Chapter 10

Quasiformal structures

- Foster interactions based on interests rather than on hierarchy. -Problemfocused -Interactions

High degrees of formalization can make a firm... =

- Efficient but negatives are; - Becomes rigid - Stifles employee creativity - Employees may not feel empowered or motivated to implement new solutions

Centralized firms may be better at:

- Better able to make a bold change in its overall direction because command-and-control structure enables it to impose such change on lower levels

Formalization can substitute what in a firm?

- Can sub for some degree of managerial oversight, thereby help large firms run smoothly with fewer managers

Organic structure:

- Free-flowing, low levels of formalization and standardization - Often considered more appropriate for innovation and dynamic environments - Not well-defined job responsibilities and operations may be characterized by a high degree of variation

Decentralized firms may struggle to:

- Get the cooperation from all the divisions necessary to undergo a significant change

Loosely coupled organizational structures

- In a loose coupled structure, development and production activities are not tightly integrated but rather achieve coordination through their adherence to shared objectives and common standards - By using a shared interface that facilitates communications across firms, the involved parties in the development can works autonomously yet cooperatively - Firms can become more specialized by focusing on a few key aspects of tech innovation that relates to the firms core competencies, while obtaining other activities through outsourcing or allicances.

What is evidence for small firms being better at innovation than large firms?

- Small firms has shorter development cycles than larger firms

Icarus Paradox

A firms prior success in the market can hinder its ability to respond to new tech generations (must satisfy its current large customer base)

Is bigger firms better?

- Better position to take on large or risky innovation projects than smaller firms - Spend more on R&D and reap economies of scale and learning curve advantages in R&D - Tends to outperform small firms in innovation.

Mechanistic structure:

- Combination of formalization and standardization - Greater operational efficiency, particularly in large-volume production settings - Consistency and reliability (I think of conveyor belt) - Can be decentralized with formalization as sub for direct oversight, pushing decision-making down the firm while still ensuring the decisions are consistent with top management objective - Often deemed unsuitable for innovation (stifling creativity)

Disadvantages of Loose coupling:

- Activities that require the frequent exchange of complex or tacit knowledge are likely to need closer integration than a loosely coupled development configuration can offer - An integrated firm also has mechanisms for resolving conflict that may be more effective or less expensive than those of loose coupling. If a dispute should arise over the development of a new product among development groups that are within the same firm, top managers can decide what action to take. But if the development groups are in separate companies, developing a new product in a collaboration agreement, neither firm may possess the authority to resolve the dispute and enforce a particular outcome. If the firms are unable to resolve the dispute themselves, they may face going to court or arbitration to resolve the dispute, an expensive and time-consuming option.

Ambidextrous organization:

- Behaves as the firms at once, different divisions of the firm may have different structures and control systems, enabling them to have different cultures and patterns of operations - Aim to achieve both short-term efficiency and long-term innovation - High levels of formalization and standardization in manufacturing, while no formalization and standardization in R&D divisions. Different objectives in the different divisions, meaning different behaviors from employees

Center-for-global strategy:

- (A main centralized hub conducting all innovation, then deployed globally throughout the firm) - Chosen when = Strong desire to control evolution of a technology, strong concern about the protection of proprietary technologies, when development requires close coordination or when there is a need to respond quickly to technological change where dispersed efforts are likely to create inefficiencies PROS + Tight coordination of all R&D activities + Greater specialization and economies of scale in R&D activities + Avoiding duplication of activities in multiple divisions + Develop and PROTECT core competencies + Ensure that innovations are standardized and implemented throughout the company CONS: - Not very responsive to the diverse demands of different markets - Divisions might resist adopting/promoting centrally developed innovations - Innovations developed centrally may not closely fit the needs of foreign markets and may also not be deployed quickly or effectively

Globally linked strategy

- (a system of decentralized R&D divisions that are connected to each other. Each geographically division might be charged with a different innovation task that serves the global company's needs) PROS: - Innovation is decentralized to take advantage of resources and talent ppools offered in different geographic markets CONS: - Expensive in both time and money as it requires intensive coordination

Local for local strategy:

- Each subsidiary uses tis own resources to create innovations that respond to the needs of its local market - Chosen when = Divisions are very autonomous and when markets are highly differentiated PROS: Uses access to diverse info and resources, and customizes innovation for the needs of the local market - Chosen when= Divisions are very autonomous and markets are highly differentiated CONS: - Significant redundancy in activities as each division reinvents the wheel - Divisions may suffer from a lack of scale in R&D activities - Valuable innovations will not be diffused across the firm

High degrees of standardization =

- Ensure that activities within the firm run smoothly and yield predictable outcomes BUT; - Stifles innovation - Limit creativity and experimentation that leads to innovative ideas

What is the different between locally leveraged and globally linked strategies?

