The reflections on Middle Management

In today’s modern world that is being characterized by a number of situations that range from political, social, economic, and social-cultural contexts, middle management and managers (MMs) has been emerged very important and crucial to the success or failure of any contextual dimension within an organization. Over the past few years, stable and mature Western markets has entered stagnancy, due to this fact emerging markets has emerged and created attractive opportunities and makes these markets very lucrative to enter. Yet these are the markets are characterized by high degree of turbulence, uncertainty and risks as compared to the former, stable and mature Western markets.

In this paper written for a class assignment I would like to approach the middle management argument from the perspective I have briefly introduced above. For who would like to pursue a career as middle managers in an international arena can find this approach and discussion interesting and helpful.

Some potential benefits have been drawn in the first paragraph; should go along with a set of managerial decisions and challenges that have to be overcome. Starting with the questions of how to deal with uncertainty and high degree of turbulence, and how to develop an appropriate organizational structure to fit and integrate new markets structure. As we have learned one the most efficient ways to deal with the uncertainty is to be agile. In this sense organizational structure/body carries vital importance, needless to say less hierarchic, more flat, organic, dynamic and decentralized organizations will respond to change and uncertainty more effectively and efficiently than centralized and mechanistic organizations. Having the competent MM in the right place within the organization will gain and maintain the organization needed flexibility by closing the gap between head and foot of the organization by strengthening the internal communication, and will ease the stress of uncertainty and high degree of turbulence upon the top management by taking responsibility of making important as well as urgent managerial decisions by themselves. Today’s hectic business has made it clear that MMs are the vital parts of the organization whenever change initiatives that organizations have targeted McNamara (2008) views indicate that planned change occurs when leaders in the organization recognize the need for a major change and proactively organize a plan to accomplish the change. I believe that in the process of change middle managers are getting quite an important role or should take since they are actual implementers of change (Balogun, J., 2003).

To conclude, I do believe in the importance of MMs for the aforementioned fact that since they are much closer to the lower employees and customers and maintain the internal communication; needless to say they are personally more aware of the issues going on within the company which may possibly affect the company in the long run.

References:

Balogun, J., (2003) From Blaming the Middle to Harnessing its Potential: Creating Change Intermediaries, British Journal of Management, vol. 14, 69-83.

McNamara, Authenticity Consulting Charter. Toronto, 2008.

Champions in the Organization

Taking off from the SMEs module, the literature has made me to think over the importance of the individuals within the organization, though not all yet a few take an important role in the organizational innovation process. These few have been referred as champions in the management literature. According to the Great-Man-Theory that aims to explain history by the impact of “Great men”, the creation of something new is often used to be accredited solely to one outstanding individual. In the same way that historical achievements are linked to certain individuals (e.g. Columbus discovered America) also innovations are accredited to their inventors (e.g. Otto four-stroke cycle) (Hauschildt, 2004).

The concept and the role of one outstanding individual promoting the innovation process was initially identified and coined by Schon`s (1963) study on radical military innovation. Schon names this individual “the Champion”. In his 1963 paper, Schon studied the nature of resistance to innovation in organizations, the requirements of successful technical innovation, and the steps that management can take to ensure that the necessary development work leads into promising proposals for radical new products and processes. Thereby he identified a gap between the wish for elaborate and systematic procedures of innovation and the uncertainty and risk inherent in the innovation process, that every organization faces (Schon, 1963). On the one hand, the recognized need for change and radical product innovations in order to grow, expand, diversify and to get ahead of the competition conflicts with the risk and uncertainty of the innovation process on the other hand. In fact, established systems, structures, processes and procedures in firms are designed to maintain the status quo and avoid risks. However, the pernicious problem is not the existing resistance to change, but the failure to recognize it (Schon, 1963). Unrecognized resistance becomes capable of destroying most product innovations and enables masked defences against change. Nevertheless, innovation does take place but therefore typically one individual emerges as champion of the idea. Especially where radical innovation is concerned, Schon (1963) argues that a champion is required to overcome the resistance to change and to promote new idea. Referring to Schon (1963), the champion of new developments has to identify with the idea and its promotion to a great extent, and has to take the risk to fail with the championed idea. Therefore, he characterizes champions based on the attributes of considerable power and prestige, informal sales and promotion, a wide variety of interests (e.g. technology, marketing, production and finance) and courage of heroic quality (Schon, 1963).

