Innovation Exposed: Case Studies of Strategy, Organization and Culture in Heterarchies 9783658293345, 3658293349

Table of contents :
Foreword
Acknowledgements
Table of Contents
Table of Contents
List of Figures
List of Tables
List of Illustrations
List of Abbreviations
Abstract
1 Introduction
1.1 Background
1.2 Research Questions and Aims
1.3 Structure
2 Literature Review
2.1 Innovation
2.1.1 Newness as The Central Characteristic of Innovation
2.1.2 Uncertainty and Ambiguity
2.1.3 Complexity
2.1.4 Riskiness
2.1.5 Adopted Definition of Innovation
2.2 Organization
2.3 Bureaucracy
2.3.1 Characteristics of Bureaucracy
2.3.2 Hierarchy as the Central Characteristic of Bureaucracy
2.3.3 Bureaucracy and Innovation
2.3.4 The Need for Sheltering Innovation in Bureaucracy
2.4 Innovation Management
2.4.1 Definitions of Innovation Management
2.4.2 Holistic Concepts of Innovation Management
2.4.3 Adopted Definition of Innovation Management
2.4.4 Strategy and Direction for Innovation
2.4.5 Processes and Structures for Innovation
2.4.6 Culture and Leadership for Innovation
2.4.7 Indications of Bureaucracy in Classic Innovation Management
2.4.8 Conclusion
2.5 Heterarchy as Non-Bureaucratic Alternative in the Innovation Context
2.5.1 The Innovative Organization
2.5.2 Alternatives to the Bureaucratic Model
2.5.3 Defining Heterarchy
2.5.4 Operationalizing Heterarchy
2.5.5 Heterarchy and Innovation
2.6 Conclusion and Research Gap
3 Research Design and Methods
3.1 Summary of the Methodological Approach
3.2 Conceptual Model and Research Purpose
3.3 Research Philosophy and Approach
3.4 Research Methodology: Case Study
3.4.1 The Case for Case Study Research
3.4.2 Multiple Case Design
3.4.3 Case Selection
3.4.4 Data Collection
3.4.5 Data Analysis
3.4.6 Reporting the Research Findings
3.5 Quality Measures of Qualitative Research and Limitations
3.5.1 Construct Validity
3.5.2 External Validity
3.5.3 Reliability
4 Innovation in Individual Case Heterarchies
4.1 Case 1: People Software
4.1.1 People Software’s Innovativeness and Heterarchicalness
4.1.2 The General Nature of Innovation
4.1.3 Summary of Case Findings
4.1.4 Strategy and Direction: Emerging Themes
4.1.5 Processes and Structures: Emerging Themes
4.1.6 Culture and Leadership: Emerging Themes
4.1.7 Conclusion
4.2 Case 2: Home Care Network
4.2.1 Home Care Network’s Innovativeness and Heterarchicalness
4.2.2 The General Nature of Innovation
4.2.3 Summary of Case Findings
4.2.4 Strategy and Direction: Emerging Themes
4.2.5 Processes and Structures: Emerging Themes
4.2.6 Culture and Leadership: Emerging Themes
4.2.7 Conclusion
4.3 Case 3: Digital Transformers
4.3.1 Digital Transformers’ Innovativeness and Heterarchicalness
4.3.2 The General Nature of Innovation
4.3.3 Summary of Case Findings
4.3.4 Strategy and Direction: Emerging Themes
4.3.5 Processes and Structures: Emerging Themes
4.3.6 Culture and Leadership: Emerging Themes
4.3.7 Conclusion
4.4 Case 4: FIRECO
4.4.1 FIRECO’s Innovativeness and Heterarchicalness
4.4.2 The General Nature of Innovation
4.4.3 Summary of Case Findings
4.4.4 Strategy and Direction: Emerging Themes
4.4.5 Processes and Structures: Emerging Themes
4.4.6 Culture and Leadership: Emerging Themes
4.4.7 Conclusion
4.5 Case 5: Global Industries
4.5.1 Global Industries’ Innovativeness and Heterarchicalness
4.5.2 The General Nature of Innovation
4.5.3 Summary of Case Findings
4.5.4 Strategy and Direction: Emerging Themes
4.5.5 Processes and Structures: Emerging Themes
4.5.6 Culture and Leadership: Emerging Themes
4.5.7 Conclusion
5 Results of the Cross-Case Analysis
5.1 The General Nature of Innovation Across Cases
5.2 Innovation Across Cases: Summary of Findings
5.3 Strategy and Direction for Innovation Across Cases
5.3.1 Guidance Through the Organization’s Purpose
5.3.2 Some Elements of Strategy or No Systematic Approaches
5.3.3 Direction by Management with Significant Influence by Employees
5.3.4 Combination of Ex-Ante Planning and Ad-Hoc Initiatives
5.4 Processes and Structures for Innovation Across Cases
5.4.1 A Multitude of Possible Paths for Moving from Idea to Launch
5.4.2 Idea Selection Based on Intuition and Some Rough Criteria
5.4.3 Management with Considerable Influence on Decisions
5.4.4 Innovation as Everybody’s Responsibility
5.5 Culture and Leadership for Innovation Across Cases
5.5.1 Management as Power Promoter
5.5.2 Empowerment and Individual Responsibility
5.5.3 Innovation-Supportive Organizational Values
5.6 Conclusion
6 Discussion of Findings, Implications and Further Research
6.1 Discussion: Innovation in Heterarchies
6.1.1 Innovation Exposed Rather Than Sheltered
6.1.2 Multiple Rivalling Principles within Strategy, Organization and Leadership
6.1.3 Differences within the Organization of Heterarchies
6.1.4 Holistically Innovative Heterarchies
6.1.5 Better Fit between Heterarchical Structures and Innovation Culture
6.1.6 Leadership for Innovation in Heterarchies
6.1.7 The Absence of Competition for Hierarchical Positions and Innovation
6.2 Implications: Lessons from Heterarchies
6.2.1 Organization Context
6.2.2 The Individual Level
6.2.3 The Project Team Level
6.2.4 The Organizational Level
6.3 Further Research
6.3.1 Generalizability
6.3.2 Specific Innovation Mechanisms in Heterarchies
6.3.3 The Role of Size and Industry
6.3.4 Transformation to Heterarchy?
6.3.5 Human Resource Management Practices
7 Conclusion
Bibliography
List of Research Interviews

Citation preview

Sarah Schoellhammer

Innovation Exposed Case Studies of Strategy, Organization and Culture in Heterarchies

Innovation Exposed

Sarah Schoellhammer

Innovation Exposed Case Studies of Strategy, Organization and Culture in Heterarchies With a foreword by Prof. Dr. rer. pol. Dr. h. c. Dietmar Vahs

Sarah Schoellhammer Würzburg, Germany Dissertation University of the West of Scotland, 2018, United Kingdom

ISBN 978-3-658-29334-5 ISBN 978-3-658-29335-2  (eBook) https://doi.org/10.1007/978-3-658-29335-2 © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 This work is subject to copyright. All rights are reserved 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 Springer Gabler imprint is published by the registered company Springer Fachmedien ­Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Foreword “Panta rhei” - Everything is changing, only one thing seems constant: the reference to increasing pressure to innovate. It would be an innovation to start a scientific text with a different topic. However, this pressure can be regarded the central trigger for far-reaching changes in the organization of companies that cannot yet be foreseen. Digitalization, globalization, demographic changes, ever shorter development and product cycles: more and more industries are characterized by hypercompetition. While China has been belittled as a copy-cat in the past, Chinese companies have already surpassed the West in many areas following their strategy “China 2025”. In order to survive in the medium and long term, companies must more than ever be able to adapt flexibly to rapidly changing conditions. This ability of companies to adapt to new environments, to find their evolutionary niche and to transform themselves to fit the niche fast enough can be regarded as THE core competence of the future. At the same time, digitalization offers many opportunities. In particular, new forms of cooperation are now possible, transparent and flexible across hierarchical, organizational and national borders. These can also be an advantage in attracting young talents, because more than ever employees attach importance to meaningful work, participation and leadership at eye level. Alternative forms of organization promising to better facilitate flexibility and innovativeness, such as adhocracy, heterarchy or holocracy, have been known and described in organizational theory since the 1960s. However, it is only in recent years that the number of post-bureaucratic organizations, characterized by flat hierarchies, flexible project teams and a high degree of informal communication, has also increased in corporate practice. At the same time many traditional corporations such as Deutsche Bahn, Bosch, Daimler, and Siemens rely in parts on self-organizing and agile teams in order to keep pace with speedboat-like startups. By definition, innovations are uncertain, complex, and risky. In retrospect, real innovations were mostly the result of intricate paths, marked by numerous setbacks, plan changes and persistant innovators. The attempt to “manage” the unknown, i.e. to plan, steer and control, mostly produces only incremental changes. In times when entire industries are faced with disruptive changes, small improvements will no longer suffice. To be able to play a leading role, companies need more courage to innovate more radically: directed inwards, i.e. chang-

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Foreword

es in the corporate structure and culture, as well as directed external, i.e. new solutions targeted at the market and customers. Also the discipline that is concerned with fostering innovations in organizations has to evolve and does so. This book contributes to this by questioning the foundation of classic innovation management and examining a possible alternative. If heterarchies offer a more conducive environment for innovation than bureaucracies, how do they innovate and what can we learn from them? Sarah Schoellhammer's fundamental work shows that in the innovationfriendly climate of heterarchies, innovation is enabled rather than being planned, controlled and sheltered from the mainstream organization. It also points out that holistically innovative companies are less a question of formal structures and processes than of culture and leadership. Authentically and insistently exemplifying the central importance of innovation and innovation-friendly values is of central importance. Formal structures as manifested corporate culture certainly have an influence on lived values. However, it is certainly not necessary to start a revolution and introduce a circular organization to learn from heterarchies how to innovate better. It is still unclear what the innovation of innovation management will ultimately look like, whether it will remain incremental or more radical. What is certain is that the only constant is change; also concerning the discipline of organizing for change and innovation itself. I wish readers both in the areas of science and corporate practice an interesting and insightful reading experience with this outstanding work.

Prof. Dr. rer. pol. Dr. h.c. Dietmar Vahs Director of the Institute of Change Management and Innovation (CMI) Esslingen, October 1st, 2019

Acknowledgements I would like to express my gratitude to my Director of Studies Stephen Gibb from the University of the West of Scotland for keeping the fine line between granting freedom for curiosity and necessary guidance to a novice researcher. For his empathy, valuable feedback, and his immediate and appreciative support throughout this project. Johann Nagengast, my second supervisor from the Deggendorf Institute of Technology, for his trust, for always being there with pragmatic advice and network, and for being a role model for life. Many thanks to all interview partners from the case study organizations participating in this project; for their time and honesty in reporting their personal experiences, and for taking hurdles and risks, experimenting with new ways and leading the way to a more human-centric business life. Most importantly, I would like to thank my family for countless discussions, enriching the research and broadening my personal horizon with their life experience, healthy common sense, and positive example, as essential complement to theory. I am grateful for them raising me up in an antiauthoritarian style, and much more than that, for them accepting the not always easy result. My mother for exemplifying that cooperative and appraising leadership is a personal decision more than a structural question.

Table of Contents 1 Introduction........................................................................................................ 1 2 Literature Review .............................................................................................. 7 3 Research Design and Methods ......................................................................... 51 4 Innovation in Individual Case Heterarchies ..................................................... 75 5 Results of the Cross-Case Analysis ............................................................... 173 6 Discussion of Findings, Implications and Further Research .......................... 201 7 Conclusion ..................................................................................................... 223

Table of Contents 1 Introduction........................................................................................................ 1 1.1 Background ............................................................................................... 1 1.2 Research Questions and Aims ................................................................... 2 1.3 Structure .................................................................................................... 4 2 Literature Review .............................................................................................. 7 2.1 Innovation ................................................................................................. 7 2.1.1 Newness as the Central Characteristic of Innovation ....................... 8 2.1.2 Uncertainty and Ambiguity ............................................................ 11 2.1.3 Complexity ..................................................................................... 12 2.1.4 Riskiness ......................................................................................... 13 2.1.5 Adopted Definition of Innovation .................................................. 13 2.2 Organization ............................................................................................ 13 2.3 Bureaucracy ............................................................................................ 15 2.3.1 Characteristics of Bureaucracy ....................................................... 16 2.3.2 Hierarchy as the Central Characteristic of Bureaucracy ................. 18 2.3.3 Bureaucracy and Innovation ........................................................... 19 2.3.4 The Need for Sheltering Innovation in Bureaucracy ...................... 24 2.4 Innovation Management.......................................................................... 24 2.4.1 Definitions of Innovation Management .......................................... 25 2.4.2 Holistic Concepts of Innovation Management ............................... 26 2.4.3 Adopted Definition of Innovation Management ............................. 27 2.4.4 Strategy and Direction for Innovation ............................................ 27 2.4.5 Processes and Structures for Innovation ......................................... 28 2.4.6 Culture and Leadership for Innovation ........................................... 31 2.4.7 Indications of Bureaucracy in Classic Innovation Management..... 36 2.4.8 Conclusion ...................................................................................... 38 2.5 Heterarchy as Non-Bureaucratic Alternative in the Innovation Context . 39 2.5.1 The Innovative Organization .......................................................... 39 2.5.2 Alternatives to the Bureaucratic Model ......................................... 41 2.5.3 Defining Heterarchy ....................................................................... 42 2.5.4 Operationalizing Heterarchy ........................................................... 44 2.5.5 Heterarchy and Innovation ............................................................. 46 2.6 Conclusion and Research Gap................................................................. 48 3 Research Design and Methods ......................................................................... 51

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3.1 Summary of the Methodological Approach ............................................ 51 3.2 Conceptual Model and Research Purpose ............................................... 53 3.3 Research Philosophy and Approach ........................................................ 55 3.4 Research Methodology: Case Study........................................................ 57 3.4.1 The Case for Case Study Research ................................................. 57 3.4.2 Multiple Case Design ..................................................................... 58 3.4.3 Case Selection ................................................................................ 59 3.4.4 Data Collection ............................................................................... 66 3.4.5 Data Analysis.................................................................................. 68 3.4.6 Reporting the Research Findings .................................................... 71 3.5 Quality Measures of Qualitative Research and Limitations .................... 72 3.5.1 Construct Validity .......................................................................... 72 3.5.2 External Validity ............................................................................ 73 3.5.3 Reliability ....................................................................................... 73 4 Innovation in Individual Case Heterarchies ..................................................... 75 4.1 Case 1: People Software.......................................................................... 75 4.1.1 People Software’s Innovativeness and Heterarchicalness .............. 75 4.1.2 The General Nature of Innovation .................................................. 87 4.1.3 Summary of Case Findings............................................................. 87 4.1.4 Strategy and Direction: Emerging Themes ..................................... 90 4.1.5 Processes and Structures: Emerging Themes ................................. 91 4.1.6 Culture and Leadership: Emerging Themes ................................... 93 4.1.7 Conclusion ...................................................................................... 97 4.2 Case 2: Home Care Network ................................................................... 98 4.2.1 Home Care Network’s Innovativeness and Heterarchicalness ....... 98 4.2.2 The General Nature of Innovation ................................................ 104 4.2.3 Summary of Case Findings........................................................... 104 4.2.4 Strategy and Direction: Emerging Themes ................................... 106 4.2.5 Processes and Structures: Emerging Themes ............................... 107 4.2.6 Culture and Leadership: Emerging Themes ................................. 109 4.2.7 Conclusion .................................................................................... 112 4.3 Case 3: Digital Transformers ................................................................ 113 4.3.1 Digital Transformers’ Innovativeness and Heterarchicalness ...... 113 4.3.2 The General Nature of Innovation ................................................ 122 4.3.3 Summary of Case Findings........................................................... 122 4.3.4 Strategy and Direction: Emerging Themes ................................... 125 4.3.5 Processes and Structures: Emerging Themes ............................... 127

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4.3.6 Culture and Leadership: Emerging Themes ................................. 128 4.3.7 Conclusion .................................................................................... 133 4.4 Case 4: FIRECO .................................................................................... 133 4.4.1 FIRECO’s Innovativeness and Heterarchicalness ....................... 133 4.4.2 The General Nature of Innovation ................................................ 143 4.4.3 Summary of Case Findings........................................................... 143 4.4.4 Strategy and Direction: Emerging Themes ................................... 146 4.4.5 Processes and Structures: Emerging Themes ............................... 147 4.4.6 Culture and Leadership: Emerging Themes ................................. 148 4.4.7 Conclusion .................................................................................... 151 4.5 Case 5: Global Industries ...................................................................... 151 4.5.1 Global Industries’ Innovativeness and Heterarchicalness ............ 152 4.5.2 The General Nature of Innovation ................................................ 160 4.5.3 Summary of Case Findings........................................................... 160 4.5.4 Strategy and Direction: Emerging Themes ................................... 163 4.5.5 Processes and Structures: Emerging Themes ............................... 165 4.5.6 Culture and Leadership: Emerging Themes ................................. 168 4.5.7 Conclusion .................................................................................... 171 5 Results of the Cross-Case Analysis ............................................................... 173 5.1 The General Nature of Innovation Across Cases .................................. 173 5.2 Innovation Across Cases: Summary of Findings .................................. 174 5.3 Strategy and Direction for Innovation Across Cases............................. 178 5.3.1 Guidance Through the Organization’s Purpose ............................ 179 5.3.2 Some Elements of Strategy or No Systematic Approaches .......... 180 5.3.3 Direction by Management with Significant Influence by Employees..................................................................................... 181 5.3.4 Combination of Ex-Ante Planning and Ad-Hoc Initiatives .......... 182 5.4 Processes and Structures for Innovation Across Cases ......................... 182 5.4.1 A Multitude of Possible Paths from Idea to Launch ..................... 184 5.4.2 Idea Selection Based on Intuition and Some Rough Criteria........ 185 5.4.3 Management with Considerable Influence on Decisions .............. 186 5.4.4 Innovation as Everybody’s Responsibility ................................... 187 5.5 Culture and Leadership for Innovation Across Cases ........................... 188 5.5.1 Management as Power Promoter .................................................. 193 5.5.2 Empowerment and Individual Responsibility............................... 194 5.5.3 Innovation-Supportive Organizational Values ............................. 196 5.6 Conclusion ............................................................................................ 199

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6 Discussion of Findings, Implications and Further Research .......................... 201 6.1 Discussion: Innovation in Heterarchies ................................................. 201 6.1.1 Innovation Exposed Rather Than Sheltered ................................. 201 6.1.2 Multiple Rivalling Principles within Strategy, Organization and Leadership .................................................................................... 203 6.1.3 Differences within the Organization of Heterarchies ................... 204 6.1.4 Holistically Innovative Heterarchies ............................................ 205 6.1.5 Better Fit between Heterarchical Structures and Innovation Culture .......................................................................................... 207 6.1.6 Leadership for Innovation in Heterarchies ................................... 209 6.1.7 The Absence of Competition for Hierarchical Positions and Innovation ..................................................................................... 210 6.2 Implications: Lessons from Heterarchies .............................................. 211 6.2.1 Organization Context.................................................................... 211 6.2.2 The Individual Level ................................................................... 213 6.2.3 The Project Team Level .............................................................. 216 6.2.4 The Organizational Level ............................................................ 217 6.3 Further Research ................................................................................... 219 6.3.1 Generalizability ............................................................................ 219 6.3.2 Specific Innovation Mechanisms in Heterarchies......................... 220 6.3.3 The Role of Size and Industry ...................................................... 220 6.3.4 Transformation to Heterarchy? ..................................................... 220 6.3.5 Human Resource Management Practices ..................................... 221 7 Conclusion ..................................................................................................... 223 Bibliography .................................................................................................. 229 List of Research Interviews............................................................................ 243

List of Figures Figure 1.1: Structure ........................................................................................... 4 Figure 2.1: Topics covered in the literature review ............................................ 7 Figure 2.2: Bureaucracy and heterarchy and their characteristics as a spectrum ......................................................................................... 44 Figure 2.3: The research gap in context ............................................................ 49 Figure 3.1: Summary of the methodological approach ..................................... 52 Figure 3.2: Initial conceptual model ................................................................. 54 Figure 3.3: Assumed primary nature of innovation in bureaucracy and heterarchy........................................................................................ 54 Figure 3.4: Elements of the research process .................................................... 55 Figure 3.5: The case organizations as to the dimensions of bureaucracy ........ 63 Figure 3.6: Comparing cases and standard-bureaucratic organizations ............ 64 Figure 4.1: Online survey: People Software’s innovativeness .......................... 80 Figure 4.2: Online survey: People Software’s heterarchicalness ...................... 84 Figure 4.3: Online survey: People Software’s heterarchicalness per dimension ........................................................................................ 85 Figure 4.4: Online survey: “Please rate the relative importance of culture and formal organization for coordinating innovation at People Software.” ....................................................................................... 87 Figure 4.5: Online survey: “Which of the following values best describes ‘The way we do things here’ at People Software?” ........................ 96 Figure 4.6: Online survey: “Which of the following values best describes ‘The way we do things here’ at Home Care Network?” ............... 111 Figure 4.7: Online survey: Digital Transformers’ innovativeness .................. 116 Figure 4.8: Online survey: Digital Transformers’ heterarchicalness .............. 119 Figure 4.9: Online survey: Digital Transformers’ heterarchicalness per dimension .................................................................................... 120 Figure 4.10: Online survey: “Please rate the relative importance of culture and formal organization for coordinating innovation at Digital Transformers.” .............................................................................. 122 Figure 4.11: Online survey: “Which of the following values best describes ‘The way we do things here’ at Digital Transformers?” ............... 129 Figure 4.12: Online survey: FIRECO’s innovativeness .................................... 136 Figure 4.13: Online survey: FIRECO’s heterarchicalness ................................ 140

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List of Figures

Figure 4.14: Online survey: FIRECO’s heterarchicalness per dimension ........ 141 Figure 4.15: Online survey: “Please rate the relative importance of culture and formal organization for coordinating innovation at FIRECO.” ..................................................................................... 143 Figure 4.16: Online survey: “Which of the following values best describes ‘The way we do things here’ at FIRECO?” .................................. 150 Figure 4.17: Online survey: Global Industries’ innovativeness ........................ 155 Figure 4.18: Online survey: Global Industries’ heterarchicalness .................... 157 Figure 4.19: Online survey: Global Industries’ heterarchicalness per dimension ..................................................................................... 158 Figure 4.20: Online survey: “Please rate the relative importance of culture and formal organization for coordinating innovation at Global Industries.” ................................................................................... 160 Figure 4.21: Online survey: “Which of the following values best describes ‘The way we do things here’ at Global Industries’?” ................... 169 Figure 5.1: Online survey results across cases: “Please rate the relative importance of culture and formal organization for coordinating innovation.” .................................................................................. 173 Figure 6.1: Final conceptual model ................................................................ 201 Figure 6.2: Affirmed assumptions and detailed model on innovation in heterarchy ..................................................................................... 206 Figure 6.3: Implications at the individual, project team and organizational levels............................................................................................. 213

List of Tables Table 2.1: Table 2.2: Table 2.3: Table 3.1:

Overview of empirical studies on bureaucracy and innovation ....... 21 Tasks of an innovation manager ...................................................... 30 Definitions of heterarchy ................................................................. 42 Overview of case organizations participating in the empirical study ................................................................................................ 60 Table 3.2: Summary results of triangulating for innovativeness/ heterarchicalness.............................................................................. 62 Table 3.3: Ranking the case organizations in terms of heterarchicalness ........ 65 Table 3.4: Data sources used in the empirical study ......................................... 66 Table 3.5: Example of aggregated findings per case ........................................ 70 Table 3.6: Most aggregated findings across cases ............................................ 71 Table 4.1: People Software’s innovativeness and heterarchicalness ................ 76 Table 4.2: Evaluation of People Software’s innovativeness ............................ 76 Table 4.3: Evaluation of People Software’s heterarchicalness ........................ 81 Table 4.4: People Software’s results: strategy and direction for innovation ..... 88 Table 4.5: People Software’s results: processes and structures for innovation ........................................................................................ 88 Table 4.6: People Software’s results: culture and leadership for innovation .... 89 Table 4.7: Home Care Network’s innovativeness and heterarchicalness ......... 98 Table 4.8: Evaluation of Home Care Network’s innovativeness ..................... 99 Table 4.9: Evaluation of Home Care Network’s heterarchicalness ............... 102 Table 4.10: Home Care Network’s results: strategy and direction for innovation ...................................................................................... 105 Table 4.11: Home Care Network’s results: processes and structures for innovation ...................................................................................... 105 Table 4.12: Home Care Network’s results: culture and leadership for innovation ...................................................................................... 106 Table 4.13: Digital Transformers’ innovativeness and heterarchicalness ......... 114 Table 4.14: Evaluation of Digital Transformers’ innovativeness .................... 114 Table 4.15: Evaluation of Digital Transformers’ heterarchicalness ................ 117 Table 4.16: Digital Transformers’ results: strategy and direction for innovation ...................................................................................... 123 Table 4.17: Digital Transformers’ results: processes and structures for innovation ...................................................................................... 123

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List of Tables

Table 4.18: Digital Transformers’ results: culture and leadership for innovation ...................................................................................... 124 Table 4.19: FIRECO’s innovativeness and heterarchicalness .......................... 133 Table 4.20: Evaluation of FIRECO’s innovativeness ...................................... 134 Table 4.21: Evaluation of FIRECO’s heterarchicalness .................................. 136 Table 4.22: FIRECO’s results: strategy and direction for innovation............... 144 Table 4.23: FIRECO’s results: processes and structures for innovation ........... 144 Table 4.24: FIRECO’s results: culture and leadership for innovation .............. 145 Table 4.25: Global Industries’ innovativeness and heterarchicalness ............... 152 Table 4.26: Evaluation of Global Industries’ innovativeness .......................... 152 Table 4.27: Evaluation of Global Industries’ heterarchicalness ...................... 155 Table 4.28: Global Industries’ results: strategy and direction for innovation ...................................................................................... 161 Table 4.29: Global Industries’ results: processes and structures for innovation ...................................................................................... 161 Table 4.30: Global Industries’ results: culture and leadership for innovation ...................................................................................... 162 Table 5.1: Aggregate results across cases per theme ...................................... 174 Table 5.2: Individual case organizations’ innovation practices per theme ..... 176 Table 5.3: Attributes of heterarchies: strategy and direction for innovation ... 178 Table 5.4: Attributes of heterarchies: processes and structures for innovation ...................................................................................... 182 Table 5.5: Attributes of heterarchies: culture and leadership for innovation .. 188

List of Illustrations Illustration 3.1: Codes created during the interview analysis ........................... 69 Illustration 3.2: MAXQDA first level summary grid........................................ 70 Illustration 4.1: People Software’s organizational chart .................................. 77 Illustration 4.2: People Software’s operating system of the organization ......... 78 Illustration 4.3: Excerpts from People Software’s homepage ........................... 79 Illustration 4.4: Impressions from People Software’s common office area ...... 79 Illustration 4.5: People Software’s meeting rooms .......................................... 80 Illustration 4.6: Graphic record of People Software’s strategy process ............ 82 Illustration 4.7: People Software’s offices ........................................................ 83 Illustration 4.8: Generalized organizational chart of Home Care Network .... 100 Illustration 4.9: Home Care Network depicted as “Onion model”.................. 103 Illustration 4.10: Excerpts from Digital Transformers’ homepage ................... 115 Illustration 4.11: Digital Transformers’ organizational chart ........................... 118 Illustration 4.12: Screenshots of the FIRECO homepage ................................. 135 Illustration 4.13: Office rooms in the FIRECO headquarters ........................... 135 Illustration 4.14: FIRECO’s organizational chart ............................................. 138 Illustration 4.15: “10 reasons for (FIRECO) as an employer” .......................... 139 Illustration 4.16: Excerpts from Global Industries’ homepage ......................... 153

List of Abbreviations C1 (2,3,4,5) ................................................................................. Case 1 (2, 3, 4, 5) CEO .................................................................................. Chief Executive Officer C&L ................................................................................... Culture and Leadership CTO ............................................................................... Chief Technology Officer DI ................................................ Digital Transformers (case study organization) e.g. ............................................................ Exempli gratia, Latin for ‘for example’ et. al. .............................................. Et alii / et aliae / et alia, Latin for ‘and others’ FI ................................................................... FIRECO (case study organization) GL ...................................................... Global Industries (case study organization) HRM ...................................................................... Human Resource Management HO ................................................ Home Care Network (case study organization) i.e. .................................................................................... Id est, Latin for ‘that is’ IM ................................................................................... Innovation Management INQUA .............................................................Initiative Neue Qualität der Arbeit KPI ............................................................................. Key Performance Indicators n.d. ............................................................................................................. No date org. ...................................................................................................Organizational PE ....................................................... People Software (case study organization) P&S.................................................................................. Processes and Structures p. .................................................................................................................. Page pp. ................................................................................................................. Pages S&D .................................................................................... Strategy and Direction SME .............................................................. Small and Medium-Sized Enterprise R&D ............................................................................Research and Development SWOT ........................................... Strengths, Weaknesses, Opportunities, Threats USA ................................................................................ United States of America Vol. ........................................................................................................... Volume

Abstract As innovation is an inherently ambiguous, complex and risky undertaking, there is often a presumption that shelter for innovation from the mainstream organization is the best approach. This shelter, too, provided by classic innovation management, remains working to bureaucratic principles of formalization and centralization, though limitations as to flexibility are acknowledged. Nonbureaucratic forms of organization, such as heterarchy, have long been proposed to better enable innovation. Why and how has been explored more in theory than in practice. The gap, describing and analyzing how innovation happens in heterarchies, is to be closed by exploring their strategy and direction, processes and structures, and culture and leadership for innovation. A multiple case study was undertaken, exploring organizational and innovation management practices in one small, two medium-sized and two large organizations, drawing from semistructured interviews and a range of other sources. Cross-case analysis suggests that how innovation is managed in heterarchies is both distinct from and shares characteristics with the ‘classic’ approach; with variation within heterarchies. It is distinct in the extent to which there is less formally managed ‘shelter’ for innovation, and so greater exposure, but in a generally innovation-supportive climate. It is similar as the culture and leadership in heterarchies mirrors the norms and values associated with an innovation culture. This study is a contribution to knowledge in that it sheds light on how innovation happens in heterarchies, described in theory as particularly innovation-supportive. That contribution can be summed up as evidence that heterarchies are holistically innovative organizations, where innovation thrives because it is ‘exposed’ rather than sheltered, as an integral part of the innovation-supportive culture. That exposure brings with it a different set of challenges for leaders and employees to those normally associated with achieving and managing innovation. While such a picture in general was anticipated the details on the strategy, structure and culture of heterarchy are revealed. Further, the contribution here is evidence that heterarchies support innovation; they do so more by cultural norms and values than by formal organization; largely dispose of formalization and centralization both in general and for innovation, such as an official innovation process. The features of what such exposure of innovation entails can be explored and lessons for practice generalized within and beyond heterarchies. Innovation as it has been exposed here in heterarchies in the double sense, rendered visible and seen to be unsheltered, has

XXIV

Abstract

many implications for innovation in organizations, which are not mainly heterarchical.

