Complementarity in Organizations: Strategy, Leadership, Management, Talent and Engagement in the Fourth Industrial Revolution 3031106539, 9783031106538

Table of contents :
Acknowledgements
Contents
About the Author
List of Figures
1: From Singularity to Complementarity
Competitive Progression—Achieving Economic Growth with a Positive Effect on Society
Business Strategy—More than a Reflexive, Intuitive Reaction to Market Forces
Leadership and Management—Influencing a Group to Commit Willingly to a Common Goal
From Exclusive to Inclusive—Defining Talent and Engagement
Organisations—Collections of Individuals and Political Systems with Defined Boundaries, Goals and Values, Administrative Mechanisms, and Hierarchies of Power
Sources of Progression over Four Industrial Revolutions
Complementarity is the Antithesis of Singularity
The Structure of the Book
References
2: The Fourth Industrial Revolution
Fourth Industrial Revolution—‘Unlike Anything Humankind has Experienced Before’
A Confluence of Technologies and Their Applications—From the Analytical to the Predictive
Fourth Industrial Revolution—Strategic Discontinuity and Transformed Business Models
Organisational Responses to a Transformed Environment
Progression—Organisational Knowledge, Management Competence and Complementarity
Conclusion
References
3: The Origins of Complementarity
Complementarity—From Quantum Physics to Business Strategy
Complementarity—A Scientific Foundation
Complementarity in Economics
Complementarity in the Business Environment—Theoretical Underpinnings
Complementarity in the Business Environment—Practical Examples
Complementarity and Organisational Performance—A Working Definition
Conclusion
References
4: Complementarity and Business Strategy
Coherence, Congruence and Consistency
The Evolution of Business Strategy Concepts
Business Progression and Cross Functional Synergies
Complementarity in Strategy Setting and Strategic Choice
Conclusion
References
5: Complementarity in Leadership and Management
Progression, Complementarity and Business Strategy
Progression, Complementarity, Leadership and Management
A Convergence of Leadership and Management Responsibilities
The Competences of Leaders and Managers to Deliver the Potential of Complementarity
The Role of Leaders and Managers in Delivering the Potential of Complementarity
Conclusion
References
6: Complementarity in Talent and Workforce Engagement
People Issues Are Business Issues
Defining Talent and Talent Management
The Significance of a Fully Engaged Workforce
Complementarity Between Talent Management and Workforce Engagement
Complementarity Between Talent Management, Workforce Engagement and Organisational Performance
Developing Talent Management and Workforce Engagement to Achieve Complementarity
Conclusion
References
7: Complementarity in Organisation
Complementarity- the Interaction of Strategy and Resource Allocation
Organisational Evolution- from Hierarchy to Matrix to Swarm
A Complementarity Model of Organisation
Conclusion
References
8: Complementarity and Competence-knowledge, Skills, Attitudes, and Behaviours
Complementarity- a Combination of Organisational Competence and Leadership Capability
Organisational Competence- from the Inside Out
Leadership and Management Competence
Conclusion
References
9: Complementarity in Business Organisations- 20 Important Conclusions
Complementarity and Business Progression
Complementarity- Continuous Evolution; Diverse Meanings
Complementarity- Definitions in a Business Context
Complementarity and Business Practice
Complementarity- Twenty Key Learning Points
Principles and Definitions
Complementarity and Business Strategy
Complementarity, Leadership and Management
Complementarity, Talent and Engagement
Complementarity and Organisation
Conclusion
References
Index

Citation preview

Complementarity in Organizations

Strategy, Leadership, Management, Talent and Engagement in the Fourth Industrial Revolution Paul Turner

Complementarity in Organizations

Paul Turner

Complementarity in Organizations Strategy, Leadership, Management, Talent and Engagement in the Fourth Industrial Revolution

Paul Turner Leeds Business School- Associate Leeds Beckett University-Associate Leeds, UK

ISBN 978-3-031-10653-8    ISBN 978-3-031-10654-5 (eBook) https://doi.org/10.1007/978-3-031-10654-5 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To Violet Renee Turner

Acknowledgements

Liz Barlow Karthika Devi Professor Martin Reynolds And to the support and happiness given by Gail, Jane-Marie, Annette, Harrison, Ellis, Sebastian, Jacob, Gary, Will Heart like Roses

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Contents

1 From Singularity to Complementarity  1 2 The Fourth Industrial Revolution 31 3 The Origins of Complementarity 59 4 Complementarity and Business Strategy 87 5 Complementarity in Leadership and Management115 6 Complementarity in Talent and Workforce Engagement143 7 Complementarity in Organisation173 8 Complementarity and Competence-­knowledge, Skills, Attitudes, and Behaviours203

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x Contents

9 Complementarity  in Business Organisations- 20 Important Conclusions233 Index261

About the Author

Paul Turner  has held Professorial appointments at Universities in Leeds, Birmingham, Nottingham and Cambridge. His business career included Executive and Director positions in FTSE and Fortune companies, and as Vice President of the CIPD. He was Chair of Human Asset, People Innovation and the European Talent for Tomorrow Conferences as well as being a judge on the Middle East HR, European HR Excellence and the CIPD People Management Awards. Paul is the author or co-author of The Making of the Modern Manager (2021), Employee Engagement (2020), Leadership in Healthcare (2018), Talent Management in Healthcare (2017), Make Your People Before You Make Your Products (2014), Workforce Planning (2010), The Admirable Company (2008), Talent Strategy, Management and Measurement (2007), Organisational Communication (2003) and HR Forecasting and Planning (2002). He has written articles for academic and business journals and the International Press. Paul has a first degree from the University of East Anglia, a Ph.D. from the University of Sheffield and is a Companion of the CIPD.

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List of Figures

Fig. 1.1 Business progression—complementarity, strategy and development16 Fig. 1.2 Complementarity—at the core and at the periphery 22 Fig. 2.1 The Fourth Industrial Revolution—characteristics, impact and response33 Fig. 4.1 Complementarity and business strategy five areas of potential 96 Fig. 5.1 Leadership and management competences for complementarity 124 Fig. 6.1 A model for developing talent management and workforce engagement to achieve complementarity 160 Fig. 7.1 Organising for Complementarity 180

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1 From Singularity to Complementarity

 ompetitive Progression—Achieving Economic C Growth with a Positive Effect on Society All business organisations strive for progression. Progression is achieved through movement towards an objective by converting energy within an organisation from latent potential to actual force, and orchestrating assets and resources in support of this movement. In addition, it means development- providing foundations for future growth—by balancing a focus on short term gains with investments that will pay back in the longer term. Progression manifests itself by results—profit, return on investment, or the maximisation of shareholder value and by the successful adaptation to contemporary environments including social objectives -fairtrade practices, contribution to social welfare, respect for and understanding about the environment, diversity, and equality of opportunity. It may be said that in a modern context, business progression means achieving economic growth taking account of wider societal needs and expectations. It means not only achieving competitive advantage but investing to sustain that advantage in a positive, inclusive way. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_1

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There is a panoply of strategic thought as to how organisations can achieve such advantage. A potential contributor to this process is that of complementarity in which one capability reinforces the impact of another capability. In this concept, the organisation would seek to exploit its unique resources by combining them with others to produce a formula that is difficult to imitate on the part of competitors. Whilst there is no universal definition, one interpretation that is relevant to a business context, is where both tangible and intangible assets combine and complement each other rather than stand alone; where strategy, stewardship and policy facilitate such combinations and where human resources know what to do to make them effective. This holistic view is based on the potential benefits of synergies or linkages between each of the organisation’s elements from manufacturing or operations to marketing to supply chain management. The existence of complementarity across management practices is put forward as an explanation for unit-level productivity differences. (Cavaco & Crifo, 2014; Hong et al., 2015) It is an idea that has evolved over time with both a scientific and economic foundation. Its applications stretch from government policy to global financial regulation, from technological development to individual behaviour. (Samuelson, 1974; Teece, 1986; Lenfant, 2006) It is also used to explain the outstanding performance of organisations such as Amazon and Disney as they apply complementarity principles across their business units. Furthermore, in their definitive article Brynjolfsson, E. and Milgrom, P. (2013) noted that organisations such as Wal-Mart, or Toyota ‘enjoyed sustained periods of high performance. As a result, they were heavily studied by competitors, consultants and researchers, and many of their methods were documented in great detail. Nonetheless, even when competitors aggressively sought to imitate these methods, they did not have the same degree of success as these market leaders. Complementarities in organisations can help explain why.’ Identifying and utilising complementary assets will be potential success factors in the age of the Fourth Industrial Revolution. But the initiatives to do so require clarity about what the term means in the context of business and the organisation. A reasonable option therefore would be a definition of complementarity that will enable those seeking business benefits—from functional synergy to competitive

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advantage—to craft how they go about leveraging any potential complementarities they may have. Hence, from the many definitions and interpretations, which will be discussed in more detail later, and for the purposes of this book: Complementarity is the interaction of business strategies and management practices to produce coherent, aligned and mutually reinforcing systems and processes that give superior outcomes (such as shareholder value, profit, customer satisfaction, market share or cost reduction) over those that would occur if such strategies or practices had taken place independently of one another. It is where the complementary agency of those strategies produces superior results, where the relations of independent units or their evolution creates higher value than their individual operation.

How to apply this interpretation will depend on those responsible integrating activities into the organisation’s systems and processes. It will be affected by the organisation’s dynamics and requires agility in a way that enables new initiatives. Guiding all is the language of vision or mission, articulated in the form of objectives, strategy, stewardship, and policy, and brought to life by leadership, management, and a talented, engaged workforce. In this respect, a good business strategy will focus on all of these elements and seek coherence—an alignment between expectation and reality; congruence—where elements of the strategy are integrated and reinforce each other; and consistency—between intention and action. Their implementation will be through the application of the concepts of business management, their language, systems, and processes— which are locked into every aspect of organisational life. But, as the Fourth Industrial Revolution gathers momentum, the scale and velocity of change in the global economy is creating new challenges and causing reflection about how to make tried and tested business theories and practices work in a radically different context. Whilst a confluence of new technologies offers significant opportunity, business managers will face an environment that is unlike anything that has gone before, transforming conventional models of strategy, and forcing companies to redesign both internal and external structures if they are to remain successful.

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(Rumelt, 2011; Schoenwaelder, 2019; Lanteri, 2021) An understanding of how the core concepts of strategy and management evolved and their characteristics over time may provide pointers to how they may change in future scenarios involving complementarity initiatives.

 usiness Strategy—More than a Reflexive, B Intuitive Reaction to Market Forces The primary concept upon which organisational performance depends is its strategy, and its numerous, elaborate, definitions, models and methodologies, which proliferated as competition amongst industrial and commercial organisations increased in intensity into the twentieth century. The perception was that more was required than a reflexive, intuitive reaction to market forces. Business strategy evolved with the scale and increasing diversification of organisations and the concomitant increase in levels of investment, which in turn led to the demand for a better understanding of the time and place for a return on that investment. It was from this milieu that corporate planning emerged in the 1960’s, portfolio planning in the 1970’s and a greater focus on market analysis in the 1980’s. Different approaches to strategy were informed by SWOT, PESTLE, Gap analysis or Balanced Scorecards and used a wide variety of strategic frameworks such as the iconic Ansoff and BCG strategic decision-­making matrices. Each of these was underpinned by a dominant rationalist approach to strategic thinking—scan the environment, assess strengths and weaknesses, formulate the strategy, and then proceed with implementation. The view was that business strategists could apply analysis to help shift the competitive equilibrium. From the mid 1980’s the work of Michael Porter, five forces analysis, the value chain and the theories of competitive advantage, cemented the rationalist approach and, for many, confirmed the assumption that there were benefits to an explicit process of strategy formulation to ensure that policies and actions were coordinated and directed to a common set of goals. Porter’s work was the most comprehensive and influential of all the strategy concepts whereby ‘competitive advantage grows fundamentally out of the value a firm is

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able to create for its buyers that exceeds the firm’s cost of creating it.’ He argued that competitive advantage was influenced by the choice of competitive scope and the range of a firm’s activities. (Porter, 1980, 1985; Henderson, 1989; Kay et al., 2006) Overarching all of these considerations was the belief that the maximisation of shareholder value would not come about by serendipity but by clear objectives, a well thought through strategy and plans, and an understanding of the value chain and the importance of each link in it. But the greater depth of analysis implied in strategy setting brought a diversification of strategic theory and practice. The literature of strategy proliferated, with a variety of distinct ‘schools,’ including design, planning, positioning, entrepreneurial, learning, the cognitive school, the environmental school, and the configuration school. Some of these were prescriptive, concerned with models of how strategy should be formulated. Some were about positioning the organisation, others about learning and others still about charismatic leadership. (Ahlstrad et  al., 1998) Subsequently, a resource-based view of strategy and the exploitation of core competences were enthusiastically embraced as alternatives. There were plenty of models from which those involved in strategy could choose. But the lack of consensus on the best way to approach strategy prompted questions. Martin (2014) argued for example that a too rigid approach could create a series of ‘comfort traps’ which would lull the strategists into a false sense of control. Strategic planning and cost-based thinking were often bound by ‘self-referential planning frameworks’ based on what the company could control thereby limiting a focus on what it couldn’t. Further reservations were raised about the very processes of strategic planning. Earlier, and to counter such perceived rigidity, Henry Mintzberg wrote of the concept of emergent or crafted strategy (1978 and 1987) that presented an approach requiring agility; a responsiveness to unanticipated events and the ability to ‘craft’ as opportunity became clearer, using its resources to build advantage. At each end of a spectrum Porter believed that the essence of strategy not only included decisions about what to do but also choices about what not to do; whilst Mintzberg viewed strategy as a pattern based on a stream of decisions. There are multiple positions between these two points of view. One of which, the Resource Based View (Barney, 1991) is of particular interest,

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given its focus on the exploitation of internal resources in the achievement of competitive advantage—when resources are valuable, rare, imperfectly imitable, and non-substitutable, they could create competitive advantages, which explain the differences in overall performance. Complementarity is the process by which such resources are allocated to benefit the whole organisation (Hsu, 2013). As the Fourth Industrial Revolution gathers momentum, there is a panoply of strategic theory and practice from which organisations can choose as they navigate their way through the transformed environment. In its most explicit form, competitive advantage can be achieved by differentiation or by being a lowest cost provider; it can be based on exploiting unique competences or resources that exist within the organisation. It can be based on a planned and systematic analysis of markets, or it can be based on opportunistic agility to respond to whatever the environment produces. Strategy can be concerned with adaptation to new environments, or developments within those environments; it can be concerned with dealing with chaos or getting to grips with radical change. ‘At its limit, strategy formation is not just about values or competences, and capabilities, but also about ‘crisis and commitment, organisational learning and punctuated equilibrium, industrial organisation and social revolution.’ (Ahlstrad et  al., 1998) The shock to global order which came about in the second decade of the twenty-first century added significantly to the necessity to deal with crisis however this was manifested. Business strategy has evolved from being less of a mould into which corporate ingredients could be poured and a fully formed figure emerging, to more like clay on a turntable, fashioned and crafted into shape. Whatever model was used, it was not enough to have strategy setting in isolation from other functions and so theories and practices of leadership, general management, talent management and workforce engagement developed—sometimes synchronised and sometimes in parallel—in response to economic, social and technology dynamics. As the quest for understanding of competitive advantage grew, so did questions about what needed to be done to achieve it—what is good strategy, what makes an effective leader, what is the role of the modern manager, how do we define talent, what makes employees engaged- and the recognition of their importance to business performance. In the contemporary

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organisation, the agency of strategy, stewardship, and policy provide the direction; talented leaders and managers decide on the allocation of resource and navigate a course; a committed and skilled workforce carry out operations, innovating and improving processes along the way. In each of the functions, responsiveness to change has been remarkable.

Leadership and Management—Influencing a Group to Commit Willingly to a Common Goal Accompanying the rise of theories about strategy and a surfeit of strategic models, was a renewed focus on the type of leadership needed to match corporate ambitions. From one perspective, leadership was seen as something that would be transformational, based on an individual’s charisma. In some cases, leaders built enduring greatness through a blend of personal humility and professional will whilst some had emotional awareness which allowed them to achieve more than those without (ie they have high levels of emotional intelligence). For some, leadership was concerned with authenticity, for others it required a ‘shift’ to a new level where purpose, mastery, autonomy, and trust were characteristics of the organisation and whose leaders shared aligned values and aspirations. (Greenleaf, 1977; Burns, 1978; Bass, 1985; Conger & Kanungo, 1998; Goleman, 1996, 1998; Collins, 2001; Goffee & Jones, 2006; Hlupic, 2014) In most cases, leaders were those people who could ‘mobilise others to want to get extraordinary things done in organisations… transform values into actions, visions into realities, obstacles into innovations, separateness into solidarity, risks into rewards … create a climate in which people turn challenging opportunities into remarkable successes’ (Kouzes & Posner, 2007). Leaders were people who could influence a group to commit willingly to a common goal. Analysis of the many and varied perspectives on leadership summarised the approaches as, Person based which associated with the traits pertaining to a leader’s character or personality including having a clear vision and strategic objectives, decisiveness, being an inspiring communicator,

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integrity, trust and delegation, honesty, and consistency. Or leadership could be results based which is founded on realising potential as a distinguishing feature of the leader’s actions. Process based leadership on the other hand used the assumption that ‘people that we attribute the term leadership to, act differently to non-leaders.’. Position based leadership defines the term as a spatial position i.e where a person sits in the organisation’s hierarchy. Leadership has been categorised as trait, behaviour, power-influence, situational, integrative or intra individual; as well as being defined into generic groupings (such as that based on trait or behaviour) and local leadership theories including functional leadership or group and team leadership. (Alimo-Metcalfe & Alban-Metcalfe, 2003; Grint, 2005; Yukl, 2010; Edger, 2012) Theories sometimes distinguished between a leader who sits at the head of an organisation, department or business unit and leadership which is a social phenomenon that occurs at many organisational levels and points. Given a wide array of leadership theories, there is support for Kilburg and Donohue’s conclusion (2011) that ‘leadership is a complex, multidimensional, emergent process in which the leader and followers use their characteristics, capabilities, thoughts, feelings, and behaviours to create mutually influencing relationships that enable them to coevolve strategies, tactics, structures, processes, directions, and other methods of building and managing human enterprises.’ Nevertheless, and not for want of trying, there is no universally accepted theory of leadership. Some 300 definitions, means that an analysis of leadership is more like looking through the lens of a kaleidoscope rather than that of a microscope because with each turn it changes shape and colour and hue. (Turner, 2019) The subject of management is equally vibrant, and its genesis can be traced back to the First Industrial Revolution and the principles of division of labour as articulated in Adam Smith’s seminal work of classical economy the Wealth of Nations in 1776. This was the beginning of the organisational hierarchy, of planning and forecasting, the transformation of the nature of work, the workforce to deliver it and the skills of the people required to organise its production; the latter being known variously as executives, directors, managing partners, agents, foremen, under-­ agents, over-men, corporals, supervisors, or stewards; but collectively as leaders or managers. (Turner, 2021) During the nineteenth century the

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seeds of Scientific Management were sown and cultivated. However, an awareness that time clocks, stop watches and slide rules could only go so far in informing how people should be managed, led to the growth of a more human emphasis on management and from the early twentieth century the emergence of Behavioural Management theories. At around the time of the Third Industrial Revolution new approaches arose. Hence Management Science underpinned new management theories, followed by the importance of the organisational environment. In this latter Management as Practice is of particular importance and within this area, the innovations in practice introduced by successful global corporations that came out of the economies of Asia. There are many excellent analyses which cover the various stages of management theory (Drucker, 1954, 1974; Child, 1969; Wilson & Thomson, 2009; Muldoon et al., 2020) supporting a conclusion that management could be an economic resource performing a series of technical functions which comprise the organising and administering of other resources; or a system of authority through which policy is translated into the execution of tasks; or an elite social grouping which maintains the associated systems of authority. The kaleidoscope’s lens would show management as shifting in form, sometimes expanding, sometimes contracting, always changing. The final consideration has been that of how leaders differ from managers and how leadership differs from management. This subject is one of continuing debate in spite of the observations that ‘it is obvious that a person can be a leader without being a manager (e.g. an informal leader), and a person can be a manager without leading.’ (Yukl, 2010) There have been attempts to distinguish between them. Two of the leading thinkers on these subjects had clear points of view in answer to the question. Peter Drucker was extremely forthright in his response; ‘as for separating management from leadership, that is nonsense—as much nonsense as separating management from entrepreneurship. Those are part and parcel of the same job. They are different to be sure, but only as different as the right hand from the left or the nose from the mouth. They belong to the same body.’ Whilst Henry Mintzberg noted that ‘leadership cannot simply delegate management; instead of distinguishing managers from leaders, we should see leaders as managers, and leadership as management practiced well.’ Mintzberg’s belief that delineations between leadership and

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management were wrong because ‘managing is controlling and doing and dealing and thinking and leading and deciding and more.’ (Mintzberg, 2011) it would appear that there are more things that bind the concepts of leadership and management together than separate them. Those contemplating the nature of leadership and management in Industry 4.0. organisations have a wide range of options.

F rom Exclusive to Inclusive—Defining Talent and Engagement With a strategy in place, leaders ready to transform and managers focused on objectives, there is the question of productivity—what talent exists for innovation and how engaged is the workforce with the organisation’s direction and their roles in it. Recognition of the importance of effective people management—in particular, talent and workforce engagement— too often regarded adjuncts to the financial aspects of the strategic plan, has increased. However, as in the case of strategy and leadership, opinions abound about the precise meaning of both terms. The greater focus on talent came about with the seminal work of Chambers et al. (1998a) who captured the talent zeitgeist of a period in which talent shortages were prevalent from the mid 1990’s. In the War for Talent, publications (Chambers et al., 1998a, 1998b) ‘C suite’ executives were found to be in short supply because of demographics (insufficient people within the normal experience range of executives and senior managers) and demand side economic growth forecasts. An imbalance between the two, created intense competition for the best people and the position was deemed to be so dire that the shortage of executive talent was a threat to business survival. But it was soon clear that talent shortages were not confined to those in a narrow group of people in executive positions and with the growing recognition that talent management was necessary organisation wide and was a strategic issue (Cappelli, 2008; Collings & Mellahi, 2009, 2013; Tarique & Schuler, 2010; Collings et al., 2015; Cascio & Boudreau, 2016). The perceived inequality of having only a few people as being identified with talent in the exclusive approach; the experience of global organisations in their quest to fill the

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roles of global specialists (such as project managers who were able to manage across cultural and geographic boundaries); and the recognition that there were talent shortages at many levels, brought about reflection on the approach. This led to a more comprehensive, inclusive, perspective on talent. This inclusivity was articulated by the UK’s professional organisation, the Chartered Institute of Personnel and Development. (Tansley et al., 2007). This discussion was focused on talent at the organisational rather than the individual level but attempts to define talent have also been couched in terms of natural ability, mastery, commitment and fit, performance, competences, capabilities, and commitment. (Gallardo-Gallardo et al., 2013) There is, however, a contextual element that permeates much of current thinking about talent. Ulrich and Smallwood’s (2011) research refined the approach and proposed a model which identified talent segments to facilitate the efficient allocation of resources across the organisation. In this analysis talent covers a wide span of the organisation and the management of talent was a whole organisation enterprise. In the twenty years since the term ‘talent war’ was first articulated, the management of talent, its attraction and retention has been high on the corporate agenda. And more recently, there is also recognition of the strategic importance of workforce engagement. This is an area of organisational practice that has been located within the subject of people or HR management but is increasingly viewed in other organisational contexts because of its impact on a range of business, service, or operational outcomes. As in the case of leadership, management and talent, defining the term ‘engagement’ proved to be problematic with some 50 definitions emerging—‘more than enough to confuse even the most positive people managers.’ (Huggett, 2009). The reason for the intensity of activity can be found in the high level of attributed benefits showing relationships between employee engagement and shareholder returns, operating income, revenue growth, profit margins, creativity and innovation and customer or client satisfaction, whilst work engagement has been associated with turnover intention, task performance, contextual performance, and employee well-being. (Saks, 2006, 2017; Schwarz, 2012; Bakker, 2017) There is further evidence that engaged employees outperformed

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non-engaged co-workers. The US based Society for Human Resource Management (SHRM) concluded that ‘employees who are engaged in their work and committed to their organisations give companies crucial competitive advantages—including higher productivity and lower employee turnover.’ (Vance, SHRM 2006; 1) The Chartered Institute of Personnel and Development (CIPD) concluded that there were positive relationships with profit, revenue growth, customer satisfaction, productivity, innovation, staff retention and efficiency. (CIPD, 2017) The academic narrative on employee engagement is rich and diverse with significant contributions from inter alia Maslach and Leiter (1997). Schaufeli and Bakker (2004); Saks (2006, 2017); and Albrecht et  al. (2018). As a result, a wide range of terminology has been used whereby engagement is viewed through the lens of emotional and rational factors such as enthusiasm, passion, satisfaction, confidence, empowerment, and positivity of attitudes; a person’s ‘preferred self ’ in behaviour which promotes connections to work and to others. Schaufeli and Bakker (2004) defined engagement as a positive work-related state characterized by vigour, dedication, and absorption; where vigour relates to energy and resilience; dedication to feeling enthusiasm and being inspired by one’s work. Absorption is the intense concentration in the work being undertaken. Christian et al. (2011) considered that employee engagement had a psychological connection with the performance of work tasks; the selfinvestment of personal resources in work and was a state of being rather than a trait or characteristic. The analyses suggest that employee engagement is connected to both the job and the organisation and is an active, work-related state—although there is debate about whether employee engagement is a trait, psychological state or a behaviour. From these perspectives engagement may be viewed as the simultaneous employment and expression of a person’s ‘preferred self ’ in task behaviours that promote connections to work and to others, personal presence (physical, cognitive, and emotional), and active, full role performance.’ (Saks, 2017.) A holistic analysis showed that considerations of employee engagement could be seen not only in psychological terms but also in relation to the sociology of work and the organisation of work. (Turner, 2020)

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A compelling conclusion about both talent and workforce engagement is that both concepts are essentially contextual. There is no grand unifying theory in either case. Instead, organisations have adapted the definitions in ways that suit their specific circumstances. Nevertheless, questions remain about what is the nature of the workforce in the Industry 4.0 environment, what skills are required to work in smart workplaces and what is the nature of talent in this new environment?

Organisations—Collections of Individuals and Political Systems with Defined Boundaries, Goals and Values, Administrative Mechanisms, and Hierarchies of Power A further consideration on the theme of progression, is that of organisation design and development. In the early stages of industrialisation, longer production runs, and new levels of supervision necessitated a level of formality, and an introduction of hierarchy albeit limited in depth and scope. This period was not only the genesis of modern management but also the genesis of modern organisation. As industrial and commercial opportunities grew, an ‘American way’ of business was shown to be more efficient. In this instance new management processes became the norm, based around the scientific management methods of Taylor, and deployed in large scale industrial units epitomised by Henry Ford’s factories. Organisations became more structured—Weberian hierarchies- and accountabilities for each layer of design or process were formulated. Later, more people-oriented business methods—a human relations approach— was used to replace or supplement the purely process driven methods that had provided the bedrock of industrial development. By the time of the Third Industrial Revolution from the middle of the twentieth century, Asian organisations, first from Japan, then the Asian Dragons and Asian Tigers and subsequently Indian and Chinese organisations, took advantage of new technologies and globalisation in remarkable levels of business performance, often introducing new forms of management or organisation design.

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In all cases organisations are both collections of individuals and political systems. They have defined boundaries, goals and values, administrative mechanisms, and hierarchies of power. Their structure influences the behaviour of individuals and groups and determines how job tasks are divided, prioritized, and coordinated. Traditionally, business organisations have been functional, geographic, or product-oriented structures and based on the principle of unity of command and authority on an unbroken line. However, more recent developments present the organisation as a holistic phenomenon. It is not a static configuration but a constant process of design and redesign and is driven not only by technical-structural rules but also by general ones. Hence contemporaneously, organisations have evolved into new forms—ecosystems, networks, matrices or swarms to enable them to address more complex tasks in more complex environments. And of particular relevance to this book the idea of complementarity, which proposes that in the objective of achieving optimal fit, the design of organisations should seek to leverage any interdependencies between organisational elements, rather than dealing with individual elements singularly or separately. This is ‘chemistry of organisation,’ the combination of organisational elements, analogous to that of chemical elements composing a variety of substances. In all cases, however defined, organisations offer ‘a fine weave of influence patterns whereby individuals or groups seek to influence others to think or act in particular ways.’ (Handy, 1976; Grandori & Furnari, 2008; Magalhaes, 2018; Sytch et al., 2018; Giri & Ramakrishnan, 2019) In future, progression will depend on the ability to craft strategy through these complexities, on agility and flexibility in organisational design and response, on the ability to integrate new technologies across the value chain from product design to sourcing of materials in the supply chain to manufacture to marketing, and of the full application of the talents of all the workforce in an inclusive environment. The pioneering work of Milgrom and Roberts (1990) offers important insights. They argued that flexibility in equipment and product design, together with an emphasis on speed to market and overlaps in design, product and process engineering were mutually complementary and could be adopted together—each making the other more attractive. Only coordinated changes among all of the variables would generate optimum outcomes.

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‘Significant complementarities in a rapidly changing environment provide a reason for close coordination between functions.’ In this construct, profit maximising firms adopt a coherent business strategy that exploits complementarities. This involves recognising that decisions should be made across a number of variables in a ‘cluster of complements.’ In place of the singularity of decision making is the complementarity of decision making. With AI, more robots, and smart machines in day- to- day operations the physical and virtual world will fuse together. Such a radically different type of environment will require organisations to ‘master the profound technological challenges at work and transform them into opportunities.’ (WEF, 2019a, 2019b, 2019c) The design and structure of that organisation will be an important part of the formula or chemistry by which progress is achieved.

 ources of Progression over Four S Industrial Revolutions As outlined above and visualised in Fig. 1.1 the theory and practice of business management have been well served by research and evidence with the principles surrounding key disciplines being honed, over a long period of time, through a sequence of challenge and response. The value of tangible assets has been increased by effective competitive strategies leading to competitive advantage, embracing all aspects of the value chain from cost management through to the development of leaders, the creation of a talented engaged workforce and effective organisational designs. In recent times recognition of the importance of intangible assets—from brand value to corporate ‘admiration;’ from technical prowess and know how to strategic capability—has grown and strategy setting will increasingly take account of their value. In a knowledge-based economy, competitive advantage is increasingly rooted in the management of intellectual capital, and intangibles rather than tangible assets. (Nakata et al., 2010) Insights into all of the elements that are identified in this book as core sources of progression arise from a vast array of supporting material, strategic models, leadership and management competence lists, talent management programmes and tools and measures for employee engagement.

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Business Progression

Objective increase the value of tangible assets

Objective increase the value of intangible assets

Objective progressive and sustainable development

competitive advantage

competitive strategy

develop people or human capital with cross organisational capability

respect for the environment and fair trade practices

through differentiation against competitors

by effective strategy setting systems and processes which go beyond singularity to complementarity

increase information capital through exploitation of knowledge

resepct for diversity and creation of equality of opportunity

developing leadership and management competence

identify and build organisation capital through networks in the development of an ecosystem

through cost leadership against competitors

with agile governance and pace of adaptability

identifying and implementing complementarities

synergies through talent management and workforce engagement

contribution to social welfare

deliver complementarity value by synergies between intangibles

organisation design and development to foster collaboration and knowledge management

Fig. 1.1  Business progression—complementarity, strategy and development

These models have increased in their incidence and sophistication, in response to the rapidly changing environments of Four Industrial Revolutions, though most notably during the course of the Third as organisations took the learning from the scientific management processes and Weberian hierarchies from earlier times into a global context. Today, thousands of business schools worldwide teach business theory and practice; business consultancies offer support through bespoke models covering every aspect of business strategy and operations and leaders and managers bring their transformational or transactional skills to bear in

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carrying out their roles. Informed and influential business leaders or ‘gurus’ have carried their messages throughout the world’s business organisations. From Taylor to Weber, Follet to Washington; Drucker to Handy, to Porter; Mintzberg to Kanter, Taiichi Ohno to Soichiro Honda; Zhang Ruimin to Lakshmi Mittal—each of whom were and remain influential in their industries, communities and beyond. If the intent behind the research and development of strategic models was to help business prosper, then they can claim success. The future challenge will be to bring all of these elements together through whole system change which includes strategy, structure and process. There has been tangible progress in the world’s economies over the past 50 years. If we compare economic prosperity today with any earlier time, ‘we see that every single region is richer than ever before in its history.’ And the enduring nature of capitalism has survived seismic shocks from the Great Depression in the 1920’s and 30’s to the Great Banking Crisis of 2008 interspersed with Pandemic, War and Political Upheaval. Through judicious intervention by government or judicious non-­ intervention by government, the average person in the world today is 4.4 times richer than in 1950. (Roser, 2013) GDP per capita in the USA at the time of independence was around $2500, but by 2018—roughly 240 years after independence—GDP per capita had increased by more than 20 times to $55,335. The trend in the USA can be used as a bellwether for others whether they are in Europe, in China, India or Japan each of which have demonstrated phenomenal economic growth. Of course, these high-level average figures conceal the reality of disparity in wealth distribution, the haves and have nots, the somewheres and everywheres, the left behind. But what they can’t conceal is that today, the world is a more prosperous place than it was, that there is less poverty and more opportunity. Behind macro-economic growth were the giants of corporate development. In the USA these included Coca Cola, Westinghouse Electric, General Electric, Pepsico, Ford Motor, Gillette, IBM and Walt Disney— which all came to life during the Second Industrial Revolution. Companies such as Honda, Matsushita—with brand names National and Panasonic— Toyota, Sumitomo, Mitsui, Mitsubishi, and Sony achieved global success through their product design and development, manufacturing or service

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prowess and effective management aligned to international trade and globalisation during the Third. As did companies such as Samsung, BP, Volkswagen, Lloyds and Unilever. Not only was it the established large organisations that could be successful through the globalisation of opportunity but newer, agile, technologically adept, ones too. Corporations such as Apple and Google founded in 1998; Facebook, launched in 2004 (with 2.5 billion users) and Chinese company Alibaba founded in 1999, are worth close to or into the trillions; by applying technologies with new management and organisational formats that saw them grow to be amongst the largest companies in the world. Amazon—whose business model, already a benchmark for the application of Industry 4.0 technologies—was bolstered by its remarkable adaptation to COVID 19’s far reaching implications, has become one of the world’s most valuable companies; and in 2021 the Tesla and SpaceX companies reached an astonishing market value. And of course, there are the thousands of SME’s that have prospered in every geography. Each industrial revolution brought the opportunity for value and wealth creation to those organisations that had the foresight, entrepreneurial drive, and preparedness to risk capital investment. Each one of these organisations also had the need for leaders and managers to take key decisions about strategy or direction, and managers to take responsibility for implementation and application. (Turner, 2021) Synthesizing the various points of view suggests that in contemporary organisations, business management comprises of a series of interlinked activities. In the first place, the organisation will have objectives. These might be related to shareholder value, rate of return on investment, market share or geographic expansion. They will represent where the organisation desires to be. Strategies will then articulate how the organisation intends to get there and to where resource will be allocated in so doing. It will be up to leaders and managers to convert strategy into action through their competences, talented people to convert tacit knowledge into explicit knowledge and a workforce to convert objectives into outputs based on their engagement with the overall purpose and clarity about their roles in contributing to it. The analysis of the evolution of these concepts has shown there was no golden ticket to guaranteed success and the sequence of challenge and response that epitomised early

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industrial and commercial ventures reflected a willingness to learn and to adapt on the part of entrepreneurs and leaders. These experiences showed the necessity of sufficient resources, as well as a clear understanding about intent, priorities, and actions among key stakeholders. Effective strategy execution depends on good communication, resource allocation, coordinated actions, clear goals and responsibilities. Of particular interest to this book, the need to overcome silo behaviour, sub-optimization, ineffective cultures, and a resistance to change were particularly important since too often the failure of organisation stemmed from the inability to translate a broad competitive strategy into the specific action steps needed to gain competitive advantage. (Porter, 1985; Rumelt, 2011; Kraaijenbrink, 2019) A conclusion that is of particular relevance is that some of these failures could be attributed to singularity—that is discreet interventions in a specific function such as the creation of a new strategy, the appointment of a visionary or charismatic leader or innovations in operational management- taking place with little or no coordination with other strategies or activities within the organisation. Sets of concepts or actions become conflicting rather than coherent. At best this would result in an uncoordinated, sub optimal activity, at worst it could destroy value. The objective therefore is to have three elements in place—these being of coherence, congruence and consistency—to improve the odds of a successful execution of strategy. The generation of business value—through such resources as IT- is contingent upon the availability of other complementary organisational resources and capacities. (Moreno et  al., 2019) A complementarity approach instead of one of singularity may enhance this process.

 omplementarity is the Antithesis C of Singularity It can be explained as follows; ‘Complementary goods are used together. Examples include right and left shoes; razors and blades; cake and icing; horses and carriages; cars and highways; TV sets and TV shows; computer hardware and software; and tea, hot water and a cup. The value of a group of complements in joint use is super-additive, that is, the things

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used together are more valuable (to someone) than the sum of their values in separate use.’(Baldwin, 2018) Competitive advantage will only remain an advantage if an organisation builds in progression as part of its value chain, progression means forward movement in the generation of tangible assets, intangible assets, and sustainable development. In this respect complementarity holds that the business phenomena of strategy, leadership, management, talent, and engagement, have complementary properties which, if recognised and directed, can have a broader impact than if they were regarded as independent activities. It is concerned with ‘the valuable, unique, and inimitable synergy that can be realized by integrating complementary resources provides an opportunity for the firm to create competitive advantages that can be sustained for a period of time.’ (Harrison et al., 2001) In this regard the concept of complementarity has been applied across organisational theory and practice. Most notably Milgrom and Roberts (1990) applied it to the shift from mass production to modern manufacturing, with the proposition that doing more of one thing increases the returns to doing more of another. ‘The theoretical model specified complementarities between an organisation’s strategy, structure, and managerial process….The core insight is that certain configurations of organisational structures and practices are associated with a firm’s competitive advantages.’ (Jackson & Ni, 2013) The challenge to all organisations is to ensure that the energy unleashed by such activity is experienced as positive force that has benefits to the whole organisation rather than conditional potential that has benefits for a part. Complementarity is the principle that the outcomes of singular initiatives will be improved where they take account of the potential synergistic opportunity with other initiatives. It brings together the properties of singular activities into a complementary framework which takes account of the totality of the phenomena. Progression through complementarity will have occurred when coherent, aligned, mutually reinforcing business strategies and management practices give superior outcomes (such as shareholder value, profit, customer satisfaction, market share or cost reduction) to those that would occur if such strategies or practices had taken place independently of one another. It is where the complementary agency of those strategies produces superior results. The core tenets of this hypothesis are:

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• The performance of the whole organisation will be improved when there is complementarity between elements of business strategy—for example between the technology strategy and the marketing strategy or the finance strategy. • The performance of the whole organisation will be improved when there is complementarity between business strategy, leadership, management, talent and engagement; where there is a culture of complementarity backed by systems and processes designed specifically to recognise and address complementarity. • The outcomes of business strategy will be superior if the strategy is complemented by leadership, management, talent and engagement practices that are specifically incorporated into the processes for achieving such outcomes. • The performance of leaders will improve if leadership competences are complemented by management competences; the performance of managers will improve if they complement traditional management competences with those traditionally ascribed to leaders. • Workforce engagement will improve if it is complemented by talent management practice that addresses engagement issues; the performance of talent management will be enhanced by talent aligned engagement practices. In particular, the book will address the idea that there are synergies to be had where organisational functions or practices go beyond singularity—strategies that take place with little reference to others- to complementarity. Complementarity holds that the business phenomena of strategy, leadership, management, talent or engagement, have properties which, if recognised and directed, can have a broader impact than if they were regarded as independent activities. This book is concerned with the idea of progress in organisations as we stand on the cusp of the Fourth Industrial revolution or Industry 4.0. There are elements of business strategy that can stand alone. But there are elements that would benefit from being linked to and associated with others as shown in Fig.  1.2. It is to the latter that complementarity applies.

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complementarity between leadership and management

complementarity between business unit or functional strategies

complementarity between talent management and workforce engagement

complementarity in organisation design and development complementarity outcomes and benefits for the whole organisation

Fig. 1.2  Complementarity—at the core and at the periphery

A confluence of technologies will transform every aspect of how organisations operate; from the design and creation of products and services to how they are distributed to market. The ubiquity of new technologies will ensure its presence in every aspect of life and work. The context within which business takes place will be radically different—a great reset or a great transformation. The challenge will be to put in place a business model to take advantage of the opportunities. (Turner, 2021) ‘Strategic coordination or coherence is not ad hoc mutual adjustment. It is coherence imposed on a system by policy and design. More specifically design is the engineering of fit among parts, specifying how actions and resources will be combined.’ (Rumelt, 2011) Complementarity will be a fundamental consideration in this process.

The Structure of the Book This chapter has covered the nature of industrial revolutions; how organisations have adapted to date; and some of the challenges ahead. I also outlined the idea of progression in organisations and how complementarity can enhance the execution of business strategy. Chapter 2 will look in

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more detail at the characteristics and nature of the Fourth Industrial Revolution, some of its opportunities and challenges and the strategic options open to organisations as they navigate the transformed industrial and commercial world. The issues to be addressed are about the nature of strategy, of leadership and management and the role of talent and workforce engagement in the face of these dramatic, powerful forces for change—which are themselves compounded by a compelling narrative on equality and diversity in race and gender; and the impact on life and work of COVID 19. Chapter 3 will concentrate on the concept of Complementarity and its relevance to business. It will define complementarity and evaluate its possibilities; provide a literature review of how the subject has evolved from its basis in quantum physics and show how the concept can be applied in the milieu of modern business management. It is proposed that a comprehensive response to the new, challenging context will be enhanced if the elements of Strategy, Leadership, Management, Talent and Engagement become mutually reinforcing. Chapter 4 will seek to apply the concept of Complementarity to strategy setting and strategic choice with the hypothesis that single issue competitive advantage may not be the only option available to organisations in Industry 4.0. As such, prosperity will not only come about by pace and agility; or by cost leadership or differentiation; but by the ability to make sure that every investment creates advantage across the whole organisation; and that such investments are mutually reinforcing. To achieve this will require strategies that recognise complementarity. Chapter 5 will apply a similar process to the subjects of leadership and management with a working hypothesis that the qualities of leadership and the qualities of management, when combined, produce more than the sum of the qualities of leadership or the qualities of management as singular instances. The outcome will be a complementarity model of leadership and management. Chapter 6 will analyse the potential for Complementarity in talent and engagement with a working hypothesis that the activities of talent management, when combined with and complementary to the activities of employee engagement, produce more than the sum of the benefits of each when treated as singular events. The outcome will be a complementarity model of talent and engagement. Chapter 7 will review Complementarity in

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organisation design and development with the hypothesis that when the qualities of leadership complement those of management which in turn complement those of talent management and employee engagement in a holistic model of organisation, the outcomes will exceed the sum of each of these phenomena as singular events. The outcome will be a complementarity model of organisation. It will focus on the creation and dissemination of knowledge, an emphasis on collaboration to ensure that knowledge is applied in an optimal way across the organisation, leaders and managers who are committed to organisation wide goals and objectives as much as functional or business unit ones; talent that is regarded as a corporate resource and is deployed for the benefit of the wider organisation; and workforce engagement that is based on knowledge, skills, attitudes and behaviours that add to the strength of the organisation as a whole. Chapter 8 will review the knowledge, skills, attitudes, and behaviours required to ensure that the concept of Complementarity is applied to optimum effect. It will focus on organisational competence and how this will be developed with the application of complementarity; and the leadership and management competences to facilitate this process. It will cover the meaning of competence at all levels, a literature review on the subject and a methodology for identifying the competences required in a complementarity system, organisation, and culture. Finally, Chap. 9 will present 20 important conclusions and outline the benefits of taking a more comprehensive, holistic perspective when considering the areas of strategy, leadership, management, talent and engagement and highlight the benefits of so doing. Excellence in the singularity of a strategy—such as cost leadership or differentiation, or the vision of charismatic leaders or innovations in operational management- underpinned the achievement of competitive advantage. But now, a confluence of technologies will transform how organisations operate; how they design and create their products and services and how they distribute them to market. These developments will benefit organisations that are able to adapt and to integrate their operations and services in an ‘extended ecosystem.’ The context within which business takes place will be radically different—a great reset or a great transformation. The challenge will be to put in place business models to take advantage of the opportunities, but the question is, what is the best business model—‘as our knowledge becomes wider, we must always be

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prepared therefore to expect alterations in the points of view best suited for the ordering of our experience.’ (Bohr, 1929) We are on the brink of a Fourth Industrial Revolution which will fundamentally alter the way we live, work, and relate to one another. ‘In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.’ Robotics, advanced materials, genetic modifications, the Internet of Things, drones, neuro-technologies, autonomous vehicles, artificial intelligence, and machine vision, will become integrated into physical, social, and political spaces, altering behaviours, relationships, and meaning. Fundamentally, Society 4.0. and Industry 4.0. will bring about significant shifts in the way that economic, political, and social value is created, exchanged, and distributed. In this context, an important question is how can commercial organisations adapt their business models and modus operandi to compete successfully? This book seeks to address the point by applying the concept of complementarity to business areas that are usually dealt with independently—these being Strategy, Leadership, Management, Talent and Engagement. The point of view is that organisational success will come about not only by singularity—discreet interventions in these areas— but also by complementarity—organisation wide interventions that have synchronicity—connecting each of the functions to a broader purpose. Complementarity means organisational constructs and actions that are collaborative, multi layered, multi-faceted and add to the competitiveness of the whole organisation. The argument being put forward is that whilst the factors of an organisation will continue to affect each other in one of three ways: independent, substitutive, and complementary, it will be towards the latter that a greater level of importance is attached.