Later, the concept and the term of “the champion” became the prevailing notion in Anglo-American innovation research, were extended and are still leading the discussion (Rost et al., 2006; Hauschildt, 2004). The functions of the champion were specified and names like product champion, innovation champion, project champion, executive champion, and management champion can be found in the literature. Yet the consentaneous perception identifies one outstanding individual in charge of pushing and promoting an idea into an implemented innovation, and empirical research and data has provided evidence of the champion as a crucial factor of success for the entire innovation process.

Chakrabarti (1974) ascribes the importance of the role of the product champion within the innovation process to the selling of the idea to the management. Based on the assumption that successful innovation requires attention of the top management and a nurturing atmosphere, the key task of the product champion is to get the management interested in an idea or project (Chakrabarti, 1974). He defined the champion as “an individual who is intensely interested and involved with the overall objectives and goals of the project and who plays a dominant role in many of the research-engineering interaction events through some of the stages, overcoming technical and organizational obstacles and pulling the effort through its final achievement by the sheer force of his will and energy” (Chakrabarti, 1974:58). Moreover, to influence and stimulate a positive decision-making the champion has to go beyond his formal organizational role and over the hierarchical chain (Chakrabarti, 1974). Based on the notion that the decision to adopt an idea is a collective process that, referring to Rogers and Shoemakers (1971), consists of five sequential stages (namely stimulation, initiation, legitimation, decision, and execution), Chakrabarti concludes that the champion has to play multiple roles (Chakrabarti, 1974). These roles are related to the five stages of the collective decision process and further on, the champion acts as a link between these different phases. Thus, champions are advocates of new ideas, products or projects who are actively involved in all stages of the innovation process, and may use different skills during each of these stages (Chakrabarti, 1974).

Also Rogers (2003) points out the important role that an innovation champion can play in fostering and promoting a new idea in an organization. He describes the champions as “a charismatic individual who throws his or her weight behind an innovation, thus overcoming indifferences or resistance that the new idea may provoke in an organization” (Rogers, 2003: 414).

Day (1994) identifies dual-role champions who combine the role of product champion (bottom up) and organizational sponsor (top down) through their ability to mobilize knowledge, information and power.

The champion theory often considers the champion as a powerful individual with a high rank within an organizational hierarchy. Day (1994) discovers the existence of powerful champions particularly for cost-intensive, risky and radical innovations. Her findings were supplemented by studies that showed that less radical innovations were championed by less powerful individuals (middle management) who acted as brokers and arrangers for an innovation, helping to fit it into the organizational context (Rogers, 2003). Howell and Higgins (1990) came to the result that a champion doesn`t have to be inevitably more powerful than other involved individuals but rather they tend to be more focussed on innovations, influential with others, and higher risk takers. Moreover, Howell et al. (2005) define Champions as “individuals who informally emerge to actively and enthusiastically promote innovations through the organizational stages”.

By reviewing the literature, it is apparent that the role of a champion is one that is internal to the organization. Champions are well connected to people and the organizations resources which support them in championing an innovation successfully. Furthermore, the championing individual emerges unsolicited, come in all ages, with varying degrees of formal power, and with different types of abilities. Champions identify themselves as champions, but are also regarded as champions from all levels within a firm including senior management. Perhaps their exact characteristics depend on the nature of the innovation and the organization. But in any event, the champion’s role is to initiate the innovation process and to guide the new idea through to approval and implementation (Rogers, 2003). Persuasive and willing to take calculated risks, champions adopt innovations, ideas or projects as their own and relentlessly promote them. Thus, the champion’s overwhelming enthusiasm and visionary qualities distinguishes him from other roles and makes him outstanding and unique.