1

Introduction

1.1

Background

Organizations of all kinds are increasingly faced with challenging customer demands, rapid changes in technologies and increasing competitive pressures. As a result, they need to ever more flexibly respond and be better innovators. Drucker (1998) declared: “Today no one needs to be convinced that innovation is important. (…) How to innovate is the key question.” 20 years later many debates in theory and practice exist about ‘how to innovate’. The discipline of innovation management aims to systematically improve corporate innovation performance, though it is acknowledged that innovation as an “unpredictable activity” cannot be wholly planned (Hunter et al., 2012). Still, this has given rise to classic innovation management, which “covers all tasks related to the planning, deciding, controlling, and monitoring of generating and implementing new ideas into marketable solutions,“ that is managing the innovation process (Vahs and Brem, 2013). There is often a presumption that shelter for innovation from the mainstream bureaucratic organization is the best approach, because innovation is an inherently uncertain and ambiguous undertaking, the journey from idea to launch being complex, non-linear, and risky (Van de Ven, 1996). This shelter, too, operating within the processes and structures of classic innovation management, is working to bureaucratichierarchical principles of formalization and centralization (Klotz, 2010). Limitations of innovation management in terms of flexibility are acknowledged; yet the adequate balance of freedoms and structures for innovative undertakings remains debated (Pfeiffer, Schütt and Wühr, 2012). Non-bureaucratic forms of organization have long been proposed to better enable innovation. There is an extensive nomological network of terms and constructs to describe these, ranging across time from Burns’ and Stalker’s Organic Organization (Burns and Stalker, 1961) and Mintzberg’s Adhocracy (Mintzberg, 1979), to more recent concepts like Holacracy (Robertson, 2007). These share a concern with strategies, structures and cultures that emphasize empowered individuals and teams, and primarily horizontal coordination in networks. These are associated with flexibility and capacity to enable ad-hoc emergent activity more than following a top-down plan. The contemporary theory which is adopted here to differentiate the organization form of interest © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2_1

2

Introduction

amidst the nomological profusion of terms available, is the theory of heterarchy (Reihlen, 1996; Stark, 2009). It is best positioned to be contrasted directly with hierarchical-bureaucracy, which enables the further elaboration and exploration of this at present. Heterarchy in this thesis is defined as an encompassing model of organization, which contrasts with formal and stable hierarchical-bureaucracy particularly by its capacity to flexibly adapt its structure according to specific requirements. Thus, it integrates a multitude of possible organizational structures in one (Crumley et. al., 1995). Heterarchy allows and requires, by definition, all parts to participate in this, actually or potentially. This is not, as some may imagine, a form of democracy. In a heterarchy power is dynamically allocated to the individuals perceived the most suitable, depending on tasks at hand and problem-solving skills of individuals and their situational expertise (Reihlen, 1996). Such is the theory of heterarchy. In practice heterarchy seems limited to some maverick organizations that have experimented with non-hierarchical concepts on the firm level, “flat” or “bossless” organizations, reducing or removing managers (Hamel, 2011). Others adopt approaches based on principles for agile development projects (Ries, 2011) or Design Thinking (Schmiedgen et al., 2015), which emphasize the role of selfregulating teams and fast experimentation. Together and more broadly these can be seen as instances of the adoption of non-bureaucratic forms of organization (Reihlen, 1996), where the limitations of bureaucracy in terms of flexibility have been to some extent transcended. 1.2

Research Questions and Aims

Heterarchies appear to favor innovation and are thought of as good, even great, forms of organization for innovation (Reihlen 1996). This is due to being organizations richer in characteristics supportive of innovation, including individual creativity (Sarooghib, Libaersa and Burkemperb, 2015), team effectiveness (Litchfield, Karakitapoğlu-Aygün, Gumusluoglu, Carter and Hirst, 2017) and innovation friendly systems and cultures (Colombo, von Krogh, Rossi-Lamastra and Stephan, 2017; Jaakkola and Hallin, 2018). The theory that heterarchical organization can manage innovation well, given how their organizational form as whole is conceived, appears to have been supported by some empirical studies. This is not surprising as creativity is fostered

Research Questions and Aims

3

by organizational diversity, multi-layeredness, redundancy, organizational slack and rivalry (Spelthann and Haunschild, 2011), which heterarchies possess. Prior research on heterarchies has often focussed on how they organize in non-bureaucratic ways (Hamel, 2007) or on their innovativeness (Bhargava and Sinha, 1992; Liu, Magjuka and Lee, 2008). Yet ‘how’ innovation, at these levels, is managed in heterarchies is obscure. The detail of practice in heterarchies remains uncertain and under-researched, and lacking the detail which is relevant to innovation management. To expose innovation management in heterarchies, to uncover and explore it, can provide the detail which can identify how heterarchies do innovation. This is of interest in itself; and may also expose how others in contexts that are and will remain bureaucratic might learn from this. The literature, conceptualization and theory all suggest that innovation in heterarchies is more coordinated by informal, cultural mechanisms than formal structures (Reihlen, 1996; Stark, 2009). This shall be investigated on a high level in this work: 1) “Are innovation activities in heterarchies coordinated more by cultural norms and values or by formal organization, such as processes and structures?” Beyond that, to advance our knowledge and understanding of innovation management in heterarchies the broad organizational themes of strategy and direction, structure and process, culture and leadership for innovation (Goffin, Herstatt and Mitchell, 2009; Stern and Jaberg, 2010; Cooper, 2013) can be adopted and elaborated upon more systematically and in detail. The core research question here is: 2) “How do strategy, structure and culture shape innovation management in heterarchical organizations?” How innovation is managed in heterarchies would be expected to contrast with classic innovation management, as described in major texts of the discipline. The constituent research questions then are about the extent to which the broad themes of innovation management, strategy and direction, processes and structures, and culture and leadership for innovation do differ between heterarchies and classic innovation management. Thus, the further research questions are: 2a) “Innovation mangement within bureaucracies suggests a clear innovation strategy, but what initially guides innovative efforts in heterarchical organizations?”

4

Introduction

2b) “Where the classic view suggests specific innovation processes and structures, how does an idea move from problem identification to market launch in heterarchies?” 2c) “Compared to the innovation culture and leadership described in innovation management, which organizational values and norms support innovative undertakings in heterarchies?” The contribution of this research is to present knowledge about innovation management practice based on non-bureaucratic principles as potential alternative or complement to classic innovation management. That knowledge can be applied at the individual, project team and organizational levels in all kinds of organizations, heterarchies and hybrid forms of bureaucracies. Thus, these might also help organizations that are not wholly or mainly heterarchical increase corporate innovative capacity by using more effectively the collective intelligence and creativity of their people. 1.3

Structure

The structure of this work is described in the following and illustrated in Figure 1.

Figure 1.1: Structure

Chapter 1 introduces the reader to the background of the research, presents the research aims and questions, and gives an overview of the thesis structure.

Structure

5

The relevant literature is reviewed in chapter 2. First, the review covers the characteristics of innovation. This is followed by its prevalent organizational context, bureaucracy, in theory and its impacts on innovation practice. Next, the overview of classic innovation management is provided by considering the themes of strategy and direction, processes and structures, and culture and leadership. The bureaucratic elements in classic innovation management are defined. The characteristics of heterarchies, as alternative non-bureaucratic organizations, and their innovation practices are then outlined. The literature review concludes with a description of the research gap. Chapter 3 describes the approach to answering the research questions. Initially, the purpose and aims of the research project are presented, using the conceptual model developed by the author. Next, the underlying philosophy and approach are described. The research methodology proposed and completed is a set of organization case studies. Mixed methods used for gathering and analyzing data are explained. The appropriateness, challenges and validity of this research approach are addressed. Next, the research results are presented. First reporting the findings from five individual case studies in chapter 4, followed by the cross-case analysis in chapter 5. The contribution to knowledge from these cases and cross-case analysis about innovation in heterarchies are discussed in chapter 6. Implications for other organizations are provided at the individual, project team and organization level. Opportunities for further research are outlined. A final conclusion is drawn in chapter 7.

2

Literature Review

In this chapter the relevant literature is reviewed. An overview of covered topics is provided by Figure 2.1. These also form the basis for the initial conceptual model presented in chapter 3.2.

Figure 2.1: Topics covered in the literature review

First, the characteristics of innovation and its organizational context are outlined, particularly the concept of bureaucracy, prevalent in organization theory and practice. Next, there is an extensive section on innovation management and what is termed ‘classic innovation management’ literature and practice. This is based on reviewing major textbooks of the discipline. As theories of innovation from various disciplines exist these can be mentioned, though not all reviewed comprehensively. Further, heterarchy as alternative organization concept is introduced, focusing on what is known about innovation in heterarchies. The chapter concludes by describing the research gap in the literature. 2.1

Innovation

In the literature and organizational practice there is a general agreement that innovation is of central importance to firm and macroeconomic survival and growth (Drucker, 1998). Beyond that, consensus regarding the concept of innovation appears to be restricted to the understanding that innovation describes © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2_2

8

Literature Review

something new, as the Latin origin of the term implies. ‘Innovatio’ derives from ‘novus’ (new) and can be translated as novelty, renewal, and introduction of something new (Vahs and Brem, 2013, p. 22). Initiating the discipline of innovation, Schumpeter in 1912 first describes innovation as the “discontinuously occurring implementation of new combinations of means of production” (Schumpeter, 1964, pp. 99-100). Innovation fuels general economic progress through regular but discontinuous developments of “creative destruction” of established industries and the competences on which these are built (ibid., pp. 99-100). Innovation has since been investigated at various levels of analysis such as individual, team, firm, industry, country and from many different perspectives (Damanpour and Aravind, 2012; Shipton et al., 2017), in various disciplines, including sociology and psychology (Amabile, 1998), business and management (Drucker, 1998), and engineering management (Bullinger and Bading, 1997). Unsurprisingly some have concluded that “the term ‘innovation’ is notoriously ambiguous and lacks either a single definition or measure.” (Adams, Bessant and Phelps, 2006, p. 22) The elements of a definition in this context are described next. 2.1.1 Newness as The Central Characteristic of Innovation There is agreement on the fundamental criterion of innovation being newness (Damanpour and Gopalakrishnan, 2001; Vahs and Brem, 2013). There are diverse views, however, on what objects should be regarded as innovations, how new something has to be to be called innovative, and from whose perspective. This is elaborated upon in turn. Innovation can be understood both as a process and as an outcome (Damanpour and Aravind, 2012). Perceived as an outcome, innovation is “a new technical, commercial, organizational, or social solution that aims to achieve organizational goals in a new way” (Vahs and Brem, 2013, p. 1); this refers to increasing the mid- and long-term competiveness of an organization (Damanpour and Aravind, 2012, p. 484). Innovation aims to address new customer needs or fulfill existing needs better than the competition in order to achieve a competitive advantage. Innovative firms do best amidst fierce competition over price and profiting from a ‘firstmover monopoly’ (Vahs and Brem, 2013). This is why Brown and Eisenhardt pose that: “Product development is among the essential processes for success,

Innovation

9

survival, and renewal of organizations, particularly for firms in either fast-paced or competitive markets” (Brown and Eisenhardt, 1995, p. 344). There is general consensus that the technical realization of a novel idea, invention, does not yet qualify as an innovation (Vahs and Brem, 2013). While innovation in a narrow sense requires that an invention is launched on the market, innovation in a wider sense requires acceptance and diffusion in the market (ibid.). Change is a big feature of the nomological network within which innovation sits. Compared with innovation, change is generally regarded the more encompassing term (Vahs, Koch and Kielkopf, 2010). Innovation usually refers to the first-time implementation of a novelty to an industry or to the world. To qualify as change it is sufficient if the novelty is new to the adopting organization (Daft and Becker, 1978). Relating to the direction of a novelty, the term change describes internally directed novelties, such as improved processes or structures. In contrast, innovation relates to externally directed novelties, i.e. those targeted at the market and external customers. Thus, the term innovation - and innovation management - generally describes new or improved products and services, business models, and production processes (Vahs, Koch and Kielkopf, 2010). This is in line with the common views among professionals engaged in corporate innovation. For 85 percent of respondents of a 2010 HEC Paris survey, “the creation of new products and services” is the objective of their innovation activities (HEC Paris, 2010, p.12). These are the key drivers of the most frequently named objectives of innovation being “growth and development”, “competitiveness and differentiation”, as well as “performance and profitability” with 56 percent (ibid., p. 1). With a great variety of schemes for classifying innovations in terms of newness, the discipline is far from agreeing on a common scale or measure (Damanpour and Aravind, 2012). The general dichotomy of ‘incremental’ and ‘radical’ innovation has become widely accepted in academia and practice. Incremental innovation, the improvement of existing products, services or processes, builds on the exploitation of existing competencies. In contrast, radical innovation, the development of fundamentally new solutions, requires the organizational capability to explore completely new technologically and market-related areas (Leifer et al., 2000). There is disagreement as to how new a development needs to be to qualify as innovation. Some include small improvements in their definition, such even small-scale changes in technological know-how, an improvement or incremental

10

Literature Review

innovation (Rothwell and Gardiner, 1985). Others make the point that the term innovation requires a significant advancement from existing solutions and is substantially more than a gradual improvement (Hauschildt and Salomo, 2011). Depending on market characteristics such as fierceness of competition or rate of technological change, organizations need an adequate balance of incremental and more radical innovations (Benner and Tushman, 2003). In the short term, exploitation, the continuous improvement of existing products and processes allows to address current customers and profitability (Leifer et al., 2000). For radical innovations as basis for long-term growth, firms also need explorative capacities (ibid.). From an exogenous point of view an innovation can be new to an industry, a country, or new-to-the-world (Hauschildt and Salomo, 2011). As an invention only becomes an innovation when it is accepted in the market it appears useful to assess a development’s degree of newness from the perspective of the respective target group, as suggested by Rogers: “An innovation is an idea, practice, or object that is perceived as new by an individual or other unit of adoption.” (Rogers, 2003, p. 12) From the process perspective, “innovation is the generation, acceptance and implementation of new ideas, processes products or services” (Thompson, 1965, p. 2). Research about this is concerned with an innovation as a complex series of events, activities and decisions (Van de Ven et al., 1996). Especially in the early phases of development, at the individual and teamlevels creativity is an essential input to innovation. Amabile and Pillemer define creativity as “the ability to create something novel and appropriate” (Amabile and Pillemer, 2012, p. 101). Levitt underlines that creativity is not a sufficient condition for innovation: “Ideation and innovation are not synonyms. The former deals with the generation of ideas; the latter, with their implementation.” (Levitt, 2002) A successful innovation as an outcome requires goal-oriented and disciplined implementation as much as free and creative ideation. Thus, Roberts captures the essence of innovation by stating: “innovation = invention + exploitation” (Roberts, 1987, p. 3). Shipton et al. (2017) highlight the characteristic of innovation being a multilevel phenomenon. While creativity is rooted in individual behaviors, innovation refers to “collective outcomes arising from those behaviours.” The authors pose that, “innovation is the collective manifestation (in concrete form) of individuallevel behaviours that are both original (novel for the context) and feasible (have the potential to be enacted).” (Shipton et al., 2017, p. 248) Consequently, organi-

Innovation

11

zational characteristics supportive of innovation include individual creativity (Sarooghib, Libaersa and Burkemperb, 2015), team effectiveness (Litchfield et al., 2017) and innovation friendly systems and cultures (Colombo et al., 2017; Jaakkola and Hallin, 2018). Sequential phase or stage models of the innovation process are regarded suitable for means of illustration. Due to the central characteristics of innovation, newness, multidimensional uncertainty and complexity (see subsequent sections), innovation rarely develops along a linear path or through sequential phases. Rather, “Innovation is an unpredictable, messy process” (von Hippel, Churchill and Sonnack, 2009, p. 45). In the longitudinal studies of the Minnesota Innovation Research Program (MIRP), Van de Ven et al. found that none of the analyzed innovations had followed a linear sequence of phases. Still, certain patterns could be identified across projects and were summarized into the broad sections ‘initiation,’ ‘development,’ and ‘implementation’ (Van de Ven et al., 1996, p. 23). It is common in the innovation literature to find two broad sections of the innovation process: the ‘fuzzy front end’ and the ‘implementation stage’ (Herstatt and Verworn, 2001; Gassmann and Sutter, 2013). The front end of the process covers the activities of idea generation, concept development, and evaluation and selection. It is characterized by divergent thinking and creative processes of an iterative nature. At this early stage relevant knowledge on technical feasibility and market requirements is relatively limited, which makes this phase appear ‘fuzzy.’ In contrast, during the later implementation stage, these uncertainties should have been significantly reduced and the focus lies on efficiently developing and launching the new solution on the market (Herstatt and Verworn, 2001). 2.1.2

Uncertainty and Ambiguity

The constitutive characteristic of newness is essentially what makes innovation both highly valuable and extremely difficult to handle. When the available knowledge on market and technology is limited, organizations are required to deal with uncertainty and ambiguity. The first term describes knowing what is not known, while the latter refers to not knowing what is not known (Schrader, Riggs and Smith, 1993). Technical uncertainty relates to the quality of the relevant scientific knowledge, to questions of technical feasibility and durability of a new solution and the production process (Leifer et al., 2000). Market-related uncertainty results from incomplete information on future customer needs, the anticipated market size and suitable sales channels (ibid.). Especially at an early

12

Literature Review

stage of development of radical innovations it is often uncertain if these will result in a commercial application. Thus, these are typically characterized by a high degree of technical and market-related uncertainty (Christensen, 2006). Organizational uncertainty relates to the question if an organization is capable of making the necessary internal adjustments to implement a novel idea. Particularly radical innovations often fail because they do not fit the mainstream organization. Due to a lack of internal acceptance they might not be allocated the necessary resources to be completed (Leifer et al., 2000). The dimensions of uncertainly are strongly interrelated: the higher the degree of newness, the higher the degree of uncertainty and ambiguity in the different dimensions (Herstatt and Verworn, 2001; Leifer et al., 2000). An innovation can only be evaluated with certainty in retrospective, after it has diffused in the market. However, a potential innovation has to be initiated, developed, and launched in advance. Over this process a number of decisions have to be made, before certain information on its degree of novelty, technical feasibility, and market success can be determined with certainty. This is essentially what differentiates innovation from routine processes and what makes handling innovation particularly difficult (Leifer et al., 2000). 2.1.3

Complexity

Innovation processes, particularly developments of a high degree of newness, are highly complex. On the one hand, this is due to the immense and fast increasing rate of technological and market change, leading to continuously changing conditions that need to be considered over the course of an innovation project (Vahs and Brem, 2013). On the other hand, the majority of innovations do not originate in the activities of individual inventors, tinkering in a research and development department or their own garage. Berkun calls the “lonesome inventor” one of the “myths of innovation” (Berkun, 2010, p. 76). Rather, today’s innovations are largely developed within complex networks spanning across department and organizational boundaries, especially at interfaces where diverse knowledge comes together (Tidd and Bessant, 2009). The trend towards ‘Open Innovation,’ i.e. the opening of corporate innovation activities beyond firm-boundaries, is fostered by the vast amount of diverse and widely spread knowledge that is available today (Chesbrough, 2006). The related complexity of innovation activities is expected to further increase in future years (Eagar et al., 2011).

Organization 2.1.4

13

Riskiness

As a consequence of innovations being new, uncertain, and complex undertakings, they often fail to fulfill expected results. As shown by Stevens and Burley, on average out of 3000 raw ideas, only one becomes a successful innovation (Stevens and Burley, 1997). In line with these findings, Cooper reports that between 25 and 45 percent of new products fail in the market. The vast majority of innovation projects has never made it to that point and was “killed along the way,” often after considerable amounts of resources have been invested (Cooper, 2013, p. 18). Requiring the investment of substantial amounts of resources, which are wasted in the event of failure, innovations must be seen as risky undertakings. On the one hand, organizations aiming to stay competitive in the long run hardly have a choice but, to some extent, accept this risk. On the other hand, new product success rates differ significantly: Cooper reports that the worst performing firms have a product innovation success rate of 37.6 percent, that is the share of new products introduced successfully in the market. Compared to that the best innovators achieve 79.5 percent successful product innovations (Cooper, 2013). These findings indicate that innovation is far from gambling and chances for innovation success can be purposefully influenced. The question how organizations can increase their chances of being continuously innovative will be addressed in chapter 2.3. 2.1.5

Adopted Definition of Innovation

In this thesis innovation will be understood both as a process and as an outcome. The aim of the research is to shed light on how innovation happens in heterarchies. Though not confined to the process level of analysis, it is investigated how innovation evolves from idea to launch in heterarchical as compared to hierarchical-bureaucratic organizations. Perceived as an outcome, innovation refers to successfully implemented new or improved solutions directed at the market, especially novel products and services, production processes, and business models. 2.2

Organization

The typical context for corporate innovation in literature and practice remains to be that of hierarchical bureaucracy. Despite the variety of organizational models described in organization theory (see section 2.5.2), the bureaucratic model is

14

Literature Review

hardly questioned and often understood as the only realistic option. According to Parker, “It seems that dominant contemporary understandings of organization make this concept almost equivalent to concepts such as management, and hierarchy, and even capitalism.” (Parker, 2009, p. 1282)

Thus, in the following, the literature on bureaucracy as the rationale behind much contemporary organization strategy, structure and culture (Blau and Meyer, 1968) is reviewed among its key characteristics. Further, innovation in this organizational context, in theory and practice is described. On the one hand, organization refers to an institution, that means a private or public institution ‘is’ an organization (Vahs, 2009, p. 19). Originally the term organization comes from ‘organon’ which can be translated as ‘tool’ (Hedlund, 2005, p. 236). Thus, on the other hand, organization can be understood as an instrument, more specifically a tool for creating and maintaining order in complex social systems of individuals who share certain goals (Vahs and Brem, 2013, pp. 137-138). In this sense, a firm ‘has’ an organization (Vahs, 2009, p. 17), which comprises both formal and informal organization. Formal structures can be purposefully designed, whereas informal culture is much more difficult to analyze and consciously change (Schein, 2004). The organizational design and the behavior of its members together result in a more or less effective factual ‘order’ (Göbel, 1993, p. 39) The strong interrelation between informal and formal organization is underlined by Handy (1999), describing a number of different organizational cultures each of which is reflected by certain structures and systems. The ‘power culture,’ illustrated by a web, is agile thanks to a low level of formalization, but highly dependent on a central power, typically the founder. The ‘role culture’ associated with a greek temple, mostly corresponds to the concept of bureaucracy (see section 2.3). It is based on the pillars of specialized departments, working efficiently along a set of clear role descriptions, rules and procedures. While the role culture’s strength at predictability and stability helps to strive under stable conditions, it has disadvantages where flexibility or product innovations are required. The ‘task culture,’ pictured by Handy as a net, has the matrix structure as one of its corresponding forms. Teams strive for the common objective, with influence being rooted on expert knowledge. As a highly flexible organization, the task culture is advantageous where “speed of reaction, integration, sensitivity and creativity are more important than depth of specialization.” (Ibid., p. 188). Finally, at the ‘person culture,’ represented as cluster, the organization’s individuals are of highest importance, with no greater objective and minimal structure. Or-

Bureaucracy

15

ganizations where this culture is predominant include families, small consultancies, or communes (Handy, 1999). In line with contingency theories Handy underlines that the most appropriate culture and corresponding structure differs and depends on a number of factors: “History and ownership, size; technology; goals and objectives; the environment; the people.” (Handy, 1999, p. 192). Further, the dominant culture and structure change over the lifecycle (Handy, 1999). This is in line with Greiner’s theory of organization development: In the early stages of the organizational lifecycle all organizations are characterized by high levels of learning and creativity as well as relatively low degrees of vertical differentiation and formalization. With increasing size, the need for reliability and efficiency of operations typically leads to the development of processes and structures. These are advantageous for optimizing the output of the current business but reduce the firm’s ability to learn and innovate (Greiner, 1997). This is why large organizations, the more proficiently their processes are organized, tend to become increasingly ‘crusted’ (Weltz, 1992, p. 71) or inert (Gilbert, 2005). Increasing ‘bureaucratization’ is a typical but not inevitable development as organizations grow (Heckscher, 1994; Heckscher 2015). According to contingency theories, certain organizational forms are most suited under certain conditions. Organizations that mainly focus on exploitation profit from a more bureaucratic structure. Those with a stronger focus on innovation or exploration activities are well advised to assume a less bureaucratic structure (Hall, 1963). 2.3

Bureaucracy

The concept of bureaucracy was developed by Weber at the beginning of the 20th century, in the context of industrial mass production. Its original and prevailing meaning in the relevant literature is far from the colloquial usage of the term that describes inefficiency and red tape in public institutions (Blau and Meyer, 1968). Rather, it has become the key basis of both organization studies and real-life organizations: “The major concepts articulated by Weber are the same ones still used by most managers in their conscious planning: rationality, accountability, and hierarchy.” (Heckscher, 1994, p. 19) Weber describes bureaucracy, literally “rule by bureau,” as rule legitimized by rationality and knowledge. It is contrasted with other forms such as “rule by traditions” (Weber, 2010, pp. 167) “charismatic rule” (ibid., pp. 179), “feudal-

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Literature Review

ism” (ibid., p. 189), and the principle of “collegiality and separation of powers” (ibid., p. 201). Burns and Stalker describe bureaucracy as “mechanistic organization” (Burns and Stalker, 1961). Already Weber explains the advance of the bureaucratic organization with its “technical superiority” over every other organizational form, comparing a machine to non-mechanical forms of production: “Precision, rapidness, unambiguousness, competence, continuity, discretion, uniformity, strict subordination, avoidance of frictions, factual and personal costs are increased to the optimum in strictly bureaucratic, especially: monocratic administration by qualified individual officials, compared to cooperative or honorary forms” (Weber, 2010, p. 716). Cooperatively organized work causes frictions and delays and compromises between colliding interests and opinions. It proceeds less precisely, more independently towards the top, thereby less consistently and slower (Weber, 2010, p. 716). Weber mentions that the bureaucratic apparatus may and does create constraints when individual cases, that means potential innovations, are being handled (ibid.). 2.3.1 Characteristics of Bureaucracy Weber’s account of bureaucracy is a comprehensive description of large organizations, comprising a set of key principles or characteristics, which are outlined in the following. Professional specialization based on the division of labour (Weber, 2010, p. 727): This results in the creation of offices or departments. The coordination through a detailed system of rules is a consequence of this: “What has been taken apart must be put together again” (Blau and Meyer, 1968, p. 17). The principle of hierarchy of offices (Weber, 2010, pp. 703-704): According to Weber describes “a stable ordered system of domination and subordination of departments by supervision of the lower ones by the higher ones” (ibid., p. 703). In a highly developed bureaucracy this hierarchy is ‘monocratic,’ which implies that every individual has exactly one superior instance to report to (ibid., pp. 201-202). The principle of stable and clearly defined roles (ibid., p. 703): Through the separation of person from office under bureaucracy clear roles are defined based on the needs of the organization. For each role respective tasks, scope of authority and responsibilities are clearly defined. These exact written rules are meant to ensure that followers implement their orders as prescribed by

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superiors (Heckscher, 1994, p. 19). Officers should be guided by the central norm, the “rational consideration of factual ends and means” (Weber, 2010, pp. 720-721). Administration by general rules (ibid., pp. 704-705): Officers in bureaucracies perform their tasks along generally fixed rules that prescribe how every task is to be completed. These rules need to be learned, which explains the importance of extensive professional qualifications prior to taking over an office in a bureaucracy. The rule of formalistic impersonality (ibid., p. 166): Members of a bureaucracy are expected to fulfill their tasks “sine ira et studio,” that is without hate or passion. Rather than with enthusiasm they are expected to act “under the pressure of duty” based on given facts and irrespective of the person concerned (ibid., p. 166). All ‘irrational’ emotional elements are to be excluded from work. This relates to the superior importance given to written documents (ibid., p. 704). The principle of secrecy: Bureaucracy excludes the public: “The bureaucracy hides its knowledge and actions from criticism, as much as it possibly can.” (Ibid., p. 730). The rule by knowledge (ibid., pp. 165-166): Weber describes bureaucratic administration as “rule by knowledge” (ibid., p. 165). Qualifications and expert knowledge are of central importance as these enable to act rationally, considering factual ends and means (ibid., pp. 165-166). Ideal types are to be seen as “especially valuable and indispensable extreme cases” useful for analysis, while in reality transitions between these principles are fluid and there are almost always mixed forms (Weber, 2010, p. 160, 738). Later concepts of bureaucracy stressed mixed or ‘hybrid’ forms that are not necessarily inflexible (Courpasson and Dany, 2003; Styhre, 2007). For empirically researching bureaucracy, many authors use the major indicators of bureaucratic control, “centralization of decision-making authority” and “formalization” (Damanpour, 1996). Hall, in contrast, describes and empirically tests the concept of bureaucracy by using the key dimensions described by Weber, each of which has the form of a continuum: A division of labor based upon functional specialization A well-defined hierarchy of authority A system of rules covering the rights and duties of positional incumbents A system of procedures for dealing with work situations

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Literature Review Impersonality of interpersonal relations Technical qualifications (Hall, 1963, p. 33)

Applying these variables, it can be determined how bureaucratic or nonbureaucratic an organization is in each of the dimensions. Like this, organizations can be more realistically described than by assuming the polar extremes of ideal types (Hall, 1963). The dimension ‘technical qualifications’ might not be suitable to determine an organization’s degree bureaucracy (Hall, 1963). Even though technical competence might be very important in highly bureaucratic organizations, it cannot be concluded that a low level of technical competence describes an organization of a low degree of bureaucracy. The other dimensions covered in the operationalization of bureaucracy will be used as a consistent structure throughout this thesis for comparing organizational forms and for identifying real-life nonbureaucratic organizations. 2.3.2

Hierarchy as the Central Characteristic of Bureaucracy

The principle of hierarchy describes a system of formal super- and subordination of offices. It constitutes the central and most defining element of the bureaucratic structure (Weber, 2010; Blau and Meyer, 1968; Heckscher, 1994; Höpfl, 2006; Rothschild-Whitt, 1979). Hierarchy is understood as one possible form of authority structure or coordination mechanism, which is often contrasted with market mechanisms or heterarchical coordination (Stark, 2009). Therefore, hierarchy should be understood as an integral element of the more encompassing model of organization of bureaucracy. Literally, hierarchy describes “the rule of the holy,” which points to the religious origins of the concept. In the 5th or early 6th century Dionysius the Areopagite used the term to describe the clear order of heaven, with God the almighty and all-knowing at the top, several ranks of angels, and finally fallible humans at the bottom (Parker, 2009, p. 1284). In this conception, “a hierarchy is a sacred order, a state of understanding and an activity approximating as closely as possible to the divine” (Pseudo-Dionysius, cited in Luibhéid and Rorem, 1987, p. 153). From an anthropological view, Rubin differentiates dominance hierarchies and productive hierarchies. Through the first, also referred to as pecking orders, resources are allocated in groups. According to Rubin, these are assumed to be “universal among humans” (Rubin, 2000, pp. 260-269). Productive hierarchies

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are consciously created to achieve certain aims. They serve to coordinate the efforts of specialized individuals working on complex tasks under division of labor. In contrast to dominance hierarchies, these are employed by humans over a relatively short time horizon (ibid., pp. 260-269). Still today, “the idea of hierarchy is central to theories of organization, and justifications of the managerial prerogative” (Parker, 2009, p. 1281). Many authors agree that hierarchy is often not questioned or even used synonymously with ‘organization,’ naturally assuming that there is no alternative way of order in organizations (Crumley, 1995; Parhankangas et al., 2005; Hedlund, 2005; Fairtlough and Clegg, 2007; Diefenbach and Sillince, 2011). The authors suggest reviewing the origins of these perceptions to question their suitability under today’s conditions. In organizations, hierarchies constitute asymmetries among the individuals of a group. These differences may have the form of formal power, i.e. decision competence, status in the form of prestige, size of office, additional benefits like a company car, or income disparities (Anderson and Brown, 2010). Beyond that, hierarchies can take the form of formal hierarchies, corresponding to the organizational chart, and informal hierarchies, i.e. factual power relations. Even if organizations are formally egalitarian, the emergence of power differences can hardly be avoided. Diefenbach and Sillince even suggest that “whenever in common types of organizations formal hierarchy decreases, informal hierarchy increases.” (Diefenbach and Sillince, 2011, p. 1516) 2.3.3

Bureaucracy and Innovation

It has been argued that bureaucracy is not necessarily inflexible (Hlavacek and Thompson, 1973; Dougherty and Corse, 1995; Styhre, 2007). For instance, task forces might be created for strategic initiatives to circumvent inflexible routine processes. Still, the fundamental aim of the bureaucratic organization is to foster reliability and efficiency in solving routine tasks. Therefore, its structures and corresponding norms are designed to solve exactly this purpose and prove less effective in the context of non-routine tasks, which innovations are (Heckscher, 1994). That is why Bennis envisioned that bureaucracy would prove less effective and lose importance under the conditions of the 21st century: “It is my premise that the bureaucratic form of organization is becoming less and less effective; that it is hopelessly out of joint with contemporary realities; that new shapes, patterns, and models are emerging which promise drastic changes in the conduct of the corporation and in managerial practices in general.

