any temptation to take all the credit for success-

ful interventions.

Leadership and management: are they mutually exclusive?

Any organisation or business needs people who are good at both leadership and management if they are going to succeed. With good management and poor leadership they will be able to execute everything very well, but will be doing so without a consistent direction and overall strategy. With good leadership and poor management a company will have the goals and inspiration succeed, but no one to execute the plan on how to get there.

Emphasis needs to be placed equally on both areas if an organisation wants to thrive. The trouble in many organisations is that many executives feel it is good to have control. They become addicted to power – and that is what can kill companies. Good leaders habitually talk of ‘we’ rather than ‘I’.

Good leaders and good managers are not often the same person; the few people that excel at both tend to be overwhelmingly successful in achieving their goals. Management and leadership skills are in some ways at opposite extremes: short vs. long term, big picture vs. detail oriented, etc. It can be very difficult to excel at both. Often organisations that succeed have a mix of individuals, some who excel at leadership and some who excel at management.

While it’s good for anyone to clearly understand whether they excel at management or leadership, being aware of the characteristics of both is important. Just knowing what it takes to be a good leader can make someone more aware of his or her self even if they know they tend to be an excellent manager. Understanding the differences between leadership and management can ensure a person sees where they can improve and what else they should be thinking about, and not assume they are excellent at both. Ultimately this can make both a better leader and a better manager.

Practice

Assessing individual leadership skills audit

Captaining or leading a team is a demanding occupation and calls for a high level of emotional intelligence. This involves mastering the key components of emotional intelligence – self- awareness, self-management, self-motivation, empathy and well-honed social skills.

Assessing individual leadership skills audit interpretation

When you have completed the audit in Table 11.4 add up your scores and refer to Appendix 11.1.

(continued)

Table 11.4 Leadership skills status audit

Statement Never (score 1)

Occasionally (score 2)

Frequently (score 3)

Always (score 4)

1 I ignore employees’ small mistakes and focus on more important matters.

2 I can take criticism without losing my temper

3 I am relaxed and calm at work and in the company of others

4 I am a confident person 5 I am careful not to let personal relationships

prejudice professional ones 6 I am forward in praising my team when

they do well 7 I am seen to be fair in my evaluation of

matters and situations 8 I convey confidence to my team 9 I am approachable and a good listener 10 I am concerned to hear about and help with

individuals’ problems 11 I am respectful of the views and opinions of

people both below and above my level in the organisation

12 I am regarded by my team as someone who can create the conditions for high levels of group and personal motivation

13 I take care to delegate authority 14 I demonstrate impartiality in respect of

colour, religion, nationality or gender 15 I ‘roll-up’ my sleeves and help out my team 16 I choose between speed and perfection

when necessary 17 I distinguish between what is urgent and

what is important 18 I demonstrate that I am a creative person

who is willing and able to think ‘outside the box’

19 I encourage all staff to be creative and innovative and welcome their ideas

20 I take care to see that my staff receive appropriate training

21 I am a confident and effective representative of my organisation to insiders and outsiders

22 I generate high levels of trust in my team and with outsiders

23 I keep an ‘open door’ and listen to my staff and others whilst being careful to distinguish between what is urgent and what can be seen to later

24 I keep my promises with my team and others, e.g. to give my time to helping with non-urgent matters

Total

238 Strategic innovation in changing times

Action

Seizing the initiative

Good leaders seize the initiative and by their example create the conditions in which individ- uals and groups motivate themselves. They possess know-when and know-how. They make decisions with due regard to context, time, task and their followers. They are action-oriented individuals. Increasingly, management and leadership are seen as being inextricably linked. It is one thing for a leader to advance a grand vision: but this is redundant unless the vision is managed into real achievement. Inspiration leaders according to DeVries et al. (2010) go beyond narrow definitions. They have an ability to excite people in their organisations.

Leadership challenges

The development and maintenance of leadership skills should assume great importance if organisational CEOs and managers are to meet the contextual changes and disturbances evi- dent in the business environment successfully. Essentially, existing and potential leaders need to be able to meet the following challenges:

• Individual challenges:

{{ balancing the concepts of effectiveness and efficiency; {{ learning from others; {{ gaining experience; {{ preparing to lead.

• Group challenges:

{{ forming a team; {{ delegating tasks; {{ communicating clearly.

• Organisational challenges:

{{ the importance of establishing a realistic vision; {{ the changing role of organisational leadership; {{ corporate leaders deliver more than just financial returns; they also build enduring

institutions by balancing public interest with financial returns (Kanter, 2011); {{ CEOs must expand their investments to include employee empowerment, values-

based leadership and related societal actions.

Leadership and innovation

Leaders have a mindset that enables them to cope with the challenges that the business envi- ronment presents. They take tactical decisions and rally their troops to deal with short-term problems that upset the smooth daily running of their businesses activities. Gifted leaders also possess the ability to detect trends that will challenge their organisations. Most identify innovation as being of paramount importance to secure their business future in the light of accelerated change in today’s global business environment. Whilst some identify leaders as gifted tacticians, the best are also skilful strategists and realise that to successfully make a difference requires a disciplined strategic approach to managing innovation.

The importance of leadership 239

Whilst incremental innovation usually results as organisations shape their businesses in the light of market experience, radical innovation requires a strategic approach. This neces- sitates the adoption of a holistic attitude to pioneering innovation in business processes, distribution, value chains, business models and even, as this text argues, in the functions of management. Senior executives need to display a collective leadership that creates a climate that actively encourages the development of internal and external networks to emerge and flourish. In addition, they can take explicit steps to foster an innovation culture based on trust among employees. Employees need to understand that their ideas are valued, trust that it is safe to express them, and oversee risk collectively, together with their managers. In short a Theory WB culture as described in Chapter 13.

The changing role of leadership

The leader’s role has changed and become more complex and, arguably, even more critical to an organisation’s success. Leaders must:

1 ensure that high performance-levels are achieved and sustained; 2 handle complexity and ambiguity; 3 enjoy leading the change process; 4 ensure that the organisation and its processes are constantly developed to deliver the

strategy and required performance; 5 constantly act in the belief that, in leadership, trust between superiors and subordinates

plays a quintessential role – see Kovač and Jesenko’s (2010) article on the results of their empirical research completed in Slovenia.

6 an important trend since the 1990s is the increasing belief that leadership is a shared pro- cess, rather than an individual skill set, that is spread through networks of people (Pearce and Sims, 2006; Wang et al., 2014).

These are highly demanding tasks and skills. Developing leaders with the capacity to learn, adapt, coach, support and inspire others is a critical challenge for major companies. Meeting the challenge requires commitment, investment and creativity.

Ricardo Semler

Ricardo Semler is the CEO and majority owner of Semco Partners, a Brazilian company that is known for its achievements in changing a traditional family Theory X manage- ment approach to a vibrant industrial democracy that champions employee well-being. Semco employs over 3,000 and under Semler has evolved a corporate model that is founded on democratic employee leadership. He believes that the key to management is to get rid of managers. The key to getting work done on time is to stop wearing a watch and the best way to invest corporate profits is to give them to the employees. The purpose of work is not to make money. The purpose of work is to make the workers, whether rank and file or top executives, feel good about life.

Source: Semler, R. (1994) Maverick, New York, NY, Random House.

240 Strategic innovation in changing times

In a business world that presents organisations with multi-faceted and emerging chal- lenges that require complex and innovative solutions there is a growing need for a collective leadership environment. This may sound obvious but it is an important deter- minant for success or failure and calls for top management’s holistic commitment to encourage the growth of multi-level leadership. The concept of collective leadership will take time to morph. It will need to live side-by-side with the current individual leader- ship paradigm for a while but the need for it and the power in it will become clearer and more compelling. Wise (individual) leaders will do well right now to encourage the foundational processes that will assure their organisations are prepared to thrive as col- lectively led entities.

Summary In the light of the challenges facing many organisations’ operating environments it is essen- tial for those in positions of authority to practice real leadership skills. This chapter has presented much for leaders to think about as, hopefully, they seek to hone their skills. A Poor Leader fails to engage convincingly with people and performs ineffectively. A Command Leader achieves an effective performance but largely on the basis of vested authority; a person to be obeyed but not one who engages with people. The best ‘leaders’ (Inspirational Leaders) are those who are readily acknowledged and trusted by their follow- ers. Lastly, leaders who are seen to be high on engagement but low on effectiveness (Social Animals) are often characterised by being essentially ‘all talk and little do’.

Ideal leaders consistently communicate well with their staff (engagement); display sound contextual vision; harness professional skills to get the job done (effectiveness) and are gen- erally highly rated by their staff.

Changing times call for changing responses. Whilst sound management practices (see Chapter 3) are clearly required so too are strong leadership practices. Too much management (especially when it becomes micromanagement) and the desire for control that this often implies is dangerous and can be fatal in times of discontinuous change, when organisations are confronted and challenged by a new and sometimes hostile environment. In such conditions creative responses, rather than academic or rule-based approaches, are required. Sound leaders can deal with the unexpected, hold people together, stand firm in times of trial and display an acute awareness of real-world con- textual reality.

Discussion questions 1 What key competences define a leader? 2 How do leaders differ from managers? 3 Some believe that certain individuals are born leaders and that others can never be seen

as leaders. How would you argue against this assertion? 4 Leadership is about action in response to contextual challenges and involves others. 5 How do you rate as a leader in the light of the audit in this chapter? How might you

increase your leadership skills? 6 How would you define trust and why is it so important for leaders to command?

The importance of leadership 241

7 Name an example of a Poor Leader, a Command Leader, an Inspirational Leader and a Social Animal that you remember meeting.

8 Can creativity and innovation be managed or should it be a multi-level leadership function? Discuss.

Case exercise

African leaders: perspectives on leadership

Africa’s economic growth remained resilient in 2015. Real gross domestic product (GDP) grew by an average of 3.6 per cent, higher than the global average growth of 3.1 per cent and more than double that of the euro area. At this growth rate, Africa remained the second fastest growing economy in the world (after emerging Asia), and several African coun- tries were among the world’s fastest growing countries. The OECD forecast that Africa’s economic growth would gradually pick up during 2016–17, predicated on expanding SME activity and on a recovery in the world economy and a gradual rise in commodity prices. African businesses, large and small, can learn from viewing the careers of top business leaders in the region.

Study the profile briefs on Manu Chadarin, Brian Joffe, Naushed Merlai and Onsi Sawiris, and respond to the questions posed at the end of the piece.

Manu Chandaria, Chairman, Comcraft Group (nationality: Kenyan)

East Africa’s most venerable business leader is chairman of the Comcraft Group, a $2 billion industrial behemoth that produces steel, plastics and aluminium products from manufac- turing facilities in 45 countries – 16 of which are in Africa. Total workforce: over 40,000 people. He has been hailed as one of Kenya’s leading industrialists and Kenya’s biggest phi- lanthropist. His Chandaria Foundation is active in over seven countries, and has given away millions to causes in education, health and the arts.

Brian Joffe, CEO, Bidvest Group (nationality: South African)

Joffe is the founder and successful CEO of Bidvest a large South African conglomerate that contains over 300 companies and 117,000 employees. He has an eye for discerning where money can be made and is a forceful negotiator. His early career saw him acquire a 50 per cent share in a pet food business for R49,000, buying out his partner after a year, expanding the business and then selling the company for $1 million. After a four-year sojourn in the United States he returned to South Africa in 1982. Having sounded out the business scene and wheeled and dealed for six years he formed the Bidvest Group in 1988 building it into a highly diversified group. He developed a decentralised company enabling business units to manage their own affairs.

Though a big wholesale and distribution group operating in the areas of commercial and industrial products, electrical products, financial services, freight management, office and print solutions, outsourced hard and soft services, and automotive retailing the busi- ness is run with the determination and commitment evident in a small business enterprise.

242 Strategic innovation in changing times

The company believes in a philosophy of empowering people, building relationships and improving lives. Entrepreneurship, incentivisation, decentralised management and com- munication are the keys to the company’s success. The organisation believes and practices transparency, accountability, integrity, excellence and innovation in all business dealings. Skilled in the business of acquisitions the Bidvest Group turns ordinary companies into extraordinary performers, delivering strong and consistent shareholder returns in the pro- cess. In April 2016 the company reported a trading profit of R5.1 billion up 11.8 per cent on the previous year. The secret of Joffre’s success as a business leader is reckoned to be his vision and his ability to identify opportunities that others fail to see.

Naushad Merali, Chairman, Sameer Group (nationality: Kenyan)

In 2000, the Kenyan-Asian tycoon partnered with French media giant Vivendi to found Kencell, a Kenyan mobile phone service provider, which he later sold off to Celtel and Bharti Airtel. He still owns 5 per cent of Bharti Airtel’s operations in Kenya, and serves as chairman of the board. But the bulk of his power and fortune comes from his ownership of one of East Africa’s largest conglomerates – the $2 billion (annual turnover) Sameer Group, which owns some of the most prominent companies in Kenya’s financial services, construction, agricul- ture, energy and ICT sectors. Merali is chairman of the group.

Merali is a firm believer in team working and the empowerment of employees, and supports training programmes to build their careers. In his companies he is a commit- ted philanthropist and his Zarina and Naushad Merali Foundation supports hospitals and needy schools. Merali has been quoted as saying that ‘nothing is impossible if you believe in it’ and that ‘TEA – Trust, Efficiency, Attitude in a nutshell summarise success of every business’.

Onsi Sawiris, Founder, Orascom Group (nationality: Egyptian)

Sawiris is the patriarch of Egypt’s wealthiest family and founder of Orascom Construction Industries. In 1971, the Egyptian government nationalised Onsi Sawiris’ first construction business. Undeterred, he went on to build Orascom Construction Industries, the flagship company of the Orascom Group that has interests in telecoms, infrastructure, hotels and tour- ism. His three sons – Naguib, Samih and Nassef – run all the companies.

Sawiris’s success has resulted from his vision to invest in the future, and to spot an opportu- nity and seize it. He was the first to spot the potential of the arrival of the telecommunications business in Africa. Determined to play a part in boosting Egypt’s future competitiveness he established the Onsi Sawiris Scholarship Programme that fully supports Egyptian students studying in top U.S. universities. He also has a heart for people and supports several causes including one that involves the purchase of a Greek island where he wants to build accom- modation and a future for migrants and refugees.

Questions

1 Evaluate these top business leaders in the light of Tables 11.1 and 11.2. 2 What can be learned from their careers and how do they meet the leadership challenges

and perceptions featured in this chapter?

The importance of leadership 243

3 Explain how the acronym TEA provides a useful business leadership lesson. 4 What do the leaders have in common?

Sources: OECD African Economic Outlook report 2016; Forbes profiles, 2014–16; The World Folio (2016), 16 July.

YouTubes

‘ALD Interview with Manu Chandaria’, https://www.youtube.com/watch?v=sA0ASUh LTcE.

‘Brian Joffe: CEO of the Bidvest Group’, https://www.youtube.com/watch?v= rp6F_ ddLLvI.

‘Behind the Scenes with Naushad Merali’, https://www.youtube.com/watch?v=185y- w-r08Y.

‘The Quiet Millionaire’, https://www.youtube.com/watch?v=eWSvmpnNsAM.

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Harvard Business Publishing. Bennis, W. and Nanus, B. (1985) Leaders: The Strategies for Taking Charge, New York, NY, Harper

Row. Blake, R. R. and Mouton, J. S. (1984) The Managerial Grid, Houston, TX, Gulf Publishing. Board, B. and Fritzon, K. (2005) ‘Disordered personalities at work’, Psychology, Crime and Law,

Vol. 11, pp. 17–32. Castaldo, S., Premazzi, K. and Zerbini, F. (2010) ‘The meaning(s) of trust: A content analysis of

the diverse conceptualizations of trust in scholarly research in business relationships’, Journal of Business Ethics, November, Vol. 96, Issue 4, pp. 657–68.

De Vries, R. F., Bakker-Pieper, A. and Oostenveld, W. (2010) ‘Leadership = communication? The relations of leaders’ communication styles with leadership styles, knowledge sharing and leadership outcomes’, Journal of Business & Psychology, September, Vol. 25, Issue 3, pp. 367–80.

Drucker, P. F. (2001) The Essential Drucker, Oxford, Butterworth Heinemann. Fiedler, F. E. (1967) A Theory of Leadership Effectiveness, New York, NY, McGraw-Hill. Fiedler, F. (1964) ‘A contingency model of leadership effectiveness’, Advances in Experimental Social

Psychology, Vol. 1, pp. 149–90. Gill, R. (2011) Theory and Practice of Leadership, 2nd edn, London, Sage. Hayibor, S., Agle, B., Sears, G., Sonnenfeld, J. and Ward, A. (2011) ‘Congruence and charismatic

leadership in CEO–top manager relationships: An empirical investigation’, Journal of Business Ethics, August, Vol. 102, Issue 2, pp. 237–54.

Hersey, P. and Blanchard, K. H. (1974) ‘So you want to know your leadership style’, Training and Development Journal, February, pp. 1–15.

Hoffman, B. J., Bynum, B. H., Piccolo, R. F. and Sutton, A.W. (2011) ‘Person–organisational value congruence: How transformational leaders Influence work group effectiveness’, Academy of Management Journal, August, Vol. 54, Issue 4, pp. 779– 96.

244 Strategic innovation in changing times

House, R. H. (1971) ‘A path goal theory of leader effectiveness’, Administrative Science Quarterly, September, pp. 321–38.

Hybels, B. (2012) Courageous Leadership, Grand Rapids, MI, Zondervan. Jones, M. (2010) ‘The marriage of logos and mythos: Transforming leadership’, Journal of Leadership

Studies, Fall, Vol. 4, Issue 3, pp. 73–6. Kanter, M. (2011) ‘What counts as good?’ Harvard Business Review, November, Kindle edition. Kotter, J. P. (1990) A Force for Change: How Leadership Differs from Management, Glencoe, IL, Free

Press. Kovač, J. and Jesenko, M. (2010) ‘The connection between trust and leadership styles in Slovene

organizations’, Journal for East European Management Studies, Vol. 15, Issue 1, pp. 9–33. Larson, J. and Vinberg, S. (2010) ‘Leadership behaviour in successful organisations: Universal or situ-

ation dependent?’, Total Quality & Business Excellence, March, Vol. 21, Issue 3, pp. 317–34. Michaelis, B., Stigmaier, R. and Sonntag, K. (2009) ‘Affective commitment to change and innova-

tion implementation behaviour: The role of charismatic leadership and employees’ trust in top management’, Journal of Change Management, December, Vol. 9, Issue 4, pp. 399–417.

Pearce, C. L. and Sims, H. P. (2006) ‘Shared leadership: Toward a multi-level theory of leadership’, Advances in Interdisciplinary Studies of Work Teams, Vol. 7, pp. 115–39.

Reardon, K. K. (2007) ‘Courage as a skill’, Harvard Business Review, January, pp. 58–64. Rickards, T (2012) Dilemmas of Leadership, 2nd edn, Abingdon, Routledge. Robert, L. P., Jr., Dennis, A. R. and Hung, Y-T. C. (2009) ‘Individual swift trust and knowledge-based

trust in face-to-face and virtual team members’, Journal of Management Information Systems, Fall, Vol. 26, Issue 2, pp. 241–79.

Rowold, J. and Borgmann, L. (2014) ‘Interpersonal affect and the assessment of an interrelationship between leadership constructs’, Leadership, August , Vol. 10, Issue 3, pp. 308–25.

Thomas, G. F., Zolin, R. and Hartman, J. L. (2009) ‘The central role of communication in developing trust and its effects on employee involvement’, Journal of Business Communication, July, Vol. 46, Issue 3, pp. 287–310.

Thompson, N. (2006) Power and Empowerment, Lyme Regis, Dorset, Russell House Publishing. Tzu, S. (2009) The Art of War, Harrisburg, PA, EZ Reads, edition Pax Liborum. Wang, M., Zhou, L. and Liu, S. (2014) ‘Multilevel issues in leadership research’, in D. Day (ed.), The

Oxford Handbook of Leadership and Organisations, Part Two, Research Issues, Oxford, Oxford University Press, pp. 146–66.

Zeffane, R., Tipu, S. A. and Ryan, J. C. (2011) ‘Communication, commitment & trust: Exploring the triad’, International Journal of Business Management, June, Vol. 6, Issue, pp. 77–87.

Selected YouTubes ‘The Key Challenges of a Global Manager’, https://www.youtube.com/watch?v=Q4yJ_ Xb25GU.

‘People Management Skills: 7 Leadership Competencies’, https://www.youtube.com/ watch?v=KBivHOWlAeo.

‘John Maxwell The 5 Levels of Leadership’, https://www.youtube.com/watch?v=aPwXeg 8ThWI.

‘Management and Leadership: Is There a Difference?’, https://www.youtube.com/watch? v=RcBzlBFIkfA.

‘The Rarest Commodity Is Leadership without Ego’, https://www.youtube.com/watch?v= UQrPVmcgJJk.

The importance of leadership 245

‘Ten Theories of Leadership in Five Minutes’, https://www.youtube.com/watch?v=XKUPD UDOBVo&list=PL8iJtmN_DqqdUTtT1GOsG8rXovLbOzF7l.

‘If You Don’t Understand People You Don’t Understand Business’, https://www.youtube. com/watch?v=XKUPDUDOBVo&list=PL8iJtmN_DqqdUTtT1GOsG8rXovLbOzF7l.

Appendix 11.1: assessing individual leadership skills audit interpretation

Score Interpretation

32–50 Your leadership skills are weak and you have probably lost the respect and trust of your team and other work colleagues. Review the individual statement scores and study this chapter to stimulate your thinking as to how you could improve your overall rating

51–75 You are performing reasonably well but there is scope for improvement. Study the statement scores where you recorded a 1 or 2 and think about how you can improve your performance

7 –100 You are a first-class leader; now seek to improve your overall audit score

12 Business social responsibility

Business is part of society, not outside it. (Niall Fitzgerald, former CEO of Unilever)

It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities.

(J. C. Stamp, Economist)

Learning objectives This chapter explores:

1 The importance and leading issues of business social responsibility. 2 Defining and addressing key business ethics issues. 3 Defining and addressing key corporate social responsibility issues. 4 The importance of the concept of well-being. 5 Exploring the triple bottom line. 6 Practical business social responsibility. 7 Global recognition of business social responsibility. 8 Organisational approaches to business social responsibility.

Introduction This chapter is about business social responsibility (BSR), which we define as being an integrated management activity that incorporates business ethics and corporate social respon- sibility (CSR). (See Figure 12.1.)

Context

Business socialisation

Revival

The Millennium Survey covered 25,000 people in 23 countries and six continents. It found that the public responsibilities of businesses should increase and was more important in the

Business social responsibility 247

Figure 12.1 Exploring business social responsibility.

opinion weighting factors than corporate branding or financial performance. It was seen as an expanding discipline that covered charity and community donations, and labour practices, business ethics and environmental issues.