References:

• Chakrabarti, A.K. (1974) ‘The Role of Champion in Product Innovation’, California Management Review, vol. 17, no. 2, pp.58–62.
• Day, D.L. (1994) ‘Raising Radicals: Different Processes for Championing Innovative Corporate Ventures’, Organization Science, vol. 5, no. 2, pp.148–172.
• Hauschildt, J. (2004) Innovationsmanagement, Verlag Franz Vahlen, Munich/Germany.
• Howell, J.M., Higgins, C.A. (1990) ‘Champions of Technological Innovations’, Administrative Science Quarterly, vol. 35, pp.317–341.
• Rogers, E.M. (2003) Diffusion of Innovations, The Free Press, New York/USA.
• Schon, D.A. (1963) ‘Champions for Radical New Inventions’, Harvard Business Review, vol. 41, no. 2, pp.77–86.
• Shoemaker, P.J. (1991) Gatekeeping, Sage Publications, Newburry Park, C.A./USA.

Networked Innovation

Nowadays, firms realize more and more the benefits of networked innovation. “Collaboration” is on the top of the agenda. Co-create value with partners, could be suppliers and even competitors, is a crucial and strategic element to maintain competitive advantage (Gulati et al., 2000; Iansiti and Levien, 2005; Sawhney et al., 2005). All type of companies, SME’s or/and MNC’s, are concerned by this topic of current interest because all of them want to acquire complementary resources and increase their technological knowledge.

“An innovation […] should not be seen as the product of only one actor but as the result of an interplay between two or more actors; in other words as a product of a ‘network’ of actors” (Håkansson, 1987, p 3)

The concept of networked innovation is well-explained by Akio Morita, cofounder of the Japanese society Sony. He explains that losing money is not a problem but losing time is a critical issue for a company. So, according to him:

“The best way to gain time is to communicate a lot and establish as many personal relationships as possible”.

Networking is the key to succeed. Akio Morita said:

“The more people you know, the better it is” (Harryson, 2006).

Muller and Pénin (2006) view innovation as the outcome of a group of activities involving interaction and knowledge exchange between people and organizations. In a similar way, Cowan et al. (2007) stake out that it’s the recombination of knowledge held by the partners that result in innovation. These two authors underline the importance that firms’ knowledge complements each other. According to Gulati (1999), social networks are seen as valuable channels of information. The network theory, based on establishing relationships and ties with others, largely influence firms’ behaviors and performances in their implications for their alliances.

“An innovation network can be defined as a reasonably stable set of partners that collaborate in order to improve their research” (Muller and Pénin, 2006, p87).

“In a networked world, more money can be made in managing interactions than performing actions” (Mohanbir Sawhney and Deval Parikh, 2001, p82)

References:

Cowan, R., Jonard, N. and Zimmermann, J-B. (2007) ‘Bilateral Collaboration and the Emergence of Innovation Networks’, Management Science, vol. 53, no. 7, pp. 1051-1067.

Gulati, R. (1999). ‘Network location and learning: the influence of network resources and firm capabilities on alliance formation’. Strategic Management Journal, 20, 397- 420.

Gulati, R., Norhia, N., & Zahere, A. (2000). Strategic Networks. Strategic Management Journal, 21, 203-215

Harryson, S. (2002). “Why know-who trumps know-how”, Strategy and Business Magazine, issue 27, second quarter 2002, pp 1-6.

Håkansson, H. (Ed.) 1987. Industrial Technological Development: A Network Approach. Beckenham: Croom Helm Ltd.

Iansiti, M., & Levien, R. (2004). Strategy as Ecology. Harvard Business Review, March, 1-10

Muller, P. and Pénin, J. (2006) ‘Why do firms disclose knowledge and how does it matter?’, Journal of Evolutionary Economics, vol. 16, no. 1-2, pp. 85-108.

Sawhney M. and Parikh D. (2001), “Where value lives in a networked world”, Harvard Business Review, pp 79-86, January 2001

Sawhney M., Verona G. and Prandelli E. (2005), “Collaborating to create: the internet as a platform for customer engagement in product innovation”, Journal of interactive marketing, vol. 19, n°4, pp 4-17, autumn 2005

Ambidextrous Organization

In order to ensure its long-term profitability, maintaining actual customers and leveraging new ones by innovating, a company has to find the right balance between exploration and exploitation phase (Harryson, 2006; Sawhney and Prandelli, 2000). Exploitation is linked to the creativity network and the inventions. As opposed to exploitation, exploitation relates to the process network based on the commercialization of innovations. In fact, exploration includes searches and discoveries of new knowledge and exploitation is more about selecting and using existing knowledge for application (Benner and Tushman, 2003; Grant and Baden-Fuller, 2004 and March, 1999). A company who succeeds to find equilibrium between the order and the chaos is called an “Ambidextrous organization” (Duncan 1976; Grant and Baden-Fuller, 2004; He and Wong, 2004; Tushman and O’Reilly, 1996). That means the company has developed an ability to design “dual structures” (Duncan, 1976) that facilitate the initiating stage and implementation stage of the innovation process. Indeed, “Organizational ambidexterity refers to an organization’s ability to perform two different things at the same time” (Gibson and Birkinshaw, 2004).