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So within the next twenty-five to fifty years, we should all be witness to, and participate in, the end of bureaucracy and the rise of new social systems better suited to twentieth century demands of industrialization.” (Bennis, 1965, p. 31) Thompson (1965) theoretically outlines how the characterizing elements of bureaucracy negatively impact corporate innovation. The following is a summary of his arguments: Over-specification prevents diversity required for innovations, departmentalization fosters ‘silo-mentality,’ resistance to new ideas, the lack of common goals fosters irresponsibility for the whole; Superiors can veto suggestions without the possibility of appeal, creative conflicts are suppressed, extrinsic reward system minimizes personal incentives to take risks and stimulates conformity; Employees are afraid of being punished for failures within their defined area of responsibility, nobody feels responsible for innovation except for development engineers or R&D departments; Detailed procedures hardly cover and help in unforeseen work situations, which is the norm in innovation activities, there is no place for the new in the existing structure, innovations are regarded as disturbing routine procedures, experimentation is not supported; The focus on written communication, clear regulations regarding organizational roles and procedures, and vertical orientation all reduce the need for direct and extensive communication within and outside the organization, which would facilitate innovation (based on Thompson, 1965, pp. 3-10). Many of the previously outlined aspects on the relation of bureaucracy and innovation are supported by empirical evidence. Damanpour reports that: “Despite a few exceptions (Ettlie, Bridges, and O’Keefe, 1984; Miller and Friesen, 1982), later empirical research has generally confirmed Thompson’s view, reporting a negative association between two main elements of bureaucratic control, centralization and formalization, and organizational innovation.” (Damanpour, 1996, p. 149) The author refers to studies by Aiken, Bacharach, and French, 1980; Hage and Aiken, 1967; Kaluzny, Veney, and Gentry, 1974; Kimberly and Evanisko, 1981. Centralization relates to the degree to which decisions are made by few individuals at a high level of the hierarchy, rather than a wider group of individuals spread over the organization (Anderson and Brown, 2010, p. 8). It corresponds to the bureaucratic characteristic hierarchy of authority. Formalization refers to the

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degree to which work procedures and individual tasks and responsibilities are prescribed by formal rules (Damanpour, 1996). Table 2.1 gives an overview of studies on bureaucracy and innovation. The first five studies relate to innovation more indirectly, focusing on innovation proposals or innovation adoption in a stable or unstable environment or routine or non-routine work. The other studies directly relate to innovation outcomes. Table 2.1: Overview of empirical studies on bureaucracy and innovation Authors Burns and Stalker (1961)

Data/focus of research

Major findings

Study among 20 industri-  Mechanistic management system (hierarchic structure of al firms on effects of control, authority, and communication, working behavior external environment on tends to be governed by the instructions and decisions of sumanagement and ecoperiors): appropriate under stable conditions nomic performance  Organic form (e.g. network structure of control, authority, and communication): appropriate under changing conditions

Lawrence Study across six firms on  High variation in the degree of structure across the organizaand Lorsh differentiation, integrations, e.g. the departments of fundamental research organiza(1967) tion, and organizational tion were significantly less structured than subsystems in the effectiveness (degree of other organizations formalized structure and  Conclusion: Departments tend to develop a degree of formal relevant environment) structure depending on the certainty of their environment Hage and Study among 16 organi-  Organizations with more routine work: more centralized, Aiken zations on degree of more formalized social structure (1967) routine work and social  No relationship with stratification, emphasize goals of effistructure and goals of the ciency and the quantity of clients served rather than innovaorganizations tiveness, staff morale, or quality of services Quantitative study in 44  Differences between the middle and lower echelon officials: bureaucracies on level in In terms of proposals for innovation, middle managers have the hierarchy and number made far more proposals for administrative and for technical of proposals made for innovations technical and administra-  Suggested explanation: Department heads report less routive innovations tinized task activities, greater influence in work decisions, more internal communication, and higher levels of boundary spanning activity Bhargava Experimental design (n=  Non-hierarchical structure was perceived as having a higher and Sinha 20) on hierarchy and degree of production, commitment, more effective leader(1992) performanceship, and less interpersonal conflicts compared to hierarrelated/attitude-related chical organization outcomes Aiken, Bacharach, and French (1980)

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Daman- Multivariate metapour analysis of studies on (1996) bureaucracy (centralization n=31 and formalization n=25) and innovation Liu, Magjuka and Lee (2008)

Experimental design, n=44 groups (team level) on hierarchy and effectiveness under high vagueness and complexity (innovative tasks) Ronay et Two experiments (n=138, al. (2012) n=109) on hierarchical differentiation and productivity and conflict in small groups Keum and See (2014)

Anicich, Swaab and Galinsky (2015)

Laboratory experiment (n=101 persons) and a field setting on hierarchy and innovation

Centralization is negatively associated with innovation No significant difference in the relationship between bureaucracy and innovation for initiation versus implementation phase Centralization-innovation association less negative in large than in small organizations Teams with a non-hierarchical structure outperformed those with a hierarchical structure (effectiveness)

Hierarchically differentiated groups performed better on a procedurally interdependent task than groups comprising either all high-power-primed or all low-power-primed individuals No effects of hierarchical differentiation on performance on a procedurally independent task Hierarchy found to be detrimental to idea generation during the creative phase Potential advantages in idea screening “by reducing bias for self-promotion”

Quantitative survey (n=5000) on hierarchical or egalitarian cultural background of mountaineering teams in the Himalaya and expedition success (expedition as novel undertaking)

More participants of teams from more hierarchically organized societies reached the summit than from more egalitarian societies In teams from more hierarchical societies, more mountaineers died during the expeditions compared to teams from more egalitarian societies Clear roles in hierarchies might help avoid conflicts but increase chances that lower ranking individuals raise concerns, thus, increasing the risks of fatal accidents Aalbers, Social network study on 5 Individuals on higher hierarchical levels provide “organizaDolfsma, new business projects; tional support and managerial sponsorship” and data collection across one The performance and innovativeness of project teams might Leenders, year, 181 actors at time 1 benefit from concentrated “vertical cross-hierarchy ties” in 2016 and 281 actors at time 2 addition to “horizontal cross-unit ties”

Beyond that, the findings from the systematic review of empirical studies on hierarchy steepness and effectiveness by Anderson and Brown should be highlighted. The authors report that theoretical rationales and empirical findings strongly indicate that for innovation activities, formal hierarchies predict negative effects on performance- and attitude-related outcomes, as compared to more egalitarian structures. The main contingency factors constraining best practice

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regarding organizational structure and innovation performance seem size and task-uncertainty (Anderson and Brown, 2010). More specifically, the authors report that the effects of tall organization structures on attitude, that is members’ satisfaction and motivation and commitment, were consistently negative: “Groups and organizations with steeper hierarchies tended to have members who were less satisfied, less motivated, and more inclined to leave the group.” (Ibid., p. 10) This is crucial, as creativity and innovation heavily depend on individuals’ intrinsic motivation (Amabile, 1998). Anderson and Brown conclude that the effect of steep hierarchies on group performance outcomes particular depends on the nature of the task. More egalitarian structures are more effective in dynamic environments and for solving complex ambiguous tasks, requiring a high degree of creativity. In comparison, in stable environments and for simple routine tasks steeper hierarchies are more suitable, as they enable straightforward decision-making (Anderson and Brown, 2010, p. 14). Flat structures are assumed to better utilize the knowledge of many individuals and, thus, to come to better decisions as compared to hierarchies that primarily build on the opinion of few individuals at the top. Hierarchy is found to increase group homogeneity: Group members tend to adopt the opinions of higherraking individuals, typically overestimating their knowledge and capabilities, and are reluctant to raise differing views (Anderson and Brown, 2010, pp. 1314). Finally, steeper hierarchies were found to reduce the level of trust, impede communication and cooperation, especially where lower-ranking individuals are afraid of being punished by superiors. Rank differences, such as higher influence, prestige, and material benefits that come with higher positions, stimulate competition among individuals. This impairs cooperation and reduces group effectiveness in interdependent tasks (Anderson and Brown, 2010, pp. 23-25). Exchange with individuals on higher hierarchical levels might nevertheless be a success factor for innovation projects, as these provide “organizational support and managerial sponsorship.” Based on their multi-project study Aalbers, Dolfsma, and Leenders (2016) hypothesize that in addition to “horizontal crossunit ties,” the performance and innovativeness of project teams benefit from concentrated “vertical cross-hierarchy ties” (Aalbers, Dolfsma, and Leenders, 2016). Leaders’ role as promoters of innovation will be discussed in section 2.3.6, in the context of innovation culture and leadership.

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Literature Review

2.3.4 The Need for Sheltering Innovation in Bureaucracy The previous sections on the characteristics of innovation and effects of bureaucracy have shown that innovation requires fundamentally different conditions than routine processes, as summed up by Sprenger (2005): “Innovation is alien to the nature of the organization. [...] The company as one special form of organization, is geared towards efficiency and repeatability – not towards the mainly draining energy of trial and error, and the, at best possible, event of discovery” (Sprenger, 2005, p. 69). Hauschildt and Salomo point at innovation needing shelter from bureaucracy: “Innovations not only have not been considered in the organization, they are often troublemakers in the well-ordered apparatus” (Hauschildt and Salomo, 2011, p. 46). In the short term, the repeated experience of rejected innovative proposals may cause frustration among employees and an unbalanced portfolio of smaller and more fundamental innovations. In the mid and longer-term companies risk to ‘unlearn’ innovating (Benner and Tushman, 2003, p. 242). To avoid that the majority of innovative initiatives is rejected within the structures and processes developed for ensuring reliability and efficiency, organizations need to complement the mainstream organization with elements that ‘shelter’ innovation from those. Thus, how both daily operations and innovation can be enabled is regarded “the starting point for the organization of corporate innovation management” (Hauschildt and Salomo, 2011, p. 68), which will be the focus of the subsequent chapter. 2.4

Innovation Management

What constitutes classic innovation management will be presented in the following. First, several holistic conceptions are highlighted. Next, major elements of innovation management are outlined along each of the organizational themes strategy and direction, processes and structures, and culture and leadership for innovation. This review is largely based on what is reported in major textbooks of the discipline, e.g. Tidd, 2001; Tidd and Bessant, 2009; Stern and Jaberg, 2010; Hauschildt and Salomo, 2011; Vahs and Brem, 2013; Cooper, 2013). Further, indications of bureaucracy in classic innovation management are highlighted and a conclusion on the section is drawn. There is general agreement that innovation is of central importance to the long-term survival and growth of organizations (Drucker, 1998). Nevertheless, a

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common understanding of innovation management, as a coherent set of principles guiding innovation practice, or even a standard framework for ‘managing’ innovation, has not yet emerged (Tidd, 2001). Goffin, Herstatt and Mitchell compare the maturity level of the discipline to that of quality management in the 1980s (Goffin, Herstatt and Mitchell, 2009). They even doubt that one best way to handle innovation, a common standard comparable to quality management, is likely to emerge. The reason is that any organization’s innovation management needs to be strongly adjusted to a range of organization-specific factors (Goffin, Herstatt and Mitchell, 2009). As suggested by Tidd, a firm’s environmental contingencies constrain its choices regarding the aspired degree of innovation. The strategic goals as to innovation influence the choice and design of appropriate organizational configurations, which impact a firm’s performance (Tidd, 2001). Therefore, he calls for identifying the most suited combination of organizational structures and processes for each organization based on the degree of uncertainty and complexity of the market and technological environment (ibid.). The absence of a coherent framework for handling innovation does not imply that there are no generalizable findings on how to increase chances for successful innovation. Nor is innovation management a mere collection of methods and tools for generating and selecting ideas. In the following, several definitions and conceptions of innovation management are reviewed. 2.4.1 Definitions of Innovation Management In the classic view innovation management “covers all tasks related to the planning, deciding, controlling, and monitoring of generating and implementing new ideas into marketable solutions” (Vahs and Brem, 2013, p. 28). On the strategic level this involves analyzing the competitive environment and deriving goals and strategies for corporate innovation. On the operational level the focus lies on the design of the innovation process and the management of innovation projects, often related to as “new product development” in theory and practice (Vahs and Brem, 2013, p. 28). The innovation process being seen as the heart of innovation management, the discipline is sometimes narrowly defined as “the systematic planning, monitoring, and control of the innovation process” (ibid., p. 2). From the perspective of systems theory innovation management can be defined as the “conscious design of the innovation system”. Besides innovation processes, this includes the organizations in which these take place (Hauschildt

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Literature Review

and Salomo, 2011, pp. 29-30). In this wide view, innovation management comprises all tasks that lead to innovation capacity and, thus, to innovations (Stern and Jaberg, 2010, p. 8). It was expected that innovation management would develop in the direction of creating holistically innovative organizations, where innovation is no longer seen as the exclusive task of research and development (R&D), but increasingly of the whole organization (Eagar et al., 2011). Recent findings indicate that this has not translated into practice yet, quite the opposite: The majority of organizations participating in a recent survey report to operate a dedicated innovation lab with no other innovation activities beyond (Buvat et al., 2016). 2.4.2 Holistic Concepts of Innovation Management Several concepts of innovation management largely correspond to the previously mentioned more encompassing understanding. Even though they differ as to how key dimensions are delimited, they all stress the systemic understanding of innovation: The “Pentathlon innovation principle” according to Goffin, Herstatt and Mitchell: “Innovation Strategy,” “Ideas,” “Prioritization,” “Implementation,” “People and Organization” (Goffin, Herstatt and Mitchell, 2009, p. 63); The “Basic patterns of successful innovation processes” according to Stern and Jaberg: “Strategic direction,” “Leadership,” “Organizational climate,” “Innovation team,” “Opportunity-risk-analysis,” “Organization of the innovation process” (Stern and Jaberg, 2010, p. 20); “The Innovation Diamond” according to Cooper: “Product Innovation and Technology Strategy,” “Climate,” “Culture and Leadership,” “Idea-toLaunch-Process,” “Portfolio Management” (Cooper, 2013, p. 6); The “House of innovation” according to A. T. Kearney: “Innovation Strategy,” “Innovation Organization and Culture,” “Innovation Lifecycle Management” covering idea generation, development, continuous improvement, “Enablers” covering HR, controlling, and IT (improveinnovation.eu, 2014). On a general level, the components of these concepts can essentially be assigned to the “interdependent firm dimensions” (Doppler and Lauterburg, 2014, p. 69), also called the “levers of change” (Bartscher and Stöckl, 2011, p. 34): Strategy and direction, processes and structures, and culture and leadership. This implies that on the firm level conditions can be created that facilitate the contin-

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uous initiation, development, and launch of successful new solutions targeted at the market. This can be done by at least partly adjusting strategy, organization, and culture towards this goal. A corporate innovation management understood as the “conscious design of the innovation system” beyond the innovation process allows increasing innovative capacity at the firm level (Hauschildt and Salomo, 2011, p. 29). These firm level conditions are strongly interrelated with factors at the team and individual levels. Efforts for increasing corporate innovation capacity and performance are suggested to be most effective when considering the interrelations between various levels of innovation (Sparrow, 2016). 2.4.3 Adopted Definition of Innovation Management In essence innovation management should encompass all conscious efforts to create a supportive environment for innovation: First, on the level of the organization, by aligning strategy and direction, processes and structures, and culture and leadership towards the goal of innovation. Second, on the project team level covering all activities related to generating, selecting, and implementing novel ideas targeted at the market. Third, on the individual level, with individual creativity being the starting point for innovation. 2.4.4 Strategy and Direction for Innovation An innovation strategy is described in classic innovation management textbook as a bundle of sub-strategies, which allows directing and aligning innovation activities towards common organizational goals. It is the basis for a systematic allocation of limited resources to the most promising development projects (Tidd and Bessant, 2009; Stern and Jaberg, 2010; Cooper and Edgett, 2010). The term covers “all long and short-term innovation goals in a company from the vision, over the strategy and search fields up until concrete ideas” (Stern and Jaberg, 2010, pp. 29-32). A long-term vision is meant to have a motivating effect on the collective of employees. Through the subsequent strategy elements the way to this corporate goal is broken down in more concrete and short-term actions to be taken. Management should give impulses for innovations, provide orientation through goals, values, and continuously encourage people to take initiative in innovation (ibid.). The innovation strategy is deducted from different systematic analyses, such as trends and scenarios, external opportunities and risks and internal strengths and weaknesses (SWOT), or product portfolios. It typically comprises statements

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about target market and customers, market entry strategies, technology strategy, core competencies, and portfolio planning (Stern and Jaberg, 2010). Similarly, Cooper and Edgett describe the process of innovation strategy development in a number of steps, including the definition of “innovation goals and objectives,” “the selection of strategic arenas,” defining “attack plans and entry strategies,” as well as “methods for resource allocation and deployment using strategic buckets and strategic roadmaps” (Cooper and Edgett, 2010). With the help of roadmaps the most important innovation initiatives are typically planned far ahead, “often five to eight years” (Cooper, and Edgett, 2010, p. 40). Management’s role regarding the innovation strategy is central. Cooper and Edgett describe top management as responsible for creating a vision for the company and breaking it down into more short-term actionable steps to be taken on the operational levels: “In this way, senior management is able to translate its view of the future and its strategy into resource commitments and concrete actions.” (Cooper and Edgett, 2010, p. 40) ‘Management’ is even part of their suggested definition of roadmap: “A roadmap is simply a management group’s view of how to get where they want to go or achieve a desired objective.” (Ibid., p. 40) 2.4.5 Processes and Structures for Innovation The Innovation Process If in an organization innovative undertakings are realized repeatedly, it is advised to support those by implementing an organizational frame (Goffin, Herstatt and Mitchell, 2009, p. 372). On the one hand, innovation processes allow increasing the effectiveness of innovation activities. On the other, through learning over repeated projects they may improve the efficiency of developing and launching innovative solutions. By directing innovation efforts towards realization, an innovation process allows improving innovation performance, in terms of meeting goals regarding time, costs, and quality of innovation activities (Vahs and Brem, 2013, pp. 60-61). The innovation process covers all activities from identifying market or technology-related opportunities for innovations, over ideation covering idea collection and generation, idea evaluation and selection and concept development, to implementation involving development, prototyping, and testing, to the market launch and diffusion of novel solutions (Verworn and Herstatt, 2007; Cooper, 2013). General innovation process models developed for illustrative purposes

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need to be adjusted to organization-specific conditions (Goffin, Herstatt and Mitchell, 2009). A well-known innovation process model is the Stage Gate© process. Cooper reports that the concept is implemented by 73 percent of US American companies (Cooper, 2013, p. 80). The overall process is divided into a number of ‘stages’ that are separated by decision points, called ‘gates’. For each phase certain activities are prescribed, for example conducting market research or a prototype test. This is meant to ensure that the required market- and technology-related information is gained before proceeding in the process. After evaluating initiatives on the basis of a criteria catalogue, in regular management gate meetings it is decided, which ideas will be pursued further, which will be ‘put on hold’, and which will be ‘killed.’ This stepwise selection process may increase the chances that limited resources are allocated to the most promising innovation initiatives (Cooper, 2013, p. 57). As innovation is of an ambiguous, complex and risky nature, there is a continuous debate that tight processes are not suitable to effectively support the transformation of innovative ideas through development and launch (Wolf, 2011; Pfeiffer, Schütt and Wühr, 2012). The appropriate balance of freedom and structure in innovation processes appears to be a dilemma: “Too much discipline with a strong focus on process management compromises researchers’ and developers’ creativity, because through this discipline the innovation process is structured to such a high degree that every activity becomes part of a bureaucratic program and the inventive spirit. No structuration means a lot of freedom and creativity for R&D personnel, but, apart from an inefficient use of resources, bears the risk that good ideas are not pursued further if they are not by coincidence found by a sponsor with strong decision competence.” (Sandmeier and Jamali, 2007, p. 341) Herstatt and Verworn suggest adjusting the degree of process formalization to the level of project uncertainty (Herstatt and Verworn, 2007). Similarly Leifer et al. argue that the more radical an innovation and the higher the levels of uncertainty, ambiguity, complexity and risk, the more the process needs to be viewed as a learning process: stepwise trial and error is more likely to contribute to success than detailed planning, monitoring, and control (Leifer et al., 2000). Particularly high levels of uncertainty and ambiguity in the fuzzy front end call for far-reaching flexibility (Herstatt and Verworn, 2001). In the implementation stage a tight organizational frame appears adequate to reduce iterations and time-to-market (ibid.). Gassmann and Sutter propose two distinct phases: While

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a relatively unstructured ‘creative cloud-phase’ meets the requirements in the early innovation phase, development projects are realized in a clearly structured ‘module phase’ (Gassmann and Sutter, 2013, p. 44). The higher the degree of uncertainty, the more freedom and process flexibility is required (Tidd and Bessant, 2009). Structures for Innovation Classic innovation management suggests that innovation processes need to be supported by specific organizational structures. There are several options for integrating innovation management into the mainstream primary organization. All these structural options aim to create a ‘safe space’ for innovations within or outside the main organization, which remains organized as a bureaucracy. The overall model of organization remains unquestioned. An innovation function can be set up as staff function reporting to top management, typically attached to a role called ‘innovation manager’ (Vahs and Brem, 2013). Typical tasks of innovation managers are presented in Table 2.2. Table 2.2: Tasks of an innovation manager (Vahs and Brem, 2013, pp. 187-188; Stern and Jaberg, 2010, p. 126) Vahs and Brem, 2013

Stern and Jaberg, 2010

Facilitate innovation planning and decision-making: Innovation strategy development, evaluate innovation alternatives, present those to management Support implementation of innovations: Control innovation process, moderating at the interface of different functions, control innovation success, overcome barriers Knowledge management for innovation; administration and connecting of internal know how and sourcing of external knowledge Network management: Build and use relations in internal and external networks Idea management: Facilitates the systematic generation, collection of ideas and provides them to the team Supports the innovation culture as “motivator” and makes sure innovation is on everybody’s mind Gives regular impulses for innovation

In R&D-heavy organizations innovation management activities are typically located with the R&D department.

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Most larger organizations have set up a separate innovation management departments (McKinsey & Company, 2012, p. 2). In a 2017 Capgemini survey, 87 percent of companies reported to have “a lab or space dedicated to innovation.” In most cases these are the clear center of innovation activities: Only 17 percent report to innovate beyond those (Buvat et al., 2017, p. 6). R&D and innovation management departments correspond to setting up separate structures with suitable conditions for both exploitation and exploration at the firm level. This is referred to as ‘ambidextrous organization’ (Benner and Tushman, 2003). Centralized organizational units deal with daily operations, exploiting existing competencies through tight processes and culture supporting reliability and efficiency. Small, decentralized units specialized on innovation activities explore new markets and technologies in a surrounding where both organization and culture ‘shelter’ creativity and innovation (ibid., p. 248). Often those innovation centers are also physically separated from the headquarters and co-located to hubs of academia, tech startups or other partners (Buvat et al., 2017). Both units are integrated by top management and a common strategy (Benner and Tushman, 2003). Due to limited resources this approach is often not feasible for small and medium-sized enterprises (Frank, Güttell and WeismeierSammer, 2010). Beyond that, Tidd and Bessant argue that the ambidextrous organization does not meet the requirement of innovation being a cross-divisional task that should not be the solely responsibility of an R&D department (Tidd and Bessant, 2009, p. 474). In a less radical form cross-functional, highly autonomous teams can realize innovation projects outside the mainstream processes and structures. Such secondary structures allow to crosscut ‘functional silos’ of the primary structures and to facilitate cross-departmental collaboration for innovation (Goffin, Herstatt and Mitchell, 2009, p. 407). In the end organization serves to support the people who perform innovation activities (Jaworski and Zurlino, 2007). That is why organization that facilitates innovation in the sense of “structures being put to the service of creativity” (ibid., p. 139), especially through reducing structural barriers, is also essential for the development of an innovation culture, being presented in the next chapter. 2.4.6 Culture and Leadership for Innovation For developing incremental improvements a mere “administration of the new” might be sufficient. As innovative undertakings are inherently ambiguous, com-

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plex, and risky Jaworski and Zurlino underline that, even with the most sophisticated processes, successful innovations will not happen without passionate people willing to constantly challenge the status quo, take initiative, bring forward ideas and realize them against obstacles (Jaworski and Zurlino, 2007). This is part of what is termed ‘innovation culture,’ an “organizational culture shaped by management through organizational values, norms, and artifacts [which] encourages and supports innovative behaviors” (Hogan and Coote, 2013, p. 10). Organizational Culture and Leadership In the common understanding culture refers to “the way we do things around here.” More specifically, Schein defines culture as, “a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.” (Schein, 2004, p. 17)

Particularly in organizations, where people are expected to work towards organizational goals, culture can be used for “explicitly manipulating members into perceiving, thinking, and feeling in certain ways.” (Schein, 2004, p. 19) Schein distinguishes three levels on which culture can be analyzed, from visible and consciously alterable to highly subliminal and hardly changeable: On the most visible level culture manifests for example in artifacts, such as “the architecture of its physical environment; its language; its technology and products; its artistic creations; its style, as embodied in clothing, manners of address, emotional displays, and myths and stories told about the organization; its published lists of values; its observable rituals and ceremonies; and so on.” (Ibid., pp. 25-26) Beyond that, formal organization can be artifacts of culture, such as processes “by which such behavior is made routine,” and structures, such as “charters, formal descriptions of how the organization works, and organization charts” (ibid., p. 26). Espoused beliefs and values describe socially validated beliefs and moral rules that group members are conscious of and that are explicitly articulated. In providing guidance regarding appropriate behavior in certain situations, they have a normative function for established and new group members (Schein, 2004, p. 30). If largely consistent with a group’s basic assumptions, espoused beliefs and values can serve to integrate the group and foster a sense of common identity (ibid., p. 30). Basic assumptions refer to beliefs and values that have been successfully applied by a group over a considerable time and have become highly uniform,

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taken for granted, and nonnegotiable. These are also called “the group’s DNA,” referring to the notion that they are extremely difficult to change (Schein, 2004, p. 31). Calling them the “two sides of the same coin,” Schein highlights the close interrelation of culture and leadership (Schein, 2004, p. 10). Leaders can form cultures by being role models in using new ways of working. If perceived as successful, these behaviors are followed by other group members. Over time may they develop into shared values and finally, into basic assumptions. In this way, leadership can be regarded a moderator of culture in two directions at the organizational, team, and individual levels (ibid., p. 36). Characteristics of an Innovation Culture Which specific norms and values do support innovation? Stern and Jaberg regard cooperative leadership as the starting point. Open communication and a positive climate are seen as the basis for sharing knowledge, open information, trust and safety, and understanding failures as opportunities among employees. With these principles there are better chances that employees feel comfortable, dare to take risks, and conflicts are solved. This in turn supports teamwork and cooperation, learning orientation and readiness to change (Stern and Jaberg, 2010). Vahs and Brem first define the characteristics of cultures that impede innovation (Vahs and Brem, 2013, pp. 206-207): Department thinking: People from other departments are regarded as “opponents” competing for limited resources; Strong risk averseness: ideas are often rejected, reasons for potential failures being rated higher than opportunities; Strong hierarchical thinking: Individuals at lower hierarchical levels with limited decision-making authority, management continually controls project progress; Limited trust and support of individuals and teams by top management. In contrast, an innovation friendly culture is characterized by the absence of these and the presence of a number of additional factors (Vahs and Brem, 2013, pp. 207-213): High importance of innovation Safety and trust for employees Cooperative work and leadership concepts

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Literature Review Extensive education and training Support of innovation champions with information, direct communication, freedoms Accepting and learning from failures

Testing Schein’s model in an empirical setting, Hogan and Coote (2013) provide a comprehensive set of artifacts, norms, and values for innovation, which are characteristic of an innovation-supportive culture (Hogan and Coote, 2013, pp. 11-12): Artifacts Stories about “heroes” of innovation Physical arrangements for innovation Rituals of innovation Language supporting innovation Norms Success in innovation Openness and flexibility for innovation Internal communication supporting innovation Competence and professionalism supporting innovation Inter-functional co-operation supporting innovation Responsibility of employees for innovation Appreciation of employees supporting innovation Risk-taking for innovation Values Success Openness and flexibility Quality of internal communication Competence and professionalism Inter-functional co-operation Responsibility of employees Appreciation of employees Risk-taking To be effective, as underlined by Ahmed, on the one hand innovation cultures need to be of high intensity. This means that norms relating to innovation

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are strongly approved among the members of an organization. On the other hand, cultures have to be of high crystallization, implying that such norms are widely shared within the organization (Ahmed, 1998, pp. 32-33). Leadership and Innovation To support creative behaviors, according to Amabile, leaders should in the first place remove organizational obstacles, which dampen employees’ intrinsic motivation (Amabile, 1998). Creating an innovation culture, however, requires further efforts. She suggests to foster employees’ intrinsic motivation and to increase creativity by: Providing challenging work: matching people and tasks; Freedom: autonomy around process; Adequate resources: time and money for experimentation; Assembling effective teams characterized by a diversity of expertise, a common goal, and a collaborative attitude of members. Further tasks of leaders in building an innovation culture include: Supervisory encouragement: acknowledging innovative efforts, being role models of behaviors that support creativity and innovation; Organizational support: establishing adequate processes and values, such as for information sharing and collaboration showing that innovation is important in the organization (Amabile, 1998, pp. 80-84). Can an Innovation Culture Be Consciously Fostered? According to Schein, an established organizational culture that has typically been developed over decades cannot intentionally be ‘designed’ to better support innovation. However, it is assumed that its development can be influenced in a certain direction by leadership in the long-term (Schein, 2004, p. 292). This view is backed by the 2010 HEC Paris Survey, which reports a huge gap between the awareness and perception of business reality regarding requirements of an innovation culture. Across a range of aspects almost 100 percent of the surveyed innovation practitioners agree that these are important for innovation success, whereas equally consistently only at around 50 percent see them realized in their own organizations. Even in organizations with specialized innovation personnel reality lags behind awareness regarding innovation-supportive cultures (HEC Paris, 2010).

