So I am enjoying a break after the finals. Needless to say, this break comes after a grueling couple of months, so it is so very welcome.
Had some thoughts on organization design that we discussed as a part of:
MGMT 850 - 1 Effective Teams and Managerial Excellence
This is about how established organizations can also innovate. It is true that established companies have their advantages in being stable with a positive and steady cash flow. However, often times, these companies are so set in their well-trodden paths that they tend to lose sight of new stuff on the horizon and generally play a catch-up game. So the question is, how does a big well-established firm innovate to effectively play in an ever-changing market?
First of all, What prevents innovation in an established firm?
· Established firms have one or more successful products; the firm’s resources are focused on milking the benefits of the existing product line.
· Every new opportunity is seen in the light of how that opportunity will affect existing product line.
· Culture, as the company ages its resources age as well, and with age comes maturity as well as an attitude of risk-averseness. You may hear a lot of “..from my experience, this can’t be done”
So is there a solution?
Yes, there is a design structure thing called an ambidextrous organization design structure. The image attached shows how the structure of such an organization can look like. Such a design structure can be achieved by separating out a self-contained division for development of new products (Emerging Business Unit) from the division responsible for developing(read ‘milking’ existing products (Existing Business Unit).
The goals and the composition of the two business units are described below:
· Emerging Business Unit:
o Primary goal is to develop new products.
o Should have big Marketing and Product development team:
The Emerging Businesses unit should have experienced resources in big size ‘Marketing’ and ‘Product Development’ team to support its primary goal of investigating new markets and develop new products.
o Should have a small Manufacturing and Sales units.
The ‘Manufacturing’ unit should be oriented towards exploring innovative techniques, with plans to handoff development once the design specs have been finalized. Similarly, the ‘sales’ team should be small and primarily oriented towards experimenting with methods to sell new products.
· Existing Businesses Unit
o Primary goal is to achieve manufacturing operational efficiency.
o Should have a big Manufacturing and Sale subdivision,
To support its primary goal of extracting maximum profits through operational efficiency and producing high quality products using proven manufacturing processes.
o Should have a small size Marketing and Product Development unit to maintain the existing product line.
Finally, there should be a plan to hand-off mature products from the emerging to the existing business units.
· Establish a product hand-off process
New products that are developed by Emerging Business unit should be supported by its sales and production until they start reaching their peak capabilities (this would also be the time when viability of mass producing such a product is assured). At this time, the product should be handed over to the Existing Business unit for further production/and reduction in costs.
Such an organization structure may not be the panacea for innovation in established company but it may be one of the first steps towards one.
Had some thoughts on organization design that we discussed as a part of:
MGMT 850 - 1 Effective Teams and Managerial Excellence
This is about how established organizations can also innovate. It is true that established companies have their advantages in being stable with a positive and steady cash flow. However, often times, these companies are so set in their well-trodden paths that they tend to lose sight of new stuff on the horizon and generally play a catch-up game. So the question is, how does a big well-established firm innovate to effectively play in an ever-changing market?
First of all, What prevents innovation in an established firm?
· Established firms have one or more successful products; the firm’s resources are focused on milking the benefits of the existing product line.
· Every new opportunity is seen in the light of how that opportunity will affect existing product line.
· Culture, as the company ages its resources age as well, and with age comes maturity as well as an attitude of risk-averseness. You may hear a lot of “..from my experience, this can’t be done”
So is there a solution?
Yes, there is a design structure thing called an ambidextrous organization design structure. The image attached shows how the structure of such an organization can look like. Such a design structure can be achieved by separating out a self-contained division for development of new products (Emerging Business Unit) from the division responsible for developing(read ‘milking’ existing products (Existing Business Unit).
The goals and the composition of the two business units are described below:
· Emerging Business Unit:
o Primary goal is to develop new products.
o Should have big Marketing and Product development team:
The Emerging Businesses unit should have experienced resources in big size ‘Marketing’ and ‘Product Development’ team to support its primary goal of investigating new markets and develop new products.
o Should have a small Manufacturing and Sales units.
The ‘Manufacturing’ unit should be oriented towards exploring innovative techniques, with plans to handoff development once the design specs have been finalized. Similarly, the ‘sales’ team should be small and primarily oriented towards experimenting with methods to sell new products.
· Existing Businesses Unit
o Primary goal is to achieve manufacturing operational efficiency.
o Should have a big Manufacturing and Sale subdivision,
To support its primary goal of extracting maximum profits through operational efficiency and producing high quality products using proven manufacturing processes.
o Should have a small size Marketing and Product Development unit to maintain the existing product line.
Finally, there should be a plan to hand-off mature products from the emerging to the existing business units.
· Establish a product hand-off process
New products that are developed by Emerging Business unit should be supported by its sales and production until they start reaching their peak capabilities (this would also be the time when viability of mass producing such a product is assured). At this time, the product should be handed over to the Existing Business unit for further production/and reduction in costs.
Such an organization structure may not be the panacea for innovation in established company but it may be one of the first steps towards one.
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