Moreover, for Levinthal and March (1993), an ambidextrous organization is a company who

“Engage in enough exploitation to ensure the organization’s current viability and engage in enough exploration to ensure future viability”.

It has to be the right balance. As Harryson (2006) mentioned it, a firm cannot be 100% on the exploration phase or 100% on the exploitation phase. Each company has to find its own balance in order to be profitable. In line with this argument, He and Wong (2004, 492) claim that

“The organizational tension inherent between exploration and exploitation may become unmanageable when both are pursued to extreme limits”.

References:

Benner, M. J., M. L. Tushman. (2003). Exploitation, exploration, and process management: the productivity dilemma revisited. Academy of Management Review, 28(2) 238–56.

Duncan, R.B. (1976). The ambidextrous organization: Designing dual structures for innovation, In: R.H. Kilman, L.R. Pondy, & D. Slevin (Eds.), The Management of Organization, vol. 1: 167-188. New York: North-Holland.

Gibson, C.B., & Birkinshaw, J. 2004. The Antecedents, Consequences, and Mediating Role of Organizational Ambidexterity. Academy of Management Journal, 47(2): 209-226.

Grant, R. and Baden-Fuller, C. (2004). ’A knowledge accessing theory of strategic alliances’.
Journal of Management Studies, 41, 61-83.

Harryson, S. (2002). “Why know-who trumps know-how”, Strategy and Business Magazine, issue 27, second quarter 2002, pp 1-6.

He, Z-L. and Wong, P-K. (2004). ‘Exploration vs. exploitation: an empirical test of the ambidexterity hypothesis’. Organization Science, 15, 481 – 94.

Levinthal, D.A., & March, J.G. 1993. The Myopia of Learning. Strategic Management Journal, 14: 95-112.

Sawhney M. and Prandelli E. (2000), “Communities of Creation: Managing Distributed Innovation in Turbulent Markets”, California Management Review, vol. 42, n°4, pp 24, summer 2000

Tushman, M. L., O’Reilly, C. (1996). ‘Ambidextrous organizations: managing evolutionary and revolutionary change’. California Management Review, 38, 8-30.

Automobiles being fueled by flower power

Over the past 15 years OEMs ( Original Equipment Manufacturers) have been facing mature market conditions i.e. stiff price competition (Veloso and Kumar 2002, 2). On top of that over the few past years, the entire automotive industry has entered stagnancy due to the maturity of the developed markets and the lowered demands. The Triad regions (Western Europe, Japan, and United States) have been affected particularly by this downward trend. As a result OEMs around the world are under pressure to meet the challenge of producing distinctive and innovative cars while keeping the cost low. The maturity and demand fall down has lead the industry shift into the emerging markets. South America, India, People’s Republic of China (PRC), and Eastern Europe have emerged as promising markets due to their economical progress, sustainable development and considerable demand of car. Thus most OEMs have invested heavily in plants outside their home base to better reach local consumers and meet their demands. Trade, safety, and environmental regulations establish incentives and requirements for modernization and change in design or production (Veloso, and Kumar, 2002, 2; EMCC, 2004). For instance a compulsory emissions standard dictated by EU Commission for all the EU Member States has led the large-scale industrialization in the industry and moreover biofuels has started to be taken into consideration by the automobile industry that is adapting its motorizations (EurObserv’er 2007). Although internal combustion engine most likely will continue to dominate the automobile industry, I believe that there is still a room for alternatives. Alternative such as ethanol-capable flexible-fuel vehicles (FFV); at present thay are being sold more and more which would have seen impossible just only a few years ago (MacKenzie 2007, 5). Moreover upward slope towards being more environmental friendly especially in the central Europe gives me more confidence to bet on the alternatives.