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This picture is supported by a 2016 Capgemini study, highlighting that investments in innovation centers are not translating into improved innovation performance. The authors see the reasons in corporate cultures, which do not likewise support innovation: “Many organizations do not have a culture where employees are empowered to experiment, test and learn, and deploy their ideas at pace.” (Buvat et al., 2017, pp. 6-10) The authors call to “tackle the weakest links: Ecosystem and Culture” which requires “strong, committed, and determined leadership.” (Ibid., p. 17) 2.4.7 Indications of Bureaucracy in Classic Innovation Management Classic innovation management approaches focus on systematically planning, controlling, and monitoring innovation (Vahs and Brem, 2013). It is argued that these are substantially based on classic organization theory and a mechanistic understanding of organizations (Howaldt, Kopp and Beerheide, 2011). The following is a selection of central innovation management elements, with apparent roots in the bureaucratic principles previously outlined. The examples can be found in many major textbooks (e.g. Tidd and Bessant, 2013; Vahs and Brem, 2013; Hauschildt and Salomo, 2011). Specialized departments for R&D or innovation management; Thus, organizational silos remain, restricted cross-department communication and collaboration; Top management as decision committee in gate meetings and as innovation sponsors; consequence: decisions not based on optimal information available, restricted autonomy, climate of mistrust and control, potential demotivation; Innovation manager as an organizational role: job descriptions with clearly specified tasks, competences and responsibilities, consequences: individuals outside R&D do not feel responsible for innovation, innovation as additional workload on top of main duties and responsibilities; Idea management and innovation processes with clearly defined phases, activities, selection criteria, controlling mechanisms: innovation efforts are slowed down by formalization (filling forms, discussing status in meetings), promising ideas might be killed while others bypass the process; consequences: ineffective and inefficient innovation efforts, potential demotivation; Primarily electronic communication between idea givers and decision committee in employee suggestion schemes / idea management processes; conse-

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quence: inefficient and ineffective, rejections of proposed ideas often not made sufficiently understandable, potential demotivation. Beyond being established in the literature, the above-listed approaches can be assumed widely spread in corporate practice. In an exemplary way, the following section outlines empirical findings from the HEC Paris 2010 survey and the 2012 McKinsey Global Survey on the presence of bureaucratic principles in corporate innovation practice. Specialized departments for innovation are widely spread, as reported by the 2012 McKinsey Global Survey. The most driving separate innovation function takes the form of an innovation center in 27 percent of responding organizations, a new-business development function in 25 percent, and an emerging-business opportunities group in 18 percent (McKinsey & Company, 2012, p. 2). Even 87 percent of respondents work for an organization that has a lab or space dedicated to innovation, as found by a 2017 Gapgemini study (Buvat et al., 2017, p. 6). That there should be a high degree of collaboration among departments to ensure successful innovation was supported by 100 percent of respondents to the 2010 HEC Paris Survey. 69,3 percent report this to be accomplished in their organization, with 10 percent who fully agree (HEC Paris, 2010, p.16). This indicates that despite awareness, overcoming ‘departmental silos’ remains a challenge in innovation practice. Further, the McKinsey Global Survey revealed that top management is heavily involved in innovation activities. 40 percent of the respondents state that top management extremely or very frequently interacts with the separate innovation function, compared to 17 percent where interaction is described as somewhat frequently, and 22 percent where there is rarely or no interaction at all (McKinsey & Company, 2012, p. 5). Regarding the way top management is involved in innovation, 38 percent of respondents indicate that they are actively involved in the operational process from ideation to market launch. In 35 percent of the organizations they evaluate major innovation projects and provide feedback especially regarding strategic priorities and investment decisions. In 26 percent top management serves on an innovation council or committee. Only in 14 percent, executives are not at all involved in innovation activities (McKinsey & Company, 2012, p. 5). That everybody should propose innovative ideas related to their job, is supported by close to 90 percent of surveyed innovation personnel in the HEC Paris study. Still, the view that there should be specialized roles or functions for inno-

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vation is widely accepted: 87 percent state that innovation managers should be aware of new ideas within their organization. The same share supports that that some departments or people should be more dedicated to innovation than others (HEC Paris, 2010). The view that there should always be a process to improve ideas before deciding to implement or not, is supported by 82 percent of innovation practitioners in the HEC survey. In 46 percent this process is in place. Another 85 percent support the view that innovation managers should be evaluated based on the quality of the innovation process (HEC Paris, 2010, p. 30). In 54 percent innovation is supported by a commonly shared method (ibid., p. 33). The presence of a formal template in their company to suggest ideas with standard criteria is reported by 46 percent of respondents (HEC Paris, 2010, p. 32). These selected findings indicate that departmentalization, hierarchy of authority, formalization of organizational roles and formality are widely spread in corporate innovation practice. 2.4.8 Conclusion At the level of the organization innovation does not fit into the bureaucratic apparatus with its focus on reliability and efficiency. Therefore, within innovation management strategy, structure and culture are aligned to support and shelter innovation. However, innovation supportive structures and cultures may be difficult to be maintained within the overall environment having an opposing bureaucratic orientation. Even more, key elements of innovation management, meant to shelter innovation from bureaucracy, show themselves roots in bureaucratic principles. Thus, supportive environments for innovation capacity need to be considered from a holistic point of view, covering strategy, structure and culture and interrelations between various levels. In the following, heterarchy is presented, a nonbureaucratic model of organization suggested to better foster innovation than prevalent bureaucracy.

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2.5 Heterarchy as Non-Bureaucratic Alternative in the Innovation Context 2.5.1 The Innovative Organization If the bureaucratic model impedes innovation, as suggested by theory and empirical evidence, alternative models that promise to better facilitate novel undertakings should be considered. The characteristics of such an innovation-supportive organization were described by Thompson (1965). The following is an overview of his arguments, highlighting the characteristics of the innovative organization broadly following the structure provided by Hall’s (1963) operationalization of bureaucracy: Innovative areas rather than formal departments, innovation as task and responsibility of the whole organization rather than professional developers or R&D departments, some degree of overlapping and vagueness between units to foster communication; Broadly dispersed power and influence, control by peers rather than superiors, multiple group membership as mechanisms for deciding on ideas, formal authority/jurisdiction only to be applied in case of arbitrary situations, extrinsic reward system based on status differences loses importance; Continuous redefinition of own responsibilities on case basis, no rejection of new tasks on the basis of narrow job descriptions possible, project organization or job rotation to maximize stimulation by diverse experiences; High degree of autonomy and freedom to innovate for individuals, optimally a loose structure that allows for flexible restructuring depending on the task at hand: more unstructured for idea generation, tighter and more hierarchical for implementation, a permanently loose structure is to be preferred over a permanently too rigid one; Free communications in all directions facilitated by low status differences and high need for exchanging views (based on Thompson, 1965, pp. 4-20). Later contributions of theoretical and empirical nature have largely confirmed and built on Thompsons’s arguments (Damanpour and Aravind, 2012). In their meta-analytic review of studies on organizational factors and innovation, Damanpour and Aravind find that the innovative organization is characterized by a low level of centralization, high levels internal and external communications, a positive attitude of management towards change, professionalism and technical competence, as well as the availability of slack resources (ibid.).

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Literature Review

In their study of 153 organizations, Akgün, Keskin and Byrne (2012) find that, “autonomous behaviors of departments positively impact technology and management system adaptive capability, loose management style influences market and management system adaptive capability, and uneven/slow information travel in organizations negatively affects technology and management system adaptive capability.” (Akgün, Keskin and Byrne, 2012, p. 171). In their meta-analtic review of 233 empirical studies, Evanschitzky, Calantone, and Jiang find “cross-functional integration,” “cross-functional communication” and “dedicated human resources” as factors related to product success, with organizational culture being an important moderator (Evanschitzky, Calantone, and Jiang, 2012, p. 29). With a focus on Human Resources Management (HRM), Shipton et al. (2017) propose that employees are less innovative in environments characterized by control-oriented HRM, which “fosters employee innovative behaviours that are aligned with institutional norms, values and expectations.“ Such “isomorphic pressures” to show conformative behaviours are suggested to negatively influence the bottom-up emergence of more radical innovations and reduce organizations’ capabilities to adjust to major external changes (ibid., p. 254). Separating creative individuals in entrepreneurial startup functions from the general workforce is regarded an example of such “top-down, control-based HRM” (Shipton et al., 2017, p. 253). By contrast, “entrepreneurial HRM“ is suggested to promote “reflective innovative behaviours“ that enable both the bottom-up emergence of innovations that are aligned with the organization (“composition”) and the emergence of divergent perspectives being integrated to possibly more radical innovations (“compilation”) (Shipton et al., 2017, p. 255). The term “control-oriented” can be interpreted as more centralized-hierarchical, while “entrepreneurial” is assumed to relate to empowering HRM strategies and practices. The organizational structure or design is central for innovation capacity as it impacts factors at all other levels. Thus, as the reviewed empirical evidence suggests, to increase innovative capacity, organizations should on all levels organization, team, and individual - foster innovation-supportive organizational processes and structures, and behavioral practices, such as encouraging crossfunctional communication and thinking beyond organizational boundaries.

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2.5.2 Alternatives to the Bureaucratic Model The organization literature offers a range of concepts that are suggested as alternatives to bureaucracy and promise to overcome its central limitation, a lack of flexibility. Before narrowing the focus on one of these, available alternatives needed to be reviewed to avoid excluding knowledge on differently termed but otherwise similar concepts. The following databases were screened: Business Source Premier, EconLit, Emerald Insight JSTOR, ScienceDirect, science gate, SSRN, SpringerLink, Wiley Online Library; using the following search terms and combinations: ‘post-bureaucratic,’ ‘non-hierarchical,’ ‘heterarchical,’ ‘organizational,’ ‘model of organization,’ ‘organizational structure.’ The following organizational concepts were identified: The Organic Organization (Burns and Stalker, 1961) The Adhocracy (Mintzberg, 1979) The Collectivist Organization (Rothschild-Whitt, 1979) The Information-based Company (Drucker, 1988) The Interactive Type (Heckscher, 1994) Heterarchy (e.g. Hedlund, 1986) The Horizontal Organization (Castells, 1996) The Network Organization (e.g. Baker, 1992) The Virtual Organization (e.g. Mowshowitz, 1997) The Peer-based Organization (Nielsen, 2011) Holacracy (Robertson, 2007) Teal Organizations (Laloux, 2014) Reviewing these concepts revealed that many of these are strikingly similar as to structure and functions, often only with slightly different foci. Still, while all of these concepts promise to better facilitate innovation, the concept of heterarchy has the most comprehensively elaborated theory with regard to innovation. Therefore, in the further course the focus is narrowed to heterarchies. In the following sections, first a definition and operationalization of heterarchy for this work are derived. Next, theory and empirical findings on innovation in heterarchies are presented, concluding with a description of the research gap.

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2.5.3 Defining Heterarchy As summarized in Table 2.3, there is a number of definitions of heterarchy, most of which focus on its key characteristic, the capacity to dynamically change its structures as the task requires. The term heterarchy was first used by neurologist McCulloch for describing the structure of the human brain: Neurons form nervous nets with a huge number of connections that can possibly be activated, rather than a stable configuration of super- and subordination: “Circularities in preference instead of indicating inconsistencies, actually demonstrate consistency of a higher order than had been dreamed of in our philosophy. (...) It has a heterarchy of values, and is thus interconnectively too rich to submit to a summum bonum.” (McCulloch, 1945, p. 3) Similar to McColough’s definition, according to Hofstadter (1979), “a program which has a structure in which there is no single ‘highest level,’ or ‘monitor,’ is called a heterarchy.” This corresponds to the view of Crumley, stating that a heterarchy is constituted by elements that are not ranked or can possibly be ranked in different ways (Crumley, 1995). Herbst contrasts not only bureaucratic hierarchy with a centralized structure and with a de-centralized structure, but sees both as opposits of an “unstructured chaotic state.” This view opens the opportunity for a “forth alternative,” which he sees in a “multistructured organization” (Herbst, 1976, p. 3). Herbst summarizes: “Bureaucratic hierarchical organizations are based on the principle of a single rigid structure, while each nonhierarchical form of organization has the capacity for multistructured functioning.” (Ibid., p. 9) Table 2.3: Definitions of heterarchy Authors

Definition

“Circularities in preference instead of indicating inconsistencies, actually demonMcCulloch, strate consistency of a higher order than had been dreamed of in our philosophy. (...) 1945, p. 3 It (an organism) has a heterarchy of values, and is thus interconnectively too rich to submit to a summum bonum.” Hofstadter, “A program which has a structure in which there is no single ‘highest level,’ or 1979, p. 134 ‘monitor,’ is called a heterarchy.” Crumley, “the relation of elements to one another when they are unranked or when they pos1995, p. 3 sess the potential for being ranked in a number of different ways.” “a self-governed organizational form structuring its operations according to the Reihlen, requirements of the innovation process, favoring cooperation even in the face of 1996, p. 8 conflict and dissension while combining the decentralized knowledge in a problem oriented structure.”

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Stark, 2009, “Heterarchy represents an organizational form of distributed intelligence in which p. 19 units are laterally accountable according to diverse principles of evaluation.” “a) multidimensional (knowledge, action and position); b) asymmetrically ordered along the dimensions; Hedlund, c) temporary subordination and simultaneous sub- and superordination; 2005, p. 232 d) non-transitivity, circularity; e) horizontality; f) normative, goal-directed integration” “the recognition that a system has multiple organizing principles. These might inDavies, volve hierarchy, but can also link aspects of society horizontally (…). The primacy 2009 of these organizational principles may be context-specific and involve fluctuating power relations.” Spelthann “an organizational and institutional context characterized by: (1) complexity and and multilayeredness, (2) duplication, overlap and incongruence, (3) redundancy and Haunschild, organizational slack, (4) latency, and (5) rivalry” 2011, p. 101 Cumming, “an organizational continuum that incorporates elements of both networks and hier2016, p. 626 archies.”

Heterarchy’s “multiple organizing principles,” including top-down hierarchical and horizontal peer-to-peer-processes, take effect in “contextspecific and involve[s] fluctuating power relations” (Davies, 2009). Thus, Cumming describes heterarchy as “an organizational continuum that incorporates elements of both networks and hierarchies” (Cumming, 2016). Along the dimensions ‘flat-hierarchical’ and ‘networked-individual,’ Cumming differentiates four types of heterarchies: ‘reticulated,’ typical for startups, ‘polycentric’ with distributed control, ‘individualistic’ corresponding to anarchy, and ‘pyramidal’ relating to traditional large organizations (Cumming, 2016, pp. 626, 629). Contrasting heterarchy with hierarchy (as e.g. Parhankangas et al., 2005, p. 433) would imply reducing the concept to nature of authority, which is seen as just one, even if constitutive element among others. Rather, corresponding to the conception of bureaucracy outlined before, heterarchy is understood in this work as more encompassing organizational model, “a self-governed organizational form” (Reihlen, 1996) covering a number of elements, as shown by Figure 2.2. As corporate innovation capacity is influenced by a range of factors, which together make an innovation-supportive environment, the more encompassing view is chosen here. Based on the above presented definitions, heterarchy in this thesis is defined as an encompassing model of organization, which contrasts with formal and stable hierarchical bureaucracy particularly by its capacity to flexibly adapt its structure according to specific requirements, thus, integrating a multitude of

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possible organizational structures in one. Corresponding to the central characteristic of bureaucracy, a stable formal hierarchy of authority, the constitutive element of a heterarchy is dynamic influence structures, whereby influence is dynamically attributed to those members regarded most competent in a certain situation, as opposed to stable authority structures on the one side, and democraticegalitarian systems on the other. 2.5.4

Operationalizing Heterarchy

Primarily following the more encompassing definitions suggested by Hedlund (2005), Reihlen (1996; 2009), and Stark (2001), organizations qualifying as heterarchical in this thesis will score high in the following dimensions, which are summarized and contrasted to Hall’s dimensions of bureaucracy in Figure 2.2.

Figure 2.2: Bureaucracy and heterarchy and their characteristics as a spectrum

Network structure: counter to Weber’s: “A division of labor based upon functional specialization and clearly separated departments”; Dynamic influence: counter to: “A well-defined hierarchy of authority”; Culture as primary mechanism coordinating individual action: counter to: “A system of rules covering the rights and duties of positional incumbents”; Culture as primary mechanism coordinating collective action: counter to: “A system of procedures for dealing with work situations”;

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Informality and high degree of interpersonal communications in all directions: counter to: “Impersonality of interpersonal relations”. More specifically, intra- and inter-organizational networks become the locus of action in heterarchical organizations. As a result, internal boundaries, that is departments, and firm boundaries are less important and less distinct in heterarchies than in bureaucratic departmentalization. (Stark, 2009). Rather than being positioned in only one department, being clearly seperated from others, actors in heterarchies form a network structure, with social interaction and power relations flexibly adapting according to changing requirements. Heterarchy’s formal organizational design is kept at a minimum, which leaves high levels of autonomy and self-organization to individuals (Reihlen, 1996). The organizational structure of heterarchy in principle allows everybody to participate in decision-making. However, in contrast to both hierarchical or democratic systems, in heterarchy’s negotiated system decision making power is dynamically allocated to the individuals perceived the most suitable in an ad-hoc negotiation process, depending on tasks at hand and problem-solving skills of individuals, i.e. situational expertise. This mechanism is known as “the principle of potential leadership” (Reihlen, 1996, pp. 9-10). Thus, dynamic influence describes that power relations, as opposed to being formally defined and stable, may easily shift to different persons, depending on who is regarded how competent in which situation or task (Reihlen, 1996; Stark, 2009). Heterarchical organizations are expected to be more flexible, responsive, and to show a higher learning capability, essentially based on high levels of autonomy and normative integration (Reihlen, 1996). Individual and collective action in heterarchy is primarily coordinated through cultural mechanisms such as strong common values and norms that its members commit to (ibid.). This distinguishes heterarchy from networks (Stark, 2009): The interaction between actors is based on often implicit evaluative principles, which are not part of network ties (Stark, 2009). The culture of a heterarchy combines pluralism, in the sense of differing expertise, views, opinions, with unity, i.e. common interests and norms. Like this it builds the ground for innovation: permanent creative conflicts among diverse solutions in the ideation phase, while ensuring integration during implementation (ibid.). Central to heterarchies is the innovative community that offers trust and security to its members and facilitates risky experimentation (Reihlen, 1996). Maintaining an appropriate balance is seen as vital: Where this common culture is too weak, there is a risk of drifting to anarchy, a state where individuals follow

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their self-interest rather than a common direction. Where it is too strong the organization might develop into a community of faith, where pluralism and creative conflicts are suppressed (ibid.). While actors in heterarchies are highly autonomous from management, they are laterally accountable to their peers and the collective (Stark, 2009). These interdependencies imply a high need for lateral communication and coordination (ibid.). As opposed to bureaucracy’s impersonality of interpersonal relations, heterarchy is characterized by informality and a high degree of interpersonal communications. Individuals suited to work in heterarchies are described as willing and able to collaborate and network, to take initiative and responsibility for the whole and to handle conflicts. That is why Reihlen suggests that heterarchical organizations should hire highly qualified persons with a high sense for achievement, selfactualization and autonomy (Reihlen, 1996). In contrast to bureaucracy, where career aims relate to moving up the hierarchy, in heterarchies the aim is to improve personal reputation in order to increase chances that one’s services are demanded (ibid.). 2.5.5 Heterarchy and Innovation Underlining the concept’s suggested advantages for facilitating innovation, Reihlen defines heterarchy as, “a self-governed organizational form structuring its operations according to the requirements of the innovation process, favouring cooperation even in the face of conflict and dissension while combining the decentralized knowledge in a problem oriented structure” (Reihlen, 1996, p. 8).

As proposed by Stark, the need for strategic planning by top management is made obsolete by the collective of individuals being empowered to search for and exploit new opportunities. In heterarchies exploitation and exploration activities are not separated and performed by different, specialized departments. Instead, innovation is everybody’s task and realized throughout the organization (Stark, 2009). Both Reihlen and Stark explain how heterarchy’s organizational culture builds the ground for innovation. It combines pluralism and unity: The first refers to permanent creative conflicts among differing views and expertise that foster ideation and a bigger number and variety of solutions. The latter describes common interests and values, which ensure integration and implementation of ideas (Stark, 2009). In this context, the innovative community offers trust and security to its members and facilitates risky experimentation (Reihlen, 1996).

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Which options are selected follows “the principle of rivalry of evaluative principles”: rather than having a fixed ranking, any order is being constantly renegotiated (Stark, 2009, p. 19). This increases the chances that superior options are selected, which is suggested a major reason why heterarchies are regarded particularly adaptive and suitable for dynamic environments (ibid.). While heterarchical principles may be not be generally applicable, “the more a firm’s competitiveness depends on the ability to learn and to innovate, the more important elements of the heterarchical logic of coordination become.” (Reihlen, 1996, p. 16) Theory that the non-hierarchical concept of heterarchy better supports innovation than bureaucracy has been supported by a number of empirical studies. These complement the findings on performance and attitude-related effects on innovation performance of bureaucratic and non-bureaucratic organization outlined in chapter 2.3.3. Bhargava and Sinha (1992) report that in their experiments on the group level, heterarchical structure was perceived as having a higher degree of production, commitment, more effective leadership, and less interpersonal conflicts compared to hierarchical organization (Bhargava and Sinha, 1992). In their case studies on development processes in the Linux community and three business examples, Parhankangas et al. (2005) find those to be “systems of negotiated order.” Using an experimental design, Liu, Magjuka and Lee (2008) find that under high degree of vagueness and complexity, that means innovative tasks, teams operating with a non-hierarchical structure outperformed those with a hierarchical structure in terms of effectiveness (Liu, Magjuka and Lee, 2008). According to Spelthann’s and Haunschild’s (2011) qualitative study based on one heterarchical organization in the dynamic and creative video production industry, creativity is fostered by organizational diversity, “characterized by multilayeredness, duplication, overlap, incongruence, redundancy, organizational slack, rivalry and latency” (Spelthann and Haunschild, 2011, p. 106). The authors’ findings indicate that creativity is fostered by the characteristics of heterarchical structures. In their qualitative study on non-hierarchical principles in seven large software companies, Holmström Olsson and Bosch (2016) find that these are primarily adopted for exploring innovations or new strategic areas, research collaborations with customers, new development approaches, and developing competences in new focus areas (Holmström Olsson and Bosch, 2016).

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Literature Review

In their firm-level case analysis of innovation practices at Google Inc., Steiber and Alänge (2013) find that continuous innovation is facilitated by the whole organization being involved in innovation, which is supported top management. Culture and people were considered the most important factor explaining the organization’s innovation performance. In contrast, ‘organizational policies, structure, and processes,’ was not regarded among the top three (ibid., p. 250). The general view was that institutionalizing innovation, through formalized roles such as innovation managers or innovation departments was inadequate: “Ideas were believed to come from anyone and everywhere in the organization“ (ibid., p. 250). However, even though Google might fulfill some of the characteristics of heterarchy, with central importance attributed to self-organizing employees, Steiber and Alänge (2013) did not attempted to evidence this. As the research focus was capacity for continuous innovativeness, the case of Google was selected for its dynamic environment and continuous innovation performance rather than organizational model (Steiber and Alänge, 2013, p. 244). According to the 2014 study by the Initiative Neue Qualität der Arbeit, organizations with network structures are expected to be best suited to cope with the challenges of modern work. The majority of the 400 surveyed executives assume that the collective intelligence of self-organizing networks allows for more creative impulses, higher innovation capacity, faster processes, and reduced complexity (Initiative Neue Qualität der Arbeit, 2014). 2.6

Conclusion and Research Gap

The management of innovation, how it is done, is usually explored in theory and practice with reference to three themes; strategy and direction, processes and structure, culture and leadership (see Figure 2.3). In essence to exist and grow innovation has to be ‘sheltered’ by management, as the general bureaucratic organization has a dominant concern with reliability and efficiency. This shelter and control presents a double edge for innovation (Brown and Eisenhardt, 1995; Wolf, 2011; Pfeiffer, Schütt and Wühr, 2012). Shelter and control can be positive; it protects that which needs nurturing, the first and early manifestations. Or shelter and control can be constraining; it can shape and constrict, perhaps distort that which is nurtured. This, in theory and in practice, renders shelter and control ambiguous in the context of innovation management. The ambiguity is resolved in classic innovation management by essentially

Conclusion and Research Gap

49

aligning with bureaucratic principles and rationales, in the name of shelter and support for innovation. The forms taken by and problems of such organizational sheltering to manage innovation have been described with reference to aspects of management in strategy, structure and culture (Hauschildt and Salomo, 2011; Tidd and Bessant, 2013). Resulting limitations of traditional innovation management with regard to flexibility are acknowledged. Still, there is debate about how much freedoms and structures are adequate to support inherently ambiguous and complex innovation initiatives.

Figure 2.3: The research gap in context

The non-bureaucratic concept of heterarchy has long been proposed to better enable innovation: With strategies, structures and cultures that emphasize empowered individuals and teams, and primarily horizontal coordination in networks, these are associated with flexibility and capacity to enable ad-hoc emergent activity. The theory that heterarchical organization can manage innovation well, given how their organizational form as whole is conceived, appears to have been supported some empirical studies. This is not surprising as creativity is fostered by among other things an organizational diversity, multi-layeredness, redundancy, organizational slack and rivalry (Spelthann and Haunschild, 2011), which heterarchies possess. Descriptions of individual cases of heterarchical organizations are available particular in the popular literature, such as W. L. Gore & Associates, Morning Star, Medium, Semco and others (Semler, 1993; Hamel, 2007; Bernstein et al., 2016). In the great majority it cannot be asserted that these cases are based on scientific standards as to data generation and analysis. Rather, these often take the form of books by the CEO or newspaper articles based on few interviews and are purely descriptive.

50

Literature Review

In the reviewed prior research, mostly the focus lies on organizations’ quality to be heterarchical, rather than innovation mechanisms within such organizations. Descriptions of why and how heterarchies innovate are rare. In these reviewed studies, innovation is largely operationalized as an outcome rather than a process. Thus, the outcome of innovation success in different models of organization is at the focus, rather than the course and activities along the innovation process. In exceptional cases where innovation in primarily selfmanaging organizations is described in detail (Steiber and Alänge, 2013), no attempts were made to classify the underlying organizational model. Further, there are few studies that systematically compare aspects of nonbureaucratic, heterarchical organizations across several organizations. Data going beyond the highly specific conditions and solutions found at individual organizations are likely to better allow drawing conclusions of a more general nature. Summing up, empirical research has tended to either focus on the structure and general functioning of individual non-hierarchical organizations or on their innovativeness. The detail of practice in heterarchies remains uncertain and under-researched, and lacking the detail which is relevant to innovation management. Within bureaucracy innovation is sheltered by classic innovation management strategies, structures, and cultures (Figure 2.3); But what is the corresponding equivalent in heterarchies? Evidence is needed to show if and how the conditions of heterarchy favor innovation by empirically examining the actual experiences of innovation, describing and exploring these across a number of multiple cases and organizations.

3

Research Design and Methods

3.1

Summary of the Methodological Approach

The methodological approach applied in this study is summarized in the following section and in Figure 3.1. The text sections where the more detailed explanations are given in the further course of this chapter are referred to throughout this summary. With the research aim to test and extend the limited prior theory on innovation in the context of heterarchy (see 3.2) beyond individual cases, a multiple case study approach was chosen, with five heterarchies of different sizes and industries (see 3.4.1 and 3.4.2). Screening for “flat,” “non-hierarchical,” and “collectively-led” organizations, the cases were identified through the popular media and the researchers’ network. Three approaches were used to validate their heterarchicalness and, thus, their suitability for this study in parallel to the actual data collection and analysis process (see 3.4.3). Next, the data collection tools were designed, most importantly a qualitative semi-structured interview guideline and an online survey meant to characterize the cases in terms of their heterarchicalness. Starting with FIRECO as a pilot case, the further cases on Home Care Network, People Software, Digital transformers, and Global Industries were prepared sequentially and partly overlapping. Findings from the earlier interviews and cases somewhat guided data collection and analysis in the later cases, e.g. as to rephrasing interview questions or adapting earlier codes. In each case data from five sources was collected and analyzed: Semi-structured interviews, organization documents (organizational charts, described values and behavior orientations), an online survey (n=37), workspace (office architecture and equipment), and external view (articles in newspapers, magazines, books or research papers). Data from all sources were triangulated for determining the cases’ heterarchicalness and innovativeness (3.4.3. and 3.4.4).