Social concern about the responsibility of business is increasing under pressure from the interest of mainstream organisations and social networking. Charities and NGOs are increas- ingly turning their attention to business ethics and CSR publicity.

248 Strategic innovation in changing times

Leading issues

BSR addresses important issues concerning human rights, work place standards and environment concerns.

Human rights

UN Declaration of Human Rights Principles

In 1948 the Universal Declaration of Human Rights (UDR) was adopted by the United Nations. At present there are over 460 translations, which are available in HTML or PDF format. A summary prepared by the People’s Movement for Human Rights Learning cites 30 articles and clearly states that:

• Human rights are universal, indivisible, interconnected and interrelated. • They are with equality and without discrimination for all women and men, youth

and children. • Democracy must be a delivery system of human rights. • All must know, own, organise, plan and act guided by human rights as a way of

life.

The UDR is a statement of a moral code for all those who influence the lives of others. Since 1948 numerous wars have been fought between nations in the sad history of human conflict. MNCs often appear to be guided by a military approach to their business despite the trend away in the developed world from Theory X to Theory Y and Theory Z modus operandi. The developing world in many cases falls short of meeting the UDR standards and as a result people are exploited. All too often this is overlooked by Western organisations as they chase cheap supply sources.

Source: http://www.etc-graz.at/typo3/fileadmin/user_upload/ETC-Hauptseite/Menschenrechte_ lernen/POOL/UDHR_Short_version.pdf (accessed 7 July 2016).

Corporations can have enormously detrimental effects on the environment. Oil spills are some of the most conspicuous examples, but industries as varied as chemical manu- facturing, mining, agriculture and fishing can do permanent damage to local ecosystems. Climate change can also be attributed in large part to corporations. While their responsibility is hard to untangle from that of the consumers who demand electricity and transportation, it is difficult to deny that many corporations have profited from the deterioration of the global environment.

In many cases, harm to the environment and harm to vulnerable communities go hand in hand: indigenous groups in the Amazon rainforest, for example, have been decimated and even wiped out, both intentionally and unintentionally, in order to make room for logging, cattle ranching, gold mining, oil and gas drilling, and hydroelectric power generation.

In light of this often dark legacy, some areas of corporate culture have begun to embrace a philosophy that balances the pursuit of profit with a commitment to ethical conduct. Google’s slogan sums up the idea of CSR nicely: ‘Don‘t be evil.’

Business social responsibility 249

Key principles

Definition of business social responsibility

This texts defines BSR as being an interactive mix of business ethics and CSR.

Business ethics

Business ethics is the study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, CSR and fiduciary responsibilities. Most businesses seek to balance the need to serve people and planet on one side, and achieve shareholder satisfaction on the other. But is trading off profits against ethics an outmoded approach incapable of solving the big problems of climate change, population growth, resource depletion, etc., which is a short-term fix at best? How can businesses contend with the pressures of the short term while being part of a necessary transformation in the long term?

Building on this a high set of ethics in the conduct of business provides benefits to every- one. Ethics are not only a guide to making decisions, but also the criteria on which the public judge organisations. In business, this is critical, because how people view a business is the basis of building trust.

Value of high ethical standards

Personal ethics form as individuals are influenced by the people and the environment that sur- round them. There are ethical views that apply to people all around the world, while others are more personal, and apply only to individuals and businesses (Cavalieri, 2007). Over time, your ethical views can change as you’re exposed to different situations and environments. In a busi- ness, ethics have very positive benefits. The reasons for having high ethical standards include:

• a higher morale within your employees and the organisation; • it helps to attract new customers; • it builds higher customer loyalty; • it reduces the risk of negative press or backlash caused by doing ‘the wrong’ things; • it helps to make a positive impact on the community.

If you want to run a sustainable business, having a high set of ethics is critical, and there can be serious consequences if poor ethical decisions are made. Regardless of whether you believe good business ethics contribute to profits or not, poor ethics will have a major impact on your bottom line. Without standards you have misinformed, misguided and bad decisions being made, which can cause financial loss or injury to other people, or the business. Many legal cases are raised because of people seeking compensation for their losses as a result of business people making unethical decisions.

Pachamama Alliance

Pachamama Alliance is an organisation that seeks to instil social responsibility in the industrialised or ‘modern’ world. Our partnership between the indigenous Ecuadorian tribe, the Achuar, began when they recognised the imminent threat of oil drilling in

(continued)

250 Strategic innovation in changing times

their home. This tribe, hidden deep in the Amazon forest, has inhabited this area for thousands of years and is at risk of total destruction.

The goal of the Pachamama Alliance is to restore a sense of active decision mak- ing to the people and companies of the modern world. Currently, the Achuar and their home are in danger because of our addiction to crude oil. This addiction is the result of a faulty system of beliefs that disregards the environment, its inhabit- ants, and the consequences of our actions. A change in this universal mentality is imperative if the Achuar are to survive this threat; in order to do so pandemic social responsibility is essential.

Source: http://www.pachamama.org/social-justice/social-responsibility-and-ethics (accessed 2 July 2016).

Corporate social responsibility

CSR refers to a company’s activities to assess and take responsibility for its effects on envi- ronmental and social well-being. The term generally applies to efforts that go beyond what may be required by regulators or environmental protection groups. CSR may also be referred to as ‘corporate citizenship’ and can involve incurring short-term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environ- mental change. Bowen (2013) defines it as ‘obligations . . . to pursue those policies, to make decisions, or follow those actions which are desirable in terms of the objectives and values of society’. Moon (2008) defines it as ‘policies and practices of corporations that reflect busi- ness responsibility for some of the wider social good’.

Carroll’s pyramid

The concept of the CSR Pyramid, proposed by Carroll (1999), divides business obligations into four levels, explaining requirements of obligations in each level, as well as their impor- tance (Figure 12.2).

• Economic responsibility is considered to be a core responsibility of a business and relates to profit maximisation. Economic responsibility is mainly self-regulatory in a way that if a business entity neglects or fails to meet its economic responsibilities it is just a matter of time before the business fails.

• Legal responsibility relates to adhering to rules and regulations of the respective govern- ment. Meeting legal responsibilities is critically important for businesses.

• Ethical responsibilities for a business entity relate to certain commitments that go beyond basic economic and legal requirements for a business entity. Ethical responsibilities are usually expected by organisational stakeholders, but typically there are few, if any, govern- ment laws and regulations to enforce these responsibilities. However, each case is different and there might be instances where governments may interfere in relation to ethical issues.

• Philanthropic responsibility is understandably placed at the highest level of responsibili- ties because it is not generally expected and mainly initiated for advertisement and public relations purposes. Philanthropic acts engaged in by businesses may include sizable dona- tions to various causes or local communities, or contributing to society in other ways.

(continued)

Business social responsibility 251

Although Carroll’s CSR Pyramid is widely considered to be a substantial contribution to the development of the field of CSR, it has been criticised by various authors. Hockerts et al. (2008) criticise this framework by arguing that there is no need to represent CSR as a hierarchy. In other words, according to Hockerts et al. (2008), unlike Maslow’s Hierarchy of Needs, in Carroll’s CSR Pyramid there are weak or no relationships between CSR activities involved in each level.

Generating and sharing social value

Businesses have been criticised as a major cause of social, environmental and economic problems. Companies are widely thought to be prospering at the expense of their commu- nities. Companies could bring business and society back together if they redefined their purpose to create and share social value – generating economic value in a way that also produces value for society by addressing its challenges. A shared value approach would reconnects company success with social progress (Porter and Kramer, 2011).

Well-being

According to the New Economics Foundation (NEF) a successful society is one where business activity delivers high levels of sustainable well-being for all its citizens. NEF has been researching well-being – how people experience their lives and flourish – for over a decade. Well-being plays a central role in creating flourishing societies. Focussing on well- being at work can benefit societies by helping working individuals to feel happy, competent and satisfied in their roles. The evidence shows that people who achieve good standards of well-being at work are likely to be more creative, more loyal, more productive and provide better customer satisfaction than those with poor levels of well-being at work.

For decades, organisations have tried to foster these qualities through employee engage- ment strategies but engaging employees is just one part of the story. Improving well-being at work requires a more rounded approach that focuses on helping employees to:

Figure 12.2 Carroll’s Pyramid.

252 Strategic innovation in changing times

• strengthen their personal resources; • flourish and take pride in their roles within the organisational system; • function to the best of their abilities, both as individuals and in collaboration with their

colleagues; • have a positive overall experience of work.

NEF’s ‘Wellbeing at Work’ report

NEF’s ‘Wellbeing at Work’ report concludes that:

• Getting the right work–life balance is an effective way of avoiding stress at work. • It is possible to maximise overall organisational wellbeing through a re-evaluation

of how salaries are distributed among employees. • Organisations can adopt certain approaches towards job security that help their

staff achieve higher levels of job satisfaction. • Working with employees to ensure they have a sense that their job is achievable

can lead to greater job satisfaction, as well as higher levels of morale. • Management behaviour seems to be highly important, with some management

styles more successful than others at strengthening wellbeing at work. • Creating a safe working environment and a sense of the social value of the work of

the organisation, may increase employees’ feelings of job satisfaction. • Good levels of job-fit and skill-use, and opportunities to develop new skills, can

create high levels of employee satisfaction. • Helping employees to take greater control over their work can lead to better per-

formance and greater job satisfaction.

Source: NEF (2014).

Practice

Exploring the bottom line

Figure 12.3 Bottom line issues?

Business social responsibility 253

In the twenty-first century, sustainability isn’t optional it’s essential for business success. By making the case for sustainability as a fundamental business practice, The Triple Bottom Line (Elkington, 1997) became an instant classic when first published. It showed a generation of business leaders how to find their companies’ sustainability sweet spots where profitability merges seamlessly with the common good. One problem with the triple bottom line is that the three separate accounts cannot easily be combined (Edgeman et al., 2015). It is difficult to measure the planet and people accounts in the same terms as profits – that is, in terms of cash.

Put in a more friendly way triple bottom line is about ‘People, Planet and Profits’. This concept recognises that a company cannot be judged by financial performance alone. Furthermore, it also recognises that the three legs are linked. It is not sufficient, however, just to talk about triple bottom line as a ‘nice, warm, fuzzy’ concept. For those of us who see this concept as the way of the future it is also necessary to ‘walk the talk’.

People issues

This text argues that organisations should encourage people to generate ideas and evaluate them in terms of business goals and then invest resources to develop innovative customer- perceived value products and service packages. As the pace of competition increases compa- nies need to innovate consistently and should treat their employees as they would members of their own family – that is, with respect. Sadly many organisations still, while upholding the importance of treating employees as they would be done by, nevertheless turn the other cheek and conduct business with domestic and foreign organisations that fail to meet basic worker standards in the pursuit of profit.

The same money and influence that enable large companies to inflict damage on people and the environment allows them to effect positive change. At its simplest, a corporation can give money to charity. Companies can also use their influence to pressure governments and other companies to treat people and resources more ethically. Companies can invest in local com- munities in order to offset the negative impact their operations might have. A natural resources firm that begins to operate in a poor community might build a school, offer medical services or improve irrigation and sanitation equipment. Businesses also practice social responsibility by donating to national and local charities. Whether it involves giving money or time, businesses have a lot of resources that can benefit charities and local community programmes.

Diamond industry

The diamond industry, for example, has come under fire for benefiting from injustices along its supply chain. ‘Blood diamonds’ or ‘conflict diamonds’ are diamonds which have been sourced from war zones, where rebel groups will often fund their campaigns through mining, frequently using forced – often child – labour.

Such situations have arisen in Angola, Liberia, Ivory Coast, Mozambique, Zimbabwe, the Democratic Republic of the Congo and Congo-Brazzaville. International consumer and NGO pressure has caused diamond companies to scrutinise their supply chain, and has reduced the number of diamonds reaching the market from conflict zones.

Source: Investopedia, http://www.investopedia.com/terms/c/corp-social-responsibility.asp (accessed 20 June 2016).

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Planet issues

Environmental responsibility

Companies can have enormously detrimental effects on the environment. Oil spills are some of the most conspicuous examples, but industries as varied as chemical manufacturing, min- ing, agriculture and fishing can do permanent damage to local ecosystems. There is mounting evidence that the planet is warming. According to NASA melting ice sheets are changing the way the earth wobbles on its axis and this highlights how real and profoundly large an impact humans are having on the planet. While the responsibility of corporations is hard to untangle from that of the consumers who demand electricity and transportation, it is difficult to deny that many corporations have profited from the deterioration of the global environment (Klein, 2015).

Businesses and investors were instrumental in shaping the Paris climate conference in December 2015 (COP21) agreement. Delegates attended in great numbers and 195 countries pledged trillions, promised support for clean energy, a carbon floor price, responsible policy and more, all to be implemented by 2020. Will this agreement deliver the transition to the low carbon economy and in time? Or will cheap oil and the government withdrawal of support for renewables and clean tech throw spanners in the works?

The same money and influence that enable large companies to inflict damage on people and the environment allow them to effect positive change. At its simplest, a corporation can give money to charity. Companies can also use their influence to pressure governments and other companies to treat people and resources more ethically. Companies can invest in local communities in order to offset the negative impact their operations might have. A natural resources firm that begins to operate in a poor community might build a school, offer medical services or improve irrigation and sanitation equipment.

According to many, and elegantly discussed by Klein, there are at base two key issues; the rapidly emerging need to preserve the environment and the attitude of many corporations and states in regard to honouring the terms of COP21. The evidence of the problem can be clearly seen with the acceptance by many of the importance of recycling resources but the muted response to the serious and possible terminal influence of climate change. In this respect many global corporations run the risk of receiving the fate of the dinosaurs. Sadly for mankind, politicians and corporate management are often in denial on the impact of climate change as they adopt lukewarm policies that hardly skim the problem. In the end, of course, in this war between corporate management and climate scientists it is the latter that will prevail, but by that time it may be too late. Business is a necessary activity and it can be pursued with due regard to the well-being of communities rather than rewarding sharehold- ers and private individuals.

As politicians and corporations continue to talk down the importance of climate change their inaction brings us ever closer to global disaster. The three main pillars of the present neo-liberal age – privatisation of public bodies, deregulation of the corporate and banking sec- tors and the lowering of income and corporate taxes, paid for by cuts to public spending – are incompatible with the steps that society should be taking to reduce damage to the environment.

Effect of the global export of industrial agriculture

The rapid globalisation of agricultural systems since the turn of the century has been a major cause of increases in greenhouse gas emissions. Whilst consumers in developed countries can now buy seasonal vegetables and fruit all the year round the energy cost

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of this is substantial. Container ships, jumbo jets and diesel trucks all burn massive amounts of carbon fuels.

Source: Shryman, S. (2000) ‘Trade, agriculture, and climate change: How agricultural trade poli- cies fuel climate change’, Institute for Agriculture and Trade Policy, November, p. 1.

Resource sustainability

A company might invest in R&D in sustainable technologies, even though the project might not immediately lead to increased profitability. In recent years, supply chains have emerged as a central focus of CSR. Company X’s management might make extraordinary efforts to hire, foster and empower a diverse workforce. They might offer generous paid maternity and paternity leave. They might sponsor after-school programmes in crime-affected neigh- bourhoods, fund the clean-up of local river systems and put pressure on elected officials to consider the needs of all citizens rather than simply seeking political expediency. None of that would change the fact that they source their raw materials, albeit indirectly, from outfits that use slave labour.

For years the economic model of ‘extractivism’ has depleted the natural resources of both developed and under-developed countries as evermore raw materials were removed and used to gain income and to produce added value products. The model is the opposite of stewardship and unless countered by renewal and restoration policies will continue to blight the planet.

Circular economy

The contemporary economy is based on the fast obsolescence of many of the things we buy. Tablet computers, mobile phones and other gadgets enjoy reduced shelf lives. This leads to a serious inefficiency in the way we manage the earth’s scarce resources (Wijkman, 2015). It results in increased pollution with its concomitant damage to the eco-system. Increasingly the business world is accepting seriously that resources need to be better managed.

The concept of the circular economy is one that has great potential, as it is restorative and regenerative by design. It addresses three key issues that underpin a circular economy: renewable energy, energy efficiency and the efficient use of raw materials. Successful transi- tion to the desperately needed circular economy will require radical and committed business leadership.

Profit issues

Executive pay

As business becomes progressively more and more challenging because of the expo- nential growth of buyers’ markets, increasing strain is being placed on the ability of companies to generate acceptable profit performances. This has led to a belief that what is needed is top executive talent. As a result there has been an escalation in executive pay salaries and awards. What is not so clear is what constitutes top talent and there is a grow- ing suspicion that many boards may offer exaggerated payment packages in order to gain corporate prestige and, perhaps, more cynically to boost their own salaries. In the first half of 2016 the media reported the dissatisfaction of shareholders to the decisions of a

256 Strategic innovation in changing times

number of UK boards to the granting of substantial awards to their CEOs. At a time when the many businesses are practising austerity policies it is hardly surprising that eyebrows were raised in society at large.

Rank and file pay

In difficult business climates it is usually the rank and file employees at the sharp edges of business activity who suffer most. Senior management press for cost economies outside the boardroom but rarely take a hit themselves. This damages morale throughout an organisation and some boards compound the negativity by granting themselves bonuses for their success in reducing costs! A variant of wage/salary freezes (or reductions) for middle management is the growing tendency to offer zero hours contracts or pay rank and file staff a lower rate than the national minimum standard.

Business profiteering

Whilst few would deny that making money (at least breaking even) is a crucial role of com- panies, it is regrettable when private business owners decide to extract money from their businesses for themselves and fail to see that pension funds are protected. Despite such behaviour being legal, if a company is privately owned, it presents the cynical and unaccepta- ble face of capitalism, as does the use of tax havens to maximise profits. Other practices such as minimum wage policies and low contributions to environmental and social improvement funds are also deplorable. Society in the UK was rocked in 2015 when British Home Stores, a well-known high street store, was sold for £1 and a year later went into liquidation with a huge hole in its pension provision.

Effects of MNC profit strategies on SMEs

As the traditional heavy industries such as chemical, coal mining, and iron and steel, that once were the backbone of the UK economy, have drifted abroad the country has become heavily dependent on the role of SME’s. This has been further emphasised by the sale of much of the UK’s manufacturing industry to foreign ownership where vital decisions affecting the well- being of UK people are taken in foreign boardrooms. The situation has been compounded by the migration of several UK-owned MNCs to overseas countries. This has led to falling tax receipts and a creeping realisation that government spending will in future not be a key sup- port of living standards that it has been since the end of the Second World War.

The SME sector already employs more people than the MNC sector and is now very much the spine of the UK economy but is severely hampered by business strategies practised by some MNCs that exploit their market power. Examples are provided by the time many SMEs find themselves waiting for payment, by continuous pressure to reduce SME supply prices and by the policies of some service MNCs such as banking and energy companies.

All SMEs need money services, energy availability, fast Internet connections and fairly priced assurance and insurance policies. All around the country these services are subject to widely varying availability. Many MNCs, have adopted a mindset that is driven by a cost reduction mantra that results in the centralisation of key services. Banks, which are highly centralised in the UK having over the years acquired local banks, are now closing branches, reducing the number of available cash machines and forcing SMEs, as well as private citi- zens, to switch to Internet banking. Such centralisation may save money for the banks but it loses the specialist understanding of the factors influencing local businesses that used to

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support SME start-ups and investment capital requests. The banks that like to be recognised by the general public and SMEs as local service institutions have largely abandoned this role in favour of aggressive corporate cost reduction and profit policies.

Action

Business solidarity: implementing CSR

A successful society is one where economic activity delivers high levels of sustainable well-being for all its citizens. Practical matters which determined organisations can address include community, workplace, market place and environment issues. CSR should not be regarded as just another source of pressure or as a passing fad. As customers, employees and suppliers – indeed, society more broadly – place increasing importance on CSR, some busi- ness leaders have started to look at it as a creative opportunity to fundamentally strengthen their businesses while contributing to society at the same time. They view CSR as central to their overall strategies, helping them to creatively address key business issues (Figure 12.4).

Community

CSR programmes are popular amongst SMEs as many have a limited local reach. Activities of MNCs sometimes attract suspicion, as it can seem that their prime motive is to gain tax-free or promotional advantage. Sustained MNC commitments to community projects demonstrate a firm solidarity. Key areas of activity include: education, local environment, and sponsor- ship of SME conferences and events.

Workplace

Good organisations seek to provide an excellent working environment for their employees. In most developed economies working conditions normally meet at least basic acceptable standards. This is not the case for many SME and MNC employees labouring in many under- developed economies where regulatory legislation is either absent or generally ignored.

Figure 12.4 A call to action?

258 Strategic innovation in changing times

Market place

CSR programmes typically feature upstream (supply chain) and downstream (marketing) activities. In the under-developed world the price of labour is cheap, which allows SMEs and MNCs to offer labour-intensive customer support.

Environment

There has been extensive and growing environmental regulation concerning the use of natural resources such as forestry and water. Responsible MNCs are concerned with the impact of their operations on natural resources and the by-products of their activi- ties. Some, however, are tempted to gain cost advantages by turning a blind eye to the exploitive activities of their overseas subsidiaries. When such cases come to light there is typically an international outcry. Review meetings are held but in many cases little progress results.

Toxic chemicals in outdoor products of leading brands

Greenpeace Environment group has called on outdoor clothing companies to phase out PFCs, which have been linked to reproductive and developmental problems.

Forty products – including bags, jackets, trousers, tents and sleeping bags – from leading outdoor brands were tested and it was found that 36 contained hazardous per- fluorinated (PFC) compounds. PFCs are chemicals used to make surfaces repel water and oil. They do not occur naturally, do not degrade, many last indefinitely in the envi- ronment, and are eliminated very slowly from humans and other animals.

Source: Slezak, M. (2016) The Guardian, 24 January.

Anglo American: basic principles of good citizenship

Anglo American plc owns and operates a range of businesses which, by virtue of their nature, scale and location, have the potential for significant positive and negative social impacts on host communities and relevant labour sending areas (hereafter referred to as ‘associated’ communities).

The overall conduct of Anglo American businesses and the values and standards that guide us are set out in ‘Good Citizenship: Our Business Principles’. In addressing inter- actions with our employees and associated communities, these Principles are based, as a minimum, upon a vision of Zero Harm. We are also committed, however, to supporting our employees in developing their potential, and to enhancing the opportunities available to, and capacities of, the communities in which we operate.

Our approach to social issues is based primarily upon seeking to leverage our core business impacts, including in areas like human resources, procurement and contractor management, in such a way as to enhance our development outcomes; in addition to conventional social investment.

Source: Anglo American (2009) SOC_000001 Issue 1, April.

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The big challenge for companies is how to develop an approach that can realise their ambi- tions. However, some innovative companies have managed to overcome this hurdle, with smart partnering emerging as one way to create value for both the business and society simul- taneously. Smart partnering focuses on key areas of impact between business and society and develops creative solutions that draw on the complementary capabilities of both to address major challenges that affect each partner.