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Turner, P. A. (2021). The making of the modern manager. Palgrave Macmillan. Ulrich, D., & Smallwood, N. (2011). What is talent. Michigan Ross School of Business, Executive White Paper Series. execed.bus.umich.edu/execdev/.../ dulrich_wp_what_is_talent. Vance, R. (2006). Employee engagement and commitment, SHRM. https:// www.shrm.org/hr-­today/trends-­and-­forecasting/special-­reports-­and-­expert-­ views/Documents/Employee-­Engagement-­Commitment.pdf Wilson, J.  F., & Thomson, A. (2009). The making of modern management. Oxford University Press. World Economic Forum. (2019a). The importance of collaboration in a connected world. https://www.weforum.org/agenda/2019/01/how-­collaboration-­is-­ the-­modern-­company-­s-­secret-­weapon/ World Economic Forum. (2019b). HR4.0: Shaping people strategies in the Fourth Industrial Revolution. http://www3.weforum.org/docs/WEF_NES_White paper_HR4.0.pdf World Economic Forum. (2019c). 3 ways firms can master the digital challenges of the 4IR. https://www.weforum.org/agenda/2019/04/3-­ways-­digital­c hallenges-­f ourth-­i ndustrial-­r evolution-­c ybersecurity-­a i-­a rtificial-­ intelligence/ Yukl, G. (2010). Leadership in organisations. Pearson.

2 The Fourth Industrial Revolution

F ourth Industrial Revolution—‘Unlike Anything Humankind has Experienced Before’ We are on the cusp of a technological revolution that will have ramifications for the world’s economies and societies. It comes about during a 250-year cycle in which the development of the modern capitalist world can be set within a framework of Four Industrial Revolutions. A common theme running through the First, Second and Third was the belief that society was entering a new age in which existing technologies would become largely obsolete, setting off a migration of physical, financial, and human capital from established or traditional to alternative sources of value creation. Each revolution was accompanied by social, political and economic change. And each change was considered to be more dramatic than the one that had gone before. With each revolution came new ways of living and new means to live. And with each revolution came new ways to work, with technology development being the common denominator. In these scenarios, industrial and commercial organisations progressed through a sequence of challenge and response, which, for the most successful, led to innovations in organisation, business strategy, leadership and management. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_2

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Excellence was achieved by focus- on such strategic options as cost leadership or differentiation- or by visionary leaders persuading others to follow their charismatic style in pursuit of an exciting vision, or by innovations in operational management, revolutionising production processes. And now, a Fourth Industrial Revolution will, by both its scope, velocity, and system impact once again change the competitive landscape with radical alterations to the structure and functions of socio-economic systems to cope with a complex, knowledge-based economy. It will present opportunities such as lower barriers between inventors and markets; a more active role for artificial intelligence and the integration of different technics and domains (fusion). (Laursen & Foss, 2003; Ghislieri et al., 2018; Xu et al., 2018; Turner, 2021) These dynamics will involve the transformation of production, management, and governance. Organisational competitiveness will depend on the ability to adapt to these new circumstances as well as integrate new technologies across the value chain from product design to sourcing of materials in the supply chain to manufacture to marketing. However, it is not just concerned with technology applications and as McKinsey (2022) note, the Fourth Industrial Revolution will be people powered—‘Companies at the forefront of the technology frontier are empowering their workers with digital technologies—and the skills they need to use them.’ Pervasive machine automation applications, together with borderless and dynamic environments will converge in almost every aspect of industry and commerce, from smart factories using the new developments to increase productivity and efficiency, to smart offices combining digital systems to create new products and services. Undoubtedly, the consolidation of technologies into ‘a new innovative ecosystem’ has created high expectations. Its characteristics are the integration of the physical, digital, and biological worlds through Cyber-Physical Systems which communicate via the Internet of Things. They connect infrastructure, physical objectives, humans, machines and processes ‘across organisational boundaries, enabling the fusion between physical and virtual world, exploiting sensors, actuators, and computation power to transmit data in real-time for decentralised decision-making processes.’ The Fourth Industrial Revolution will be a continuous sequence that is likely to last for years or even decades as the application of technological innovations continues to

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grow, with the confluence of technologies forecast to reach its apogee in around 2030. It has been described as ‘markedly different from its predecessors’ (Schafer, 2018; Morgan, 2019; Díaz-Chao et al., 2021; Zheng et al., 2021) because of a combination of integrated circuits on microchips, memory units to store information, networks that help to enhance communication, software applications that provide a direct link to consumers’ needs and sensor capacity that allows artificial intelligence to analyse most things which were previously only accessible to the human mind. In business its impact will be the transformation of the frameworks of production, management, and governance. It will present opportunities to harness technology and extend the range of human capability. Some of the impact and potential responses are included in Fig. 2.1. The challenge is to ‘stay on the right side of history when the rules of engagement are changing so rapidly.’ (Johnson &

Fourth Industrial Revolution

Impact on Business and Commerce

Organisational Response

• A confluence of technologies • Cloud Computing • Artificial Intelligence • Blockchain • Mobile devices • Internet of Things • Digital Energy, Health, Transportation,Communications, Production

• Transformation of the frameworks of production, management, and governance • Industry 4.0. • Pervasive machine automation applications • Smart and Collaborative Robots • Cyber physical systems • Smart Worplaces • Borderless commerce

• Progression multifaceted and connected • Strategic progression on multiple fronts • Organisation from hierarchy to ecosystem • Leasership and Management competence and agile governance • Workforce Progression- knowledge, skills, attitudes, and behaviours • A holistic view of business- complementarities and synergies sought

Fig. 2.1  The Fourth Industrial Revolution—characteristics, impact and response

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Markey, 2020; Peccarelli, 2020) These developments will benefit organisations that are able to adapt and to integrate their operations through a ‘great reset’ or ‘great transformation.’ It is forecast that competitive advantage will become more transitory thereby requiring organisations to adopt radically new types of competitive strategy, from maintaining cost competitiveness but also delivering customer service or attracting talent. For some it will be an opportunity to inspire, and foster collaboration, a reinvention, a reshaping of how organisations operate with positive, complementary and synergistic experiences in intercultural management interactions (Barmeyer & Mayer, 2020; BCG, 2020; Deloitte, 2020; McKinsey, 2020)

 Confluence of Technologies and Their A Applications—From the Analytical to the Predictive Inevitably, technologies underpin the Fourth Industrial Revolution and Industry 4.0. where Industry 4.0 largely represents the ‘factory of the future’, smart manufacturing technologies and the convergence of a wave of innovative operational technologies with Internet-driven IT. (Martinelli et al., 2019) The core themes will be the fusion of smart and intelligent systems, automation, and digitalized production. These include the cyber-physical—a collection of transformative technologies that connects the operations of physical assets and computational capabilities and often go hand in hand with the Internet of Things—a world-wide information network of interconnected physical objects (sensors, machines, cars, buildings, and other items) that enables the collection and exchange of data, allowing interaction and cooperation of these objects; and based on standard communication protocols. The decisions within these systems are informed by Big Data—the collection and analysis of large amount of available data, processed in higher volumes, with higher velocities and in greater variety. The foundations for these activities are Cloud Technology Systems which provide online storage services for all applications, programmes, and data within virtual servers- rather than locally or on a personal computer.

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Artificial Intelligence that ‘thinks’ in a rational way—includes machine learning to recollect patterns and features directly from data leading to actions based on algorithms—will drive both strategy and operations with the disciplines of natural language processing, knowledge representation, automated reasoning, machine learning, computer vision and robotics. Systems security will be enhanced by Blockchain which is a database that creates a distributed and secure ‘digital ledger of transactions, including timestamps of blocks maintained by every participating node.’ A combination of these multiple systems will enable Augmented and Virtual Reality applying technologies to create an interactive world as well as extensive automation and industrial robots. (Zheng et al., 2021) The connected things, automation, people and organisations are bound by data and information interactions which operate on five dimensions— connection, collection, computation, communications and co-creation. (Bonamigo & Frech, 2020; Fakhar et al., 2021; Hamdan et al., 2021) The breadth and depth of new technologies will form a ‘fertile layer’ of innovation which will span most industrial and commercial organisation from software development to industrial production to supply chain services. Furthermore, technology is moving beyond the analytical to the predictive. Smart workplaces will see physical systems cooperating and communicating not only with each other but with humans in real time, integrating systems horizontally—for example, from supplier to customer- and vertically from the shop floor to enterprise resource planning in smart factories or in smart service provision. To this latter point are the incidence of such things as wearables to facilitate access, supplies or messaging; work performance informed by real-time metrics and supported by machine learning for root cause problem-solving of issues; monitoring of equipment in real-time to predict faults and then allowing machines to learn from their own mistakes and adjust their settings to improve quality output. The power of combining these new technologies will enhance the application of robotics, advanced materials, genetic modifications, drones, neuro-technologies, autonomous vehicles, and machine vision. (McKinsey, 2018; Skilton & Hovsepian, 2018) The outcomes will be cost savings by improvements to supply chains; time savings from real-­ time data; and new product developments by processing massive amounts of data in product design and productivity gains.

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New technologies will be ubiquitous; they will converge in unprecedented ways and combinations and their reach will be global. At organisational level, the velocity and scope of change will have a massive impact. Manufacturing, Professional Services, Wholesale and Retail, Information and Communication, Financial Services, Construction and HealthCare will all be affected. In this context, the potential of the Fourth Industrial Revolution can be mapped across digital energy, which will use digital technologies to manage the generation and distribution of energy from traditional as well as renewable resources; digital health—digitisation will have a significant role in improving healthcare by comprehensive monitoring of health status, better preventive care, more accurate diagnosis and efficient delivery of treatment; digital transportation and autonomous vehicles; digital communication—using sophisticated wirelessly connected smartphones; e-commerce web services and image and voice recognition and chatbots; and digital production. In its scale, scope, and complexity, it is ‘unlike anything humankind has experienced before’ (Gilchrist, 2016; Schwab, 2016; Caruso, 2018; Koh et al., 2019; Mazali, 2018; Marengo, 2019; Philbeck & Davis, 2019; Accenture, 2019; King, 2020; Kipper et al., 2020) The Fourth Industrial Revolution will take place in an environment of pace and unrelenting change spanning both technology and human resources with the union of physical systems and virtual systems. These transformations have implications for competitiveness; the strategic choices organisations have in how they respond to the new dynamics; requiring ‘human ingenuity of the highest order.’

F ourth Industrial Revolution—Strategic Discontinuity and Transformed Business Models The management challenges of the Fourth Industrial Revolution and Industry 4.0. will be immense and will span both technology and human resources in the context of significant social change and the union of physical systems with virtual systems. Not only will organisations have to

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deal with inherent strategic discontinuity forcing them to rethink their own business models in fundamental ways, but also with significant disruption as Industry 4.0. technologies rapidly become dominant. Four interpretations of this new environment are a Socio oriented approach which addresses the impact on contemporary society; a Competence approach which focuses on new skills; a Production approach reflecting large scale automation and a Behaviouristic approach which deals with the human impact of object- to- object interaction. Whatever perspective is taken it is assumed that competitive advantage may no longer be as durable as it once was. Instead, it may become transient. (Popkova et al., 2019; Cagnetti et al., 2021; Lanteri, 2021) This conclusion, precipitated by the confluence of technologies and their myriad applications as outlined above, means that organisations will have to adopt a new organisational logic, with different approaches to strategy, stewardship, and governance, and create new structures of collaboration and high levels of knowledge worker performance. Not only will these factors be strong and powerful forces for change in the first instance, but they will also be critical to the sustainability of business strategy in the second. Organisations will deal with the turbulence and volatility with faster and more frequent strategic decisions and a rewrite of the rules of strategy. Furthermore, there will be greater awareness of the social impact as demonstrated by the Deloitte (2020) survey of C-suite executives where leaders were balancing the transition to Industry 4.0 by ‘capitalizing on advanced technologies to help propel their businesses forward while acting in more socially responsible ways, particularly in the area of environmental stewardship.’ Progression will be achieved in ways that are multifaceted and connected and therefore the principle of fusion will be the key to innovation and interconnected supply or value chains both within organisations and across borders. It is in this context that complementarity will be an important consideration. The potential for a ‘supply side miracle’ with the transformation increasing productivity and ultimately changing the competitiveness of companies and regions on the one hand will be matched by an equally dramatic demand side revolution as customers and clients amend their expectations for products and services and how they are delivered. If the advantages of new technologies are to be realised,

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though, systems will need to be integrated, enterprise wide, virtually, and physically; with an extended ecosystem of business partners, and an efficient responsiveness to change. In short, management excellence across multiple fronts. Organisational competitiveness will depend on the ability to integrate new technologies along the value chain from product design to sourcing of materials to manufacture to marketing. And having integrated them to secure a favourable competitive position, the willingness and capability to change if necessary. (McKinsey, 2015; Schwab, 2015; Rabeh et al., 2017; Johannessen, 2019; Koh et al., 2019; Mazali, 2018; Reif, 2018; Skilton & Hovsepian, 2018; Moueddene et  al., 2019; Zunino et  al., 2020; Mathivathanan, 2021; Turner, 2021) In such an environment progression in organisations will depend on adapted business models and excellence and agility in operational processes relating to how the business model is implemented. For some, the challenge will be no less than reinventing the future of work which will require ideas and initiatives from every quarter. It is likely that this reinvention will not be a single experience but one of continuous learning and hence continuous change. It is for these reasons that the recommendation to ‘institutionalize’ ownership of change is important in building an operating environment (structures, people, culture) that is able to ‘collate and deploy useful data and drive true collaboration.’ (Accenture, 2020)

Organisational Responses to a Transformed Environment The responses to these challenges and opportunities—agile governance which is ‘adaptive, human-centred, inclusive and sustainable’—will apply equally at to commercial organisations. (WEF, 2018) The context for this agility will be in strategy, organisation, management competence and workforce skills. And a holistic view of how each of these impact on organisational performance because ‘the acceleration of innovation and the velocity of disruption are hard to comprehend or anticipate …there is clear evidence that the technologies that underpin the Fourth Industrial

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Revolution are having a major impact on businesses.’ (Schwab, 2016) The impact will be best addressed across the whole organisation rather than in a single function or unit. • Strategic progression on multiple fronts To date, and within the many schools of strategy, it may be said that there are two key approaches to setting and crafting business strategy: which are the positioning and the resource-based points of view. In the former, the strategic drivers are derived from establishing a focus on a chosen industry or business that is either based on lowest cost of production or differentiation. Having made this decision, the organisations would seek a coherent approach in its activities along the value chain— comprising of support activities such as HR or technology and primary activities such as inbound logistics, operations, outbound logistics, marketing and sales and service. (Porter, 1980 and 1985) In the latter, the resource-based approach, organisations will focus their strategic attention to cultivating ‘unique resources and capabilities to develop a durable competitive advantage to best their competitors.’ However, the advent of digital technologies and globalization with the emergence of different competitive landscapes, means that ‘both positioning-based and resource-­ based principles are increasingly perceived as insufficient to guide strategic decisions and their tried-and-tested applications need to be reconsidered.’ (Lanteri, 2021) The approach to setting strategy and crafting its implementation will therefore likely change. In the first place, there are indications of the need for a strategy that goes beyond a single focus that has been the case in other contexts. The multiplicity of technologies, their ubiquity and the level of overlap require an approach that not only develops a functional strategy—marketing, finance, HR- in support of a specific type of competitive advantage, low cost or differentiation, but ones that are relevant to a multiplicity of advantages and so will be cross functional, inter functional and intra-functional. It may not be enough to define strategy in terms of a single functionality or a single measure of effectiveness. Instead, the emphasis will be on the ability to craft strategy across multiple fronts and in ways that are complementary to each other- and back these up

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with resources allocated with complementarity in mind. This means not only the ability to define strategy in terms of hurdle rates or rates of return for a single investment but of strategy as a series of interconnected activities with varying degrees of individual impact- singularity—but with greater degrees of impact collectively- complementarity. Strategy and its associated methods of stewardship and policy setting will take greater account of the benefits across the whole organisation rather than one geography, business unit or department. It will go to the heart of how organisations operate to the new requirements. Where this is successful i.e. ‘understanding business strategy from the perspective of interdependencies’ can generate opportunities to be more productive, profitable, and innovative than their competitors—as demonstrated by ‘Disney’s ability to generate value for customers not only from producing blockbuster movies, such as Frozen, but also profit from related demand for TV, music, and merchandizing, as well as theme park content in the wake of such box office successes.’ (Yang, 2021) Strategy setting will be more inclusive than when it was previously the domain of dedicated strategists or the most senior of business managers. New technology applications based on such factors as network integration, intelligent technology and flexible automation will generate new competitive opportunities. To take advantage of them, ‘when developing a strategic vision, it is important for companies to pick the relevant data out of the information flow about the external and internal environment and convert it into organisational knowledge, which is a core management resource.’ Strategy setting will require analysis of the impact across multiple domains—functional, structural and geographic; operational decision making to be more collaborative and processes that take account of the skills and contribution of a broader swathe of the workforce than was previously the case. (Kolyasnikov & Kelchevskaya, 2020; Turner, 2021) There are benefits to so doing and research has shown that where the technologies of Industry 4.0 are combined—in such areas as lean production—then they can add extra value to customers; limits can be exceeded with increased speed of information sharing leading to greater competitiveness. In this respect a complementarity of strategy has the potential to increase productivity and flexibility. The challenge facing organisations is to identify and understand how precisely new

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technologies can create advantage in their specific circumstances because Industry 4.0 is a ‘digital container’ (Chiarini et al., 2020; Cagnetti et al., 2021) filled with many different technologies, principles of application and potentially multiple management systems. To maximise levels of performance will require the organisation to understand the status of resources at its disposal—their value or rarity compared with competitors—and to ensure that these are deployed to maximum effect. (Barney, 1991) Progression through complementarity will have these principles at its heart. • Organisation from hierarchy to ecosystem Organisational structures and practices are interdependent, and so rather than a single best practice for organizing, ‘complementarities suggest that the effectiveness of one organisational element may be dependent on the presence or absence of another particular element.’ This brings forward the importance of different types of configurations relating to fit, congruence, or synergies. (Jackson & Ni, 2013) If, as forecast, there is ‘horizontal integration through value networks, end-to-end digital integration… across the entire value chain and vertical integration and networked manufacturing systems’ then the traditional Weberian type of hierarchy may not provide the most appropriate option for organisation design. Horizontal integration facilitates collaboration for dispersed value chain partners by integrating their information and communication systems and processes. Maximising the outputs of this integration will be brought about by an organisation design or structure that is geared towards the free flow of information and process. In a similar way, end-to-end digital integration allows cross-linking from raw material procurement to manufacturing systems, to product sales and marketing. Vertical integration involves networked systems that link information flows from product development to manufacturing, procurement and logistics and sales which are dependent on cross-functional collaboration. (Sorooshian & Panigrahi, 2020) By enabling a holistic approach towards an organisation’s management processes because of the potential for systems integration, the Fourth Industrial Revolution is necessitating a review of the structure and

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process of organisation such that ‘ecosystems not companies are becoming a new unit of competitive analysis.’ (Fatorachian & Kazemi, 2021; Lanteri, 2021) In this scenario ecosystems are integrated networks of separate entities that co-create value in which organisations operate as nodes in a network. The impact of such structures will be across the whole organisation and hence there is the need to build flexibility and responsiveness into structures, systems and processes, not only because of possible market volatility—which relates to both challenge and opportunity; but also, the requirement of shorter product lifecycles, possible higher product complexity, and the necessity to work within dynamic supply or production chains. (Rabeh et al., 2017) The hierarchical structure which has served well over the centuries may not always be the best way of ‘leveraging the internal technology ecosystem within the company’ or indeed without. New types of organisation will be less about silos of specialists but more about dedicated project teams, focused on implementing and exploiting technologies across the whole organisation, though these will still adhere to strict protocols. Hence, the difference will not just be about the many combinations of new technology but the management processes and organisational constructs for working with them. There is the potential to integrate manufacturing and services in new forms of business model, creating ‘smart firms’ which not only deepen the integration of technologies with both product design and development but also build responsive production processes. Responsiveness will be facilitated by new types of organisational structure. (Dean & Spoehr, 2018) In the short term the organisational challenge will be one of transition to new methods, systems, and processes, from legacy to new systems with implications for the transformation of the organisation’s business model. In the longer term the challenge will be to sustain flexibility and responsiveness within an agreed strategy or framework. The replacement of single source technology with multiple technologies; and of singularity with complementarity does not mean replacing strategy and organisation with anarchy. Instead, it means a new outlook; one that encourages innovation and diversity of method but does this within a framework of competence. Four considerations will be important to organisation, which are the structure of the working environment and the culture of decision

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making; secondly the ability to integrate new systems either in their totality or into a legacy of existing systems; third the necessity to consider the social impact of the transformation and finally the impact on the workforce of new business models, structures, systems and processes. (Turner, 2021) In this context, success will relate to capabilities on how the organisation can harness and organise the skills of people, infrastructure, equipment, or tools through appropriate organisation in order to achieve certain objectives (Jacobs & Pretorius, 2020) Both management and workforce competence are highly relevant in support of this point. • Leadership and Management Competence and agile governance Of course, the whole will comprise of interlocking parts, and these will require a high level of management competence to ensure their effectiveness. Leaders and Managers will continue to be responsible for innovation outcomes (the ‘what’ and ‘what to do’), the innovation process (the ‘how’) as well as the corresponding determinants of innovation (the ‘why’). In addition, the complexity of human resources interfaces will also require managers who ‘know how to behave.’ However a key attribute of those who will lead and manage organisations will be responsive decision making and a willingness to adapt rapidly, in short, agile governance in which business leaders instil a culture of learning to overcome knowledge gaps between the old and the new. There are practical implications and successful adaptation will depend on leaders and managers who are able to change their perspective from ‘problem-focused to solution-­ orientated.’ Where leaders and managers embrace the potentialities of the new technologies then these will be converted into actual organisational advantages or benefits, but amongst the barriers to the implementation of these technologies, ‘apart from the necessity to invest high financial resources,’ are the low level of necessary support from the management of enterprises. (Barmeyer & Mayer, 2020; Stachowicz et al., 2021; Turner, 2021) The necessity for change is reinforced by fast-changing competitive landscapes which will: force companies to reconfigure and redeploy assets and redesign both internal and external structures to remain successful. Doing so requires

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embracing strategic agility and cultivating a set of dynamic capabilities which together consist of understanding change in turbulent ecosystems, making strategic decisions to seize emerging opportunities, and effectively transforming organizations to navigate VUCA environments. While dynamic capabilities help organizations respond to change, it is a truism that they are not and cannot be experienced at doing something new in changed contexts. (Lanteri, 2021)

The ability of the organisation to respond will depend on competences of leaders and managers that are appropriate for the new environment. Such competences will be particularly relevant during any transition from legacy to new technologies but there are added dimensions. In particular it is the incidence of multiple technologies that will stretch the boundaries. This is no longer about putting in an Enterprise- wide logistics or HR system, but the probability of multiple new systems being put in place simultaneously with frequent sometimes radical updates. The second competence relates to the ability to manage in distributed or network organisational forms and cultivate the culture within which such organisations and their workforces can thrive. The new forms of organisation will require agility and adaptability on the part of the leaders and managers. Their environment will be one of Cyber Physical Systems, and intelligent and connected products each of which will be constructed outside of the parameters of the rigid organisational chart and its emphasis on clear roles and responsibilities. Hence the capabilities in monitoring, controlling and systems optimisation on the one hand; (Rosin et al., 2020) but the creation of shared values on the other. Managing in the new organisation will require the core competence of agile governance creating business responsiveness and the ability to initiate a rapid response in the face of uncertainty. But this will only be the case if managers are able to use shared information effectively. In this respect managing internal and external collaborative networks will be one that underpins the new ways of working. Building this environment will depend largely on the ability to motivate and engage a diverse, collaborative, and empowered workforce. The connectivity and complementarity of new organisations mean that ‘decisions in response to strategic or operational choices will not be in the hands of a single decision maker but will entail greater

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consensus from a greater number of people who have greater knowledge and information on which to base their positions.’ (Turner, 2021) This is indeed a radical departure from the hierarchical approach that has dominated the organisational world for many decades. • Workforce Progression—knowledge, behaviours

skills,

attitudes,

and

The introduction of new technologies in industrial work systems will create sociotechnical challenges affecting overall system performance as well as human well-being. This new environment will have implications for the implementation of new human systems where at the centre of the creation of technology solutions are ‘the aspirations, curiosity, creativity, competence, and passion of the people who have imagined, prototyped, and tested a technology’ hence recognition of the centrality of people in organisational life. (Lee et al., 2018; Kadir & Broberg, 2021) The understanding of the extent to which technology acts as a complement or substitute is an area of debate. On the one hand technology can decrease the value of work by performing substituting for humans, but on the other it can increase the value of other work by making it more productive—the complementarity effect. A positive take is that a characteristic of the new organisations that emerge out of the maelstrom of revolution may be ‘a curious workforce of builders and problem solvers …. in whole brain thinking organizations; operations workers, technical or systems specialists, systems facilitators and work progressors.’ (NESTA, 2017; Accenture, 2019; WEF, 2019; Pedota & Piscitello, 2021) The success of any strategic or operational initiatives that concern new technologies will benefit from the momentum of employees whose tacit knowledge offers great potential. This buy in will be dependent on how effective the manager can be at engaging the workforce affected by these developments though evidence suggests that this will require significant effort. (Lee et al., 2018; Ghislieri et  al., 2018; Hahn, 2020; Schneider & Sting, 2020) For the organisation to progress its workforce must too. The impact of technology-enabled digital manufacturing or service delivery will change both the nature of the workforce—knowledge skills attitudes and behaviours—and how members of this workforce interact

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in a rapidly and continuously changing operational environment. Amongst the unique challenges in workforce management will be technology acceptance and uses of technology which are not only based on knowledge of technology applications but also emotional attitudes (trust towards technology, perceived threat) and the type of workplace-based training in organisation. In addition, team identification is important for the development of positive attitudes where humans and technologies (such as robots) come together. There may be a growing incidence of cross functional or self-managed teams where sharing knowledge and experience defines the best way to reach goals, prioritize activities, and focus its effort. (Ellis, 2018) How to ensure a workforce, that has the right skills, in the right place, at the right time will be high amongst the concerns and challenges of managers. The digital revolution is also a human revolution—‘it is people who will bring it to life in businesses’ and they will play a strategic role on the one hand by determining the organisation’s strategy, be responsible for implementing the strategy, and monitor progress against this and where necessary intervening in ‘the cyber-physical production system.’ (Ghislieri et al., 2018; WEF, 2019; Porubčinová & Fidlerová, 2020.) The preparation of a workforce is likely to bring with it reskilling, upskilling and lifelong learning, an essential competence to prepare the workforce for the new industrial paradigm. (Koh et  al., 2019; WEF, 2019) The forecasts about the impact of technology on the workplace cover a broad spectrum—‘some fear a robot apocalypse that will eat up all jobs, leaving mass unemployment in its wake. Others are techno optimists and see a future where advancing technologies will create more new jobs than they eliminate.’ Whatever scenario plays out the effect of future technology innovation will be on how people work, the tasks that make up jobs and how individuals and groups or teams combine tasks into work systems. (Kochan, 2019) Industry 4.0. will have a far reaching and profound effect. • A holistic view of business—complementarities and synergies sought There is an impending radical shift for employees, organisations, and society as a whole. In this context ‘work and the meaning of work are

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revolutionising as technology matures and organisations are driven by digitalisation and smart ecosystems. This shift will require a balance between technological innovation in the workplace with new jobs and employment concepts.’ (Ross & Maynard, 2021) There has been some precedence for this though perhaps not on the scale envisaged in future. As organisations developed through the volatility that has been an inevitable feature of revolution, first owners and subsequently managers tried to bring order to the way in which businesses were run. Organisational hierarchies gave clear lines of responsibility, objective setting gave clear accountability and functional specialisation created centres of excellence in such areas as marketing and finance, technology, and HR.  Formal structures and the application of specialist skills were essential to deal with the complexities of globalisation. Nevertheless, VUCA—volatility, complexity, uncertainty and ambiguity, were never too far away and organisations continued to adapt, using new forms—networks and matrices, new approaches to strategy—crafting and collaborating, new leadership and management competences and new approaches to both talent (inclusivity) and workforce engagement (empowerment). work and the meaning of work are revolutionising as technology matures and organisations are driven by digitalisation and smart ecosystems. This shift will require a balance between technological innovation in the workplace with new jobs and employment concepts.

The advent of the Fourth Industrial Revolution will require organisations to continue along this path, responding to challenge in innovative and dynamic ways. Some forecast an end to traditional strategy others see an evolution in approach arguing that the seeds of change were set during the period of technological advancement of the Third Industrial Revolution. What most will agree on is that the new age will be one of immense opportunity to those who are able to set up business models that allow agility and dynamism whilst not losing sight of the overall goal. A characteristic of this will be the need to view the ‘wholeness’ of the business, one that favours a complementarity point of view. The implications are significant. In the first place, business strategy will be more holistic, where functions or business units set strategy for a particular area

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but increasingly include impact- opportunity- to apply their principles in others. Here, the singularity of strategy setting is replaced by the complementarity of strategy setting. Secondly, leaders and managers will need to be able to respond to transformation with agility and agile governance. Third, the workforce will be active in seeking and disseminating their knowledge of operations across functional or unit boundaries. And finally, organisations will not be static entities but become fluid ecosystems of internal and external partners. The World Economic Forum speculated that the implications of the Fourth Industrial Revolution would fundamentally alter the way we live, work, and relate to each another. ‘We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive.’ (Schwab, 2016) The response from business organisations will increasingly be by taking a holistic perspective on all aspects of organisational decision making. It will present some of the biggest challenges of all.

Progression—Organisational Knowledge, Management Competence and Complementarity A multiplicity of forces is having a disruptive effect on the competitive environment amongst which are globalisation, mass customisation and a proliferation of technologies and their applications—notwithstanding a global pandemic. Hence the ‘traditional’ business enterprise is facing new, possibly unprecedented business challenges. ‘The demand for faster delivery times, more efficient and automated processes, higher quality and customised products are driving companies.’ The effect is one of the transmutation of business structure. The competitiveness of organisations will depend on whether their value-creation systems are agile, efficient, and adaptable. Where this is the case, and where organisations are able to leverage their resources and unique or rare capabilities then there is the potential for advantage and progression. For example, whilst both lean manufacturing and factory digitalisation individually contribute to

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improved operational performance, when used together, they have a complementary (or synergistic) effect that is greater than their individual effects combined. Identifying, modelling and implementing such combinations will be a key aspect of the new environment. Where this is successful then there is potential for both supply-side complementarities—an organisation’s synergies from its resources and capabilities—and demand-­ side synergies through customer complementarities An analysis of the business models developed by Amazon.com for example identified how customer complementarities—network effects and one-stop shop effects—supported growth and competitive advantage. (Aversa et  al., 2021) Amazon Prime is an example of a business model where, customer groups benefit from a large number of complementarities from one stop shop and network effects. The requirements for complementary resources that they are positively correlated and that they produce synergistic effects on performance that are greater than their individual effects combined. The Fourth Industrial Revolution and Industry 4.0. provide the opportunity to ensure that these resources are identified and their potential for performance improvement realised. Having strategies that facilitate such an approach, leaders and managers who have the competence to deliver it, a workforce that is fully engaged with the process and an organisation structure that facilitates it will be key elements. In turn, these will require ‘timely and dynamic adjustments in organisational and technology strategies to ensure that an alignment is achieved and maintained between the organisation’s capabilities and the changes impacting its value-creation requirements.’ (Jacobs & Pretorius, 2020; Mahmood & Mubarik, 2020; Buer et  al., 2021; Zheng et  al., 2021) These powerful forces will affect the entire value chain by simplifying manufacturing and engineering processes, improving the quality of products and services, optimizing relationships between customers and organisations and providing new business opportunities and economic benefits. (Kohnova et  al., 2019; Ślusarczyk et al., 2020) Bringing together the many and varied demands will require organisations to pay more attention to the convergence of various initiatives or strategies. ‘For the successful implementation of innovations, a changed mindset and the communication of a clear strategy in regard to those innovations among all parties involved is

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necessary…. furthermore, the transformation needs to be considered as a long-term process with cyclical, successive phases consisting of various trials with an organisational nature which is inter-organisational and cross-functional.’ (Preindl et al., 2020) The success in making the necessary changes and innovations, will require the support of the whole organisation and to cope with these unprecedented dynamics will require organisational ambidexterity. The objective will be to connect the physical and vertical worlds in the quest for progression, seeking synergies along the way. (Bittencourt et al., 2021) The transitory nature of future competitive advantage demands the agility and responsiveness that are the feature of most commentaries on organisational strategies for the future. But will adaptation be sufficient or is the environment now pointing towards radical change. And so, success during the Fourth Industrial Revolution will depend on ‘the totality of its implementation.’ The new management paradigm will therefore comprise of inter alia ‘comprehensive integration and information transparency;’ increasing automation of production systems; selfmanagement and decision-making by objects; digital communication and interactive management functions. In addition, the need to build flexible workforce planning systems is paramount. The implication of the new environment of the Fourth Industrial Revolution is therefore related to new ways of strategy setting, business operations and structures more open and inclusive models. Vlatka Hlupic’s concept of a ‘management shift,’ seems relevant with the belief that people have unlimited potential; that everyone is connected; that they are looking for opportunities for continuous self-development and personal growth or have a ‘can do anything’ attitude. In response, those leading or managing the organisation will see challenge as opportunity, are content to release control in favour of collaboration, and are committed to ‘emergent collective action.’ (Hlupic, 2014) The response to the changed attitudes and behaviours of the workforce will be one of widespread cooperation and collaboration, with high levels of trust and a strong team culture. ‘Industry 4.0 is imposing a paradigm-shift towards organisation structures and human roles and activities. The role of people needs ‘to be placed in the centre as they are considered the leading component for a given revolutionary shift.’ (Flores et al., 2020) The role of

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the manager will be one of engagement, but the new context means that this takes place in complex networks with a renewed focus based on transparency, collaboration and inclusiveness.

Conclusion The Fourth Industrial Revolution stimulates advances in science and technology at an unprecedented pace, ‘in which the Internet of Things and its supporting technologies serve as backbones for Cyber-Physical Systems and smart machines are used as the promoters to optimize production chains.’ It differs in speed, scale, complexity, and transformative power and this advancement goes beyond both organisational and territorial boundaries, requiring organisational agility, intelligence, and networking. (Liao et al., 2017; Xu et al., 2018) The new economic paradigm envisaged by the confluence of technologies ‘makes the Internet (and data) a way to create value for people and societies and not only serve as a communication channel,’ it creates and environment which is more digital, more connected, more flexible, and more responsive. ‘Well-­ known social relationships are changing beyond recognition; we are moving from business-to-consumer relationships to peer-to-peer modes.’ (Morrar et al., 2017) It offers opportunity to those organisations that are able to define to where they want progression and how they are going to get there i.e. alignment between objectives and strategy. Complementarity will have a role to play in this process and evidence shows that there are innovational complementarities between such aspects as the Internet of Things and wider information and communications technology applications with correlation between the efficacy of this relationship and economic growth. The ‘introduction of complementary innovations’ will transform the potential application of known techniques. Examples include ‘the introduction of low energy consumption in sensors, and their declining costs, are boosting their diffusion; advanced machine learning and deep learning are now beginning to drive automation; the introduction of cloud connectivity is delivering low cost processing power and pervasive interconnection; and finally, new ways to connect monitoring and

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management systems.’ Where these linkages are recognised and exploited, there is the potential for such technology complementarity to have further impacts on service complementarity. (Montes, 2016; Martinelli et al., 2019; Edquist et al., 2021). How the organisation orchestrates its assets to take advantage of such opportunity will be critical. In so doing, new forces are at play and considerations will take into account the possibilities that single issue competitive advantage may not be the best course of action; that prosperity will not only come about by pace and agility but by the ability to make sure that every investment creates advantage across the whole organisation and that these will in turn create multiple competitive advantages. Strategic decisions about which markets to serve are intertwined with tactical considerations about which technologies will support those objectives. There are certain key steps that organisations may wish to review as they make the transition. In the first place there is the issue of the most senior leaders or managers up to Board level. What competences do Board members need for example, what should be the constitution of the Board, what new skills need to be brought in. And then, having addressed this question, there is that of readying the organisation from structure through to governance, from competences to resource allocation. The key question is in regard to readiness at all levels. Amongst the considerations here is that of accessing the talent needed for the new environment, which may not be just about replacement but also about upskilling and most likely reskilling as requirements change. And finally, the single issue that will define all of these considerations is that of choosing the right strategy. (Endow, 2019)

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3 The Origins of Complementarity

 omplementarity—From Quantum Physics C to Business Strategy Complementarity has been a subject of interest for over a century. Originating, simultaneously in both the scientific community—in particular, quantum physics—and across economic theory and practice, there has been rigorous debate about its meaning and relevance. Latterly, interest has spread to a diverse range of applications making it a potentially useful construct as ‘a new epistemological framework’ for thinking. The idea of complementarity has become one that was capable of wide generalization since it could be applied to many examples of conjugate or connected observables. In 1949 the editorial board of Dialectica, a quarterly journal of the philosophy of knowledge, stated that a proper understanding of this principle was the greatest single contribution of modern physics to philosophy. Interest has gathered momentum in subsequent decades. It has informed debate in international criminal law, American political development, the nature of global trade, in studies of poverty, in Darwinian evolutionary biology, from capitalism and sustainable development to the complementarity of faith and philosophy. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_3

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Why would this be the case? The answer concerns the universality of its doctrine and potential application. A concept that had multiple applications and could be used to explain a variety of outcomes was in itself attractive. Furthermore, the realms of a ‘concept,’ which Plotnitsky (2013) describes as a multi component entity, can be defined by the specific organisation of its components which may be general or particular in nature. But it is rare for a concept to have only one component and as it acquires further features it takes on a different hue. This is manifestly the case as the ‘concept’ of complementarity evolved from its early roots. And so, whilst the search for a sharper meaning of the term (as desired by Albert Einstein in his critique of the work on complementarity by his colleague Nils Bohr,) was a valid sphere of activity, it was inevitable that as the concept gathered more elements, it would become germane to a wider range of disciplines. Each piece of research or evidence has added to its lustre and its growing use in explaining phenomena across disciplines. Complementarity has been identified as a powerful tool in economics and business although there remain several alternative notions of its definition and application. (Topkiss, 1998) Understanding how it has evolved and the subsequent attempts to define it may help in deciding which of these notions may be a best fit for any particular organisation.

Complementarity—A Scientific Foundation At the acclaimed ‘Solvay’ conference in 1927, two Nobel Prize winners— Albert Einstein (Nobel Prize in Physics, 1921) and Niels Bohr (Nobel Prize in Physics, 1922)—went head- to- head over their differences of opinion on a field of quantum science—the nature of light. The essence of the debate (which continued for many years afterwards) was based on a contrast of two theories—wave and particle—which, when viewed separately seemed at odds with each other, but when taken together, appeared to provide an answer to the question being considered. It was out of this contradiction that Bohr concluded that the solution to many problems could only be explained when viewing the ‘wholeness’ of a situation

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where mutually exclusive events or characteristics come together in the form of completeness. In Bohr’s interpretation this meant light acting as both a wave and a particle, a point of view was the antithesis to one that was purely mechanistic or objectivistic. It was argued that there are phenomena which cannot be causally and unambiguously explained by traditional means. The profundity and universality of this powerful assumption with the crucial ingredients of joint completion and mutual exclusiveness—meant that it could be applied in a wide range of scientific fields. (Bohr, 1957; Plotnitsky, 1994; Katsumori, 2011; Miller, 2012; Home, 2013; Bala, 2017; Grygar, 2017; Shomar, 2020) The result was more than a compromise or amalgamation of two differing viewpoints but offered a ‘richer science’ in which aesthetic and quantitative valuations, each retaining its own integrity, would contribute equally to the explanation of natural phenomena. (Blackburn, 1971). This formed the basis of the subject in its scientific context and the application of complementarity principles continued with the evolution of new sciences developed in the twentieth century, such as information, materials, or life science. Interpretations were identified as cognitive, or disciplinary, institutional, and technical complementarity where ‘the former two are commonly found in the literature in reference to the complementarity between scientific disciplines (inter-, multi-, or trans-disciplinarity) and experimental facilities, respectively. The latter…refers to the need for scientific institutions to interact and cooperate with non-scientific institutions for purposes of scientific production.’ (Bonaccorsi, 2010) By 2021 the Scientific American was able to conclude that ‘Complementarity alerts us that answering different kinds of questions can require radically different approaches.’ (Wilczek, 2021) Complementarity as it evolved in the area of science has adapted with new forms and interpretations. The essence, however, was related to both mutual exclusivity and completion and there was consistency for this in psychology where such concepts as thought, and sentiment appear to be mutually exclusive but together explain the nature of humanity. This principle is based on the ‘dualistic, dialectically contradictory essence’ of the phenomenon studied. A further interpretation is that opposites when taken together build a complete picture—yin and yang. Again, using Bohr’s principle,

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‘opposites are complementary’, i.e. that the unity of opposites is an indispensable additional characteristic of the phenomenon of nature and society which the researcher reaches as soon as he gets into their essence.’ (Afanasyev et al., 2015) This interpretation is perhaps best summarised by the phrase ‘everyone knows what beauty is, because of the existence of ugliness. Everyone knows what goodness is, because of the existence of badness. Thus, what is beautiful and what is good can only be understood because of ugliness and badness.’ (Bao et al., 2017) However, whilst one psychological principle of complementarity is based on mutual exclusivity, other interpretations were also be based on similarity. For example, individual personality traits attract responses from those with similar traits resulting in complementary actions; or where the principle of multiple interests leads to a person’s desire to cooperate and complement. The construct of interpersonal complementarity has been proposed ‘when a person’s demonstrated level of affiliation elicits similar (or correspondent) levels of affiliation from others, and when a person’s demonstrated level of control/status elicits opposite (or reciprocal) levels of control/status from others.’ In this, a person’s behaviour tends to ‘pull, elicit, invite, or evoke responses from relationship members who are similar in affiliation.’ (Dryer & Horowitz, 1997; Fiske, 2000; Beluco et al., 2015; Borodina, 2015; Wang & Busemeyer, 2015; Bao et al., 2017; Vishwanatha et al., 2021; Felton et al., 2021) In the scientific domain therefore, complementarity can be based on mutual exclusivity on the one hand or what might be termed mutual inclusivity on the other. Two very different interpretations. Nevertheless, both share a common assumption of the need to observe the wholeness of a phenomenon for a better understanding.