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2_3

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Research Design and Methods

Figure 3.1: Summary of the methodological approach (based on: Yin, 2015, p. 60)

Data from the interviews served as the key input for investigating innovation activities, the focused “how” and “why” of innovation in the non-bureaucratic context. In each organization two to five interviews were conducted. The

Conceptual Model and Research Purpose

53

selection of participants was guided by their potential ability to contribute to the study with diverse backgrounds and views (e.g. developers and management). Open questions were phrased around the major themes of innovation management, strategy and direction, processes and structures, and culture and leadership for innovation as a rough guiding structure (3.4.4). The 15 interviews were analyzed through content analysis, deducting themes within the broad areas of strategy, structures and culture through open coding within the individual interviews and subsequently selective coding across several interviews (Flick, 2014). Template analysis (King, 2004b) was used to subsume findings within the individual cases. The data matrix (Nadin and Cassell, 2004) was applied for deriving propositions on strategy, structures, and culture for innovation in heterarchies from the more aggregated data across the five cases (see 3.4.5). Finally, the findings’ implications on theory and organizational practice were outlined (see 6.1 and 6.2). The quality of this piece of qualitative research and its limitations were described in section 3.5. 3.2

Conceptual Model and Research Purpose

Having described the theory of innovation management in bureaucracy and heterarchy as a potential alternative, the contrasting implications they have in principle for innovation management can be elaborated. In essence, the management of innovation can be explored with reference to a conceptual model which identifies antecedents and mediators of innovation management as an outcome (see initial conceptual model in Figure 3.2). The theories of bureaucracy and heterarchy provide contrasting potential antecedents, representing alternative organization forms within which innovation is handled. Three mediators are identified, representing the organizational themes of strategy and direction, processes and structure, culture and leadership (Stern and Jaberg, 2010; Cooper, 2013; Herstatt, Goffin and Mitchell, 2009). The outcomes of this in the practice of innovation management is well described already where the antecedent is bureaucracy, the gap is in describing innovation management where the antecedent is heterachy. To advance our knowledge and understanding of innovation in heterarchies the mediators of strategy and direction, structure and process, culture and leadership can be adopted and elaborated upon more systematically and in detail. The

54

Research Design and Methods

core question is how in heterarchical organization strategy, structure and culture shape innovation management.

Figure 3.2: Initial conceptual model

Within the core question, how innovation works in heterarchies, the subordinate research questions follow the organizational mediators and dimensions of innovation management, strategy and direction, processes and structures, as well as innovation culture and leadership. As presented in chapter 1.2, more specifically, it is investigated what guides innovative efforts in organizations defined as heterarchical, how an idea moves from problem identification to successful market launch, and how organizational values and norms support these innovative undertakings. The literature review expanded on the initial thinking that would suggest that the heterarchical organizations are in theory different in respect to innovation management in bureaucracies through the mediators of strategy-direction and processes-structure, though perhaps similar in respect to culture-leadership (Figure 3.2).

Figure 3.3: Assumed primary nature of innovation in bureaucracy and heterarchy

Research Philosophy and Approach

55

Theory suggests that innovation is driven by both organizational and cultural mechanisms. Innovation management with roots in classic organization theory is assumed to be more based on formal processes and structures for handling innovation, even though the importance of innovation-supportive culture and leadership are acknowledged. As indicated in Figure 3.3, it is hypothesized here that in heterarchy, innovation is more coordinated by cultural than by formal organizational mechanisms. This is investigated on a high level of analysis. Based on innovation practices identified under the conditions of nonbureaucratic heterarchical organization, the goal of this thesis is to provide learnings to other organizations that are not mainly or wholly heterarchical, but aspire to increase their innovative capacity. 3.3

Research Philosophy and Approach

The elements of the research process aiming to fulfill this purpose are summarized in Figure 3.4. Each of those is explained in the subsequent text section.

Figure 3.4: Elements of the research process (based on: Saunders, 2012)

In terms of epistemology, a critical realist view is taken in this work. It is concerned with “the use of existing theory and critical engagement with participants’ knowledge and experience” with regard to the phenomena being investigated (Fletcher, 2016, p. 181). Most importantly, and in contrast to both positivism and constructivism, it is assumed that, “ontology (i.e., what is real, the nature

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Research Design and Methods

of reality) is not reducible to epistemology (i.e., our knowledge of reality). Human knowledge captures only a small part of a deeper and vaster reality.” (Fletcher, 2016, p. 184) More specifically critical realism differentiates the “real” (structures and their “causal powers”), the “actual” (events and processes), and the “empirical” (what is experienced and observed) (Fairclough, 2005, p. 922). As it intends to explain, “social processes and events in terms of the causal powers of both structures and human agency and the contingency of their effects” (ibid., p. 922), this scientific view is regarded particularly suitable for investigating and critically exploring innovation mechanisms in heterarchical organizations. Bhaskar distinguishes transitive and intransitive objects of knowledge. While the first exist independent of human intervention, the latter, for example social structures, are shaped by human activity and cannot be empirically investigated independent of it (Bhaskar, 1979; Fairclough, 2005). Therefore, human experiences and understandings matter and may challenge existing knowledge (Redman-MacLaren and Mills, 2015). Prior theory is an essential input for critical realist empirical research (Bhaskar, 1979). As different theories can be closer to or further from reality, Fletcher stresses: “The initial theory facilitates a deeper analysis that can support, elaborate, or deny that theory to help build a new and more accurate explanation of reality.” (Fletcher, 2016, p. 189). Theory and empirical research exists on innovation management and heterarchies separately. However, there is little research that combines both and allows to deduct why and how heterarchies are innovative. The epistemology and ontology of critical reality is suited to investigate prior theories and identify potential connections of structures or behaviors in heterarchies and their innovativeness. “Knowledge is always mediated by preexisting ideas and values.” (Seale, 1999, p. 470) The qualitative researcher is reflective of having their own values and theories as preconceived views of the world, among others. There is a risk that these influence the selection and interpretation of data, naturally confirming these initial views. Therefore, these need to an extent to be suspended, which a critical realist approach enables (Fletcher, 2016). To some extent the research may be guided by these, albeit justifiable with reference to knowledge on organization studies and classic innovation management in the literature. For example, the researcher assumed and theory and empirical evidence presented in chapters 2.3.3 and 2.5.5 suggests that heterarchies better supports innovation than bureaucracy. Such belief and pre-existing support for the theory is to be questioned in a

Research Methodology: Case Study

57

critical realist way, and explored rather than tested is if it might be proven true in a deterministic way. 3.4

Research Methodology: Case Study

3.4.1 The Case for Case Study Research First, the adopted research paradigm impacts the methodology to be selected. Critical realism as a general methodological framework does not prescribe certain research methods (Fletcher, 2016). As organizations are understood as complex systems with multiple overlaps and interrelations, critical realist researchers look for patterns or tendencies rather than objective truths (Danermark et al., 2002). Coding of qualitative data allows identifying such tendencies (Fletcher, 2016). Second, the nature and extent of pre-existing knowledge on the research area defines the appropriate approach. As shown in the literature review, prior theory and empirical evidence of innovation in heterarchical organizations is of a nascent to developing nature. Thus, Edmondson and McManus’ framework of methodological fit in management field research would suggest qualitative data collection methods such as open-ended interviews and relevant documents that facilitate identifying patterns and building theory (Edmondson and McManus, 2007). The case study approach was chosen, as it allows for analyzing “complex social phenomena” and gaining “a holistic and real-world-perspective” (Yin, 2015, p. 4). Further, case study research is regarded especially suitable as it builds on some pre-existing theory, in line with the chosen critical realist perspective (Bhaskar, 1979). Additionally, case study research is regarded “an allencompassing method - covering the logic of design, data collection techniques, and specific approaches to data analysis” (Yin, 2015, p. 17). Thus, it provides the set of suitable methods, which is hardly described for critical realist empirical research (Fletcher, 2016). Yin defines case study based on its scope (1) and features (2): “1. A case study is an empirical inquiry that investigates a contemporary phenomenon ("the case") in depth and within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident. (…)

58

Research Design and Methods

2. The case study inquiry copes with the technically distinctive situation in which there will be many more variables of interest than data points, and as one result, relies on multiple sources of evidence, with data needing to converge in a triangulating fashion, and as another result benefits from the prior development of theoretical propositions to guide data collection and analysis.” (Yin, 2015, pp. 16-17) 3.4.2 Multiple Case Design A holistic multiple-case study approach (Yin, 2015, p. 62) was chosen with the aim to investigate innovation across several heterarchical organizations. A number of cases are linked through the common phenomenon of heterarchy. Stake calls this “phenomenon or condition to be studied” the quintain (Stake, 2006, p. 6). Similar results across similar cases would make the findings more robust compared to those in individual cases (Yin, 2015, pp. 57, 62). Following the literal replication logic the thesis aims to identify and compare common characteristics, mechanisms, and context variables across a number of heterarchies. With theoretical replication contrasting results would be seen under contrasting conditions (ibid.). Therefore, heterarchies of different sizes and industries shall be analyzed. Further relevant context factors are likely to come up in the process (Stake, 2006). By analyzing the phenomenon in different contexts, a multiplecase design can help understand how innovation is realized under the conditions of heterarchical organization (ibid.). The steps of the multiple research project are described in the following. First, based on the research question and goals, qualifying case study organizations were identified. Suitable data collection methods were selected and questionnaires developed. Next, data from various sources on the first case study FIRECO was collected and analyzed, starting in December 2015. The other individual case studies were prepared in the same way, partly sequential, partly overlapping. After all individual case reports were completed in August 2017, the cross-case analysis was conducted. Finally, the findings were prepared as a cross-case study report and discussed in terms of theoretical and practical implications.

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3.4.3 Case Selection Case Selection Strategy For selecting cases, Eisenhardt (1989) suggests theoretical sampling as it “focuses efforts on theoretically useful cases - i.e., those that replicate or extend theory by filling conceptual categories” (Eisenhardt, 1989). In theoretical sampling decisions as to the selection and composition of empirical material are made stepwise during the actual process of data collection and analysis (Flick, 2014). In contrast to statistical sampling techniques, selection does not aim for representativeness. Cases and individual interview partners were chosen because they were expected to contribute additional insights to the emerging theory, against the background of already collected and analyzed material and the current status of theory (ibid.). To guide case selection Stake suggests the following criteria: “relevance regarding the quintain, diversity across contexts, good opportunities to learn about complexity and contexts” (Stake, 2006, p. 23). This study’s quintain or umbrella term for possible cases is Heterarchy, as an encompassing non-bureaucratic model of organization. Thus, companies known for their unusual, non-hierarchical model of organization were identified through popular management literature, media articles, and recommendations from the researchers’ network. Strong indicators of heterarchy were statements about the organizations like: “No ranks, no titles,” “no hierarchy,” “collective management elections” or documents such as circle shaped organizational charts. The advantages coming with a multiple case design might be restricted with a too high or too low number of cases. As a general guideline Stake recommends to include at least four and a maximum of ten cases (Stake, 2006). The aim was to “ensure variety in terms of a number of personal and organizational characteristics, such as practice size and location, tenure, and experience” (King, 2004a, p. 17). In the end, five organizations of different sizes (two small, two mediumsized, and two large organizations according to EU definition) and industries (healthcare, consulting, HR software, fire engineering, heavy industries) were identified and investigated. Three of the cases have been heterarchical from the start, while two have gone through restructurings from standard-bureaucratic to more heterarchical. These individual cases were prepared sequentially and partly in parallel. On the broad dimensions strategy and direction, processes and structures, and culture and leadership, the findings continued to replicate towards the analysis of

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Research Design and Methods

the final case to be prepared. On a more detailed level, new findings through additional cases are still likely. However, Yin underlines that clear cut-off points for data collection would not work in case study research. Rather, sufficient data is collected when there is “confirmatory evidence” for the major topics (Yin, 2015, p. 104). The main findings of this work are supported by several of the cases and different data sources. Thus, a sufficient degree of data saturation was reached with the five cases presented here. It should be noted that, “case studies, like experiments, are generalizable to theoretical propositions and not to populations or universes.” The aim of case study research is analytical generalizability, not statistical generalizability (Yin, 2015, p. 21). Thus, the transferability of findings is limited. This is regarded acceptable as the focus lies on shedding light on heterarchy under different conditions in order to explore and identify innovation practices. Further research based on a larger number of cases and quantitative measures is necessary to allow statistical generalization (ibid.). Quality measures for qualitative research are discussed in more detail in section 3.4. The Case Organizations An overview on the backgrounds of the five participating case companies and on the conducted interviews is provided in Table 3.1. As the organizations participated under the condition of anonymity their real names were replaced. It should be noted that also references that would allow identifying the case organizations were redacted in the case study reports (chapter 4) of the digital version of this thesis, which is provided for open access. Further, organization homepages or documentation are not included in the list of references or provided in the appendix for reasons of anonymity. Table 3.1: Overview of case organizations participating in the empirical study Size

Case

Small

Digital Transformers

Medium

FIRECO

Details Consulting with focus on digital transformation processes Leipzig, Germany, founded in 2012, 10 employees (2016) Org. history Non-hierarchical from the start Data 2 interviews; November/December 2016; interviewees: CEO collection and founder, senior consultant; 52 - 58 min.; Survey: n=5 Fire engineering and consulting Background Berlin, Germany, founded in 2000, 180 employees (2016) Org. history Transformation to non-hierarchical in 2009 Data 3 interviews; December 2015; interviewees: CEO, talent collection management, Scrum master; 35 min. - 1:20 h; Survey: n=13 Background

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61

Human resources software and consulting Background Sankt Gallen, Switzerland, founded in 2009, 150 employees (2016) People Org. history Non-hierarchical from the start Software 5 interviews; February/March 2016; interviewees: CEO, Data chairman, employees from talent management, product mancollection agement, methodology expert; 23 min. - 68 min.; Survey: n=11 Home care for the elderly, maternity care, mental care Background Based in Almelo, the Netherlands, founded in 2007, 10,000 Home employees (2016) Care Org. history Heterarchical from the start Network Data 2 interviews; December 2015 and March 2016; interviewees: collection CEO and founder, nurse; 32 - 68 min.; Survey: n=2 Large Global corporate operating in various industries Background Based in the USA, founded in 1892, 300,000 employees (2016) Global Org. history Restructured several times Industries 3 interviews, November 2016, interviewees: senior principal Data and innovation manager, senior principle for strategy develcollection opment, principal researcher; 39 min. - 52 min.; Survey: n=6

The investigated case study organizations include a small consultancy, called Digital Transformers in the following, focusing on digital collaboration and cultural change in digital transformation processes. It was founded in 2012 and had 10 people as end 2016. Further, a medium-sized organization called FIRECO with 180 people is included, operating in the area of fire engineering and consulting since 2000. People Software is another medium-sized organization of 150 people. It focuses on talent management software and consulting and belongs to a market-listed group. With around 10,000 people (2016), Home Care Network is a large home care provider based in the Netherlands. The other large organization, Global Industries, is one of several research centres of a US-based corporate, which is active in various industrial segments. Verification of Case Selection All case organizations were found to qualify as heterarchical according to the definition applied in this thesis, though with varying degrees. Three approaches were employed to validate their suitability to contribute to this study and to rank them within the group of investigated cases based on their heterarchicalness. First, triangulating on interviews, documents, workspace, an online survey, and external view points to all case organizations qualifying as both innovative

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Research Design and Methods

and heterarchical, as summarized in Table 3.2. Thus, the data indicates that heterarchy supports innovation. Table 3.2: Summary results of triangulating for innovativeness / heterarchicalness (based on analyzing interviews, documents, workspace, online survey, and external view) Interviews Documents Workspace Case 1: People

Innovativeness

Supported

Supported

Supported

Supported

Supported

Supported

Supported

Supported

Supported

Innovativeness

Supported

Innovativeness

Supported

Supported Not support. Not support. Supported Partly Partly Not support.

Supported Supported

Supported

Supported

Supported

Not support.

Heterarchicalness Partly Partly Supported

Supported

Supported

Not support.

Supported

Supported

Supported

Supported

Innovativeness Supported Partly Partly Not support. Case 4: FIRECO Heterarchicalness Partly Partly Supported Not support. Case 5: Global

External view

Heterarchicalness Supported

Case 2: Home Care Heterarchicalness Supported Case 3: Digital

Online Survey

Innovativeness

Partly Partly Supported Partly Partly Partly Partly Supported

Heterarchicalness Partly Partly Partly Partly Not support. Partly Partly Partly Partly

The positive triangulation of data sources on heterarchicalness and innovativeness in Table 3.2 in each of the categories is indicated by ‘supported’ in the respective section. Where the data source points to an ambiguous view, this would be indicated by the half-cell and ‘Partly’. If the data source indicates nonheterarchical or non-innovation friendly evidence, this is indicated by the cell being blank and ‘Not support.’. More specifically, with results in all five data categories indicating an innovative and a heterarchical organization, People Software scores highest both in terms of innovativeness and heterarchicalness. Data in three categories points to Home Care Network being innovative. Its heterarchicalness is supported by three data sources and a balanced picture in one. In four of the five data sources, data supports the view that Digital Transformers is innovative. In three of the categories each and a balanced view in one, the small consultancy qualifies as heterarchical. In three of the categories each and a balanced view in one, data indicates that FIRECO is both heterarchical and innovative. Finally, the data in two categories and a balanced picture in three points to Global Industries being innovative. A balanced view in four data categories results in a mixed picture as to the corporate qualifying as heterarchical. Second, to determine the potential case organizations’ heterarchicalness and to validate their suitability to contribute to the study, a short survey was conduct-

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63

ed to see whether the preselected case organizations would sufficiently differentiate from other organizations. For this purpose, heterarchy needed to be operationalized. Hall (1963) describes and empirically tests the concept of bureaucracy by using six of the key dimensions described by Weber, each of which has the form of a continuum. Applying these variables, it can be determined how bureaucratic or non-bureaucratic an organization is in each of the dimensions (ibid.). Following this view, the concept of heterarchy is operationalized as bureaucracy reversed (see Figure 3.5). More precisely, an organization is assumed to qualify as bureaucratic if at least its essential characteristics centralization and formalization are fulfilled. In a small online survey, for each of the five measurable dimensions of bureaucracy suggested by Hall (1963), one question was defined, asking whether a clear indicator of bureaucracy was present at the organization or not. As it is regarded the constitutive element of bureaucracy, hierarchy of authority (centralization) was tested through three questions. Formalization is measured by one question each on clear roles, clear procedures, clearly separated departments, and formality of personal relations.

Figure 3.5: The case organizations as to the dimensions of bureaucracy (short survey)

The answers of the five case study organizations to the small survey are depicted in Figure 3.5. Home Care Network scores highest in terms of heterarchi-

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Research Design and Methods

calness (bureaucracy reversed), People Software and Digital Transformers come second. The results of FIRECO and Global Industries are mixed. Thus, the survey indicates that Home Care Network, People Software and Digital Transformers are clearly heterarchical, while FIRECO and Global industries tend to be hybrid forms.

Figure 3.6: Comparing cases and standard-bureaucratic organizations (short survey)

Calculating the bureaucracy index, for each ‘Yes,’ a value of 1 was attributed, for each ‘No’ a value of 0. Where ‘Partly’ was selected, the value of 0.5 was considered. With heterarchy being defined as bureaucracy reversed, the heterarchy index HI is calculated as BI x (-1) in this thesis. Thus, full heterarchy is indicated by a value of 1, while full bureaucracy can be assumed at a value of 0. It is defined here that with a heterarchy index value of HI ≤ 0.35 an organization qualifies as bureaucratic. With a heterarchy index of HI ≥ 0.7, an organization is considered heterarchical in this study. Between these scopes, that is 0.3 ≤ HI ≤ 0.65, an organization is regarded as hybrid form. For illustrative rather than statistical purpose the questionnaire was answered by representatives of five other organizations, in addition to the five case organizations.

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As shown in Figure 3.6, all case organizations differentiate from standardbureaucratic organizations participating in the small survey and, thus, qualify as sufficiently heterarchical to be included in the research. People Software, Home Care Network and Digital Transformers qualify as full heterarchies, FIRECO and Global Industries are regarded hybrid forms. The other standard-hierarchical organizations participating in the small survey are rated as bureaucratic. The sample size of n = 10 is too small to allow for a clear differentiation of heterarchical case companies and standard bureaucratic organizations, but merely gives an indication. Further research might use a bigger sample to see how heterarchies can be differentiated from more standard organizations. Further, the results support the view that bureaucracy and heterarchy should be regarded a spectrum rather than ideal types. Table 3.3: Ranking the case organizations in terms of heterarchicalness (based on analyzing interviews, documents, workspace, online survey, and external view) Interviews 1. Home Care 1. 2. People Softw. 2. 3. Digital Transf. 3. 4. FIRECO 4. 5. Global Ind. 5.

Rank

Documents People Softw. 1. FIRECO 2. Home Care 3. Digital Transf. 4. Global Ind. 5.

People Softw.

Home Care

2, 1, 2, 1, 1 1

1, 3, 4, 2, 2 2

Workspace Digital Transf. People Softw. Global Ind. Home Care FIRECO Digital Transf. 3, 4, 1, 3, 5 3

Online survey 1. 2. 3. 4. 5.

People Softw. Home Care Digital Transf. FIRECO Global Ind. FIRECO 4, 2, 5, 4, 3 4

External view 1. 2. 3. 4. 5.

People Softw. Home Care FIRECO Global Ind. Digital Transf. Global Ind. 5, 5, 3, 5, 5 5

Third, in order to more precisely rank the case organizations in terms of heterarchicalness within the group of investigated cases, the comprehensive data set was employed for a further approach: In each of the data categories evidence from the different cases was compared and ranked from least to most heterarchical (Table 3.3). Next, summing up the ranks of each organization in each of the data categories and dividing by the number of categories resulted in a ranking of cases from least to most heterarchical across data categories. As can be deducted from Table 3.3, People Software was found to be the most heterarchical of the case organizations. Based on ranking evidence across cases within each data category, Home Care Network qualifies as second most heterarchical. Next, Digital Transformers is ranked third, followed by FIRECO on forth and Global Industries on fifth rank.

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Research Design and Methods

On this basis, People Software, Home Care Network, and Digital Transformers are perceived as full or developed heterarchies. FIRECO and Global Industries are regarded hybrid forms or heterarchies in the transition stage. 3.4.4 Data Collection Mixed Methods “The case study’s unique strength is its ability to deal with a full variety of evidence - documents, artefacts, interviews, and observations.” (Yin, 2015, p. 12) Therefore, multiple sources of evidence were used in a mixed-methods approach. This is especially useful for exploring nascent areas, as it “strengthens grounding of theory by triangulation of evidence” (Eisenhardt, 1989). Findings can be perceived more robust where data from different sources, i.e. data triangulation, and a number of methods, i.e. methodological triangulation, are combined (Yin, 2015). Construct validity is supported by convergent findings from various sources and methods (ibid.). In order to determine the case organizations’ innovativeness and heterarchicalness, extensive evidence from five data sources was collected (Table 3.4): interviews with organization leaders and employees, documents, for example organizational charts or defined values and norms, workspace architecture, online survey results from a wider group of organization members, and external view, such as media resonance and business awards. Interview statements were also used to further explain the documents presented in the respective sections. Data from the first three sources were collected mainly during organization field visits by the researcher. All case organizations except for Home Care Network were visited personally. Table 3.4: Data sources used in the empirical study Data sources

Documents

Description Semi-structured interviews around the innovation system with 2-5 members of each organization with different backgrounds Organizational chart, webpage, brochures

Workspace

Architecture and office concepts, values reflected and norms supported by those

Interviews

Online survey External view

Quantitative online survey among members of each organization, focusing on how these are heterarchical (operationalization of heterarchy in 5 dimensions with 5 items each) Awards, media resonance, articles, blogs, videos

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Interviews Semi-structured interviews were used as main source of data. These are particularly valuable for exploring social processes and structures in organizations, such as innovation in heterarchies, while considering the complexity of real phenomena (Froschauer and Lueger, 1992). To ensure a focus on innovation mechanisms, semi-structured interviews were used (Flick, 2014). Questions built around the themes strategy and direction, processes and structures, and culture and leadership for innovation (see section 2.4.2). For each of these, open and broad questions were phrased to which bureaucracy’s answer would possibly be classic innovation management approaches. For instance, an innovation process would be bureaucracy’s answer to the question: “How are ideas for new products and services initiated and realized, from idea to market launch?” These questions to heterarchies might result in similar or different answers. Answers to these initial questions were flexibly followed up with probes, until practices related to each of the dimensions appeared to be sufficiently understood. An initial pilot case study (FIRECO) was done to test and improve the data collection and data evaluation methods described below, before preparing the further case studies. In each of the case organizations interviews were conducted with leaders and employees. The intention was to make sure the researched phenomenon, heterarchical innovation practices, is viewed from different angles (see Table 3.1). At Digital Transformers, interviews were conducted with the CEO and founder and a senior consultant. At FIRECO, the interview with the CEO was complemented with the views of one employee from talent management and the other a Scrum master. In the case of People Software, two leaders were interviewed, the current CEO as well as the founder, former CEO and current chairman, and three employees, from talent management, product management, and a methods expert. At Home Care Network, the CEO and founder and one community nurse were interviewed. At Global Industries, three interviews were conducted, with two senior principals and a researcher. The majority of interviews were conducted personally, on the organization sites by the researcher. 6 of the 15 interviews were conducted via Skype. All interviews were recorded and transliterated. Overall, 15 interviews were conducted, which lasted between 35 minutes and 80 minutes. The number of interviews suggested for a qualitative study varies widely, depending on a number of factors (Bryman, 2012). In particular with limited access or where only a small number of possible cases or interview partners qualifies

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for a study, relatively few interviews are regarded sufficient (Adler and Adler, 2012). This is certainly the case with real life heterarchies, which are still regarded ‘maverick’ exceptions. The number of interviews per organization is limited, as ‘gate keepers’ only agree to participate when the capacities of their organization to be dedicated to the research project are considered appropriate. The number of interviews conducted in each of the organizations is acceptable as the focus of the study lies on comparing mechanisms across several organizations. Thus, two to five interviews per organization allow to get insights on innovation practices and to compare those among heterarchies. Further, interview statements were complemented with data from a number of other sources, which allows to sufficiently strengthen the validity of these findings. Considering the resource constraints of a multiple case study design, the number of interviews is considered a good data base. 3.4.5 Data Analysis Analytical Template Method for Individual Cases For analyzing the qualitative interview content, the collected data was first transliterated and then analyzed using the content analysis software MAXQDA (Flick, 2014). Template analysis is especially suitable for comparing “the perspectives of different groups of staff within a specific context” (King, 2004b, p. 257). Thus, it was used for summarizing and comparing the perspectives within the individual case studies. While grounded theory, of an inductive approach to data analysis, starts from no presumptions or predefined codes (Länsisalmi, Peiró and Kivimäki, 2004), template analysis uses a priori codes based on some initial theory (King, 2004b). ‘Innovativeness,’ ‘strategy and direction,’ ‘processes and structures,’ and ‘culture and leadership’ served as higher-order codes and initial categories of a template to be filled with the collected data (see Illustration 3.1). From there analysis took the direction of going into more details, coding the interview statements openly (Flick, 2014). This inductive approach allowed for creating subcategories and not a priori expected themes to emerge within the three broad organizational themes. The created codes are depicted in Illustration 3.1.

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Illustration 3.1: Codes created during the interview analysis (screenshot of MAXQDA)

The allocated interview statements were paraphrased and then subsumed step-wise using a template in the software MAXQDA, called ‘Summary Grid.’ First this was done on the level of individual interview partner and subcategory (see Illustration 3.2).

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Illustration 3.2: MAXQDA first level summary grid (exemplary screenshot)

Next, the statements per subcategory were subsumed across all interviews per case organization, using a different summary grid in MAXQDA. After that the findings were summarized within the aggregate level categories of strategy/structures/culture. Grouping similar factors is referred to as selective coding (Flick, 2014). Like this a number of findings or propositions about the innovation practices were derived for each case and in each of the broad themes strategy and direction, processes and structures, and culture and leadership. This allowed to draw conclusions and to interpret the data on a more aggregate level (see Table 3.5).

Table 3.5: Example of aggregated findings per case (illustrative)

Findings on how innovation works in heterarchies are mainly based on the interviews with members of the organizations. In the dimension culture and leadership, the findings from the interviews were compared to the values identified through the online survey, capturing the views of a wider group of organization members. Further, documentation on values and norms could be integrated here. Data Matrix for Cross-Case Analysis As it allows for handling larger amounts of data and facilitates comparative analysis, the analytical matrix method was applied for the higher-level cross-case synthesis (Nadin and Cassell, 2004).

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For this purpose, the aggregate results of the individual case studies were transferred to a more abstract analytical matrix to facilitate subsequent analysis across the individual cases (Yin, 2015, pp. 167). Retrieving cross-case patterns from such tables relies “strongly on argumentative interpretation, not numeric tallies.” (Yin, 2015, p. 167) The most aggregate findings across cases were contrasted with approaches suggested by innovation management to identify similarities and differences (Table 3.6). This allowed to extend existing theory on innovation in heterarchies and to deduct learnings for organization and innovation management theory and practice (Eisenhardt, 1989).