Addressing rural distribution challenges in India

More than 70 per cent of India’s population resides in rural villages scattered over large geographic areas with very low per capita consumption rates. For multinationals, the cost of reaching and serving these rural markets is significant, as typical urban distri- bution approaches do not work. Hindustan Unilever Limited’s (HUL) Project Shakti overcame these challenges by actively understanding critical societal and organisational needs. HUL partnered with three self-help groups, whose members were appointed as Shakti entrepreneurs in chosen villages.

Source: Hindustan Unilever Limited.

United Nations Global Compact (UNGC) principles

The ten principles of the UNGC (United Nations Global Compact) are as follows:

1 Support and respect the protection of internationally proclaimed human rights. 2 Avoid being complicit in human rights abuses. (Labour rights (derived from the International Labour Organisation and Rights of

Work).) 3 Uphold the freedom of association and the effective recognition of the right to

collective bargaining. 4 Elimination of all forms of forced and compulsory labour. 5 The effective abolition of child labour. 6 The elimination of discrimination in respect of employment and occupation. (The environment (derived from the Rio Declaration on Environment and

Development).) 7 Support a precautionary approach to environmental challenges. 8 Initiatives to promote greater environmental responsibility. 9 Encourage the development and diffusion of environmentally friendly technologies. (Anti-corruption (derived for the UN Convention against Corruption).) 10 Work against corruption in all its forms, including extortion and bribery.

Source: Derived from the UN Convention on Human Rights.

Global recognition of BSR

The UNGC is a call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take action that advances societal goals.

260 Strategic innovation in changing times

Organisational approaches to CSR

Global or local?

In most cases it is best if MNCs locally fine-tune their corporate approaches to CSR, which in theory makes them more responsive and closer to the needs of local society. Many MNCs have become more corporate and centrally oriented and so run the danger of seeking to super- impose a central culture on local operations. Unilever has gained a favourable reputation for its CSR activities by delegating a great deal of autonomy to local managers.

In the case of companies that trade mainly in their home market a greater CSR impact can be achieved if their activities are integrated. Marks & Spencer provides a salient example.

Marks & Spencer

UK food and clothing retailer Marks & Spencer has integrated its sustainability activi- ties in its Plan A. It aims to integrate five sustainability goals:

• to become carbon neutral; • to cease sending operational waste to landfill; • to extend sustainable sourcing; • to be a fair trade partner and set new standards in ethical trading; • to help customers and employees live a healthier lifestyle.

Source: Marks & Spencer PLC.

A matter of attitude

Today, a shift has occurred in the way people conceptualise CSR. For decades, corporate business models have been assumed to be necessarily harmful to certain communities and resources. The intention was therefore to mitigate or reverse the damage inherent in doing business. Now many entrepreneurs consider profit and social-environmental benefit to be inextricable (Rakotomavo, 2012). Few tech start-ups pitch their ideas without describing how they will change the world for the better. Social media platforms believe they will facilitate democracy and the free exchange of information; renewable energy companies believe they will make money by selling sustain- able solutions; sharing economy apps believe they will cut down on the waste and inefficiency of a post-war economy myopically geared toward the individual consumer.

To be sure, some companies may engage in green-washing, or feigning interest in CSR. Companies may tout window-dressing contributions to ‘the greater good’ while engaging in morally questionable or inherently unsustainable conduct in the background. Google’s ‘Don’t be evil’ slogan can seem hypocritical when viewed in terms of the company’s collabo- ration with repressive regimes, not to mention the questionable practice of compiling reams of personal data on every customer.

Some think CSR is an oxymoron. Others see CSR as a distraction of a different sort, that is, from the lawful pursuit of profits. To them, a corporation’s sole responsibility is to gener- ate returns for its shareholders, not to try to save the world or to fret over its own impact. Laws and regulations must be followed in all jurisdictions in which the company operates, but management should not go beyond that, as that could hurt its bottom line and violate its

Business social responsibility 261

duties to the owners. Some counter that this concern is misplaced, since responsible initia- tives can increase brand loyalty and therefore profits. This may become increasingly true as ethical consumer culture gains wider acceptance and metrics enable the return on CSR expenditure to be evaluated (Daza, 2009).

A few cynical executives will inevitably try to portray themselves as responsible when they are decidedly not. And for some critics, nothing short of a massive overhaul of the world system will suffice. The truth is that many large corporations are devoting real time and money to environmental sustainability programs and various social welfare initiatives. These activities should be encouraged but, at the same time, continually questioned and reassessed.

In 2010, the International Organisation for Standardisation released ISO 26000, a set of voluntary standards meant to help companies implement CSR.

Summary Business activity is essential for the human well-being but needs to be conducted ethically in solidarity with society and the environment. The chapter addresses important and pressing issues that are evident in much of current business practice. It is important for those corpora- tions and governments to counter the harmful effects of business practice. Life is about more than generating profits to please shareholders whilst knowingly exploiting employees and paying scant regard to the impact on local or distant environments. Climate change is real and not something to be conveniently dismissed if it raises issues concerning corporate activity. Wilful blindness is cynical, insults human rights and damages the environment. The chapter has reviewed the impact of CSR in relation to people, planet and business issues.

Discussion questions 1 Why do you think that all businesses should adopt high ethical standards? 2 How does Carroll’s Pyramid assist the key aspects of CSR? 3 Name two MNCs that appear practically to be genuinely aware of the on-going impor-

tance of CSR and two that seem to be seeing CSR as short-term marketing public relations activity.

4 Briefly explain the concept of the triple bottom line. 5 How are the activities of some MNCs damaging the finances of SMEs? 6 What is meant by the concept of well-being? 7 How might MNCs present the acceptable face of capitalism? 8 How might marketing executives and advertising agencies advance the CSR cause?

Case exercise

Molinos Rio de la Plata: championing BSR

Business ethics in South America, as in many other countries, combine the positive (values, honesty, transparency, respect) and negative (corruption, fraud, bribery, inside information, human rights violations, lack of punishment). There are clear rules and laws about correct and ethically sound business behaviour, but few regions in these countries enforce com- pliance. Complicity and connivance in business are so common that in general the South American public profoundly distrusts business and government. Citizens, politicians and business leaders seem to be confused by the concept of ethics and even more sceptical when

262 Strategic innovation in changing times

this concept is related to business. Too often, public speeches and discussions of business ethics are more oratorical and superficial than they are serious and indicative of a strong com- mitment to moral values.

Molinos is Argentina’s largest branded food processing company, which employs circa 5,000 people and is based in Buenos Aires. Molinos produces a wide range of packaged foods for domestic consumption, including bottled oil, margarine, pasta, pre-mixes, pack- aged flours, yerba mate, rice, cold cuts and frozen foods.

The company’s mission is to generate value for shareholders, clients, employees, consum- ers and the community at large and its vision is to become the leading food company in the region, known for its reliability, innovation and growth. Molinos bases its corporate philoso- phy on the following principles:

1 Ethics and credibility in business relations and management. 2 Clear communications. 3 Professional and personal development of their employees in a working environment

based on motivation and innovation. 4 Environmental protection. 5 The health and safety of employees. 6 Continual improvement in the quality of their management. 7 Team work. 8 Learning from their mistakes. 9 Leadership based on knowledge and setting examples.

The corporation takes its responsibility to operate ethically seriously and has established a channel that employees and associates can use to report any action that is opposed to its principles. The Ethics Hotline is a confidential toll-free number and the company also spon- sors a website that is run by a third party that associates can use to report any misconduct of company employees.

A committed and responsible approach is taken to corporate sustainability issues and the company takes a strategic approach to health and welfare, community and human development and to care for the environment. The aim of the Health and Welfare Molinos Commitment Programme is to provide healthcare professionals with valid, scientific and reli- able information about nutritional facts, advantages and benefits of the company’s products. Initiatives running in the Community and Human Development programme include the Eat Tasty, Eat Healthy activity, which encourages a healthy diet among fifth grade students, par- ents and teachers from primary schools close to the company’s sites. Other social activities funded include foodbanks, community sport and educational programmes.

Molinos actively pursues initiatives to improve and sustain the environment by means of the company’s Environmental Care programmes, which cover logistics, energy and fuel pro- jects to reduce harmful emissions in addition to initiatives to reduce raw material and water usage. A continuous effort is made to design packaging that generates less waste, can be eas- ily recycled and has the least potential negative impact on the environment.

Questions

1 Does Molinos’s corporate philosophy clearly states its approach to business practice? 2 What is the company doing to boost resource sustainability and to mininise negative

effects on the environment?

Business social responsibility 263

3 In what ways does Molinos act to improve and share social value in Argentina? 4 Would you like to work for them? Briefly explain your decision.

Source: Molinos website, http://www.molinos.com.ar/ (accessed 8 August 2016); Wikipedia, https://en.wikipedia.org/wiki/Molinos_R%C3%ADo_de_la_Plata (accessed 8 August 2016).

YouTube

‘Molinos Rio De La Plata, Un Gigante Que Se Come Todo’, https://www.youtube.com/ watch?v=FgSwmBiexCQ.

References Bowen, H. R. (2013) Social Responsibilities of the Businessman, Iowa City, University of Iowa

Press. Carroll, A. B. (1999 ) ‘Corporate social responsibility’, Business Society, Vol. 38, Issue 3. pp. 268–95. Cavalieri, E. (2007) ‘Ethics and corporate responsibility’, Symphonya, Emerging Issues in

Management, Issue 2 (online management journal), http://www.unimib.it/upload/gestioneFiles/ Symphonya/2007,issue2/cavalierieng22007.pdf (accessed 14 August 2016).

Daza, J. R. P. (2009) ‘A valuation model for corporate social responsibility’, Social Responsibility Journal, Vol. 5, Issue 3, pp. 284–99.

Edgeman, R., Eskildsen, J. and Neely, A. (2015) ‘Translating triple top line strategy into triple bottom line performance’, Measuring Business Excellence, Vol. 19, Issue 1, http://www.emeraldinsight. com/doi/full/10.1108/MBE-12-2014-0054 (accessed 30 November 2016).

Elkington, J. (1997) Cannibals With Forks: The Triple Bottom Line of 21st Century Business, Oxford, Capstone.

Hockerts, K., Casanova, L., Gradillas, M., Sloan, P. and Jensen, E. (2008) ‘An overview of CSR prac- tices response benchmarking report’, INSEAD Working Papers Collection, 67, pp. 1–50.

Klein, N. (2015) This Changes Everything, London, Penguin Books. Moon, S. (2008) ‘Corporate environmental behaviours in voluntary programs: Does timing matter?’,

Social Science Quarterly, Vol. 89, Issue 5, pp. 1102–20. NEF (2014) ‘Our work: Wellbeing’, http://donate.neweconomics.org/issues/entry/well-being (accessed

30 November 2016). Porter, M. E. and Kramer, M. R. (2011) ‘The big idea: Creating shared value’, Harvard Business

Review, January–February, pp. 62–77. Rakotomavo, M. T. J. (2012) ‘Corporate investment in social responsibility versus dividends?’, Social

Responsibility Journal, Vol. 8, Issue 2, pp. 199–207. Savitz, A. W. and Weber, K. (2013) Triple Bottom Line: How Today‘s Best-Run Companies Are

Achieving Economic, Social and Environmental Success – and How You Can Too, San Francisco, CA, Jossey-Bass.

Wijkman, A. (2015) ‘Circular economy could bring 70 per cent cut in carbon emissions by 2030’, Guardian, 15 April.

Selected YouTubes ‘Rethinking Business: Join the Circular Revolution’, https://www.youtube.com/watch?v= vH2UFUzhXbA.

‘Social Responsibility and Business Ethics’, https://www.youtube.com/watch?v=MzLEy ED-xUs.

‘Business Ethics’, https://www.youtube.com/watch?v=y9VAY6HJ2R4.

264 Strategic innovation in changing times

‘Corporate Social Responsibility, State Bank of India’, https://www.youtube.com/watch? v=VifQfC3PsYE.

‘Re-thinking Corporate Social Responsibility’, https://www.youtube.com/watch?v=jga4 s0Ei7Zs.

‘The Social Responsibilty of Business’, https://www.youtube.com/watch?v=Z5KZhm 19EO0.

‘What Is Economic Well-Being?’, https://www.youtube.com/watch?v=zpd-1vkSleQ.

‘Deepak Chopra on Economic Well-Being and Happiness’, https://www.youtube.com/watch? v=pGB2iTIeOSQ.

‘What Is the Triple Bottom Line? John Elkington’, https://www.youtube.com/watch? v=l5MPOuhmpmk.

‘Triple Bottom Line and Sustainability: The Science of Good Business’, https://www.you tube.com/watch?v=2f5m-jBf81Q.

‘Sustainability at Shell: Responsible Means . . . ’, https://www.youtube.com/watch?v= yr6DjeiSIgY.

13 Organisational renewal for strategic innovation

The order is Rapidly fading And the first one now Will later be last For the times they are a-changin’

(Bob Dylan)

People often resist change for reasons that make good sense to them, even if those reasons don’t correspond to organizational goals. So it is crucial to recognize, reward, and celebrate accomplishments.

(Rosabeth Moss Kanter)

Learning objectives This chapter explores:

1 The impact of contextual change. 2 The traditional business game. 3 Corporate games. 4 Business ethics. 5 The evolution of organisational structures. 6 The challenge of change and selecting an organisational style. 7 The importance of organisational culture and achieving employee trust.

Introduction This chapter opens with a contextual focus from the boardroom, explores the key principles and strategic approaches of senior management and warns of the chaos that can result from top management’s too distant view of real-time activity. A major theme of this text is the importance of applying business activity to boost the well-being of society and not to mainly seek strategies that maximise profits at the cost of society. The pursuit of well-being and profits are not mutually exclusive goals and possible ways of achieving both are suggested by revisiting the Theory Z approach and its extension and development in the proposed Theory WB approach introduced in the text. Successful management activity to secure mor- ally acceptable profits and well-being in today’s business climate, and hence real and lasting

266 Strategic innovation in changing times

creativity and innovation, requires senior management to seriously address real corporate culture reform and to gain and build trust amongst corporate game players and society. It is hoped that this text will act as strong stimulant to the creation and more equitable distribution of wealth in a world where business players are often blind to the need to boost creativity and innovation and exercise due regard to preserving the environment. (See Figure 13.1.)

Figure 13.1 Organisational renewal for strategic innovation management.

Organisational renewal for strategic innovation 267

Context

View from the boardroom

The financial crisis of 2008 sent shock waves across the globe. Almost a decade later national economies are striving to recover confidence. The North American economy has grown stronger under the presidency of Barack Obama though several observers are con- cerned as to how business confidence will fare following the 2016 presidential election. South America in the shadow of the U.S. economy is showing signs of recovery but has been hit by weak raw material and oil prices. Europe is displaying very little or no growth with the exception of the UK, which is still to regain pre financial crisis growth achievement levels. In June 2016 the UK held a referendum to discover if the country wanted to remain in the European Union (EU), which resulted in the electorate deciding to leave. This triggered a period of uncertainty in the global marketplace. The African economies have experienced a check to their rate of growth due to the impact of droughts and political instability. Asia is dominated by the economies of China, India and Japan and all three are experiencing low growth rates.

The business environment is difficult in many countries and business observers and play- ers are looking out of their boardroom windows at an unclear and uncertain world. At such times throughout economic history academics, CEOs and their advisers are questioning their current operations and responses. Some dismiss the necessity to change their modus oper- andi and seek to ride out economic storms and business setbacks in the belief that every business cycle downturn is followed by an upturn. This is essentially a myopic view and has been termed ‘wilful blindness’. Others increasingly believe that it is time to re-evaluate their visions and missions or risk further business decline.

The challenges caused by change are affecting all business players – MNCs, NGOs and SMEs – and pose the following questions:

1 How appropriate are the operating paradigms, goals and present game plans? 2 What is the approach to respecting the environment, trusting their employees, and con-

ducting CSR programmes to demonstrate their commitment to social solidarity? 3 How might organisational structures evolve to encourage creativity, innovation and to

build trust and subsidiarity? 4 Does governance/ownership aid or restrict operations and performance? 5 Are business financial matters (gratuities, payments and rewards) conducted transparently?

A useful place to seek answers to these questions is to review the business game chest.

Key principles

Business game components

A broad set of business game components are summarised in Table 13.1, which it is hoped will stimulate thought on the most appropriate selection for the players in today’s difficult national and global markets.

268 Strategic innovation in changing times

Table 13.1 Major business games

Game Summary description

Money • The role of financial institutions (stock markets, shareholders etc.)

• Risk taking paradox • Betting for reward

Corporate • Generate profits for distribution and/or investment in business activities

• Weaken both national and international competition • Seek monopoly positions • Plan to achieve growth

Strategy • Modernist view • Post-modernist view • Post-capitalist view • Short-term • Medium-term • Long-term

Corporate responsibilities • Ethics • Environment • Social responsibility • Diversity • Learning

Business orientation • Cost • Marketing • Service • Customer-perceived value • Well-being

Leadership style • Theory X • Theory Y • Theory Z • Theory WB

Management style • Autocratic • Democratic • Laissez faire • Paternalistic

Attitudes to • Creativity • Innovation • Change management

The Western, essentially North American, dominant game, is market fundamentalism, which is the pursuit of profits under the dynamic of market forces. In the EU the approach is softer, as more concern is generally given to the impact of strict adherence to this laissez faire doctrine on people and society. African-owned businesses largely follow market fundamentalism while in Asia there has been a weakening of this approach. Particularly noteworthy is the distinctive business style of several MNCs in India that have tempered their exclusive pursuit of profits in favour of furthering a social mission policy (Capelli et al., 2010). Several major Japanese companies have long practised Theory Z approaches. Chinese businesses broadly follow the typical U.S. business style (Theory X or Theory Y).

Organisational renewal for strategic innovation 269

Benefactors

The Western game style is essentially geared toward rewarding shareholders whose paper investments rise and fall on stock exchanges. Companies are required by law to run their business activities in order to generate returns that are acceptable to shareholders rather than their workforces.

The risk paradox and casino market games

CEOs are charged with the responsibility of exercising vision in their businesses and some are prepared to be more open to taking risks to seek competitive advantages than others. To grow many MNCs and SMEs need to be able to borrow from the banks to fund invest- ment programmes. Banks are traditionally risk averse and are wary in their agreement to lend money. This can severely check the investment plans of SMEs in particular who need to expand their businesses and convince the banks of their ability to achieve and sustain a strong ‘bottom line’. Banks and financial institutions, in contrast, are quite happy to play the property and financial markets and at times can overplay their hands causing financial chaos. Despite some tightening in regulation since the financial crisis of 2008, market players are still able to find legal wriggle room to speculate wildly in search of amassing profits.

Bets, sweats and debts

Gambling has long been attractive to many and the industry has grown at a rapid rate in the last decade. Betting shops are to be found in most high streets; TV screens are flooded every night with gambling advertisements, which also appear on the shirts of sports people and in social media. Offstage and in the background the banks continue to play their casino games. A lottery culture has emerged and loan sharks prey on struggling members of society.

Investment

As technology accelerates exponentially, businesses will need to give careful consideration to keeping pace with highly competitive market demands. This is essential if they are to sus- tain growth by supplying customer-perceived value packages to increasingly sophisticated customers.

Business game players

The main players in the national and international business games are MNCs, SMEs, NGOs, charities and governments in a direct or indirect mode.

Multinational corporations

An MNC is a parent company that engages in foreign production through its affiliates located in several countries, exercises direct or indirect control over the policies of its affiliates and implements transnational business strategies in production, marketing, finance and staffing

270 Strategic innovation in changing times

in a way that transcends national boundaries. In other words, MNCs exhibit no loyalty to the country in which they are incorporated. They tend to be headed by CEOs who exhibit diverse loyalties: they are slaves to financial institutions and closely tied to shareholders and employees. Others, sad to say, are self-seeking mercenaries who in the worst cases damage their com- panies. Over the past century Europe has seen its economic might shrink. Overtaken by American and later Chinese and Indian firms in many industries, the economies of the old world have struggled to keep up.

MNCs are gaining strength in Africa, Asia and South America

MNCs are gaining strength in Asia and the rate of growth in China is particularly phenom- enal and in 2015 accounted for 50 per cent of Asia’s top MNCs. India followed some distance behind as did South Korea. In South America companies like Embraer, Cemex, Telmex, Gerdau and JBS have grown rapidly leading commentators to coin the term multilatinas to describe globally trading South American MNCs.

The importance of SMEs

SMEs are the backbone of Europe’s economy. They represent 99 per cent of all businesses in the EU. In the past five years, they have created around 85 per cent of new jobs and provided two-thirds of total private sector employment in the EU. The European Commission consid- ers SMEs and entrepreneurship as key to ensuring economic growth, innovation, job creation and social integration in the EU.

Today African SMEs create around 80 per cent of the region’s employment, establishing a new middle class and fuelling demand for new goods and services. The scale of this trans- formation should not be underestimated. The International Monetary Fund (IMF’s) Regional Economic Outlook for Sub-Saharan Africa, released in April 2015, says: ‘Over the next 20 years . . . sub-Saharan Africa will become the main source of new entrants in to the global labour force.’ This is an emerging Africa that is absolutely determined to succeed. As a fol- low up to their bold commitment to infrastructure investment, African governments have now turned to entrepreneurs to support future growth.

Asia’s SMEs need finance to help them grow into dynamic, internationally competitive companies. This is key to strong sustainable growth in Asia as the world recovers from the recent global economic slowdown, according to the Asian Development Bank. Asia has mil- lions of SMEs but few of them are able to grow to the point where they can innovate or be part of the global supply chain. ‘To do this, they need more growth capital and opportunities to access various financing channels’, said Noritaka Akamatsu, Senior Advisor in ADB’s Sustainable Development and Climate Change Department, which produced the report.

The current economic setting in most Latin American countries suggests that, if the SME sector does not perform well during the next couple of decades, overall economic performance will also be unsatisfactory, especially in the areas of employment creation and income distri- bution. No other major sector has the potential to generate a large amount of adequate-income jobs. Experience of other countries has proven that this sector can play a central contributing role, under proper conditions and with adequate support. Various types of evidence from the countries of the region suggest that considerable potential is present in their SME sectors. But both experiences elsewhere and economic logic imply that a strong and coherent sup- port system will be necessary if that potential is to be reasonably fulfilled. Such a system has been notoriously absent in most Latin American countries in the past. Countries which fail to

Organisational renewal for strategic innovation 271

rectify this lack may suffer serious social and economic consequences. The parallels between the economies of many Latin American countries and various others around the developing world (e.g. South Africa, Philippines) both in economic structure, recent growth performance and level of inequality, suggest that many of the conclusions applicable to Latin America are relevant elsewhere as well.