Complementarity in Economics In parallel, complementarity was of interest in the study of economics, particularly in relation to demand theory—where economists debated the need for a ‘good’ definition with the underlying descriptive notion that complementarity occurs where two products are considered complements if having more of one product increases the marginal value derived

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from having more of the other product. From the early years of the twentieth century, this search attempted to build on the assumption within the theory of supply and demand, by means of cross-price elasticity ‘which measures the responsiveness of demand for one good to a change in the price of another good (ceteris paribus). Whilst significant progress was made in search of this ‘good’ concept, there remained different interpretations. (Topkiss, 1998; Lenfant, 2006; Puka & Jedrusik, 2021) As economists debated, the number of definitions proliferated. In macro-economics, complementarity was presented as a central concept to comparative capitalism. Here, specific combinations or sets of institutions and practices in economic activity were found to yield superior outcomes than the sum of their component parts. For policy makers the challenge was to identify which practices worked together better than others. For example, it was found in the relationship between social sector institutions and economic development. Furthermore, there was a link between the circular economy-economic development in a sustainable way—and institutional economics where complementary arises because ‘each tradition has strengths worthy of further attention by the other.’ In the case of the circular economy, an important aspect is its focus on resource use, whereas in the case of institutional economics, a major facet is its attention to institutions. And when complementarity was applied to link the relationships between the Internet of Things, communications technology, and economic growth (total factor productivity) the results were positive and support the excitement that is being generated by the prospects offered by the Fourth Industrial Revolution. At the highest level of the economy, the concept has proven to be a useful method of explaining the relationships that exist between a number of influential factors. (Whalen & Whalen, 2018; Bilan et al., 2019; Darwish et al., 2020; Edquist et al., 2021) Other economic relationships have been informed by applying the principle. On the one hand complementarity theory has been used to examine the effects of foreign aid, foreign direct investment, and domestic investment on economic growth with the conclusion that complementarity between these three forms of investment was a positive influence and that aid, and foreign direct investment work as complementary factors to direct investment. On the other hand, financial

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governance between regulatory institutions at global, regional and country level in ASEAN+3 countries found similar, complementary characteristics, goals, and behavioural expectations. (Pardo & Rana, 2015; Tsaurai, 2018; Younsi et al., 2021) Once again, it has proven a relevant approach, in these cases to the study of global fiscal policy and governance. Teece’s (2018) contribution to understanding complementary in commercial environments has been significant for over 30 years and his summary of the various interpretations identified: • Hicksian (Production) Complementarity where factors of production were complements when a decrease in the price of one factor led to an increase in the quantity used of its complements in production. • Edgeworth/Pareto (Consumer) Complementarity occurred if the utility of consuming two goods together was greater than that of consuming them in isolation. • A third interpretation was that of Hirshleifer (Asset Price) Complementarity which was a financial perspective about profit from an innovation. • Technological Complementarity which occurs ‘when the value of an innovation depends on altering the nature of one or more existing technologies and/or on creating new ones.’ • Innovational Complementarity was where improvements in a general-­ purpose technology increased the productivity in downstream sectors. ‘For instance, the improvement of a cellular network opens new innovation opportunities for firms providing wireless data devices.’ Puka and Jedrusik’s (2021) excellent summary, building on Berry et al.’s (2021) valuable work presented a range of economic interpretations, some of which were: • quantitative complementarity occurs when an increase in the quantity of one good leads to an increase in the value of another. An example cited was that of a right and left shoe • qualitative complementarity is when an increase in the quality of one good leads to an increase in the value of quality of another good. In this case the example of a suit paired with a tie was used

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• a third interpretation was that of ‘within a category complementarity’ where ‘a basket of goods within the same category is selected in such manner as to best suit the customer’s current needs, e.g., a home film library.’ • This was contrasted with cross-category complementarity where goods from different categories relate to each other to achieve a greater value for the consumer, such as milk and cornflakes, or software and hardware. • Provider-driven complementarity was where ‘independent goods become complementary if they are delivered by the same provider (often within a brand or series), e.g., banking services and brokerage services.’ Applications of complementarity lead to the conclusions in respect of mutual exclusion and joint completion on the one hand, but similarity as a source of complementarity on the other. This inherent contradiction implies the point of view that complementarity may be a context specific construct. The subsequent quest for clarity around its meaning and purpose has led to a richness of debate with multiple definitions emerging in both theory and practice—from the simplest explanation that sugar is a complement to coffee, to complex explanations of the nature of wave and particle theories. Indeed, and in spite of a debate which continues, it can be argued that complementarity is just ‘a fact of scientific life, which, once accepted…relieves the anguish caused by the emergence/reduction debate.’ (Andler, 2006; Bonaccorsi, 2010; Brown, 2017) Samuelson’s (1974) point of view in ‘Essay on The 40th Anniversary of the Hicks-Allen Revolution in Demand Theory’ postulated that ‘the last word has not yet been said on this ancient preoccupation.’ These words echo those of Professor Lachmann who, writing in 1947, warned ‘this is a field in which the wise walk warily.’ Many have walked warily in applying the concept to business and business management.

Complementarity in the Business Environment—Theoretical Underpinnings This is because a potentially important source of business progression comes through complementarity. Its relevance and applications are pervasive subjects across business management, organisational theory and

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economics covering such areas as responsiveness, game theory, scale economy, human resources management practices and external supplier/client relationships in the overall ‘ecosystem’ with Teece’s (1986 and 2018) analyses providing the foundation and impetus for further investigation. If the logic of complementarity is applied to organisational performance it implies that organisational success will come about not only by the singularity of management actions—meaning discreet interventions, decisions, or strategies in response to challenge or opportunity—but also by complementarity—that is interventions that connect actions, practices, tasks, resources, or assets to others and to a broader purpose or goal. It recognises that complementary sets of business practices are able to yield superior outcomes than the sum of their component parts. In management literature complementarity among resources or among elements of an organisation’s architecture has been used to predict outcomes which include the sustainability of competitive advantage, rent appropriation, superior innovation outcomes, the interdependence of organisation design choices, reduced organisational change and alliance formation. It is associated with the sustainability of competitive advantage, superior innovation, and the interdependence of organisation design choices: Complementary assets (vertical and lateral) in the digital context are no longer just potential value-capture mechanisms (through asset price appreciation or through preventing exposure to monopolistic bottleneck pricing by others); they may well be needed simply for the technology to function. Technological and innovational complementors present both coordination and market design challenges to the innovator.

It can be described as emerging from the interaction of either homogeneous or heterogeneous units or elements, ‘when relations of independent units or their evolution creates higher value than their individual operation.’ In this respect, two activities are complementary when the adoption of one increases the marginal returns of the other and vice versa. It will come about where different elements interact such as strategic choices, business elements and means such as resources, partners, activities, customers, distribution channels, and the cost/income structure. ‘The larger number of the aforementioned elements interacts more intensively… the higher the probability for the occurrence of complementarity.’ Hence it is

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the result of choices regarding task networks, incentives, and job design. It is not about whether an organisation implements a work practice but rather how it is aligned with others. (Gao, 2004; Choi et al., 2006; Fedele & Mantovani, 2008; Furlan et al., 2011; Baldwin, 2018; Kinderis, 2019) It can be seen as the harmony of two or more parts as they integrate into a whole. But how exactly this construct can be applied in business is one that is open to discussion. The first is that, as in most cases, where business models are conceptualized through the value perspective—the value proposition, value creation and capture; or the opportunity perspective—opportunity exploration and exploitation. Here, complementarities are regarded in the context of competitive advantage or as market-related phenomena through production complementarity, consumer complementarity, input complementarity, asset price complementarity, technology complementarity or innovation complementarity. (Teece, 2018; Xu et al., 2020) The second is that of resource complementarity which creates the potential for synergy leading to long-term performance improvements and is ‘the valuable, unique, and inimitable synergy that can be realized by integrating complementary resources provides an opportunity for the firm to create competitive advantages that can be sustained for a period of time.’ (Harrison et al., 2001) Brynjolfsson and Milgrom (2013) noted that synergies occurred when two or more agents interreacted such that that their combined effect was greater than the sum of their individual effects. As an example, Teece argued that innovation could only be used to generate profits, if it took place with complementary assets such as sales or marketing or assets for coproduction. This was such a powerful requirement that ‘the ownership of complementary assets, particularly when they are specialized and/or cospecialized, help establish who wins and who loses from innovation.’ He argued that imitators could outperform innovators if they were better positioned in respect to critical complementary assets. In applying these concepts to the digital economy Teece (2018) further argued that value-capture involves different challenges from those in the industrial economy. In pursuing such arguments, the range of business occurrences to which it has been applied includes multi-­business organisations, mergers and acquisitions, human resource systems, strategic alliances and interorganisational relationships. (Soda & Furlotti, 2017)

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Evidence points to the conclusion that complementarities are central for the emergence of novel technologies and the ‘functioning’ of existing ones. ‘Automobiles, for example, require a network of gas stations, a road infrastructure, traffic and safety regulations, repair shops, specialized suppliers and insurance services. Smart phones require a network of base— and switching stations, interconnectors to landlines and the internet, interoperability standards, different kinds of software, service providers etc.’ (Markard & Hoffmann, 2016; Soda & Furlotti, 2017) Studies have taken place in individual organisations as well as across whole industries or communities of commercial organisations—such as the work of Mothe et al. (2015) or Zhu (2004) which looked into complementarity in relation to innovation behaviour in Luxembourg; and organisations across the US retail industry which found that the positive inter-action between the IT infrastructure and e-commerce capability generated complementarities that contributed to improvements in performance through sales per employee, inventory turnover and cost reduction. Most recently—because of increasing co dependence and co-­operation, opportunity complementarity is an important antecedent of the business model. Today, markets can be structured as ‘platform ecosystems, in which a stable core (such as a smartphone operating system or a music-­ streaming service) mediates the relationship between a wide range of complements (such as software applications or music titles) and prospective end users.’ (Rietveld et al., 2019) Here, complementarity comes about by the recognition that the chances of securing the benefits of a business opportunity is improved by co creation and co capture in a collective way. In all cases, it can be seen in business as what happens when one management action complements that of another over time or space. It means that specific sets of institutions and practices yield superior outcomes than simply the sum of their component parts. (Darwish et al., 2020) From the resource-based view, organisational resources and capabilities, if managed effectively can provide an additional characteristic over and above their intrinsic, ‘stand-alone’ value which is complementarity. ‘The complexity that arises from complementary resources and capabilities makes a firm’s competitive advantage causally ambiguous and sustains a firm’s competitive advantage.’ In this respect complementarity may relate to assets that are generic, specialized or co-specialized, where

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specialized assets ‘are those for which there is unilateral dependence between the innovation and the complementary asset. Cospecialized assets are those for which there is a bilateral dependency.’ (Baldwin, 2018; Feizabadi et al., 2021)

Complementarity in the Business Environment—Practical Examples Complementarity in the business environment spans a multitude of industries and sectors. When researching the concept of industry clusters for example—geographic concentrations of interconnected organisations—it was found that the strength or degree of cluster complementarity in a given urban area creates economic advantage for that area. And where this is combined with investment in research and development activities there is a knock- on effect—‘complementarity’ between it and exports—engaging in R&D activities will increase the probability of engaging in export activities. The impact was not just felt in large industrial or commercial conglomerations and the interactions between small and medium size enterprises backed by effective communications channels between individual companies fostered complementarity which improved performance and facilitated adaptation capabilities to deal with changes in the economic environment. (Neves et al., 2016; Xu et al., 2017; Najda-Janoszka, 2018; Brave & Mattoon, 2020; Sánchez-García et al., 2020; Torres & Augusto, 2020; Climent & Cakir, 2021). In financial services, three levels of complementarity were demonstrated between markets—the complementarity of expertise and information, the complementarity of institutions and services and the complementarity of market systems. The application of the ‘SOLOMO’ (social, location, mobile) concept, facilitates transactions in the emerging sharing economy hubs by increasing the pool of potential service providers and sellers through networked technology. The effect is to change how market participants engage in a specific transaction. Examples of complementarity industries—where skill complementarities are prevalent in the workforce—are chemicals and rubber and plastics. The rise of the digital

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economy has provided evidence on how companies like Google, Facebook, Uber, Apple, Spotify, Airbnb, eBay, and Netflix have flourished by scaling up and leveraging effective and complex relationships. (Knox-Hayes, 2009; Chen et al., 2017; Stoyanov & Zubanov, 2019; Aversa et al., 2020) Resource complementarity in organisations creates the potential for greater synergy. As outlined earlier integrating complementary resources can give the organisation competitive advantages that can be sustained— viz competitive progression. (Harrison et al., 2001) Furthermore, complementarities between human capital and new technologies causes those who have recognised and implemented policies tend to innovate first, and complementarities among new technologies can create rising returns to innovation and the incentive to adopt multiple technologies. (Yu et al., 2011) The caveat on this assumption is that the existence of complementary resources is necessary but an insufficient condition by itself to achieve synergy. Instead, the resources must be proactively integrated and managed to realize the synergy—input complementarity. There are numerous examples where the concept has been applied in a business context. • Of particular relevance to the context of the Fourth Industrial Revolution is the potential of business value and profitability of e-commerce and e-business by focusing on the exploration of complementary relationships between internet technologies and other elements within the organisation to see positive returns from investments in these technologies. Data-driven business models such those used by Amazon or Netflix offer complementarity opportunities by collecting, organizing, and summarizing data, to identify unmet customer needs and other opportunities in the market. Furthermore, while both enterprise resource planning and e-business technologies have positive impacts on business value, the two IT resources together are complementary. ‘The existence of one resource enhances the value of the other.’ Furthermore, the complementary effect based on how the two are deployed could contribute more than the main effects of such technologies as stand alone. It is the complementary use of the two resources to build system integration and business process coordina-

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tion capabilities that is the key mechanism in creating greater business value. (Hsu, 2013; Xu et al., 2020) There is complementarity between management control mechanisms, when applied together the impact is greater than any isolated additive effects—for example managing the positive relationship between innovation, production, and service capability. (Zhang & Zhao, 2010; Nielsen et al., 2018; Ndubisi et al., 2020; Darwish et al., 2020; Moreno et al., 2020) Furthermore, internal collaboration and supplier operational capabilities can act in a complementary way such that the ‘complementary deployment of internal collaboration and external competencies enhances each other’s contribution to innovation capability’ and so organisations should consider making concerted efforts to develop internal collaboration, supply network flexibility and supplier operational capability as a bundle.’ (Liao & Li, 2019) Intellectual property rights had a positive impact on performance, especially in a ‘preferred specification,’ where having patent and trademark rights had a complementary effect when performance was measured by profitability. (Grazzi et al., 2019) Amongst the means of implementing effective processes is the judicious use of technology where the ‘right mix of technologies an enterprise should have to increase its value proposition and value creation’ is regarded as technological complementarity, which helps to improve the quality of services and products, facilitates manufacturing processes, and increases enterprise flexibility. For example, there is evidence that complementarity between two forms of cross-domain alignment—business strategy and IT- creates a positive effect on business unit performance. Whilst technology itself won’t necessarily c­ reate superiority or advantage, but that relative advantage can be created and sustained where the technology leverages other critical resources. It has positive effects on collaborative innovation leading to new products or services as well as additional or unexpected opportunities that challenge traditional perspectives. Dynamic capabilities improve the complementarity of IT and organisational resources and capabilities. (Montes, 2016; Popa et al., 2016; Moreno et al., 2020; Queiroz et al., 2020; Zhou et al., 2019)

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• Research into SMEs found that those that were located in a region with a strong pro-business environment and higher levels of market development, open innovation brought more value than it did for those located in regions with lower levels of those factors. There was a strong complementary relationship between location and the incidence of open innovation. (Chen et al., 2020) Innovation complementarity is enhanced in this case by geographic proximity and cultural alignment. • Service complementarity, where new services complement existing services, increased the value proposition of the whole business, attracting more customers, and increasing profitability. Complementarities have been identified between Web services and business process management technologies in ensuring greater utilisation and efficacy of the organisation’s resources. This principle also applies in the relationship between core and non-core products with a sizeable ‘and systematic within-firm one-way complementarity between products that can explain non-core product trade flows.’ (Padmanabhuni et al., 2004; Montes, 2016; Arnarson, 2020). • The concept has also been applied to other organisational functions and constructs. Complementarity in marketing, for example, has been used as a way of explaining and managing offline-to-online targeting of customers. The argument being that ‘inducing offline customers to buy online may complement a firm’s store channel. This is because as more channels are used to engage customers, the value of these customers increases, and multichannel shoppers are more loyal and spend more than single-channel shoppers.’ (Luo et al., 2020) In addition there are potential synergies between online and offline channels such as showrooms in the store and allowing customers to buy-online and pick-up-in-store, an arrangement which improves the shopping experience. • Internal collaboration (as a manifestation of exploitative learning) and external competencies, including those along the supply chain such as supply network flexibility and supplier operational capabilities compensate for each other’s deficiencies. ‘Complementary deployment of internal collaboration and external competencies enhances each other’s contribution to innovation capability.’ (Ying & Yulong, 2018)

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• Marketing research and a two-stage model of generating product advice was used to test the principle ‘that the first-stage recommendations (personalized or non-personalized) influence the impact of different types of second-stage functionality, which augment the first stage by facilitating either alternative-based or attribute-based processing. Results show that the complementary synergies between the two stages result in higher perceived decision quality, but at the expense of higher perceived decision effort.’ A further analysis categorises complementarities as complementarities-in-performance and complementarities-­in-use. The former approach tests the economic value of combining different activities and practices whilst the latter investigates the links between two sets of activities, suggesting that one practice often requires other practice. Research into specific industry sectors—from manufacturing to Banking (Kuehn, 2020)—have also shown the occurrence of production, innovation and consumer complementarity and its potential benefits, although with variations between sectors. In tourism for example the intensity of business model complementarity was manifested between ‘essential partnerships, value proposition, distribution/accessibility, consumer segment and the analysis of resources and abilities.’ (Kinderis, 2019) In US manufacturing, the complementary effect between enterprise resource planning and e-business technologies in creating business value was found to be stronger than the main effects of ERP or e-business technologies alone. (Hsu, 2013) In the retail sector complementarities achieved by effective supply chain cooperation was found to increase profit to a level higher than where there was little or no cooperation and hence complementarity between suppliers. (Liu et al., 2020) And in the renewable energy sector there were complementarity effects and financial benefits where organisations were part of a wider the generation portfolio. (Camargo et al., 2013) A study of the Spanish service sector found that it was possible to increase productivity if technological innovation and non-technological innovation are implemented simultaneously—i.e. a complementarity emerged from the two. (González-Blanco et al., 2019) And research into the performance of Portuguese organisations found that there was complementarity between R&D and exports, ‘which

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means that engaging in R&D activities will increase the firm’s probability of engaging in export activities. Additionally, engaging in export activities will also increase the probability of engaging in R&D. The results also provide support for the hypothesis that more productive firms self-­ select into exporting activities and also provide support for the learning-­ by-­exporting hypothesis.’ (Neves et al., 2016) In the energy sector, two types of complementarity were identified—where it was the property of one or more energy sources to complement each other’s production. In the first- Space-complementarity was when the energy availabilities of two or more types of sources complemented themselves within a certain region. In the second- Time-complementarity existed when the energy availability of two or more types of energy resources ‘present periods of availability that are interlaced over time in the same region.’ (Beluco et al., 2015) Taken together, these diverse examples present a solid case for considering complementarity in a range of business domains and functions across a range of sectors. The case is perhaps strengthened when considering responses to the new, challenging context of Industry 4.0. Is it possible that competitiveness will be enhanced if the elements of Strategy, Leadership and Management, Talent and Engagement and Organisation become mutually reinforcing? And if this is the case, how to make them so is a critical organisational challenge.

Complementarity and Organisational Performance—A Working Definition Resources rarely stand alone in creating or sustaining competitive advantage. Nor is advantage solely confined to tangible resources—evidence from Japan shows that tangible and intangible capital are complementary and indeed tangible investments are more strongly positively associated with intangible investments as the degree of the complementarity between the tangible and intangible assets becomes larger. This suggests that progression—competitive advantage in the short term and investment for growth in the longer term—requires that organisations pay attention to

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the totality of their strategies and the interdependence of their operations—organisational performance that is focused on alignment/ fit/congruence between strategy, structure, processes, and environment and the effective deployment of resource in support of this congruence. Complementarity is consistent with much of this thinking even though theory has been a contested area of debate for decades. One interpretation concerns how mutually exclusive elements combine to form a greater whole. Another is that complementarity means interdependence and interrelationship of like elements. Where most would agree is that it goes beyond ‘a simple interactive relationship between organisational characteristics,’ in that a holistic approach has to be taken of the synergistic interplay between the variables. It most generally involves benefits that are derived from making joint decisions about multiple combinations of goods and activities involving both synergy and a holistic perspective of the system effects that occur when the whole is greater than the sum of its parts. An example cited is that of offering financing in addition to the production of durable goods with additional benefits (through customer relationships) that go beyond those that would have accrued if either of these services had been offered separately. ‘Overall, complementarity theory explicates an organisation as an array of contextual factors, organisational structure and processes, and strategy within which all elements reinforce each other to produce superior performance. This theory contends that to understand firm performance, we need to adopt a holistic view and understand how the relationships between elements can create more value than the system’s individual components.’ (Parmigiani & Mitchell, 2009; Woudstra et al., 2017; Arranz et al., 2019; Feizabadi et al., 2021) In such an assumption progression does not arise from singularity but through reciprocity and complementarity, where such factors as technological, product and process are determining factors to the performance of one another. The above analysis shows a rich vein of research and evidence of the benefits of complementarity in a business context. It also shows that the many examples and case studies offer variations in how the concept might be defined and applied although there is a common theme running through each. For the purposes of this book, a ‘distinctly pragmatic’ point of view has been taken and in this spirit a definition is proposed that:

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Complementarity is the interaction of business strategies and management practices to produce coherent, aligned and mutually reinforcing systems and processes that give superior outcomes (such as shareholder value, profit, customer satisfaction, market share or cost reduction) over those that would occur if such strategies or practices had taken place independently of one another. It is where the complementary agency of those strategies produces superior results, where the relations of independent units or their evolution creates higher value than their individual operation.

In this definition, organisational choices can be based on qualitative and structural questions, from discrete alternatives in respect of combinations or clusters of activity within the organisation (technology or human resource practices for example) and in relation to the overall structure of the organisation. Since the objective of complementarity is progression, then it is important that a holistic view is taken so that specific elements, that might otherwise stand alone in organisational activity are perceived in their contribution to wholeness as well as the independent performance of an area, business unit, or department. Hence the core tenets of the complementarity hypothesis are: • Progression will be achieved when there is complementarity between business strategy, the organisation’s design or structure, how it is ­stewarded or governed, and the policies enacted to deliver long term direction and day to day activity. • A primary assumption behind this principle is that the performance of the whole organisation will be improved if there is complementarity between elements of business strategy—for example between the technology strategy and the marketing strategy or the people or human resources strategy. In this instance, complementarity means that any strategy is not only developed for the benefit or progression of that function but for the benefit or progression of the whole organisation. Business strategy does not only relate to tangible asset allocation because there is a ‘necessity to take into account the relation between the dynamics of tangible and intangible capital in terms of their complementarity for precisely understanding the mechanisms governing a firm’s growth.’ (Hosono et al., 2020)

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• A critical enabler of this and the performance of the whole organisation will be complementarity between business strategy, leadership, management, talent and engagement; and an organisation that is designed to promote interaction rather than singularity. The outcome of this will be a culture of complementarity backed by systems and processes designed specifically to recognise and address complementarity. • Performance will be superior if the organisation’s strategy is complemented by leadership, management, talent and workforce engagement practices that are specifically incorporated into the processes for achieving such outcomes. In this scenario, strategy is not just a top-down process, ‘the strategy is made; now we implement it. That’s unlikely to work. A successful strategy execution process is seldom a one-way trickle-down cascade of decisions.’(Vermeulen, 2017) • The performance of leaders will improve if leadership competences are complemented by management competences; the performance of managers will improve if they complement traditional management competences with those traditionally ascribed to leaders. • Workforce engagement will improve if it is complemented by talent management practice that addresses engagement issues; the performance of talent management will be enhanced by talent aligned engagement practices. • The performance of the organisation will be improved when it minimises singular interactions and maximises complementary interactions. The organisation’s design and structure will be critical factors in achieving this objective. A feature of this approach is that the complementarity perspective conceptualizes attributes explicitly as practices. Milgrom and Roberts seminal work on the subject of complementarity concluded that it was natural to expect the characteristics of the modern organisation to be reflected in the way the organisation was managed and the way it structured its relations with customers employees and suppliers. ‘Exploiting such an extensive system of complementarities requires coordinated action between the traditionally separate functions of design engineering, manufacturing and marketing.’ The complementarity perspective of this point of view notes that complementary practices (i.e. practices that if

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one of them increases, the marginal benefits of other practices also rise) can be exploited in the creation of competitiveness. This goes beyond the clustering of similar attributes and emphasizes that the complementary association could stem from distinct traits. (Milgrom & Roberts, 1990; Grandori & Furnari, 2008; Feizabadi et al., 2021) The challenge will be to do so in the dynamic fast paced and unpredictable context of the Fourth Industrial Revolution and Industry 4.0.

Conclusion Traditionally the factors of production in any organisation affect each other in one of three ways—these being firstly independent of each other; secondly substitutive for each other, and thirdly complementary to each other. Independence exists when a change in the level of one element does not affect the value of another element; substitution occurs when an increasing value of one element weakens the value of another; and complementarity exists when a change in the level of one element increases the impact of another element. It means synchronizing the organisational factors to create a system which will produce superior performance. It means creating a mutually reinforcing, interlinked system which will produce superior performance. It is characterised by different approaches to strategy setting for competitiveness; new styles or competences for leaders or managers with an emphasis on complementarity; agile organisation structures and governance; open innovation, a sharing of knowledge, an interest in obtaining new knowledge and an ease of assimilating new knowledge. Complementarity is an important source of ‘path dependence’ where successful change has to involve many variables in a system and apply or combine them in specific ways. (Laursen & Foss, 2003) Of equal importance will be the necessity to link talent and engagement strategies firstly to each other and secondly to wider organisational strategy. With this in mind, the advent of the Fourth Industrial Revolution has accentuated an aspect of organisational strategy which could be a significant source of competitive advantage in a highly competitive market environment. That is how to identify primary assets that are rare or

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unique or difficult to replicate and how to deploy complementary assets or resources either to support or to enhance their use. But what specifically should, organisations do to ensure they maximise the gains of complementarity? What should be their approach to the setting and implementation of business strategy; on what competences should the attraction, recruitment and development of leaders and managers be based and how should talent be managed against these; what can be done to ensure that a workforce to deliver against the requirements of complementarity is engaged in so doing and finally what is the best way to structure the organisation against these requirements? Progression through complementarity may well require organisations to adopt radically different approaches or it may require adaptation rather than radical restructure. It is unlikely that there will be one best way to achieve complementarity, Instead it is likely that best fit will be a more realistic option. Either way, a greater understanding of strategy, leadership, management, talent, engagement, and organisational design will provide a foundation on which such decisions can be made.

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González-Blanco, J., Coca-Pérez, J. L., & Guisado-González, M. (2019). Relations between technological and non-technological innovations in the service sector. Service Industries Journal, 39(2), 134–153. Grandori, A., & Furnari, S. (2008). A chemistry of organisation: Combinatory analysis and design. Organisation Studies, 29(3). https://doi.org/10. 1177/0170840607088023 Grazzi, M., Piccardo, C., & Vergari, C. (2019). Concordance and complementarity in IP instruments. LEM Working Paper Series, 19, Scuola Superiore Sant’Anna, Laboratory of Economics and Management (LEM), Pisa. Grygar, F. (2017). Bohr’s complementarity framework in biosemiotics. Biosemiotics, 10(1), 33. Harrison, J. S., Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. (2001). Resource complementarity in business combinations: Extending the logic to organizational alliances. Journal of Management, 27(6), 679. Home, D. (2013). Bohr’s philosophy of wave-particle complementarity. Resonance: Journal of Science Education, 18(10), 905. Hosono, K., Miyakawa, D., Takizawa, M., & Yamanouchi, K. (2020). Complementarity between tangible and intangible capital. The Singapore Economic Review, 65(5), 1293–1321. Hsu, P.-F. (2013). Integrating ERP and e-business: Resource complementarity in business value creation. Decision Support Systems, 56, 334–347. Katsumori, M. (2011). Niels Bohr’s complementarity. Springer. Kinderis, R. (2019). Identification of business model complementarity and the factors that determine it in the Klaipeda city incoming tourism. Journal of Tourism and Services, 10(19), 93–110. Knox-Hayes, J. (2009). The developing carbon financial service industry: Expertise, adaptation and complementarity in London and New York. Journal of Economic Geography, 9, 749–777. Kuehn, J. (2020). Strategic complementarities in bank branching decisions. Journal of Industrial Economics, 68(4), 640. Lachmann, L. M. (1947). Complementarity and substitution in the theory of capital. Economica, 14(54), 108–119. Laursen, K., & Foss, N. J. (2003). New Human Resource Management practices, complementarities and the impact on innovation performance. Cambridge Journal of Economics, 27, 243–263. Lenfant, J.-S. (2006). Complementarity and demand theory: From the 1920s to the 1940s. History of Political Economy, 38(Suppl 1), 48–85. Duke University Press.

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4 Complementarity and Business Strategy

Coherence, Congruence and Consistency As business organisations strive for progression, their direction will be guided by an aspirational vision or mission but articulated in the form of business objectives, business strategy and the stewardship and policy to deliver them. These will include the allocation of complementary assets, combined through the strategy setting process. Such assets may be technological know-how but also process or system capabilities or competence across the value chain. To be effective, strategy will require coherence—an alignment between expectation and reality; congruence—where elements of the strategy are integrated and reinforce each other; and consistency—between intention and action. Contempora neously it will take account of the merger of physical assets and advanced digital technologies which will enable organisations to be more flexible and responsive and make data-driven decisions in a fast moving and unpredictable environment. Such dynamics create the need for an approach that not only develops a domain strategy for a specific business unit or function, but one that is relevant across the whole. The enduring idea is that successful business © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_4

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strategies are able to exploit complementarities across management practices within an organisation. To achieve this requires utilizing large arrays of interdependencies—strategic decision-making is conducted in an environment of complexity and uncertainty. Where organisations such as Disney or Amazon are successful, they are able to overcome these and maximise complementarities across various business segments, thereby creating better value for customers as well as superior returns for the company. The question that is raised in this consideration is which type of strategy or business configuration is associated with high levels of performance in a technology-based environment and what complementarities underly it? (Cozzarin & Percival, 2006; Rumelt, 2011; Aversa et al., 2015; Markard & Hoffmann, 2016; Deloitte, 2020; Yang, 2021). The emphasis will be on the ability to develop strategy with multiple fronts— with the ambition of super-modularity which occurs where an increase in the performance of a single unit has the potential to increase the marginal payoff of all other units—in ways that are complementary to each other. And to back these up with assets and resources allocated where complementarity is the interaction of business strategies and management practices to produce coherent, aligned and mutually reinforcing systems and processes that give superior outcomes (such as shareholder value, profit, customer satisfaction, market share or cost reduction) over those that would occur if such strategies or practices had taken place independently of one another. It is where the complementary agency of those strategies produces superior results, where the relations of independent units or their evolution creates higher value than their individual operation. In this context, the definition of strategy can be that which occurs at corporate level, and which refers to the positioning of a portfolio of organisations. Here, strategy will likely be concerned with directing business units to attractive market segments in which, through detailed analysis, they are deemed to be competitive. The expected outcomes of these units in the portfolio will range from cash through to market share. Corporate interventions will be through portfolio management and ownership of a few common strands such as branding or talent management. In another example, strategy can also refer to positioning and actions within an individual business unit—a company or a firm—and will be prepared with the specific objectives of that organisation in mind; an

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example of which would be to increase market share. In this case complementarity will arise from such strategic activity as mergers and acquisitions or alliances from which synergies through complementarity are evident. For example, if an organisation with strong R and D capabilities acquires one that is weaker in this area but strong in sales and marketing, then the potential benefits to both—through combining their strengths can be realised (Harrison et al., 2001). And finally, strategy can refer to a function within a business unit—technology or human resources for instance. In this case the strategy will be designed to enhance the performance of that particular domain. Hence, the term strategy can be interpreted in a variety of ways with a variety of objectives. How strategy is set is also open to interpretation.

The Evolution of Business Strategy Concepts The increasing diversification of organisations at a time of globalisation from the 1970’s and 1980’s brought with it increasing levels of investment. In return, investors demanded more insight and information about how their money would be spent and when they would receive dividends. It was from this milieu that more sophisticated models of strategy emerged accompanied by corporate and portfolio planning derived from detailed market analyses and forecasts. The new tools of strategy included SWOT, PESTLE and Gap analysis or Balanced Scorecards against which investments in business units or functions could be monitored. Positioning matrices such as those by Ansoff, GE and BCG underpinned a dominant rationalist approach to strategic thinking based on scanning the environment for opportunity, methodical assessment of strengths and weaknesses in this environment, a potential ‘position’ in a chosen market and the formulation of strategy to achieve this. The goal was to shift the competitive equilibrium and achieve competitive advantage. The work of Michael Porter, with concepts such as five forces analysis, the value chain and the theories of competitive strategy and competitive advantage, cemented the rationalist approach. Porter argued that competitive advantage grew out of the value a firm was able to create for its buyers that exceeded the firm’s cost of creating it. It was influenced by the choice of competitive scope

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and the range of a firm’s activities (Porter, 1980, 1985). In this way, the maximisation of shareholder value—a common objective—would be achieved by the clarity of both objectives and a well thought out strategy backed by detailed and specific plans. However, there were those who argued that the dynamism and unpredictability of world markets required more than formal structured matrices. The concept of VUCA—volatility, unpredictability, complexity, and ambiguity—came as a reality check. Alternative ideas emerged, with ten distinct ‘schools’ of strategy including the design school, the planning school, the positioning school, the entrepreneurial school, the learning school, the cognitive school, the environmental school, and the configuration school (Ahlstrad et al., 1998). Many approaches were prescriptive, with models of how strategy should be formulated; others were concerned with positioning. And as an antithesis to the positioning approach came a resource-based view which sought the exploitation of core competences based on four ‘empirical indicators’—value, rareness, imitability and substitutability—inside out rather than outside in. Here was a link between an organisation’s internal characteristics and performance where its resources and capabilities were at the heart of value-creating potential. In this, sustainable competitive advantage stemmed from resources and capabilities that were valuable, rare, and difficult to imitate or substitute. In the resource-based view, valuable resources are valuable because of their contribution to enablement—conceiving and delivering strategy. They are important in facilitating the exploitation of opportunity or the neutralisation of threat. If these resources are rare—the second aspect of the resource-based view—in that they are possessed by few in a particular market or sector, then these will provide additional sources of sustainability from a strategic perspective. The third aspect is whether the resources are ‘imperfectly imitable.’ This means that organisations which do not have the resources cannot obtain them—because of unique historical conditions. The social complexity of resources is also a potential source of advantage including interpersonal relations among managers, an organisation’s culture, or its relationship with either suppliers or customers. Finally, substitutability, means that there are no similar or substitutable resources that can be utilised by a competing organisation. The resourcebased view advocates that these sources of advantage are recognised and

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utilised. Complementarity can build on this assumption in the process of strategy setting (Barney, 1991; Schweiger et al., 2019). Almost regardless of the point of view—internal resources or external analysis—Henry Mintzberg wrote of the concept of emergent strategy (1978, 1987, 2011) that emphasised strategic agility and responsiveness to unanticipated events, resulting in a crafted, as opposed to pre-formed strategy. The concepts of business strategy, its schools, its language, and its systems have been present in organisational life for decades and the preparation of the familiar five-year plans—later displaced by three-year plans—with the first year as the budget, have been a feature of the role of managers at all levels. But, more recently, and as the Fourth Industrial Revolution gathers momentum, the scale and velocity of change in the global economy is creating new challenges and causing reflection about how to make business strategy work in the radically different context. The political upheaval caused by the events of the second decade of the twenty-first century added significantly to this new context. Whilst a confluence of new technologies offers significant opportunities, business managers will face an environment that will be unlike anything that has gone before, in which conventional models of strategy may well be transformed. For some, ‘a VUCA world is a shift in kind rather than degree. Tried and tested approaches cannot be simply updated, they should be altogether replaced. Fast-changing competitive landscapes force companies to reconfigure and redeploy assets and redesign both internal and external structures to remain successful’ (Lanteri, 2021). In all cases, the challenge for leaders and managers is to achieve their desired outcomes by ensuring that the energy created in the strategy setting process, and the subsequent resource allocation, become positive forces that benefit the whole organisation.

 usiness Progression and Cross B Functional Synergies The dynamics of the Fourth Industrial Revolution will create significant new opportunities but also new complexities because of few precedents as to the best practice approach to strategy formulation to take advantage of

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them. For example, scholars have found positive results not only from conventional approaches but from hybrid or combination strategies where low cost and differentiation strategies are complementary rather than mutually exclusive. As outlined earlier, this reflects the principle that the outcomes of singular initiatives—such as functional strategies—will be improved where they take account of the potential synergistic opportunities with other initiatives. It reinforces the congruence element of successful strategy. Complementarity theory means that the elements of structure, process, and strategy in one area reinforce others to produce superior performance over and above the total of individual strategies. The theory advocates that organisations adopt a holistic view to help them understand ‘how the relationships between elements can create more value than the system’s individual components.’ A recent analysis of the business models used by Amazon for example, noted that customer complementarities—network effects and one-stop shop effects—supported growth and the achievement of competitive advantage. Significant complementarities in a rapidly changing environment provide a strong reason for close coordination between units, departments, or business functions. Further examples occur in the rationale during acquisitions where a base assumption is that ‘acquired knowledge and technology should be complementary to the acquirer’s knowledge base because such a combination leads to a surplus over and above the value the acquirer’s and target’s resources could create independently.’ However, this will be context specific, and so the ways in which organisations achieve these desirable outcomes will depend on the adaptation of their own unique experiences to the markets in which they choose to operate (Milgrom & Roberts, 1990; Cassiman & Veugelers, 2006; Rumelt, 2011; Jackson & Ni, 2013; Grimpe & Hussinger, 2014; Woudstra et al., 2017; Arranz et al., 2019; Haefliger et al. Haefliger & Hueller, 2020; Feizabadi et al., 2021). The questions facing organisations is how can strategy be set in this unpredictable environment and how can complementarity create additional value from it; which strategies and practices work together better than others? In whatever way value is created, whether through cost leadership, differentiation, or by the maximisation of performance from internal

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resources, the ability to make sure that investments are mutually reinforcing and create advantage across the whole organisation is an important aspect of strategy. Whilst accepting that the process has evolved from being ‘less of a mould into which corporate ingredients could be poured and a fully formed figure emerging, to more like clay on a turntable, fashioned and crafted into shape,’ complementarity presents additional opportunities. Competitive progression in this way strives to maximise the value that can be created over and above what would be the case if those strategies were implemented singularly. Extracting the benefits of cross functional synergies becomes desirable. There are some important assumptions behind this point of view. • In the first place, the confluence of technologies envisaged in the immediate future and the potential for interlinking systems turns the potential of complementarity into reality. But how to do so is likely to require additional way points in the strategy setting process. In these instances, strategy is not only developed for the benefit or progression of a particular domain, but—explicitly—for the benefit or progression of the whole organisation. Return on investment will include the returns anticipated from other areas outside of the unit, department, or function where that investment was made. Securing this return will require revised systems of strategy development, approval, evaluation, and measurement. • This approach is not necessarily a schism from the past and business strategy will continue to include the steps to create and appropriate economic value from whichever markets an organisation chooses to compete. There is no definitive way of developing these strategies and the alternatives range from the rational or analytical approach to determine strategic positioning or the emergent approach to strategy as a pattern that emerges from the stream of decisions dependent upon the context within which those decisions were made; or the resource-based view—the resources which an organisation has at its disposal and how they are orchestrated. Whatever the basis, there is consensus that business strategy is intended to create a strong competitive position from a range of alternatives. However, and for the purposes of this study, an adaptation of the many and varied definitions of strategy may be that

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complementarity is concerned with achieving competitive progression through the deployment of resources to deliver objectives in ways that bring advantage across the whole organisation, and the coordination of strategies, policies and actions in ways that deliver value over and above the value of singular strategies, policies, and actions. This implies that unit or functional strategies have an additional element in that their objective will be consideration of additional value from their impact on other areas. • In the same way that a single domain or functional strategy does not stand alone in this environment, neither does the process of strategy setting. Instead, competitive progression will be achieved when there is complementarity between business strategy, the organisation’s design, or structure, how it is stewarded or governed, and the policies enacted to deliver long term direction and day to day activity. Strategy setting will be more inclusive and whilst it may be guided by domain specialists, will take input from the tacit and explicit knowledge of a wider number of members of the workforce. Utilising knowledge in support of complementarity becomes a core competence. This means the effective integration of technologies, specialised knowledge, skills, techniques, and experiences in a way that delivers differentiated advantage over and above that which would apply should such technologies and knowledge be applied singularly. It is a ‘company’s collective knowledge about how to coordinate diverse production skills and technologies,’ or ‘a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace.’ Knowledge will become one of the most important resources and harnessing it is both a feature of core competence and a means of developing it (Turner, 2021). The appendices of traditional strategy—organisation design, process engineering, policy and stewardship, and people management now become integral. • In support of competitive progression will be an organisation structure in which complementarity value can be recognised; a culture that both supports and facilitates its delivery; systems and processes designed specifically to ensure its smooth implementation; leaders and managers, who recognise the potential and are prepared to work collaboratively; and a workforce fully engaged with its broad-based objectives.