Table 3.6: Most aggregated findings across cases (illustrative)

3.4.6 Reporting the Research Findings The case findings were reported in five individual case study reports through “summarizing detailed notes about themes, selecting illustrative quotes, and producing a coherent ‘story’ of the findings” (King, 2004b, p. 267). In the subsequent cross-case report, the approach was to report the findings along the major identified themes, as “this tends to be the approach, which most readily produces a clear and succinct thematic discussion” (King, 2004b, p. 268). Themes of strategy and direction, processes and structures, and culture and leadership for innovation in heterarchies were described on an aggregate level and compared to classic innovation management approaches. Further, findings from

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the individual cases were compared for similarities and differences among each other. These results were presented in a comprehensive cross-case study report (see chapter 5). 3.5

Quality Measures of Qualitative Research and Limitations

In the following section, the quality of this research is evaluated against the common tests, which are established for social science research: construct validity, external validity, and reliability. Internal validity was not considered, as it is not applicable for explorative case studies (Yin, 2015). 3.5.1

Construct Validity

Construct validity describes to what extent correct operational measures were used for the studied phenomenon (Yin, 2015, p. 45). In this thesis this test applies to heterarchicalness, innovativeness and innovation management. Heterarchy was operationalized based on previous theory and counter to Hall’s measures of bureaucracy (Hall, 1963). The cases were tested for their heterarchicalness and innovativeness by triangulating on various data sources: qualitative interviews, documents, workspace, an online survey, and external view. For rating the cases’ innovativeness more quantitative data could have been used to further increase construct validity, such as “number of newly introduced products in the last three years” or “share of earnings from products introduced during the last three years,” “number of patents filed per year.” However, such quantitative measures of innovation performance are not easy to calculate. For example it is unclear how new a newly introduced product has to be to qualify as ‘innovation’. As a result, many organizations, especially SMEs do not professionally use such key performance indicators (KPI) (von Ahsen, Kuchenbuch, and Heesen, 2010). Further, such measures are hardly comparable across industries, for example due to industry-specific differences in R&D intensity or the lenghth of product lifecycles (Gault, 2016). Due to the expected low informative value of innovation-related KPIs and expected challenges in aquiring those from all cases, this option was abandoned. Largely convergent findings from the utilized five data sources would with sufficient certainty indicate whether the cases qualify as innovative. Innovation management was operationalized along the three broad themes strategy and direction, processes and structures, and culture and leadership. This definition was on purpose kept very broad, to facilitate openness towards

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unexpected themes on how innovation is enabled coming up from the cases, rather than being restricted by narrow definitions of classic innovation management. 3.5.2

External Validity

The test for external validity describes in how far findings from the cases can be generalized (Yin, 2015, p. 46). As has been put forward in section 3.3.3, case studies are “generalizable to theoretic propositions and not to populations or universes.” (Yin, 2015, p. 21) As the cases do not represent a larger population, the findings cannot be directly transferred to all organizations qualifying as heterarchical, which would be “statistical generalization” (ibid., p. 40). Rather than aiming for statistical probabilities, the limited theory on innovation in heterarchies should be advanced (ibid.). Lessons learned go beyond the investigated cases, for example by deriving working hypotheses on innovation principles in heterarchies or producing more specific research questions, based on the initial light shed on the phenomon through the empirical exploration done in this thesis (Yin, 2015). Yin underlines that “the generalization, principles or lessons learned from a case study may potentially apply to a variety of sitations, far beyond any strict definition of the hypothetical population of “like-cases” represented by the original case” (Yin, 2015, p. 41). This suggests that innovation practices found in heterarchies may also be possible and helpful in more buraucratic or hybrid organizations. The full benefits of reported practices may to some extent depend on the presence of firm-wide heterarchical organization. By investigating the phenomenon innovation in heterarchies using a multiple rather than single case design, the study’s external validity could be strengthened (Yin, 2015). Similar results across similar cases, i.e. a literal replication logic, make the findings more robust compared to individual cases (ibid.). 3.5.3

Reliability

The test for reliability shows whether the applied research procedure, if repeated by a different researcher in the same way, would come to the same results (Yin, 2015). Some degree of subjectivity cannot be excluded, as the researcher's personal experiences, opinions, and previous knowledge will inevitably influences interpretations to some extent (see section 3.2).

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To ensure reliability in this project the applied research procedure was described in detail in this chapter. Further, the used data was thoroughly referenced and made available, most importantly all interview transcriptions. These are featured in the full appendix, which is found in the digital version of this thesis. The aggregation of interview statements to more abstract propositions was done stepwise. The individual case study reports feature numerous original quotes from the interviews throughout all sections. This procedure allows others to look at the less aggregated or even raw data and consider whether they would have come to the same abstracted summaries, interpretations and conclusions.

4

Innovation in Individual Case Heterarchies

The data from the empirical study are presented in the following. First, the data from each of the five organizations are reported individually. This starts with describing the cases’ innovativeness and heterarchicalness, and the suitability of the case to be in this study. Next, findings on the general nature of innovation are outlined. Third, how innovation is managed is analyzed with respect to the themes of innovation management: strategy and direction, processes and structures, and culture and leadership for innovation. Each case ends with a conclusion. Innovativeness and heterarchicalness, described in the first section in each of the cases, are determined by triangulating on a number of data sources: semistructured interviews, documents, workspace, an online survey, and external view. Exploring innovation management in the heterarchies is mainly based on the interviews with members of the organization. Where available, such as in the theme of culture and leadership the findings from the interviews were compared to the values identified through the online survey, capturing the views of a wider group of organization members. Further, documents on values and norms were integrated here. 4.1

Case 1: People Software

Case organization 1 is called ‘People Software.’ It is operating in the field of talent management software and consulting. Founded in 2000, it has around 150 employees, 100 of whom are based in the headquarter in Sankt Gallen, Switzerland as 2016. It is frequently recognized in the media for the collective of employees democratically voting for their management on a yearly basis (see section on heterarchicalness and external view for details and references). While official elections take place since 2013, the organization is described as being ‘democratic’ from its inception (Case 1: Chairman, personal communication, May 2nd, 2016). 4.1.1

People Software’s Innovativeness and Heterarchicalness

Triangulating interviews, documents, workspace, an online survey and external view, the case’s innovativeness and heterarchicalness are supported by all of the five data sources (Table 4.1). © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2_4

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Table 4.1: People Software’s innovativeness and heterarchicalness Interviews Case 1: Innovativeness People Softw. Heterarchicalness

Documents Workspace

Online Survey

External view

Supported

Supported

Supported

Supported

Supported

Supported

Supported

Supported

Supported

Supported

Is People Software Innovative? All data sources support People Software’s innovativeness as shown in Table 4.2. The details of analysis behind the summarized findings are described for all of the five data sources in the following sections. Table 4.2: Evaluation of People Software’s innovativeness Data source Interviews Documents (org. chart, brochures, webpage) Workspace Online survey External view (media resonance: articles, awards)

Innovative X X X X X

Balanced

Standard

Interviews Interviewees were the organization’s CEO, the chairman and founder, and three employees from talent management, product management, and a methods expert. All describe the organization as very innovative, referring to software as core product, the consulting approach, and the model of organization (Case 1 (C1): Chairman, CEO, Employee 1, 2, 3, personal communication, May 2nd, 2016). According to the Chairman: “People are coming up with ideas, not only in the products and not only in the areas that I was responsible for but for the whole company (…). And that’s, I think that’s something that is in our DNA.” (C1: Chairman, personal communication, May 2nd, 2016)

The CEO confirms: “We have disrupted our own business model or we changed our own business model two to three times in our business history.” He details: “I guess we are between let’s say innovative agile and chaotic. (...) We spend let’s say 10 percent of our energy in tensions and frictions, which probably would be better in an efficient system, but we get benefits like a high innovative feedback culture.” (C1: CEO)

On this basis, People Software is rated as ‘innovative’ in the data category interviews.

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Documents As can be seen in Illustration 4.1, People Software’s organizational chart consists of a number of overlapping circles of different sizes, colours and borders. The chart underlines the difference with pyramid-shaped organizational charts. Some of the functions and roles included are highlighted next.

Illustration 4.1: People Software’s organizational chart (documents)

The major ‘circles’ summarize all functions related to customers, market, technology, and operations. Some functions clearly belong to one of these areas, others relate to several areas, which is indicated through overlaps between circles. The CEO is depicted in the center circle, surrounded by circles named CFO, HPO, CTO, Leader Customer, Manager Customer, Manager Market, and Leader Market. Some of the roles associated with ‘standard’ organizations do exist here, though differences lie in how these individuals are appointed and fill these roles. Some functions are filled by two roles, a management role and a leader role, for example Manager Customer and Leader Customer. This is further discussed in section 4.1.3.

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Innovation in Individual Case Heterarchies The framework used at People Software (Illustration 4.2) differentiates: Passive employees in controlled model of organization: Direction and control Passive employees in self-organizing organization: Overstrained organization Actively creating employees in self-organizing organization: Agile network Actively creating employees in controlled organization: Shadow organization

Illustration 4.2: People Software’s operating system of the organization (documents)

The chairman says that he was not sure if as an overall organization People Software would qualify as an agile network according to the framework. He says that, “there is also this ambiguity of course we will have certain processes that we need high efficiency and it will be very, very hierarchically organized. And that’s important, it is necessary” (C1: Chairman). Employee 1 details that through the yearly voting teams can choose for themselves on which level they like to be managed. This results in ‘three forms’ in one organization: “We have one part of the organization which is really agile, self-organized and, yeah, those people who are really empowered to move their things forward. Another department might prefer to work with classical processes and normal project management because customers would not understand the agile way of working. In addition there are different topic-related circles that people are in. And then it’s important to define one person who is really responsible for this topic because if you don’t do it, we have 20 projects and no one seems responsible.” (C1: Employee 1, personal communication, May 2nd, 2016)

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Illustration 4.3: Excerpts from People Software’s homepage

The homepage (Illustration 4.3) has a mix of humans, icons, and screenshots of the software products. The content focuses on products and solutions, and particularly the human element in it, though not the democratic background. People Software uses social media for recruiting its own staff. Jobs are for instance published on Twitter. Organization members, for example an elected people coach, draw attention to the organization by sending tweets, relating to the democratic element: “I am an elected coach.” The variety of communication channels used, including blogs and several social media platforms, supports the notion of an innovative organization. In particular the organizational chart consisting of concentric and overlapping circles is very unusual and strongly indicates that the organization is innovative. Workspace The offices, which house about 150 of the organization’s employees, are spread over four floors. On each floor there is an open space with kitchen, coffee machine, and seating opportunities (Illustration 4.4). It was observed that the open coffee space can be and is used for small informal and formal meetings of two to three people, often several at a time. While multiculturalness is rather unusual for this part of Switzerland, English, and eastern European languages are heard here, apart from Swiss and standard German.

Illustration 4.4: Impressions from People Software’s common office area (pictures taken by the author during organization visit, May 2nd 2016)

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The open space on the second floor features a table football and snooker (Illustration 4.4), which are heavily used around lunchtime. The floor features a number of meeting rooms of different atmospheres. One with large green sofas and a multi-colored carpet reminds of a lounge, while others feature a large round table or a wooden-like wall, as can be seen in Illustration 4.5. Further details on workspace can be found in the following section describing how the organization is heterarchical.

Illustration 4.5: People Software’s meeting rooms (pictures taken by the author during organization visit, May 2nd 2016)

Online Survey There were 11 participants in the online survey, with backgrounds in operations, talent management, transformation expert (twice), methods expert, service developer, sales assistant, team assistant, and chairman. As shown in Figure 4.1, the respondents perceive People Software as an innovative organization.

Figure 4.1: Online survey results: People Software’s innovativeness

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External View People Software has received several awards for their innovative work concept and products. As the case organizations participated on a condition of anonymity, references which might identify the case organizations were redacted in the digital version of this thesis provided for open access. Is People Software Heterarchical? Analyzing various sources of data for indications of People Software’s heterarchicalness, the majority of data in each of the categories points to a heterarchical organization (see Table 4.3). Table 4.3: Evaluation of People Software’s heterarchicalness Data source Interviews Documents (org. chart, brochures, webpage) Workspace Online survey External view (media resonance: blogs, articles, awards)

Heterarchical Balanced

Standard

X X X X X

Interviews People Software is known for the management being elected by the collective of employees during the yearly strategy meeting (see subsequent section on external view for references). The chairman stresses that this does not imply that every decision is made through ‘democracy.’ Instead, there is a range of leadership styles: “That means that you have one side democracy but on the other side also elected leaders that you have to follow, that’s ambiguity.” (C1: Chairman) All interviewees express the view that anyone can lead and anyone follows, depending on the specific topic and individual expertise. In terms of its democratic model, the organization appears to be on the leading edge, as Employee 1 reports: “And from organizational structure, I think, we are really, really, really innovative.” She adds: “We have meetings with other companies about agile working so it’s called agile stars. And we (...) are always like a pioneer, it’s crazy. We like to try things.” (C1: Employee 1)

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Documents The organizational chart with its overlapping circles instead of the classic pyramid indicates a heterarchical model of organization. Other documents like the organization’s “Manifest – Values & rules for collaboration” describes which behaviors are expected at People Software. This includes being “Inspiring,” “Respectful,” and “Driving” (documents). It is expected that everyone leads in their role, gives direct and honest feedback, solves conflicts with openness, and takes the consequences of one’s decisions. These expected behaviors are in line with and support heterarchical organization. Beyond that, the organization has a more detailed “Constitution,” which describes the “Design Principles of our Democratic Organization.” It is meant to clarify what the model of organization is and what it is not, focusing for instance on collective intelligence and leadership culture (documents). The organizational chart and culture documents strongly indicate that the organization has a structure and culture based on heterarchical principles. Workspace

Illustration 4.6: Graphic record of People Software’s strategy process (picture taken by the author during organization visit, May 2nd 2016)

In the entrance area the journey to the collectively developed strategy is displayed as visual record (Illustration 4.6). Also the strategy is openly shown as post-it arrangement. Such public displays indicate the high levels of transparency typical for heterarchies. The open offices mostly accommodate two to twelve people. They are separated from the floors by glass walls, some of which are painted on. Walls are

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used as full wall-size blackboards with project plans, financial figures or concepts scribbled on them. In one room there is a globe painted on the wall with pictures of international colleagues allocated to different regions (Illustration 4.7). These features indicate transparency, creativity, and network-character, which can be interpreted as heterarchical rather than bureaucratic aspects.

Illustration 4.7: People Software’s offices (pictures taken by the author during organization visit, May 2nd 2016)

The CEO has no personal office. The intention is to be moving around more and being closer to employees. When he has to work at a desk he mostly does in the reception area next to his assistant (C1: Assistant, personal communication, May 2nd, 2016). As office size is a classic status symbol, this can be interpreted as sign of heterarchy. Online survey People Software qualifies as heterarchical given the results of the online survey. Across the five dimensions of the heterarchy spectrum, consisting of five items each, respondents chose more often those options that indicated a highly heterarchical organization than a balanced or more bureaucratic organization (see Figure 4.2). More specifically, Figure 4.3 illustrates that there is a network structure at People Software. The presence of dynamic influence at People Software was also clearly supported (Figure 4.3/2). Of all dimensions of heterarchy, respondents most clearly agreed to cultural mechanisms coordinating individual actions at People Software (Figure 4.3/3). Culture coordinating collective action at People Software was still clearly supported (Figure 4.3/4). Finally, respondents clearly agreed to the presence of informality at People Software (Figure 4.3/5).

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Figure 4.2: Online survey: People Software’s heterarchicalness

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Figure 4.3: Online survey: People Software’s heterarchicalness per dimension

External View Many newspapers and magazines have featured articles on People Software or interviews with key persons. In most coverage the focus was on the democratic way of working, especially reports on the yearly elections of the management. The big media resonance indicates that the model of organization raises substantial public interest. As before, for reasons of anonymity references in this section which might identify the case organizations were redacted in the digital version of this work.

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4.1.2 The General Nature of Innovation The respondents of the online survey clearly rated cultural norms and values to be more important for coordinating innovation activities at People Software than formal organizational such as processes and structures (see Figure 4.4).

Figure 4.4: Online survey: “Please rate the relative importance of culture and of formal organization for coordinating innovation at People Software.”

4.1.3 Summary of Case Findings How innovation is managed can now be analyzed with reference to the strategy and direction, processes and structures, and culture and leadership framework. The three tables summarize the major findings per theme. Evidence is provided and it is indicated whether these innovation practices correspond to classic innovation management (IM) (tick), differ (cross) or partly correspond (tick and cross).

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Theme

Innovation Evidence

Strategy & direction

Table 4.4: People Software’s results: strategy and direction for innovation

Common vision is internalized and guides developments. Other sources like customer needs and technological developments. There is an overall organization strategy and team strategies that guide developments, additionally product roadmaps. Collective strategy development process, everybody can contribute. Employees have proven strong initiative collectively identifying the need and urging to realize major strategic turns. Combined approach: Yearly strategy meeting, continuous working groups and ad-hoc initiatives leading to factual strategy.

Comparison with IM Supported Supported Not supported Partly

Partly

With strategy and direction People Software appears to have a common vision that is internalized and guides developments. A range of other sources for innovation is used like customer needs and technological developments. Further, there is an overall organization strategy and team strategies, which guide developments, as well as product roadmaps. The strategy is developed through a collective process where everybody can contribute. In addition there are continuous working groups. Beyond that, ad-hoc initiatives for realizing strategic initiatives are common.

Theme

Innovation Evidence

Processes & structures

Table 4.5: People Software’s results: processes and structures for innovation

No clearly defined innovation process but a multitude of channels for suggesting and realizing innovative ideas, some official, some in the shadow. Partly portfolio management calculates a business case using KPIs like market potential, cost of return on invest, and strategy fit, partly ideas are realized based on gut feeling and customer interest. For customer requests there is committee staffed with people from product management, development, sales, and consulting, deciding which requests are prioritized. Fuzzy ideas may be pursued further even if not approved. A few facilitators and many creatives, everybody is and feels responsible for innovation.

Comparison with IM Not supported

Partly

Partly

Partly

Partly

Partly

Partly

With processes and structures for innovation (Table 4.5), the medium-sized organization has no clearly defined innovation process. Rather, there is a multitude of channels for suggesting and realizing ideas, some official, some in the shadow. The internal social network is described as a central tool facilitating

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innovation. Ideas are selected partly systematically with portfolio management, business case, and KPIs, and partly based on gut feeling and customer interest. For prioritizing customer requests there is a cross functional committee. More fuzzy ideas or ideas in the shadow may still be pursued further if supported by enough people. In a context where everybody is expected to and feels responsible for innovation, there are many creatives supported by few facilitators. The key results as to culture and leadership are displayed in Table 4.6. Table 4.6: People Software’s results: culture and leadership for innovation

Culture & leadership

Theme

Innovation Evidence Management as innovation driver: Challenges the status quo, communicates importance of innovation, facilitates, provides trust

Comparison with IM Supported

Management as power promoter: Uses power to provide resources Supported Empowerment and high levels of individual responsibility for innovation by employees: Everybody leads and everybody follows Innovation supportive values: Collaboration, democratic, feedback culture, self-directed, commitment, open-minded, trust.

Supported Supported

With culture and leadership for innovation, management takes the role of communicating the importance of innovation and challenging the status quo. Besides, management provides resources for innovation. People are empowered and take responsibility for innovation to a high degree. There is a strong understanding that everybody leads and everybody follows depending on the topic. Values and norms at People Software are supportive of innovation, such as collaboration, democratic, self-directed, commitment, responsibility, open-minded, and trust. Some significant themes emerged within strategy and direction, processes and structures, and culture and leadership. These will be evidenced and discussed in turn. Strategy and direction Sources of innovation Employees shape the strategy A mixture of planning and ad-hoc experimentation Processes and structures The need for organizing for self-organization The way from idea to launch: a multitude of paths, structured and in the shadow

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Innovation in Individual Case Heterarchies Formal and informal decision criteria Methods for innovation: visual and customer-centric Everybody is responsible for innovation: few facilitators and many creatives

Culture and leadership Natural leadership and democratic leadership elections Empowerment and taking responsibility Measures for developing the culture 4.1.4 Strategy and Direction: Emerging Themes How the common vision and mission guide developments is explained by Employee 1: “When you are working here it’s like a lot more energy than in other companies, (...) when I’m here I feel that people are really (...) building great things. So we need a common vision and a mission (...). We like to change the world a little bit and we like to show other companies how you can work together without structures and formalities.” (C1: Employee 1)

Employee 3 describes how together with the customer ‘Lego Serious Play,’ a business version of Lego bricks, is used to imagine how a certain field could look like in the future. Those individual perspectives are integrated to build a product vision, which is always a story. This story is subsequently deconstructed into different parts, for each of which they ideate and create solutions, which are then integrated into one solution. Applying this approach on several customers allows seeing patters arising across these product visions (C1: Employee 3). The requirements of large customers are an important source of innovation. They also bring in information about competitors through the sales process. To capture customer requirements and ideas, the organization also uses a public idea platform where all the customers can submit and vote on suggestions. Satisfying customers often dominates everything else because development is paid. This is described as a dilemma to some degree, as ideas coming from customers are often not the most innovative ones. Thus, incremental projects paid by customers need to be balanced with potentially more innovative, but also more risky initiatives (C1: Employee 1). In contrast to topics that have overall relevance to several teams, strategies that only relate to one team are developed team-internally. Thus, in order to ensure a stronger focus, there are permanent “circles” of people interested and competent in a certain topic, for example a “design circle” consisting of frontend developers initiating innovations in their field (C1: Employee 1).

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Another example of involving the collective of employees in central strategic decisions is when a part of the organization was sold a few years ago, people were asked to decide which organization of several presented options should buy People Software. They decided against the option that would have promised more money in favor of the option that allowed them keep their unique culture and structure (C1: Employee 3). Innovations driven by the vision are described as often not clear on the outset. Rather than planning ahead, an action-oriented approach to innovations is described, which results in an emergent strategy: “Okay, we want to do something totally new, we looked at what fits to our vision, what’s easily shaped, and then we just did it without a lot of market research, with just saying okay, it is more or less something to try out, you have to make a minimal viable product and then see how the market reacts, how they use it and so on.” (C1: Chairman) With regard to strategic direction, the chairman states: “But that is more or less the thing that we, that I personally believe if you have a culture that empowers and encourages people to do things then innovation can happen on every level.” (C1: Chairman) 4.1.5 Processes and Structures: Emerging Themes Stressing the importance of rules, the chairman argues: “exactly, selforganization only can work if you have the rules,” which can be “culturally really lived” or “explicitly written.” While in a small organization the rules are implicitly clear, in an organization of a certain size, however, rules need to be made explicit and intensely trained to enable people to participate and to take over responsibility (C1: Chairman). How ideas are developed into new products at People Software is summed up by Employee 3: “bringing together the people giving them the free space to express their thoughts, their ideas and to also have the room to do it and pursue some ideas and try to, try it out if it works or not, is for us more important than having a streamlined process.” (C1: Employee 3)

The CEO confirms: “I wouldn’t say it is a very, very structured way overall but in the different channels you can have more or less a description of what’s going on normally.” (C1: Chairman) A lot of innovations are created in the “shadow organization,” as the CEO explains:

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Innovation in Individual Case Heterarchies “So a lot of employees worked in their free time on these products and had great ideas and they tried it out in the evening (...), and they showed it some sales guys and the sales guys liked it and the sales guys sold it to customers and then they sold it. And initially an idea was created in the shadow, but was sold finally to customers, and the second and third customers bought it as well then it became a product.” (C1: CEO)

At an early stage, people propose their ideas and others signal that they are interested by formal voting, for example electronically, or informal voting, for example by raising their hands if they think an idea makes sense. “Everyone can choose whatever fits for him and then if there are enough people that say, ‘Okay I want to follow on that.’ and then he is leader for that thing.” (C1: Chairman) Customer interest appears to be a major criterion for judging ideas. Relating to the open idea platform, voting for ideas is not done organization-internally but by users: “it can be whoever users. It could be even our competitor voting for something, it’s totally open.” (C1: Chairman) For customer requests channeled through sales to product management, there is a committee staffed with people from product management, development, sales, and consulting, that decides which requests are prioritized (C1: Chairman). The product owner from the management team and most of the time the CEO is involved, “because he is very close with the customer” (C1: Employee 2). At the stage of business case calculation, hard figures are used: “we need to involve cost of return on invest and range, so the market potential, how much money is out in the market actually (..) just like KPIs we have to clarify and whichever rightful indicators and then of course if it fits in our company strategy or not, if its a key focus to product and we would like to solve or not.” (C1: Employee 2) On the other hand, also ideas where the potential is not yet clear, might be followed up: “we have as well ideas with no business case but a lot of people believe in it and then you enter a certain scout phase, you say okay let’s make a prototype (...) and then we validate if there is an idea or not.” (C1: CEO) Beyond the official ones there are innovation initiatives in the shadow, where “people decide on their own (...). So if you are not satisfied with the decision of the group you can, yeah they challenge then the system and go into the shadow,” which is supported by the CEO: “I think it’s healthy to have an innovation shadow organization.” (C1: CEO) Lego Serious Play is used, “as an all-around methodology but mainly for project scoping, to align with the stakeholders, to build a shared vision of the project, to create strategies how to implement it. And we also use it for team building, we use it for innovation workshops together and to inspire creativity and to get an aligned view of the future.” (C1: Employee 3)

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The main advantage is seen in everybody having to do something, in contrast to brainstorming, which is often dominated by a few persons. That is why Employee 3 describes it as “democratic approach.” Beyond that, the highly visual methods Design Thinking and Canvases are often used at People Software. Overall, a few individuals at People Software focus on facilitating and spreading methodologies and mindset for innovation, while everybody is responsible for being creative and realising innovations in their areas. Who is responsible is intentionally not precisely defined at People Software, as the CEO explains, “It makes as well sense to let it a lit bit open because we want to have a culture (...) where everybody can take decisions where he feels comfortable to take one or where he or she feels in an area of ownership. So we don’t want to make it crystal clear what are the responsibilities. (...) Because we like these tensions, as well the question who decides what because then discussion occurs.” (C1: CEO)

He admits that this has drawbacks in terms of efficiency: “But on the other hand this often makes the system a little bit slower and not very efficient right because if you have not crystal clear defined who is responsible for it then you have a lot of discussions.” (C1: CEO)

Regarding the responsibility for innovation, the CEO says: “So (...) I have at least a very strong mind that I want everybody to participate in the innovation process.” (C1: CEO) “And there are the moderators, the facilitators, they are not the guys with the smartest ideas. (...) And I believe they have to facilitate as well technology platforms.” (C1: CEO) Based in the development team, Employee 3 is the only person in the organization who moderates creative workshops and develops methodologies for new products and services, especially in the consulting area. One of his colleagues is described as “innovation advisor in sales” who “is trying to infuse sales with innovation methodologies, with design thinking mindsets and approaches.” Besides, there is one person described as “innovation evangelist,” whose role is mainly to make innovations known in the market (C1: Chairman). In-joke they use shiny titles commonly held with pride in other companies: “Helmut is the elected executive vice president of markets and entrepreneur, yeah we are making fun of it all the time.” (C1: Employee 3) 4.1.6 Culture and Leadership: Emerging Themes Underlining the principle of natural leadership, the chairman and former CEO explains how the original founders were asked to name an official leader for registration at the authorities, which they did not have: “And then my three co-

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founders said, ‘Well for us it’s clear, it’s you, Hermann.’ And if you want to say that was the first democratic election but it was not formal because we were still a small company.” Today, the chairman stresses: “But of course on one side we have formal leadership structures, we still have them. They are also necessary.” He estimates that, “in the midst 10 percent of our employees are in elected leadership positions.” These elections by the collective take place since 2013 during the yearly strategy meeting (C1: Chairman). The CEO explains that a main intention of electing people in leadership positions was to foster a feedback culture: “The idea was to (...) make it like a contract what a leader should do for one year and then give a feedback if this was okay or not. But what we identified accidentally, and I think this is very important for innovation culture, is that this leads to a culture where employees feedback their management as well beyond within the year 365 days a year, beyond the election. And as a leader this is often very painful right, because if you do something and then employees will tell you the bloody truth and say, ’Look Marc this wasn’t that good.’ But this is challenging the status quo right?” (C1: CEO)

He stresses that in every organization employees vote for their leaders every day, not officially but from their level of commitment you can see their decisions. By formalizing this voting, he assumes that people accept their leaders’ decisions more, being partly responsible of this person being in power (C1: CEO). At People Software the classic manager role is split into “technical manager” and “people coach” or “leader,” as explained by Employee 1: “A leader should really lead or guide people with vision and bigger mission and try really to make each person totally successful in each team to have them grow and to give them a new work environment where they can use their talents the best they can. A manager is a person who is a little bit more controlling the team. So we need both.” (C1: Employee 1)

The chairman further differentiates: “The leader is more responsible for leading in the sense of looking outside, looking where we should go providing direction and a manager is more responsible for processes and in general organization. Like foreign minister and interior minister.” (C1: Chairman) The CEO sees leaders as facilitators who “have to serve the company.” That is why “the organization defines what they need from a leader, it’s not the leader who defines what he should do.” (C1: CEO) The chairman describes the challenge of defining and communicating that democratic leadership at People Software involves a spectrum of leadership styles, “from base democracy to temporary dictatorship” (C1: Chairman): “And for example when we talk about our strategy and our organization goals, that is a process everyone is involved but even that doesn’t mean it is leaderless. Democracy is not leadership-less, you need leaders but they have a different way of leading. You

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have to convince people, they have to follow you voluntarily and you (...) cannot just order something and that’s happening. That’s one part, and that means major decisions we make are fully democratic and everyone is involved and all get heard. But on the other side we are also electing leaders to lead, for example talking about a product owner (...). We say, ‘Okay you are now our product owner for that and therefore you make the final decision.’ And that has to be clear, people have to understand it.” (C1: Chairman)

This means that not everybody is asked for their opinion on every question, but also accept decisions by those appointed to decide: “we have to make decisions, we are electing leaders who have the mandate to lead.” This has for some employees been hard to understand, who have complained about “pseudo democracy” on Kununu, an online platform for rating employers (C1: Chairman). Especially in the beginning it can be difficult to find one’s place at the organization: “You need to figure it out. And this is exhausting actually, it is really exhausting to get it going into the company and figure out what is the most important task I need to do” (C1: Employee 3). Employee 1 agrees that it takes longer to on-board: “That we hire the right people and that we give people time to be successful in this work environment. So when we hire new people they need much more time to become successful but at the end they are much more successful than in other companies.” (C1: Employee 1)

All interviewees express that at People Software, everybody leads and everybody follows, depending on the specific topic and individual expertise. A necessary condition is that people are highly intrinsically motivated to work: “People who like their jobs like to work a little bit more. When you are burning for something you like to finish and you like to move it forward, you like to invest much more than your eight hours a day. We want to have people who love their jobs.” (Employee 1)

Employee 2 agrees that people should be “ready to go the extra mile” (C1: Employee 2). In return People Software aims to create an organization with happy employees. There is a “happiness index” where people indicate on a weekly basis on a 1 to 10 scale how happy they are with their job, with an average result around 8. Every three months the teams present their scores. If a score would be low, issues would be discussed to improve the situation (C1: Employee 1). All interview partners underline the need to be self-organized and taking responsibility, “because nobody is telling you what to do” (C1: Employee 2). This can lead to a high degree of pressure, as Employee 1 indicates: “So when you are not able to prioritize you are out because you are a low performer because you are not able to move things forward.” (C1: Employee 1) Positive is that “when you are working here it’s like a lot of more energy than in other companies.” (C1:

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Employee 1) Taking ownership involves not only deciding but also taking the consequences, as the CEO underlines (C1: CEO). Findings from the interviews are supported by the results of the online survey. As shown in Figure 4.5, the values collaboration and democratic are most often associated with “How things are done” at People Software, followed by self-directed and commitment. The respondents were asked to select the values that best describe “The way we do things here” from 26 diverse options, multiple answers being allowed.