Corporate game plays

Profit quest

Most MNCs are seeking to generate profitable returns for private and institutional sharehold- ers, and SMEs to meet their owners’ needs. To be successful and profitable in contemporary national and global markets requires businesses to successfully obtain and sustain a competi- tive edge. Profits can then be used to reward investors and/or to fund investment in existing and new business opportunities.

Growth quest

The need to achieve growth is espoused by many MNC CEOs, government ministers and business commentators. Many SMEs would also like to build successful businesses. There is a degree of confusion about what is meant by growth. Government ministers stress the impor- tance of growing national economies to boost business confidence in international financial markets and claim this boosts national living standards. But is this always the case? MNCs keep a constant eye on the performance of their shares on the world’s leading stock markets.

It is clearly important for national economies to fend off stagnation in times of eco- nomic downturns that can damage the fortunes of the best-run economies. Balancing the books is seen by many politicians as being the main policy to reduce the cost of borrowing in the financial markets. Interest payments can assume overbearing levels if governments are spending too much. However, what is not always clear to governments is the need to balance the needs of good housekeeping with social justice. Allowing market forces to cripple an important national industry is ethically questionable if it results from dump- ing by strong international competitors. The UK government’s treatment of the UK steel industry provides an acute warning of the dangers of such policies. Its short-term view will cripple the livelihoods of many and will result in escalating social welfare costs. Governments should carefully balance the need to manage economies for the good of its citizens rather than maintain a doctrinaire view of market forces and run the risk of hurting many to benefit the few. This requires careful consideration in order to temper political dogma with social justice.

MNCs also face severe pressure in the developed world when their domestic markets approach saturation. This results in an added emphasis on expanding into other countries and continents and especially into the under-developed world. If undue regard is not given to supporting domestic industry, corporations can prosper at the expense of their own national economies. Once again there is a pressing need for dogma to be balanced with due considera- tion for domestic operations.

SMEs account for most of the economic activity in both the developed and under- developed world. Governments need to fine-tune their economic and political actions to boost their ability to prosper. A common problem SMEs experience is the reluctance of MNCs to pay ethical prices for their output and to pay them promptly.

272 Strategic innovation in changing times

Table 13.2 Key game activities

Business activity set Description

Operating activities Cash flow from operating activities Investing activities Business activities that are capitalised over more than a year Financing business activities Sources of funds, private, public to support business activities

Corporate game strategies

Running any business organisation whether in the private or public sector, whether it is an MNC, SME, NGO or charity involves three basic business activity sets (Table 13.2).

Business managers can take a short-term view, a long-term view or a mixture of both views. In the developed countries there is a tendency for companies to take a short-term to medium term-approach. Investment decisions for long-term projects occur in the public sec- tor but private sector projects in many MNCs are subject to financial market pressures.

Operating paradigms

The main operating business game paradigms at present are (see Chapter 3):

• least-cost production; • marketing orientation; • customer-perceived value orientation; • service dominant logic; • post capitalism – seeking a better balance between market fundamentalism and climate

change.

Three-way stretch model

As described by Goodman, the scenario develops as follows. Top management (directors and senior managers) sense, in the face of falling sales and mounting costs, that business is dif- ficult. If they judge this to be a temporary blip in the expected (i.e. familiar) course of events they may decide to keep a stiff upper lip and retreat to the boardroom and executive offices. For fear of panicking the organisation, they may resort to a policy of restricting communica- tion and/or over-using familiar hard systems tools so as to be seen to be doing something. Meanwhile, middle management try to hold back the tide and make repeated entreaties for help to both senior and junior colleagues. In the worse cases, top management retreat com- pletely and middle managers find that they are placed under pressure by the rank and file to act decisively in the threatening conditions. This they may feel unable to do before receiving the active or tacit approval of the top management. If this response to contextual change pres- sures continues for long, huge fissures will start to open up in the organisational hierarchy that will threaten its very existence.

Top management will be locked in the boardroom, middle management in their offices and the rank and file (junior managers, supervisors, workers) will be calling mass meetings. This may seem a little far-fetched to many readers, but let’s look a little more closely at what is happening. Figure 13.2 illustrates the fundamental point. The onset of chaos has distorted the organisation so that it is in the process of breaking into three sub-organisations, each concerned about the dangers to the original organisation.

Organisational renewal for strategic innovation 273

The original organisation, represented by the shaded rectangle in the figure, has been pulled into the hatched polygon. Top management are conspicuous by their absence and commu- nication with middle management and the rank and file is poor, if it exists at all. Middle management are concerned for their jobs and are trying to extract some direction from the top. The rank and file are very worried about their positions and are getting increasingly frus- trated as they see the organisation disintegrating.

Since the dawn of history it has been known that a house that is divided will fall. If the organi- sation above is to survive, top management have to regain control, unite the house and change their modus operandi. In unstable conditions, with contextual stimuli changing rapidly, a pre- dominantly hard systems approach will probably be difficult to justify. What is needed is a new way of doing things. The old corporate mindsets must give way to a new set that will emphasise softer systems and acknowledge the value of human capital. To effect real change, top manage- ment will have to consult openly with individuals and begin to build a new climate of trust.

Practice

Assessing organisation culture

Chapter 7 discussed the key factors that organisations should consider if they are deter- mined to create the right operating conditions in which creativity and innovation will thrive. This requires a new holistic approach to learning at individual, group and organisational levels. Chapters 4 and 5 contained audits to assess the creativity quotients of individuals and groups respectively. A critical part of any pre-planning for change is to obtain a picture of an organisation’s disposition toward any desired adoption of a new culture that is as accurate as possible. To adopt business creativity as a major driver within their organisations CEOs need to sound out their senior management on the six key themes that have emerged from the argument in this text, namely:

Figure 13.2 The three-way stretch.

274 Strategic innovation in changing times

1 context 2 management/leadership 3 creative response 4 individual empowerment 5 group empowerment 6 organisational empowerment.

You are invited to take the Organisational Creativity Audit presented in Table 13.3. You will probably find it useful to photocopy it. Tick the boxes that best describe your views and refrain from consulting with others as you complete the audit. Now turn to Appendix 13.1 for the interpretation of your responses.

Table 13.3 Organisational Creativity Audit

Questions Agree strongly

Agree Disagree Disagree strongly

1 We are a supply oriented organisation 2 We have a working definition of management that

is communicated to all our people 3 We are aware of business creativity 4 We encourage individual creativity 5 We support group working 6 We value our people 7 We are service oriented 8 We organise tailor-made training programmes for

our people 9 We understand what business creativity is all

about 10 We practise open communication 11 We provide suitable training for groups 12 We try to make the organisational culture serve

the people rather than make the people serve the culture

13 We are a domestic organisation and do not look for business abroad

14 We believe it best to run our organisation on hard systems thinking

15 We are prepared to evaluate new ways of management thinking

16 We try to provide secure employment for our people

17 We encourage and provide time for business creativity group work

18 We are seriously influenced by contextual factors 19 We believe that customers are more important

than our organisational culture 20 We encourage and provide space for CPS activity 21 We cultivate a trust culture 22 We train people to facilitate groups 23 We are a Learning Organisation 24 We don’t know what the market (or our internal

colleagues) think of us 25 We operate a democratic management style

Organisational renewal for strategic innovation 275

26 We are running or have recently run a major organisational change programme

27 We spend as little as we can on the work environment

28 We reward individual and group achievements 29 We tolerate mistakes 30 We expect loyalty upwards and downwards

Selecting an organisational style

Whilst this text argues for businesses both large and small, public and private, to adopt an organisation style that reflects the importance of managing employees in a culture that stimulates creativity and innovation, it is impossible to describe in detail a one-style-fits-all organisational style blueprint. Figure 13.3 summarises the main organisational styles dis- cussed in this text and strongly argues for business to seek to adopt the underlying philosophy and practices of Theory WB organisations. Inevitably there will be the need at times for strong action that will mirror some of the cut and thrust activities of Theory X organisations.

Readers are invited to study this figure and the Semco case study (and, for those working in organisations, their own culture experience) and to superimpose a circle on the matrix that maps the apparent organisational style which will be a mix of all the quadrants of the matrix.

Inside or outside track?

Opinion is divided as to the best way of approaching a change programme. Some, such as Lord Sharman, a former Chairman of KPMG International, believe that ‘companies can change only from the inside’ (BBC, 2005). Others hold the view that to avoid the danger of top man- agement myopia it is best to retain outside consultants to help them think, help them do and to do it for them. Whilst the first two interventions are fine the third would surrender ownership of the change initiative. Top and senior management must visibly own change programmes. It is generally best not to regard the inside/outside issue as being a mutually exclusive deci- sion. If it is viewed in the light of a continuum then top management can select an appropriate blend – drive the exercise internally but harness external expertise when and where necessary.

Theory WB Theory Z

Theory XTheory Y

High

Low

High

Low

Relative empowerment

R e la

tiv e w

e ll-

b e in

g

Figure 13.3 Organisational style matrix.

276 Strategic innovation in changing times

Theory Z revisited

Theory Z or adhocracy is the opposite of the power-command hierarchical approach (Theory X) and is provided by self-management. Many in top management dismiss this alternative prematurely because they believe that it will lead to anarchy. This is misguided, as bureaucratic and self-management styles should not be seen as mutually exclusive. They represent opposite ends of a continuum and the task of top management is to find the right blend for their organisation.

The self-management style (Hamel, 2011) encourages the development of trust, team- working and high morale. It resembles in many ways the operating style of a professional orchestra where performance standards are gained by the strong vision, mission and commit- ment of all the players. The advantages of its adoption include:

• lower costs – absence of traditional and hierarchical managers reduces wage costs; • savings can be used to reward staff and invest in growth; • encourages collegiality and internal loyalty, as people discover the benefits of working

in teams where all have equal status; • encourages initiative – people become pro-active and open to new ways of thinking and

strive to increase their personal and reputational capital; • long-stay loyalty – few leave to join other organisations; • increased expertise – as with the individual players in an orchestra people are highly

motivated to maintain high-quality work standards and to continually develop their skill sets;

• sharper decisions – to avoid the three-way stretch phenomenon; • increased flexibility – orchestras can play more than one piece and perform in more than

one location. The team can meet and deal more effectively with sudden surprises and challenges.

Nay-sayers might point out that self-management has a number of drawbacks:

• Expectations – people have to perform to high standards and accept group judgement on their achievements. If both of these become lax then the self-management model can foster mediocrity.

• Pool progress issues – the absence of a hierarchy can make it difficult for people to pro- gress to positions of greater responsibility. However, a swimming pool presents a flat surface but contains a depth continuum from shallow to deep.

• Joining experience – team-based collegiate system can be daunting to new people but also more accommodating, as it is in everyone’s interest that new people contribute as quickly as possible.

Theory WB approach

The Theory WB approach proposed by Goodman places an even greater emphasis on the value of employees and their welfare and well-being than the Theory Z approach. Ricardo Semler at Semco inherited a Theory X style SME from his father, which he rejected in favour of a Theory WB model. So effective has this approach proved that now Semco has grown to become a well-respected MNC. Several organisations have attempted to copy the Semco style of operation but with limited success. The Semco model works, as Ricardo Semler is

Organisational renewal for strategic innovation 277

a charismatic leader and part owner of the company. Adopting the self-management social democratic Theory WB style in an existing public MNC requires a determined effort by management to massively overhaul and reshape their corporate structure. Organisations need to fully sign up to becoming a just culture that encourages employee involvement where employees do not get punished for criticising managers and for making mistakes. Courageous leadership is required to accept that organisations function most effectively if important spe- cialist day-to-day decision-making is performed in small strategic business units (SBU). Evidence shows that an effective SBU should employ a maximum of 150. For large MNCs this requires top management to adopt a network structure as illustrated in Figure 13.4.

High-cost investment decisions can be referred to central HQ. Systems can be designed to accommodate the key principles of the Theory WB approach if there is a sufficient determi- nation by top management to grow a culture in which honesty levels (peer-to-peer) need to be clear and open. Such organisations have to change from hierarchical fiefdoms to democratic organisations that place a high value on the well-being of workers.

Figure 13.4 Structure of a Theory WB organisation.

Semco

Semco was created in the 1950s as a company manufacturing centrifuges for the veg- etable oils industry. Over the years, the company has modernised by expanding its range and investing in other businesses, moving heavily into the services area always in association and partnership with world leaders.

(continued)

278 Strategic innovation in changing times

After successfully developing several businesses in the environmental consultancy area, facilities management, real estate consultancy, inventory services and mobile maintenance services, Semco Group is currently market leader in the industrial equip- ment area and solutions for postal and document management.

In addition to these companies, Semco also manages a foundation which mentors and catalyses educational, cultural, environmental and strategic projects.

A company based on innovation, Semco does not follow the standards of other com- panies with a predefined hierarchy and excessive formality. At Semco, people work with substantial freedom, without formalities and with a lot of respect. Everybody is treated equally, from high-ranking executives to the lowest ranked employees. This means the work of each person is given its true importance and everybody is happier at work.

Source: Semco; Semler (1994b).

(continued)

Managing change to boost well-being, creativity and innovation

Well-being

During last 25 years technological development has accelerated the globalisation process, which has caused dramatic changes within and across organisations (Krainz, 2015). Business performance is varying, complex, global and changing faster than ever before. Over the same period social expectations have changed; changes have affected customers, partners and employees as well. In order to succeed in the global market, organisations need to inte- grate well-being at work to reinforce their competitiveness. Well-being plays a central role in creating flourishing businesses and societies. Focusing on well-being at work can benefit societies by helping working individuals to feel happy, competent and satisfied in their roles. The evidence shows that people who achieve good standards of well-being at work are likely to be more creative, more loyal, more productive and provide better customer satisfaction.

For decades organisations have tried to foster these qualities through employee engage- ment strategies but engaging employees is just one part of the story. Improving well-being at work requires a more rounded approach that focuses on helping employees to:

• strengthen their personal resources; • flourish and take pride in their roles within the organisational system; • function to the best of their abilities, both as individuals and in collaboration with their

colleagues; • have a positive overall experience of work.

The ‘Wellbeing at work’ report (Jeffrey et al., 2014) summarises the strongest evidence on the factors that influence well-being at work, along with possible implications for employers. The key findings are:

• A good work-life balance reduces employee stress levels. • Job security and greater personal control helps motivate others. • Companies benefit from promoting well-being through increased staff loyalty, creativity

and productivity.

Organisational renewal for strategic innovation 279

The University of Cambridge has established the Wellbeing Institute (WBI), a cross-disciplinary initiative that promotes research in the science of well-being, and its integration into first- rate evidence-based practice and policy. As a centre for the scientific study of well-being, the WBI’s aim is to make major contributions to the development of new knowledge and its application in enhancing the lives of individuals and of the institutions and communities in which they live and work. Well-being at Work (WAW) continues to increase in importance for employees and employers and across countries. While there are different definitions of what the concept entails, within the EU one useful definition acknowledges that well-being is ‘a summative concept that characterises the quality of working lives, and it is a major determinant of productivity at the individual, enterprise and societal levels’. The relevance of the concept is heightened further as the work environment continues to change assisted by increasing migration (especially from less developed to more developed countries), globalisa- tion, the development of new technologies, the move from manufacturing to service-based economies, the ageing workforce and population, an increase in the number of women in the workforce and the transformation of work patterns; these factors have led to a workforce for which psychosocial risks have increased in priority.

Holistic approach to well-being

Osram, in the Czech Republic, has developed a holistic and comprehensive approach to well-being for employees by relying on several measures. It concentrates on skill development and improvements of health and well-being that aim to improve the qual- ity of work, and these have positively impacted on voluntary staff turnover. Osram also takes into consideration the balance between work and family life in order to support family members working in Osram (e.g. time schedule of work shifts according to their needs, support in getting transport to work). The company has also implemented health promotion activities at the workplace.

Omnitel, based in Lithuania, places great emphasis on dialogue with employees, discussion of the goals and values of the company and participation in decision mak- ing. Omnitel has implemented various methods of communication with employees. It has attempted to establish a favourable environment for the family and developed initiatives to help balance work and family commitments. Omnitel is committed to providing its employees with opportunities to have good living conditions. One of the key measures is that each of the company’s employees receives a welfare package. As knowledge and professionalism are two of Omnitel’s valuable resources, the company focuses on continuous staff training.

Source: Schulte and Vainio (2010).

A new workplace democracy model

Theory WB proposed in this text is a new workplace democracy model and a well-being manifesto that should be incorporated into management thinking and organisational develop- ment. It focuses on:

• trusting a company’s destiny to its employees; • treating its employees as responsible adults;

280 Strategic innovation in changing times

• encouraging employees’ self-expression and self-management; • placing a strong emphasis on the well-being of employees both in the workplace and at

home.

Well-being manifesto

It is hoped that business can be conducted with an attitude and in a style that reflects the points that have been explored in this text to increase the well-being of all and not just the privileged few at the expense of the majority.

W Wealth generated for individuals and society by faire trading practice. E Equitable distribution of wealth, end to pursuit of tax evasion. L Leadership that respects employees, society and the environment. L Learning to master total thinking skills needed to foster innovation. B Behaviour that displays high ethical standards and exhibits transparency. E Enterprise approach to make a difference in a highly competitive world. I Imagination – willingness to foster and support creativity in the workplace. N New approach to business activity that is sensitive to climate change. G Global outlook that respects local and foreign cultures.

Source: AJM Management Development.

The Theory WB approach proposed by Goodman in this text incorporates the principles of the Well-being Manifesto summarised in the vignette above. Table 13.4 contrasts this approach with typical Theory Y approaches. Readers are invited to think through these descriptions and select which type of organisation they would prefer to experience. Every organisation is unique and most people recognise that treating others in a manner that would be acceptable to them is a fair condition for human interaction. The tragedy is that this underlying principle is often forgotten by organisations that encourage or tacitly accept power-command leadership styles. As commented previously in this chapter there is no one detailed organisational style that is suitable for universal application and as with Theory Y styles there can be problems with new workplace democracy models such as Theory WB. Perhaps the main problem with the naysayers of democratic structures is a reluctance to really give them a go.

Disadvantages of workplace democracy

Workplace democracy means allowing employees to have a strong voice in the direction and decisions within organisations (Kokkinidis, 2012). It has become increasingly popular in the early twenty-first century as businesses have encouraged participative management and emphasised employees as major assets. Despite its prevalence, workplace democracy does present some challenges and disadvantages:

• Delayed Decisions: workplace diversity can take many forms. At its extreme, employees may take part in virtually all decisions. This can delay responses to urgent situations and lead to more time spent on decision making than in taking action and producing results. The more voices involved in the decision process, the longer the delays and the more difficult it is to come to a resolution that works for all involved.

Organisational renewal for strategic innovation 281

Table 13.4 Theory Y and Theory WB organisations

Management concept

Typical Western approach Theory Y

Wellbeing approach Theory WB

Structure Hierarchical /autocratic Democratic Leadership Power-command; telling and

yelling! Devolved to working units. Willing

and doing Employee

power Directed Self-management

HQ support functions

Several, e.g. Finance, HR, IT, Marketing, etc.

Minimal, most functions performed by unit workers

Communication Restricted by top management Completely open, company plans and financial information available to all employees

Recruitment Interviews and selection carried out by central HR

Interviews and selection carried out by work unit personnel

Training Organised by central HR Determined by unit work groups Job titles Fixed job descriptions Job functions fluid, not fixed job

descriptions Career plans Largely determined by HR Determined by individual employees Attendance

hours Mainly inflexible but some

flexibility Flexible, even including working at

home Performance Assessed in the main by line

managers Assessed by work unit peers, including

managers Pay Base pay determined largely by

central HR/Finance Personal incentives Profit-sharing

Base pay self-set with unit employee participation

Personal incentives Profit-sharing

Strikes Tendency for strikes – strikers may be penalised

Smaller risk of strikes – strikers not penalised

Dismissal Line manager/central HR function.

Last step in a conflict situation after efforts to turn situation into a learning experience

Conflicts Resolution procedures can range from exploratory with a view to solve or can be dismissive

Resolutions sought in working units

Decision making

Undertaken largely by line, middle and top management.

Decentralised to working groups. Major decisions ratified with senior managers

Work place environment

Specific offices, toilets, dining rooms, and relaxation areas for management personnel. Separate parking places, etc.

No environmental perks. Preference for open workspaces. Relaxation areas open to all

Philosophy/ values

Mission and vision on paper and walls. Purpose: to reward shareholder and favoured personnel, e.g. CEO bonuses

Mission and values in employees’ minds. Purpose: to make work fulfilling, enjoyable and to foster the well-being of all employees

• Strong Employee Power: workplace democracy is intended to create an environment where employees have a recognised and influential voice. In some industries employees form unions to ensure their voice is heard. The risk for employers is that a democratic workplace may go too far if employees demand authority to go along with their opin- ions. This can create a potentially harmful imbalance of power that leads to ineffective decisions or inner conflict that takes away from company focus.

282 Strategic innovation in changing times

• Cultural Tension: when employees have input, tension can arise within the ranks. Employees may find that their opinions conflict on various topics. This may go against a culture where teamwork and collaboration are emphasised. Some companies implement segmented teams and specific roles for employees to share their opinions to avoid these types of issues. However, the more democratic the workplace, the more difficult it can be to get employees and leaders to agree on what to do unless there is a strong corporate culture.

Action

Conventional planning practice

Managers, whether individual, group or top management, are charged with the fundamental tasks of deciding where they should be going and how they should get there. This has par- allels with the everyday decisions that a car driver needs to make. The planned approach tradition for a metaphorical car journey would assume that the destination was known and that to all intents and purposes there would be few questions to answer concerning choice of route and likely causes of delay. To many managers the sellers’ market environment (see Chapter 1) posed few dangerous contextual challenges. Markets were there for the taking. Making money called for sound financial and supply skills in the main.

In such a climate many were keen on planning. Governments, corporations and public sector organisations were relatively flush with funds and the act of planning functional activ- ity in a virtually given scenario was seen as sound practice. Planning took off in a big way in many organisations and assumed massive complexity. Hard systems approaches delivered the goods and all was well until performances fell short of expected levels. Potentially threat- ening contextual disturbances were increasingly affecting levels of achievement. Suddenly rigid planning fell short. Management could no longer expect an easy drive and had to review their assumptions.

To a degree organisational plans can be fine-tuned to take into account intermittent and relatively minor contextual changes in the business environment. However, if the distur- bances to the expected conditions escalate and become more serious then organisations have to change their plans radically.

Reasons for pre-planning

All businesses (whether private, public, small or large) should spend time thinking about their organisations before determining their overall objectives. This pre-planning stage is essential for later effective and efficient decision-making. Key matters for a CEO to consider include:

• Does the organisation have effective and respected leaders? • Can these leaders create the right operational conditions for their people to motivate

themselves? • Can the organisational culture be changed?

Ignoring or paying scant regard to the pre-planning phase is a major cause of the failure of change initiatives.