In today many car manufacturers are working on a host of different technologies of emission. It seems that competition on eco-car market will gain speed since European Commission set an average goal of 130 grams of CO2 per kilometer for all new cars by 2012. To overcome this issue, Saab unveiled its latest 9-5 BioPower car, which runs on biofuel ethanol for the Swedish market, where 80 percent of the Saab 9-5s sold are now BioPower, as well as promoting sales in other European markets and extending BioPower to other models (Saab’s official website). The number of FFVs in Sweden currently has exceeded 70,000 (See Figure).

References:

Bennett, J. (2007) Lessons Learned – Key Biofuel Markets, Power Point Presentation, ASEAN-U.S. Enhanced Partnership - Biofuels and the Automotive Industry Seminar, Bangkok

EMCC, European Monitoring Centre of Change (2004) ‘Trends and drivers of change in the European automotive industry: Mapping report’, prepared for the European Foundation for the Improvement of Living and Working Conditions.

EurObserv'ER (2007) ‘Biofuels Barometer’, www.ethanolstatistics.com/Expert Opinion Interview, Per Carstedt, SEKAB, 22.10.2007.

MacKenzie, D. (2007) ‘The Environmental Performance of Car Companies’, Union of Concerned Scientists.

Veloso, F. and Kumar, R. (2002) ‘The Automotive Supply Chain: Bibliography 143 Global Trends and Asian Perspectives’, Working Paper, Asian Development Bank (ADB), Jan. 2002.

SMEs vs. MNCs in automotive industry (partII)

Tesla Company has a rather unusual history since the company has almost no connection to the traditional American auto industry. The founder had no experience in the auto industry when he decided to create the world’s first high performance electric car.(http://auto.howstuffworks.com/tesla-roadster2.htm)

The founder of eBay the billionaire Jeff Skoll, the founder of PayPal Elon Musk and the founders of Google Larry page and Sergey Brin have contributed with $40 million to Tesla motors because they all want to see an electric car becoming the vehicle of the future.
(http://tyler.blogware.com/blog/_archives/2006/6/1/1998229.html)

Martin Eberhard and Marc Tarpenning founded a company based on a portable eBook reader and became frustrated at the mainstream auto industry’s inability to create an effective electric car that could appeal the mass. Therefore made Eberhard a decision to create one himself and instead of creating an entire car from scratch took Eberhard the advantage of outsourcing. The new company therefore chose a design from England-based Lotus (http://tyler.blogware.com/blog/_archives/2006/6/1/1998229.html).

The partnership between Tesla and Lotus works well for many reasons. Lotus factory in England is well suited to produce cars in small runs, which allows Tesla to basically manufacture the cars that is ordered and then avoids spending lots of money to warehouse not jet sold cars. Another reason for using Lotus factory in England is that the Tesla Roadster is based on the Lotus Elise. The car has the same basic chassis and other parts and this result in savings on material costs. (http://tyler.blogware.com/blog/_archives/2006/6/1/1998229.html)

In Tesla’s business plan it is mention that innovative technology is often very expensive and that very rich customers are usually the first to adopt it. First when the prices come down, the technology could be more available at the market. That’s a reason why Tesla’s first car is a exclusive sports car and only made in limited numbers. In 2008 is Tesla planning to release a four door electric sedan. (http://tyler.blogware.com/blog/_archives/2006/6/1/1998229.html)

An electric car will probably always be more expensive then a gasoline car and the savings for the customers come when they look at the fuel costs and how they have an impact in the environment. An electric car will always have zero emissions, but if you count the emissions created when the power is produces then is the electric car more environmental friendly even if the power comes from a coal plant.

Ebhard claims that the energy provided by one gallon of gasoline could be used to drive an electric car 110 miles. Also if the price of gasoline and electricity is compared, you could go 150 miles for the price of one gallon of gasoline. (http://auto.howstuffworks.com/tesla-roadster2.htm)

Musk the CEO of Tesla Motors says that this company has the potential to be one of the greatest car makers of the 21st century. "The starting point is a high performance sports car, but the long term vision is to build cars of all kinds, including low cost family vehicles. Tesla is one of those rare opportunities to change the world in a positive way and build a valuable company in the process." (http://tyler.blogware.com/blog/_archives/2006/6/1/1998229.html)