Figure 4.5: Online survey: “Which of the following values best describes ‘The way we do things here’ at People Software?” (Multiple answers allowed)

The organization’s “Manifest” describes the following behaviors as central: “Inspiring,” “Respectful,” and “Driving” (documents). It is expected that everyone leads in his role, gives direct and honest feedback, solves conflicts with openness, and takes the consequences of one’s decisions. All these were indentified through the interviews, as described in the previous section: ‘Inspiring’ relates to the core value innovation and experimentation, ‘respectful’ is in close connection to communication and collaboration skills, ‘driving’ describes an intrinsically motivated and self-responsible working style. A major point for fostering the culture for democratic leadership and innovation is seen in recruiting for cultural fit, more than for technical expertise: “And more often than not we have people applying for a job where we say, ‘Okay, well (...) we don’t believe that this person will fit the role, but will probably fit the culture.’” (C1: Employee 1) Through team recruiting, teams decide which person will be hired. Further measures involve communication: “Obviously we try to make crystal clear what we mean with democracy. So we have a constitution, we write about what means decision-making, what means ownership, who can decide what and so and it’s all written down.” (C1: CEO)

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Putting this into practice is challenging and more training is needed: “That’s a good basis but it does not turn out into behavior. We trained people in the on-boarding that they understand what we mean with this written word because they come from different contexts and you we want to explain them ours, then we have some feedback sessions and so on but to be honest we miss training. We want to be much better in training, so train what it means to take a decision, train what it means to take ownership.” (C1: CEO)

Underlining the importance of People Software’s culture, Employee 3 states that, “Our unique selling proposition (…) or main asset is not the software, for me its the culture, that’s why we can compete against Oracle, against SAP with much bigger teams, much bigger areas in this kind of market. They have like 600 developers, we have three or five.” (C1: Employee 3)

All interviewees agree in that they see no problems with regard to scaling the structure. In their opinion, with technology as an enabler and the right people and mindset, the system could work at any size and industry (C1: all interviews). 4.1.7 Conclusion People Software can be described as a clearly heterarchical organization, based on self-organization and the degree to which this is apparently internalized and lived by the employees. Employees have and are expected to use high levels of freedom. In doing so, they can choose from a range of paths, official ones and unofficial ones. In terms of leadership styles and decision-making, however, it is relatively clearly regulated ‘how’ is decided, leaving the ‘what’ open to employees. Despite their leading status, they recognize they still face challenges like balancing innovation and efficiency and making everybody understand and cope with the ambiguity of a range of leadership styles from “base democracy” to “temporal dictatorship” (C1: Chairman). To improve this understanding in theory and daily life, apart from training, hiring people who fit the culture is seen as essential: the right mindset is more important than technical expertise required for a certain role. Notably, despite the fact that there are few titles and ranks, People Software has a distinct high performance culture, where it is expected to work more hours and more self-driven than in other jobs and “low performers” are not accepted by the collective. This “hard” side, assumedly more driven by people’s intrinsic motivation and mutual accountability than career aspirations, is apparently not in conflict with the very people-oriented and cooperative side of the culture.

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People Software’s culture, characterized by a high degree of self-initiative, commitment, collaboration, and continuous innovation, is understood as the key factor for long-term success. 4.2

Case 2: Home Care Network

Case organization 2 is called ‘Home Care Network.’ It is operating in the field of home care for the elderly, and more recently mental, youth and maternity care. Starting with ten locations in 2006, it has around 10,000 employees as end 2016. The vast majority are local nurses organized in 850 teams across the Netherlands. Only 45 members of staff are based in the central administration. The organization is frequently recognized in the media for the self-organizing nurse teams, the basis of the unusual model from the start (for references see section on heterarchicalness and external view below). 4.2.1 Home Care Network’s Innovativeness and Heterarchicalness The case organization’s innovativeness was supported by three of the five data sources (see Table 4.7); heterarchicalness by three of these data categories and a balanced view in one. The online survey results are based on the views of the two interview partners, the CEO and founder and one community nurse. Due to the low number of respondents the data base is insufficient to allow for valid assumptions on the organization’s innovativeness or heterarchicalness in this data category. The details of analysis are described in the subsequent section. Table 4.7: Home Care Network’s innovativeness and heterarchicalness Interviews Documents Workspace Case 2: Innovativeness Supported Home Care Network Heterarchicalness Supported

Supported

Online Survey

External view

Not support. Not support. Supported

Supported Partly Partly

Supported

Supported

Is Home Care Network Innovative? As shown in Table 4.8, interviews, documents, and external view support the view that the organization is innovative. In terms of workspace it appears rather standard. As there is insufficient data from the online survey Home Care Network is rated as ‘Standard’ here.

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Table 4.8: Evaluation of Home Care Network’s innovativeness Data source

Innovative

Interviews

X

Documents (org. chart, brochures, webpage) Workspace

X

Online survey External view (media resonance: articles, awards)

Balanced

Standard

X Insuffic. data X

Interviews The approach of Home Care Network itself can be regarded a social innovation, both in terms of organization and offered product. The CEO and founder reports how it started: “Firstly, the idea started to grow in 2004/05. I was not satisfied with the way home care was organized myself, as a district Nurse in the '80s. So, together with some friends, in 2004/2005 we started to discuss some alternatives (...). We created a model based on our ideas about how a network could work and how it could be realized. (...) So, in 2007 we started in ten different locations in Holland. Yes, it was something like that, a kind of experiment. And from the start we had a lot of attention, a lot of nurses heard about it and asked how it works: ‘How can we do this in Amsterdam, or Rotterdam or wherever?’ (Case 2: CEO, personal communication, December 21, 2015)

With a market share of 70 percent in the Netherlands (as 2015), the new model of home care has proven not only successful in the market, but can even be described as disruptive for home care in the country. Beyond that, the model is transferred to the UK, Sweden, Germany, Japan, and the USA (homepage). The CEO stresses: “What we always try to do is show that everyone can start something and we will support it as good as possible.” (C2: CEO) The interviewed community nurse defines innovation at Home Care Network as being flexible and adapting quickly, for example to frequently changing requirements from politics or insurances. She describes the way they operate as “very innovative” compared to other care providers that she has worked for before. In her seven-persons team the nurses are able to discuss issues and implement changes quickly. Among the key reasons for this adaptability she sees that “there are not so many layers that have to be changed.” She argues that the team itself is “not locked in a certain routine of ‘We have always done things like that.’” Besides, thanks to the nurses’ very practical point of view they make suggestions, which are very likely work out in practice (C2: Employee, personal communication, March 31, 2016).

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As an example for an innovation implemented at Home Care Network at an early stage the nurse describes a tablet-based system for easily creating care plans. After a bit of practice it was considered a helpful tool making the nurses’ work easier. Through Home Care Network the system became more known in the Netherlands and today the system is used by many organizations in the country (C2: Employee). The CEO describes the example of close cooperation between nurses and local physiotherapists, which after some time of experimentation has become a national standard (C2: CEO). Beyond that, Home Care Network’s organizational model can be considered highly innovative. Details are described in the section on heterarchicalness. Documents Documents, particularly the organizational chart, more point to an innovative than a standard organization.

Illustration 4.8: Generalized organizational chart of Home Care Network (Wolf, 2016)

The generalized organizational chart shown in Illustration 4.8 strongly indicates a non-hierarchical approach to organization. The “Director” is allocated on the same level as “Coach” and “Back Office.” Above those, a number of connected “Teams” are displayed. This indicates that the organization is based on independent teams of nurses, who are connected through their network. They are supported by an administrative back office, coaches and the CEO. On the homepage the organization’s approach to care is described and how it is innovative. The approach differentiates from other care providers through the close cooperation and support from local communities. This reduces the necessary care performed by the nurses and allows for flexibility in terms of patient’s individual needs.

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‘Innovation’ is presented as a prominent theme on the homepage. A number of innovations by Home Care Network are described, such as community mental health care services, offers for children, youngsters and families. A further example is a stroller race among elderly, which was first initiated by Home Care Network people and has spread across the Netherlands. In terms of appearance, the homepage features lots of large scale pictures of humans, along with topic sections separated by coloured boxes. Besides, there is a video talk by the CEO and founder explaining the organizational model. Workspace For judging Home Care Network’s heterarchicalness as indicated by its workspace, no pictures of the administrative offices or local nurse teams were provided. Therefore, on recommendation by the interviewed nurse, pictures were drawn from an online source; specifically from an article published in the online version of the newspaper ‘de correspondent’. The organization’s premises appear more standard than innovative. The pictures and further descriptions are found in the section on heterarchicalness. External View The following selection of studies and awards supports the view that Home Care Network’s unconventional model is also functional in terms of results, such as employee satisfaction, client satisfaction, and financial success. Innovation being defined as a new and better solution accepted and diffused in the market, these can be interpreted as indicators of innovativeness (list from organization homepage). A further indication that the organization’s approach is non-standard is the substantial public interest in the organization’s approach to home care and its organization, as shown by numerous articles and interviews, and a TED talk by the founder. As before, for reasons of anonymity references in this section which might identify the case organizations were redacted in the digital version of this thesis. Is Home Care Network Heterarchical? Table 4.9 summarizes that interviews, documents and external view support that the organization is heterarchical rather than standard-bureaucratic. Workspace is

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rated as balanced. The online survey results were excluded due to the low number of responses. Table 4.9: Evaluation of Home Care Network’s heterarchicalness Data source Interviews Documents (org. chart, brochures, webpage) Workspace Online survey External view (media resonance: articles, awards)

Heterarchical

Balanced

Standard

X X X Insuffic. data X

Interviews The CEO himself underlines that, “Leadership is not an issue in the organization.” He sees the term leadership strongly connected to a hierarchical paradigm. Instead, “The focus is too much on leadership, and it should be: Leadership is defining a team focusing on the best possible care is very concrete, and if you’re good at it, then you become a role model for others.” (C2: CEO) When the nurse applied to work for organization, she was particularly attracted by “The freedom to decide yourself, playing an active part in the overall organization.” How every team is organized is very individual. Which changes are implemented is decided by each of the teams, always in joint consideration and decision. She says that the CEO is not the type of person to impose things on the teams on a national level. Rather, the nurses “always have the feeling to have participation, to be heard.” (C2: Employee). Thus, the organization is rated as heterarchical in this data category. Documents The organizational chart, homepage, and excerpts from presentations by the organization strongly indicate that Home Care Network has a very unusual structure and working culture based on heterarchical principles.

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Illustration 4.9: Home Care Network depicted as “Onion model” (homepage)

Illustration 4.9, from a presentation by the organization, shows Home Care Network as “Onion model,” consisting of “formal networks,” nurse “teams,” “informal networks,” and an “independent client.” This strongly reminds of the characteristic of heterarchy network structure. Striking is that the client is at the center, which highlights that the organization is built around the customers with the purpose being to serve them best. Further, the model is described as “empowering and adaptive, network creating, supporting,” which are norms and values associated with heterarchy. “Humanity over bureaucracy” is prominently stated in the central space on the start page of the organization’s international homepage. The structure based on self-managing nurse teams is presented in the text and by a video talk by the CEO and founder. In other sections, the importance of collaboration and working in networks is underlined (homepage). Further, the presented mission highlights that the concept is based on selforganization of nurses: Home Care Network “is a non-profit organization with an important social mission: to change and improve the delivery and quality of home health care through the leadership and collaboration of the community nurse, allowing the individual to receive the kind of care they most need, where they most want it, and thus avoid more costly institutional care for as long as possible.” (Homepage) Workspace The administrative premises of Home Care Network make a plain and modest impression from the outside and inside (as can be seen in the pictures provided in

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Bregman, 2016). Work desks are decorated individually rather than being “clean.” This makes for a personal touch, as does the dog strolling through the premises. These can be interpreted as indications of informality, an aspect of heterarchy. The map of the Netherlands on the wall, indicating the locations of independent nurse teams, underlines the importance of networks. There are no apparent hierarchical signs and a few indications pointing to heterarchical principles, which results in a balanced picture in this data category. External view The immense public interest in Home Care Network’s organizational model from the general media, specialist media, and scientific authors strongly indicates that the organization’s approach is non-standard. The following is a selection of newspapers and websites that have featured articles on Home Care Network or interviews with the CEO. In most cases the focus lies on the organization’s unusual model of organization. As before, for reasons of anonymity references in this section which might identify the case organizations were redacted in the digital version of this thesis. 4.2.2 The General Nature of Innovation Both respondents to the online survey, the CEO and a nurse, indicate that cultural mechanisms such as common norms and values are far more important than formal organizational mechanisms such as processes and structures for coordinating innovation activities at Home Care Network (both chose 6 on a 7-point scale). As before, findings are not considered due to the low number of respondents. 4.2.3 Summary of Case Findings Innovation approaches identified at Home Care Network and those suggested by classic innovation management are strikingly different, except for culture and leadership. Of all cases, the organization’s innovation practices bear least resemblance with classic innovation management. Table 4.10 displays the key results of analysis in the theme strategy and direction. With strategy and direction, the common purpose ad mission of the organization guides innovations. The major sources are customer needs and changes in legislation. There is no strategy. The CEO does not see himself as the one to give

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strategic guidance. Consequently, there is no ex-ante planning of new developments, but ideas come up and are tested. Table 4.10: Home Care Network’s results: strategy and direction for innovation

Strategy & direction

Theme

Innovation Evidence

Comparison to IM

Common purpose of organization guides innovations. Major sources of innovation: customer needs, changes in legislation. There is no strategy.

Supported

Not supported No strategy development; CEO does not see himself as the one to give strategic guidance. Not supported No ex-ante planning of new developments, ideas come up and are tested. Not supported

The key results as to processes and structures are displayed in Table 4.11. Table 4.11: Home Care Network’s results: processes and structures for innovation

Processes & structures

Theme

Innovation Evidence There is no process for innovation. Problems and ideas are discussed on the common intranet and within teams, tested in some teams, and then implemented on a larger scale. There are no clear criteria for selecting ideas, all ideas get a budget for experimentation. Practicability and well-being of customers are likely to play a central role implicitely. No management decisions on ideas, not even involvement.

Comparison to IM Not supported

Not supported Not supported

No innovation manager; everybody feels responsible for innovation. Not supported

As to processes and structures, there is no process for innovation. Problems and ideas are discussed on the common intranet and within the teams, tested in some of the teams, and then implemented on a larger scale. There are no clear criteria for selecting ideas, but practicability and the well-being of the patients are likely to play a central role implicitly. Idea selection is no management decision, but employees quickly come to a consensus through discussions in the teams and on the common intranet. In an environment where everybody is expected to and seems to feel responsible for innovation, there is no specific role such as innovation manager. Table 4.12 displays the key results of analysis in the theme culture and leadership.

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Theme

Innovation Evidence

Culture & leadership

Table 4.12: Home Care Network’s results: culture and leadership for innovation

CEO as innovation driver: Communicates importance of innovation and acts as role model. CEO provides resources for innovation. There is budget for testing all ideas. High levels of empowerment, individual and team responsibility by employees. Central values supportive of innovation: Innovation, team work, communication, openness, knowledge sharing.

Comparison to IM Supported Supported Supported Supported

With culture and leadership, the CEO communicates the importance of innovation and acts as role model. Further, he provides resources for innovation in the form of a budget for testing all ideas that come up. Employees are empowered to a high degree and fill those freedoms with individual and team responsibility. The values identified at Home Care Network are generally regarded supportive of innovation: innovation, teamwork, knowledge sharing, and openness. A number of themes have come up and are discussed in turn, within strategy and direction, processes and structures, and culture and leadership: Strategy and direction Guidance through clients’ needs rather than a strategy Processes and structures The path from idea to launch: Online collection of ideas followed by experimentation Responsibility for innovation: Everybody can start and implement an innovation Culture and leadership The CEO as promoter of innovations Role models rather than leaders Empowerment, responsibility and accountability Further values and norms: Helpful and sharing, communication skills and openness 4.2.4 Strategy and Direction: Emerging Themes Being a district nurse himself, the CEO had not been satisfied with the way home care was organized when he started the alternative home care organization with some friends in the ‘80s. The vision back then was based on the idea, “that if we

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focussed on patient-centered care in small self-organizing teams with hired skilled nurses, the outcome would be much better and the costs would go down.” (C2: CEO) Similarly, the interviewed nurse describes the common goal that drives the nurses today: “It is our vision to provide the least care possible to a patient at home. Yes, and then quick, short contacts among each other. A lot of cooperation with families and neighbours. We don’t want to contribute to high costs in home care, we actually want to reduce costs.” (C2: Employee)

This differentiates them from others in the health care system: “But I think that actually, this has made us strong, that we try to make people independent again, make them autonomous. Through this, we are also more and more trusted by hospitals, other care providers and GPs.” (C2: Employee) Guidance for improvements comes from the focus on patients’ needs, not a strategy: “If you have a very strong focus on delivering the best possible healthcare, then that’s your incentive. Every day you can reflect on what you’re doing, and if you have a good idea about how you can improve it, then you should just try it, even though we don’t have a strategy on that. We don’t have a strategy on anything.” (C2: CEO) The nurse very similarly describes the internalized common goal: “We all have the same goal in mind, well, and this is the well-being of the client, that is my objective. I want to go home with a good feeling, and well, this is of course also my reward in some part.” Beyond that “we know of course as a team what we are working towards, what our goals are.” (C2: Employee)

The CEO does not see himself as someone to provide strategic guidance: “Everyone can innovate, so I'm not an innovation strategist from a practical view on one of the teams. They have an idea that pops up, or focus when the nurse starts a certain program and sometimes she checks there’s enough support from the team or from the organization.” (C2: CEO) The nurse agrees that the CEO is not the type of person to impose things on the teams (C2: Employee).

4.2.5 Processes and Structures: Emerging Themes The CEO describes the path from idea to launch of new practices: “There is not really a structured process. (...).” In the case where in a nurse team, “an idea that pops up (...), sometimes she checks there’s enough support from the team or from the organization.” He then says, “‘Okay, let’s make a plan and let’s find out if we can make it work.’” To support idea realization, the CEO helps people unlearn common practices:

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“I then create the conditions where they can experiment and usually they need some support, because most people come from other organizations, they have some ideas about how it’s working yet, and they need some support in learning how to lose all kinds of things.” (C2: CEO)

Thanks to their lean business model there is a substantial budget for innovation. They can experiment with every idea that is suggested rather than selecting: “We’ve created a business model with a lot of independency to the outside world, so the business model and the way we work avoids a lot of overhead costs, so, financially we do very well and we have a lot of reserves to use for innovation. (…) If you want to do something, you can just do it and we can decide whether to do it.” (C2: CEO)

Thus, a budget is provided for each idea: “She is going to need some money; everyone who has a good idea can start something.” After a certain time of experimentation, “we ask everyone to see how the experience is from their specific project.” When experiments in some teams are successful, others start implementing the new practice (C2: CEO): “Most of the ideas are shared on the web (...); they describe what they’re doing, they say they have good results and all the teams pick up on it and they also experiment it, and then it starts becoming the way of working. That’s how it happens all the time. And then it becomes part of the work of more and more teams.” (C2: CEO)

The nurse describes the journey that an innovation takes at Home Care Network. It usually starts from a problem described by the CEO on the organizationwide intranet, which is regularly accessed by the nurses. Using a kind of chat function the CEO asks the collective: “‘How do you think about this? How can we resolve this? Or how can we change so that we are in line with the new legislation?’” Every team can individually considers the problem and what they can contribute to better correspond to the new circumstances. The team meets and discusses how they have been working so far, if the change has impact on them, and what ideas they have. In this spontaneous discussion each of the seven nurses has her say. After coming to a conclusion they give their feedback on the intranet, as the other teams do (C2: Employee). On the intranet ideas are discussed and everybody can respond to the others’ suggestions. The nurse underlines that there is not much variance in the suggested ideas because, in her view, there are not many possibilities. She considers that “managers” might have “other ideas that would not work in practice.” As they are all practical nurses most suggested ideas are likely to be practicable. Thus, the collective comes to conclusions quickly. Next, pilot applications are done in some teams for a few months. If these are successful, more teams pilot the approach. Then every team can decide whether to implement it (C2: Employee).

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The CEO criticizes how innovation is hindered in many other organizations: “What happens in a lot of organizations is that behavior is punished by management for little things, which are not regulated in an organization. You get punished by the hierarchical system every day, it’s quite silly. If you have a good idea you should take your time and develop it.” (C2: CEO)

In contrast, at Home Care Network, “everyone can start an innovation.” (CEO) To support that people take this initiative, he regards simplicity, an open culture, and responsibility as important: “Don’t make it too complicated for people to start something. It’s an open culture and anyone who has an idea is welcome. (…) It’s a non-hierarchical way of working where everyone feels free to start something, so the responsibility and accountability is quite different than in the average organization.” (C2: CEO)

That everybody feels responsible for innovation is reported by the nurse, too: “That is actually more the task of everybody. Yes, it is actually taken up from all sides.” Every team decides whether to take over certain changes (C2: Employee). 4.2.6 Culture and Leadership: Emerging Themes The CEO has a strong understanding that creativity is something that is given and often hindered by standard management practice: “I think its normal human behavior. (…) If you have a good idea you should take your time and develop it.” Thus, he appears to have the role of a promoter for innovations in the sense that, “I then create the conditions where they can experiment and usually they need some support (…).” Part of this is fostering a culture that is supportive of creativity and initiative, which he describes as: “It’s an open culture and anyone who has an idea is welcome. We welcome new ideas.” (C2: CEO) Beyond that, the CEO makes sure that sufficient funds are provided for experimentation: He reports: “Everyone who has a good idea can start something, we can spend €30,000 for every idea.” He argues that a lot of other organizations “are only starting innovation when they get paid for the innovation,” e.g. through government funds for innovative projects. At Home Care Network, in contrast, “We do it the other way around, where we experiment to find out if it’s a good idea and then talk to people who can pay for it,” such an insurer or another institution in the health system (C2: CEO). Regarding his own role the CEO explains that, “There are different aspects. One is negotiating with the health insurers (…). Another role is to support and inspire new innovations that we have started new in different parts of the organization.” (C2: CEO)

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Further, the CEO and founder can be regarded a role model as to innovation for the nurses. The nurse reports about the CEO that he “was so courageous to name the whole of problems in the system but also to say: ‘Ok, I will change things, stand my ground and found my own organization.’” (C2: Employee) Focusing on his perception outside the organization, she describes him as somebody who has achieved a lot. Being in media frequently, he has become a wellknown person, presented as role model in the Netherlands. Besides, he is heard and taken very seriously with his ideas also in politics. Despite this success the nurse describes him as very modest. What is characteristic of him is, “the human side, definitely the human side.” He wants to make things better for everybody, also beyond the organization: “He speaks for everybody.” (C2: Employee) She describes his leadership style: “But really leadership? I would not call him the big boss. This is not how he acts, no.” She says that, “this is just what makes him strong, I think. Because he treats everybody very cooperatively and human. And actually treats everybody the same.” She describes him as “down to earth”: “Yes, he is our boss, but at the same time our colleague.” The relation to him “is definitely based on trust” (C2: Employee). The CEO himself vehemently argues that, “leadership is not an issue in the organization.” Rather: “For example, if you’re making furniture or jewelry, then, generation by generation, you learn from the master craftsman, so you develop your profession based on the experience of the senior. My idea is that a lot of this is based on different types of knowledge; you share it and by talking about it you become a better nurse and learn more things (…). But if you talk about leadership and management it doesn’t have content; it is about behavior, and behaving like a leader as an abstract theme is not useful in my idea. If you are doing the right things you will be seen by others as a role model and as a leader. It’s the result of what you’re doing.” (C2: CEO)

Within the teams everybody has the same influence. The nurse admits that influence has to do with level of education, work experience, and personal characteristics. Every nurse has her own field of expertise, where she gives information sessions and is the contact person in the community and for other teams in the network (C2: Employee). The model of Home Care Network is based on responsibility and accountability, which is seen as independent of industry by the CEO: “It’s a certain way of looking at people. If you focus on people and focus on their skills (…). It’s normal that you want to grow, and if you create circumstances for people to have the ability to grow, then they’ll take responsibility and they’ll be accountable for what they’re doing.” (C2: CEO)

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The nurse appears highly intrinsically motivated when she says that the well-being of the patient is essential for her: It makes her feel good and partly is the reward for her work. She was attracted by “the freedom to decide yourself, playing an active part in the overall organization.” (C2: Employee). In adapting to patient needs the nurses need to be very flexible. This implies being in charge all the time: “Working time does not just end. Also on free days I can be called.” In principle she could also say no, but she feels a strong sense of responsibility, to patients and her colleagues: “You cannot go to work with an attitude like ‘I work from 8 to 12 and after me, the deluge!’ That is not working. Yes, you have the responsibility for this small organization.” (C2: Employee) Without this strong mutual accountability, she says, “we could close down the thing within a week.” (C2: Employee) Both survey respondents, the CEO and the nurse, associate the values communication, customer-focus, democratic, teamwork, and self-directed with “How things are done” at Home Care Network (see Figure 4.6). The limited validity of these findings must be considered. However, these are in line with and strengthen the interview findings described in this section.

Figure 4.6: Online survey: “Which of the following values best describes ‘The way we do things here’ at Home Care Network?” (Multiple answers allowed)

Further, customer focus as a key value is in line with the available piece of documentation. As presented in the section on heterarchicalness and documents, the “Onion model” displays the client at the center of the organization, with selfdirected teams around (Illustration 4.9).

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“Warm” is what the nurse instantly associates with the climate at Home Care Network. This comes from feeling that, “You are heard, yes. You are being involved a lot. Yes, you feel being heard and understood. And nothing is dismissed as not being necessary, no. Everything is taken seriously.” (C2: Employee) She details that, “Also the whole organization it almost feels like a family (...). Everybody can contact and talk to everybody. You always get an answer, you get help fast, yes. Actually it is like a family. You ask and get help.” (C2: Employee) Within the team and across teams people are very flexible and help each other out when one team is understaffed or when a certain expertise is required (C2: Employee). On rare occasions where a team cannot solve issues among themselves, a regional coach can be asked to mediate neutrally between the parties and help to come to a joint solution. The nurse herself has not experienced such a situation in her seven years with the organization. She points that communication and the joint planning works very well. She admits that this requires high levels of self-discipline from the nurses: “You have to take a lot, be critical to yourself and be able to take criticism.” (C2: Employee) The close cooperation within the team also requires nurses to be very open with their colleagues. For instance they need the others to understand if, due to their private situation, they are unable to work. In a normal organization they could just go to their manager and state that they were on sick leave for a week. The manager would then be responsible to deal with the consequences (C2: Employee). Beyond that the teams are well-integrated in their local communities: “In our community we are also the contact persons for, well, actually everybody.” The nurses are in contact for example with GPs to discuss about clients or give talks about their care-related fields of expertise. Further this refers to exchange with the other teams, primarily through the intranet (C2: Employee). To fit in at Home Care Network nurses need to be “innovative, open, social.” When teams recruit new colleagues, they look out if the candidate fits to the team, also in terms of mindset (C2: Employee). 4.2.7 Conclusion Home Care Network was set up in a non-bureaucratic way from the start and has grown with it. This can be regarded an advantage over organizations that go though a transformation from bureaucratic to heterarchical.

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Central elements of the organizational culture, such as communication skills, a helpful and sharing attitude, have a strong fit with the organization’s purpose and field of operation: providing care to those in need. Nurses might tend to choose their profession because they are social, communicative, and helping. Home Care Network being considered as warm, family-like and helpful, can be assumed to reestablish this fit. With a 70 percent market share in the Netherlands, a substantial share of nurses in the job market works for the organization. Thus, a considerable share of people in this field is apparently able and willing to take responsibility within the right circumstances. In contrast to industrial organizations, innovation in home care does not require large resources in terms of development capacities and budgets. Thus, there is no R&D, production facilities or large-scale marketing required. Instead, every team individually performs these activities as necessary, while successful new practices are shared and adopted by other teams. Due to the franchise-like approach, the organizational model is regarded easily scalable, according to the CEO: “It’s an organic process, and we don’t see any difference between 100 teams or 800 teams. (...) Now, from the organizational perspective, you have an entity, but it can also be two entities, or three entities or whatever.” (C2: CEO) 4.3

Case 3: Digital Transformers

Case organization 3 is called ‘Digital Transformers.’ It is located in Leipzig, Germany, and was founded in 2013. With ten employees as end 2016 it is categorized as small. The consultancy focuses on digital transformation processes and particularly supports the related cultural change. It has a strong understanding of pioneering and experimenting with the approaches they help their clients implement, for example flexible work concepts and digital collaboration tools. More recently, aspects from non-bureaucratic concepts have been adopted. 4.3.1 Digital Transformers’ Innovativeness and Heterarchicalness As shown in Table 4.13, the organization’s innovativeness and heterarchicalness are supported by four of the five data sources. The details behind the summary are described in the following section.

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Table 4.13: Digital Transformers’ innovativeness and heterarchicalness Interviews Documents Workspace Case 4: Innovativeness Supported Digital TransHeterarchicalness Supported formers

Online Survey

External view

Supported

Supported

Supported Not support.

Supported

Supported

Supported Not support.

Is Digital Transformers Innovative? Table 4.14 summarizes that interviews, documents, workspace, and online survey point to an innovative rather than standard organization. There is insufficient data to support the external view that Digital Transformers is innovative. Thus, the organization is rated as standard in this category. Table 4.14: Evaluation of Digital Transformers’ innovativeness Data source Interviews Documents (org. chart, brochures, webpage) Workspace Online survey External view (media resonance: articles, awards)

Innovative

Balanced

Standard

X X X X X

Interviews Both interview partners, the CEO and a senior consultant, agree that Digital Transformers is very innovative. Innovation has been essential for Digital Transformers from the start, says the CEO: “It’s part of our core values to be innovative because I’m really convinced in our business, in the digital change business topics are moving so fast (…) and that it’s very important for us to keep ahead of the developments (...) and to always ask ourselves what this means for our clients.” She also explains where they are innovative: “new ways of consulting, new event structures, new methods and new ways of training people.” (C3: CEO, personal communication, December 12, 2016).