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Hence strategy setting in pursuit of competitive progression will continue to be about making choices. But these choices have an additional consideration. Do they add value, over and above their specific ROI, to other parts of the organisation which when taken together create more value than the singular investment or strategy? Support of this process will come about once there is recognition of the place of complementarity in strategy setting, the knowledge, skills, attitudes, and behaviours at all levels of the organisation to acknowledge that structures, systems, and processes will need to be in place for its delivery and finally, the creation of methods to capture and report benefits.

 omplementarity in Strategy Setting C and Strategic Choice An organisation will make decisions relating to both its scope of business activities and the strategies it intends to deploy in pursuit of its own progression. Exploiting valuable or rare resources, deciding on the target market position, or seeking cost advantage or differentiation are possibilities. However, there is also a scenario that such combinations will be serendipitous. In the case of the former, integrated strategic processes will be necessary. In the case of the latter, the organisation will depend on strategic agility and agile governance. Adopting complementarity principles in this process provide a further potential source of advantage. An example of this in practice is in respect of the business value of technology applications, where it’s important to consider their effects on a broad range of business capabilities (i.e., logistics, customer service, marketing, and analytics) that ultimately enhance firm performance rather than in a singular or independent way. On the assumption that ‘resources can be orchestrated into configurations with unique performance characteristics’ (Denrell et al., 2003; Suoniemi et al., 2020), identifying how this will occur and crafting strategy to facilitate its incidence can therefore be an important determinant of progression. There are five areas of enhancing the potential of complementarity in strategy setting discussed below and shown in Fig. 4.1:

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●Cross-domain

●Asset orchestration by combining advantageous resources

●Exploiting social

complexity

alignment and coordination of functional strategies

●Integrating

strategic processes

Complementarity and business strategy

Measuring the outputs of complementarity

Fig. 4.1  Complementarity and business strategy five areas of potential

• Cross-domain alignment and coordination of functional strategies Alignment has been a watchword in strategic theory as an essential precursor to congruence, coherence, and consistency. It is part of the ‘kernel’ of good strategy and constitutes coherent action behind a set of agreed goals. But it can often present a challenge since its achievability will most likely be conditional on contextual variables. For example, alignment may be made more difficult because of situations in which the organisation’s leaders and managers divide rather than combine their attention on various aspects of strategy—a singular approach. Managerial objectives focused on a specific unit, department or function may not, for example, include a broader organisation wide brief. And internal politics, referred to euphemistically as organisational dynamics, may hinder concerted action. In other cases, leaders or managers may be inhibited in their collaborations with other functional strategy owners—rigid organisation design or an inflexible culture are possible causes. Internal factors are as diverse as geography and physical location or organisational culture—a silo mentality for example—which may inhibit the achievability of alignment; whilst external factors such as the strength of competition

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can be unpredictable or volatile and add to the difficulty of making decisions in favour of complementarity (Barney, 1991; Cassiman & Veugelers, 2006). To break with such inhibitions therefore, a strong case will need to be made for the benefits of seeking complementarities. The foundation of this case is recognition that the performance of a function can be significantly influenced by complementary forms of cross-domain alignment, and organisational performance can be influenced by complementarities between strategic efforts in domain or function and organisational goals. Hence, while there are benefits from singular strategic orientations. a combination of strategies ‘create synergies that surpass the effects of individual strategic orientations. Therefore, to achieve superior performance, firms need to align their strategy making efforts’ (Schweiger et al., 2019; Queiroz et al., 2020). There are some useful examples which support the argument for alignment. Firstly, technology complementarity has positive outcomes where there is alignment between the corporate or business unit IT platform and their business strategies. In these examples there is a complementary effect between enterprise-wide resource planning and technologies in creating business value that was stronger than the effects of these alone. Cross domain alignment will depend on managers finding collaborative partners and establishing collaborative relationships. The strategy setting process has the potential as a catalyst for such activities since a ‘combination’ strategy can provide a distinct advantage in both product and process innovations. In these and other cases, technology-enhancing combinations proved to add strategic value as well as increasing productive capacity in two ways—first through the combination’s direct and independent impact on productivity; second through additional increases in productivity generated by the joint implementation of the combinations (Marcela et al., 2016; Gonzalez-Blanco et al., 2019; Zhou et al., 2019; Wang et al., 2021). But it isn’t just in relation to the deployment of IT resources. Ground-­ breaking work on complementarity in respect of human capital and human capital resources demonstrated the benefits of aligning such resources with others (Ployhart et al., 2014; Wolfson & Mathieu, 2018; Wolfson & Mathieu, 2021). In the former, an individual’s knowledge, skills, abilities, and other characteristics (competences) are important for

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achieving economic outcomes, whilst the latter are individual- or unit-­ level capacities that are accessible for unit-relevant purposes. Hence, although human capital can be described as accumulated employee competence for them to yield human capital resources ‘they need to be integrated and be potentially valuable for unit-relevant purposes.’ There was a potential performance effect to be gained from aligning ‘not only individual competencies with changing characteristics of performance episodes, but also with team-level competencies’ (Ployhart et al., 2014; Wolfson & Mathieu, 2021). Where a team is assembled, with the principle of complementarity in mind, and informed by the benefits of cross domain knowledge exchange, then there is the potential to deliver improvement over and above the total of individual performance. Cross domain alignment has significant potential for delivering the benefits of complementarity. However, these are not automatic and will therefore require a form of strategic planning to be coordinated with the objective of competitive progression or sustained competitive advantage. This will include identifying domains that have valuable or rare resources, and extrapolating areas that, when combined will provide a source of potential over and above their individual value or return. The point of view is the recognition that by combining resources in a way that adds value over and above the value that those resources would generate independently, is a potential source of progression. The question is how to convert this potential into reality. The objective of strategic alignment is to ensure that all elements of strategy support the organisation’s objectives. Cross domain alignment adds a further criterion with the question of ‘do the elements of business strategy support each other in delivering the organisation’s objectives?’ Setting business strategy to achieve complementarity therefore adds to what may be called vertical alignment—from the base to the overarching goal or purpose—with horizontal alignment—each domain is aligned with the other. Hence, the first requirement is to ensure a strategy setting process that is not only focused on the development and preparation of singular strategies for particular domains or functions but also includes the coordination of strategies, policies, and actions to identify value over and above the value of singular strategies, policies, and actions. Each element of strategy will be brought together with the explicit intent of

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identifying complementarity value. The strategy setting process will allow for the exploration of combinations of individual strategies or investments. To do so will require the incorporation of tacit or specialised knowledge, skills, techniques, and experiences to identify ways to deliver advantage over and above that which would apply should such knowledge be applied to a single domain. In this way, tacit knowledge becomes explicit knowledge enhancing the opportunity for complementarity benefits. Cross domain alignment will allow not only a post development review of other domain strategies but pre-development input into the creation of strategy. Thirdly, the process of seeking cross domain alignment will include considerations about the fit of the strategy with the organisation structure, requiring adaptation to maximise additional benefits of and minimize the potential blockages in their attainment. Part of the process of alignment will be resource allocation that enhances the possibility of achieving complementarity. • Asset orchestration by combining advantageous resources If it is the ‘bundle’ of unique resources possessed by an organisation that may enable it to gain and sustain competitive advantage, then it is how those resources are orchestrated—that is set up, organised and managed—that will convert potential to meaningful outputs. It is how those resources are applied in the creation and delivery of strategy, how they are orchestrated to the right place, at the right time, that is critical. It is the combinations—rather than net levels—of resources that will achieve resource complementarity (Harrison et al., 2001). The challenge is to ensure that the resources, when interacting, provide over and above what they would when considered individually. This means ‘orchestration’ in terms of breadth—across the scope of the organisation; life cycle—at various stages of the organisation’s maturity, and depth—at multiple levels. Resource allocation represents a dynamic renewal of resources, routines, and capabilities; going beyond the direct effects of individual resources and ‘uncovering different resource configurations that maximize profitability’ (Sirmon et al., 2011; Hughes et al., 2018). To use the words of Nils Bohr: (1929)

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as our knowledge becomes wider, we must always be prepared therefore to expect alterations in the points of view best suited for the ordering of our experience.

Hence the creation and dissemination of knowledge, combined with an emphasis on collaboration will ensure that both are applied in an optimal way and will inform the deployment of resources and assets. The objective is to maximise the use of tacit knowledge to facilitate complementarity and convert this tacit into explicit knowledge to maximise its benefits. The use of knowledge and technology resources in building system and business integration capabilities will lead to the most complementarity value because such value depends on the interaction of a whole system and the organisation’s dynamic capabilities (Cao et al., 2011; Hsu, 2013; Ho et al., 2016; Moreno et al., 2020). It is a quest for mutualistic symbiotic relationships—where symbiosis—the complementarity of strategic assets—is important for the generation and capture of the value of such things as innovation projects. The challenge is how to orchestrate valuable and rare assets or resources in a way that they are complementary to each other. In this respect the four principles of accessing, integrating, developing, and releasing are important, where accessing and releasing are based on inter-unit relationships, whilst integrating and developing focus on intra-unit processes (Cassiman & Veugelers, 2006; Monteiro et al., 2020; Queiroz et al., 2020; Suoniemi et al., 2020). The strategy setting process provides ways to deliver these anticipated positive outcomes. In the first place, those involved in strategy development will have a key part of their objectives consciously to identify and seek cross functional synergies—because resource complementarity is not given but jointly constructed in interactions with multiple potential partners through recursive cycles referred to as prospective resourcing (Deken et al., 2018). Secondly, the process will benefit from modelling combinations of assets and resources to determine how the relationships between elements can create more value than the system’s individual components. And thirdly, there will once again be a ‘complementarity consciousness’ in the commitment to the deployment of resources to deliver objectives in ways that bring advantage across the whole organisation. This will involve trade-offs as decisions favour one type of investment over another.

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The buy in of the organisation’s leaders and managers to this will determine how much these trade-offs contribute to competitive progression. Whilst the intent to explore cross domain complementarities and orchestrate assets accordingly is a positive move towards competitive progression, it will be converted to benefits by practical and explicit strategy setting processes. Amongst the requirements will be the goal of integration whereby an organisation’s ‘systemic capability to align its core strategic processes creates super-additive performance effects that exceed the sum of the marginal effects of adopting each orientation separately’ (Schweiger et al., 2019). The ability to deliver the potential of the organisation through progression will be enhanced where strategy formulation and implementation are integrated such that the three elements of successful strategy-coherence, congruence and consistency are achieved. • Integrating strategic processes Integrating strategic processes is essential if the benefits of complementarity are to be realised. In the dynamic environment that is envisaged as the Fourth Industrial Revolution gathers momentum, strategic management will not only pay attention to market positioning based on external analysis but also to the integrative capability that contributes to ‘sensing, transferring and modifying internal and external resources and capabilities.’ Complementarity will depend on the strength, of this integrative capability and may involve new organisational structures, operational systems and business processes. Furthermore, such integration is likely to span organisational boundaries as organisations cooperate and collaborate in new types of business ecosystem. This point is reinforced by BCG (2020) whose findings showed that manufacturing organisations are achieving smarter automation and harnessing efficiency in several ways including installing smart robots and using collaborative robots; employing augmented reality; applying production simulations and using Big Data and Analytics. These require a significant amount of integration competence. There is a range of possibility for the type of complementarities that can occur. Reciprocal interdependence, for example is the ‘synchronous adoption of product and process innovation often creating opportunities

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for other product and process innovations.’ In this case, complementarity would be identified and realised by ensuring strong links between product development and business process improvement or reengineering as they take place. Sequential interdependence, another variation is where ‘the project commences with the development of a new product concept, this subsequently necessitates (triggers) changes in process innovation.’ The integration of strategic processes in this case would once again be between product development and process engineering but here, process improvement would take place ‘downstream.’ The organisation would build in waypoints into the strategy process to ensure that such opportunities are picked up. Finally, pooled interdependence would require the conversion of tacit knowledge into explicit knowledge that is available across the organisation, and this would be an integral part of the strategy process. Refinement of these concepts and depending on the aims of the strategy (such as New Product and Process Development) complementarities could be derived from a variety of combinations (Hullova et al., 2016). Having specific ways of so doing will be an important consideration in strategy setting. The potential for the integration of strategic processes exists regardless of the scale of the organisation or its evolution and history. On the one hand, larger organisations may have a stronger presence in a chosen market or may have the advantage of economies of scale and scope. On the other hand, smaller organisations may have less bureaucracy and as a result be more open to innovation, agile and more efficient in integration. There will be fewer silos or barriers to change (Cassiman & Veugelers, 2006). In established organisations, functional experience complementarity will be an important aspect of integration. Where the CEO and top management team have experience across several aspects of the organisation, then they are more likely to be supportive of strategies outside of any one particular function in favour of combining aspects of singular strategies by taking a holistic view of the benefits to the organisation. The ‘realism of experience’ may well add value to complementarity in strategy setting (Reimer et al., 2018; Pang et al., 2019; Yoder, 2019). But realism doesn’t only come from experience. Nor does it only come from a deep understanding of business theory. Indeed, many of the characteristics of the

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Fourth Industrial Revolution will be unprecedented. Hence an important ability in integrating processes will be practically informed, in real time and dependent on the agility of those responsible for integrating to draw on immediate experience and realism to craft strategy in new, unforeseen ways. Functional experience will be enhanced by managerial agility in the here and now. The integration of strategic processes will therefore require a number of initiatives. In the first place, a reengineering of the overall strategy setting process to reflect the opportunity for complementarity. This means that each domain strategy includes the identification of potential cross domain complementarities. To facilitate this will require the communication of the overall strategic process and the engagement of the whole organisation into its intent or objectives. The process will include the introduction of incentives for leaders and managers to identify complementarity opportunities outside of their own domains. Methodologies to capture and demonstrate the benefits of complementarity will be included as part of this. The process will also clarify that the level of complementarities identified will inform how assets and resources are allocated or orchestrated. A factor that applies to all of the above processes will be the ability of the organisation to mobilise its human resources. Amongst the challenges will be exploiting unique, rare or complex people resources such as tacit knowledge, or the relationships between levels of management and between managers and the workforce. • Exploiting social complexity Complementarity goes beyond systems and processes and its success will be informed as much by human interaction as by technology interaction. For example, whilst a particular technology may be available to all organisations, only one of them may have the social relations or culture or a history of success in technology installation to ensure its effectiveness; complementarities between human resource management and innovation activities can have an impact on both innovativeness and productivity (Bartoloni & Baussola, 2018). It is to this area that social

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complexity applies. Social complexity was identified by Barney in his definitive work on resources and competitive advantage (Barney, 1991 and Barney and Clarke 2007). Amongst the reasons for such complexity were interpersonal relations between managers and its culture or dynamic, higher-order capabilities including unique competencies for creating, capturing, and transferring knowledge and its application in innovation (Camisón et al., 2016). The complementarity of respective actions of individuals, creates beneficial cooperation over and above that which might be normally expected. Contributory factors include not only communication and the division of labour, but also joint actions involving ‘complex rituals,’ joint decision making, committing to collective behaviour, acting in concert in relation to outsiders, and ‘any action whose outcome depends on cooperation based on shared understandings’ (Fiske, 2000). Hence from management style to culture to knowledge, social complexity has a broad reach. Because of the challenges in replicating its characteristics—relationships or culture are imperfectly imitable—an organisation that has efficiency and effectiveness in its management, a unique ability to turn tacit into explicit knowledge or a culture that fosters innovation, should ensure that its strategy setting process takes account of these hard to replicate features and that asset orchestration and resource allocation build on them. The principle can apply in different types of organisations. In one case it could be that organisational practice is based on a clear-­ cut formal hierarchy, whereby a formally identified leader has the authority to ‘direct group members’ behaviour, assign roles to individual members, and monitor their efforts and performance.’ Praise of hierarchy is a rarity, but where this is effective-positive relationships between managers, an efficient culture, or a history of making such formality work— then complementarity will be geared towards how the outputs of this formality can benefit other parts of the organisation. However, in the absence of formal power and authority structures—perhaps in networks or matrices or swarms—informality can equally be source of effectiveness and efficiency. The challenge of social complexity spans both of these perspectives on organisation. It has been argued that ‘organisations often have difficulties ensuring that managers and others look past their self-­ interest to support collective, official goals. This is the classic problem of organisational control’ (Cardinal et al., 2017; Oedzes et al., 2018). Where

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those managers are able to go beyond this self-interest, then there is the potential for a more inclusive strategy in pursuit of progression. Indeed, the ability to collaborate in the creation and sharing of knowledge and information will be regarded as a core management competence with a working definition of ‘the ability to disseminate knowledge by connecting individuals and teams and inspire them to collaborate in working towards common goals’ (Turner, 2021). How an organisation uses this knowledge will contribute to how that organisation performs in its chosen markets. The ways of so doing will be through interactivity and the promotion of knowledge flow and integration. And an aspect that will be key to this is collaboration and cooperation whereby members of the workforce share through formal channels such as strategic projects or business improvement schemes as well as outside of any structured or curated interactions. Such a process is socially complex and therefore hard to imitate. Its contribution to progression might be immense and it is therefore an important part of the strategy setting process, albeit in the resource-based approach as opposed to the rational market analysis one. Exploiting social complexity means taking advantage of knowledge. It means building a strategy around the uniqueness or rareness of knowledge that the organisation possesses. Hence a requirement is to identify where such knowledge exists and providing a mechanism by which such knowledge can be shared amongst all of the domains. Converting tacit knowledge into explicit knowledge is therefore an important objective. A second aspect of exploiting social complexity and its role in strategy is recognising that the uniqueness of the organisation’s leadership and management resources are a source of competitive progression. Strategy setting may therefore build upon this strength in creating its strategic options. And thirdly it means providing a strategy setting process that includes communication, participation, and joint action, making joint decisions and channelling knowledge by committing to collective behaviour in the agreement and execution of strategy. It is strategy which includes cooperation and shared understanding. The objective of cross domain alignment, the principle of asset orchestration, the creation of integrated strategic processes and the exploitation of the uniqueness of social complexity are addressed to create an environment in which complementarity can flourish. However, there is a final

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aspect of strategy setting that will cement the concept into the organisation’s strategy and that is by capturing the benefits of these methods and to demonstrate how they have contributed to performance. • Measuring the outputs of complementarity Complementarity depends on integrating strategies or adding an activity to that of another with the objective of business performance improvement over and above that which would result from the independent or singular creation of strategy—in a single domain such as a business unit or function. However, to realize the full potential, complementarity directed control mechanisms and measurement systems will be required to capture any benefits. Metrics will address the core idea that ‘simultaneous implementation of different activities should prove to be more valuable than implementing each of them separately.’ The test of complementarity is guided by measures which assess performance using measures of interactivity and the impact of combinations of activities. The objective will be to demonstrate that strategies, when applied together ‘are greater than any isolated additive effects—an example being the positive relationship between complementarity and innovation and service capability.’ Measures can relate to sequential complementarity and continuous monitoring of performance; information complementarity; organisational complementarity; methodical complementarity and hierarchical complementarity. Which relates to information gathered as part of performance management at the policy level (Nielsen & Hunter, 2013). In this respect, organisations will undertake complementarity strategies if such strategies increase returns on investment made through complementarity between units or functions—a productivity effect or by increasing their performance in the markets in which they choose to operate—a strategic effect. (Milgrom & Roberts, 1990; Zhang & Zhao, 2010; Mothe et al., 2015; Di Giannatale & Passarelli, 2018). The challenge is to demonstrate such benefits. And so, if the organisation’s business strategies are truly complementary, then their effect will show up in measures of performance. To this end, management control systems should be designed to ‘motivate subordinates and direct their attention to what is important for optimizing

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their particular areas of responsibility (e.g. purchasing, production or marketing) while, at the same time, ensure that they do so in a way that is consistent with overall financial objectives.’ To achieve this, Gerdin et al. (2019) propose certain conditions for synergy effects to occur. These include that management control practices are complements in solving a particular control problem and that management controls contribute to achieving the goals of the control combination interactively. This means functionally specialized management controls being reciprocally interdependent where the marginal returns of one control is increased when combined with another control, and vice versa. There is evidence that returns are possible. For example, complementarities between IT components have been shown to be ‘significantly associated with firm profitability … we find that, in contrast to prior studies, IT investment is significantly associated with firm profitability measured by ROA and ROE.’ The application of IT influenced customer, financial, human resources, and organisational effectiveness as measures of performance. However, this is not deliverable without the additional complementarity of knowledge or competences of the organisation’s human resources. (Jiung-Yee Lee et al., 2014) The challenge is for organisations to develop information systems that recognise and measure additional outputs in a coherent format. Whilst there are numerous ways of measuring Return on Investment, the challenge is to measure the Return on Complementarity. Underpinning all of the above are systems that provide four levels of knowledge: • Data—in this example, the degree of complementarity will be shown to have an impact on an aspect of performance such as product sales, where innovative bundling can be shown to expand the sales of existing products and new products (Liu et al., 2020) • Information—data that has been selectively refined to produce more meaningful outputs, can show improvements in efficiency—which would be a productivity effect, and which consists in the improvement of a domain or function. This effect is positive if there are substantial complementarities among their resources such as synergies, better organization, economies of scale (Di Giannatale & Passarelli, 2018)

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amongst the information outputs that could be identified are profitability, Return on Investment, Return on Assets—the ratio between a company’s annual earnings and its total assets, and Return on Equity. • The third element of knowledge can be referred to as intelligence and is a combination of internal and external data or information sources. This will measure the strategic effect of complementarity such as market power or position against competitors, improved customer experience, better ‘upstream’ supplier performance Here, organisations will be shown to achieve better financial returns because of adopting a contextually appropriate mix of practices in a complementary way. A study of Indian organisations found that service organisations with high customer involvement capability were able to gather information from customers which informed innovation activities and strategies to create competitive advantage (Di Giannatale & Passarelli, 2018; Darwish et al., 2019). • The fourth and final aspect of measuring the effectiveness of complementarity is that of Insight. This means the unique knowledge that organisations acquire from intelligence over time, which in itself becomes a unique or rare resource. Measuring the outputs of complementarity is an important part of the strategy setting process. It provides a business case to support the alignment of domain strategies, the orchestration of resources and investment decisions. What is measured, how it is measured and how it is converted to explicit knowledge will ultimately determine whether there is business support for the concept.

Conclusion There is a strong case for developing strategy with complementarity at its heart. Assets and activities are mutually complementary if the marginal return of one activity increased the level of the other. In other words, ‘if doing more of an activity (x) the marginal benefits of doing more of a complementary activity (y) increase. Complementarity gives rise to synergy among the complementary activities ‘with the total being more than the sum of the parts.’ If, for example, a manufacturer raises the reliability

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of a product by investing in better production equipment and processes, it may become attractive to extend the warranty as well. Competitive advantage has been gained by how the investment in tangible production assets increased the value of the brand in terms of reliability whilst in turn allowing a more competitive service offering. In the resource-based view of strategy complementary assets play a crucial role in explaining sustainable competitive advantages and innovations (Milgrom & Roberts, 1990; Stieglitz & Heine, 2007). If the organisation’s various domain strategies can be developed with this fundamental point in mind, then the opportunity for improved business performance can be realised. But strategy and strategy setting can be interpreted in numerous ways. It can be a dynamic process that reviews missions, strategies, and operations relative to market forces, or it can be about crafting a strategy that seeks innovation and imagines new, different futures. Either way its success will depend on coherence, congruence, and consistency, how the management of the organisation goes about strategy setting and effective asset orchestration and resource allocation—how organisations allocate their investments and whether this allocation maximises organisational capabilities. Developing a strategy that not only considers total investment, but investments in specific configurations of assets is therefore essential to complementarity (Aral & Weill, 2007; Srivastava & D’Souza, 2021). The need actively to manage the creation and usage of complementary assets requires coordination and cooperation. Organisations have ‘different characteristics, operate in different institutional contexts and work on a portfolio of projects,’ and for these reasons there is ‘no simple winning complementarity strategy’ (Hullova et al., 2016) between product and process innovation. Complementarity strategy will most likely be best fit rather than best practice.

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Moreno, V., Ferreira, R., & Filardi, F. (2020). Dynamic capabilities and complementarity in complex it projects in Brazil: Dataprev’s experience. Americana de Estrategia, 3, 6. Mothe, C., Nguyen-Thi, U., & Van P. N. (2015) Assessing complementarity in organizational innovations for technological innovation: The role of knowledge management practices. Applied Economics. Taylor and Francis (Routledge) 47(29) 3040–3058. Nielsen, S. B., & Hunter, D. E. K. (2013). Challenges to and forms of complementarity between performance management and evaluation. In S. B. Nielsen & D. E. K. Hunter (Eds.), Performance management and evaluation (Vol. 137, pp. 115–123). New Directions for Evaluation. Oedzes, J. J., Van der Vegt, G. S., Rink, F. A., & Walter, F. (2018). On the origins of informal hierarchy: The interactive role of formal leadership and task complexity. Journal of Organizational Behaviour, 40(3), 311–324. Pang, C., Wang, Q., Li, Y., & Duan, G. (2019). Integrative capability, business model innovation and performance: Contingent effect of business strategy. European Journal of Innovation Management, 22(3), 541–561. Ployhart, R. E., Nyberg, A. J., Reilly, G., & Maltarich, M. A. (2014). Human capital is dead; long live human capital resources! Journal of Management, 40(2), 371–398. Porter, M. E. (1980). Competitive strategy. The Free Press. Porter, M. E. (1985). Competitive advantage. The Free Press. Queiroz, M., Tallon, P. P., Coltman, T., Sharma, R., & Reynolds, P. (2020). Aligning the IT portfolio with business strategy: Evidence for complementarity of corporate and business unit alignment. Journal of Strategic Information Systems, 29(3) 4–21. Reimer, M., Doorn, S., & Heyden, M. L. M. (2018). Unpacking functional experience complementarities in senior leaders’ influences on CSR strategy: A CEO–top management team approach. Journal of Business Ethics, 151(4), 977–995. Rumelt, R. (2011). Good strategy, bad strategy. Profile Books. Schweiger, S. A., Stettler, T. R., Baldauf, A., & Zamudio, C. (2019). The complementarity of strategic orientations: A meta-analytic synthesis and theory extension. Strategic Management Journal, 40(11), 1822–1851. Sirmon, D. G., Hitt, M. A., Ireland, R. D., & Gilbert, B. A. (2011). Resource orchestration to create competitive advantage: Breadth, depth, and life cycle effects. Journal of Management, 37(5), 1390–1412. Srivastava, S., & D’Souza, D. (2021). Measuring strategic thinking in organizations. Journal of Managerial Issues, 33(1), 90–111.

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Stieglitz, N., & Heine, K. (2007). Innovations and the role of complementarities in a strategic theory of the firm. Strategic Management Journal, 28(1), 1–15. Suoniemi, S., Meyer-Waarden, L., Munzel, A., Zablah, A. R., & Straub, D. (2020). Big data and firm performance: The roles of market-directed capabilities and business strategy. Information and Management, 57(7) 1–17. Zhang, T., & Zhao, S. (2010). The business measurement of industrial complementarity: A methodology perspective. 2nd IEEE International Conference on Information Management and Engineering, 293–296. Turner, P. A. (2021). The making of the modern manager. Palgrave Macmillan. Wang, N., Xiao, M., & Savin, I. (2021). Complementarity effect in the innovation strategy: Internal R&D and acquisition of capital with embodied technology. The Journal of Technology Transfer, 46(2), 459. Wolfson, M. A., & Mathieu, J. E. (2018). Sprinting to the finish: Toward a theory of human capital resource complementarity. Journal of Applied Psychology, 103(11), 1165–1180. Wolfson, M. A., & Mathieu, J. E. (2021). Deploying human capital resources: Accentuating effects of situational alignment and social capital resources. Academy of Management Journal, 64(2), 435–457. Woudstra, U., Berghout, E., & Chee-Wee Tan, van Eekeren, P., & Deden, G. (2017). Resource complementarity and IT economies of scale: Mechanisms and empirical evidence. Information Systems Management, 34(2), 185–199. Yang, M.-J. (2021). The interdependence imperative: Business strategy, complementarities, and economic policy. Oxford Review of Economic Policy, 37(2), 392–415. Yoder, M. E. (2019). Better together: Complementarity between theory and practice in strategic management education. Journal of Education for Business, 94(5), 324–332. Zhou, J., Liu, Z., Li, J., & Jiao, H. (2019). Technology complementarity and collaborative innovation: The moderating effects of IT adoption. IEEE International Symposium on Innovation and Entrepreneurship (TEMS-ISIE).

5 Complementarity in Leadership and Management

Progression, Complementarity and Business Strategy Progression towards an organisation’s objectives will be influenced by the strategic choices made by leaders and managers, and the efficacy of the actions taken to implement them. At corporate level—for example, this will involve decisions about the positioning of subsidiaries in chosen markets; whilst at business unit level—a company or a firm—it will involve direction and actions with specific objectives in mind such as profitability or market share. And strategy can also refer to a domain or function within a business unit where it is set to ensure the performance of that particular area—such as IT or Finance—closely aligned with the goals of the organisation as a whole. In each of these scenarios, leaders and managers will make decisions about positioning, support them with resource allocation and engender them with the promotion of a collaborative culture—instrumental in advancing complementarity. The ways they do so will be set in the context of the organisation because the term strategy is interpreted in a variety of ways with a range of objectives. To support these interpretations is a panoply of strategic theory and practice © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_5

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from which organisations can choose to help in their navigation. In one model, strategy is concerned with achieving competitive advantage by differentiation or by being the lowest cost provider and ensuring that a value chain is established to reinforce these; in another it can be based on unique competences or resources—the resource-based view. It can be formed through systematic analysis and developing a position within a particular market, or it can be more opportunistic using the organisation’s agility to respond to changes in the environment. Strategy formation covers organisational activities from mission and vision to the direction of travel, from competences, and capabilities, to commitment and organisational learning (Ahlstrad & Mintzberg, 1998). And contemporaneously, business strategy is ‘less of a mould into which corporate ingredients could be poured and a fully formed figure emerging, to more like clay on a turntable, fashioned and crafted into shape.’ Whatever route is chosen and whatever formula is prepared to get there, strategy will succeed where there is coherence—an alignment between expectation and reality; congruence—where elements of the strategy are integrated and reinforce each other; and consistency—between intention and action. In this construct, strategy is not just a top-down process, ‘a successful strategy execution process is seldom a one-way trickle-down cascade of decisions.’ Instead, it will be more inclusive, maximising the potential of tacit and explicit knowledge and using resources to their optimum levels (Barney, 1991; Fedele & Mantovani, 2008; Vermeulen, 2017). An assumption is that leaders and managers will create a complementarity effect through their competence and orchestration of the organisation’s resources. A working hypothesis for this chapter therefore is that the qualities of leadership and the qualities of management, when combined, produce more than the sum of the qualities of leadership or the qualities of management as singular instances. The complementarity benefit is significant and will be achieved when leaders recognise and act on this potential harnessing the creative potential of employees as they work with new technologies. They have a pivotal role in ‘accelerating the transition to new heuristics’ (Pedota & Piscitella, 2021). How the organisation defines the terms leadership and management will help to identify what qualities are needed in this acceleration.

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 rogression, Complementarity, Leadership P and Management As with the previous Three Industrial Revolutions, new technology will be a major factor in influencing the nature of these qualities. However, this is only one of several powerful forces that are shaping the way in which organisations will prosper. Instead, as progression manifests itself by results—profit, return on investment, maximisation of shareholder value and by the successful adaptation to contemporary environments, leaders and managers will work where social objectives—fair-trade practices, contribution to social welfare, respect for and understanding about the environment, diversity, and equality of opportunity are included in corporate manifestos. As outlined previously business progression means achieving economic growth whilst having a positive effect on society as a whole. It means not only developing a competitive advantage but investing to sustain that advantage. Hence, whilst leadership and management practices will continue to be valuable where they stand alone (for example in a business unit or domain), there is also greater potential because different practices may also complement each other across the organisation, making joint adoption of particular types of management practice more valuable (Hong et al., 2015). How the concepts of leadership and management have evolved may be important in informing a best fit style, structure, and function for the future. In addition, they may provide the foundations on which a complementarity approach towards leadership and management can be developed. But clarity about their precise definitions continue to present challenges. In spite of decades of analysis there is no universally accepted theory of leadership. In one respect it can be based on contingency theory which will link leadership style to a particular environment or situation; in another it can be based on exchange theory, which will focus on the theme of leader—follower relationships. From one perspective, leadership can be transformational; from another it can be framed in terms of an individual’s charisma. Then there are the high-level leaders who are able to build enduring greatness through a blend of personal humility

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and professional will; or those with emotional awareness which allows them to achieve more than those without—i.e. they have high levels of emotional intelligence. For some, leadership is concerned with authenticity; or inverting the traditional perception to become servant leaders. Others still will attempt a ‘shift’ to a new level where purpose, mastery, autonomy and trust are characteristics of the organisation and whose leaders share aligned values and aspirations. Leadership can be person, process or position based or that based on trait, behaviour, power-­ influence, situational, integrative or intra individual (Greenleaf, 1977; Burns, 1978; Bass, 1985; Conger & Kanungo, 1987; Goleman, 1996, 1998; Collins, 2001; Alimo-Metcalfe & Alban-Metcalfe, 2003; Grint, 2005; Kodish, 2006; Yukl, 2010; Hlupic, 2014). Such leaders see opportunities in challenges and build a strategy for exceptional performance; they are ‘powerful but humble,’ see leadership in terms of collective action and lead for change and adaptability. In most cases, leaders will be people who ‘mobilise others to want to get extraordinary things done in organisations … transform values into actions, visions into realities, obstacles into innovations, separateness into solidarity, risks into rewards … create a climate in which people turn challenging opportunities into remarkable successes’ (Kouzes & Posner, 2003, p. 8). Theories sometimes distinguish between a leader who sits at the head of an organisation, department or business unit and leadership which is a social phenomenon that occurs at many organisational levels and points. There is compelling support for Kilburg and Donohue’s conclusion (2011) that ‘leadership is a complex, multidimensional, emergent process in which the leader and followers use their characteristics, capabilities, thoughts, feelings, and behaviours to create mutually influencing relationships that enable them to coevolve strategies, tactics, structures, processes, directions, and other methods of building and managing human enterprises.’ The consensus basis of these styles is that such leaders achieve exceptional things through followers who would be deemed to go the extra mile. The concept of management is an equally rich source of discussion and interpretation such that it can be seen as a constellation of concepts and ideas. Indeed, there are few concepts that have attracted as much business interest as the management of organisations. The breadth and depth of

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reach of management means that it can often span the boundaries of leadership and strategy whilst also applying to business administration. In their day-to-day roles managers are responsible for operational efficiency whilst also dealing with human emotions. ‘They are responsible for intangibles—such as brands or goodwill, and tangibles—such as machinery on a production line or IT systems in a bank. Managers are concerned with both change and stability; sometimes simultaneously. They operate within Weberian hierarchies—‘functional frames of reference,’ or in network or swarm structures because in ‘our digitally mediated world’ the classic bureaucracy is less prevalent (Hilbert, 1987; Muellerleile & Robertson, 2018; Turner, 2021). Diverse points of view about best practice have proliferated since Adam Smith first articulated the productivity benefits of the Division of Labour during the First Industrial Revolution. The concept of management evolved with each Industrial Revolution. During the nineteenth century—the Second Industrial Revolution— greater analysis of management practice led to the evolution of Scientific Management, made famous by Frederick Winslow Taylor, applied in the factories of Henry Ford and taken into a European context by Henri Fayol. The limitations of only using time clocks, stop watches and slide rules became apparent and led to the growth of a more people related emphasis on management and from the early twentieth century—The Third Industrial Revolution—with the emergence of Behavioural Management followed by Management as a Science emphasizing the importance of the organisational environment. In this interpretation of management ‘professional managers were assigned responsibility for planning, setting goals defining problems and making decisions. The methodological cornerstone was a contingency approach with unobtrusive control devices such as job specification, internal career ladders and operating routines monitoring performance’ (Wilson & Thomson, 2009). Theoretical (and practical) approaches to management proliferated out of the work of Peter Drucker (The Practice of Management 1954) through to W. Edwards Deming (Out of the Crisis 1982) and Total Quality Management through to Thomas Peters and Robert Waterman (In Search of Excellence 1982) and the Learning Organisation.

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Globalisation from the mid-twentieth century further enriched the subject with Management as Practice incorporating innovations introduced by successful global corporations that came out of the economies of Asia. At the forefront of this point of view was Henry Mintzberg with his fundamental question ‘how do we make sense of the vast array of activities that constitute managing?’ (Mintzberg, 2011). He was of the opinion that leaders could not simply delegate management. Instead, managers were themselves leaders and leadership was management practiced well. In addition, he proposed that management was not uniquely a science nor uniquely a profession, but a practice that could be learned through experience and context. The essence of management of practice was not confined to purely Western centric approaches and a rich canvass of new management styles—originating in Japan—became sources of innovation. Whilst there was no one single management culture (Sanger et al., 2017), there has been a significant influence of Asian management practices. ‘It might be argued that the impact of Taiichi Ohno of Toyota who is credited with developing the JIT (Just in Time) system in the 1950’s and 1960’s was as powerful an influence as F.W. Taylor; or that of Soichiro Honda, Zhang Ruimin, Lakshmi Mittal and Jack Ma as influential as Henry Ford. The rise of Japanese corporations introduced a whole new set of systems, processes and language of management. Amongst these were total quality management and continuous improvement that gained global traction’ (Turner, 2021). Decision making by consensus, root cause problem solving, Just-in-Time systems, jidoka, or ‘automation with a human touch;’ kanban, a production tool helping just-in-time production and poka yoke or mistake proofing are concepts that can be added to the canon of management theory. Child (1969) believed that management could be regarded as either an economic resource performing a series of technical functions including organising and administering of resources; or as a system of authority where policy is translated into the execution of tasks; or as an elite social grouping which acts as an economic resource in maintaining systems of authority. Wilson and Thomson (2009); and Muldoon et al. (2020) provide comprehensive analyses and are essential reading on the subject. However, much in the same way as leadership, there is an argument that universal solutions to management problems do not exist (Hofstede, 2007). The upheavals of the second

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decade of the twenty-first century reinforce the point of a more context specific view. Hence, as industrial and commercial organisations were transformed over the course of Four Industrial Revolutions, the concepts of leadership and management duly followed suit, producing disciplines that are full of richness and diversity, as well as controversy and contradiction.

 Convergence of Leadership A and Management Responsibilities An additional source of debate is whether the roles of leadership and management continue to be separate functions or whether new organisation designs blur the boundaries between them. The roles and responsibilities of leaders and managers have overlapped and in others converged with each phase of industrialisation such that leadership is in many instances one of the roles of the manager (Ellis & Bach, 2015), and management is one of the roles of the leader. In complex, fast moving environments how could this not be the case? Peter Drucker believed that separating management from leadership, was nonsense—‘as much nonsense as separating management from entrepreneurship. Those are part and parcel of the same job. They are different to be sure, but only as different as the right hand from the left or the nose from the mouth. They belong to the same body’ (quoted in Galagan, 1998). Whilst Henry Mintzberg noted that ‘leadership cannot simply delegate management; instead of distinguishing managers from leaders, we should see leaders as managers, and leadership as management practiced well’ (Mintzberg, 2011). In resolving this debate, the scope and structure of the organisation will increasingly contribute to a convergence of roles. ‘Organisations are sets of ongoing human relationships utilising various technologies in which people cooperate to achieve tasks which would otherwise not be possible either at all or from an equivalent resource base’ (Watson, 1994). At the heart of the managerial role is the task of orchestrating exchanges within the construct such that managerial work is organising work. Where there are fewer boundaries within organisations and achieving

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objectives increasingly become collaborative exercises, then leaders will be forced to manage in the classical sense and managers will be forced to lead, again in the classical sense. From the Goffee and Jones (2006) point of view leadership is non-hierarchical and there will inevitably be an overlap with those roles designated as managerial ones. Similarly, if managers undertake activity outside of strictly designated boundaries (because there may be none or they may have changed-) then this may be interpreted as leadership. Mintzberg’s belief that delineations between leadership and management were wrong because ‘managing is controlling and doing and dealing and thinking and leading and deciding and more’ (Mintzberg, 2011). It is this hypothesis that will be applied to the narrative about the role of leaders and managers in respect of complementarity and the competences necessary to fulfil this role. The know-how, know why, know when, know what and know how to behave of management will contribute to organisational success by singularity—which are discreet interventions in a specific domain—and complementarity—which are interventions connected to a broader purpose—such as to contribute to progression in another domain.

The new technologies of the Fourth Industrial Revolution will transform business models, strategies and operational processes and have the potential to change how people in the workforce connect, interact, and communicate. These dynamics will demand that leaders and managers are agile, unconcerned with boundaries, adaptable and collaborative. The competences that have been identified in previous studies will take place in a different context. Competences may be defined as those things that are causally related to effective performance, consisting of knowledge— which is the retention and utilisation of information, skills—or the ability to demonstrate a sequence of behaviour towards a goal—and attitudes and behaviours—which are the social manifestations of how a manager undertakes a role (Boyatzis, 1982). They can be specific, such as technology knowledge or that related to the business domain, or generic relating to interpersonal competences. A typology includes cognitive competence or work-related knowledge and the ability to apply it; functional competence the ability to perform

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work-based tasks; social competence or relational and communication skills; and meta-competence or personal and professional values. They are the know-how, know why, know what, know when and know how to behave of management (Turner, 2021). These competences will contribute to organisational success by singularity—which are discreet interventions in a specific domain—and complementarity—which are interventions connected to a broader purpose—such as to contribute to progression in another domain. Complementarity means organisational constructs and actions that are collaborative, multi layered, multi-faceted and most of all add to the competitiveness of the whole organisation. The convergence of many of the responsibilities of leaders and managers and the blurring of organisational lines mean that in some organisations the roles will overlap requiring a good deal of flexibility on the part of the people who fulfil those roles; or they may merge completely-depending on how ‘flat’ the organisational structure is or be temporary as in the case in swarm organisations (such as projects or ad hoc initiatives). In whatever way leadership and management is configured, the roles of leaders and managers will have additional elements because of complementarity and there are two important considerations. First. what are the competences needed for leaders and managers as they take on these new elements? Second how will the role change with the new emphasis and what will be the priorities?

 he Competences of Leaders and Managers T to Deliver the Potential of Complementarity The ‘Promise of Complementary Leadership’ manifests itself in one of four ways. The first is referred to as ‘task complementarity,’ where leaders divide management responsibilities into coherent blocks of tasks. The second is ‘expertise complementarity’—where different levels of skill between leaders and managers result in the formation of teams with complementary expertise. A third manifestation might be referred to as ‘cognitive complementarity’—which involves differences in how individuals process information.

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It is extraordinarily rare, for example, to find leaders who are equally good at dealing with the big picture—creating and communicating compelling visions and crafting breakthrough strategies—and at driving execution through an intense focus on tactics, details, and follow-through.

And a fourth is ‘role complementarity’ which involves leaders playing discrete and complementary social roles in organisations—for example when one leader plays diplomat and another plays warrior (Miles & Watkins, 2007). These descriptions demonstrate that there is no best practice approach. Instead, the type of complementarity is often best fit based on the specific circumstances of an organisation, unit, domain, or department. Nevertheless, it is worth pursuing whether there are aspects of competence that underpin leadership and management roles or configurations of interactions that, when applied can provide intrinsic benefits (Bruning et al., 2020). Figure 5.1 shows five possible areas of competence that might be considered as appropriate for leaders and managers seeking complementarities in their organisations. These are (after Turner, 2021):

Integrates multiple systems and processes and seeks complimentarities through synergy-'know how'

●Knows

when to allocate resources and knowing how this will impact on other projects or business initiatives

Demonstrates agile governance in identifying and delivering complementarity opportunities 'know what to do'

Leadership and Management Competences for complementarity 'know thyself'

Collaborates to create and share knowledge and information to expand the potential for complementarity 'know why'

Engages and Develops the Workforce to identify opportunities for complementarity within and without their own domains 'know how to behave'

Fig. 5.1  Leadership and management competences for complementarity

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• Demonstrates agile governance in identifying and delivering complementarity opportunities—‘know how’ Agile governance in its general management definition means ‘the ability to respond to change in a dynamic and flexible way; aligning change methodologies to the needs of the unit; whilst identifying the ramifications of change for areas outside of the unit and influencing or shaping the organisation and its processes accordingly.’ In this respect agile governance bears elements of transcendence, with the implication that the manager is not totally constrained by current boundaries; but is able to think beyond barriers and redefine the context and terms of the business practice. Complementarity will require agility in respect of identifying opportunity over and above that within the leader’s or manager’s day to day responsibilities or domain and influencing the organisation to take advantage of that opportunity. The leader or manager will need to negotiate cross domain alignment in making these decisions and it will take agility to maximise any additional opportunities between competing demands, but also to reconcile any differences— maintaining a course towards strategic objectives but manoeuvrability in the overall direction (Rozuel, 2011; Queiroz et al., 2020; Feizabadi et al., 2021; Turner, 2021). For example, if an opportunity presents itself—an application of technology that hadn’t been anticipated or knowledge in one process that can be applied to another—the leader or manager would be able to influence a shift in that direction by being confident and competent in taking responsibility to reshape or to influence others to do the same; to take advantage of the opportunity. An aspect of core competence will be to influence change across the whole system regardless of system boundaries to deliver the additional benefits (Hammer & Champy, 1993; Lopes et al., 2016; Bogel et al., 2019; Cohen, 2019; Javidroozi et al., 2019; Maisiri et al., 2019; Marr, 2019; Luna et al., 2020; Renjen, 2020). Agile governance, with its implications of cross boundary working, demands a strong leaning towards collaboration and knowledge sharing. • Collaborates to create and share knowledge and information to expand the potential for complementarity—‘know why’

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The ability to optimise resource deployment will be a critical facet of the role of the leader or manager as they seek to deliver the potential of complementarity. Key to this will be effective knowledge management through connecting individuals and teams and turning tacit into explicit knowledge for the benefit of the whole organisation. This does not only apply to the domain for which the particular leader or manager has responsibility but the ability to acquire and share resources and knowledge with others—complementarities arise from both similar and dissimilar resources (Soda & Furlotti, 2017). This assumption is based on the principle that collaboration provides access to scarce resources and enables synergistic interaction between businesses as a source of competitive advantage. The complementarity view is that once accessed, a bundle of resources grants a higher value, and that ‘knowledge-as-a-bundle’ offers ‘higher values to organisations when deployed jointly.’ However, complementarity will only be achieved where there are coordination mechanisms to enable collaboration. Understanding this and facilitating access in a holistic way is an important feature of competence since resource complementarity is not given but jointly constructed in interactions with multiple potential partners through recursive cycles (Deken et al., 2018). One of the responsibilities of leaders and managers will be to ensure that norms are set and adhered to that foster collaboration and trust. Knowledge complementarity will come about when organisations commit to management and direction of the internal knowledge base. The objective is the promotion of knowledge flow and integrating that knowledge into complementary activities. For example, customer intelligence used in creating products and services could also be used in manufacturing, supply chain or finance activity. Complementarity occurs where knowledge is actively shared and used in areas outside of its original source, producing performance outcomes over and above what would have occurred if the knowledge had remained in its original domain. Collaboration and cooperation mean sharing through formal channels such as strategic projects or business improvement schemes and outside of any structured or curated interactions (Wang et al., 2004; Deiser, 2009; Chaudhuri & Boer, 2016; Pinnington & Ayoub, 2019; Bolade, 2021; Xu & Zeng, 2021). Leaders and managers will act as creators of knowledge, sources of knowledge, and disseminators of knowledge in the quest for additional opportunities and benefits.