Organisational renewal for strategic innovation 283

Understand the people

Unlike managing oneself, managing others demands interacting with others. A paradox that is evident in many organisations is that top management distance themselves from middle managers and the rank and file. Some still maintain their own separate dining and relaxation rooms. People know about the top managers and read about their successes in house pub- lications but rarely meet them. Over the last 10 years there has been a declining use of the telephone and more communication by email, which tends to be impersonal. People can feel that the organisation merely gives them a payroll number, and regards them as a cost, or a digit. The trend toward the depersonalisation of staff is like a cancer that threatens business creativity.

People need to be treated as individuals who deserve and will thrive in a culture that values their contributions in the workplace. Organisational mindsets can turn the daily expe- riences of staff into a mechanical and boring experience. Many organisations become steeped in mindsets that have developed over the years during better times. Three common ones are corporate ethos, bureaucracy and process. Or put another way, ‘the way we do things here’. People look to the top of an organisation to undertake a positive and interactive lead in any change programme that can be accepted as having a good chance of success.

Many organisations discover that their modus operandi can frustrate change and ren- der it difficult if not impossible for staff to actively contribute to a change programme and realise their potential. A change in culture is required that must begin with the demonstrable enthusiasm and involvement of top management. Once achieved it is quite common for them to realise that a great proportion of their management had been pro- moted because of their technical expertise (or good connections) rather than the ability to manage people.

So the first step for top management is to develop managers’ understanding of:

• how people work; • what motivates them; • what demotivates them; • how teams are run; • how teams are led; • dynamics of team leadership.

It helps if CEOs can define management in practical terms (see Chapter 3) for commu- nication to all employees. Sadly, few companies can do this effectively and as a result team briefings and actions can lose their impact. Teams represent a dominant approach to getting work done in a business environment. Creativity enables teams to solve problems and leverage opportunities through the integration of divergent thoughts and perspectives. Research indicates that a collaborative culture, which affects how team members inter- act and work together, is a critical antecedent of team creativity (Barczak et al., 2010). Understanding people is of crucial importance in most business contexts and ultimately is the key to success. Few people go to work wanting to do a bad job. It is what they experi- ence at work that prevents them giving of their best. A realistic culture change programme must address those barriers that get in the way of people performing well as individuals and in teams.

284 Strategic innovation in changing times

Encouraging well-being

The New Economics Foundation (NEF) has developed a set of evidence-based actions (‘Five Ways to Well-being’) which promote people’s well-being from evidence gathered in the UK gov- ernment’s ‘Foresight Project on Mental Capital and Wellbeing’. The project, published in 2008, drew on state-of-the-art research about mental capital and mental well-being through life. It asked NEF to develop the ‘Five Ways to Well-being’ to communicate its key findings. The ‘Five Ways’ have been used in many different ways, for example to get people to start thinking about well- being, to develop organisational strategy, to measure impact, to assess need for staff development and to help people to incorporate more well-being promoting activities into their lives.

Understand the task

Responsible top management need to demonstrate that they understand the real position of their organisation. This means for many facing the major challenge of embarking on a change programme that it is not merely an attempt at a quick fix but rather a determined attempt to steer their organisation into clear blue water. This raises an important selection point for CEOs. Top management personnel should be supportive and active in a change initiative and not try to derail it. This challenges some age-old practices of appointing people to top posi- tions because they are family or went to the same school. Policies of entitlement have in the past been and still are a leading cause of contemporary business failures. Boards of directors need to be involved in effectively guiding organisational change while protecting the inter- ests of an organisation’s stakeholders (Fields, 2007).

Successful change programmes need to be planned across a declared time frame that, depending on the organisation and business activity area, may take several years. Typically change programmes can pass through three distinct stages:

1 Developmental change: typified by an audit of company skills and interests with a view to dropping those with a limited future; developing promising existing ones and prepar- ing for the acquisition of new ones necessary for the success of the business.

2 Transitional change: the programmed dropping of failing programmes and the introduc- tion of potentially successful ones.

3 Transformational change: the completion of the original change initiative.

It is not a question of just flicking a switch. CEOs if at all possible should remain in post as the organisation progresses through the change programme. Too many leave too soon for another post and by so doing can seriously undermine the programme. Depending on the size and complexity of an organisation a change programme can take five years or more to com- plete. An example that comes to mind is provided by the Norsk Hydro aluminium smelter at Karmoy in Norway, where the company engaged all the staff and associated interests includ- ing union personnel in a change initiative that strongly featured business creativity activities.

Understand the organisation

The existing hierarchy and culture may not present too many impediments to the usual busi- ness operations but may restrict and frustrate an attempt to introduce a new, radical, modus operandi. Top management will probably have to give serious consideration to introducing a flatter, downsized, strictly non-hierarchical structure to encourage a TEAM culture (Together Everyone Achieves More).

Organisational renewal for strategic innovation 285

Develop plans

Whilst the strategic implications of managing change are the responsibility of senior management, it is important that the functional implications are delegated throughout the management structure to enable all employees to play a part. The TEAM approach to a change initiative involving functional planning is a significant motivator. Considerable pre- planning needs to precede the detailed development of organisational change initiatives. Beer and Nohria’s (2000) findings that organisational change was rarely successful were corroborated by examining the experiences of organisations in the UK. Argyris and Schon (1996) held the opinion that organisations found it hard to change because they built in special systems and defences that prevented them from learning and questioning their basic beliefs and assumptions. McGreevy (2009) found that empirical evidence seems to indicate that where the circumstances are right change can work provided the necessary conditions are met, namely:

• objectives of the change process aligned with organisational objectives; • commitment from the top of the organisation to ensure that resources are available to

manage the change effectively; • commutations – explaining why the change is necessary; • participation; • applied project management; • taking a measured approach to the roll out of the change programme; • progress monitoring of results using metrics such as the balanced scorecard.

Pre-planning a culture change programme

CEOs need to ensure that the values and energy of the organisation can cope with a major change initiative. It requires a committed attitude to stand a realistic chance of changing an organisation’s culture. Mintzberg (1994) stresses the importance of managers engaging with people and leading them on a journey, seeing to it that everyone has a part to play. This results in a build-up of enthusiasm, which leads to effective team working.

Preparing for change will lead to a greater probability of success. There is resistance to change in organisations, brought about largely by the fear of the unknown. Handled cor- rectly, using known and tested change management techniques, change can be brought about successfully, achieving set goals and objectives and to budget. A compelling case needs to be established as a key part of the project definition, as the more people agree at the outset that the objectives of a change initiative are necessary, the more they are likely to support any change. The outcome, impact and benefits should also be defined, taking care not to over-emphasise the process of change over the impact on those involved. Any organisa- tion operating in today’s uncertain economic climate needs to know how to manage change in order to survive. It needs to react quickly to the global revolution, while at a local and national level keeping up with new technology and competition. This viewpoint provides these organisations with a conscious approach to getting ready for change, which is likely to lead to a greater probability of success (Edmonds, 2011).

Strategic approaches of Theory Y and Theory WB organisations

Adopting the Theory WB approach requires management to rethink their strategic approaches. Table 13.5 provides an indication of the nature of these challenges.

286 Strategic innovation in changing times

Table 13.5 Approaches of Theory Y and Theory WB organisations

Activity Theory Y Theory WB

Strategy Set by top management Set by self-managing employees in each working unit. Major changes of direction cleared with top management

Supply logistics Suppliers selected on the basis of least cost and/or reliability

Suppliers chosen on the basis of fit for purpose and personal relationships

Purchasing Centralised. Controlled by hierarchical management structure that exercise tight budgetary control

Devolved to working units who exercise their own budgetary control

Innovation Responsibility of internal employees, e.g. new product/service development. Produce and sell approach. External activity such as open innovation and acquisition initiatives

Usually driven by internal recognition of unit and customer needs. Able to innovate internal procedures and tasks. Fit for purpose and provides perceived value to internal or external customers

Planning Centralised, and target driven. Tendency of being set in stone so danger if contextual conditions change

Driven by what is needed at work unit level. Sense and respond approach

Ethics Set by top management but not always communicated well to the rank and file. Top management do not always abide by the ethical company codes when tempted to chase corporate or personal short- term advantage

Ethical codes well known by employees and accepted as vital to maintain integrity

Open communication results in each work unit being the keeper of the collective conscience

CSR Ranges from genuine intent to increase well-being to cynical marketing initiatives

Working units agree on the right thing to do

Change management

Centralised responsibility. Often conservative approach and skin deep. Danger of ‘three-way stretch’

Occurs organically as unit employees strive to ‘move with the times’

Importance of gaining and retaining trust

Trust is of paramount importance to individuals and groups (Castaldo et al., 2010). It implies a high level of positive regard of leaders for their employees. It can take a long time to build up and can be lost in the blinking of an eye if a business leader is clumsy or inconsiderate in dealing with people. It demands a just society and a close attention to vitally important values such as integrity, competence, consistency, loyalty and openness. Integrity concerns a leader’s honesty and truthfulness. Competence refers to their theoretical and practical ability (or know-how). Consistency relates to a leader’s reliability – his/her track record in dealing with challenging situations. Loyalty relates to the leader’s determination to support his/her charges through thick and thin. Openness relates to transparent communication behaviour and a determination to tell employees how it is.

ICT has in many organisations introduced a remote leadership practice. Robert et al. (2009) and Zeffane et al. (2011) found that the use of ICT increased the perceived risk of team failure and therefore reduced the likelihood that team members would engage in future

Organisational renewal for strategic innovation 287

trusting behaviours. Regular and reliable face-to-face communication is a vital determinant of lasting levels of trust.

In building a just culture that generates a high level of employee performance and loy- alty one success factor is committed and sustained courageous leadership. Another is a lasting commitment to employee well-being. In a sense, these success factors represent the ‘technique’ of building trust and if they fail or are found wanting a Theory WB organisa- tion will waste away (rust) and will be in danger of reverting to market fundamentalism (Theory X).

Summary

The purpose of this chapter was to present topics of vital concern to all those involved in the business activities that are intended to generate successful activity in today’s global busi- ness environment. There is a mounting degree of evidence that indicates that the conduct of business needs to be rethought and reformed in the light of pressing business social respon- sibility and environmental issues. Business activity is necessary to support the well-being of everyone in society. What is needed is a more humane approach to business that will ener- gise employees to become productive innovators. This, of course, requires top executives to cultivate organisational cultures and climates that encourage innovation. The leadership of organisations needs to change from styles that can be termed ‘pride and prejudice’ (Theory X) to styles that exhibit ‘sense and sensibility’ (Theory Z and Theory WB). Many might initially dismiss this as a blueprint for making a disaster and is a MAD proposition. This text counters by arguing that business is in need of a strategic approach to innovation that in many cases will require organisations to change the way they operate and adopt a holistic TEAM approach. This too may at first be seen as MAD. On reflection, it is hoped that this will be accepted as ethically sound and will make a difference to the generation and sharing of wealth in society.

Discussion questions 1 What are the dangers of the market fundamentalist hierarchical power-command

approach to business? 2 Can change be managed or do management approaches need to be changed? Can organi-

sations successfully conduct change programmes from an internal perspective? Address these questions and prepare a brief report for an imaginary corporate CEO.

3 Increasingly business commentators in the media hold the view that the tendency for many corporations to rigidly pursue a market fundamentalist approach will result in the collapse of their organisations. Why do you think that they hold this view?

4 Why is the concept of well-being receiving increased interest amongst responsible capi- talist corporations?

5 What are the dangers illustrated in the ‘three-way stretch model’? 6 Why is pre-planning an important stage in organisational change initiatives? What are

the main understandings that need to be addressed? 7 Why is it important for CEOs to gain and retain the trust of their employees? 8 Why might running MNCs with a responsible SME approach hold considerable

potential?

288 Strategic innovation in changing times

Case exercise

Semco: a maverick approach to management

Semco is a Brazilian company that has gained attention owing to its radical form of industrial democracy. However, this was not always so. The company was founded in 1952 by Antonio Semler and specialised in the manufacturing of marine pumps. His son, Ricardo, assumed control of the company in 1980. Horrified at the hierarchical and patriarchical style of his father Ricardo Semler was determined to apply a totally different philosophy. His time at Harvard Business School had left him questioning conventional management wisdom. He was determined to put his trust in his employees not subject them to a power-command way of managing. His first major action on succeeding his father was to dismiss 75 per cent of the senior executives to clear the ground to introduce his vision of a democratic organisation.

Ricardo Semler established a company culture that is based on three fundamental values:

1 Democracy 2 Profit sharing 3 Information transparency.

He felt that people should enjoy going to work and to be free to express their talents. Ricardo Semler was convinced that it was a waste for employees to find themselves trapped in a boring workplace life that fostered mediocrity. Semco is a company that has no official cor- porate structure and not even a fixed CEO – this job rotates. Common sense team working is a key strength and has been refined over the years by the creation of a workplace culture that provides a climate of well-being for all its people. The guiding hand of Ricardo Semler is reflected in his central philosophy that stresses that every company should trust its future to its employees and they should be treated as responsible adults and not as children who are told what to do.

Ricardo Semler firmly believes that if people are treated with respect they will give of their best. Accordingly, rule books were torn up and employees released to form a working environment where they are self-governed and self-managed. Semco’s management structure has been reduced from 12 layers to just three and all employees have one of just four titles:

• Counsellors – who coordinate general policy and direction. • Partners – who run business units. • Co-ordinators – the first level of management. • Associates – everyone else.

Support staff were reduced by 75 per cent. Employees are expected to meet and greet their own guests and be their own secretaries. Though an enjoyable place to work, Semco does not offer anyone a job for life. Every six months, all Semco managers are evaluated by the people they manage. Before they are hired every manager is interviewed by the people with whom they will be working. Company offices are open plan and barriers to communication removed. This transparency even extends to a full disclosure to all employees of the compa- ny’s finances. Staff are even offered training courses so that they can understand the figures!

Ricardo Semler abolished formal business plans and forward planning diversifying the business through a looser ‘feel’ approach. The SBUs, which are termed manufacturing cells, are self-governing and defined by product, market or machine, but always include people

Organisational renewal for strategic innovation 289

responsible for sales, marketing and production. SBU committees meet regularly with senior management to discuss all work-related issues and policies. Semco has replaced the original pyramid hierarchy with a flat organisational network that consists of three circles. The cen- tral circle has six counsellors, the middle circle contains the partners and the third circle the coordinators and associates.

In a small business unit, everyone knows what everyone else is doing – and how they contribute. Employees are encouraged to move on to another job within Semco every two to five years. It stops them becoming trapped in a job and encourages the development of new skills. Every two years or so employees are encouraged to take two months’ leave to learn new skills. White collar staff are expected to work wherever they think fit and blue collar factory workers set their own hours of work in consultation with their immediate work group. Employees are free to question company decisions and are permitted to strike without any adverse repercussions.

Remuneration is set by employees as they decide how to manage funds. The percentage of company profits to be distributed to the workforce is negotiated by them and they are empowered to decide how best to apportion the money in their business cell work commit- tees. At Semco, each division has a separate profit sharing programme through which, twice a year, 23 per cent of the after-tax profit on each division income statement is given to three employees elected by the workers of that division. Usually the money is divided equally amongst cell workers.

Employees are also encouraged to set up their own businesses, often with the company’s help, and supply Semco as well as other companies as part of the well-being philosophy of the company.

The manufacturing company has diversified and prospered under Ricardo Semler and has grown into a group containing several companies, from real estate to industrial equipment, to document management and to consultancy, to education and to tourism. Semco’s profitable transformation from a Theory X style to a Theory WB democratic culture proves, according to Ricardo Semler, that ‘worker involvement doesn’t mean that bosses lose power’, but that an organisation rids itself of ‘the blind irrational authoritarianism that diminishes productiv- ity’. Annual employee turnover is only 1 per cent.

For years Ricardo Semler had harboured a dream of founding a school based on his demo- cratic philosophy and principles. Bothered by the rigidity of conventional school teaching he established his Lumiar Schools for children up to 14 years of age (http://lumiar.org.br/ index.php/a-escola/?lang=en); the schools are designed to promote democratic education that encourages freedom and self-knowledge.

Sources: Semler (1994a, 1994b, 2003).

Questions

1 ‘The key to management is to get rid of managers’ (Ricardo Semler). Discuss. 2 Ricardo Semler has abandoned business plans, future projections as well as job descrip-

tions, permanent positions, and many of the top executive approvals formerly needed to accomplish tasks. So how does his company succeed?

3 Why do both Brian Joffee of Bidvest (see case study in Chapter 11) and Ricardo Semler place such a strong emphasis on running their businesses as if they were a collection of SMEs?

290 Strategic innovation in changing times

YouTubes

‘Innovative School: Lumiar-Brazil’, https://www.youtube.com/watch?v=XzuhoTDPoBU.

References Argyris, C. and Schön, D. A. (1996) ‘Organisational learning II: Theory’, Asia Pacific Journal of

Human Resources, Vol. 36, Issue 1, pp 107–9. Barczak, G., Lassk, F. and Mulki, J. (2010) ‘Antecedents of creativity: An examination of team emo-

tional intelligence, team trust and collaborative culture’, Creativity and Innovation Management, Vol. 19, Issue 4, pp. 332–45.

Beer, M. and Nohria, N. (2000) ‘Cracking the code of change’, Harvard Business Review, May–June, pp. 133–41.

Capelli, P., Singh, H., Singh, J. and Useem, M. (2010) ‘The India way: Lessons for the US’, Academy of Management Perspectives, May, Vol. 24, Issue 2, pp. 6–24.

Castaldo, S., Premazzi, K. and Zerbini, F. (2010) ‘The meaning(s) of trust, a content analysis of the diverse conceptualizations of trust in scholarly research in business relationships’, Journal of Business Ethics, November, Vol. 96, Issue 4, pp. 657–68.

Edmonds, J. (2011) ‘Managing successful change’, Industrial and Commercial Training, Vol. 43, Issue 6, pp. 349–53.

Fields, D. (2007) ‘Governance in permanent whitewater: The board’s role in planning and implement- ing organisational change’, Corporate Governance: An International Review, Vol. 14, Issue 2, pp. 334–44.

Hamel, G. (2011) ‘First, let’s fire all the managers’, Harvard Business Review, December, Vol. 89, Issue 12, pp. 48–60.

Jeffrey, K., Abdaliah, S. and Michaelson, J. (2014) ‘Wellbeing at work’, New Economics, Foundation, http://neweconomics.org/wellbeing-at-work/?lost=true&_sf_s=+publications+++well+being+at+w ork.

Kokkinidis, G. (2012) ‘In search of workplace democracy’, International Journal of Social Policy, Vol. 32, Issue 3/4, pp. 233–356.

Krainz, K. K. (2015) ‘Enhancing wellbeing of employees through corporate social responsibility con- text’, Megatrend Review, Vol. 12, Issue 2, pp. 137–54.

McGreevy, M. (2009) ‘Why change works sometimes’, Industrial and Commercial Training, Vol. 41, Issue 6, pp. 305–13.

Mintzberg, H. (1994) ‘The fall and rise of strategic planning’, Harvard Business School Review, January–February, pp. 107–14.

Robert, L. F., Jr., Zolin, R. and Hartman, J. L. (2009) ‘The central role of communication in developing trust and its effects on employees involvement’, Journal of Business Communication, July, Vol. 46, Issue 3, pp. 287–310.

Schulte, P. and Vainio, H. (2010) ‘Wellbeing at work: Overview and perspective’, Scandinavian Journal of Work, Environment and Health, Vol. 36, Issue 5, pp. 422–9.

Semler, R. (1994a) ‘Why my former employees still work for me’, Harvard Business Review, January– February, https://hbr.org/1994/01/why-my-former-employees-still-work-for-me.

Semler, R. (1994b) Maverick, New York, NY, Random House. Semler, R. (2003) The Seven Day Weekend, London, Arrow Books.

Organisational renewal for strategic innovation 291

Semler, R., Dimenstein, G. and Neilsen, E. H. (2004) No School Classroom, Brazil, Papirus Editora. Zeffane, R., Tipu, S. A. and Ryan, J. C. (2011) ‘Communication, commitment and trust: Exploring the

traid’, International Journal of Business & Management, June, Vol. 6, Issue 6, pp. 77–87.

Selected YouTubes ‘What Is Change Management?’, https://www.youtube.com/results?search_query=What+is+ change.

‘Ways to Build Trust in the Workplace’, https://www.youtube.com/watch?v=IjisUrs4ws8.

‘Organizational Identity and Culture in the Context of Managed Change: Transformation in the Carlsberg Group 2009–2013’, https://www.youtube.com/watch?v=8uw13q5yFHQ.

‘McGregor’s Theory X and Y’, https://www.youtube.com/watch?v=NK8-LhqF4N0.

‘Theory Z’, https://www.youtube.com/watch?v=-ijrHlXE9JU.

Appendix 13.1: organisational creativity audit interpretation

Organisational Creativity Factor Analysis (OCFA): context-related factors

Statement Agree strongly

Agree Disagree Disagree strongly

1 We are supply oriented 7 We are service oriented 13 We are a domestic organisation and do not look for

business abroad 18 We are seriously influenced by contextual factors

OCFA: management-related factors

Statement Agree strongly

Agree Disagree Disagree strongly

2 We have a working definition of management that is communicated to all our people

8 We organise tailor-made training programmes for our people

14 We believe it best to run our organisation on hard systems thinking

19 We believe that our customers are more important than our organisational culture

25 We operate an open management style

292 Strategic innovation in changing times

OCFA: individual empowerment factors

Statement Agree strongly

Agree Disagree Disagree strongly

3 We are aware of business creativity 9 We understand what business creativity is all about 15 We are prepared to evaluate new ways of

management thinking 20 We encourage and provide space for creative

problem-solving activity 26 We are running or have recently run a major

organisational change programme

OCFA: creativity-related factors

OCFA: organisational empowerment factors

Statement Agree strongly

Agree Disagree Disagree strongly

4 We encourage individual creativity 10 We practise open communication 16 We try to provide secure employment for our people 21 We cultivate a trust culture 25 We spend as little as we can on the work environment

OCFA: group empowerment factors

Statement Agree strongly

Agree Disagree Disagree strongly

5 We support group working 11 We provide suitable training for groups 17 We encourage and provide time for business

creativity group work 22 We train people to facilitate groups 28 We reward individual and group achievements

Statement Agree strongly

Agree Disagree Disagree strongly

6 We value our people as we do our family friends 12 We try to make the organisational culture serve the people

rather than make the people serve the organisation 23 We are a Learning Organisation 29 We tolerate innovation mistakes 25 We expect loyalty upwards and downwards

14 Reflections

Whatever you do or dream you can do – begin it. Boldness has genius and power and magic in it.

