I am busy with an overview of the different types of innovation which organisations can generate. In the previous delivery I looked at innovation around the dimension of Business Processes. Next up is innovation along the Organisation dimension. Organisation is the way in which a company structures itself, its partnerships and its employee roles and responsibilities. Organisational innovation often involves rethinking the scope of the firm’s activities as well as redefining the roles, responsibilities and incentives of different business units and individuals.
Innovation is usually associated with new products, services (product and process innovations) and technologies, but not so much with how an organisation structures itself. It is surely one of the “lesser known” dimensions of innovation. However, how an organisation is structured can be a serious source of competitive advantage. The importance of organisational innovation for competitiveness has been proven by several studies which analysed the impact of organisational innovations on business performance. These studies point to two different results. First, organisational innovations act as the prerequisites and facilitators of an efficient use of technical product and process innovations (as described above) as their success depends on the degree to which the organisational structures and processes respond to the use of these new technologies. Second, organisational innovations present an immediate source of competitive advantage since they themselves have a significant impact on business performance with regard to productivity, quality and flexibility.
To give more detail on how organisational innovation can influence competitiveness, organisational innovations influence, change and improve responsibilities, accountability, command lines and information flows as well as the number of hierarchical levels, the divisional structure of functions (marketing, production, human resources, financing, etc.), or the separation between line and support functions. Such organisational innovations include, for instance, the change from an organisational structure of functions (product development, production, distribution, human resources, etc.) into product- or customer-oriented lines, segments, divisions or business units. Let me provide a more concrete example – unfortunately not close to home. Thomson Financial, a New York City based provider of information and technology applications for the financial services industry, transformed its organisation by structuring around customer segments instead of products. In this way, Thomson was able to align its operational capabilities and sales organisation with customer needs, enabling the company to create offerings like Thomson ONE, an integrated workflow solution for specific segments of financial services professionals.
For a while now, the big buzz around organisation innovation has been to replace the traditional tall hierarchical structure to a non-hierarchical, team-driven flat structure. Flat organisational structures operate matrix structures for specific projects that require a variety of skills.
Once projects has been completed these employees move on to another project with a different group of employees. This structure creates a highly motivated and empowered workforce with everyone having access to advice and coaching. Having said that, I still have to see it implemented successfully in Namibia.
Forget about product and service innovation for a while and think about how you can innovate your organisational model to motivate and empower employees to give you a serious competitive advantage?
As an advocate of innovation, the innovation column must also be innovated from time to time. So after more than 4 years of writing about innovation, I am in discussion with the editor of the Namibia Economist to give the column a “face lift”, so watch this space. I conclude with a quote by Scott Berkun, which I have found to be extremely true for business innovation: ““Big thoughts are fun to romanticize, but it’s many small insights coming together that bring big ideas into the world”.