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• Engages and Develops the Workforce to identify opportunities for complementarity within and without their own domains ‘know how to behave’ A third area of importance is the ability to engage the workforce to spot opportunities and to create a culture whereby it is normal to articulate them routinely as part of the management of the particular area or domain; or exceptionally outside of any formal structural boundaries. In this, the leader or manager will seek to strike a balance between control ‘aimed at alignment of individuals’ behaviour with organisational goals,’ and autonomy or the individual ability to exercise a degree of control over the content, timing, location, and performance of activities. This means management mechanisms that leave a way for employees to ‘feel empowered, to participate, and to enact and increase their professional competence (which) will establish a complementary system that reinforces the effects of control and intrinsic motivation in aligning organisational members’ activities with organisational objectives’ (Porter & van den Hooff, 2020). The system would take account of the needs of all those involved whilst at the same time supporting the complementarity nature of knowledge sources i.e. ‘the simultaneous adoption of different sources being more valuable than the use of each of them separately’ (Serrano-Bedia et al., 2018). Where leaders and managers are successful in this then it can prove to be a primary source of motivating employees for their defined objectives as well as activities, which generate ‘employee knowledge through boundary-spanning exploration’ (Fang et al., 2021). In its most general sense this aspect of competence is ‘the ability to create a positive working environment and inspire individuals to apply themselves with intelligence, energy, resilience, enthusiasm and concentration; whilst providing the means for their personal and professional development’ (Turner, 2021). Articulating the ‘why of work’ (Ulrich & Ulrich, 2011) in this case means creating a culture for complementarity whereby members of the workforce understand and are enthused by the prospect of enhancing the performance of the whole organisation as well as the particular domain in which they work. It means creating a learning culture that benefits both individual members of the workforce and the organisation as a whole. But this does not only mean learning for those

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being managed, it means learning for those managing. Having an open or ‘Sunao’ mind will be a success factor for the performance of leaders and managers. • Knows when to allocate resources and knows how this will impact on other projects or business initiatives Brynjolfsson and Milgrom (2013) asked the question why is organisational change so difficult? and concluded that ‘when there are a large number of complementarities among practices within an existing system, but conflicts between practices from the old system and practices from the new system, then it is likely that the transition will be difficult.’ One way of addressing this issue was to change all of the practices in the new system simultaneously. However, this was likely to be unfeasible for a number of reasons. In addition to possible coordination problems or the presence of poorly defined practices centred on culture or heuristics, was that of timing. Here, some of the dependent variables may not be synchronized. Knowing when to act or to change will therefore be critical to progression. Recognising opportunities is an important aspect of the role of leaders and managers. But acting to create any synergies that result will decide whether the opportunity is realised. Knowing how, knowing why, and knowing what to do are the bases for actions. But a further aspect of leadership and management competence therefore relates to the timing of decisions. The priority here is not only how the alignment of business strategy with the organisation’s objectives takes place but when. The more coordinated alignment practices are, the more valuable they will be had they been taken in isolation. Knowing when to allocate resources and knowing how this will impact on other projects or business initiatives will be critical aspects of leadership and management competence. In this instance the leader or manager will be faced with choices. Should decisions be made to follow a sequential path—challenge and response—or should projects or initiatives be enacted simultaneously. And whilst research has shown that high levels of alignment practices and high levels of complementarity in the early phase of a particular initiative, led to higher levels of value, there are unlikely to be hard and fast rules. Instead, the decisions will be specific to the context, culture and resource levels of

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a particular organisation (Harrison et al., 2001;Vermerris et al., 2014; Luna et al. 2020; Turner, 2021). The velocity of change will need to be matched by the pace and precision of internal decision making which is sufficiently inclusive but not delayed by being mired in debate. • Integrates multiple systems and processes and seeks complementarity through synergy—‘know how’ Complementarity always takes place with a focus on outcomes. But the essence of the construct is a focus on multiple outcomes—from a particular domain but also those that stem from learning or resources in that domain being used to improve the performance of others. Their delivery will depend in large part on the ability of leaders and managers to comprehend and use technology tools and processes both to manage information derived from customers and from the market, but also to implement complementarities that arise from cross boundary applications. They will be critical to each of four dimensions, these being infrastructure; technical and managerial knowledge; the development of the different IT resources and the degree of integration with strategy. All will depend on effective integration of systems and processes. The proposition is that leadership and management competence in integration, by enhancing organisational capabilities (including technology and human resources) will enable production and knowledge-intensive services to achieve greater competitiveness (Khatri et al., 2010; Perez-Arosegui et al., 2012). In the first place, this competence requires the ability to coordinate technology and human resource systems in a way that is aligned to the overall objectives of the organisation i.e. into a coherent and meaningful whole. But in addition, complementarity will add the prospect of synergies with other areas, some of which will have been envisaged by original planning processes and some of which will not. Both will require integration competences on the part of the leader or manager as they develop systems to deliver progression through creating a competitive strategy and operations. Innovation and improvement through complementarity will become a continuous cycle once integration is successful. These four areas might be considered to be core management competences. In the Fourth Industrial Revolution they will inevitably have their

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foundations in technology, that is the ability not only to integrate technologies into particular spheres of responsibility but also to seek and disseminate knowledge that may benefit other areas or domains and ultimately the whole organisation. It is this holistic perspective that is the added dimension of complementarity and extends competences beyond their traditional boundaries.

 he Role of Leaders and Managers T in Delivering the Potential of Complementarity Having identified some of the competences that may be present in leaders and managers, the question remains as to exactly how such competences will be demonstrated to produce coherent, aligned and mutually reinforcing systems and processes that give superior outcomes over those that would occur if such strategies or practices had taken place independently of one another. For the subject of leadership and management this means the qualities of leadership and the qualities of management, when combined, produce more than the sum of the qualities of leadership or the qualities of management as singular instances. It also means that the qualities will be applied in ways that are specifically targeted towards complementarity benefits or objectives. Performance remains as the focal outcome (Bruning et al., 2020) and includes four considerations. First, how can leaders and managers both participate in and facilitate collaborative, cross domain working that ensures the sharing of knowledge that will benefit the whole organisation. Second, what will be the criteria by which they allocate resources. Third, how can they ensure that systems and processes are integrated and work for complementarity. And finally, how can they exploit any social complexities that exist in the organisation’s resource base to create advantage. • Participating in strategy setting in a collaborative way-cross domain Strategy setting will be increasingly a cross domain process demanding more participation, collaboration and knowledge sharing. This is reinforced by a demonstrated and significant relationship between participative leadership and a process which includes the integration of factors

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such as marketing or manufacturing with information systems capability—resulting in higher levels of performance and positive business outcomes. Leaders and Managers have a clear responsibility for ensuring that these links are facilitated by participating in strategy setting in a way that enhances the possibility of coherence, congruence and consistency as described earlier. To do so means that they will not only develop strategy from the perspective of their own domains—though this remains their priority—but will also seek to deliver additional potential, through collaboration with colleagues and peers, areas where complementarity is a possibility. Leaders and managers will act as fulcra between teams by looking for opportunities to bundle strategies and actions in such a way as to deliver over and above what those strategies and actions would have delivered if they had taken place independently of one another. The incidence of new forms of organisation structure or self-managed teams does not diminish the role of leadership and management. Even those organisations motivated to increase egalitarianism and participation among peers within complex task groups may need to maintain adequate forms of formal leadership, possibly combining sufficiently directive formal leadership behaviour with initiatives that encourage individual members to voice their ideas, views, and opinions’ (Bharadwaj et al., 2007; Cohen & Olsen, 2015; Oedzes et al., 2019; Ali et al., 2020). Strategy setting provides the foundation for complementarity; resource allocation provides the building blocks for its delivery. • Allocating resources complementarity

to

enhance

the

possibility

of

Complementary resources, for example, between the technology knowledge of computer engineers and the customer knowledge of marketers, or in systems and processes, between IT infrastructure capabilities and e-business capabilities, may lead to better overall performance outcomes when combined than if only one is present or they are managed independently, producing positive effects on sales growth and stock market returns (as in the case of mergers and acquisitions). Likewise, organisations that combine superior technology capabilities with other resources available to them can create agility in response to market trends and prompt innovative behaviour in developing digital platforms on

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which to base competitiveness. How to achieve such complementarities will be high on the agenda of leaders and managers in both strategic and operational roles. This means influencing the orchestration of resources, the way in which they are bundled and the way they are used to leverage the value of resources at multiple levels and organisation wide. The success of and the ability to create value is not only dependent on the theoretical complementary fit between resources but also on the behaviour of the receivers of the resources. If it is to be effective, the resource management activities of leaders and managers at all levels of the organisation should be prioritized, synchronized, and supported—that is, orchestrated—managerial choices and orchestration efforts lead to synergies (Woo, 2006; Nakata et al., 2011; Crocker & Eckardt, 2014; Soda & Furlotti, 2017; Ravichandran, 2018; Uwizeyemungu et al., 2018; Schweiger et al., 2019; Dellestrand et al., 2020). The challenge will be in identifying mutually reinforcing combinations of factors or activities for multiplier rather than simple additive effects. The ability to do so will be in part tacit and in part explicit competence. Having the right systems in place, which are operationalised for complementarity activity will be critical. • Ensuring systems and processes are integrated and work for complementarity Integrating distributed systems or organisational knowledge into actionable, competitive, and innovative strategies are essential aspects of management and where practices are aligned, complementarities can occur. Hence, systems integration is seen as an important competence at the organisational, leadership and management levels. Where effective it is a powerful driver of value creation not only through business—as usual activity but also with the possibility of a complementarity effect. This can produce a strong positive interaction between, for example, technology infrastructure and ‘front end’ capability—such as e-commerce. Evidence suggests that their complementarity ‘positively contributes to firm performance in terms of sales per employee, inventory turnover, and cost reduction through complementary synergy,’—between systems integration and such outcomes as innovation or effective solution design. As systems and processes are integrated then this will facilitate the sharing of

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resources between separate units, from which it will be possible to increase strategic capabilities leading to flexibility or faster time to market. Furthermore, knowledge management strategies, where successfully integrated into business processes, can create ‘super-additive value synergies’ that are not captured by stand alone strategies. The maximisation of such value will depend on an integration process which includes communication, shared understanding, demonstration of management commitment and effective evaluation. There is a strong business case for a leadership and managerial focus on integrating systems and processes to ensure their maximum contribution (Nakata et al., 2011; Ceci et al., 2014; Vermerris et al., 2014; Kim et al., 2021). This aspect of leadership and management goes beyond the essential task of alignment. Instead, leaders and managers will seek integration opportunities that go beyond those envisaged in the day-to-day operational mode. To identify such integration opportunities will require both knowledge and agility. • Exploiting social complexity Social complexity is based on human dynamics and includes the nature of interpersonal relations, a distinctive culture and the higher-order capabilities of competencies for creating, capturing, and transferring knowledge. Any organisation comprises of a network of individuals, and that those individuals will have unique talents or behaviours that will determine the level to which these attributes are used positively. How they do so will be derived from social networks—complex systems characterised by many ‘dynamically interconnected component entities.’ The way in which these interconnections utilise talents or behaviours that are difficult to imitate and can be combined with other rare or inimitable resources, will be instrumental to competitive progression. It will be a key role of leaders and managers to exploit such complexities in the pursuit of their objectives. The outcome would be that combinations of these socially complex attributes which yield benefits over and above those that each element could generate on its own. Simply put, ‘a certain degree of fit or match among the organisational practices and technologies in place is required to achieve superior performance’ (Milgrom & Roberts, 1990; Barney, 1991; Potgieter et al., 2007; Stucki & Wochner, 2019). Maximising this potential requires leaders and managers first to

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demonstrate that they can engage the workforce with the task in hand, second that they can create an organisation design and structure that facilitates the practice of complementarity and third that they are adept in sharing knowledge and practices that may enhance cross organisational performance. Knowledge can be used to generate valuable solutions that are hard to imitate and replace and knowledge sharing is important ‘because it connects individual knowledge with organisational knowledge’ allowing units to influence each other through their experiences to create new knowledge (Balle et al., 2020). This means not only knowledge collection but knowledge dissemination and exploitation through effective collaboration. This will depend on how the workforce is organised with an orientation toward making progress on agreed or set goals as well as critically evaluating alternatives. Management style will shape group members’ thoughts and behaviours in a way that increases group potency in both regards. Leader/manager team complementarity can benefit performance through task driven/motivational processes which will in turn lead to increased team potency because of shared beliefs that the team can perform successfully. The benefits of such an environment will manifest themselves through changes in ‘groups’ perceptions of joy, happiness, enthusiasm, and optimism,’ which in turn have the potential to improve performance outcomes (Hamstra et al., 2014; Hu & Judge, 2017; Bruning et al., 2020). Such configurations of leader and manager behaviour and group potency will foster positivity in the working environment, as well as the group's sense of competence and self-determination. Social complexity, its identification, its rareness and its inimitability are possible sources of competitive progression if it can be harnessed in such a way and combined with other rare resources in the creation of strategy and practice, to deliver complementarity benefits. The actions of leaders and managers will be instrumental in so doing. Using behavioural competence in engagement and structural competence in knowledge sharing or organisation design, their actions will determine the extent to which theoretical recognition of the value of social complexity is converted into the practice of business results.

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Conclusion The success of an organisation’s strategy will depend in large part on the abilities of its leaders and managers. Traditionally these abilities were seen either as separate with clear boundaries between the roles of a leader and a manager articulated in the phrase that leaders did the right things whilst managers did things right. More recently there has been debate—still unresolved—that it was not entirely possible to separate the two roles. Conventionally leaders have to be effective at management practice if they are to be successful in their roles whilst managers have to lead to deliver their objectives. In support of this assertion there is evidence that a failure in basic management actions to implement compounded by poor execution have undermined many a grand leadership vision. A lack of understanding of the organisation’s dynamics and a risk averse culture can likewise impede performance. And so, whilst leaders and managers will rarely be excellent in all aspects of their roles, separating the two in the contemporary organisation appears to be less credible. A complementarity in the roles means that vision and action go hand in hand; that strategy and implementation are aligned. Hence the first aspect of complementarity in leadership and management concerns the competences in the role. As outlined above, these centre on four key areas namely agility, collaboration, engagement and integration. A leader’s competences include those of a manager and a manager’s those of a leader. The second area in leadership and management functions concerns how those competences are applied in practice and with the objective of complementarity as their foundation. Cross domain and more inclusive setting of strategy and the subsequent allocation of resources to fulfil potential add to those actions that traditionally fill the daily lives of leaders and managers. Recognising the importance of ensuring that systems and processes are not only integrated but their potential and effectiveness span organisational boundaries. Acquiring and disseminating knowledge, tapping into the unique skills of the workforce, and converting these into advantage and progression or exploiting the uniqueness of the organisation’s design or culture feature heavily.

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It is towards this latter point that the next aspect of complementarity applies and that is in relation to the organisation’s talent and how to ensure that this is fully engaged with what the organisation is trying to achieve, both in its mission and vision and in the contribution of complementarity to their achievement.

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6 Complementarity in Talent and Workforce Engagement

People Issues Are Business Issues The higher the incidence of the collective interactions of a fully engaged, talented workforce, the greater the chances of producing superior results from complementarity. The objective is to generate value through synergies over that which would be realised if practices had taken place independently. A contributor to this will be where systems and processes allow members of the workforce to engage in strategy and action and to enhance both by their knowledge and collective problem solving. Underlying the realisation of the anticipated positive outcomes will be talent management and workforce engagement. When technological advancement and a workforce engaging in problem solving or performing creative tasks come together, they can deliver complementarity in ‘complex, dynamic ways’ (Crocker & Eckardt, 2014; Barmeyer & Franklin, 2016; Collings et al., 2018; Burdin & Kato, 2021; Kim et al., 2021; Pedota & Piscitella, 2021). The essence of this argument is: the activities of talent management, when combined with and complementary to the activities of employee engagement, produce more than the sum of the benefits of each when treated as singular events. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_6

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In this context, employee engagement refers to an individual; and workforce engagement applies to the totality of employees in an organisation. Talent management can be interpreted as exclusive, inclusive, or pluralistic in nature. The complementarities will occur between the two functions and between these and organisational performance. People issues are business issues. Strategic HRM research supports this point of view and emphasizes the positive effects of high-performance work systems on organisational level outcomes such as productivity, innovation, and financial performance—where changing a ‘broad suite’ of HRM practices impacts on performance through productivity. Human resource practice combinations are instrumental as coordination mechanisms in knowledge creation and exploitation. However, in addition to being a repetition of best practice, a complementarity approach to people related work systems will seek to exploit heterogeneity—those human resource practices that are difficult for competitors to imitate. From a resource-based view, this offers the opportunity to apply unique people management practices and experiences to deliver performance over and above that of competitors (Laursen & Mahnke, 2001; Fabling and Grimes, 2014; Bartoloni & Baussola, 2018; Chadwick & Flinchbaugh, 2021). The challenges are how to identify aspects of human resource practice that are unique and having done so deciding on what combinations are advantageous. The answers to these questions will allow the organisation to decide how the areas of talent, talent management and workforce engagement can contribute most effectively; that is understanding how talent management as being simultaneously ‘exclusive’ and ‘inclusive’ can be incorporated into the new paradigm; and how the psychological, sociological, and organisational aspects of workforce engagement can be accommodated into such an approach.

Defining Talent and Talent Management Karl Schwab (2016) has written that ‘in the future, talent, more than capital, will represent the critical factor of production.’ Talent is a valuable and rare resource and there are compelling reasons why it has assumed a significance in management practice. Talent can be a driver of

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value creation, of higher shareholder returns, for investor confidence, brand recognition, and customer relationships, commitment, and market share. It is perhaps because of the perception of these many perceived benefits that talent remains one of the key challenges for organisations worldwide in a dynamic and volatile market environment. To be effective requires a response that is both quantitative and qualitative—the right people in the right place, with the right skills at the right time. Clarity about what talent means to the organisation, who has it and how best to manage talented people are important antecedents to developing a talent strategy. The logic behind this assumption is that a clear definition will inform how to allocate resources to ensure they are pivotal to enterprise success. It would provide the foundation for an organisation wide approach to talent. And would give coherence to talent management since the quest for complementarity will require the development of appropriate systems and processes aligned to the achievement of enhanced objectives. But a definition of what is meant by the term, has been the subject of much debate within both academic and practitioner circles (Lewis & Heckman, 2006; Dries, 2013; Meyers & van Woerkom, 2014; Collings et  al., 2015; Cascio & Boudreau, 2016). Talent is variously viewed as human capital, individual difference, giftedness, identity, strength, or perception. For example, talent was defined by the Chartered Institute of Personnel and Development, as ‘those individuals who can make a difference to organisational performance either through their immediate contribution or, in the longer-term, by demonstrating the highest levels of potential’ (Tansley et  al., 2007). But, interpretations have also been couched in terms of natural ability or mastery of a particular function, as well as by competences, capabilities and commitment. There is also the question of whether talent is the result of nature or nurture; and whether it is innate or whether it can be taught and developed. There was the view that talent emerges from the transformation of individual aptitudes to systematically developed skills and that this was most likely a combination of cognitive, affective and conative traits that ‘in turn, determine the direction, intensity, duration and effectiveness of practice/learning’ (Huselid et al., 2005; Ulrich & Smallwood, 2011; Björkman et al., 2013; Ackerman, 2014). The many variations of the definition provided a wealth of material but

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didn’t resolve the paradox of whether those who could ‘make a difference’ were those at the top of the organisation (and where talent management was directed to this group known as an ‘exclusive’ approach), or all employees (where talent management was targeted in this way, known as an ‘inclusive’ approach). A summary of the questions raised by studies of talent and talent management is; ‘does talent refer to people (subject) or to the characteristics of people (object)? Is talent more about performance, potential, competence, or commitment? Is talent a natural ability or does it relate more to mastery through practice? Is it better to take an inclusive or an exclusive approach to talent management?’(Gallardo-­ Gallardo et al., 2013). The definition of talent appears to be largely phenomenon rather than theory driven, and this has implications for what is included within the boundaries of talent management and the operation of talent systems and processes. Definitions cover those typical human resource practices, functions, activities or specialist areas such as attraction, selection, development, and career management, or the creation and development of talent pools (Lewis & Heckman, 2006). On the one hand talent management can be ‘all organisational activities for the purpose of attracting, selecting, developing, and retaining the best employees in the most strategic roles— those roles necessary to achieve organizational strategic priorities’ (Vaiman et al., 2012); or the activity which systematically utilised HRM policies to attract, develop, and retain individuals with high levels of human capital (e.g., competency, personality, motivation) consistent with the strategic direction of the organisation in a dynamic, highly competitive environment (Tarique & Schuler, 2010). Collings and Mellahi (2009) articulated it as the process for the identification of key positions which significantly contribute to competitive advantage, the development of talent pools to fill such roles, and a human resources architecture geared to filling these positions; a definition which emphasized so called pivotal positions. A more inclusive stance towards talent management would have a greater emphasis on focussed competence development concentrating on talent flows, and from a social capital perspective taking account of contexts and relationships as well as human capital. So, talent may refer to the most senior roles in the organisation, and here the priority would be to make sure that succession plans are in place

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and there are enough people at the right level to lead and manage the organisation. Talent management would be concerned with leadership potential, and their development and retention—often referred to as the ‘exclusive’ approach At the other end of the spectrum, there may be a more inclusive approach, where ‘everyone has talent’ and talent management extends throughout the organisation with a possible remit to create an employee value proposition for career and professional development opportunities for a broad swathe of employees. Some organisations take a pluralistic view about talent management which contains elements of both exclusivity and inclusivity, ‘focuses on organisational needs such as effective and sustained leadership (people and roles); but at the same time seeks to satisfy individual needs through employee engagement and the provision of career opportunity to the majority’ (Swailes et  al., 2014; Turner, 2017). A conclusion from the vast amount of research and practice evidence is that there are too many factors to synthesize talent or talent management into a single approach. It is for these reasons that demographic, behavioural and attitudinal forces have created a shift to a more pluralistic outlook. And so, where once approaches were framed in the context of senior managers and high potentials, there is now a perspective that increasingly embraces both exclusive and inclusive positions, often simultaneously. Increasingly, talent management is likely to include both leadership development and whole workforce development; designing career paths for board level successors whilst enabling the career progress of the majority of the workforce; and a range of activities to ensure that retention underpins organisational development and culture. The greater the integration of these activities with business or organisational objectives, strategies and culture, the closer the organisation will be to a high performance organisation (Turner, 2017). The various philosophies about talent and talent management that have evolved over the past two decades and beyond are not competing approaches because they ‘reflect different and alternative dimensions of a more strategic approach to talent management. Each philosophy makes different contributions to the potential study of the value of talent management’ (Sparrow & Makram, 2015). Talent management is a mix of science and art—the science being derived from psychology, sociology

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and organisational dynamics and the art from engaging executives, managers, and the whole workforce. These factors and the importance of context suggest that organisations choose a best fit approach to go down a path of what is right for them in their particular circumstances. The effectiveness of this best fit will be crucial in determining whether an organisation is able to maximise returns from complementarity. Where a definition is ‘exclusive’ i.e. referring to the most senior leaders or managers and those in talent pools, resource directed towards complementarity may well be in learning, training and development ensuring that those in the most senior positions have the strategic competences and awareness relevant for achieving complementarity goals and objectives. Where talent management is of a more inclusive hue, then resources will still be directed towards learning, training and development but with an emphasis on team working and collaboration. Talent management is a mix of science and art—the science being derived from psychology, sociology and organisational dynamics and the art from engaging executives, managers and the whole workforce into the practice of talent management.

At its most strategic, Business or Organisation Integrated Talent Management is used to drive organisational performance and is a board level agenda item—influences the direction of the organisation. Moreover, talent management is likely to be pluralistic with multiple communities and objectives. The same assumptions are true for the subject of employee or workforce engagement.

The Significance of a Fully Engaged Workforce The performance of the workforce is a critical determinant of operational and strategic outcomes and hence there is a strong rationale attached to the importance of workforce engagement. This is accentuated by the people management challenges of the confluence of technologies accompanying the Fourth Industrial Revolution or approaches to work as a

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result of the global pandemic. The results are new business models, changes in the type of work available, a requirement for new skills and innovative approaches to organisation, interaction, and communication. Recruiting, developing, motivating, and retaining employees with the right level of skill in the right place at the right time remain priorities. A combination of more traditional approaches and new requirements will reinforce a core management competence of engaging and developing a workforce, which is ‘the ability to create a positive working environment and inspire individuals to apply themselves with intelligence, energy, resilience, enthusiasm and concentration; whilst providing the means for their personal and professional development’ (Turner, 2020). This applies at an individual (employee) level of engagement and of the workforce as a whole. Achieving such a lofty goal is not, however, a straightforward task because workforce engagement is a complex, multi-faceted concept. The question of why employees are enthusiastic and will engage with their job, team or organisation is one that has exercised academics and practitioners over time from Kahn’s (1990) ground-breaking research which articulated the concept of workforce engagement as how employees ‘harnessed’ themselves and their roles through the application of their physical, cognitive, and emotional resources whilst they were at the place of work; to Schaufeli and Bakker’s (2004) conceptualisation of engagement as a positive work-related state characterized by vigour, dedication, and absorption—where vigour concerns energy and resilience, dedication is about enthusiasm and being inspired, and absorption is the intense concentration in the work being undertaken. From this perspective, employee engagement can be seen as the simultaneous employment and expression of a person’s ‘preferred self ’ in task behaviours that promote connections to work and to others, personal presence (physical, cognitive, and emotional), and active, full role performance (Saks, 2006, 2017). Other definitions include those of organisational engagement—the level of employee commitment to the organisation; work engagement-a positive, fulfilling, work-related state of mind; job engagement—the level of commitment to the job or role; cognitive engagement-how an employee understands their job; physical or behavioural engagement—effort, performance, or productivity; personal engagement—the harnessing of self

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to work roles; and social engagement or how engaged individuals interact with colleagues and co-workers to propose and implement new ideas. employee engagement is a positive work-related state characterized by vigour, dedication, and absorption.

The Jobs-Demand-Resources theory has traversed multiple definitions which brings together many of the concepts as it models all working environments or job characteristics on two categories, namely job demands—physical, psychological, social, or organisational aspects of the job that require sustained physical or psychological effort; and job resources—physical, psychological, social, or organisational aspects of the job that are functional in achieving work goals; reduce job demands or stimulate personal growth, learning, and development (Bakker & Demerouti, 2014). The theory has implications for the level of engagement of an individual member of the workforce and for the workforce as a whole. The level of interest in employee or workforce engagement is explained in part by the attributed benefits that accrue to those organisations and individuals where engagement is high. These include impacts on shareholder returns, operating income, revenue growth, profit margins, creativity and innovation and customer or client satisfaction for the organisation and well-being for employees. Workforce engagement is clearly a priority, accentuated by new demands and opportunities. To maximise the benefits of such opportunity will require a workforce that is engaged with the role, the team and the organisation with the skills relevant to the work that is required. They will need to be resilient on the one hand and to employ their skills to maximum effect on the other in a context where employee engagement is influenced by both individual and circumstantial elements. First, in the psychology of work which will include meaning at work, no fear or blame, emotional presence, emotional intelligence and positive mutual regard. Second, the sociology of work will include organisational climate and culture, work demand and resource supply, health and well-being and the physical work environment. Whilst third, the organisation of work will include the structure, organisational dynamics, and the impact of technology (Turner, 2020).

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Developing strategies and plans for each of these three areas will be important for organisations as they seek to increase levels of engagement in their workforces. In summary, and in an ideal scenario workforce engagement is most effective when it takes place in the context of a people strategy that is aligned to business strategy; including the fair treatment of employees and support for their well-being; empowering employees to shape their roles; processes for two-way communication; leaders and line managers with engagement as a priority in their people management skills; effective and motivational performance management systems, whole workforce talent management, opportunities for professional development and HR practices that address and value inclusivity. Complementarity provides an opportunity to exploit the outcomes of this scenario by addressing the question—are there ways in which talent management and workforce engagement can be coordinated such that they produce higher levels of return than if they had been addressed as individual concepts? There is significant potential for complementarity benefits between talent management and workforce engagement on the one hand and between the two and organisational performance on the other.

 omplementarity Between Talent C Management and Workforce Engagement Ability and effort are complements thereby reinforcing links between human resource practices (Bonatti & Hörner, 2017). Both areas can be addressed by bringing together approaches to or strategies for talent management and workforce engagement. These will be at the individual level where inclusive talent management will have a knock-on effect on the psychology of work—individuals will perceive a strong link between their personal goals and opportunity to fulfil them; and the sociology of work where employees will feel attuned to their roles within teams by being trained to fulfil that role on the one hand whilst developing the competence associated with collaboration and knowledge sharing on the other. In addition, effective talent management can have an impact on the organisation of work—a third driver of employee engagement—where

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the employee will feel a strong affinity to the organisation, its culture and its goals by effective onboarding, day to day management and career paths or development opportunities. Where talent management includes employee engagement as a critical aspect of its purpose, there may be complementarity benefits over and above those that would occur if talent management took place as an independent, stand-alone human resource discipline. Likewise, where employee and workforce engagement not only draw on the outputs of talent management but also inform its priorities, direction, and content then there is the possibility of additional benefits over and above those that would occur if they had been treated as separate strands in HRM. Changes that are taking place as a result of the Fourth Industrial Revolution and Industry 4.0. are important considerations in determining both. New business models, new types of work, a requirement for new skills and innovative approaches to organisation, interaction, and communication are forcing a rethink about the nature of work. Recruiting, developing, motivating, and retaining employees with the right level of skill continue to be priorities, but there are additional elements to the ‘human dimension’ of work that are relevant to complementarity. This is because delivering through mutually beneficial cooperation—the day-to-day life in the organisation—will increasingly depend on such things as knowledge creation, dissemination and exchange, joint actions to solve problems, joint planning for work-flow, making joint decisions and committing to collective behaviour, i.e. action whose outcome depends on cooperation based on shared understanding. Furthermore, cooperative capabilities—competencies relevant to information processing, communication, knowledge transfer, intra- and interunit coordination, the ability to develop trusting relationships, and negotiation, have the potential to create competitive advantage that is not easily imitated. Where these interactions are effective and when organisational practices, systems and processes work together with a complementarity focus, they can create a productivity premium over and above that where practices were implemented separately. Such dynamic capabilities facilitate taking new business opportunities and creating opportunities for additional value-­ creating strategies.

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The evidence of the complementarity between the two is often included in more general arguments i.e. where organisations are able to provide an environment in which human resources practices can be coordinated and combined, there is potential over and above that which would have occurred in individual human resource practice circumstances. Internal fit, cultural fit and strategic fit are important factors creating an inimitable system of practices (Stahl et al., 2012; Baltrunaite et al., 2021). The quest to ensure ‘fitness’ may indicate where complementarities between talent management and workforce engagement are present: • At the highest level of awareness, talent management is used to drive organisational performance; it is a board level agenda item; and it influences the direction of the organisation. Similarly, workforce engagement is regarded as a significant contributor to organisational performance. The challenge of complementarity is to ensure that systems and processes are in place to identify and deliver any synergies that may exist and converting these into benefits that accrue over and above those that would be present if the two areas were treated as separate aspects of human resource management. If the strategies were integrated there are opportunities for synergy derived from economies of scope. • One of the most effective tools in ensuring that employees stay engaged and committed to their work is talent management. Hence, ‘a synchronization of talent management practices and employee engagement initiatives leads to improved talent retention’ such that talent management and employee engagement have a positive and significant relationship (Pandita & Ray, 2018; Yuniati et al., 2021). The two can be mutually reinforcing—talent management can have a significant impact on workforce engagement levels; workforce engagement strategies have the potential for attracting and retaining talented people. • There is a strong relationship between talent management practices, employee engagement and employee retention such that talent management practices are positively correlated to employee engagement and that employee engagement has positive correlation with employee retention (Alias et al., 2014).

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• Where talent management is pluralistic with multiple communities and objectives, it gives the opportunity to overlap approaches to workforce engagement. The development of career paths (career ladders, executive or personal coaching, funding for qualifications) within the talent management domain can have a significant impact on how members of the workforce regard the organisation and their commitment to its objectives. There are overlaps between this aspect of talent management and that of workforce engagement. • The objective of fusing inclusive talent management in the context of improving employee and workforce engagement, will be facilitated by creating an environment whereby the expectations of employees are understood and met. The result will be tangible outcomes (return on investment in talent) and intangible ones (motivated and engaged employees or increase in the value of intangible assets such as corporate reputation or Intellectual Property.) The maxim that ‘everyone is important. Make talent important for everyone’ (Caplan, 2011) means focusing on the individual development of all employees. This is a powerful antecedent of employee engagement. The opportunity is to build talent management and employee engagement strategies synchronously. Where this is achieved—cultural fit—there is potential to differentiate against competitors in terms of converting high engagement levels to output and productivity. This can contribute to the social complexity discussed earlier and make human resource practices difficult to imitate on the part of competitors. • Organisational learning facilitates the development of cognitive and behavioural skills, ‘which can lead to profound, lasting modifications’ to how the organisation operates—strategic fit. Because strategies for learning, training and development have taken on a more inclusive hue, in which a whole workforce approach is as much of a priority as that towards ‘top talent’—inclusivity is considered as an essential antecedent of workforce or employee engagement and thereby organisational performance. Career planning along with incentives and organisational support are important aspects of talent management that are critical to engagement and in turn retention (Bhatnagar, 2007). Workforce engagement relies on effective talent management; and together they can be mutually performance enhancing.

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• The effective transfer of training improves engagement with a particular role or team which in turn improves performance. This applies to training and development for individuals and operational teams with knowledge and skills for specific roles or tasks; specialists in particular areas of the value chain—sales, marketing, procurement, finance or HR—and architects able to negotiate complex social, economic and political environments through innovation. Progressive organisations are continuously seeking ways to increase effectiveness through development of the workforce and the transfer of training through rapid digital adoption and different modalities and content. To maximise this potential will require both a strategic response—crafting strategies that enhance the potential for synergies between talent and workforce engagement—and the effective operationalisation of these initiatives. The additional factor of complementarity may require a change in approach since it is both a characteristic of and integrated into human resources strategies informing aspects of talent and engagement including recruitment, career management, learning training and development. A strategic approach will not only bring together the management of human capital with the goals and objectives of the organisation but also with the objective of complementarity. It is part of ‘Business Integrated Talent and Engagement,’ which is strategy driven. The value of combining system-oriented strategies with person-oriented strategies is higher than that of using the strategies in isolation (Harrison et al., 2001; Kim et  al., 2021). In this regard, the priorities of talent management and workforce engagement are aligned to both organisational strategy and potential complementarities. Successful talent management and workforce engagement will create an environment of learning which if it is to be meaningful will require knowledge articulation and knowledge codification. The objectives of complementarity for talent and workforce engagement will include maximisation of a knowledge portfolio—an intentional combination of individual knowledge management strategies to capture the benefits of multiple knowledge scopes and types (Laaksonen & Peltoniemi, 2018; Kim et al., 2021).

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 omplementarity Between Talent C Management, Workforce Engagement and Organisational Performance There is a positive relationship between talent management, workforce engagement and organisational performance. Employees who are engaged and committed can achieve higher productivity and are less likely to leave. But to arrive at this position requires a combination of factors including a mix of strategic (mission, vision) and operational (values and behaviours). Vital to this are leaders with the competences to deliver and leadership actions that do so; managers who regard engagement as a key part of their role and a fully developed workforce. Where these elements are in place then there is the possibility of complementarity benefits (Jackson & Ni, 2013): Stakeholder theories suggest complementarities between corporate governance characteristics of ownership and boards, on one hand, and employment patterns, on the other. For example, commitment by relational investors supports stable long-term employment, investment in worker training, and cooperative industrial relations.

To reach high performance levels through talent management an organisation should also focus on creating an appropriate climate supporting the individual creativity of its employees. Workforce engagement and talent management are intertwined and there is an incentive for the organisation to create an environment and culture conducive to this partnership. In so doing the complementarities will be greater motivation, commitment and enthusiasm for jobs or work, whilst at the same time ensuring alignment with the values of the organisation, and ‘well informed and well-integrated’ teams. This will have a knock-on effect on productivity. Conventionally, it is common to link talent management or workforce engagement practices directly to the organisation’s performance. The assumption is that the effect was due to enhancing human capital resources in their most general sense. Hence, when most human resource research refers to complementarities, it is essentially focussing on those

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that may exist among the talent management practices rather than the resources that are influenced by those practices. An alternative perspective would be to consider enhancements in business performance not as the result of activities within a singular domain but the activities of that domain in relation to others. A definition that embraces this perspective is that complementarities in human capital resources result from synergistic relationships between two or more human capital resources (Jeswani & Sarkar, 2008; Ingram, 2016; Ployhart & Cragun, 2017). Since the performance of the workforce will be a strong determinant of both operational and strategic outcomes, there is a powerful rationale behind the importance of talent management and workforce engagement. The probability of successful outcomes for both the individual and the organisation will increase where there are direct linkages between talent management, human resources development and human resource management—in particular workforce engagement. Where those who are regarded as talent—whether this be in an exclusive, inclusive or pluralistic definition—also have a high level of commitment, then this has the potential to increase engagement and add value in the organisation in a variety of beneficial ways (Turner, 2017; Ramli et al., 2018). Some would go further since research has shown that whilst talent management represents one of the most important functions affecting competitive advantage achievement, this will be most effective when talent management is aligned with corporate and business strategy, as well as being coordinated with other functions of which workforce engagement can be regarded as important (Abrahamson, 1973; Dryer & Horowitz, 1997; Fiske, 2000; Tyler, 2001; Aral et al., 2012; Laaksonen & Peltoniemi, 2018). A combination of talent and workforce engagement can have complementarity effects on aspects of the business environment from productivity through to innovation through to knowledge creation and capture. • There is a relationship between managerial talent, employee engagement, and business-unit level performance. There are two critical areas that can improve the probability of business-unit level success; selecting managers with the talent to manage people efficiently and creating an environment that supports employee engagement. ‘Together these factors explain complementary and unique variance in business-unit

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level performance within organisations’ (Harter, 2000). Furthermore, there is a positive relationship between talent management and engagement and the ‘triple bottom line’ of environment, society and economy (Alhaddi, 2015). Seeking complementarities and facilitating their delivery through a combination of talent management and workforce engagement has the potential to satisfy multiple organisational objectives. • The relationship between workforce engagement and performance at the business/ work unit level continues to be substantial and highly generalizable across companies. Gallup’s, 2020 survey found that those organisations with higher engagement scores showed differences between top and bottom quartile organisations of 10% in customer loyalty and 23% in profitability, as well as 18% in productivity (sales); 18% in turnover for high-turnover organisations (those with more than 40% annualized turnover) 81% in absenteeism; 41% in quality (defects); 66% in wellbeing and 13% in organisational citizenship (Gallup, 2020). This study raised two important questions that are both influential and directly related to talent management. These concerned career discussions and ‘opportunities at work to learn and grow.’ Linking talent management attributes to workforce engagement can have positive organisational outcomes. And where organisations were able to configure their human resources with other competitive resources—such as technology—there was a strong possibility of high performance. Effectively implemented talent management and enhanced workforce engagement can be strong predictors of positive organisational performance (Hughes & Rog, 2008; Markos & Sridevi, 2010; Aversa et al., 2015). • Amongst the benefits of effective talent management are greater commitment, well-being, favourable turnover intentions and fairness. It is argued that if talent strategy is to succeed, then those responsible will have to achieve credibility with business leaders. They will do so by having a dialogue around the strategic agenda and how talent can support the delivery of business goals. Talent has been identified as a driver of value creation; more talent, better shareholder returns and potential outcomes in respect of market value; better p/e than competitors, community reputation—brand recognition and impact; Business exe-

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cution—ability to implement new strategy; Customer commitment and share (Ulrich & Smallwood, 2011). Complementarities from talent management and workforce engagement include the creation and dissemination of knowledge more effectively than if the two activities were separate. There was evidence of additional benefits where human capital and knowledge management capabilities interacted to influence customer service outcomes (Alma’aitah et  al., 2013; Cohen & Olsen, 2015). • The value of whole workforce training and development to business innovation. Improvements in on-the-job productivity; improvement in customer satisfaction; reduced time away from the job; and greater levels of engagement are the result of the offer of training and career progress. The above discussion had two areas of focus. First to show the potential of identifying and exploiting synergies between talent management and employee or workforce engagement; second to demonstrate that having done so, the resulting approach would impact positively on organisational outcomes. The achievement of these desirable objectives however will also require recognition of the potential for complementarity and strategies and actions to deliver them.

 eveloping Talent Management D and Workforce Engagement to Achieve Complementarity Whilst complementarities between talent management and workforce engagement and between talent management, workforce engagement and organisational performance can happen spontaneously, it is important to have strategies, implementation plans and ways of capturing performance outcomes through synergies or economies of scope. From the former these will be improvements in talent metrics from attraction to recruitment to retention, and engagement metrics from a greater alignment of the workforce with the vision or objectives of the organisation.

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The outcomes for the latter will include knowledge creation and dissemination leading to improvements in innovation and productivity, which in turn will impact business measures such as shareholder value. Benefits will be realised by having clear definitions of both talent and engagement in the specific context of an organisation—providing a focus; a strategy for ensuring that benefits are delivered both within the functions of talent and engagement and between the two and business performance. The ability to execute the proposed strategies will determine the success of the initiative. This means that the strategies should have coherence, congruence and consistency and clarity about expected outcomes including measures of effectiveness for complementarity initiatives. A summary of the strategies required to support the potential for complementarity is included in Fig. 6.1 and a detailed description of each is discussed below. • Defining talent and talent management in the organisational context; defining employee or workforce engagement

Defining talent and talent management in the organisational context Defining employee or workforce engagement

Measuring return of investment in complementarity; for 'business case' and resource allocation

Identifying synergies between talent management and workforce engagement; developing strategy to realise the benefits of those synergies; agreeing actions to deliver

Complementarity talent and workforce engagement

Identifying synergies between talent management, workforce engagement and organisational performance; aligning talent and engagement strategies to organisational strategies

Ensuring operational alignment informing management activity for talent and engagement with the complementarity principle; leadership and management competence aligned with achievement of complementarity objectives

Fig. 6.1  A model for developing talent management and workforce engagement to achieve complementarity

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Talent and engagement will be pivotal to organisational success. An important prerequisite of delivering to the potential complementarities therefore is a clear, organisation wide definition for each. A definition of who would be regarded as talent and the organisation’s unique perspective of engagement will be important in answering the questions of where to prioritise and how to direct activity accordingly (Schiemann, 2014). The logic is that a clear definition will help to inform how an organisation allocates its resources. Talent management may have an exclusive focus relating to the ‘top team’ or high potentials, or it may be inclusive and based on the mantra that everyone has talent. Increasingly, the definition will be pluralistic embracing both exclusive and inclusive elements. Whatever definition is used, this step will provide the basis for a coherent approach to talent management which would lead to the development of systems and processes aligned to the achievement of the organisation’s unique objectives, the identification of possible synergies with workforce engagement and areas of potential for complementarity. The principle of providing a focus is also important in seeking a definition of workforce or employee engagement. Once again this is likely to be context specific because employee engagement is a multi-faceted, multi layered construct to which simplistic definitions are difficult to attach and simple ‘solutions’ unlikely to be effective (Turner, 2020). It is in part a psychological phenomenon; in part a sociological phenomenon; and in part an outcome of organisational dynamics. And it is influenced by supply push and demand-pull factors; where ‘supply push’ are those elements that have a positive impact on an individual, the resources they have at their disposal and the climate in which they work; and ‘demand pull’ elements that interfere with or motivation of the individual or the smooth operation of work. The challenge facing organisations is to recognise the effect of these in their own unique context and develop strategies to ensure that there is enough supply to outweigh demand. Given these considerations, it will be up to the individual organisation to decide on how they define engagement, what elements of psychology, sociology or organisation are relevant and which supply and demand characteristics are strongest.