(J. W. Goethe)

Talking isn’t doing. It is a kind of good deed to say well; and yet words are not deeds. (Shakespeare, Henry VIII)

Learning objectives

This chapter explores:

1 Noteworthy contextual business trends in Africa, Asia, Europe and South America. 2 Key leadership trends. 3 Key organisational trends. 4 Growing importance of creativity and innovation. 5 The pursuit of happiness. 6 The need for business to face up to the impact of wealth creation activity on the environ-

ment and society. 7 The importance of revisiting acceptable ethical and moral attitudes in the business

practice.

Introduction

This is the closing chapter of this text and it is hoped that it challenges readers to think through the key points raised on the journey though Chapters 1 to 13. (See Figure 14.1.)

Context

Business trends

Chapter 1 discussed the array of contextual changes that are impacting on the business world. These have coalesced to produce a challenging climate for organisations both large and small. The world is now perceived as a ‘global village’. The four continents

Figure 14.1 Overview of reflections.

Reflections 295

that are featured in this text (Africa, Asia, Europe and South America) are all seeking ways to boost their national economies. As the developed economies face increasing competition from the major under-developed countries (Brazil, Russia, India, China) and their satellites the business world is faced with the impact of the rate of technological advance. The digital megatrend has brought together the world as one big community boosted by the powerful globalisation megatrend (Kekic, 2012) that is characterised by highly competitive markets.

As the pace of business development accelerates many businesses are experiencing buy- ers’ markets in which the supply of goods and services exceed the demand. To survive and prosper companies increasingly have to turn to innovation as a major driver of growth with the same urgency that attached to the mergers and acquisitions in the 1990s.

Business activity occurs in a world that is rapidly running out of non-renewable resources. An example is carbon-based, organically derived fuel. The original organic material, with the aid of heat and pressure, becomes a fuel such as oil or gas. Earth and metal ores, fossil fuels (coal, petroleum, natural gas) and groundwater in certain aquifers are all considered non-renewable resources, though individual elements are almost always conserved. In contrast, resources such as timber (when harvested sustainably) and wind (used to power energy conversion systems) are considered renewable resources largely because their local- ised replenishment can occur within time frames meaningful to humans. Land and water are becoming short and both are becoming more polluted. Another increasingly important exam- ple is rare earth, which is used in smartphones, hybrid vehicles, missile systems, medical devices and other electronic products. In future society will have to function in a closed-loop or circular economy.

Added to all these trends are the complex darkening clouds of climate change and pollu- tion that have been addressed by Naomi Klein (2014) in her important book This Changes Everything. She blends together the science, psychology, geopolitics, economics, ethics and activism that encompass these dangerous trends.

Figure 14.2 Circular economy.

296 Strategic innovation in changing times

African trends

Instant availability

Despite being the least developed of the four continents, global communication and foreign investment is fuelling consumer demand in Africa. Upwardly mobile Africans regard the ready availability of goods and services not available to the masses to be a status symbol.

SureSlim: chocolate flyer encourages weight-loss

In July 2015, South Africa-based weight-loss programme SureSlim produced a flyer made out of 100 per cent pure milk chocolate to attract new customers. The chocolate flyer was distributed across the country, offering people 20 per cent off the weight-loss programme if they brought the uneaten flyer to a SureSlim store. Another chance was given to those who gave into temptation, by giving customers 1 per cent discount for every block of chocolate they hadn’t eaten.

Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).

Kenyan government and Grundfos

ATMs provide clean water on tap. June 2015 saw Danish water engineering com- pany Grundfos and the Kenyan government collaborate to launch ATM-style water dispensers in Nairobi. The ATMs require a smart card system to provide water to slum residents and are designed to provide an alternative to traditional sources of water. Users insert a smart card (which can be topped up at kiosks or via cellphone), and then specify how much water they’d like, before it’s dispensed from a pipe below the ATM.

Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).

Like Kenya’s ATM water dispensers, investing in clever tools that allow users to flaunt their new service provider is vital. Other beneficial strategies include instilling ‘barriers to entry’ that aspiring consumers will covet, like ‘smartphone over feature phone’ compatibility, or pre-required user skill-sets/know-how, such as WeChat familiarity.

Responsible consumption

Many Africans have long realised that emulating models of growth hijacked from the West may not be the answer. Now they are looking for new models of growth – with a renewed confidence in themselves and a new sense of urgency. Most Africans no longer rely on gov- ernments to facilitate a better country. Indeed, 58 per cent of Africans believe that corruption on the continent is getting worse (Transparency International/Afrobarometer, 2015). Instead, they are looking to brands and entrepreneurs to support them. Increasingly aware of the negative and damaging impacts of ‘third world consumerism’, the black market and a lack of individual discipline, conscientious individuals will welcome brands that use responsible consumption to encourage or even enforce good behaviour and improved well-being.

Reflections 297

Transaction convenience

As disposable incomes grow for many Africans, the financial services infrastructure gap is becoming even more apparent. These consumers are realising that they are being held back by their inability to transact easily with brands and businesses around the world and online. This is creating a heightened demand for newer and more innovative forms of payment. Innovative companies won’t imitate outdated models or wait for the powers that be to lead the way. Instead, they will implement convenience payment strategies of their own and in the process will attract loyal, happy and (most importantly) paying customers.

Vodacom, MTN, Cell C and Telkom South Africa

Telecoms networks allow donations of cellphone data for protesting students

A website enabling members of the public to pay for bundles of cellphone data on behalf of South African students involved in a protest was set up in October 2015. Donations covering the cost of 100 MB data bundles from various operators could be made through the website, using online banking or via Bitcoin, with prices starting at ZAR 19 (around US$1.40). An initiative to support students involved in #FeesMustFall – a movement fighting hikes in university fees in South Africa – students could also use the website to request a donation.

Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).

Africa is a late adopter in the banking sector. Ghana, for example, only introduced deposit ATMs in 2013. However, this can be advantageous. In the same way that Africa leapfrogged the laptop and went straight to the cellphone there are many opportunities to do the same with outdated transaction methods.

Gender equality

Whilst women in the EU and beyond continue to fight for their rights Africans are fast closing – if not overcoming – the West’s gender gap. Until recently, acknowledging women in Africa remained an institutional affair. Now, businesses across the continent are actively responding to the call to bring women to the forefront of society.

Gender reforms will mark the convergence of three key growth areas of African female empowerment:

1 Gender equality through ongoing training and skills building initiatives. 2 Expansion of women employees in the traditional male-dominated industries. 3 Increase in the availability of innovative new goods and services for women.

298 Strategic innovation in changing times

Pink Taxi: female only taxi-service launches in Egypt

September 2015 saw the arrival of Pink Taxi in Egypt. The taxi service caters exclu- sively for female passengers and is run solely by female drivers. The company’s founder states that the service caters to the need for safer transportation for women in the country. Cabs are available to order in advance via phone, online or using the Pink Taxi mobile app. Prices for a ride start from EG£35.

Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).

Improved online services

With rising connectivity and adoption of smartphones, Africa’s disorganised consumer land- scape will be developed to provide a systematic roadmap to assist consumers to buy online and offline. Africans are used to the instant information that the Internet provides, however, the informal economy and institutional services have largely stayed offline, lagging behind in the adoption of more automated, instantly accessible, informative and democratic services. The result is an increased chance of poor service quality, lack of safety guarantees and little accountability.

Kaymu: online retailer’s Lagos hub facilitates transactions between local buyers and offline sellers

October 2015 saw Nigerian ecommerce platform Kaymu open the Kaymu Village: a physical space in Lagos bringing small businesses and local entrepreneurs together with buyers. The space allows customers who cannot complete e-payments to make purchases, and will provide support, resources and marketing to sellers. Nigeria has around 67 million Internet users among a population of 180 million.

Source: http://trendwatching.com/trends/5-trends-for-2016-africa/ (accessed 10 July 2016).

Asian trends

Network connections

Asia is the world’s social capital and socially inclined consumers will connect with strangers and individuals in their extended network for mutual benefits, to get things done and create shared value. The idea of tapping into personal connections to achieve a goal is age-old in Asia and connectivity is allowing consumers to reach even more people, despite distance and differences, to maximise resources and create shared value.

Additionally, the prevalence of social media means attitudes towards connecting with strangers are now more relaxed. The growth of the sharing economy and the transparency culture that the Internet allows (from peer reviews to verified information) means many con- sumers now have fewer reservations when engaging in transactions with strangers.

Reflections 299

Airfrov: platform connects travellers to shoppers

Airfrov is a Singapore-based platform that pairs frequent travellers with luggage space to spare with shoppers who want to buy specific products from overseas but don’t have the luxury to travel for it. Through Airfrov, shoppers can enjoy their favourite products more frequently, and without the exorbitant shipping fees, while buyers get to make a little profit in exchange for filling the empty spaces in their suitcase.

For Singapore’s SG50 Independence Day celebrations in August 2015, Airfrov launched a promotion allowing overseas Singaporeans in selected cities in the UK, China, Taiwan, Hong Kong and Japan to request traditional products unavailable in their current residences.

Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).

Corporate social responsibility

The Sharing Economy meets the future of CSR in Asia. In a world of transparent informa- tion flow, being responsible (both socially and environmentally) is now a hygiene factor for brands and businesses. But what’s next for CSR in Asia? As the relationship between MNCs and consumers becomes increasingly democratised, boundaries will continue to blur. MNCs should consider utilising idle capacity and embedding value into resources that would usu- ally get wasted – all for the good of society. Showing ‘human’ values via a social media presence and a brand personality is no longer enough. Consumers demand real action from companies to show that they really care. Meanwhile, the sharing economy has re-shaped con- sumer expectations around access to resources. Now this expectation is being transferred to companies. If consumers can share resources and create shared value, why can’t companies do so too?

K Raheja Corp: mall-generated electricity provides rural villages with light

Announced in April 2015, The Escalator Project is an initiative from K Raheja Corp providing rural homes with electric lights. The Indian real estate group provided 50 homes with lamps using rechargeable batteries which could be charged via dynamos in escalators at the K Raheja Corp-owned InOrbit Mall. Charged batteries are swapped each week, in order to ensure a consistent supply of light.

Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).

Heritage appeal

Preserving tradition is very popular in Asia. On the one hand, consumers are concerned that the wave of globalisation and Westernisation that is sweeping across Asia will erode traditional values and cultural heritage. They increasingly crave authenticity and a sense of

300 Strategic innovation in changing times

identity, desiring to stand out in a world where standard company offerings are marketed from Shanghai to Surabaya. On the other hand, in an era where almost anything can be deliv- ered at the push of a button, consumers do not want the hassle and inconvenience that often comes with preserving tradition. Mature consumers are also more open towards new and liberal ideas that push the boundaries of tradition.

Smart companies are addressing this gap by reinventing tradition to remain relevant in today’s lifestyle – by adding layers of convenience, embedding it seamlessly into modern living, making it fun, and more.

Eveready: battery brand revives the ancient art of illuminated story-telling

Eveready’s Book of Play is inspired by Wayang Kulit, the Malaysian tradition of using light and shadow to tell stories. Bringing the stories to life when illuminated with a flashlight, the battery brand’s bedtime story book was designed to bring families closer together. Around 30,000 copies of The Eveready Book of Play were distributed to 1,000 stores across Malaysia.

Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).

Responsible business

Some issues, such as smoking and littering, are so deep-seated in Asian societies that consum- ers have long since accepted them as the norm. Now, consumers are looking to companies to stand for something other than only making money, and to take a more active role in solving society’s issues. Businesses are increasingly turning to shock methods to jar consumers into action. Many social and environmental problems are complex, and so deeply ingrained that people have long since given up trying to solve them. Also, jaded consumers are bombarded by a tide of messages and calls-to-action.

Thai Health Promotion Board: anti-tobacco posters printed with ink made from smokers’ lungs

In 2015 the Thai Health Promotion Foundation unveiled ‘The Message from the Lungs’: an anti-tobacco campaign featuring posters printed with ink made from smokers’ donated lungs. The Foundation worked with Chulalongkorn University’s Faculty of Medicine to extract tar from smokers’ lungs and turn it into ink. Posters were printed with the result- ing ink and displayed in public spaces to encourage smokers to quit. As a result of the campaign participation in smoking cessation programmes increased by 500 per cent.

Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).

Reflections 301

The informal economy meets smartphone culture

The informal economy – providing informal, decentralised and cash-based services – has always thrived in Asia. Although consumers are now used to the instant information that the Internet provides, the informal economy has mostly stayed offline. However, with growing connectivity, expectations as to what is available online are always broadening. Consumers are now demanding the same ease of information when it comes to informal service provid- ers. An important consequence of the informal economy’s decentralised nature is a lack of quality and safety guarantees. New connected platforms that organise and manage these informal service providers bring with them the culture of reviews, ratings and transparency. Consumers are embracing this new assurance with open arms.

Go-Jek: on-demand motorbike taxi app adds beauty, cleaning and moving services

Go-Jek are unlicensed motorcycle taxis that are a popular mode of public transport in Indonesia. October 2015 Go-Jek added new in-app services. Go-Glam offers on-demand access to beauticians, Go-Box offers house and office moving services, and Go-Clean offers home and office cleaning. Go-Jek transformed the informal marketplace when it launched in January 2015; the service operates in Jakarta with over 2,500 drivers.

Source: http://trendwatching.com/trends/5-asian-trends-for-2016/ (accessed 15 August 2016).

European trends

The euro: a means not an end in itself

The Eurozone is in crisis and is suffering from a long period of stagnation. Prosperity in terms of GDP (adjusted for inflation) was only marginally higher in 2015 than it was in 2007 and many countries have been depressed for years (Eurostat, Code: tsdec100, accessed 17 August 2016). Employment prospects are bleak in the Eurozone with unemployment over 10 per cent since 2009. The creators of the single currency failed to realise the implications that this would have on the Europe’s economic and political diversity and national aspirations. Although the founders of the euro had great expectations that it would substantially improve the national fortunes of its members essentially it was a political initiative designed over time to build a united European state.

The decision of the UK electorate to leave the EU has caused a disturbance of earthquake proportions leaving the members of the EU with a massive challenge. The bell is tolling and politicians will need to revisit immediate post-war dreams of forging a united economic and political Europe to see whether it is worth the cost. Brexit has lit a democratic fuse that may lead to EU member states voting to abandoned the dream. The Eurozone was intended to bring greater well-being but is in reality just a means to an end. If well managed and backed up by sound business decisions, it can still bring greater prosperity for all but, if not, it will depress living standards (Stiglitz, 2016).

302 Strategic innovation in changing times

Connecting customers

The Connection Economy rewards value created by building relationships and creating connections, rather than building assets by industrialism. This means the most valuable com- panies will connect buyer to seller, or consumer to content. Regardless of their sector of activity, all European businesses have the chance to take advantage of this development. The Internet can play an essential part in accelerating growth, not just for selling products or services online, but also for finding raw materials and external providers at the best price. A social media presence is key to this. Over 900 million people use social media today. Companies and brands have a great opportunity to reach them in innovative ways.

Targeting Millennials

The largest group of individuals, according to the Census Bureau is people in their 20s (80 million). This group, often categorised as Millennials, now represents the largest cus- tomer and employee segment. They are also soon to be the largest business owner segment. From 1947 to 2010, Baby Boomers represented the largest segment of the population.

Importance of SMEs

SMEs are seen as important for the region’s growth and development.

Need for product and service innovation

Basic commodity products will continue to see margins erode. Attention to developing a corporate culture of customer service and strategic innovation management to meet customer expectations will enable companies to grow and sustain their profitability.

Waitrose targets expats

Waitrose, the premium UK supermarket owned by the John Lewis Partnership, has struck a deal to offer 2,000 own-label products through the online retailer British Corner Shop to more than 138 countries. The decision to sell overseas will allow the company to target expats and faster growing countries, particularly in the developing world.

Source: The Independent (2016) [email protected], 5 July.

Call for strategic innovation

Basic commodity products will continue to see margins erode. Strategic attention to devel- oping a corporate culture of customer service and strategic innovation management to meet customer expectations will enable companies to grow and sustain their profitability.

Reflections 303

South American trends

Immigration and integration

As the complex refugee crisis playing out in Europe impacts South America, immigrants have been welcomed, adding to the influx of those who have applied for asylum in recent years. As a result, the region has become even more diverse, increasing tolerance for diversity. In August 2015, for example, Mexican citizens started a petition at Change.org to pressure the Mexican government to give asylum to refugees from Syria. Integration is the key word for the region.

Helping Hand: Brazilian app provides information for new arrivals

In May 2015, a group of students created Helping Hand, an app that tracks institutions around Brazil that offer support to refugees and immigrants. The app provides informa- tion on how to find and engage with key institutions such as schools, NGOs, charities and government agencies.

Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).

Urbanisation

Urbanisation is accelerating in South America faster than anywhere else in the world. According to the UN, 90 per cent of Brazil and the rest of the Southern Cone’s (Argentina, Chile and Uruguay) population will live in cities by 2020. By 2050, 89 per cent of all South Americans will be urban-dwellers. This will trigger growth opportunities in the region’s cities. It will also place more stress on infrastructure, including roads and other forms of transport. As a result many are moving away from using their cars. The percentage of drivers who have cars and use their vehicles every day or almost every day in São Paulo has fallen from 56 per cent in 2014 to 45 per cent in 2015.

Dafiti and Biko: app rewards cyclists with virtual currency

In November 2015, the ecommerce platform Dafiti partnered with Colombian appli- cation Biko, a platform that aims to improve mobility problems and pollution by encouraging the use of bicycles. The tool provides a map showing bike paths, parking lots, and obstacles on the roads, among other information that may be of interest to bikers. When users of the app ride 1 kilometre they earn a ‘Biko’ (the app’s virtual cur- rency), which they can spend with partner retailers, including Dafiti.

Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).

304 Strategic innovation in changing times

Marketing to the time poor

South America’s professional, urban middle classes are experiencing higher incomes, longer working hours and an explosion in the consumer choices available to them. One result of the convergence of these three powerful forces is that consumers across the region have never felt more time-pressed. Companies that make it a priority to be there as and when needed, offer services at the touch of a button and reduce waiting times to zero (or as close as humanly possible!) will be rewarded.

Musiglota: app teaches English through song

April 2015 saw the launch of Musiglota, a Chilean app that teaches English through song. Available for smartphones and tablets, Musiglota includes an interactive music player that shows song lyrics and translations in real time. To train ‘listening’ and ‘speaking’, the app also has the option to ‘read’ each sentence of the music. The soft- ware also generates a ‘micro class’ for each played song, with exercises and interactive activities, which can be played individually or taught by a teacher in a classroom.

Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).

Co-creating customer-perceived value

South Americans are big users of social media and the Internet and have demonstrated a keen interest in joining with companies in the development of new products and services.

São Paulo’s supermarkets: discounts offered to customers who bring their own shopping bags

June 2015 saw supermarkets across São Paulo offer customers the option of receiving discounted groceries in exchange for using their own shopping bags. Customers who chose to receive discounted goods had the option of receiving BRL0.03 (US$0.01) for every five products purchased, or a discount for every BRL30 (US$9.50) spent.

Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).

Digital opportunities for SMEs

According to the International Labour Organisation (ILO), micro and small businesses are the engine of job creation in South America. There has been a huge growth in micro and small businesses. People who were once employees of big companies started their own busi- nesses, and many entered the informal economy. Careful attention to web design will make these companies easy to find on the Internet.

Reflections 305

Lupe: Argentinian app connects beauty consultants to customers

Launched in Argentina in October 2015, Lupe is a free app that lets consumers find and engage with local hairdressers and beauticians, select services, book appointments at home or in salons and pay for services.

Natura: brand partnership helps consultants get in touch with customers

Brazil-based cosmetics company Natura equipped its 1.3 million direct sales consult- ants with a chip from Claro Telecom and mobile payment machines from e-payment service Pag Seguro. The partnership gave Natura consultants free data to interact with potential customers via the Natura app, and allowed consultants to accept payments with debit and credit cards.

Source: http://trendwatching.com/trends/5-latin-trends-for-2016/ (accessed 28 August 2016).

Key principles

Management and organisation

Most established businesses are inherently conservative and feel uncomfortable in times of discontinuous change. They try, especially MNCs, to manage the squalls of the business world. Soon they realise that a different management approach is required. Consultants are recruited by some to recommend a quick fix or an acceptable solution that eases their modus operandi. Short-term thinking that seeks to shore up poor performance is common and often results in crises that threaten their existence. ‘For the times they are a-changin’’ and it is time for boldness.

To raise new questions, new possibilities, to regard old problems from anew angle, requires creative imagination and marks real advance in science.

(Einstein)

Many CEOs of MNCs, whilst personally recognising the need to forge a new way of doing things, are constrained by the Western business paradigm requirement to generate and sus- tain a steady return for their shareholders. Only the brave step out and become focused on the understanding of the necessity to forge a new organisation. Old ways can die hard and it takes courage and determination for CEOs used to traditional management practice to take on the task of rebuilding their organisations to make them fit for purpose. As it becomes increasingly evident that new ways of organising business activity is necessary, wise com- panies will see and respond to the need to design new organisational models. Shared culture, designing a work environment that engages people, and constructing a new model of leader- ship and career development.

306 Strategic innovation in changing times

Prophesy becomes reality 25 years later, but who is listening?

We are leaving the age of organised organisations and moving into an era where the ability to understand, facilitate, and encourage processes of self-organisation has become a key competence.

(Morgan, 1993)

A studied view from the boardroom will reveal important response trends that require top management to deconstruct hierarchical business models and to construct models that reflect a determination to move away from top-down power command styles toward more demo- cratic styles that reflect the values of their own family and society.

Key trends

1 To fully accept that business activity is now carried out in a highly competitive global market.

2 To realise that the best way forward in crowded market places is by being determined to make a difference by paying serious attention to innovation.

3 The need to actively develop and sustain a shared transparent culture, designing a work environment that engages people to be creative and innovative, and constructing a new model of leadership and career development.

4 To value their employees and to build a culture that seeks to address their well-being. 5 A requirement to fully recognise the importance of the digital revolution and to fully

accept the necessity to converse with their customers via channels such as the Internet and social media.

6 The need to review their business strategies in the light of these trends and to give greater attention to the medium and longer-term horizons.

7 To accept their responsibilities to act morally and ethically in their relations with their own employees, suppliers, workers and to exercise corporate social responsibility and solidarity in the societies that they impact.

8 To adopt democratic, flatter networking structures that support the activities of networks of teams to generate and sustain innovation.

9 To consider the social impact of over centralising activities to gain cost economies and to exercise subsidiarity toward their customers. Banks, for example, should pay more attention to the financial needs of local businesses.

10 To exercise responsibility to the ways in which their activities impact on the environment.

Organisational culture

Theory WB model

The purpose of this text has been to present, by means of a model (Theory WB) the deter- minants of organisational culture which influence creativity and innovation. The literature reveals that a model based on the open systems theory can offer a holistic approach in describing organisational culture. The relationship between creativity, innovation and culture has been discussed in this context (Martins and Terblanche, 2003).