- In locally leveraged strategy, decentralized R&D divisions are independent of each other and work on the full scope of development activities relevant to the regional business unit in which they operate - In globally linked strategy, the R&D divisions are decentralized but they each play a different role in the global R&D strategy. Instead of working on all development activites relevant to the region in which they operate, this strategy attempts to take advantage of the diversity of resources and knowledge in foreign markets, while still linking each division trhough well-defined roles in the company's overall R&D strategy

Large firms structure:

- Large firms often make greater use of formalization and standardization because as the firm grows it becomes more difficult to exercise managerial oversight - Formalization and standardization ease coordination costs, at the expense of making the firm more mechanistic - Many large firms attempt to overcome some of this rigidity and inertia by decentralizing authority, enabling divisions of the firm to behave more like small companies

Disadvantages with size:

- R&D efficiency might decrease because of a loss of managerial control (the bigger, the more difficult it can become to effectively monitor and motivate employees) - Increasingly difficult for scientists and entrepreneurs to feel that they make difference, lowering incentives - Less responsive to change since more bureaucratic inertia (can be due to large fixed-assets, large base of existing customers or supplier contracts)

Skunk works:

- Refers to new product development teams that operate nearly autonomously from the parent organization, with considerable decentralization of authority and little bureaucracy. - Separating the teams from the rest of the organization permits them to explore new alternatives, unfettered by the demands of the rest of the organization

Modular products

- Refers to the degree to which a system's components may be separated and recombined - Wider range of end configurations, firms can thus meet heterogenous customer demands (Modular products become more valuable) - Enables firms and customers to upgrade without replacing their entire system. - Enables customers to fulfill their preferences by configurating their specific demanded product - Modular products associated with more modular organizations with less centralization

Transnational approach

- Resources and capabilities that exist anywhere within the firm can be leveraged and deployed to exploit any opportunity that arises in any geographic market.

Decentralized firms may be better at:

- Responding to some types of tech or environmental change because not all decisions need to be passed up the hierarchy to top management, employees at lower levels are empowered to make decisions independently and act more quickly

Locally leveraged strategy

- Takes most creative resources and innovative developments from the divisions and deploy them across the company PROS: - Allows firm to take advantage of the diverse ideas and resources created in local markets, while leveraging these innovations across the company - Very effective if different markets have similar needs

How should teams be treated in early development stages?

- Teams should be isolated - it has proven to be valuable

Standardization:

- The degree to which activities are performed in a uniform manner

Centralization and Decentralization

- The degree to which decision-making authority is kept at top levels of the firm - Decentralization is the degree to which decision-making authority is pushed down to lower levels of the firm - Decentralizing R&D to each department enables divisions to develop products that closely meet their divisions needs - Decentralizing means more failed projects, but greater quantity and variety of projects - Centralizing enables R&D to maximize economies of scale in R&D, enable greater division of labor among the R&D specialists and maximizing the potential for learning-curve efforts through the development of multiple projects. - Centralizing also improves coherence of the firms new product development efforts and avoiding the possibility that valuable new technologies are underutilized throughout the organization.

Formalization:

- The degree to which the firm utilizes rules, procedures and written documentation to structure the behavior of individuals or groups in organization.

The multinational firms objective is... =

- To make centralized innovation activities more effective (better able to serve various local markets) while making decentralized innovation activities more efficient (that is, eliminating redundancies and exploiting synergies across divisions)

Many large firms disaggregated, which means...

- When the firm is separated into constituent parts, more specialized and autonomous divisions or independent firms

4 primary innovation-across-borders strategies used by firms

1. Center-for-global strategy 2. Local-for-local strategy 3. Locally leveraged strategy 4. Globally linked strategy

3 key structural dimensions that influence the amount, type and effectiveness of their innovation (makes up a structure):

1. Centralization 2. Formalization 3. Standardization

Transnational approach can be achieved by:

1. Encouraging reciprocal interdependence among the divisions of the firm (that is, each division must recognize its dependency on the other divisions of the firm). 2. Utilizing integration mechanisms across the divisions, such as division-spanning teams, rotating personnel across divisions, and so on. 3. Balancing the organization's identity between its national brands and its global image.