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These definitions will provide a framework for three important considerations. First, which aspects of the talent management definition and portfolio of activities overlap with those of employee or workforce engagement; second is there an opportunity to create synergies from these areas and thirdly what aspects of organisational design, culture or resource allocation need to change to support the achievement of complementarity. • Identifying synergies between talent management and workforce engagement; developing strategy to realise the benefits of those synergies; agreeing actions to deliver The principle of strategy setting is that competitive progression occurs where there is complementarity between business strategy, the organisation’s design, or structure, how it is stewarded or governed, and the policies enacted to deliver long term direction and day to day activity, applies as the implementation of strategy is cascaded or devolved through the organisation. In respect of talent and engagement this means understanding how the relationships between the two can create more value than if they were treated individually. An assumption in this area is that two management practices can be defined as complementary if the adoption of one practice increases the benefits of adopting the second practice. In this case combining the strategies of separate domains can provide distinct advantages (Gupta et al., 2020; Fakhreddin et al., 2021; Wang et al., 2021; Yang, 2021). However, for complementarities to be achieved it is not enough to take a general approach to investments in talent management or workforce engagement. Whilst many organisations choose to develop human capital through training employees—‘existing research suggests that such investments are likely to lead to superior financial performance when the human capital is firm-specific’ and not in the sense of generic training that can apply to any other organisation. ‘General training thus fails the test of valuable, rare, inimitable, non-substitutable, and organizationally embedded’ (Riley et al., 2016). The same may be true for employee engagement where general principles, whilst laudable, may not deliver to the potential of complementarity. In both cases the organisation should seek to identify unique combinations of the two as a route to progression.

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This represents the initial point of entry. However, it will also be necessary for actions to deliver the potential of identified synergies and in this case ‘integration and empowerment’ will require systems and processes to realise this potential. A business case for synergy will be the articulation of potential, but organisational responsiveness, a clear plan of action and competence in its enactment will be its realisation. • Identifying synergies between talent management, workforce engagement and organisational performance; aligning talent and engagement strategies to organisational strategies Those organisations that view employee human capital as an asset in which to be invested and developed can expect to outperform those who view it as a cost to be minimized. This is consistent with the resource-­ based approach, in which an organisation’s valuable, rare, inimitable, non-substitutable, and organisationally embedded resources result in superior performance. It is argued that one of the most fundamental considerations for human resource strategy is how to position employees ‘to act in ways that advance the organisation toward its goals.’ Gallup’s, 2020 study concluded that learning and development opportunities were strong influencers of engagement (Riley et al., 2016; Delaney & Royal, 2017; Gallup, 2020). Engagement is a primary means of aligning employee efforts, and along with inclusive talent management may become important factors for the effectiveness of business processes and outcomes. The question remains as to how to identify the synergies between talent and engagement and how their complementarities can be used to achieve organisational progression. To this end, Horgan and Mühlau’s (2006) excellent analysis was based around the central claim of strategic HRM viz. the way an organisation managed its workforce affects its corporate performance. They investigated the hypothesis that high performance human resource management, contributed to profitability. They argued that the benefits could be attributed to ‘complementarities’ through the processes of reinforcement and flanking. ‘When practices work consistently in the same direction (as their main target or as a side-effect of a practice with a different primary objective) and a practice alone lacks the power to achieve a critical

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performance level, we refer to it as reinforcement. Practices can also flank each other: Flanking consists in the strengthening of effect of the focal practice by putting in place practices that create favourable conditions for the working of the focal practice.’ The core hypothesis was that the complementarity effect of the high-performance HR management system enhanced employee performance over and above the sum of the effects of any individual practices. Following this approach means identifying those areas of talent management or workforce engagement that require reinforcement and allocating resource to any aspect of these that does not have sufficient heft to impact on performance. Not enough resource allocated to the learning and development aspect of employee engagement for example, or not enough resource allocated to the coaching aspect of talent management. It is the assumption that positive interventions in these areas would have complementary effects over and above those that would occur if this identification had not taken place. In a similar vein, flanking would require additional attention to any aspect of talent or engagement that does not support the objectives behind interventions that had taken place independently. For example, difficulties in accessing learning resources, making it difficult to fulfil an engagement objective relating to personal development. In these cases, identification is the precursor to action. Operational alignment is the construct that converts identification into action. • Ensuring operational alignment informing management activity for talent and engagement with the complementarity principle; leadership and management competence aligned with achievement of complementarity objectives Operational alignment will depend on leaders and managers who understand the importance of a strategic approach towards complementarity in talent and engagement and who have the competences to deliver them. It will be equally dependent on a workforce who are trained in their current roles, have the resources to deliver what is expected and see the ability to develop their own careers through talent management opportunities. Leadership competences will therefore include

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demonstration of the values of the organisation towards complementarity—collaboration and cooperation; the ability to create an environment in which such collaboration takes place and the ability to communicate effectively the vision of where complementarity will take the organisation i.e. outcomes over and above those which would have arisen if strategies had taken place independently of one another. Managerial competences will include being able to execute shared purpose and promote shared values in respect of complementarity. It will be important for leaders and managers to encourage cross functional collaboration which will have the purpose of developing individuals and breaking down any barriers that might exist. Amongst the areas under consideration in operational alignment for complementarity are demonstration of Values Based Leadership; Leaders and Managers who recognise the importance of complementarity and have the skills to identify where this exists and are empowered to allocate resources or shape the organisation accordingly. In addition, the necessity to develop complementary systems and processes that contribute to— important elements of employee and workforce engagement that can be facilitated by effective talent management. These are career and professional development-career paths and tracks and career development opportunities. • Measuring return of investment in complementarity; for ‘business case’ and resource allocation The measurement of HR activity and its impact on organisational performance has been subject to considerable research and insight leading to six phases or ‘eras’ of measurement over a twenty-year period which included linking business strategy to human resource management and using statistical analysis to demonstrate linkages between human resources practices (including those which would be embraced by the contemporary definitions of talent management) and organisational performance (Kirkpatrick, 2010; Guest, 2011). Whilst such measurement processes remain areas for study and debate the opportunity to show talent management and workforce engagement as genuine contributors to organisational objectives will continue. It is therefore an essential aspect of

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complementarity that clear and measurable outputs are identified, and systems and processes put in place to ensure that these are delivered. People analytics and performance metrics will produce data, information and intelligence about how the organisation is performing and the effectiveness of its people management. An approach which builds in the identification of complementarity opportunity into these metrics will provide genuine insight about how the organisation can exploit its rare resource to achieve competitive advantage.

Conclusion A number of external factors including the Fourth Industrial Revolution and the global pandemic have forced organisations to rethink how they go about reaching their objectives—which in themselves have become more than shareholder value or profitability and now include diversity and environmental targets. The changing attitudes of members of the workforce as they strive for fulfilling work experiences have also added to the challenge of change. These factors present opportunities for organisations to transform the way they work. People issues are business issues. Where a workforce is fully engaged with the organisation’s objectives, where the knowledge, skills and attitudes of its individual members are developed in support of this and where strategy, structure and stewardship provide a favourable environment, then there are likely to be significant business benefits. Talent management and workforce engagement are two people management techniques that can advance the achievement of organisational goals and where combined, exploiting synergies. Addressing the potential for complementarity between them therefore and converting the outputs of new strategies and actions into organisational performance will have benefits over and above those that would accrue if the functions were treated in their traditional independent ways. Human resource practice combinations are vital mechanisms in creating and utilising knowledge. Amongst these are talent management, employee and workforce engagement. There are opportunities for complementarity between them and between them and organisational performance.

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How benefits are realised will depend on effective human resource strategy and practice. However, these will also depend on agile and responsive organisation structures which will contribute to the mix for complementarity.

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7 Complementarity in Organisation

 omplementarity- the Interaction of Strategy C and Resource Allocation Progression will depend on how an organisation’s design and culture contribute to optimum performance from the multiple assets and resources at its disposal. It’s structure will be such that it promotes and facilitates cross domain co-operation in a transformed business model whilst taking advantage of the new technologies of the Fourth Industrial Revolutionapplied from product creation, to sourcing of materials, to manufacturing, to marketing. The organisation’s design will have the objective of integration- securing linkages between strategy, components of the value chain and associated processes; whilst its culture be one of empowering the workforce through digital technologies and the skills needed to use them. But integration and empowerment will only be achieved where the organisation has favourable conditions for their implementation which will take account of the nature of boundaries and working methods, the dissemination of existing knowledge and the ability to learn and absorb new knowledge. Whilst technology will be the driver it will be organisational responsiveness, competence, and culture that will turn potential into © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_7

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reality. And of particular importance to this book, a design that incorporates complementary forms of cross-domain alignment. Amongst the examples of such alignment are those identifying complementarities between IT and business strategy, between product innovation and market responsiveness, management of external relationships and business partnerships, effectiveness in planning and change management, and information systems skills and infrastructure. Each of these, as well as studies in, inter alia, the USA, Spain and France show significant productivity gains associated with how organisations are able to integrate new practices with new technologies and align them with business objectives. In these cases, complementarity has the potential for a joint positive effect on business unit performance but only where it takes place in a favourable organisational environment. The organisation’s design will both influence and be influenced by such configurations. It will result from decisions involving technology, marketing strategies, human resource policies, supplier relationships, lines of internal communication, and other operational policies. There are significant benefits to those that are not only able to change and adapt, but to do so in a way that recognises and exploits synergies that result from such change. (Ballot et al., 2015; Chen et al., 2017; Fettig et al., 2018; Kircher & Eeckhout, 2011; Lopez, 2012; Markard & Hoffmann, 2016; Milgrom et al., 1991; Milgrom & Roberts, 1995; Moreno et al., 2019; Queiroz et al., 2020; Richey et al., 2011; Song et al., 2005) In this context, complementarity is a near synonym for synergy involving a fundamental transformation which is multi-dimensional and includes technological and institutional change. In the course of such a transition, new structures emerge as existing ones decline. Complementarity is not an innate property of assets, but the result of choices- including organisation design- and the interaction between these choices. Three associated questions are important. First, what is the most appropriate structure to meet the challenges of change; second how should each element fit into this structure to ensure complementarities are realised and third how can the organisation move from present to future state in the most effective way. The requirement will be an environment in which complementary assets- resources or capabilities that generate benefits  – are orchestrated in a way that accelerates business

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value over and above that which would be generated if they were stand alone. It also means making any new business models work- based on the organisation’s prowess in implementation, flexibility and agile governance. (McKinsey, 2022; Romero-Silva et  al., 2018; Schwab, 2016; Whittington et al., 2000) A positive outcome will be the creation of new forms leading to mutually reinforcing systems that give better results over those that would occur if such practices had taken place independently of one another; where the relations of independent units create higher value than their individual operation. ‘when the qualities of leadership complement those of management which in turn complement those of talent management and employee engagement in a holistic model of organisation, the outcomes will exceed the sum of each of these phenomena as singular events.’

However, achieving it is not a simplistic link between activity ‘a’ and activity ‘b’ but a series of challenges set in the context of environmental and organisational complexity. The emphasis here therefore is on both structure and dynamics facilitating complementarities-in-performance and complementarities-in-use. (Baldwin, 2018; Fedele & Mantovani, 2008; Feizabadi & Alibakhshi, 2021; Jackson & Ni, 2013; Markard & Hoffmann, 2016; Milgrom & Roberts, 1995; Soda & Furlotti, 2017; Torres & Augusto, 2020; Yang, 2021; Yu et al., 2013) In this respect, an understanding of the nature of organisation is important.

 rganisational Evolution- from Hierarchy O to Matrix to Swarm Organisations are associations of persons grouped around the pursuit of specific goals. They are created to achieve objectives beyond those that could be achieved by any one individual and are traditionally defined by boundaries, a shared body of rules and processes and the empowerment of managers to ensure that these are adhered to. But they are neither homogenous nor static entities and are constantly adapting to new environments.

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An appropriate start to the discussion of the evolution of organisational theory is with Max Weber whose work on bureaucracy provided the foundations for structure and hierarchy with clear lines of authority and spans of control. In this model an organisation was designed to fulfil objectives through formal responsibilities between people, departments, or business units and how these relate to each other via linking mechanisms and coordinating structures. The intent was uniformity of action in pursuit of goals taking place in the context of the continuity of the business enterprise. The strengths provided by hierarchical structure were rationality of competence and specialisation, and precision in operation. Steadiness and reliability were attractive propositions, providing a certain predictability of outcomes. These were supported by sophisticated rules and procedures designed to ensure consistencies in behaviour and practice- the classical school- reinforced by approaches to Scientific Management that emerged in the USA during the Second Industrial Revolution or the development of extended hierarchies with the advent of globalisation during the Third. The interdependence of the tasks informed belief in a structure that was rational and coordinated. Technical subsystems such as processes or workflow interfaced closely with social subsystems such as relationships and communications. The hierarchy became the prevalent type and was ubiquitous across both time and geography as industrialisation gathered momentum and the opportunities of globalisation through interlinked organisation became evident. Organisations were largely self- contained, with functional or divisional structures, or based on a matrix formation which was intended to prevent silos by spreading responsibility between functions. In essence such designs were vertical, with the power of strategy and resource allocation emanating from a central senior management or executive cadre. They provided clarity of direction, objective and levels of authority. To Elliot Jacques (1990) ‘managerial hierarchy is the most efficient, the hardiest, and in fact the most natural structure ever devised for large organizations. Properly structured, hierarchy can release energy and creativity, rationalize productivity, and actually improve morale.’ Nevertheless, bureaucratic structures were also associated with inherent weaknesses such as the speed of reaction to changes in the

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environment or the potential stifling of creativity. Furthermore, the increasing complexity of globalisation forced a rethink as to how organisations could capture the benefits across a broader range of economic opportunities. Human relations theories led to a greater focus on social and emotional factors and amongst the developments were functionalist theories- ‘managerialist in orientation’- with an objective reality that defined function, structure, lines of command and communication; Radical or Critical theories which assigned more importance to power or ideology; and Postmodern theory, which, in rejecting the concept of objective reality, described organisations as reflecting different realities for different people. Successful alternatives to hierarchy, were shown in flatter structures which were deemed to be important where the environment was changing rapidly ( the argument was put forward that organisations based on small, autonomous teams were nimbler than large hierarchies, making it easier to respond to change); where innovation was important and where there was a strong central purpose which defined operations. Contemporaneously, technology has facilitated the creation of virtual organisations established on the basis of agile governance in scope and structure. (Brooks, 2009; Burton & Obel, 2018; Crowther & Green, 2004; Handy, 2014; Hatch, 1997; Hickman, 2010; Jacobides et  al., 2018; Kang & Busser, 2018; Kastelle, 2013; Leyer et  al., 2017; Sofer, 1972; Weber, 1930) Hence there was a desire for structures which emphasized business or workflow process reengineering, dispensing with internal boundaries. This was in part satisfied by digital technologies which made it easier to work in a distributed fashion with flatter structures becoming increasingly common - organising among small teams rather than in hierarchies. And to the latest stage in design and development bringing large scale outsourcing of what have been termed non-core processes, modularity and most recently the virtual organisation typified by collaboration to respond to exceptional market opportunities to enable agility and more efficient leveraging of corporate assets or resource deployment. (Hickman, 2010) There are now an increasing number of variables affecting how organisations are designed and operated. Hence, contemporary structures will span traditional hierarchies and well as polyarchies, matrices and hybrids:

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‘Given increasingly complex and dynamic environments, organisation design must (a) include agility as a component of organizational fitness, (b) broaden its focus to include complex and temporary multi-actor enterprises, and (c) incorporate mechanisms and processes of shared situation awareness; The key challenge facing organisation design in the future will be how to design business ecosystems composed of self-­ governing corporations, individuals, and communities.’ (Snow, 2018)

And so, organisations evolve as they adapt to changes in the environment, rationally determined by such factors as technology, the market, size, or its culture (because culture is the glue that holds the organisation together and stimulates employees to commit and to perform,) and adapting to change as a sequence of environmental challenge and response determines their scale, scope and shape. However, the process by which structures emerge is not always rational, logical and sequential. Responses can be ad hoc or the result of internal dynamics or politics that may or may not be related to market or environmental change. In whatever way it is reached, the structure- whether it be through work specialisation, departmentalisation, chain of command, span of control, centralisation and decentralisation or formalisation, will have an impact on the way that organisation develops and delivers strategy and its capability to secure the benefits of complementarity. The question to be answered is ‘when is it advantageous to spread complementary assets, skills and activities over many separate organisations vs. uniting them within the boundaries of a single firm?’ (Baldwin, 2018; Van den berg & Wilderom, 2004) How to do so will require a model for the creation and dissemination of knowledge, ensuring that knowledge is applied in an optimal way. It will require leaders and managers who are committed to organisation wide goals and objectives as much as functional or business unit ones; talent that is regarded as a corporate resource and is deployed for the benefit of the wider organisation; and workforce engagement that adds to the strength as a whole. In some cases, these requirements will be in the context of intertwined structures with alliance partners as part of an envisaged ecosystem. (Sofer, 1972; Handy, 1976; Sarkar et  al., 2001; Friesen et  al., 2014; Blanc-Serrier et  al., 2018; Giri & Ramakrishnan, 2018;Torres & Augusto, 2020) There are important elements that will influence the design of such a model.

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A Complementarity Model of Organisation Given the strength of the arguments in favour, what conditions will lead to the breakout from established paradigms to create a new model? This is important because business process coordination is dependent on the buy in of every department or domain, business partners, suppliers, and customers along the value chain. There are significant interdependencies between organisational domains. The argument being that competitive progression is possible by recognising these interdependencies and establishing ways to exploit complementarities between rare or valuable resources with a structure and competence to do so. Improved performance will result, not only from developing resources, but also from deploying them in an optimal way. A constellation of units, aligned and coordinated, are able to transfer knowledge between themselves in the creation of something greater than the sum of their individual parts. They will do this by combining tacit and explicit knowledge management in a complementary way, invoking synergies and ultimately improved organisational performance. Indeed, organisations that are open to changes can be more efficient in adopting new technologies which translates into productivity gains. (Choi et al., 2008; Hottenrott et al., 2016; Hsu, 2013; Nooteboom, 1999) The process will involve agility, reflecting ‘organisational fitness,’ and collaboration across enterprises with systems and processes which raise awareness of opportunities through intelligence and insight. ‘Synergies can arise from the opportunity to create denser organisational ties, hence greater coordination between the business units. These synergies derive from the strong complementarity of interdependent tasks.’ However, this is not an automatic outcome and has to be fostered. (Baldwin, 2018; Doherty & Terry, 2013; Newell et al., 2003; Torres & Augusto, 2020) A desirable objective therefore is to seek a design that facilitates integration and encourages collaboration across classical functional or institutional domains, which creates an impetus to understand the mechanisms of interdependence between specific elements and how these can shape certain outcomes. Such elements can be internal, or in an age of business ecosystems, external- from technology partners for example. Indeed, it may be the breadth of the ecosystem of related product and services that

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will become a prerequisite for success. Greater understanding will provide a framework within which organisational design and development can be accommodated. (Jackson & Ni, 2013; Janoszka, 2018; Parmigiani & Mitchell, 2009) Resources, activities and processes are highly interdependent and inherent in the model (outlined in Fig. 7.1.) Hence there are strong links-­ with many variations- between such areas as technology platforms or customer relationship management and complementary resources, which might include process, structure, capability, or culture. (Shang et  al., 2007) There is unlikely to be a best practice in achieving desirable outcomes but there are some waypoints which may act as guides. Three particular areas are important, these being identifying elements, modelling them for maximum benefit, and aligning the organisation to deliver identified potential. The following are some of the assumptions attached to each of these areas. • Complementary Elements, Sets and Bundles of Resources

Align and Implement -Strategy and Plan - develop strategy for integrating resources to realize synergies - Align organisational structure to new requirements - Utilise 'n' step or dynamic change management processes - Measure outcomes of complementairty initiatives

Complementary Elements, Sets and Bundles of Resources - identify elements, sets and bundles that provide opportunities for complementarity - tangible include strategy, policy, and the formal rules of organisation; technology applications intangibles human resources, knowledge, culture

An Organisation Structure for Complementarity

- Take a systemic and holistic view of organisations, - Seek patterns or profiles related to performance.outcomes - Set complementary assets in a design that is fit to deliver synergies

Complementarity in Organisation Design and Development

Fig. 7.1  Organising for Complementarity

Orchestrate Resource Allocation for Complementarity - seek insights from modelling 'clusters of interconnected structures and practices' - to transform data into intelligence that the organisation can use effectively in its decision-making processes’ - Allocate resources to areas of maximum complementarity

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Whilst the overwhelming thrust of the Fourth Industrial Revolution is technology based, such resources can lead to increased business value and organisational performance only when they are complemented with other organisational resources. Many organisations may have the same physical technology, but only some of these may have the social relations, culture or traditions fully to exploit it. (Moreno et al., 2019) What are the assets or resources that can be used in a complementary way? And what structure is the most appropriate to create an environment to facilitate collaborative processes. The combination of ‘organisational elements’ is an important contributor in answering these questions and can play a role which is analogous to that of chemical elements in composing a variety of substances. These basic elements are subject to ‘combinatory laws’ that regulate their effective combinations or synergies and when these are effective, they can produce high levels of efficiency and innovation. Complementarity can be unilateral where a single element provides a benefit to the other but not vice versa, or bilateral, where both elements achieve benefits for each other. However, it is a matter of perspective and whether a specific component is complementary to another depends on the underlying purpose. (Markard & Hoffmann, 2016) Because organisations are composed of ‘interactants’ with specific competences and resources there will be specific features that only they will have. Such features can be a source of ‘socially complex’ resource and turned to advantage through complementarity strategies and processes. (Hsu, 2013; Zeller and Barmeyer & Franklin, 2016; Nayaranan 2021) For example, an analysis of performance accounting data of U.S. manufacturing firms, showed that the complementary effect between enterprise resources planning and e-business technologies in creating business value was stronger than the main effects of each of these technology applications taken independently. Whilst an extensive study of Brazilian businesses found complementarity resources (to IT) in training: process orientation, organisational structure, a strategic focus on business integration and culture. General Electric who produced a wide array of products based on electric motors, was able to use its research into designing and producing electric motors as complementarity to its strategy of producing a broad range of products using those motors. ‘Improvements in the costs or capabilities of electric motors for one product line increased the

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probability of improvements for other products lines.’ Here, complementary resources are those that generate added value exceeding the sum of that obtainable from stand-alone resources applications. They can deliver by symbiotic complementarity, where surplus value is generated by different elements or by pooled complementarity, where surplus value is generated by similar elements. (Baldwin, 2018; Brynjolfsson & Milgrom, 2013; Grandori & Furnari, 2008; Hsu, 2013; Magalhaes, 2018; Markard & Hoffmann, 2016; Moreno et  al., 2019; Soda & Furlotti, 2017) An example that embraces all of these principles successfully is that of the Walt Disney Company. Its business segments are structured to make the most of complementarities, thereby creating better value for its customers as well as adding greater value to the company as a whole. ‘To understand these complementarities better, consider how Disney’s business segments are organised along a supply or value chain. Disney creates entertainment content such as movies, TV shows, and trademarked characters with a variety of production companies, such as Walt Disney Pictures, Twentieth Century Fox, Marvel, Lucasfilm, and Pixar. This content is then distributed via traditional channels using Disney’s media networks, including Disney, ESPN, Freeform, FX, National Geographic, and ABC. Disney also offers this content through novel distribution channels, such as the streaming services Hulu and DisneyPlus.’ (Yang, 2021)

Amongst assets which have been identified as complementary in previous research are and outlined in Chap. 3 can be market-related phenomena through production complementarity and consumer complementarity; or resource complementarity with potential for synergy- those ‘valuable, unique, and inimitable’ synergies that can be realized by integrating complementary resources. These resources or assets include: • Organisation structure, design or form- design facilitates the ability to combine resources from different domains e.g. finance and technology or marketing and operations. Agility and flexibility are valuable intangible assets that can complement other initiatives; including competence in change and transformation and effectiveness in planning and change management. Other attributes are cost income struc-

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ture; a structure designed to facilitate innovation and the delivery of the outputs of innovation; and finally, production complementarity between management control mechanisms. Information and communication technology- the ability to integrate technologies into multiple business areas; using innovative technology applications; combining enterprise resource planning and e-business technologies; linking R&D with product development. Since technologies per se will not produce complementarities, the presence of information systems skills and infrastructure are essential. Marketing- includes product innovation, market responsiveness, management of external relationships, business partnerships, customer relationship management, distribution channels; service complementarity, where new services complement existing services; brand reputation over multiple product lines Operational Management- economies of scale and scope in ‘the value chain of development’ and production; efficiencies by joint coordination of multiple activities; ability to reduce transaction costs by complementary operational activity; leaders and managers with competence in identifying complementarities in operations; an empowered workforce able to make improvements in production giving improvements in productivity; change management and process transformation; 'dynamic capabilities', leading to timely responsiveness and rapid innovation. Social Complexity and Human Resource policies- an empowered workforce; social relations, culture derived from clarity of mission or vision; effective integration between talent and workforce engagement; human resources policies aligned to achievement of ­complementarities; the means to achieve objectives the image of the organisation, effective management processes, the integration of employee needs and objectives with those of the organisation, interpersonal relationships, and transformative leadership; unique leadership and management skills or style Knowledge management- the ability to co create and co capture knowledge; technical knowledge, partly codified and partly tacit; organisation wide systems for knowledge creation and dissemination; the ability to convert knowledge into innovative products and services;

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the ability to convert knowledge into improvements in systems and processes, economies of scope through greater knowledge across products and services; business intelligence and analytics • Relationship management- unique and valuable relationships with suppliers, customers, and collaborators in a business ‘ecosystem;’ exploiting inter-organisation expertise to produce superior solutions, ability to exploit skill specialisation as it crosses over from knowledgeable partner organisations; ability to ‘monitor and learn from suppliers.’ There are two scenarios in which combinations of the above into complementarity outputs would take place. In the first, there is the possibility of serendipitous complementarity where benefits are accrued even in the absence of planned and systematic approaches or strategies. This is complementarity in its original interpretation, whereby positive outcomes came out of unlikely or unforeseen combinations or interactions. In this instance, sustained advantage will be achieved where the organisation is agile enough to change structure to accommodate or reinforce its causes. The strengths of leadership, management, talent and engagement remain important. Their ability to shape the organisation to maximise the potential will be the deciding factor of whether complementarity is reinforced or whether it is lost to stasis. Indeed, the development and continued existence of organisations depend on how they manage sustainable problem- solving practices. ( Barmeyer & Franklin, 2016) However, if the outcomes are to go beyond serendipity, then such recognition will come about by enlightened management being proactive in their search for complementarities and a culture that is supportive of and actively seeks innovation. In this case, success would come from identifying sets or bundles of practices which work synergistically and crafting a strategy to ensure that they do so. In some cases, this will apply to two practices- for example between two innovation practices which means that investing in one increases the value of another. In some cases, they will be internal processes and in others working with external partners. The potential can be identified internally through combinations of resources or externally in alliances with partners. In respect of the former, the first challenge is to identify where unique or valuable resources or

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practices are present. These may be technologies that are able to span several areas of the organisation and provide benefits over and above the ones that were present in a single application. Or they may be concerned with the unique skills, talents or culture that is present and has the potential to be cross domain with benefits in one area enhancing those in another. Erik Brynjolfsson and Paul Milgrom (2013) give an expert summary of such a situation. ‘Consider a company that is evaluating a triple of decisions: 1) Whether to adopt a strategy that requires implementing frequent changes in its technology, 2) Whether to invest in a flexibly trained workforce, and 3) Whether to give workers more discretion in the organisation of their work. Suppose that more flexibly trained workers can make better use of discretion and that more flexibly trained, and more autonomous workers make it easier to implement new technologies effectively, because workers are more likely to know what to do and how to solve problems. Then, there is a complementarity between several pairs of decisions, which is characteristic of a system of complements.’

There are strong arguments in favour of complementarity between internal innovation and external partnerships or cooperation. (Chen et al., 2020; Furlan et al., 2011; Jackson & Ni, 2013; Janoszka, 2018; Mothe et  al., 2015; Sabidussi et  al., 2017; Serrano-Bedia et  al., 2012; Wang & Savin, 2021; Yang, 2021) If organisations are to gain insights into achieving increased competitiveness, they will require information about the relationships between individual elements or factors, and innovation practices, which makes this aspect of analysis important. For those adopting and implementing elements which will provide complementarity such as enterprise resource planning and knowledge management it is critical to consider the different potential orientations and foci associated with each initiative. And to evaluate and prioritize the relationships between expected outcomes that will inform the design and long-term development of the organization. (Janoszka, 2018; Newell et  al., 2003) Identifying those strategies, resources or practices that, when combined, give additional advantages is therefore an important first step in the process.

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• Orchestrating Resources for Complementarity The second aspect of the organisational model for complementarity is how to allocate or orchestrate resource to deliver benefits. Business Intelligence and Analytics involving all the resources required ‘to transform data into intelligence that the organisation can use effectively in its decision-making processes’ will be critical. First, understanding the combinations of specific resources or assets that may provide added value; second constructing a business model whose system of activities stretches outside of the limits of a single unit or domain and covers all of its resources and activities linked by transaction mechanisms. This will include customers, suppliers, and partners who ‘interact in pursuit of the same objective or need—namely, the creation and appropriation of value.’ Hence the organisation can be viewed as a system of interconnected choices and performance is derived from tight complementarities between activity choices that reinforce mutually in a positive way, and the appropriateness of an organisation’s system of activities with the environmental conditions that prevail. The allocation of resources to where and the resulting organisation structure will seek to capture value from all stakeholders. (Camuffo & Wilhelm, 2016; Climent & Cakir, 2021; Janoszka, 2018; Milgrom et  al., 1991; Moreno et  al., 2019; Zeller & Narayanan, 2021) If an organisation consists of clusters of interconnected structures and practices, then determining how these can be shaped to elicit complementarities is essential. In this case, there will be an element of heuristics in which the new structure can be tested for its efficacy or ‘a vehicle for experimentation in the belief that the insights gained can be transferred to the operations being modelled.’ On the one hand complementarities can be identified when modelling two factors; (Hong et al., 2015; Zhang, 2001) on the other, combinations of multiple variables may provide rich sources of additional benefit. Academic research has been used in a variety of sophisticated analytical techniques in modelling such clusters. Managers will base their decision making on information produced by such analyses or rely on heuristics to deal with unexpected situations. An organisation design should bear in mind both possibilities but in all cases provide feedback that gives the opportunity for managers to learn about

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complementarities and the type of evidence they will need to make strategic and operational decisions. (Lyons, 2004; Pidd, 2004; Sánchez-­ García et al., 2020; Yang, 2021; Zeller & Narayanan, 2021) This configurational approach represents a systemic and holistic view of organisations, where patterns or profiles are related to an outcome such as performance. The more that complementarity is focused on the design of a business model and its organisational implications, the greater the performance. For example, if there are three-way complementarities between information technology, performance pay, and HR analytics practices, which, when working together produce a larger productivity premium than if they worked separately, what would be the best structure to ensure that added value is delivered. Would it be one of hierarchy with cross domain groups coming together to identify and deliver benefits; would it be a matrix structure in which a function runs horizontally through an organisation instead of vertically down and organisation; or would a swarm of those with different expertise come together for a specific purpose and disband at the end of the project. Each of these examples is concerned with complementarities from synergies among resources and capabilities. However, because of the many potential combinations, there is no single best practice model for organisation. It can be based on supply side economics, or a more holistic approach- an ‘integrative business model,’ combining customer complementarities with other business models. This will be achieved by facilitating internal collaboration, network flexibility and operational capability together. (Anantatmula & Kanungo, 2006; Aral et al., 2012; Aversa et al., 2020; Climent & Cakir, 2021; Fiss, 2007; Galpin et al., 2007; Liao & Li, 2019). Hence a comprehensive approach would consider the two types of complementarity: traditional supply-side mechanisms of resource and capability complementarity and demand-side mechanisms of customer complementarity. (Aversa et al., 2020) It is clear that modelling configurations of complementarity inspiring assets or resources will range from the theoretical two factor model of complementarity to a significantly more complex multivariate model through to one that embraces supply and demand side possibilities. The result of modelling or testing of combinations will help to determine the necessary structure to deliver potential benefits. A number of

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configurations might exist across the different domains of board and management structure, workflow processes and the workforce. (Arora and Gambardella, 1990; Fiss, 2007; Furlan et al., 2011; Jackson & Ni, 2013; Mothe et al., 2015; Yang, 2021) Having identified factors, tested combinations of them and the likely outcomes, it is the role of the organisation’s stakeholders- leaders, managers, and the workforce- to allocate resources to the appropriate areas and to put in place a structure that is able to deliver to such potential. • An Organisational Structure for Complementarity The identification and analysis of complementary resources is a necessary but insufficient condition to achieve synergy. Another area of equal importance is matching resources to capabilities to structure to opportunity. The design will facilitate setting a strategy for complementarity but also provide an environment in which the coordination of capabilities, transactions and scale of processes is recognised and implemented. It will determine the most appropriate allocation of resources. These are inputs into the production process, such as capital, equipment, information systems, and individual employees; and capabilities, or the capacity to deploy resources using organisational processes. At the same time the organisation’s design will limit counteracting forces such as errors of strategy ‘cognitive inertia and myopia, unclear allocation of rights and responsibilities, errors in identifying aims, imprecision in performance measuring, difficulty in focusing incentives, influence activities and problems of internal communication.’ (Morroni, 2007) Crafting a strategy that delivers complementarities and creating a structure that leads to the optimisation of potential benefits is high on the corporate agenda. As outlined earlier, an organisation’s structure- often reflected in an organisation chart- is a way or method by which activities can be divided and coordinated. In post-industrial organisations the emphasis is on knowledge and how it can influence creativity, innovation, discovery and inventiveness. And so, the structure will contribute the optimum way of focussing these on value and increasingly to complementarity and the relations between both hard elements on one side and soft elements on the other. The structure provides the framework for jobs, systems,

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operating processes, people and groups. It is the model for internal relations and reporting, communication channels, as well as the clarification of responsibility and decision- making delegation. (Ahmadya et al., 2016; Martins & Terblanche, 2003) So, what is the structure that is best fit for the organisation, taking account of what the organisation is capable of implementing based on its existing design, its history, and its culture. The options are many and varied: • A hierarchy provides rationality in decision making, clear policies, uniformity in systems and processes and accountability for strategy and operations through delegated management, vertically organised. Its critics will point to a lack of flexibility and responsiveness to rapidly changing environments. Those responsible for organisation design will therefore be required to balance the pros and cons of this type structure in respect of their own specific culture and circumstances. In particular they will decide on whether the necessary collaboration to achieve complementarity is possible or would be constrained by the strictures of hierarchy. • An alternative is a matrix structure that emerged during the period of globalisation and provides a different methodology for ensuring that cross organisational value is captured by a horizontal orientation of key resources. This is characterised as being both vertical and horizontal and ‘aims to capture both the efficiency and specialisation of a functional organisation, as well as the customer focus and flexibility of a multidivisional organisation.’ (Saunila et  al., 2013) For example, in addition to a single market or product focus for a business unit would be a ‘global’ perspective provided by the matrix which would identify opportunities across products or markets and management authority to allocate resources to take advantage of those opportunities. Once again there will be critics who will point to a lack of clear accountability, or multiple accountabilities, for a specific which may lead to confusion about the whole. Once again, the unique context of the organisation will provide additional information on whether to adopt this type of structure. • Decentralised organisational forms have arisen because of two realisations. First that increased operational decentralisation was deemed

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necessary to improve response times and to harness the tacit knowledge of operating managers; second that strategic decentralisation increases the results-orientation and accountability of business managers. ‘Decentralisation into smaller units promotes cross-functional and cross-boundary teams. In place of rigid traditional structures, organisations are increasingly shifting towards more flexible, project-based forms of organisation. Structures are therefore taking on a more horizontal character, projects being the vehicle for bridging the divisions of traditional divisional organisation.’ (Pettigrew et al., 2000) • New forms of organisation- open boundary or organic structures- that are emerging out of the miasma of technological change. These are characterised by dynamic, responsive capabilities a lack of formality and flexibility and include those based on self- managed teams and self- organising systems; there are networks with multiple nodes; swarms, virtual organisations and alliances. Encapsulating many of these characteristics is the view of the organisation as an ecosystem, of interacting organisations and modular in style. The design of the organisation will be critical in the quest for complementarity benefits. But there is no one right way and no simple indicators to inform such decisions. Instead, those leading and managing the organisation will make their decision by balancing the actualite i.e. the reality of the current structure, its systems, processes and culture, against the potential of transforming the structure. What change processes need to be put in place to ensure the engagement of all stakeholders. Alignment and implementation therefore become important considerations. • Align and Implement - Strategy and Plan Identifying potential areas for synergy and their constituent elements will lead to a strategy for integrating resources. A concomitant action will be to align the organisational structure to the requirements of the strategy. Clarification of the proposed new structure, its objectives, purpose, and its benefits with the alignment of objectives to identified outcomes will be achieved by the dissemination of information, leaders and managers who are prepared to communicate and accept suggestions or

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proposals and a workforce that is fully engaged with the changes that are envisaged- regular communication of strategies to the whole workforce is also important since it is an important process in anticipating any potential resistance to change. Amongst the most prominent of the rational approaches to change and its associated alignment is that articulated by Kurt Lewin (1947) whereby the ‘the practical task of social management’ required insight into the desire for and resistance to change and therefore an understanding of the social forces for change. The view was that change was best delivered by three steps- unfreezing, moving, and freezing of group standards. Lewin postulated that individual behaviour was a function of the group environment and therefore to bring about change depended on group acceptance of change. Subsequent methodologies advocated a planned and systematic approach often involving a number of critical, sequential and interlinked steps. Other processes included those involving diagnosis, preparation, implementing change, consolidating change and sustaining change or integrated multi phased models involving awareness, the desire to change, knowledge of how to change, implementing change, and sustaining change or the ‘n-step approach.’ (Turner, 2021) Having obtained the necessary agreement to the proposals, a coordination of actions and anticipation of potential implementation problems and regular reviews of outcomes compared with initial assumptions will be necessary. The structure will also provide an effective way for key stakeholders to engage with the process because ‘changing only a few of the system elements at a time to their optimal values may not come at all close to achieving all the benefits that are available through a fully coordinated move.’ Achieving complementarities often requires change to be wholesale rather than piecemeal; more akin to transformation and achieving competitive advantage depends upon a firm’s ability to deliver this change efficiently and effectively, exploiting existing knowledge and to generate new knowledge. (Hsu, 2013; Janoszka, 2018; Laursen & Mahnke, 2001; Milgrom & Roberts, 1995) Leaders and managers will be required to deliver such a transformation in situations that are often challenging, always complex. Changes can be functional, divisional, matrix or networked. They may be hierarchical with tight sets of rules and procedures or networked operating with a broad ecosystem of departments with

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flexible boundaries and incentives to collaborate. The new organisation structure should seek to maximise the output identified and modelled in the analyses discussed above including the exploitation of tangible resources such as technology and intangible ones such as knowledge. It should free those charged with running the organisation from constraints to do so. A structure informed by strategy and managed with agility, respecting stewardship and policy, may be the difference between success or failure. Amongst the most critical factors are human resource practice combinations which provide the coordination mechanisms to organise knowledge creation and exploitation, or technology applications in the complex social relations which typifies most organisations. Human resource practices will facilitate the implementation of complementarity systems and processes. For example, internal training is a strong complement to other work practices or various forms of team- work are made more effective if responsibilities are delegated to team members because it allows them to bring to bear their existing knowledge and to develop new knowledge for tasks that managers up in the hierarchy are unable to understand.’ Where activities are organised in a ‘flexible, decentralised, informal and highly integrated organisational structure’ there is the possibility of complementarity and a strong internal capacity to develop new services or products. (Harrison et  al., 2001; Laursen & Mahnke, 2001) This accentuates the need for adopting a wide variety of changes if the full benefits are to be realized. It will be the responsibility of leaders and managers to ensure such systems and processes are effective. This means seeking cooperation to ensure that the design is implemented with the full ‘buy in’ of those involved, because cooperating individuals will provide each other with necessary and relevant information, willingly support and help each other whilst understanding each other’s points of view, be influenced by each other’s knowledge, interests and ideas, and rely on division of labour. (Feizabadi et al., 2021; Jackson & Ni, 2013; Sarkar et al., 2001; Turner, 2021; Yang, 2021) Several factors have been identified as contributing to effective alignment and implementation. The dynamic environment which constitutes the Fourth Industrial Revolution favours organisations which are able to provide timely revelations of useful information which is essential for effective decision

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making. An optimum position would be where there is an openness to sharing which overcomes the ‘well- known problem’ of subdivisions resisting the early revelation of persistent private information because of the fear that the revealed information will be used inappropriately- or against the objectives of a particular domain. This is particularly important in organisational design and its implementation because sharing and delegation is critical to complementarity in operations for future exploitation. Hence an optimal organizational design would be one that delivers the benefits of delegation by prompting and facilitating timely information revelation. (Shin & Strausz, 2014)

Conclusion This chapter has sought to answer three questions, concerning the best fit structure to meet the challenges of change; where each element of the organisation could fit into this structure and the best way to move from present to future state. There were choices in response to each of these. The most ubiquitous form over Four Industrial Revolutions has been that of the hierarchical structure which, with its associated bureaucratic processes, rules and regulations guiding policy and behaviour, has crossed industry and geography. But structures were rarely static and as the world economy grew, particularly during the era of globalisation, so did organisations with new forms as the limitations of rigid hierarchies began to show. Divisional structures – often M shaped- grew in response to the diverse needs of international markets. Functional structures were also adopted to strengthen a particular area such as marketing or technology and where this was considered to be the fomenter of silos, then horizontal, flat or matrix structures came into being. And in today’s environment a range of innovative designs have emerged in response to the pace and dynamism of the new environment. Networks have evolved as a way of organising to take advantage of exciting ecosystems of collaborative organisations and ‘swarms’ are put in place to deal with a specific opportunity by concentrating resource. Over time, organisations have proven to be responsive; sometimes innovative, and rarely static. The opportunity presented by complementarity gives additional impetus to consider

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design not merely as a way of ensuring consistency in behaviour and checks and balances in policy, but as a powerful element of competitive advantage. Complementarity can become a key area in designing a business model and organisation. For organisations to compete in the rich and dynamic environment that is the Fourth Industrial Revolution, they will need to embrace structural flexibility and agile governance, the maximisation of cross domain technologies, the creation of high performance teams with coordination and cooperation, the application of human resource practices that facilitate continuous learning, empowerment, and the decentralisation of decision making and ‘systems for mobilising employee proposals for improvement’ with an emphasis on internal knowledge dissemination. But the challenge will be to decide which design best serves the context of the organisation and for this there is no best practice template. Since the interactions between different elements of design are important, identifying which of these interactions can make the greatest contribution to complementarity will provide the basis of change or transformation. (Athey & Stern, 1998; Feizabadi & Alibakhshi, 2021; Laursen & Foss, 2003; Mothe et al., 2015) Complementarity is therefore an important aspect of organisational analysis, of organisational dynamics and ultimately of organisational design. It can be used to inform the combinations of practices that offer advantages over and above those that would occur if linkages and synergies were not identified, exploited, and built into the essence of the organisation through its structure.