Reflections 307

Determinants of organisational culture

In the light of Theory WB, the determinants of organisational culture were identified. The determinants are strategy, structure, support mechanisms, transparent leadership and man- agement that encourage individual and group creativity and innovation within an open communication climate.

Leadership

Emergence of multiple layered leadership

The story of the last 50 years has essentially been about the individual. It began with discov- eries about what makes a good leader and was followed by the development of practices that helped leaders to learn effective leadership skills. However, in the last decade this model has become less effective owing to the complexities of the new business environment in which it is not possible for any one individual to define and solve problems. Leadership is becoming more distributed and will increasingly be as much about tapping into the leadership skills of those within organisations as it is about a single visionary, decision maker and communica- tor. This idea is not new as organisations’ project and SBU groups come to terms with what it means to be self-organising teams and will highlight the value of everyone stepping up to the role of leader. In addition, the idea of leading for the purpose of developing loyal and trusted relationships is going to be the focus of team building.

Key trends

1 Leadership is more than getting people to perform for the benefit of the bottom line by means of Theory X, or Theory Y approaches. It is about connecting with them and valu- ing their skills and talents by practising a Theory Z approach or better still being more concerned with their well-being, with a Theory WB approach.

2 Leaders are selected, recognised and evaluated for their ability to sincerely tap into the human experience and talent of the people they represent.

3 The intrinsic value of understanding others in order to establish meaningful relationships among team members, particularly those internal employees who may be physically distant.

4 Working effectively with people who are external to the organisation such as non-employee associates, suppliers, open sourcing contacts, customers, other key stake- holders and third parties.

5 Leaders need to be transparent and loyal to earn the trust of the people they work with and avoid any temptation to compromise individuals or work groups.

6 Today’s leaders must be aware of diversity issues and comfortable in working with indi- viduals no matter what their colour, culture, gender, nationality or race.

7 Organisations will need to develop multi-level leadership systems and delegate authority to business units and rank and file employees.

8 Senior leaders, for example board executives, will need to develop clear and open lines of communication.

9 There is a growing conviction that talented leaders learn their skills through direct on- the-job experience.

10 Training and development requirements should be influenced by consideration of what is needed in the workplace (some innovative organisations encourage individuals to request suitable training courses) rather than prescribed in standard boot-camp training packages by central human resource departments.

308 Strategic innovation in changing times

Creativity and innovation

Growing importance of creativity and innovation

The rapidity of ICTs and economic development raise a whole new set of challenges. Creativity is becoming the basis for successful professional activities, as it spurs innovation and ensures that problems are solved efficiently (Samašonok and Leškienė-Hussey, 2015). It is important to realise that creativity and innovation are different. Creativity refers to generat- ing new and novel ideas. Innovation refers to the application of an idea and, in many cases, is a collaborative enterprise.

Group creativity and self-management

The team has become the basic organisational unit of development and innovation work and an understanding of creativity at the collective level is crucial for long-term sustainability (Backström and Söderberg, 2016). This text takes a process perspective and understands group creativity as emerging from the interaction among group members. It is about the pos- sibility to enable the emergence of self-management, thereby increasing group creativity. In group creative problem-solving (GCPS) sessions ideation occurs freely and can be observed and used by other group members. A work process structured according to the GCPS model increases self-organisation as well as the creativity of the group.

The pursuit of happiness

As the Semco case exercise in the previous chapter has shown, employees can find happiness at work. Most want to work in organisations where people come first, yet most experience workplaces that depress. The work environment fails to inspire. Jobs can be repetitive, dull and make people feel like machines. Many are apprehensive of organisational politics and some in these unstable times fear for their jobs.

Progressive organisations realise the benefits that a happy workforce can bring to the con- duct of their businesses and some now employ Chief Happiness Officers. Unhappy workers are typically found in organisations where they have little opportunity to express themselves and exercise some degree of self-management. Happiness is excellent for business. A cheer- ful worker, Davies (2015) finds, is as much as 12 per cent more productive. What capitalism used to regard with suspicion – feeling, friendship, creativity, moral responsibility – have all now been co-opted for the purpose of maximising profits. What is not always apparent is top management’s realisation that happiness is an end in itself and not a means of power, wealth and status.

The facilitation of self-fulfilment is at the heart of the matter. Happiness is about individual well-being. It is about feeling valued and respected. It is about trust. It derives from the ethical practice of virtue as explored down the ages from Aristotle and Aquinas to Hegel and Marx. Happiness is about the contentment that comes from being treated well in the workplace. It stems from a corporate culture that respects all and fosters a team spirit. Perhaps it is use- fully summed up by the phrase, ‘do as you would be done by’. Cynics might argue that this demands taking a family approach to running businesses – something that only SMEs or pri- vately owned corporations can achieve. Good examples here are provided by Henry Stewart’s (2012) Happy Ltd. and Ricardo Semler’s (1994) Semco. The belief or prejudice that leads many to declare that this approach will never work in MNCs is countermanded by Ford with

Reflections 309

its Team Ford culture pioneered by Mulally (Hoffman, 2012) and Google’s commitment to spreading morale and empathy with its ‘jolly good fellow’ philosophy headed by the corpo- ration’s guru Chade-Meng Tan. The concept of well-being is essentially about a sustained attitude and intent to develop a supportive, transparent and loyal environment that reflects family rather than digital values. Aristotle called it politics. Shame that this noble philosophy has displayed the unacceptable face of capitalism in a large part of business life.

Practice

Revisiting the practices of wealth creators

All the chapters in this book have addressed key topics set in the framework of context, key principles, practice and action. This chapter urges wealth creators and governments to reas- sess their key principles in the light of the forces governing reality in the 2010s and beyond. As principles underpin responses to contextual change they should be revised and refined to meet the real needs of people. All communities in the wealth creation process, corporations, financial institutions and governments, should be working together to improve everybody’s well-being.

As businesses enter the last half of the decade the playing fields present major challenges, many of which have been apparent since the 1990s, to all participants. Political shifts, the pulse of rising nationalism and terrorism are evident in several countries. Top management will have to contend with a variety of issues that can no longer be paid lip-service and placed in the long grass. Some of the most pressing are briefly summarised below.

Economic system

The celebrated Cambridge economist Chang (2010) has exploded important myths that many policy makers consciously or unwittingly regard as truths such as:

• Free markets exist, are good for business and raise living standards everywhere. • Globalisation is making the world more prosperous. • Global companies need have no national roots. • Poor countries are more entrepreneurial than rich ones. • Higher paid managers produce better results. • The USA has the highest standard of living in the world. • Financial markets are rational (Cassidy, 2010).

Furthermore, he asserts that economists and politicians have become mesmerised by the spurious harmony of virtual mathematical models, and failed to see mounting instability in the real world and in particular were blind to the dangers of an unregulated financial system. In June 2016 the global economy was taken by surprise by the UK electorate’s decision to leave the EU.

As key influences on economic performance, banks, economists, financial experts and politicians have all been found wanting. Directing his fire at economists Chang writes that ‘Economics as has been practised in the last three decades, has been positively harmful to most people.’ He recognises the failings of centrally planned economies, and describes cap- italism as ‘the worst economic system except for all the others’. At the same time he is

310 Strategic innovation in changing times

confident that it can be reformed to prevent crises like the 2008 meltdown and the disturbing waves of the Brexit decision. Making markets more transparent is not enough. ‘If we are really serious about preventing another crisis like the 2008 meltdown,’ Chang writes, ‘we should simply ban complex financial instruments, unless they can be unambiguously shown to benefit society in the long run.’

As long as economic policies are heavily influenced by financial pressure groups there is little chance of reforming mindsets that favour financial products such as financial deriv- atives and casino banking. Many executives of Western global MNCs may be under the illusion that the Anglo Saxon model of capitalism is the best system and give insufficient heed to the different models in China, India and Russia. Capitalism is not only about creating wealth, it is also about power. The truth is that Western power is on the wane and that of the under-developed countries is rising.

The purpose of capitalism should be to increase the well-being of the peoples of nation states, not favour the fortunate few at the expense of the majority. Too great a degree of self-interest by business professionals will ultimately undermine and destroy societies. Best capitalist policies do not reduce public expenditure, damage national economic infrastruc- tures and impose heavy burdens on the less fortunate population.

Austerity programmes are damaging. Reducing national debt impacts negatively on demand in an economy which in turn results in falling output and GDP. This is why the Greek economy is shrinking faster than its national debt. Austerity is a self-defeating strategy. If governments want to revive their economies, they need to spend more than they receive in taxes. The argument that the books must be balanced is in essence about reducing the size of the welfare state and re-designing the economy along the lines of the U.S. model. Such a course is damaging to efforts to address the well-being of individuals. The UK welfare state does need to be reformed, as living conditions have changed since its origins in the 1950s and 1960s. People are living longer and there are fewer young people to fund it. It is not just to ridicule welfare expenditure as offering an opportunity for people to opt out of productive work. Those who raise this argument should try living on reduced state welfare payment.

Environment

The physical environment is of paramount importance to all. Carefree human degradation of the space in which we live must be checked. Wanton extractivism is an environmental disaster. Naomi Klein’s This Changes Everything (2015) says everything. Life is about the interface between wealth generation whether by a capitalist or a planned economic system. Sense rather than denial needs to prevail.

Society

Working towards achieving well-being for all in society should be a major purpose of wealth creating activity. Corporate attention should address social needs as well as those of business owners and shareholders. Business success needs to respect society and be seen to be justly gained. Regulation to safeguard social values rather than deregulation is necessary but not sufficient. What is called for is a revision of the value of human life and an abandonment of business activity that exploits people. In itself increased regulation will never succeed, as powerful corporations will always find legal loopholes. Rather, a return to family values is required. Wealth creation activity should reflect social solidarity and subsidiarity. In short, the necessity for many corporations and organisations to change their ways as argued in this text should be preceded by a new and just revision of ethical values.

Reflections 311

Action

The trumpet sounds

Business and society must recognise that it is time to pause and rethink where we are all going, to check major social and environmental abuse and to work for the common good. Wealth creation requires business activity and it is time ‘to walk the talk’ – ‘Talking isn’t doing. It is a kind of good deed to say well; and yet words are not deeds’ (Shakespeare, Henry VIII). A boost is needed to the contribution of creativity and innovation to future wealth creation that is dependent on a reassessment of corporate and organisational values and practice.

The Toymaker story provides an illustration of a different approach to business which makes a difference. In reality, the progress from Theory X to Theory WB management styles is one that in many cases will take time. Most organisations reflect a mix of Theory X, Y, Z and WB values. It is possible, as companies such as East African Breweries, Happy, Semco and Toyota have shown, to make a difference by achieving more socially and environmen- tally responsible positions on the Theory X to Theory WB continuum. What is required is a pragmatic reality-based way of thinking (Cassidy, 2010).

Summary This concluding chapter summarises some important key trends that challenge business prac- titioners. Societies need to create wealth in order to improve the well-being and happiness of their populations. The practices that generate wealth are often disrespectful of the envi- ronment and society. Managers need to become leaders and to be wary of attempting to run businesses by numbers. The focus should be on everyone and not just the privileged few. Ethical standards of legal business behaviour are in need of being recast. Climate change is real and action must be taken to reduce carbon footprints and irresponsible extractivism. The world is at a pivotal point and in need of champions to lead in a way that pays heed to solidarity, subsidiarity and a realisation that scarce resources and finance should be used to raise the well-being of society.

Discussion questions 1 The closing case raises several issues that are of prime importance for today. How might

a theory X business reform to morph into a Theory Y organisation? 2 Some say that only small businesses can achieve Theory WB status. Explain, with refer-

ence to examples, why this contention is wrong. 3 Capitalism, like communism, if practised to extreme contains a toxin that will do untold

damage to the well-being of society. Why do you think this view is attracting increasing interest in the latter years of the second decade of the twenty-first century?

Case exercise

Toymaker II

After the end

Was he still The Toymaker? This is the question which troubled him most at 3.00 am. In some ways it was a relief not to be involved anymore. Not to have business managers telling him

312 Strategic innovation in changing times

about the bottom line or the inbox filling with red exclamation marks. Not to have to give those empty speeches in front of the giant projection of his face. Not to have to pretend that the new exciting product was a new exciting product rather than the same plastic junk from last year but in a different colour. His family had told him that he should take a step back and now he had been dragged back from the edge.

It was difficult to construct what had happened; he knew it felt like being on a downward spiral helter-skelter. They had needed some money, an advisor had said float the company. It was from that point that he had begun to drown. There was a need for profits, to cut costs. To stretch the supply line, to outsource, to financially innovate. There were phone calls and meetings and offices and expansion plans. Something strange happened to time. Some meet- ings seemed to go by in a blur, others stretched out for hours; when he went home it seemed like his wife and daughter lived in another time zone. He was out of joint, the family were at a far distance but other things were too close. At some meetings he would find himself focusing on a speaker’s ears, or slight hand twitches. He began to feel heavier and heavier, imagining that gravity was sending him a message. Finally it was over, a sweaty handshake, a done deal, his image and rights sold to a volume producer. The company pulled back from the edge, the pension fund saved, a good deal for everyone. He felt as if he’d sold himself, now what was left? Spend some time with the family? Why couldn’t he sleep?

The alarm clock woke him with a start. His daughter was home for the holidays, making breakfast. The radio was tuned to a news programme so that he could catch the odd headline, ‘Flash Flood’, ‘Hottest Day on Record’, ‘Boy Drowned’.

Turning towards the kettle his daughter said, ‘I found something last night.’ He did not answer. ‘I put it together in the living room.’ He went through. There in front of the fireplace was the doll’s house. That first one from over 20 years ago. His daughter came through, ‘You remember? How excited I was?’ The walls were scratched. He knelt down and opened it up. The hinges were a bit wonky but still worked. Inside, the rooms were all there. ‘I spent last night putting the furniture back in. The lights work.’ He started to cry.

Begin again

It was when they were thinking about his name that the idea crystallised. No, the lawyer explained calmly, he couldn’t use the name Toymaker. The name was a registered trademark which he had sold for a large sum of money.

‘I can’t be the Toymaker,’ he said to his daughter as they worked together in the shed on another doll’s house for his granddaughter. ‘Do you remember that interview?’ asked his daughter, hammering in a small nail to a wall section, ‘I remember standing in the kitchen. You were so happy.’ ‘Yes,’ he replied, ‘I was The Toymaker!’

They continued working, the only sound an occasional chink. The shed was dark, the workbenches lit by spotlights. That was the way he liked it, always had, since the early days when he had the time to himself. He looked over at his daughter, carefully hammering. It was great to have someone else with him. He thought about all the toys his company had made, that had been exported all over the world.

He suddenly blurted, ‘That’s it. We add an S.’ ‘Ouch’ – his daughter had hit her hand and looked up frowning. ‘Sorry. I’ve got it.’ He went round the shed looking for paper, ‘Get me a pen.’ He found a large roll of old

wallpaper and started drawing.

TOYMAKERS

Reflections 313

The multinational competitor didn’t see the need to spend money fighting one man’s eccen- tric wishes so there was no legal wrangle about the name to hold him back and they had given him enough money to do what he wanted. The simple solution had occurred when he realised that he didn’t need to be the Toymaker, he didn’t need to be to be whole and alone. It was the solution that should have occurred to him years ago but the old way of running the company had held him back.

What was the main problem that he had faced? Yes, he had sold products, many acclaimed toys but did he really know how children used them? How could he? He was in head office, looking at feedback reports or videos of lab experiments. Then there was the problem of worldwide distribution. How did a toy translate across different cultures? Was he exporting his idea of play? Then there were the images of bits of plastic in landfill. Broken toys with no further use and always the pressure to make toys which would break so that his company could sell more. Then the secrecy, in case a competitor stole an idea.

The S was most important. His new company would be plural. It would invite everyone to be a toymaker. People looked at him like he was crazy as he described a new type of toy company. It would be set up as a series of workshops. Each workshop would have seven toy- makers and they would service a particular geographical area. The workshops would be open to the public for people to come in and play or make suggestions. Toys would be rented out with a toy diary and returned when no longer needed so that someone else could use them. Because the toys were rented they would be repairable either by the users or by returning to the store. Once someone was employed as a toymaker they would be involved in decision making about change or expansion. They would use rapid prototyping to experiment with designs. There would be no need for secrecy, as the secret of success would be high quality and flexibility based upon local knowledge.

A new vision

After the funeral his daughter gave interviews. They all wanted to know about his legacy, how he had done it. This made her uncomfortable. He wouldn’t have seen it that way. The only way she could answer was to point at TOYMAKERS. Growth had happened slowly but the company had been robust and had coped with everything a changing world had thrown at it, gradually spreading around the globe. One of the key things was loyalty; she felt as if TOYMAKERS were a family, that any part of the company would help another part. Yet, each workshop was so different. Some were in hi-tech factories, some on cabins by beaches. Some took hold in slums, some in smart gentrified districts. Some were set in glorious parkland, others down back alleys.

She thought about how difficult it had been. How her father had to give up control. How she saw him gradually learning to let the other toymakers make decisions. How he held back, let himself be outvoted in decision making. How many times he had almost fallen off a preci- pice but how TOYMAKERS survived through loyalty from staff and customers. The children using the toys knew they were better and could point to where they came from and serving local areas meant the makers could be flexible with price point and toy type. Large-scale manufacturers were facing massive challenges due to competitive automation and looming resource constraints but continued to look at each other for ideas whilst TOYMAKERS took a different open and honest path.

She thought of the quote from Einstein on her father’s desk, ‘Logic will take you from A to Z; imagination will take you everywhere.’

Source: A. Jeffrey.

314 Strategic innovation in changing times

References Backström, T. and Söderberg, T. (2016) ‘Self-organisation and group creativity’, Journal of Creativity

and Business Innovation, Vol. 2, Issue 1, pp. 65–79. Cassidy, J. (2010) How Markets Fail, London, Allen Lane, Penguin Books. Chang, H-J. (2010) 23 Things They Don’t Tell You About Capitalism, London, Penguin. Davies, W. (2015) The Happiness Industry, London, Verso. Hoffman, B. G. (2012) American Icon: Alan Mulally and the Fight to Save Ford Motor Company,

New York, NY, Crown Business. Kekic, L. (2012) ‘Globalization to remain concentrated in Asia’, CNBC.com. Klein, N. (2015) This Changes Everything, London, Penguin Books. Martins, E. C. and Terblanche, F. (2003) ‘Building organisational culture that stimulates creativity and

innovation’, European Journal of Innovation Management, Vol. 6, Issue 1, pp. 64–74 Morgan, G. (1997) Imaginization, Thousand Oaks, CA, Sage. Samašonok, K. and Leškienė-Hussey, B. (2015) ‘Creativity development: Theoretical and practical

aspects’, Journal of Creativity and Business Innovation, Vol. 1, pp. 19–34. Semler, R. (1994) Maverick, New York, NY, Random House. Stewart, H. (2012) The Happy Manifesto, London, Kogan Page. Stiglitz, J. (2016) The Euro and Its Threat to the Future of Europe, London, Penguin. Transparency International (2015) ‘People and corruption: Africa 2015 global corruption barometer’,

Berlin/Johannesburg, Transparency International and Afrobarometer.

Epilogue

In 14 chapters the text has explored business creativity and strategic innovation.

Corporates sit in a boardroom Having discussions with biscuits and views. All turn away from impending doom, (Look at the screen for Breaking News).

Leaders demand a rapid response. Engineers draw up plans, try to amaze, Note materials, make bids for finance, Gather ideas and get the best appraised.

Elements brought are blasted off, Catch at the meteor’s metal heart. Hope turns to experiences as we graph All our brains and brawn playing a special part.

Now they sit and map out a wider view: Galaxies appear and have been set free. Explorers set out to see the new, Steer out beyond any fixed decree.

Readers are exhorted to ‘Steer out beyond any fixed decree’ and continue to explore the concepts, models and techniques that the text has featured.

The closing figure summarises key points covered in the text. A realistic understanding of context should stimulate a fresh approach to response and a redefinition of management that is energised by committed and sustained leadership. Creative thinking and the empowerment of employees to generate new ideas is the first major step toward strategically managing innovation. The second concerns the development of an appropriate organisational strategy, structure and a determined and sustained intent to develop a climate and culture that is con- ducive to successful innovation.

‘Our doubts are traitors, and make us lose the good we oft might win. By fearing to attempt’ (Shakespeare, Measure for Measure) for ‘fortune brings in some boats that are not steer’d’ (Shakespeare, Cymbeline).

Figure E.1 Creativity and innovation management toolkit.

Academic index

Adair, J. 137, 139, 228 Adobe Systems 108 Agut, S. and Grau, R. 47 Albats E., Podmentina, D., Dabrowska, J.

and Teplov, R. 196 Amabile, T. M. and Khaire, M. 234 Ambos, B. and Schelgelmilch, B. B. 31–2 Anderson, L. A. and Anderson, D. 14 Andropoulos, C. and Dawson, P. 20 Argyris, C. and Schon, D. A. 285

Backström, T. and Söderberg, T. 308 Bain & Company 122 Balogan, J., Hope Hailey, V. and

Gustafason, S. 14 Banks, M., Calvey, D., Owen, J. and

Russell, D. 67 Barczak, G., Lassk, F. and Lulki, J. 284 Beer, M., Eisenstat, R. A. and Spector, B. 229 Beer, M. and Nohria, N. 285 Belbin, M. 74, 139 Bell, G. 140 Benedek, M., Jauk, E., Sommer, M.,

Aroendasy, M. and Neubauer, A. C. 88 Bennis, W. and Nanus, B. 229 Berliner, M. 165 Bilton, C. 12 Bilton, C. and Cummings, S. 12 Birkinshaw, J., Hamel, G. and Mol, M. J. 209 Blake, R. R and Mouton, J. S. 232 Board, B. and Fritzon, K. 232 Bogers, M. and West, J. 196 Bohnet, I. 6,7 Bonebright, D. A. 140 Boudreau, K. J. and Lakhani, R. 193 Bowen, H. R. 250 Bowman, C. and Swart, J. 13 Bradshaw, P. 31–2 Breen, W. 69 Burkis, D. 118 Burns, B. 30–1 Buzan, T. and Buzan, B. 89

Cameron, K. and Quinn, R. 151 Capelli, P., Singh, H., Singh, J. and

Useem, M. 268 Capozzi, M. M., Dye, R. and Howe, A. 173 Carneli, A., Tishler, A. and Edmonson,

A. C. 137 Carroll, A. B. 250–1 Cassidy, J. 309, 311 Castaldo, S., Premazzi, K. and Zerbini, F. 228, 286 Cavalieri, E. 249 Chan, D. 19 Chang, H-J. 309 Checkland, P. 111 Chesbrough, H. W. 116, 183-4 Chien-Hsin, L., Sher, P. J. and Hsin-Yu, S. 17 Christensen, C. M. 192 Conway, A. 11

Dane, E. 31 Davenport, T. H. and Harri, J. G. 30 Davies, W. 308 Dawson, R. C. and Bynghall, S. 195 Daza, J. R. P 261 de Bono, E. 145 Dean, A. and Kretshmer, M. 13 Delbecq, A. L., Van de Ven, A. H. and

Gustafson, D. H. 90 DeLong, T. and DeLong, S., 53 De Vries, R. F., Bakker-Pieper, A. and

Ostenveld, W. 234, 238 DeYoung, R. 30 Dobbs, R., Ramaway, S., Stephenson, E. and

Vigueri, S. P. 58 Drucker, P. 112, 230 Duff, A. and Duffy, T. 76 Dundon, E. 67 Dweck, C. 112, 174

Eberle, R. E 106 The Economist 13 Edgeman, R., Eskildsen, J. and Neely, A. 253 Edmonds, J. 285

318 Academic index

Einstein, A. 205, 207 Ekvall, G. 152 Ekvall, G. A. and Ekvall, I. 143 Elkington, J. 253 Encyclopaedia Britannica 71 Encyclopaedia of Management 191 Erickson, G. S. and Rothberg, H. N. 13 Erickson, T. and Nerdrum, L. 13 Eroke, L. 172

Fayol, H. 47 Fazlollahi, B. and Vahidov, R. 30 Fiedler, F. E. 233 Fields, D. 284 Figuera, J. and Ray, B. 30 Finkelstein, S., Whithead, A. and Campbell, J. 33 Friga, P. N. and Chapas, R. B. 26, 30 Fox-Wolfgramm, S. J., Boal, K. B. and Hunt, J.