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8 Complementarity and Competence-­knowledge, Skills, Attitudes, and Behaviours

Complementarity- a Combination of Organisational Competence and Leadership Capability Achieving business progression will depend on how an organisation applies its core competence- collective knowledge used to create competitive advantage- and its leadership and management competence—creating a clear vision or direction and an ‘enabling environment’ for its realisation. Competences are tacit, complex, and organisation specific, involve ‘interrelationships among the skills of many individuals’ and are firmly embedded within the fabric of the organisation. (Wittmann et al., 2009) Of particular interest in this chapter is the contribution of both core and individual competence to complementarity. Amongst the key areas for consideration will be how competence is demonstrated through the efficacy of resource allocation- critical to the achievement of complementarities and synergies- towards tangible assets such as cash, inventory, equipment and information and communication technology; or intangible ones such as knowledge and creativity or a culture of collaboration, or excellence in product innovation and distribution channel management; or operational efficiencies based on the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_8

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effective coordination of multiple activities. To maximise the outputs of investments in these areas will require competence at multiple levels, a structure that facilitates knowledge exchange and collaboration, and a philosophy of aspiring to success for the whole organisation. Ultimately, the impact of these decisions will be reflected in business performance; and manifested by progression through profit, return on investment, or maximisation of shareholder value, and social objectives such as fairtrade practices, contribution to social welfare, actions on care for the environment, or diversity and equality of opportunity. The extent of organisational complementarity will be influenced by competence in four interrelated sources of distinctiveness. First, there are input-based competences which are physical, financial and human resources that create and deliver goods and services. Second, managerial competences are the unique capabilities of leaders and managers to craft strategy, communicate and engage the workforce in that strategy and to create supportive systems and processes. Third, transformational competences include innovation, the organisation’s culture, and organisational learning. Finally, output-based competences refer to tangible outputsproducts and services and intangible outputs including customer loyalty and organisational reputation. (Kassahun & Molla, 2013; Lado et al., 1992). Using these categorisations, organisational competence includes the effective integration of technologies, specialised knowledge, skills, techniques, and experiences in a way that delivers differentiated advantage. Organisations build this by strategic product or service decision making and by applying business improvement methods such as total quality management, business process reengineering, or six sigma programmes, with a view to delivering a business proposition- innovative models, that will create value for their stakeholders. In this case competence reflects expertise that determines how an organisation is able to orchestrate its resources and adapt its routines- usually in combination. Successful organisations will additionally try to use big data and knowledge management technology to inform resource allocation, as well as agile governance in responding to external dynamics. In so doing, knowledge will become one of the most important resources and harnessing it is both a feature of core competence and a means of developing it.

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(Le Deist & Winterton, 2005; Menor & Roth, 2007; Prahalad & Hamel, 1990; Richey et al., 2011; Turner, 2021; Yang, 2015; Yin et al., 2020) Secondly, complementarity will be influenced at the individual level where competences will be specific, related to a particular business domain, or generic relating to interpersonal capabilities. They can refer to competences that are cognitive or work-related knowledge and the ability to apply it; functional- the ability to perform work-based tasks; social or relational and communication skills; and meta-competence or personal and professional values. In the case of leaders and managers these become the know- how, know why, know what, know when and know how to behave. Contemporaneously, these will contribute to organisational success not only by singularity- discreet interventions based on specific responsibilities or objectives in relation to an organisation, a business unit or a department- but also complementarity- interventions that are connected to a broader purpose. Here, competences can be causally related to the organisation’s performance and consist of knowledge- the retention and utilisation of information, skills- the ability to demonstrate a sequence of behaviour towards a goal- and attitudes and behavioursthe social manifestations of how a manager undertakes a role. Individual competence can therefore be defined as a ‘specific, identifiable, definable, and measurable knowledge, skill, ability, and/or other deployment related characteristic (e.g., attitude, behaviour, physical ability), which an individual may possess, and which is material to the performance of an activity within a specific business context.’ In contemporary organisations it is the result of a combination of cognition, intuition and emotional intelligence. (Boyatzis, 1982; Sparrow, 2000; Stepanenko & Kashevnik, 2017). Complementarity, facilitated by the application of core and leadership and management competence, has the potential to provide organisations with both efficiency and enhancement synergies (Bauer & Matzler, 2013) by identifying and then combining, unique or rare resources in ways that are difficult to imitate on the part of competitors. For example, Teece (1986) highlighted innovation- technical knowledge about how to do things better than the existing state of the art- where the know-how in question was partly codified and partly tacit. It was argued that for such know-how to generate profits, ‘it must be sold or utilized in some fashion in the market. In almost all cases, the successful commercialization of an

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innovation requires that the know-how in question be utilized in conjunction with other capabilities or assets.’ These include technologies, technology applications, unique knowledge or skills, differentiated marketing elements such as customer or client information, or a unique culture that runs through organisational dynamics in a way that is difficult to imitate. Other valuable assets include change management and the ability to transform in the face of dynamic competitive environments or such facets as exceptional human resource skills- ‘people are complements when the skills of one enhance those of another within their team.’ In this respect human resources practices are complements when one is combined with another practice thereby raising output more than they would if practiced independently. (Lazear & Shaw, 2007) The hypothesis being proposed in this chapter is that success in complementarity will depend on effectively leveraging organisational competence in ways that create a competitive position that is difficult to imitate, and leadership and management competences that are applied to progression for the whole organisation to determine how and to what extent synergies are achieved.

Organisational Competencefrom the Inside Out Prahalad and Hamel’s definitive body of work examined the core competence of the organisation i.e. the collective knowledge within the organisation that distinguished it from others. Introducing the concept prompted not only the identification and focus on differentiators but the examination and exploitation of the knowledge that led to such a position. The ability of the organisation and its managers to do so was the defining point. The argument was that organisations would be evaluated ‘on their ability to identify, cultivate, and exploit the core competencies that make growth possib1e,’ even if this means rethinking the concept of the organisation itself. In further developments, the authors argued that competitiveness in the fast- moving environment that constituted the Third Industrial Revolution and anticipated by the Fourth, would come

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about by coalition building, competence accumulation, standards setting, and market experimentation. This perspective supported the observation that success would depend on combining and leveraging internal resources and processes to meet external demand- from the inside out. (Hamel & Prahalad, 1994; Prahalad & Hamel, 1990, 1997; Ulrich & Lake, 1990) It was argued that core competence should satisfy three tests. First it should be organisation wide; second it should make significant contributions to customer benefits and third it should be very difficult for competitors to copy or acquire. (Arranz et al., 2019; Snyder & Duarte, 2003) Core competences should reflect the ability to coordinate the deployment of assets and resources directly to objectives in an efficient and effective way- an extension of the resource- based view. They are tacit, complex, and firm-specific and therefore difficult to replicate and as such can be sources of progression through complementarity. It was also noted that ‘the bottom line of value creation processes is the organisation’s combined capacity to employ their more or less unique, resources, their intangible and tangible assets.’ (Nerdrum & Erikson, 2001; Wittmann et al., 2009) Having valuable assets is not by itself and advantage. Orchestrating and deploying those assets is. The work of Barney (1996) and the VRIO model added significantly to understanding by arguing that competence can be a source of sustained competitive advantage if it creates value, is unique and rare, is hard to imitate or substitute, and the organisation has reporting structures, formal and informal management control systems which allow it to exploit this competence. Critical to this was that organisations should be able to identify opportunities and exploit those opportunities by virtue of pre-emptive and consistent building of capabilities. In today’s environment, building of capabilities includes complementarity capabilities. Amongst the many areas to which this assumption could apply, four are of particular relevance. These are agile governance, innovation and transformation, a culture that is responsive to change, and investment in complementarity focused human resource practices. If complementarities are to be achieved by leveraging core competence, then these four areas will be of particular focus. These are discussed in more detail below and summarised in Table 8.1:

Knows when to do it

Knows what to do

Leadership and Management Competence

Demonstrates agile governance in identifying and delivering complementarity opportunities Defines and prioritises what is crucial to do in the delivery of complementarity objectives Maintains course and manoeuvrability in aligning complementarity objectives with overall departmental, business unit or organisational objectives Maintains an open mind about ideas and suggestions for complementarity opportunities Systematic integration of strategic processes as part of strategy Knows when to allocate resources setting and resource allocation understanding how this will impact on A climate to maximise the creation and dissemination of other projects or initiatives Knowledge Coordinates complementarity initiatives Reward systems perpetuate a culture of sharing and collaboration and ensures they are integrated with processes and actions in pursuit of wider objectives Seeks and disseminates information about complementarity initiatives within or without of the area of responsibility Is decisive about the timing of complementarity initiatives and keeps teams from being mired in debate

Organisation structure designed to facilitate delivery and maximise synergies of complementarity Characterised by agile governance and responsiveness to complementary opportunities Responds by organisational agility as a dynamic capability critical to capturing complementarity benefits Has processes that facilitate cross-domain alignment and coordination of functional strategies Has systems in place to ensure congruence and that elements of the strategy reinforce each other towards complementarity goals Elements, sets and bundles combined to provide opportunity for complementarity

Organisational Capability and Competence

Table 8.1  Organisational, Leadership and Managerial Capabilities and Competences for Complementarity

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Knows How

Coherence in complementarity initiatives to ensure alignment between expected outputs and actual performance Asset and resource orchestration to combine advantageous resources is part of the wider organisational strategy setting and resource allocation process Allocates resources to areas of maximum complementarity Focusses on consistency between the intent of complementarity initiatives and the strategies and actions to deliver them- aligns structure to new requirements Seeks insights from modelling clusters of interconnected structures and practices Utilises best fit change practices to move from present to future state

Knows why Systems and processes to create and capture unique areas of it is being knowledge done Knowledge used to identify patterns or profiles related to performance outcomes Knowledge is disseminated throughout the organisation Collaboration is an essential part of organisational culture Metrics created to identify the outputs of complementarity in respect of all areas of business performance

Organisational Capability and Competence

(continued)

Collaborates and cooperates to create and share knowledge and information to expand the potential for complementarity Collaborates and cooperates to receive knowledge about wider organisational initiatives Understands technology applications and how these inform the potential of complementarity Aligns complementarity initiatives to wider integration initiatives ensuring that all are consistent with desired business outcomes Competence to integrate multiple systems and processes Seeks complimentarities through synergies that result from this integration Ensures sufficient resources allocated to complementarity initiatives Builds and sustains relationships both within and without the area of immediate responsibility to facilitate integration and improvement

Leadership and Management Competence

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Knows how to behave

Recognises the value of social complexity to competitive progression Ensures job enrichment, job involvement and job determination in pursuit of complementarities Develops and rewards a culture responsive to change Invests in clusters of complementary human resource practices

Organisational Capability and Competence

Table 8.1 (continued)

Communicates vision and purpose and clarifies the role of the workforce in their delivery Adopts values based leadership Engages and Develops the Workforce to identify opportunities for complementarity within and without their own domains Aligns talent management intiatives to those of workforce and employee engagement to deliver complementarity outputs Builds a culture in which employees feel empowered Enables cooperative capabilities

Leadership and Management Competence

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• Agile Governance The merger of physical assets and new digital technologies will allow organisations to be more flexible and responsive using data-driven decisions in a fast moving and unpredictable environment. Where this is effective it can enhance organisational capability and strategic processes such as entrepreneurial action and coevolutionary adaptation. The ability to improve outcomes will also depend on agile governance- converting latent potential to actual performance; by integrating, building, and reconfiguring internal and external capabilities or structures. Because the causes of change are complex, multi- faceted and multi- dimensional, the responses will need to be dynamic. ‘In the first place, organisations will progressively move from an environment of siloed, fixed location work to one of interdisciplinary, interorganisational collaboration.’ They will move from being rigid or risk-averse to agile and adaptable. Change will be driven by effective processes, a responsive organisational structure, and a readiness to leverage new technologies. (Cimini et al., 2020; Cohen, 2019; Sambamurthy et al., 2003; Turner, 2021) It is increasingly an important feature in navigating the rapidly changing world of the Fourth Industrial Revolution. In this respect, agile governance is a concept that is intended to shift the manner in which strategy and policy are generated, discussed, and enacted; one that ‘sets the expectation that governance can and should be more agile to keep pace with the rapid changes… driven significantly by the development and deployment of emerging technologies.’ (WEF, 2019) Whereas governance is a term that is concerned with the mechanisms through which authority is exercised, decisions are made, and strategy is coordinated and enacted; agility is interpreted as the ability of an entity ‘that exhibits flexibility to accommodate expected or unexpected changes rapidly, follows the shortest time span, uses economical, simple and quality instruments in a dynamic environment and applies updated prior knowledge and experience to learn from the internal and external environment.’ Agile governance combines elements of both and involves a ‘lightweight, collaborative, communication-oriented,’ accountability framework, which enables the strategic alignment of goals, performance and risk management. (Luna et al., 2020; Qumer &

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Henderson-Sellers, 2008) It means reacting to an unpredictable environment, adapting to change and aligning change methodologies to the needs of a business unit; but it also means identifying the ramifications of change for areas outside of the unit and being proactive in influencing or shaping the wider organisation and its processes accordingly. It is a whole system application and will come about by capability in sensing the need for change, responding in a tactical way, and initiating change across the entire organisation strategically if this is necessary and opportune. It relates to the comprehensive integration of a multitude of business activities, maximising the positive effect of organisational dynamics (as well as the ability to deal with unforeseen change and to benefit from change.) The application of agile governance has been identified strategically and operationally in such areas as supply chain management or design thinking in lean start-ups- contributing to complementarities that deliver results that are more than the sum of isolated initiatives. In all cases the concept has an organisation wide interpretation. (Lin, 2010; Soltanifesghandis, 2014; Tse et al., 2016; Lichtenthaler, 2020; Luna et al., 2020; Feizabadi et al., 2021; Turner, 2021.) It will take place with an element of self- regulation on the part of leaders and managers who feel empowered to identify and discuss change beyond traditional boundaries. Agile governance will include the creation of new forms or new mutually reinforcing systems that give better results over those that would occur if such practices had taken place independently of one another. The parameters for its success are broad ranging from innovative human resource management practice combinations on the one hand to commercial activities such as the establishment of partnerships and collaborations on the other; from technology capability which seeks to deliver across the whole organisation on the one hand to an effective interplay between product design, change management and strategy development on the other. (Accenture, 2020; Boehm & Turner, 2004; Klishma, 2021; Marhraoui & El Manouar, 2020; Pinel et al., 2013; Rachmawati et al., 2019; Vickery et al., 2010) Agile governance will, of course, need to be accompanied by effective systems and processes if its benefits are to be realised.

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• Innovation and transformation There is a strong argument in favour of product, process and organisational innovation being combined to produce complementarity affects. Strategies for their delivery can be mutually reinforcing because increasing the level of any of them increases the marginal profitability of the other. The second aspect of organisational competence therefore relates to innovation and the capability to transform in response to the changing environment. However, the Fourth Industrial Revolution brings a context for which there is little precedent or best practice- ‘the value-capture problem for innovators in the digital economy involves some different challenges from those in the industrial economy. It inevitably requires understanding the dynamics of platforms and ecosystems.’ (Teece, 2018) It is likely that these new circumstances will test organisations to the limit. A critical attribute therefore will be the ability to apply innovation and transformation in the building of new platforms and ecosystems through integrated technologies, and specialised knowledge, skills or techniques in a way that delivers differentiated advantage. The objective is to create an environment of technological innovation which can mean either product or process innovations- product innovation refers to those products or services that are introduced to meet the needs of consumers and process innovation are those new elements introduced into the production process or the operation of a service. Or it can refer to non-­ technological innovations including, for example, new marketing strategies that differ significantly from those that the company has previously employed or wider innovations involving the implementation of new methods or business practices, in the organisation of work, and in external relations. In many cases, innovation brings the need for transformation of systems, processes, people and technology across the whole organisation. Where such capability exists, then this would constitute an inimitable attribute which is key to complementarity. Where that capability is actively exploited, then it is a source of advantage and business progression. Complementarity from the deployment of internal collaboration and external competencies enhances the overall contribution to innovation capability. Whilst the path to innovation and transformation is likely to

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be contextual, there are some indicators as to how an environment might be created in which they might flourish(Guisado-González & Pérez, 2015; Liao & Li, 2019; Miravete & Pernias, 2006; Papalia et al., 2018; Wang et al., 2021) • For example, innovation can be encouraged by structures and processes that recognise and maximise individual competence such as creativity, internal collaboration between innovative or creative individuals • Or through the efficient leverage of knowledge from external sources, achieved in joint partnerships, supplier networks or learning from supplier operational capability. • Where cross fertilising innovation is evident between production elements, product design and business processes, complementarities occur which produce results over and above those where organisational strategies were independent. • Process innovation influences non-technological innovation, resulting in complementary benefits- for example between innovation strategies and export activity. Where the complementarities in innovation output have been tested, the results demonstrate significant potential and useful indicators for success since product and process innovations have a positive effect on productivity. In spite of the many identified positives, and even though there may be technologies to deliver it, innovation is not a given. Instead, it will require a structure that facilitates and emboldens innovation activity but also systems and processes that capture the outputs of that activity and converts this into actual benefits. Technology will be instrumental in driving innovative effort, but it will be the organisation’s absorptive capacity that will be instrumental in converting this effort into meaning. (Bogliacino & Naranjo, 2013; Miravete & Pernias, 2006; Polder et al., 2010; Serrano-­ Bedia et al., 2018; Teece, 2018) An additional facet of these competences is a culture that is responsive to change and will enhance the likelihood of complementarity outputs. Cassiman and Veugelers’ (2006) excellent analysis concluded ‘Innovation management requires a tight integration of internal and external knowledge within the firm's innovation process

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to capture the positive effects each innovative activity has on the marginal return of the other.’ • Culture Responsive to Change- Knowledge and Collaboration Agile governance and innovation often bring with them the necessity for transformation. However, when organisations have identified complementarity opportunities by combining resources and capabilities, there is the challenge of converting these into synergies and in turn progression. Two cultural factors are relevant here. First is the ability to adapt and change successfully. This is in itself a source of advantage. But the second opportunity is to convert this ability into a source of complementarity by exploiting the social complexities that are a feature of this adaptation. Social complexity relates to culture or the shared values and beliefs that shape not only interpersonal relationships but also business performance. Where there is such a culture- socially complex and therefore difficult to imitate- it can be a source of competitive advantage and business progression. It will influence the realization of synergies and the delivery of potential to which complementarity refers. Cultural fit, based on common or shared values, but also ‘which allows similarities as well as differences that mutually support each other—rather than on cultural similarity’ is therefore important. There is evidence for example that culture and strategic complementarity, are indicators for success- ‘it is not only economies of sameness that foster value creation…but, moreover, economies of fitness.’ (Anning-Dorson, 2019; Bauer & Matzler, 2013) However, for a culture of cooperation to take effect ‘it is extremely advantageous to know what other people want, judge, feel, think, and will do. Moreover, many kinds of complex mutually beneficial cooperation require this kind of complementarity: communication, exchange, division of labour, joint action, meeting at a known time and place, planning a schedule for the flow of work, conducting a complex ritual, making joint decisions and committing to collective behaviour.’ (Fiske, 2000) Where there is a uniqueness of culture- of which social complexity is an element- there is the potential for differentiation and advantage. Uniqueness can be seen in rituals, behaviours, attitudes, legends, routine

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management systems, human resources systems and language. These come together to form a system of shared meanings defining good and bad, right and wrong and the appropriate ways for members of a working group to think and behave. (Genc, 2013; Watson, 1995) Culture can be determined by power often in the hands of key individuals who then radiate the power from a strong centre; or it could be determined by rolemost often found in hierarchies with the implication of a rule- based culture. It could also be based on task—characterised by the flexibility and decentralised control of matrices. Or it could be based on personwhere the individual is the cultural focus (Grint, 2006). An assumption that permeates these interpretations of the meaning of culture is that determining activities take place over time, are embedded and based on the ‘socially significant actions’ of individuals as they interact with each other. Hence, culture and climate are produced by interactions between employees and reflect norms and values and attitudes; and are influenced by leadership and management and how employees perceive authenticity and trust in managers supervisors. (Turner, 2020) In this case it is how a unique culture can be used to deliver complimentarity. The realisation of complementarity benefits will require proactive and deliberate investment on the part of the organisation and a culture, systems and processes that facilitate resource allocation accordingly. • Investment in complementarity focused human resource practices Human resource practices directed to the achievement of complementarity have the potential to elicit a range of people behaviours which in turn lead to higher productivity levels and corporate performance. Hence, ‘if applying more of one practice increases the effectiveness in terms of knowledge creation, integration, and utilisation to applying (more of ) another practice’ and in which ‘the set of practices originating from various areas of HRM activity whose combined application can be rationally justified and empirically demonstrated to have a synergistic effect on organisational performance in a given sector.’ These practices could be viewed across multiple operational areas. A study of four of these- staffing, remuneration, training, and performance assessment- concluded that the greater that practices from different areas of human resource

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management were complementary, the more they improved organisational performance. (Barrette & Carrière, 2003) Innovative combinations of human resource practices are more beneficial than changes to individual work practices. (Laursen & Mahnke, 2001) ‘For example, various forms of team- work are made more effective if responsibilities are delegated to team members because it allows them to bring to bear their existing knowledge and to develop new knowledge for tasks that managers up in the hierarchy are unable to understand. Likewise, internal training might assist quality circles by blending leading practices developed in one part of the organisation with local knowledge in another part. ‘

Furthermore, teams were found to be more productive when team members were better trained, or were given team-based incentive pay, or were selected for skills that were complementary. These points support the concept that human resources practices can be complements, where doing more of one of them increases the return to doing more of the others. Such practices focussed on teamwork, training, and recruitment produced evidence of an impact on customer satisfaction and operational efficiency. Investing in clusters of human resource practices that can produce complementarities is therefore an important aspect of resource allocation for the organisation. Previously it has been argued that the activities of talent management, when combined with and complementary to the activities of employee engagement, produce more than the sum of the benefits of each when treated as singular events. However, they will only do so when the organisation recognises the potential of this statement and invests accordingly. This aspect of core competence will be influenced by both the context and characteristics of each organisation which will deliver solutions with clusters of human resource practices according to their own capability. (Barrette & Carrière, 2003; Laursen & Mahnke, 2001; Lazear & Shaw, 2007; Singh et al., 2017) Recognition of the value of social complexity to competitive progression will feature heavily in the nature of such decisions. Organisational competences are sometimes contextual, relevant to a point in time, or core such as adapting to change or agile governance

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that have traversed time and can be identified at many way points during the Four Industrial Revolutions over the past 250 years. The same observation can be applied to the competences needed for effective leadership or management. Generic skills such as complex problem solving, critical thinking, creativity, people management, coordinating with others, emotional intelligence, judgement and decision making, service orientation, negotiation, and cognitive flexibility are relevant over many different scenarios, and are important in the quest for complementarity.

Leadership and Management Competence Complementarities in leadership and management are twofold. In the first place between the functions of leadership and management or between leaders and managers in teams at various levels—for example when a senior management team has cooperative competencies, the output would be difficult to replicate, creating a socially complex set of operating conditions. (Tyler, 2001) Second there are complementarities between the actions of leaders and managers and the resulting organisational outcomes. The challenge with the advent of the Fourth Industrial Revolution and Industry 4.0. is for leaders and managers to operate effectively in new types of business model which, whilst continuing to develop attractive products and services, will do so in the context of technologically advanced value chain processes and systems, new forms of risk management and a transformation of work and its environment. Success will invariably require agile governance on the part of the organisation, its leaders and managers. The objective will be to convert the intangibles of structure and culture into the tangibles of business performance and progression. Here, competence is concerned with ‘the ability to sustain the coordinated deployment of assets’ in ways that help the organisation to achieve its goals. This attribute may be referred to as core leadership and management competence- knowledge, skills, attitudes and behaviourswhich an individual possesses, and which is important for performance within a specific business context. (Sanchez, 2004; Shamim et al., 2016; Sparrow, 2000; Stepanenko & Kashevnik, 2017; Turner, 2021). To achieve complementarity, leadership and management competence will

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take account of the holistic nature of an organisation and regard it as an open system. This means addressing ‘the multiplicity of individual and institutional interests that intermingle in and are served through any organisation.’ A requirement is that leaders and managers are able to define organisational goals ‘that promise a satisfactory level of goal achievement for all individual and institutional providers of the essential resources the organisation needs.’ (Sanchez, 2004). The delivery of complementary benefits adds a further element in that the goals and objectives become not only departmental, functional, or related to a single business unit, but have the additional element of a cross organisational context. Leaders and managers will require a broad range of competences to deliver this stretching scenario. • Knows what to do The primary requirement is knowing what to do to deliver opportunities generated in a new, dynamic environment. Conventionally, the ‘know what’ of management requires knowledge of strategic direction; knowledge of technology and how it will help to deliver these aspirations, and knowledge of the effect on people and organisational dynamics as a result of adopting a particular strategy, system, or process. Of particular relevance to the competence issue, in order for organisations to leverage this knowledge (such as technological knowledge) leaders and managers should have understanding about the applications, their features, and the ways in which other competitor organisations are using them. However, the dimension of complementarity adds to the element of defining and prioritising what is crucial for the delivery of additional opportunities. It is essential to appreciate the impacts of new or innovative systems and processes on all areas of the business- they are recipients, disseminators and interpreters of knowledge. It is the latter of these attributes that will inform what to do to deliver compound benefits. This not only applies to the application of existing knowledge but in that of new knowledge, since new knowledge is generated mainly by means of the recombination of both pre-existing and parallel units of knowledge. (Antonelli, 2003; Luna et al., 2020; Nakata et al., 2010; Turner, 2021)

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‘Such recombination is both synchronic and diachronic. Diachronic, vertical, recombination consists of the reorganization of elements of knowledge role acquired in the past with new bits and insights recently elaborated. Here the Newtonian understanding of the production of science as ‘standing on giants’ shoulders’ identifies a key attribute of knowledge complexity such as cumulability, i.e. the cumulative complementarity indivisibility between different vintages of knowledge. Synchronic complexity and the related horizontal recombination activities stress the complementarity between the parallel and contemporary acquisition of new bits of knowledge.’

The implication of this important finding is that in addition to existing processes of strategy setting, supported by well tried and tested systems, seeking complementarity will require an open mind about ideas and suggestions for how to achieve it, outside of convention. This attribute involves deciding between what is important and what is essential; what is fixed and what can be changed and what actions are necessary to affect the delivery of enhanced benefits. Knowing what to do in these circumstances is considered to be one of the most important competences alongside clarity of goal setting and clear communication of expectations. (Giles, 2016) On the one hand it will be concerned with ensuring the achievement of a unit’s operational objectives- existing knowledge; but on the other it will be concerned with identifying opportunities and allocating resources to complementarity initiatives- combination and recombination of knowledge. This will require making priority decisions in the interests both of the department or business unit and of the organisation as a whole. It means maintaining course- business as usual- but also the ability to manoeuvre if the opportunity presents itself- business not as usual. • Knows when to do it The success of a business strategy will depend on its alignment with the organisation’s goals and objectives, and how this takes place, accentuating the importance of knowing when to take action and to maximise the co-­ presence of alignment practices which have been shown to be more

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valuable than the same practices in isolation. Critical factors will be effective operational practices including impact, timing, and potential complementarity of practices(Vermerris et al., 2014): ‘it is important to know the required ingredients in order to prepare a certain meal. But it is still difficult to create the meal unless the timing of when to add which ingredient and when to cook for how long is unknown.’

Whilst various elements contribute to the success of strategy or associated actions, such as communication, shared knowledge of objectives and processes, management commitment and measurement of outcomes, it is timing- knowing when- that can be the difference between success and failure. The pace of change and hence the pace of opportunity adds to a particular aspect of leadership and management competence which is concerned with seeking and disseminating information and using that to coordinate processes and actions. At the same time, it is important to ensure that the likely external pace of change and opportunity is matched by rapidity of internal decision making and processes. The probability of a consensus approach to decision making, devolved authority and empowerment both add to and detract from this process. And so, whilst debate is essential, being mired in debate is not. Competence will include preventing teams from this latter course. (Luna et al., 2020; Turner, 2021; Vermerris et al., 2014) It will involve striking a balance between the surfacing and application of knowledge with the pragmatism of achieving advantage. Knowing when to take decisions and when to act on their outcomes is a feature of this. • Knows why it is being done Complementarity will be successful if the rationale for its pursuit is known throughout the organisation. It is for this reason that an important competence on the part of leaders or managers is their ability to choose and then prioritise since not all the strategies have the same effecton innovation performance for example. (Serrano-Bedia et al., 2018)

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Knowing what to do and when are the foundations on which to build the approach to the opportunity. The success of these will also be enhanced by the reasons or justification for particular courses of action; hence, awareness of the know why of complementarity. The essence of this is the argument that complementarity creates the potential for greater synergy which can lead to higher long term business performance. Amongst its facilitators are new technologies, their applications and impact on the business model. Knowing why will enable decisions that create valuable and unique synergy; and will inform the allocation of the right resources to the right place at the right time. However, ‘the existence of such resources is a necessary but insufficient condition, and the resources must be effectively integrated to realize the synergy.’ (Harrison et al., 2001) Knowing why a particular course of action is being taken is part of a wider engagement platform of the ‘why of work’ which also translates as meaning at work which, when in place, has significant benefits for both the employee and the organisation since ‘those who find meaning at work are more competent, committed and contributing; in turn employee competence commitment and sense of contribution lead to increased customer commitment; in turn customer commitment leads to better financial results for the company.’ (Ulrich & Ulrich, 2010) In the context of leadership or managerial competence the ‘knowing why’ relates to how well the goals and objectives of complementarity can be related to the broader goals and objectives of the organisation. It is the role of the manager to see beyond the limited scope of single incidence integration (such as that relating to a specific unit) and where possible take an organisation wide perspective, and regarding the organisation as a complete entity. (Turner, 2021) It will inform how complementarity can contribute to a broader organisational canvass. • Knows How to do it Integrating multiple systems and processes, together with seeking synergies represent the know- how. It is the practical application of ideas, concepts, knowledge, techniques, methodologies, systems, or processes that both the organisation and its leaders and managers possess in the development and creation of products and services. It is a dynamic

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capability which is ‘the subset of the competences/capabilities stocks of complementary know-how and other assets, which allow the firm to create new products and processes and respond to changing market circumstances.’ ( Teece & Pisano, 1994) Know how can produce economies of scope, derived from use in multiple business applications of the organisation’s underlying expertise or from the transfer of knowledge between business units. (Helfat, 1999) The process of transfer is unlikely to be automatic, but instead will require proactivity and willingness to engage within and without the units for which they have responsibility. There are three elements to this aspect of competence. In the first place there is the ability to understand the implications of multiple systems and the processes required for their effective implementation. Hence, integrates multiple systems will be an important aspect. Second is the ongoing process of improvement gained from prior experience or new knowledge. And finally, there is the essential characteristic of ensuring sufficient resources to enable integration to work effectively. A definition of this competence might be put forward as ‘integrates multiple systems and processes and seeks continuous improvement.’ (Turner, 2021) Critical to this will be the ability to build and sustain relationships in the process of integration and improvement. It is argued that those organisations that are able to find ways of using intangible knowledge assets toward value-creating capabilities, such as innovativeness, prosper. This assertion is supported by the finding that complementary resources, for example the technology know-how of computer engineers and the customer know-how of marketers, result in better capabilities when combined than if only one is present or they are managed independently (Nakata et al., 2010) Leadership and managerial know how will determine the extent to which the knowledge of individual members of the organisation and its valuable and rare assets are deployed to optimum effect. • Knows How to Behave Identifying and evaluating the potential of complementarity forms the base case. Having organisational and individual competence to deliver, underpin the possibility. An important issue in support of these is not

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whether an organisation adopts a particular work practice to enhance complementarity, but ‘how that work practice is implemented in conjunction with other complementary practices.’ Knowing ‘how to behave’ will be critical in engaging the workforce in the process of integration and change towards complementarities. Building a culture in which employees feel empowered is an important aspect of competence which is manifested in both workforce engagement and employee development not only to identify opportunities within their own domains but also without. This involves cooperation that can be explicit-oriented or tacit-­ oriented knowledge creation and dissemination. ‘Integrating external with internal knowledge source increased the probability of obtaining a higher level of organizational performance.’ (Choi et al., 2008;Turner, 2021) It is argued that amongst the social complexities that can differentiate one organisation from another and lead to sustainable advantages are cooperative competencies which can complement technological competencies for innovation and ultimately progression. Resource-based analysis has shown that ‘above average cooperative capabilities (i.e. competencies relevant to information processing, communication, knowledge transfer, intra- and interunit coordination, the ability to develop trusting relationships, and negotiation) … can be expected to provide firms with a competitive advantage that is not easily imitated or competed away (Tyler, 2001).’ It is therefore important that leaders and managers have the competence to facilitate an environment in which such co-operative capabilities are given full rein with a view to maximising their outputs. Knowing how to behave will be instrumental in creating and delivering to this environment.

Conclusion There is a body of research evidence to show that complementarity can be achieved by judicious management of such aspects of organisational strategy and practice as product innovation, process innovation, and non-technological innovation. Indeed, to achieve desirable and useful complementarity requires both a strategic approach to organisation, leadership and management through effective strategy, policy, and

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stewardship on the one hand, and a breadth of competence during implementation. Symbiotic complementarity leads to value added by the interaction of different elements, and pooled complementarity happens when value added is created by interacting with similar elements. (Guisado-­ González & Pérez, 2015; Kinderis & Danieliene, 2019; Nielsen & Hunter, 2013) Two further factors will contribute to success. First is an understanding of the conditions in which decisions are taken to generate the desired effect; and second what are the organisational and individual competences required to implement any outcomes of these considerations. In respect of the former, agility and agile governance as well as strategy setting processes and the ability to allocate resources to complementarity generating initiatives are critical. The ability to deliver to these requirements will be dependent not only on the organisation’s structure but also on the way it is led and managed and this leads to the second aspect of competences for complementarity. Knowing what to do and when; knowing why it is being done, how to do it and how to behave are therefore key facets. Progression through complementarity will involve choice in which combination of resources, assets or capabilities will make the most difference and how to allocate those resources to ensure maximum return. As competition increases or the terms of competition begin to change, these decisions will depend on the ability and the nature of the organisation’s structure and culture to implement them. This is because commercial success often ‘swings upon the terms and conditions upon which the required complementary assets can be accessed.’ (Teece, 1986) .The challenge is not only recognising that such uniqueness exists but in converting this into a workable formula and translating it into a business model which can in turn be implemented effectively. For the purposes of this book complementarity has been referred to as the interaction of business strategies and management practices which then produce coherent, aligned and mutually reinforcing systems and processes that give superior outcomes over those that would occur if such strategies or practices had taken place independently of one another. It is where the complementary agency of those strategies produces superior results, where the relations of independent units or their evolution creates higher value than their individual operation. Delivering value in this definition will depend on

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organisational competences on the one hand and individual ones on the other- particularly leadership and management competences- to facilitate the process. The benefits of complementarity will not be realised without competence. This is competence at organisational level covering agile governance and the creation and perpetuation of a culture of collaboration, and at individual level where leaders and managers have the nous and capability to enact these requirements.

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9 Complementarity in Business Organisations- 20 Important Conclusions

Complementarity and Business Progression The objective of a business organisation is to achieve progression by using the energy and resources contained within and converting them from latent potential to actual force. To support this movement, business philosophies, methods, and processes have evolved over time, occurring in a sequence of challenge and response as each Industrial Revolution created new opportunities. From the principles of Division of Labour emerged hierarchical organisation and a Weberian understanding about social relations within those hierarchies. Then came a scientific followed by a human relations view of management to take advantage of economies of scale and economies of scope. In recent decades the advent of globalisation has brought with it new approaches to strategy, to the organisation design to support that strategy and innovations in leadership, management, talent, and workforce engagement. Convention has come to mean that progression could be achieved with a vision or mission by which the organisation is guided, specific objectives in how to convert this aspiration into practice, and strategy, stewardship, and policy to ensure that those responsible operate © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5_9

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within clear and specific boundaries in such areas as legislation, resource allocation and budgetary control. Contemporaneously, business progression also means achieving economic growth whilst seeking a positive effect on society as a whole, exploiting synergies- such as complementary CSR strategies. And now, a Fourth Industrial Revolution provides a powerful impetus for change- a confluence of new technologies creating opportunity to those able to harness their potential. To achieve their objectives, organisations strive for coherence, congruence, and consistency in strategy, developed and applied with agility, with competent leaders and managers, utilising the skills of a fully engaged workforce in an agile and responsive structure. These concepts and the language of business management are part and parcel of organisational life. Many will continue to be relevant, but new technologies will create an environment of unprecedented volatility bringing conventional models of strategy and organisation into the spotlight. The dynamism of change in the global economy will require methods and techniques applied in a radically different context, requiring the orchestration of assets in untested ways. Organisations will adapt by refining strategies, redesigning structures, and identifying unique or rare resources to be applied in ways that are difficult to imitate on the part of competitors. Such resources can be tangible e.g. technology or intangible e.g. unique culture or innovative approaches to workforce management. (Cavaco & Crifo, 2014; Popa et al., 2016) The effective, complementary combination of both can lead to improvements in a range of performance measures from profitability to innovation performance. The challenge facing organisations is to identify unique resources, demonstrate how they may be integrated into powerful combinations, and to deploy them efficiently and effectively. Amongst the potential strategies for so doing is that of complementarity, whereby the outcomes of singular initiatives will be improved when they take account of the potential synergistic opportunity with other initiatives. Progression through complementarity will have occurred when coherent, aligned, mutually reinforcing business strategies and management practices give superior outcomes (such as shareholder value, profit, customer satisfaction, market share or cost reduction) over those that would occur if such strategies or practices had

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taken place independently of one another. It is where the complementary agency of those strategies produces superior results.

 omplementarity- Continuous Evolution; C Diverse Meanings The evolution of the concept of complementarity has generated multiple meanings at each of its many iterations. It has a foundation in quantum physics, based primarily on the debates initiated by the work of Nils Bohr (1929, 1957) extended to wider fields of knowledge and experience, intertwined with a range of philosophical questions ‘concerning such basic subjects as subject and object, space time and causality, chance and necessity, and so on.’ (Katsumori, 2011) And it has a foundation in economics based on the evolution of demand theory debated over time by economists such as Edgeworth, Pareto, Fisher, Hicks and Allen. (Lenfant, 2006; Samuelson, 1974) Complementarity has been applied to concepts at the abstract level in religion or philosophy; it has been used to inform practical issues in areas such as the demand and supply of goods and services; the import- export trade or the teaching of science, and it has contributed pragmatic theories in the technological sphere. Its applications stretch from government macro- economic policy to global financial regulation, from industrial development to individual behaviour. In addition, with a great number of insights from different disciplines, the concept has gained credence in areas of business and organisation through the seminal work of Teece (1986, 2018); Teece & Pisano, 1994, and Milgrom and Roberts (1990); Milgrom et al., 1991 with Barney’s (1991, 1996) resource- based theory of the firm providing a language from which the concept could evolve. Firstly, complementarity is used to explain that mutually exclusive events or characteristics can come together to form a complete whole. That is different phenomena are complementary when they are mutually exclusive, but they are all necessary for a comprehensive account of these phenomena. (Wang & Busmeyer, 2015) This principle is based on the ‘dualistic, dialectically contradictory essence’ of the phenomenon studied. Secondly, is that opposites when

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taken together build a complete picture- yin and yang. Thirdly there is an interpretation based on the idea of wholeness, but seeing complementarity as not necessarily based on mutually exclusive phenomena. Where, for example, individual personality traits attract responses from those with similar traits resulting in complementary actions; or where complementary goods are used together. Examples of which might be ‘right and left shoes; razors and blades; cake and icing; horses and carriages; cars and highways; TV sets and TV shows; computer hardware and software; and tea, hot water and a cup. The value of a group of complements in joint use is super-additive, that is, the things used together are more valuable (to someone) than the sum of their values in separate use.’(Baldwin, 2018) Fourthly, complementarity is a relationship between one factor and an associated, related factor- complementary synergies between factors. Subsequently, research studies have tested the hypothesis with results across many industrial and commercial sectors. But there is no universal definition. Indeed, it has been argued that ‘in the history of scientific thought it is hard to find another central contribution about which the opinions continue to differ so sharply. Some… consider complementarity as the most profound intellectual insight of the twentieth century, as a pinnacle of physical understanding of nature, no less inevitable than the emergence of man himself as a product of organic evolution.’ And yet others criticise complementarity as an ‘obscure ‘double-think.’ (Beller, 1992) Instead, and as the concept came to be applied in settings other than quantum physics, several different interpretations have been put forward.

Complementarity- Definitions in a Business Context Teece’s (2018) contribution to understanding complementary in commercial environments has been significant for over 30 years. His summary of the economic definitions of complementarity included ‘Hicksian’ or Production Complementarity. This was where factors of production were complements when a decrease in the price of one led to an increase

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in the quantity used of its complements in production. The second was referred to as the Edgeworth/Pareto or Consumer Complementarity which occurred if the utility of consuming two goods together was greater than that of consuming them in isolation. A third interpretation was that of Hirshleifer or Asset Price Complementarity which was a financial perspective about profit from an innovation. Two other types of were Technological Complementarity which occurred ‘when the value of an innovation depend ed on altering the nature of one or more existing technologies and/or on creating new ones;’ and Innovational Complementarity where improvements in a general-purpose technology increased the productivity in downstream sectors such as a cellular network creating opportunities for those providing wireless data devices. But these weren’t the only interpretations based on economic theory. Puka and Jedrusik’s (2021) excellent summary of the many different interpretations of complementarity -building on Berry et al.’s (2021) valuable work highlighted quantitative complementarity which occurs when an increase in the quantity of one good leads to an increase in the value of another- an example cited was that of a right and left shoe- as well as qualitative complementarity where an increase in the quality of one good leads to an increase in the value of quality of another good. In this case the example of a suit paired with a tie was used. They discussed ‘within a category complementarity’ where ‘a basket of goods within the same category is selected in such manner as to best suit the customer’s current needs, e.g., a home film library.’ This was contrasted with cross-category complementarity where goods from different categories relate to each other to achieve a greater value for the consumer, such as milk and cornflakes, or software and hardware. Provider-driven complementarity was where ‘independent goods become complementary if they are delivered by the same provider (often within a brand or series), e.g., banking services and brokerage services.’ With the progress of time, it is no longer possible to interpret complementarity solely as a binary relationship between two goods (and an individual) ‘taken apart from the context of choice. On the contrary, the context of choice is a constituting part of the definition.’ (Lenfant, 2006) And given the importance of the subject, there is support for Samuelson’s (1974) view that ‘the last word has not yet been said on this ancient

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preoccupation.’ The rich and diverse debate continues with multiple definitions emerging from theory and practice.

Complementarity and Business Practice Hence, across management research, complementarity has been used to predict the sustainability of competitive advantage, rent appropriation and superior innovation outcomes-it has been used to explain success in the emergence of novel technologies and its role in innovation. Cited examples include in the field of automobiles, which require a network of gas stations, as well as a road infrastructure, support businesses such as repair shops, specialized suppliers, and insurance services. Taking the logic a stage further, smart phones require base stations, the internet, software applications and so on. In retail, the inter-action between the technology infrastructure and e-commerce generated complementarities that contributed to improvements in performance through sales per employee, inventory turnover and cost reduction. The complementary use of IT resources to build system integration and business process coordination capabilities was the key mechanism in creating greater business value. (Hsu, 2013; Markard & Hoffmann, 2016; Soda & Furlotti, 2017; Yu et al., 2011) And finally complementarity was shown to emerge from the interaction of either homogeneous or heterogeneous units or elements, such that relations of independent units or their evolution creates higher value than their individual operation. The argument here is that two activities are complementary when the adoption of one increases the marginal returns of the other and vice versa. Complementarity will be influenced by strategic choices, the orchestration of resources, the development of relationships with partners, customers and distribution channels. The greater the level of interaction, the greater probability of complementarity. (Baldwin, 2018; Choi et al., 2006; Fedele & Mantovani, 2008; Furlan et al., 2011; Gao, 2004; Kinderis, 2019) Undoubtedly, the Fourth Industrial Revolution offers a particular opportunity to take advantage of complementarity benefits. This is because of the potential of e- commerce and e-business- complementarity creating relationships between internet technologies and other elements

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within the organisation with positive returns from investments in these technologies. Data-driven business models such those used by Amazon or Netflix offer complementarity opportunities by collecting, organizing, and summarizing data, to identify customer needs. (Xu et al., 2020) New technologies won’t necessarily give superiority or advantage, but that relative advantage can be created and sustained where the technology leverages other critical resources. Resource complementarity creates the potential for synergy leading to performance improvements- ‘the valuable, unique, and inimitable synergy that can be realized by integrating complementary resources provides an opportunity for the firm to create competitive advantages that can be sustained for a period of time. In addition, complementary resources present opportunities for enhanced learning as well as the development of new capabilities.’ (Harrison et al., 2001) Nevertheless, whilst it has the potential for advantageous positions in any particular market or sphere of activity, it is not a ‘given’ and can will emerge from jointly constructed interactions with multiple potential partners through recursive cycles. (Afanasyev et al., 2015; Deken et al., 2018) Furthermore, ‘rather than one best way of organising, complementarities suggest that the effectiveness of one organisational element may be dependent on the presence or absence of another particular element. Consequently, organisational arrangements often display multiple equilibria or what is known as equifinality, whereby multiple pathways may lead to the same or similar outcomes.’ (Jackson & Ni, 2013) Each of these interpretations may have resonance in the context of the dynamics of the Fourth Industrial Revolution and how individual organisations deal with the outcomes of significant technological and social change.

Complementarity- Twenty Key Learning Points A confluence of digital technologies is creating new types of work, new types of work procedures and new organisational competencies, roles, functions and structures and budgets. Furthermore, the landscape of cooperation has broadened beyond traditional boundaries with new ways of organising and new types of organisation design. The resulting dynamic

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is a powerful catalyst for transformation and change. In response, organisations are seeking alternatives to traditional approaches and their associated structures. Amongst these are greater vertical and horizontal integration impacting on every aspect of the supply chain creating networks of strategic partnerships. These dynamics are important in understanding why complementarity is relevant in the business environment. Throughout the evolution of the concept, with its many definitions or interpretations, runs the theme that may be of particular benefit to the business organisation as the Fourth Industrial Revolution gathers pace. This is that there are benefits to organisations from not only considering the singularity of management actions- meaning discreet interventions, decisions, or strategies in response to challenge or opportunity- but also by complementarity- that is interventions that connect actions, practices, tasks, resources, or assets to others and to a broader purpose or goal. The assumption here is that complementary clusters of business practices will yield superior outcomes over and above the sum of their component parts. Companies such as Google, Facebook, Uber, Apple, Spotify, Airbnb, eBay, and Netflix have flourished by scaling up and leveraging effective and complex relationships. (Aversa et  al 2020) Although it is also worth noting Teece’s observation that any definition of complementarity raised complex coordination issues. To be successful requires not only the means but also the ways. In the analysis put forward in the previous chapters, some of the principles of complementarity as they pertain to business functions, and then to the organisation as a whole were identified. This final chapter will pull together the key aspects of complementarity through 20 key learning points, highlighting the benefits of taking a holistic perspective when considering the principles and definitions, areas of strategy, leadership, management, talent and engagement and the dynamics of organisations. These are presented below.

Principles and Definitions An overarching objective will be to achieve competitive advantage that is sustainable over time, in other words, competitive progression. The first consideration of the utility of the complementarity concept therefore will

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be in relation to this higher- level purpose. But how to reach this position remains open with multiple interpretations and definitions. These range from positions that are derived from within the area of quantum physics with joint completion and mutually exclusivity as the core of the argument, through to the idea that opposites when taken together create a complete picture. Further interpretations derived from economic theory include complementarity as not necessarily based on mutually exclusive phenomena such as where complementary goods are used together or a relationship between one factor and an associated, related factor- i.e complementary synergies between factors. The most straightforward interpretation is complementarity in its literal sense where one article, goods or service adds value to another- Tea and milk, Tennis Balls and Tennis Rackets, Mobile Phones and Sim Cards, Petrol and Cars. The variations in definition are compounded by the dynamic nature of the context within which organisations operate. In particular the impact of technological and social change inherent in the Fourth Industrial Revolution. Nevertheless, it is possible for each organisation to identify aspects of complementarity that are relevant to its own context and whilst there is no single best practice definition of complementarity, its application will be based on the context of a particular organisation or part of an organisation- a best fit approach. The application will take place within a generic framework or interpretation of the concept. 1. In this respect, complementarity may be seen as the interaction of business strategies and management practices to produce coherent, aligned and mutually reinforcing systems and processes that give superior outcomes (such as shareholder value, profit, customer satisfaction, market share or cost reduction) over those that would occur if such strategies or practices had taken place independently of one another. It is where the complementary agency of those strategies produces superior results, where the relations of independent units or their evolution creates higher value than their individual operation. The nature of those interactions and the resources allocated to ensure that these are designed to maximise complementarity benefits. How to do so will be context specific. The concept of best practice is replaced by that of best fit. Hence the importance

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of analysis and identification during the process of strategy setting. These activities will highlight those areas of the organisation that ­satisfy the unique and inimitable criteria important in the resourcebased view. 2. The successful application of complementarity against the above definition will depend on creating value from the organisation’s resources and which have been identified as of particular utility. Hence, complementarity is concerned with identifying synergies that can be realized by integrating the organisation’s valuable, unique, or inimitable resources. That is, they are stronger than or cannot be imitated by competitors. But complementarity is not about using these resources in isolation from each other. Instead, they will be combined or clustered together and in so doing will create new products, services, or business models. Resources can include easily identifiable ones such as new technology but also those that are less tangible such as patents and copyrights or the organisation’s culture. Identification of such resources is the first step, followed by integrating them into strategy, stewardship, policy and process. 3. In the dynamic, transformational environment created by the new technologies of the Fourth Industrial Revolution, competitive advantage may only remain an advantage if an organisation builds in progression as part of its value chain. Progression means forward movement in the generation and value of tangible assets, intangible assets, and sustainable development. Complementarity holds that the business phenomena of strategy, leadership, management, talent, and engagement, have complementary properties which, if recognised and directed, can have a broader impact than if they were regarded as independent activities. A critical element in this will be the organisation’s dynamics and hence a best fit organisational designinformed by the need for agile governance to provide the responsiveness necessary to deliver complementarity advantages- will be an essential additional characteristic. These principles form the basis of a complementarity approach in business organisations. However, as the history of the development of the concept has shown, their application in practice will require proactivity

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involving not only the optimal orchestration of rare or valuable assets but a recognition of the sensitivity of the organisation’s dynamics. The success of complementarity will depend on how well the people responsible for its delivery bring together the many diverse strands necessary. It will depend not only on a good strategy but a best fit organisation design, competent leaders, and managers and a fully engaged workforce. A coherent, congruent, and consistent approach to all aspects of the organisation’s dynamics.

Complementarity and Business Strategy The route taken by the organisation as it moves towards an aspirational vision or mission will be articulated in the form of business objectives and a business strategy to achieve them. Strategy may be concerned with directing several business units to attractive market segments in which they are deemed to be competitive with corporate objectives such as shareholder value or business unit objectives such as market share or cash flow. And finally, strategy can also refer to a function within a business unit such as technology or human resources. Once strategy has been determined, then resources are allocated to support whatever actions need to be taken in its achievement. Complementarity brings with it a further consideration and that is the orchestration of assets in such a way as to create value not only within a unit but without. ‘Complementary assets’ such as technological know- how or process and system capabilities- will be combined through the strategy setting process. 4. The base point in this assumption includes both process and culture. In this regard there is an essential understanding within the organisation that the performance of the whole organisation will be improved when there is complementarity between elements of business strategy. This principle applies across the board extending it from the norm based on technology applications. Hence, complementarities will be sought for example between the finance strategy and the marketing strategy or between the production strategy the people or human resources strategy. Hence, complementarity is the antithesis of singularity. The hypothesis is that single issue competitive

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advantage may not be the only option available to organisations in future. As such, prosperity will not only come about by pace and agility; or by cost leadership or differentiation; but by the ability to make sure that every investment creates advantage across the whole organisation; and that such investments are mutually reinforcing. 5. In order for strategy setting to facilitate opportunity for complementarity, a system for ensuring cross-domain alignment and coordination of functional strategies will be necessary. This strategic integration is aimed towards fully exploiting growth potential and comes about by combining or orchestrating resources and competences towards the new business opportunities that may emerge from economic transformation. The objective is to achieve what has been referred to as the maximum-strategic-opportunity set, defined as ‘those opportunities that can let companies take the fullest advantage of their capabilities and their potential to pursue new strategies.’ (Burgelman & Doz, 2001) Hence the necessity to integrate strategic processes. Amongst the outputs of this focus will be asset orchestration by combining advantageous resources (that are rare or inimitable) such as social complexity that can’t be copied by competitors. Once again, this will require both processes and a culture that facilitate cross domain or unit alignment. Strategy setting will have twofold objectives. First to ensure that a particular function or unit has clarity about its objectives, systems to achieve those objectives and resources allocated to do so. Second, strategy setting will seek to identify where functional or unit strategies can benefit others. Complementarity replaces singularity. 6. In economic terms the theory of supply and demand is used to define complementarity using measures of the responsiveness of demand for one good to a change in the price of another good. However, Puka and Jedrusik’s (2021) analysis added a range of definitions, two of which are particularly relevant in determining the success of complementarity initiatives. Hence, quantitative measures will demonstrate their effectiveness in returns on investment, whilst qualitative measures will demonstrate the value added to other strategies apart from the functional one being considered. Measuring the outputs of complementarity is important because it provides a case or justification (as measured

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by return on investment) to support the alignment of domain ­strategies, the orchestration of resources and investment decisions. If the organisation’s business strategies are truly complementary, then the effect of their complementarity will show up in measures of performance. The objective will be to demonstrate that strategies, when applied together are greater than any isolated additive effects. What is measured, how it is measured and how it is converted to explicit knowledge will ultimately determine whether there is business support for the complementarity as a source of business progression. A ‘good’ strategy has a ‘kernel’ which contains three elements- these being a diagnosis, a guiding policy and coherent action. (Rumelt, 2011) The first two will be significant contributors to the organisation’s direction and its strategy on how to get there. The third element- coherent action- will determine whether the aspiration implied by the direction and strategy will be fulfilled. Coherent action will be dependent on leaders and managers who have the competence, not only to recognise the value of complementarity, but also to put together the ingredients to make it work.

Complementarity, Leadership and Management Competence and complementarity go hand in hand. This is because a demonstration of competence on the part of leaders and managers is causally related to effective performance. In this case, leadership and management competence consists of knowledge- the retention and utilisation of information, skills- the ability to demonstrate a sequence of behaviour towards a goal- and attitudes and behaviours- the social manifestations of how a manager undertakes a role. Competence can be specific, such as technology knowledge or that related to the business domain, or generic, relating to interpersonal competences. It can be categorised as cognitive competence or work-related knowledge and the ability to apply it; functional competence the ability to perform work-­ based tasks; social competence or relational and communication skills;

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and meta-competence or personal and professional values. Competences form the know- how, know why, know what, know when and know how to behave of management. Leaders and managers will require competence that span each of the above typologies if they are to deliver the benefits of complementarity. An important assumption here is that the performance of leaders will improve if leadership competences are complemented by management competences; the performance of managers will improve if they complement traditional management competences with those traditionally ascribed to leaders. 7. Principles and strategies will only be effective if other organisational resources are aligned with them. This will require leaders and managers who not only have the will or intent to make complementarity work but the competences to enact it. To be effective therefore requires that leaders and managers demonstrate agile governance in identifying and delivering complementarity opportunities. Agile governance itself is open to interpretation. It can be strategic and relate to longer term objectives and direction; or it can be operational in respect of resource allocation and decision making. Furthermore, it can include both narrow and broad change management and a mindset- the willingness and capability to change. Agile governance may therefore be defined as the ability to respond to change in a dynamic and flexible way. (Turner, 2021) It is that ability to respond to change in a way that is dynamic and flexible; that adapts change methodologies and aligns them to the unique context of the department or business unit; but simultaneously recognises the implications of such change for areas outside of the unit. For complementarity- a cross organisational concept after all- to be effective will require agility and the ability to influence or shape the organisation and its processes accordingly. This can be articulated as knowing what to do. 8. Knowledge creation, dissemination and exchange, joint actions to solve problems, joint planning, making joint decisions and committing to collective behaviour, will depend on cooperation based on shared understanding. There is a strong connection between knowledge possessed by the workforce and the services obtainable from its

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material resources. (Laursen & Mahnke, 2001) The relationships necessary to deliver complementarity will depend on effective information flow between individual members of the workforce, between business units and across the organisation. A critical area of leadership and management competence therefore is that of collaborating to create and share knowledge and information to expand the potential for complementarity. Having insights about the potential for complementarity will come to nothing if the leader or manager is unable to seed other areas with the same knowledge. This is the 'know why' of leadership competence. But it is a shared know why. 9. Agile governance and cross organisation collaboration will facilitate a further aspect of competence, and this is that leaders and managers are able to integrate multiple systems and processes and in so doing will seek complementarities through synergies. Where leaders and managers are able to use their resources in a complementary way ie across the organisation, then there is the possibility of building system and business integration capabilities that can extract high levels of complementary value. And indeed, as organisations build alliances with both customers and suppliers over electronic networks, the importance of integration and complementarity potential becomes a critical issue. (Hsu, 2013) This is the know- how of leadership and management as it pertains to complementarity. 10. In order to have an impact on organisational performance, people management practices will need to be aligned to complementarity initiatives. Leaders and managers will therefore need the important area of competence which is the ‘know how to behave,’ or to engage and develop the workforce to identify opportunities for complementarity within and without their own domains. The challenge here is that engaging and developing the workforce is likely to be context specific because employee engagement is a multi- faceted, multi layered construct to which simplistic definitions are difficult to attach and simple ‘solutions’ unlikely to be effective. (Turner, 2020) Engagement is in part psychological; in part sociological; and in part an outcome of organisational dynamics. It is influenced by supply push and demand- pull factors; with ‘supply push’ having a positive impact on an individual, the resources they have at their disposal and

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the climate in which they work; and ‘demand pull’ interfering with motivation and the smooth operation of work. It will be up to the organisation, its leaders and managers to reframe engagement within the context of meaning and purpose- specifically that of seeking complementarity opportunities in systems and processes. (Shuck & Rose, 2013; Turner, 2020) A culture of positive engagement, with a workforce proactive in knowledge seeking and disseminating, responsive to change and with the abilities to enact change effectively is a priority. 11. The concept of ‘Triple A’ (agile, adaptable and aligned) in relationship to the supply chain is one that resonates in other aspects of the management of the organisation. In particular these will feature heavily in the competences required by leaders and managers in knowing when, knowing why and knowing how to pursue complementarity opportunities. Therefore, ‘understanding the interactions between the system’s elements is essential to identify potential profitable changes,’ with particular relevance to complementarity. These insights will inform investment and resource allocation decisions (Feizabadi et al., 2021) and ultimately contribute to superior performance. Since the successful implementation of strategy will depend on its alignment with the organisation’s goals and objectives it is important that leaders and managers know when to seek and implement complementarities. The co-presence of alignment practices has been shown to be more valuable than the same practices in isolation. The potential for value creation through complementarity will be enhanced by conscious strategy setting, decision making and resource allocation and through the competences of leaders and managers contributing to a culture that recognises its benefits. This means a culture of collaboration and cross domain cooperation through effective talent management and employee or workforce engagement; where technological advancement and a workforce performing creative tasks become complementary in ‘complex, dynamic ways.’ (Pedota & Piscitella, 2021) Talent management and workforce engagement have become key issues in the dynamics of organisations, often dealt with at Board level

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Complementarity, Talent and Engagement People issues are business issues, and business progression will depend on their effective management, contributing to high-performance work systems with positive outcomes such as productivity, innovation, and financial performance. In this scenario resource complementarities that will arise when combining business unit– and individual-level interactions, ‘such that the aggregate knowledge and skills at the unit level fit well with and supplement the particular knowledge and skills at the individual level.’ (Burdin & Kato, 2021; Crocker & Eckardt, 2014) The benefits are multi- faceted and multi-layered. In addition, a complementarity approach will seek to use heterogeneity- human resource practices that are difficult for competitors to imitate- to deliver performance over and above that of competitors. The hypothesis is that the activities of talent management, when combined with and complementary to the activities of employee engagement, produce more than the sum of the benefits of each when treated as singular events. From a resource- based view, complementarity offers the opportunity to apply unique people management practices and experiences to deliver performance over and above that of competitors. There is support for the conclusion that the ‘relationship between individual human capital and individual performance is impacted by complementary functional and managerial unit-level human capital resources.’ The benefits of people management initiatives may be increased with a complementarity perspective across the whole organisation. (Crocker & Eckardt, 2014) Some introspection is required because of the diversity of opinion about what constitutes talent and engagement. In the case of the former, the term talent and the strategies associated with it have evolved from ones of viewing this particular aspect of organisational resource as the most senior people to a more inclusive one in which all members of the workforce have talents to offer. A more pluralistic perspective is increasingly used and talent management becomes best fit rather than best practice. Likewise, workforce engagement is a complex, multi- faceted concept that has evaded any attempts to pigeonhole it into a single discipline, having elements of psychology, sociology, and workforce dynamics. However, a critical factor in achieving

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complementarities is that the organisation decides on its definition of both talent and engagement. In so doing it will facilitate the search for complementarities between the two, and between the two and organisational performance. The key learning points in respect of this aspect of complementarity are: 12. There is a symbiotic relationship between talent management and workforce engagement. Whilst talent has become one of the key differentiators for human resources management and for leveraging competitive advantage, (Bhatnagar, 2008) employee or workforce engagement is increasingly regarded as a strategic issue. Where there is positive, proactive behaviour in the workplace and brought about by a combination of motivated, emotionally attached employees the potential benefits are significant. The assumption here is that workforce engagement will improve if it is complemented by talent management practice that addresses engagement issues; the performance of talent management will be enhanced by talent aligned engagement practices. However, the benefits of this relationship will only occur if there is clarity in the organisation about the meaning of the two concepts in the specific context of that organisation. And so, defining talent and talent management and defining employee or workforce engagement will be necessary if the right actions are to be taken and resource allocated to maximise the advantages created. 13. Human capital resources may exist individually or within a collective- the aggregate of an organisation’s competences. (Ployhart & Cragun, 2017) It is towards the latter that potential synergies occur and as such, talent management and employee engagement become mutually reinforcing. Having in place a coordinated approach to both therefore provides a basis for progression at both strategic and operational level. To do so will require identifying synergies between talent management and workforce engagement and developing strategy to realise the benefits of those synergies. Since multiple types of human resource combination exist then it is important to be aware of which are best fit to the organisation. ­Subsequent actions will have a focus on providing positive outcomes across the organisation.

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14. How human capital resources are deployed and in what combinations depend on strategic and operational decisions based on insights into which combinations are likely to produce the best performance. Amongst the factors are how talent management relates to a highperformance organisational culture; or the impact of high levels of employee engagement or a supportive change-, quality-, and technology-­driven culture, with ‘creativity, open communications, effective knowledge management, and the core values of respect and integrity.’ (Kontoghiorghes, 2016) The linkages between these human resource practices and organisational performance is a strong assumption. Identifying synergies between talent management, workforce engagement and organisational performance is therefore the essence of complementarity as it relates to the broader purpose of organisational progression. The synergies will be realised by aligning talent and engagement strategies to organisational strategies. 15. Collings et  al. (2018) identified a series of means through which organisations ‘reconfigure intangible assets, such as human and social capital, to respond creatively to the dynamic and unpredictable business conditions that characterize the global business environment.’ Achieving high performance will therefore depend on the coherence of a ‘broader ecology’ of complementarity- oriented routines. The objective for ensuring operational alignment will be management activity for talent and engagement informed by the complementarity principle. Hence leadership and management competence should be aligned with achievement of complementarity objectives. Talent management and workforce engagement will no longer be purely functional or departmental activities but will instead be directed towards overall organisational performance through complementarity outcomes. 16. The Fourth Industrial Revolution will be people powered whereby ‘companies at the forefront of the technology frontier are empowering their workers with digital technologies—and the skills they need to use them.’ (McKinsey, 2022) An important aspect of complementarity, therefore, will be to show how this approach contributes to performance outcomes. Hence measuring the return of investment in complementarity; for 'business case' and resource allocation as

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this applies to resources allocated to talent management and workforce engagement, are important features. This means data, information, intelligence and insight about how the organisation is performing and the effectiveness of its complementarity aligned people management. The working hypothesis is that addressing complementarities between talent management and workforce engagement will have benefits over and above those that would accrue if the functions were treated in their traditional independent ways. A number of factors, including changes in employee perceptions about the nature of work and the associated expectations, worldwide shortages in key skills, the transformation in the workplace precipitated by the Fourth Industrial Revolution and of course the impact of the pandemic- still being assessed- have created the opportunity for organisations to transform the way they work. This is also an opportunity to pursue the benefits of a complementarity approach to talent and workforce engagement.

Complementarity and Organisation The strength of complementarity arises out of the potential to maximise the benefits from interdependencies, linkages, and synergies. To do so will require an interaction between strategy setting and resource allocation which will create mutually reinforcing systems producing superior results over those that would occur if organisational actions had taken place independently of one another. The hypothesis is that the relationships between independent units, if directed appropriately will create higher value than their individual operations with synergistic benefits arising from unique and complementary resource combinations. However, an influential factor in the realisation of such benefits will be the effectiveness of cross-domain alignment, facilitated by a sympathetic organisational structure. The emphasis here is on organisation and its dynamics in facilitating complementarities-in-performance and complementarities-in-use. There are a number of key learning points in regard to this aspect:

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17. Complementarity not only relates to the tangibles of organisational life such as technology but also intangibles including human resources, knowledge, and culture, each of which is influenced by the organisation’s design and its dynamics. In this respect, The performance of the whole organisation will be improved when there is complementarity between business strategy, leadership, management, talent and engagement; where there is a culture of complementarity backed by organisation, systems and processes designed specifically to recognise and address complementarity. There is evidence in support of this proposition not only in achieving economies of scale through cost- based synergies but in economies of scope. For example, corporate performance was improved when the organisation simultaneously exploited a complementary set of knowledge related resources across its business units. In so doing governance choices were instrumental based on the principle that ‘when the marginal returns to vertical integration for a given vertical integration choice are increasing in the level of vertical integration on related choices, there will be complementarity on governance choices.’ In many cases the achievement of positive outcomes will require a change in business model, and once again there is evidence to support the conclusion that there was a positive complementary effect on performance where this occurred. (Carree et  al., 2011; Cucculelli & Bettinelli, 2015; Novak & Stern, 2009; Tanriverdi & Venkatraman, 2005) Insights into the impact of such choices will determine whether complementarity benefits are achieved. 18. Grandori and Furnari (2009)raised an important question. ‘What is the origin of the surplus value of the ‘joint application’ of two organisational devices, i.e. where does complementarity come from?’ The response will clearly determine how resources are allocated in its pursuit. Brynjolfsson and Milgrom (2013) noted that synergies occurred when two or more agents interreacted such that that their combined effect was greater than the sum of their individual effects. Such interaction was cooperation among groups. Complementarity was used as a near synonym in their interpretation but was set in a decisionmaking context. And it is the nature of these decisions that will determine whether such complementarity strategies or initiatives

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will succeed. Achieving positive outcomes will depend on the ability to identify elements that provide opportunities for complementarity and provide tangible strategy, policy, and the formal rules of organisation to their realisation. This will include sets or bundles of internal resources or practices which work synergistically and from this seeking insights from modelling 'clusters of interconnected structures and practices' 19. There is no best practice organisation design and indeed the Fourth Industrial Revolution has brought with it a whole new range of organisational options stretching beyond the classic hierarchies or matrices that arose in earlier times. Hence the choice facing most will be based on a best fit approach. Nevertheless, and in the absence of precedent, it will be important to model organisation configuration taking a systemic and holistic view and seeking patterns or profiles that can be related to superior performance outcomes. Grandori and Furnari (2009) outlined a range of elements from where such patterns may emerge. Amongst these were market elements, where different parts of a system are connected by valuebased exchange devices; bureaucratic elements represented by rules or policies and their stewardship; and democratic elements: such as employee voice or voting rights. Complementarity will be achieved where these elements are set in an organisation design that facilitates their interaction. 20. The adoption of complementarity initiatives and the creation of a culture in which their benefits are embedded will not only be determined by traditional factors but also by the nature and structure of the organisation. The final element to be considered in the quest for complementarity in organisations is that of aligning and implementing the strategy and plan using the transformed organisation design. This means developing strategy for integrating resources to realise synergies and aligning organisational structure to the new requirements. There are theoretical underpinnings to the nature of that structure. For example, in economics, there are ‘theories about what assets and activities should be grouped together under common ownership and unified governance go by the titles theory of the firm or theories of vertical integration. All three branches of organisa-

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tional economics— transaction cost economics, property rights theory, and agency theory—have something to say on these issues.’ However, whilst the theories are broadly consistent, no single theory integrates all three approaches. Hence it is likely that structure will be context specific although a thread that runs through each is that strong complements should be placed under unified governance. (Baldwin, 2018) Organisational practices are determined by a variety of factors of which organisation design in important. Having a structure that both reflects and facilitates the processes of complementarity will therefore be a critical success factor. Organisational design and development constitute a critical platform on which to build complementarity initiatives. However, it is the area of practice that organisational dynamics will either enhance or detract from initiatives towards complementarity. This applies at unit or departmental level where not only leaders and managers will be expected to seek synergies beyond their own immediate spheres of influence but also members of the workforce. It also applies at organisation level where cross unit or function synergies are possible if the structure and culture allow their identification and pursuit. Organisational dynamics can accentuate the possibilities of complementarity. They can also thwart its realisation.

Conclusion As business organisations strive for progression, they will seek ways to ensure that the strategies they craft and the way in which they allocate resources are consistent with their overall vision of where the organisation should be and the objectives to ensure it gets there. And, having done so, to ensure that the strategy is sustainable adding value to both short- and longer- term investments whilst at the same time respecting social objectives such as fair- trade practices or respect for the environment, diversity, and equality of opportunity. In a modern context, business progression increasingly means achieving economic growth whilst having a positive effect on society as a whole. There are numerous philosophies and theories about how to do so. Strategic models abound, definitions of the

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competences required by leaders and managers, how to manage talent or create an environment for workforce engagement and alternatives on the design of organisations have evolved over the Four Industrial Revolutions that have taken place over the past 250 years or so. There is no shortage of advice about best practice in each of these areas. However, an organisation’s leaders will make decisions less on best practice, more on best fit, taking account of both the external context and internal capability. The same principle might be applied to an additional strategic and operational alternative that is available to organisations. This is the concept of complementarity in which one capability reinforces the impact of another capability. This concept has also evolved over time and has been applied at the abstract level in philosophy as well as in practical issues relating to economics, technology, or human resource management. Complementarity is the antithesis of singularity. For the purposes of this book, it is argued that strategy, leadership, management, talent, and engagement, can have complementary properties which, if directed, will have a greater impact than if they were regarded as independent activities. Put simply, it means maximising valuable, unique synergies from the integration of complementary resources. Complementarity is based on the principle that the outcomes of singular initiatives will be improved where they take account of the potential synergistic opportunity with other initiatives. It brings together the properties of activities into a complementary framework in the context of the totality of the phenomena. The realisation of complementarities will occur where there is a strategy in place that identifies their potential and allocates resource to their delivery; where leaders and managers have a holistic view of the organisation and a competence in agile governance that allows them to propose initiatives both within and beyond their immediate areas of responsibility; a workforce that has capabilities within a specific area but an awareness of wider applications and opportunities and an organisation design that facilitates and encourages the identification of complementarity opportunities. None of these requirements are likely to occur automatically. And so success will come from a deliberate and transparent intent to maximise opportunity that may lead to unique advantage.

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Index

A

Agile governance, 38, 43–45, 48, 95, 125, 175, 177, 194, 204, 207, 211–213, 215, 217, 218, 225, 226, 242, 246, 247, 256 Agility, 3, 5, 6, 14, 23, 38, 44, 47, 48, 50–52, 91, 95, 103, 116, 125, 131, 133, 135, 177–179, 182, 192, 211, 225, 234, 244, 246 Airbnb, 70, 240 Alibaba, 18 Alignment, 3, 49, 51, 71, 72, 75, 87, 96–99, 105, 108, 116, 125, 127, 128, 133, 156, 159, 164, 165, 174, 190–192, 211, 220, 244, 245, 248, 251, 252 Amazon, 2, 18, 70, 88, 92, 239 Ansoff, 4, 89 Assets

complementary, 2, 66, 67, 69, 79, 87, 109, 174, 178, 225, 243 intangible, 2, 15, 20, 74, 154, 182, 207, 223, 242, 251 orchestration, 99, 104, 105, 109, 234, 243, 244 tangible, 2, 15, 20, 74, 76, 203, 207, 242 Attitudes, 12, 24, 45–46, 50, 95, 122, 166, 203–226, 245 B

Balanced Scorecard, 4, 89 Behaviours, 2, 8, 12, 14, 19, 24, 25, 45–46, 50, 62, 68, 95, 104, 105, 118, 122, 127, 131–134, 149, 152, 156, 176, 191, 193, 194, 203–226, 235, 245, 246, 250

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 P. Turner, Complementarity in Organizations, https://doi.org/10.1007/978-3-031-10654-5

261

262 Index

Big Data, 34, 101, 204 Blockchain, 35 Bohr, Nils, 25, 60, 61, 99, 235 BP, 18 C

Career, 119, 146, 147, 152, 154, 155, 158, 159, 164, 165 China, 17 Cloud Technology, 34 Coca Cola, 17 Coherence, 3, 19, 22, 87–89, 96, 101, 109, 116, 131, 145, 160, 234, 251 Collaboration, 24, 34, 37, 38, 41, 50, 51, 71, 72, 96, 100, 105, 125, 126, 130, 131, 134, 135, 148, 151, 165, 177, 179, 187, 189, 203, 204, 211–216, 226, 247, 248 Collaborative, 25, 40, 44, 71, 97, 101, 115, 122, 123, 130–131, 181, 193, 211 Competence leadership, 21, 77, 164, 246, 247 management, 15, 21, 24, 38, 43–45, 47, 77, 105, 124, 128, 129, 149, 164, 203, 205, 206, 218–224, 226, 245–247, 251 organisational, 24, 203–218, 226 Competitive advantage, 1–6, 12, 15, 19, 20, 23, 24, 34, 37, 39, 49, 50, 52, 66–68, 70, 74, 78, 89, 90, 92, 98, 99, 104, 108, 109, 116, 117, 126, 146, 152, 157,

166, 191, 194, 203, 207, 215, 224, 238–240, 242–244, 250 Competitive progression, 1–4, 70, 93–95, 98, 101, 105, 133, 134, 162, 179, 217, 240 Complementarity assets, 67, 100, 101, 187 business strategy, 3, 15, 21, 59–60, 71, 76, 77, 87–109, 115–116, 162, 243–245, 253 competence, 48–51, 94, 122, 203–226, 245 innovation, 67, 72, 109 leadership and management, 23, 115–136, 164, 218, 245–248 organisation, 106, 204 origins, 59–79 production, 64, 67, 73, 182, 183, 236 qualitative, 64, 237 quantitative, 64, 237 and singularity, 1–25, 42, 75, 243, 244, 256 talent and workforce engagement, 143–167, 252 Congruence, 3, 19, 41, 75, 87–89, 92, 96, 101, 109, 116, 131, 160, 234 Consistency, 3, 8, 19, 61, 87–91, 96, 101, 109, 116, 131, 160, 176, 194, 234 Corporate governance, 156 strategy, 97, 157 Cost reduction, 3, 20, 68, 76, 88, 132, 234, 238, 241 Cross boundary working, 125

 Index 

Culture, 19, 21, 24, 38, 42–44, 50, 77, 90, 94, 96, 103, 104, 115, 120, 127, 128, 133, 135, 147, 150, 152, 156, 162, 173, 178, 180, 181, 183–185, 189, 190, 203, 204, 206, 207, 214–216, 218, 224–226, 234, 242–244, 248, 251, 253–255 Customer, 11, 34, 35, 37, 40, 49, 65, 66, 70, 72, 75, 77, 88, 90, 92, 95, 107, 108, 126, 129, 131, 145, 150, 158, 159, 179, 180, 182–184, 186, 187, 189, 204, 206, 207, 222, 223, 237–239, 247 Customer satisfaction, 3, 12, 20, 76, 88, 159, 217, 234, 241 Cyber-physical, 34, 46 D

Diversity, 1, 23, 42, 117, 121, 166, 204, 249, 255 Division of labour, 8, 104, 119, 192, 215, 233 Drucker, Peter, 9, 17, 119, 121 E

eBay, 70, 240 e-business, 70, 73, 131, 181, 183, 238 e-commerce, 36, 70, 132, 238 Economics, 1–4, 6, 9, 10, 17, 25, 31, 49, 51, 60, 62–66, 69, 73, 93, 98, 117, 120, 155, 177, 187, 234–236, 244, 254–256 Economic theory, 59, 237, 241

263

Economy circular, 63 development, 63 macro, 17, 63, 235 Einstein, Albert, 60 Emotional intelligence, 7, 118, 150, 205, 218 Employee engagement, 11, 12, 15, 23, 24, 143, 144, 147, 149–154, 157, 161, 162, 164, 175, 217, 247, 249–251 Environment, 1, 3, 4, 6, 9, 13–16, 32, 36–52, 64–75, 78, 87–89, 91, 92, 94, 101, 105, 116, 117, 119, 121, 127, 134, 145, 146, 149, 150, 153–158, 165, 166, 174, 175, 177, 178, 181, 188, 189, 191–194, 203, 204, 206, 207, 211–214, 218, 219, 224, 234, 236, 240, 242, 251, 255, 256 ERP, 73 F

Facebook, 18, 70, 240 Fair-trade, 1, 117, 204, 255 Finance, 21, 39, 47, 115, 126, 155, 182, 243 Ford, Henry, 13, 119, 120 Fourth Industrial Revolution, 2, 3, 6, 21, 23, 25, 31–52, 63, 70, 78, 91, 101, 103, 122, 129, 148, 152, 166, 173, 181, 192, 194, 211, 213, 218, 234, 238–242, 251, 252, 254 France, 174

264 Index

Hierarchy, 8, 13–15, 41–43, 47, 104, 119, 175–178, 187, 189, 192, 193, 216, 217, 233, 254 Holistic, 2, 12, 14, 24, 38, 41, 46–48, 75, 76, 92, 102, 126, 130, 175, 187, 219, 240, 254, 256 Honda, Soichiro, 17, 120 HRM, 144, 146, 152, 163, 216 Human capital, 31, 70, 97, 98, 143, 145, 146, 155–157, 159, 162, 163, 249–251 resources, 2, 36, 43, 66, 76, 89, 103, 107, 129, 146, 153, 155, 157, 158, 165, 183, 204, 206, 216, 217, 243, 250, 253

Industry 4.0., 10, 13, 18, 21, 23, 25, 34, 36, 37, 40, 41, 46, 49, 50, 74, 78, 152, 218 Information, 33–36, 40, 41, 44, 45, 50, 51, 61, 69, 89, 105–108, 122, 123, 126, 129, 131, 152, 166, 174, 183, 185, 186, 188–190, 192, 193, 203, 205, 206, 221, 224, 245, 247, 252 Information technology (IT), 19, 34, 68, 70, 71, 97, 107, 115, 119, 129, 131, 174, 181, 187, 238 Innovation, 7, 9–12, 19, 24, 31, 32, 35, 37, 38, 42, 43, 46, 47, 49–51, 64, 66–73, 78, 97, 100–104, 106, 108, 109, 118, 120, 129, 132, 144, 150, 155, 157, 159, 160, 174, 177, 181, 183–185, 188, 203–207, 213–215, 221, 224, 233, 234, 237, 238, 249 Integration horizontal, 41, 240 multiple systems, 129–130, 222, 223, 247 vertical, 41, 253, 254 Intelligence, artificial, 25, 32, 33, 35 Internet of Things (IOT), 25, 32, 34, 51, 63 IT, see Information technology

I

J

G

Gallup, 158, 163 Gap analysis, 4, 89 General Electric, 17, 181 Gillette, 17 Google, 70, 240 Governance, 32, 33, 37, 38, 43–45, 48, 52, 64, 78, 95, 125, 156, 175, 177, 194, 204, 207, 211–213, 215, 217, 218, 225, 226, 242, 246, 247, 253–256 H

IBM, 17 India, 17

Japan, 13, 17, 74, 120 Jobs-Demand-Resources, 150

 Index  K

Know how, 15, 43, 87, 122, 123, 125, 127–130, 205, 206, 222, 223, 243, 246, 247 Know how to behave, 43, 122, 123, 127–128, 205, 246, 247 Knowledge creation, 100, 105, 152, 157, 160, 178, 179, 183, 192, 216, 224, 246 dissemination, 24, 100, 134, 152, 159, 160, 173, 178, 183, 194, 224, 246 exchange, 98, 152, 204, 246 management, 126, 133, 155, 159, 179, 183, 185, 204, 251 sharing, 78, 105, 125, 130, 134, 151 Know what, 2, 122, 123, 185, 205, 215, 219, 246 Know when, 122, 123, 205, 246, 248 Know why, 122, 123, 126, 205, 222, 246, 247 L

Leader, 2, 6–10, 15–19, 21, 24, 32, 37, 43, 44, 48, 49, 52, 77–79, 91, 94, 96, 101, 103, 104, 115–118, 120–135, 148, 151, 156, 158, 164, 165, 178, 183, 188, 190–192, 204, 205, 212, 218, 219, 221, 222, 224, 226, 234, 243, 245–248, 255, 256 Leadership, 3, 5–11, 15, 20, 21, 23–25, 31, 32, 43–45, 47, 74,

265

77, 79, 92, 105, 115–136, 147, 156, 164, 175, 183, 184, 203–206, 208–210, 216, 218–224, 226, 233, 240, 242, 244–248, 251, 253, 256 Lloyds, 18 M

Ma, Jack, 120 Management, 2, 7–10, 31, 43–45, 48–51, 65, 88, 115–136, 143, 151–166, 174, 203, 218–224, 233, 245–248 scientific, 9, 13, 16, 119, 176 Marketing, 2, 14, 21, 32, 38, 39, 41, 47, 67, 72, 73, 76, 77, 89, 95, 107, 131, 155, 173, 174, 182, 183, 193, 206, 213, 243 Market share, 3, 18, 20, 76, 88, 89, 115, 145, 234, 241, 243 Matsushita, 17 Measurement, 93, 106, 165, 221 Measures, 15, 39, 63, 106–108, 160, 244, 245 Measuring, 106–108, 165, 188, 244, 251 Metrics, 35, 106, 159, 166 Mintzberg, Henry, 5, 9, 10, 17, 91, 116, 120–122 Mission, 3, 87, 109, 116, 136, 156, 183, 233, 243 organisation, 87, 233, 243 Mitsubishi, 17 Mitsui, 17 Mittal, Lakshmi, 17, 120

266 Index N

P

Netflix, 70, 240

People management, 10, 94, 144, 148, 151, 166, 247, 249 Pepsico, 17 Performance, 2, 35, 66, 74–78, 88, 115, 144, 156–159, 173, 204, 234 Performance measures, 234 PESTLE, 4, 89 Porter, Michael, 4, 5, 17, 19, 39 Processes, 2, 32, 71, 87, 101–103, 116, 143, 173, 204 Productivity, 2, 10, 12, 32, 35, 37, 40, 63, 64, 73, 97, 103, 106, 119, 144, 149, 152, 154, 156–160, 174, 176, 179, 183, 187, 214, 216, 237, 249 Profit, 1, 3, 11, 12, 15, 20, 40, 64, 67, 73, 76, 88, 117, 150, 204, 205, 234, 237, 241 Progression, 1–4, 13–20, 22, 37–41, 45–46, 48–51, 65, 70, 74–76, 79, 87, 91–95, 98, 101, 105, 115–123, 128, 129, 133–135, 162, 163, 173, 179, 203, 204, 206, 207, 213, 215, 217, 218, 224, 225, 233–235, 240, 242, 245, 249–251, 255 Psychology, 61, 147, 148, 150, 151, 161, 249

O

Objectives, 1, 3, 5, 7, 10, 14, 18, 19, 24, 32, 43, 47, 50–52, 76, 77, 87–90, 94, 96, 98, 100, 103, 105–107, 115, 117, 122, 125–130, 133, 135, 143, 145, 147, 148, 154, 155, 158, 159, 161, 163–166, 173–179, 183, 186, 190, 193, 204, 205, 207, 213, 218–222, 233, 234, 240, 243–246, 248, 251, 255 Organisation bureaucracy, 102 design, 13–15, 24, 41, 66, 76, 77, 79, 94, 96, 121, 134, 135, 162, 173, 174, 178, 180, 182, 186, 188–190, 193, 194, 233, 239, 242, 243, 253–256 dynamics, 3, 36, 49, 50, 96, 100, 135, 145, 146, 148, 150, 161, 178, 194, 206, 212, 219, 240, 242, 243, 247, 248, 252, 253, 255 structure, 15, 20, 41, 42, 49, 50, 52, 75–79, 94, 95, 99, 101, 121, 123, 131, 134, 150, 162, 167, 176, 177, 181, 182, 184, 186, 188–190, 192, 194, 207, 211, 225, 234, 239, 252, 254, 255

Q

Quantum physics, 23, 59–60, 235, 236, 241

 Index  R

Research and development (R and D), 17, 69, 73, 74, 183 Resource allocation, 19, 52, 91, 99, 104, 109, 115, 131, 162, 165, 173–176, 203, 204, 216, 217, 234, 246, 248, 251, 252 Resources, 1, 35, 63, 88, 115, 131–132, 144, 165, 173–175, 181–188, 203, 233 valuable, unique, or inimitable, 67, 242 Return on investment, 1, 18, 93, 107, 108, 117, 154, 204, 245 Robots, 15, 35, 46, 101 S

Samsung, 18 Shareholder value, 1, 3, 5, 18, 20, 76, 88, 90, 117, 160, 166, 204, 234, 241, 243 Skills, 8, 13, 16, 24, 32, 37, 38, 40, 43, 45–47, 52, 69, 94, 95, 97, 99, 122, 123, 135, 145, 149–152, 154, 155, 165, 166, 173, 174, 178, 183–185, 203–226, 234, 245, 249, 251, 252 Smart factories, 32, 35 Smart workplaces, 13, 35 Smith, Adam, 8, 119 Social complexity, 90, 103–106, 130, 133–134, 154, 183, 215, 217, 224, 244 Social welfare, 1, 117, 204

267

Sociology, 12, 147, 148, 150, 151, 161, 249 Sony, 17 SpaceX, 18 Spain, 174 Spotify, 70, 240 Strategy business, 3–7, 15, 16, 20–22, 31, 37, 39, 40, 47, 48, 59–60, 71, 76, 77, 79, 87–109, 115–116, 128, 151, 157, 162, 165, 174, 220, 225, 234, 241, 243–245, 253 coherence, congruence, and consistency, 19, 87–89, 101, 109, 131, 160, 234 corporate, 88, 157 functional, 39, 92, 94, 96–99, 193, 244 policy and stewardship, 3, 7, 40, 94, 192, 225, 233, 242 Sumitomo, 17 Supply chain, 2, 14, 32, 35, 72, 73, 126, 212, 240, 248 SWOT, 4, 89 Synergy, synergies, 2, 20, 21, 41, 46–50, 67, 70, 72, 73, 75, 89, 91–95, 97, 100, 107, 108, 128–130, 132, 133, 143, 153, 155, 159, 161–163, 166, 174, 179, 181, 182, 187, 188, 190, 194, 205, 206, 215, 222, 234, 236, 239, 241, 242, 247, 250–256 Systems, 3, 13–15, 32, 67, 87, 119, 132–133, 143, 174, 204

268 Index T

Talent definition, 6 exclusive, 10–13, 144, 146, 147, 157 inclusive, 10–14, 144, 146–148, 151, 154, 157, 161, 163 War for, 10, 11 Technology, 3, 31, 34–36, 63, 87, 116, 148, 173, 203, 234 Tesla, 18 Toyota, 2, 17, 120 Triple A, 248 Turnover, 11, 12, 68, 132, 158, 238 U

Uber, 70, 240 UK, 11 Unilever, 18 USA, 12, 17, 68, 73, 174, 176, 181 V

Values, 1, 31, 62, 87, 116, 143, 173, 204 shareholder, 1, 3, 5, 18, 20, 76, 88, 90, 117, 160, 166, 204, 234, 241, 243

Vision, organisation, 116, 136, 159, 165, 233, 243 VRIO, 207 VUCA, 44, 47, 90, 91 W

Walt Disney, 17, 182 Weber, Max, 17, 176, 177 Wholeness, 47, 60, 62, 76, 236 Workforce, 3, 6–8, 10, 13–15, 18, 38, 40, 43–46, 48–50, 69, 79, 94, 103, 105, 122, 127–128, 134, 135, 143, 147–151, 154–157, 159, 161, 163, 164, 166, 173, 183, 185, 188, 191, 204, 224, 234, 243, 246–249, 255, 256 Workforce dynamics, 249 Workforce engagement, 6, 10, 11, 13, 21, 23, 24, 47, 77, 143–167, 178, 183, 224, 233, 248–252, 256 World Economic Forum (WEF), 15, 38, 45, 46, 48, 211 Z

Zhang Ruimin, 17, 120