G. 14

Gardner, H. 67 George, J. and Jones, G. 4 Gibson, L. L. and Shalley, C. E. 174 Gill, R. 229 Goodman, M. R. V. 13, 31, 139, 280 Gosling, J. and Mintzberg, H. 174 Graetz, F., Rimmer, M. and Lawrence, M. 6 Grey, C. 6 Grönlund, J. Sjödin, D. R. and Frishammar, J.

D. 119 Grönroos, C. 17–18 Grönroos, C. and Ravald, Q. 17 Gruber, H. E. and Wallace, D. B. 69 Gummesson, E. 18

Hamel, G. 276 Hamel, G. and Prahalad, C. K. 218 Hayibor, S., Agle, B., Sears, G., Sonnenfeld, J.

and Ward, A. 234 Heimal, C. 75 Hemphälä, J. and Magnusson, M. 197 Hersey, P. and Blanchard, K. H. 233 Hertzberg, F. I. 163 Hewlett, S. A., Marshall, M. and Sherbin, L. 7 Hill, L. A. and Lineback, K. 58 Hockerts, K., Casanova, L., Gradillas, M., Sloan,

P. and Jensen, E. 251 Hoffman, B. G. 309 Hoffman, B. J., Bynum, B. H, Piccolo, R. F and

Sutton, A. W. 235 Holtum, C. 172 Hon, A. H. Y., Bloom, M. and Crant, J. M. 174 Honey, P. and Mumford, A. 74 House, R. H. 233 Howe, J. 192 Hughes, T., Bence, D. Grisoni, L., O’Regan, N.

and Wornham, D. 45 Hybels, B. 236

Ibarra, H. and Hansen, M. T. 173 IBM 12–13, 109 Isaksen, S. G. 147–8, 152

Jacques, E. 150 Janis, I. L. 37 Jeffrey, K., Abdaliah, S. and Michaelson, J. 278 Jones, B. 89 Jones, M. 231

Kahneman, D. 8 Kahneman, D., Lovallo, D. and Sibony, O. 36 Kandelwan, P. and Tanje, A. 31 Kangis, P. 147 Kantner, M. 238 Kaplan, R. 31 Kekic, L. 295 Kelley, T. and Kelley, D. 189 Kennedy, D. 169 Kim, K. H., Cramond, B. and VanTasssel-Baska,

J. 88 Kirk, D. 120 Kirton, M. J. 74, 142 Klein, N. 254, 310 Kokkinidis, G. 280 Kolb, D. 74, 91 Kotler, P., Keller, K. L., Brady, M., Goodman,

M. R. V. and Hansen, T, 13,15 Kotter, J. P. 230 Kotter, J. and Rathegeber, H. 146 Kovač, J. and Jensenko, M. 239 Krainz, K. K. 278 Kreitner, R. 91,165 Kruyt, M., Malan, J. and Tuffield, R. 53 Kuhberger, A., Komunska, D. and

Perner, J. 31 Kuhn, T. 69 Kurtzberg, T. R. 7

Lambrechts, F. J., Bouwen, R., Grieten, S., Huybrechts, J. P. and Schein, E. H. 54

Larson, J. and Vinberg, S. 233 Laughlin, R. C. 14 Levinas, E. 174 Levitt, T. 17 Lichtenthaler, U. 122 Lorentz, H. A. and Lorentz, H. A. 206 Luebkeman, C. 16

Manning, R. I. 147 Martins, E. C. and Terblanche, F. 306 Mason, P. 18 McCalman, J., Paton, R. A. and Siebert, S. 5 McGreevy, M. 285 McGregor, D. 54–5 Mednick, S. 88 Meeker, M. E. 185 Merton, R. C. 196

Academic index 319

Michaelis, B., Stigmaier, R. and Sonntag, K. 234 Ming-Jer, C. and Miller, D. 45 Mintzberg, H. 285 Mintzberg, H. and Westley, F. 31 Mitroff, I. I. 164 Moon, S. 250 Morgan, G. 103, 106, 167, 306 Morton, N. A. and Hu, Q. 32 Mostert, N. M. 140 Mudambi, R., Mudambi, S. and Navarra, P. 121 Muhr, S. L. 174 Myers-Briggs 141 Myers-Briggs and McCaulley, M. H. 74

Nagurney, A., Dong, J. and Mokhtarian, P. I. 29 NEF 251, 284 Nikula, U., Jurvanen, C., Gotel, O.

and Gause, D. 35

OECD 130, 243 Okes, D. 94 Osborn, A. E. 106, 165

Parkin, M. and Bade, R. 8 Pausch, M. 153 Pearce, C. L. and Sims, H. P. 239 Pina e Cunha, M., da Cunha, J.V. and Kamoche,

K. 162 Pine II, B. J and Gilmore, J. H. 18 Pisano, G. P. 113–14, 218 Porter, M. E. 111 Porter, M. E. and Kramer, M. R. 251 Prichard, A. 74

Ramaswamy, V. and Gouillart, F. 192 Rass, M., Dumbach, M., Danzinger, F.,

Bullinger, A. C. and Moeslin, K. M. 197 Raymond, E. S. 185 Reardon, K. K. 235 Rakotomavo, M. T. J. 260 Rickards, T. 90, 227 Rickards, T. and Moger, S. 159 Rigby, D. and Zook, C. 184 Rivett, K. G and Kline, D. 13 Robert, L. P., Jr Zolin, R. and Hartman, J. L. 286 Robert, L.P., Jr., Dennis, A. R. and Hung,

Y-T-C. 228 Roosevelt, T., Thomas, D. A., Ely, R. J. and

Meyerson, D. 6, 7 Rowold, J. and Borgmann, L. 234

Samašonok, K. and Leškiené-Hussey, B. 308 Sauser, B. J., Reilly, R. R. and

Shenhar, A. S. J. 32 Sayer, J. 29

Semler, R. 148, 239, 308 Senge, P. 165, 174 Senge, P., Kleiner, A., Roberts, C., Ross, R. G.

and Smith, B. 18 Senior, B. and Swailes, S. J. 6 Sethi, R. and Iqbal, Z. 119 Shlomo, M., Srinivas, P. and

Seshadri, D. V. R 31 Sillince, J. A. A. 32 Slaughter, R. A. 188 Spitzeck, H. 47 St. Laurent, A. M. 185 Stebbins, L. H. 31 Sternberg, R. J. 69 Sternberg, R. J. and Lubart, T. I. 69 Stewart, H. 147, 308 Stiglitz, J. 301 Storm, B. C. and Angello, G. 169 Sullivan, D. M. and Ford, C. M. 88

Tapscott, D. and Williams, W. 192 Tassoul, M. and Buijis, J. 92 Taylor, J. 25 Tellis, G. J. 112 Thomas, G. F., Zolin, R. and Hartman, J. L. 235 Thompson, N. 228 Torrance, E. P. 88 Transparency International 296 Trapp, L. N. 53 Turnipseed, D. L. 147 Turpin, D. 11 Tzu, S. 230

VanGundy, A. B. 90 Van der Vliet, M. 154 Van de Vrand, E., de Jong, J. P., Vanhaverbeke,

W. and de Rochemont, M. 122, 183 Vargo, S. L. and Lusch, R. F 18 Vasilopoulos, A. 27

Wang, M., Zhou, L. and Liu, S. 239 Watkins, M. D. 151 Wetherly, P. and Otter, D. 10 White, R. D. Jr. 48 Wikhamn, B. R. 15 Wijkman, A. 255 Wilkinson, A. and Kupers, R. 189 Wyer, R. S. and Xu, A. J. 162 Wynarczyk, P. 123

Yang, Z. and Peterson, R. T. 17

Zeffane, R., Tipu, S. A. and Ryan, J. C. 235, 286

Zhao, F. 198

Subject index

Adobe Systems 108, 185 African leaders

Chandria, Manu, Kenya 241 Joffe, Brian, South Africa 241–2 Merali, Naushad, Kenya 242 Sawiris, Onsi, Egypt 242

age digital 7 economic 6, 11 industrial 5, 9 knowledge 5, 9, 13 machine learning 114

Airfrov 299 Amazon 10, 70, 112, 206, 214 Android 113,128 Apple 20, 35, 111, 113–15, 192–3, 216 Asian Development Bank 270

Barclays 10, 35 Bezos, Jeff (Amazon) 112 bias

diversity 7 managing 22, 36–7, 79, 189

Bidvest Group, South Africa 241–2 brain, physiology 71–2

brain cells, neuron 72 brainstorm 15–16, 37, 91, 94–5, 101–2,

168, 195 cerebral hemispheres 71 cerebrum 71 left/right-brain, model 65, 76–9, 81, 89–90,

94, 121, 157, 168 Branson, Richard 231 business decisions

basic 18 bias 36 big data 27 business decision process 28–30 conflict 145 contingency approach 31–3 definition 24 ethics 249–50, 255–6 incremental 33–4

business decisions cont. innovation 33–4, 219 leader 231–2, 238 levels 26 linking creativity, entrepreneurship and

innovation 37–7 making decisions 25, 31, 37–8, 46, 54, 56,

125, 136, 140, 228, 280 operational 26, 28–30, 33 radical 33–4 rational model 30–1 shareholder, finance and government

pressure 27 strategic 26–7 tactical 26–7 time frame decisions 25–6 well-being 256

business environment global 43 paradigm shift 3–8, 11, 13, 20 responsibility 154, 258 trends 6, 10

business ethics 53, 246–7, 249–50, 261–2, 265, 268, 286, 295

business games components 267–9 corporate game plays 271–2 corporate game strategies 272–3 players 269–71

business life cycles 6, 8–9, 25, 27–8 business paradigms

shift, consequences 13–14 customer-perceived value (CPV) paradigm

17–18, 36, 206, 210, 212–14, 217 least-cost production paradigm 12, 16–17, 36,

51, 65, 146, 256–7, 272, 286 marketing paradigm 16–17, 262 post-capitalist paradigm 18, 268 service dominant logic paradigm 18, 272

business social responsibility (BSR) definition 246–8 global recognition 259–60

business trends see trends

Subject index 321

buyer experience cycle 212–14 buyers’ markets 8, 16–18, 110–11, 159

Cambridge University, WellBeing Institute (WBI) 279

capital 12–13 capitalism 5 Conference 15 intellectual 13, 119 venture 123, 183, 186

Carroll’s Pyramid 251 change

causes 6–11 definition 4–6 drivers 15–16

change challenges challenges of initiating change 19 challenges of sustaining momentum 19 challenges of system wide redesign and

rethinking 19 challenge to traditional management 19

change types 14–16 developmental 14–15, 284 discontinuous 14, 18, 20, 34–5, 37, 80, 172,

175, 240, 305 incremental 5, 14, 24, 33–4, 39, 110, 114,

151, 197, 209, 212, 218, 239 radical 5, 13–15, 24, 33–4, 39, 65, 114–15,

182, 197, 212, 239, 255, 282, 284 transformational 14–15, 183, 284 transitional 14–15, 284

co-creation 192 Comcraft Group, Kenya 241 Concise Oxford Dictionary 5, 110, 161 conflict 145, 235 Confucianism 155 corporate social responsibility (CSR) 246–7,

250–1 corporate social responsibility, implementation

257–61 creative problem solving (CPS)

facilitation 95 facilitator process skills 144–5 facilitator tasks 143–4 personal problem solving (PPS) process

demonstration 90–4 CPS tools

analogy 93 clustering 92–3 mind mapping 92 private brainstorming 91 reversal 93 round robin 91 selection 94 shaping 93 time-out 94 toolbox 99–107 toolkit, introductory 94

creative thinking stimulating 87

creativity 12–13, 20 definition 67 group 131 intelligence 88–9 managers and creativity 132–3 personal, factors affecting 72

creativity audits KAI inventory 142–3 Organisational Creativity Audit 273–5,

291–2 Personal Creativity Audit 74, 83–4, 88–9

creativity blockers group 170 personal 165–8 personal, business 168–70

crowdsourcing 190, 192–5

deBono E. 181 Dafti and Biko 303 Dangote Cement, Morocco 58 Dell 35 diamond industry 253 Digital Equipment Corporation (DEC) 34–5 Dow Corning 15 Drucker 37, 46, 48, 108, 203 Dyson 231

East African Brewers 158, 47, 311 Eastman Kodak 15 eBay 35 Economic Cycle Research Institute

(ECRI) 9 efficiency and effectiveness, concepts 18, 24, 28,

33, 36–8, 53, 59, 116–17, 227, 238, 240 Einstein A. 159 Eisai 35 Electrolux 189 Enterprise Resource Planning (ERP) 32–3 entrepreneurship 37, 39, 197–8, 242, 270 environment

planet issues 254 circular economy 255, 295 environment regulation 258–9 environmental responsibility 254–55 resource sustainability 255

European Commission 123, 270 Eurozone 301 Eveready 300

Facebook 10, 47, 112, 115, 173, 190, 195 factors of production 12–13 Ford 309

Go-Jek 301 Goodman’s three way stretch model 272–3 Google 10, 112–13,124, 309

322 Subject index

groups definition 161 Group Creative Problem Solving (GCPS)

audit 157–8 empowering 136, 143–5 establishing group beliefs 136 leadership role 137 managing groups 138–9 mindsets 162 participation 133–6 rewards 137 selection and briefing 137–8 working groups 136

Handy, Charles 159 Happy Ltd. 58, 147, 308, 311 happiness, pursuit 308–9 hard systems thinking, common problems 171 Harley-Davidson 189 Helping Hand 303 Hewlett-Packard 35

IBM 1–13, 34, 108, 186 ICT 287 idea

closed sources 115–16 co-creation 192 crowdsourcing 192–5 external R&D agencies 191 idea funnel 118–19 management systems 187–9 idea scouts and connectors 191 open sources 116, 189–95 open source software (OSS) 186 poaching personnel 190 selection 118 social networking 195

IKEA 7, 10, 189 information overload 27 innovation

architectural 114 bottlenecks 124–7 champions 112 definition 110 getting started 111–12 incremental and radical innovation 113–14 innovation and entrepreneurship 197–8 innovative strategy 35 need 109–10 networks 196–7 private sector 121–2 process 117–18 public sector 122–3 technological 114

innovation, idea sources closed idea sources 188–9 open innovation sources 190–6 closed and open sources compared 182–5

innovation, idea sources cont. open-source software (OSS) 185–8 risk factors 195–6

Intel 35

Japanese management approach 55–8 Quality Circles 57 Quality of Work Life 57 Theory Z 55–7

Jobs, Steve 107, 111, 181 John Lewis 58, 146, 149, 302

K Raheja Corp 299 Kaymu 298 Kenyan Government and Grundfos 296 knowledge transfer (KT) 120, 127, 190 Kodak 113–14 Komatsu 58 KPMG International 275

Larsen-Toubrou 29 leadership

assessing skills 236–7, 245 attributes 232 challenges 238 characteristics 235–6 charismatic 234 competencies 12, 229–30 courageous 235–6 defined 227–9 innovation 238–9 management/leadership, difference

230–2, 236 role change qualities 231 transactional 235 visionary 235

leadership theories behavioural 232–3 contemporary thinking 235–6 contingency 233–4 emerging 234 trait 232 trends 307

learning 164–5 age, machine learning 114 creativity techniques 132 essence 72 organisations 18, 121, 151 patterns 161 problem solving 159 skills 44, 48, 78, 89–90, 96, 98, 120 style 74–6

Lego 216 LinkedIn 47, 173, 190, 195 Linux 185–6 LittleMissMatched 117 Lupe 305

Subject index 323

management basic decisions during times of discontinuous

change 18 challenge to traditional management 19 defining 43–51 essential/functional skills 47–50, 51–3 myopia 36, 42 problems, viewing 172–3 styles 53–4, 87, 133, 172 Theory WB 239, 265, 276–8, 281, 285–6,

287, 306–7, 311 Theory X 48, 57, 248, 287, 311 Theory Y 54, 57, 122, 248, 281, 285–6, 311 Theory Z 55–7, 122, 248, 265, 276, 311 traits assessment 157

Marks & Spencer 260 Mellowcabs 116 Metaphors 4, 44, 83, 89, 102, 106, 159–60, 185,

205, 207, 209, 282 methodology

Soft Systems Methodology (SSM) 111 Microsoft 35, 113 mindset

challenging 163, 210–11, 236 clashing 161 cost reduction 256 definition 161 entrenched 137, 139, 142, 164 entrepreneurial 197 factor sets 161–5 fixed and growth 173–4 group 162 growth 112 leaders 238 management 51, 128, 273 mindsets and paradigms 126 organisational 162–3, 168, 171, 173,

210, 283 overcoming 159–77 personal 161 power 159–62 social 155

Molinos Rio de la Plata 261–3 Musiglota 304 myopia

avoiding contextual 229 marketing and management 16, 20, 36, 42, 53,

169–70, 227, 275

National Bureau of Economic Research (NBER) 9

New Economics Foundation (NEF) 251–2, 284 Nicon 58 Nokia 20–1, 127–8, 154 Nominal Group Technique 90–1 Nordic Folkecenter for Renewable

Energy 191 Norsk Hydro 284

Omnitel 279 Osram 279 Orascom Group, Egypt 242 organisation

assessing organisations culture and climate 145, 151, 273–82

organisation, attitude and commitment 146 organisational climate 147–51 Ekvall’s Creative Climate Questionnaire

(CCQ) 152 Great Place to Work (GPW) Trust

Model 153 Isaksen’s Situational Outlook Questionnaire

(SOQ) 15 Organisational Culture Assessment Instrument

(OCAI) personality factors 151 philosophy 146

Oticon 58

Pachamama Alliance 249–50 people issues 253 perception 51, 79, 121, 126, 133, 136, 145–6,

151, 159, 163–4, 168, 235 Personal Creativity Problem Solving Audit 74,

83–4 perspectives, picture 90 Phillips 214 Pink Taxi 298 planning

conventional practice 282 development 285 pre-planning 282–3, 285 understand organisation 284 understanding people 283–4 understanding task 284

Polaroid 114 problem solving approaches

quick-fix 88 Creative Problem Solving (CPS) 88–9

Procter & Gamble 15, 194 profit issues

bottom line 253 business profiteering 256 executive pay effects of MNC profit strategies on SMEs

256–7 rank and file pay 256

psychological factor sets 163–5

risk 12, 28, 31–2, 54, 60, 112–13, 118, 122, 124, 126–7, 138–9, 143, 150, 152, 171, 174, 181, 184, 195–9, 214–17, 231, 239, 249, 268–9

Sameer Group, Kenya 242 Samsung 154–5 Sasol 59

324 Subject index

SãoPaulo supermarkets 304 SCAMPER CPS tool 106 Scenario planning 189 S-curve 24, 33–4 sellers’ markets 8 Semco 58, 239, 276–8, 288–90, 308, 311 Semler, Ricardo, 239, 276, 308 Sharman, Lord 275 Shell 189 Soantrach 58 social networking 195 SOSOL 58 Sports Direct 49–51 Stage–Gate model 119 Starbucks 214 Stewart, Henry strategic innovation

action plan 209–10 basic processes 208–9 characteristic of strategically innovative

organisations 214–16 conventional approach 207–8 creating customer-perceived

value 212–14 holistic approach 217–18 intent issues 218–19 management 111 model 205–19 purpose 216 reviewing the business 210 reviewing the market offering 211–12 transformation 217

strategy basic questions 210 cautious 34 ideation 200, 216 limpet 34 innovative 34, 216–19, 268, 286 visualising 208

SureSlim 296 systems thinking

hard and soft systems 120–1 hard systems, common problems 171

team building 129 business 13 conflict 129, 145, 148 creativity assessment 74 cross-functional 106, 137, 156, 188 Group Creativity Audit 157–8 loyalty 134–5 Personal Creativity Audit 74 interrogating 36 handling conflict 145 leading 46–7 learning style assessment 74

team cont. managing 54, 59 operating, forming, norming and performing

Tuckman model 140–1 psychological audit, MBTI 141–2 response sets 75 roles Belbin 139–40 senior team selection 52–3 TEAM culture 48, 55–8, 284–5

Technology Strategy Board (TSB) 120 technology transfer arrangements

contract R&D 191 joint ventures 192 licensing, cross licensing 191 research consortium 192 strategic suppler agreement 191

Thai Health Promotion Board 300 thinking

convergent 88 divergent 88 Left –brain thinking 76–8 Right-brain thinking 76–8 Total thinking 78–9, 89

Toyota 113, 199–200, 311 trends

African 296–8 Asian 298–301 European 301–2 South American 303–4 business 20, 54, 293, 306 climate 295 creativity and innovation 185, 238, 308, 311 economic 6, 8 environmental 6,9, 10–11, 26–7 energy 172 happiness 308 leadership 307, 238 management 306 market 35, 188 organisational 293 political 295 social-cultural 6, 8 technological 6, 9, 295

trumpet sounds economic system 309–10 environment 310 society 310

trust employee/manager trust 133–5, 149

Twitter 10, 47, 124, 173, 190 Tyrell 38–9

Unilever 8, 246, 259–60 United Nations Global Compact (UNGC) 259

Virgin Group 216, 231 Vodacom/Telekom South Africa 297

Subject index 325

Waitrose 302 well-being 251–2, 278–80, 284 well-being Manifesto, Goodman 280 wilful blindness 261 work environment and

performance 75–6

working with others 172 workplace democracy 153, 279–82

Yamaha Motor Company 220–2

Zuckerburg, M. 112