Similarly, according to the senior consultant, being innovative means, “that we are again and again prepared to integrate new impulses, work with new methods, with new insights, with new technologies.” She further rates the consultancy’s innovativeness, “very innovative here in the sense that we move through cycles very quickly (…) and that we do not hesitate at all to mix two things somehow and make something new out of that, not to somehow stick to conventions.” She rates the organization “miles away from what classic trainers do” and “very innovative” as to technological developments, enabling them to

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regularly recommend new tools (C3: Consultant, personal communication, November 11, 2016). On this basis, the organization is rated innovative in the category interviews. Documents Several elements of the homepage and the organizational chart indicate that the Digital Transformers is innovative rather than standard. The homepage is created in a highly visual way. The key topics of Digital Transformers are displayed in a network character (see Illustration 4.10). Besides, the depicted swarm of birds and the organization name symbolize the agility of modern organizations. Below, the key topics are presented as large icons.

Illustration 4.10: Excerpts from Digital Transformers’ homepage

The homepage features a job advertisement where potential applicants move through a playful test to see whether they match the organization and role. In contrast, standard job advertisements contain a description of tasks and a list of requirements (homepage). Most importantly, the organizational chart is a central element to consider in the category documents. Digital Transformers’ circle-shaped chart clearly indicates an innovative organization. It is presented in the later section on heterarchicalness. Workspace The organization’s working environment can be described as very innovative. The CEO reports: “We have no office; everybody works from home office.” This means that employees are free to work from any location (C3: CEO). This reflects to a high degree the flexible work times and places enabled by digital collaboration technology.

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Transparency through digital collaboration helps collaborate without central office: “We do a lot of work through our social network. (…) Everybody always writes what they do, what draft level it’s on, and you have a good mind-set of how the organization develops: What the topics are, where I can put my idea, and so on.” (C3: CEO)

Meeting in person is very important for innovation: “Once a week we have co-working days where everybody who’s in the city goes to the office to meet with an agenda where all the innovation topics are talked about and we develop new things.” (C3: CEO) Online Survey As shown in Figure 4.7, all five respondents of the online survey univocally rate Digital Transformers’ innovativeness compared to its main competitors 5 on a 7point scale. This clearly indicates that respondents perceive the organization as innovative.

Figure 4.7: Online survey: Digital Transformers’ innovativeness

The respondents had a background as project coordinators, team support and contact for IT partners, and CEO. Thus, considering the size of the organization with 10 employees, a sufficient range of views on the organization is covered.

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Is Digital Transformers Heterarchical? Table 4.15 summarizes that interviews, documents, workspace, and online survey indicate a heterarchical organization. As there is insufficient data to support the external view that Digital Transformers is heterarchical it is rated as standard. Table 4.15: Evaluation of Digital Transformers’ heterarchicalness Data source Interviews Documents (org. chart, brochures, webpage) Workspace Online survey External view (media resonance: articles, awards)

Heterarchical

Balanced

Standard

X X X X X

Interviews The interviews suggest that the organization is currently moving towards higher levels responsibility of employees, with considerable self-management already lived but central influence by the CEO still present. She explains: “I am the founder and somehow I’m always the person who's responsible for the whole company - for everything - but I don’t want to decide on everything. I’m the founder and, so far, the leader, because I’m the founder and the owner.” (C3: CEO)

The CEO aims to increasingly let go from central control by establishing what she calls leadership in topics: “But we have taken huge steps forwards in having a lot of people who are responsible for something. You already feel responsible and live the responsibility, so they are the leader for their topics.” (C3: CEO) The consultant confirms that, “We lead on very different levels and I would even say (...), everyone of us has already led the others or has led something.” (C3: Consultant) Documents The considered documents, the organizational chart and homepage, clearly point to a heterarchical rather than standard-bureaucratic organization. The organizational chart has the form of several circles (Illustration 4.11). The so-called “Core” is depicted in the center, surrounded by the nearest circle “Strategic team.” The next circle includes “Brand communication,” “Organizational development” and “Experience Digital Transformers.” On the third circle, individual projects are depicted.

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Illustration 4.11: Digital Transformers’ organizational chart (documents)

In the “Core,” the organization’s purpose is described, while the “Compass” is meant to provide practical behavioral guidance. Several of the listed guidelines strongly relate to heterarchical principles, such as “transparent and open” or “develop together” which refers to communicating and learning from mistakes (documents). On the homepage, in the section “About us” the whole team is displayed in a central position. Their arrangement does not indicate who has senior or leadership positions. A job advertisement on the homepage lists key principles at Digital Transformers: “Social technologies and mobile working instead of working in the office, flexible working hours instead of working according to attendance clock, networking rather than defending principalities of knowledge, responsibility as a team instead of classical hierarchy and one man show” (homepage). These correspond to heterarchical principles. Workspace The flexible working conditions, including ‘offices’ on a camping ground or meetings during a joint walk (documents), can be interpreted to reflect flexibility, informality and trust. All these are associated with heterarchical rather than bureaucratic cultures.

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Online Survey The results of the online survey clearly indicate that Digital Transformers qualifies as heterarchical (see Figure 4.8).

Figure 4.8: Online survey: Digital Transformers’ heterarchicalness

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Figure 4.9: Online survey: Digital Transformers’ heterarchicalness per dimension

Specifically, network structure at Digital Transformers was highly supported (Figure 4.9/1). The presence of Dynamic influence was also supported, though less strikingly (Figure 4.9/2). Similarly the view that values and norms coordinate individual actions at Digital Transformers was supported (Figure 4.9/3). Of all dimensions of heterarchy, culture coordinating collective action was most clearly supported (Figure 4.9/4). Also the presence of informality was clearly underlined by the respondents (Figure 4.9/5).

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4.3.2 The General Nature of Innovation As shown in Figure 4.10, the respondents of the online survey rated cultural mechanisms, such as common norms and values, as more important for coordinating innovation activities at Digital Transformers than formal organization, such as processes and structures.

Figure 4.10: Online survey: “Please rate the relative importance of culture and of formal organization for coordinating innovation at Digital Transformers.”

4.3.3 Summary of Case Findings Comparing innovation approaches identified at Digital Transformers with those suggested by classic innovation management reveals a mixed picture. Findings on innovation culture and leadership were found to largely correspond to the classic view. Aspects related to strategy and direction, as well as processes and structures for innovation show striking differences to classic innovation management. Table 4.16 displays the key results of analysis as to strategy and direction.

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Table 4.16: Digital Transformers’ results: strategy and direction for innovation

Strategy & direction

Theme

Innovation Evidence

Comparison to IM

Rather than a vision, the common purpose, “Core,” and behavior orientaNot supported tions guide developments. No clearly formulated search fields, but portfolio discussions; The common purpose, customer problems, and technological developments trigger Not supported developments. The CEO and two other persons are responsible for strategy and business development. As full-blooded entrepreneur, the CEO has key influence on initiating and finally deciding on strategic topics, but everybody has Partly Partly the chance to contribute. Combination of conscious ex-ante portfolio discussions and more opporPartly Partly tunity-driven initiatives and experimentation

With strategy and direction, rather than a vision, the common purpose, called the “Core” and behavior orientations guide developments. There are no clearly formulated search fields, but portfolio discussions. The common purpose, customer problems, and technological developments trigger developments. The CEO and two other persons are responsible for strategy and business development. As full-blooded entrepreneur, the CEO has key influence on initiating and finally deciding on strategic topics, but everybody has the chance to contribute. Factual strategic direction results from a combination of ex-ante portfolio discussions and more opportunity-driven initiatives and experimentation. The key results on processes and structures are displayed in Table 4.17: Table 4.17: Digital Transformers’ results: processes and structures for innovation

Processes & structures

Theme

Innovation Evidence

Comparison to IM

No formal innovation process: Initially online posting and discussion of problems and opportunities, followed by a number of innovation workNot supported shops in varying constellations. Idea development and selection evolves through discussion; Mostly Not supported based on gut feeling and early customer feedback. The person responsible for a certain topic finally decides, others have the Partly Partly opportunity to contribute in the discussion. The founder and CEO takes specially responsibility in innovation, however, everybody can contribute to innovations, depending on creative Partly Partly potential and topic.

With processes and structures for innovation, the small organization has no formal innovation process. Typically, problems and ideas are initially discussed

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online, followed by a number of innovation workshops in varying constellations. Ideas are selected through discussion, mostly based on gut feeling and early customer feedback. The person responsible for a certain topic finally decides; others have the opportunity to contribute in the discussion. The founder and CEO takes specially responsibility in innovation, however, everybody can contribute to innovation, depending on creative potential and topic.

Theme

Innovation Evidence

Culture & leadership

Table 4.18: Digital Transformers’ results: culture and leadership for innovation

Founder and CEO with strong entrepreneurial spirit, clearly underlining the importance of innovation for the organization. CEO provides capacities for innovation and uses her network to test new ideas. Innovation supportive values: Innovation and experimentation, openmindedness, team spirit, communication and feedback culture, knowledge sharing and transparency. Increasing empowerment and employees with individual responsibility for topics.

Comparison to IM Supported Supported Supported Supported

With culture and leadership (Table 4.18), the founder and CEO with a strong entrepreneurial spirit clearly underlines the importance of innovation for the organization. The CEO provides capacities for innovation, e.g. the weekly team day, and uses her network to test new ideas. Employees are increasingly empowered and take individual responsibility for topics. The identified values are supportive of innovation: Innovation and experimentation, open-minded, team spirit, communication and feedback culture, knowledge sharing and transparency. Significant themes emerged within strategy and direction, processes and structures, and culture and leadership. These include the following: Strategy and direction A common purpose: The guiding “Core” Strategy development Sources of innovation Experimenting for early customer feedback Processes and structures From idea to launch through online and personal discussions Responsibility for innovation: Pushed by founder, but everybody’s task Methods and tools for innovation

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Culture and leadership Values: Experimentation, open-mindedness, team spirit, communication, transparency, responsibility Leadership in topics and switching between leading and following Hiring the right people, jointly 4.3.4 Strategy and Direction: Emerging Themes An important part of organizational development at Digital Transformers was defining the organization’s core values during team sessions, as the CEO reports: “They always existed but, in a growing team, you have to renew them.” Writing down these ten values, “should help us find our orientation during daily life” (C3: CEO). From their earlier vision the three strategic people moved to formulating the “Core”: “We have said that you don’t have a vision - not this ‘this is where we aim for’ - but you have a reason for existence. That is this idea of the core or the purpose.” The consultant stresses: “Why does the world need us? If we have no reason for existence we can do something else.” (C3: Consultant)

She explains how the core, also called the “Digital Transformers Compass,” provides orientation in the context of high levels of self-organization: “This range so to say, that is where we can take the employees along, because they are given the possibility to say, there is no right and no wrong. As long as this value codex that is there, as long as you can share this, also the system fits you and you fit the system. And no rigid rules.” Regarding innovation she details: “You always talk about guidelines, that there is somehow a scope within which I can move, where I can also decide.” (C3: Consultant).

The values are formulated as behavior orientations, to make sure that they translate into practice in daily life: “Some situations arise where you have to be very efficient (...), it’s important to have the orientation and that we still come up with new ideas. It helps to get your priorities right.” (C3: CEO) The CEO and founder’s intention of defining the Core is to help her move away from central control more. She underlines that “it’s the people who bring this core to life” by shaping the organization around the core. Developed by the three strategic people it is the basis for discussion with all colleagues. The consultant explains the core’s content: “We are designers of the digital transformation and the networked digital ways of working. Why designers? Because we don’t react but absorb all topics that somehow come up in this field, try these out ourselves, be it methods, technologies, trends, (...) what it makes with people, with the organization on a small scale.” (C3: Consultant)

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The organization’s core value is “that we have to be innovative and fastmoving,” with the corresponding behavior orientation: “You better use your mind when thinking and building your own ideas instead of copying things.” Another orientation is that it is satisfactory to start with some drafts, rather than always having the perfect solution for everything, which helps being efficient and innovative (C3: CEO). There are three people in the organization who “decide on strategy and the main topics concerning the development of the organization,” during their monthly meeting. Next, these topics are brought to the team meeting, “so that they can understand it and can take part in the development process. We don’t present the final solution - it’s a discussion draft and (…) we develop it further to a final decision.” (C3: CEO)

While everybody can contribute to shaping the solution, the final decision is made by the responsible person for the topic, as the CEO underlines: “Not everybody decides, but the responsible person decides - who is me. I look for help from the others and they give their recommendations and advice; but I make the final part with the two other persons of the strategic team. I’m the responsible person.” (C3: CEO)

Similarly, the consultant reports that business development “is certainly driven through the entrepreneurial spirit of the CEO, because she simply is an entrepreneur, full-blooded.” Also other team members can contribute new topics. Particularly new colleagues joining the organization bring new topics: “And like this you automatically reinvent yourself, because we always try it out on ourselves.” (C3: Consultant) Who is involved to what extend depends: “When it is about something that might have far reaching consequences we do it in the whole team.” In discussing the organization’s product portfolio the whole circle of employees was involved (C3: Consultant).

The typical starting point for developing new offers at Digital Transformers is out of customer projects, where the consultants face a challenge. Impulses, requests and ideas from projects are always brought into the team and made transparent (C3: Consultant). Other sources of innovations are research articles or new technologies in the consultants’ private life, e.g. Snapchat. Such impulses are discussed as to how they could be transferred to the business context. Rather than systematically analyzing and planning which potential new fields could be entered, the consultants quickly discuss ideas and get feedback. After a customer meeting, for example, the consultants just tested their ideas on a potential new topic and checked whether the customer actually had a need.

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4.3.5 Processes and Structures: Emerging Themes Innovation at Digital transformers does not follow a clear process: “It’s not a defined process which we have written down, it’s more we have some experiences on how to be very efficient in developmental processes (...). We try to meet, try to focus on the meeting and not be distracted by other things. We take time over it with the right people, and so on. That’s our experience and that’s how we do it. We just do it.” (C3: CEO)

The CEO details how an innovation develops from idea to launch. She distinguishes two broad phases, the first taking place online and the second being collaboration in real meetings: “The online part (...) was more lighting ideas and looking out of your scope to see other contexts which might be relevant and connecting the dots.” The first starting point is usually a question from a client. When a colleague does not know how to solve a challenge, he or she can put the question into the open team network. Persons who are likely to be competent in that question can be directly addressed for recommendations, while “everybody can read everything, and also comment.” (C3: CEO)

When the time comes to prepare the event or speech, “the real innovation part” takes place: a small team meets for a workshop to “refine the ideas and make a real product, a real thing, out of it.” During the workshop, “we always visualize – there’s one person who has an idea, or set an idea out of the network, and starts to write something on the wall - painting or drawing - and then it becomes a bigger picture. You talk about it in a team and then there comes a mindmap or picture, which describes what you want to do.” Afterwards the responsible person considers if the developed solution is satisfactory or if further workshops are required (C3: CEO).

In the example of a management event, “we also posted on the Internet to find some ideas, but the real part was the meeting, and we had several meetings with different people. (…) we had three or four meetings until we had the method, until it was final.”

The CEO underlines that, “The main thing is to have different people. Often, I’m very creative when I have other people in the team who are challenging your ideas and have new ideas, and you need the right people in that meeting, and then it works out.” Who is invited the CEO decides based on “experience and creative potential. You know the personalities in the organization” (C3: CEO).

Regarding idea development and selection: “A lot happens through transparency and experimentation.” The consultant assumes that workable solutions are more or less automatically identified and shaped through discussion: “I believe that this develops, (…) the organization goes into discussion and then something develops, which works and is good.” (C3: Consultant)

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As to idea selection, “currently it is very much gut feeling,” which is functional at the current organization size. To better judge a new idea’s potential, it is often brought up in the next customer meeting or the CEO simply asks some customers if this could be a topic (C3: Consultant). If something develops from there requires that somebody drives the topic: “If it is not driven, responsibility is not assigned artificially, but there must be somebody who says, ‘I am up to this, I will do this now.’” That is why she regards the development of topics as “something natural, organic.” (C3: Consultant) Who has what influence, “always depends on the topic and the relevance. (…) The decision-maker must be a person with this experience and responsible for it towards the client. (…) That’s how it is in all kinds of things.” (C3: CEO) New strategic topics or business development is particularly driven by the CEO’s entrepreneurial spirit, described as full-blooded entrepreneur (C3: Consultant). With innovation being the core value, it can be considered everybody’s task. Everybody can suggest ideas online or during innovation workshops, depending on creative potential and topic (C3: CEO). The internal social network is the central tool facilitating innovation at Digital Transformers, particularly, because employees work from dispersed locations. Further, digital social collaboration is at the core of their business, thus, they constantly experiment with related tools. Visualization is considered especially important for innovation workshops (C3: CEO). Further, Design Thinking principles are used in a way adjusted to the organization (C3: Consultant). 4.3.6 Culture and Leadership: Emerging Themes As depicted in Figure 4.11, among the five respondents of the online survey, collaboration was most often associated with “How things are done” at Digital Transformers, followed by self-directed, open-minded, and teamwork. These results correspond to the values and norms identified through the interviews, as described in the subsequent section.

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Figure 4.11: Online survey: “Which of the following values best describes ‘The way we do things here’ at Digital Transformers?” (Multiple answers allowed)

In addition, the values described in documents, such as the ‘Core’ and ‘Compass’ described in section 4.3.1 are in line with the findings from the interviews and the online survey: “transparent and open” and “develop together,” which refers to communicating and learning from mistakes (documents). Further, the principles described on the homepage correspond to values identified through interviews and the online survey: “networking rather than defending principalities of knowledge” and “responsibility as a team instead of classical hierarchy and one man show” (homepage). The culture at Digital Transformers is described as “startup culture, where we are really on fire, we have constantly new topics, a lot of new customers, and that is a real hype and boom.” It is further characterized by “this pioneering spirit and this risk appetite”. According to the consultant, “this entrepreneurial spirit (..) is not only driven by the management, but that is something that we wish for from everybody who joins the organization, that he also advances the development with his talent” (C3: Consultant).

Rather than rigidly implementing a certain method, they try to adapt certain principles to their context: “And that is exactly the idea, try out and learn. Design Thinking approach, exactly to say, I have a problem here and I bring together a number of people and simply try this out as a prototype.” (C3: Consultant) To stay innovative it is very important for Digital Transformers to recruit the right people, described as open-minded by the CEO:

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“It’s very important to have a person who is not narrow-minded, but very open and flexible; open in thinking in different directions and connecting topics. (...) And we don’t need that; we need people who have experience, or who have knowledge on something, but who are able to distance from that and develop that further with others, others who are open to what others say.” (C3: CEO)

Being prepared to consider other people’s views can be regarded one aspect of the more encompassing ability to work in teams. Both interviewees agree that this is very important at Digital Transformers. The CEO describes how working in teams supports innovation, but she also underlines that collaboration supports efficiency (C3: CEO). The shared self-image of working as a team is what the consultant particularly values about working with her colleagues: “That we succeed to really work as a team, really. That we have situations where we can throw a ball into the air and the other keeps not only an eye on himself and the customer, but always also, with whom am I around, what does he maybe need now? We take care of each other.” (C3: Consultant)

She assumes that this is driven by the founder and her personal way and the people at Digital Transformers. This requires personal maturity and personalities who are not particularly ego-driven: “What does not work with us - and such people we do not hire - this being egocentric, status-driven. What you achieve and what develops from that is more important than status in the sense of making one’s name, to elevate or also subordinate to others. To have this self-perception of a team.” (C3: Consultant)

This understanding of collaboration also extends to customers and partners in the organization’s network. It is a part of their self-perception to share jointly created knowledge: “to have this demand that knowledge that is being created in collaborative projects simply belongs both parties. There is not this dividing (...). It simply belongs to all who are involved.” (C3: Consultant) This collaboration requires high communication skills. The consultant is convinced that, “from this communication and participation process automatically something develops, because here is a culture where you can just freely express your ideas, where we have a discussion culture.” (C3: CEO Consultant)

‘Thinking in drafts’ is described as very important for collaborating efficiently at Digital Transformers. Sharing ideas, which are not fully developed yet requires that people are not criticized, but given constructive feedback (C3: CEO Consultant). To have this culture it is important to “communicate at eye level.” This means that “Every behavior has it’s right to exist, also not to judge and to say, ’This is wrong,’ but to simply go into discussion, into communication.” (C3: Consultant)

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Sharing knowledge is essential for Digital Transformers, both in terms of their self-perception and their field of business (C3: Consultant). A necessary condition for collaboration at the organization is seen in a high level of transparency, primarily facilitated through the organization’s online network (C3: CEO). This kind of transparency also helps build trust and let go central control, as the CEO reports: “To let go of control and really trust other people that they do a good job and they are in their responsibility. (...) When you see that things are going well, and when you’re able to look into matters when you want to, then it helps to build trust that things are going in the right way, and to let go of control.” (C3: CEO)

It became necessary to make more transparent who does what beyond daily project life, as reported by the CEO: “There was confusion and each new person in the team said, ‘Ah, I don’t know what to do, and I don’t know how to work here!’” They approached the problem by describing more enduring roles and responsibilities. The CEO admits that this kind of transparency is not easy for everybody: “We try to become better. Some people do. For some it’s always something they have to get used to.” (C3: CEO) “Self-organization or self-management” is essential when working at Digital Transformers, as the CEO explains, “because we work in structures, which have no office and no regular times, so, everybody has his own rhythm of working; Everybody is part of different project teams or different responsibility teams and it’s very important that you can rely on people. (...) We need people who are self-organized and who are reliable for other people.” (C3: CEO)

That people take responsibility, the CEO suggests: “You can train it in a way, but I think the attitude has to be there; the selfresponsibility attitude. That you're not waiting for others to tell you what to do and how to do it, and that you don’t point at the other person who has done something wrong and hasn’t told you what you have to do. But always look at yourself: What can you do better? How can it be done? How to find a solution? It’s more the attitude issue.” (C3: CEO)

That is why they try to only hire people who fit those requirements, looking out for those values already during recruiting (C3: Consultant). Employees are not pushed into responsibility but encouraged to take initiative where they are interested and feel competent. New requests are given into the team via ‘Yammer,’ the internal network to see who wants to work on it. It is “a bit this pull-principle to say, (...) now apply for this or come and join and simply look who is keen on it.” (C3: Consultant)

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To what extent people take over responsibility differs from person to person: “We notice who rather takes on responsibility straightaway, pushes things forward and also, leadership also means staying responsible in critical situations and getting the help that is needed.” (C3: Consultant) How far they can empower whom at what stage, they need to figure out together: “Sometimes this is exactly this observing and seeing what happens there. And when you realize that a person simply does not yet feel able to do something, that it is too much at this point, the challenge too big, then to consider again, how can we facilitate a development, how can that person grow beyond himself and become confident to do it?” (C3: Consultant)

Employees are increasingly encouraged to take responsibility for topics. Leadership is viewed as something dynamic, according to the consultant: “We lead on very different levels, and I would even say (…) everyone of us has already led the others or has led something.” (C3: Consultant) The senior consultant describes how people naturally take leadership in their topics: “Natural leadership: when somebody is good at something and simply knows his onions just now, then I am happy to follow. I am also very happy to lead, but I like to follow when I realize that there is somebody who is burning, is mastering the task (...) depending on what it is, this is different.” (C3: Consultant) The CEO agrees that individual influence, “always depends on the topic and relevance. (...) The decision-maker has to be a person who has this experience and who is responsible for it towards the client.” (C3: CEO) The CEO summarizes what traits are important when working at Digital Transformers: “For us, it’s less important what expertise the person has, but more the mindset. (...) the openness, and the teamwork, the ability to work in teams, to share knowledge and to be free in your mind.” (C3: CEO) At least two of three strategic people agree to hire a candidate. Beyond that, “the team always checks if this is a person who fits in our team. I mean the team has to work with this person, everybody who will come in this situation just has to say, ’Yes, it fits or it doesn’t.’” (C3: Consultant) Being aware that the organization is profoundly based on these values, the CEO states that, “finding the right people will be the most important challenge.” (C3: CEO)

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Conclusion

In its three years of existence Digital Transformers has seen rapid growth to ten employees. As a startup non-bureaucratic way of operation was seen as “natural.” Now they move to a stage where to work effectively and efficiently, particularly new people require more orientation through some kind of organization. The challenge will be to provide this organizational frame, but keep the high level of experimentation and flexibility. Guidance through cultural norms is utilized very consciously at the consultancy. These values are human-centered and well suited to foster initiative, responsibility and innovativeness. There is a profound understanding that the organization needs to be developed further beyond defining roles (C3: CEO; Consultant). The strategic people at Digital Transformers prefer to proactively think about and experiment with new structures at an early stage. They aim to adapt certain aspects of nonbureaucratic models, with many of its principles already being lived (C3: Consultant). As consequence of working on projects in networks is it is not necessary for the organization to continuously grow (C3: Consultant). 4.4

Case 4: FIRECO

Case organization 4, ‘FIRECO,’ operates in the field of fire engineering and consulting. Founded in 2000, it has 180 people as end 2015. It is based in Berlin, Germany, with several branch offices in German metropolitan cities. The organization’s transformation from “the old world” to the “more agile and responsive” working structure is on-going since 2009 (C4: CEO, personal communication, December 14, 2015). 4.4.1 FIRECO’s Innovativeness and Heterarchicalness FIRECO’s to innovativeness and heterarchicalness is supported by three of the data categories and a balanced view in one (see Table 4.19). The details of analysis are described in the subsequent section. Table 4.19: FIRECO’s innovativeness and heterarchicalness

Case 3: FIRECO

Innovativeness

Interviews

Documents Workspace

Supported

Partly Partly Not support.

Heterarchicalness Partly Partly Supported

Not support.

Online Survey

External view

Supported Supported Supported Supported

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Is FIRECO Innovative? As displayed in Table 4.20, interviews, online survey and external view point to an innovative organization. The reviewed documents give a mixed impression. Workspace appears rather standard. Table 4.20: Evaluation of FIRECO’s innovativeness Data source Interviews Documents (org. chart, brochures, webpage) Workspace Online survey External view (media resonance: articles, awards)

Innovative X

Balanced

Standard

X X X X

Interviews All three interviewees, one of two CEOs and two employees, agree that the organization is very innovative. They refer to new products, the variety of offers, and in particular the unusual organizational structure. All stress that being creative and trying new things is very important at FIRECO. Employee 1, a Scrum master, underlines that “it is very good in this company that we, we really try to do new things. We don’t only talk about it, we really try it.” (C4: Employee 1, personal communication, December, 16, 2015) Employee 2, working in talent management, confirms: “I know it’s always possible (…) to give the opinion or ideas if there are any and, let’s discuss about it.” (C4: Employee 2, personal communication, December, 16, 2015) Documents Reviewed documents give a balanced impression of the organization’s innovativeness. The circle-shaped organizational chart is very unusual and strongly indicates that the organization is innovative. Details are provided in the section on hetearchicalness. The homepage gives few indications that the organization is non-standard. It mainly consists of a number of blue coloured boxes with text and few architectural pictures, as can be seen in Illustration 4.12. The way of communication appears rather impersonal and formal. It is assumed that the professional ‘engineering’-like look fits the expectations of potential customers in the architecture and building industry.

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Illustration 4.12: Screenshots of the FIRECO homepage

Workspace

Illustration 4.13: Office rooms in the FIRECO headquarters (pictures taken by the author during organization visit, 14 December, 2015)

FIRECO’s headquarter office space spreads over two floors, with most offices being shared by two to four people (Illustration 4.14); Almost all doors are open. Workspace is rated as standard. Online Survey As shown in Figure 4.13, the 10 respondents of the online survey clearly perceive FIRECO as an innovative organization. The respondents had backgrounds

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as CEO, member of the advisory board, competence leader, assistant, technical experts, process expert, and qualification management.

Figure 4.12: Online survey: FIRECO’s innovativeness

External View As a major part of the organization’s innovativeness, FIRECO’s nonbureaucratic organization structure has received significant media attention. The big interest, shown by the number of books and magazines featuring reports about the organization and interviews with the CEO clearly underlines that the organization is non-standard. As before, for reasons of anonymity references in this section which might identify the case organizations were redacted in the digital version of this thesis. Is FIRECO Heterarchical? As summaerized in Table 4.21, documents, online survey, and external view underline the impression of a heterarchical organization. The interviews give a mixed picture. Workspace is rated as standard. Details are described in the subsequent section. Table 4.21: Evaluation of FIRECO’s heterarchicalness Data source Heterarchical Interviews Documents (org. chart, brochures, webpage) X Workspace Online survey X External view (media resonance: articles, awards) X

Balanced X

Standard

X

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Interviews The CEO explains that FIRECO’s model of organization is based on the so called “LOAZ-principle”: Every employee excels at one or more of the following strengths: L – inspire people; O – organize; A – show alternatives; Z – listen (abbreviations from German terms). All “cells,” that is teams, are ideally composed of members with complementary characteristics, together utilizing all these strengths. The organization is “topic-driven” in the sense that people choose the topics they want and are able to work on (C4: CEO). “The bosses” with no other layers between them and the employees have a lot of influence due to experience, personality and position (C4: Employee 1). Thus, the organization is rated as heterarchical rather than standard in this category. Documents The reviewed documents indicate that FIRECO is heterarchical rather than bureaucratic. As depicted in Illustration 4.14, ‘cells’ also form the center of the organizational chart. Topics people can choose from form ‘layers’ across the organization. These include markets, branches, operative business, research or training. The two CEOs circle around the organization as ‘dynamos,’ inspiring and connecting individuals (documents).

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…

Illustration 4.14: FIRECO’s organizational chart (documents)

In the homepage section ‘About us’ all employees are introduced with a picture. People are ordered by their last names. As a result, the CEO and other

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members of the management appear in the middle and lower sections of the long display of people. While they can be identified through the position indicated under each picture, management personnel blends in rather than standing out (homepage). In an employer branding brochure and on the homepage the working environment at FIRECO is presented. Values connected to heterarchy and to an innovation culture are underlined: Communication and knowledge exchange, cooperation and helpful climate, freedom for self-initiative, trust. Potential applicants are addressed in an informal way and texts are complemented with drawings of people (Illustration 4.15).

Illustration 4.15: “10 reasons for (FIRECO) as an employer” (homepage)

Workspace The CEO has no office, he is constantly moving around. Apart from that workspace hardly indicates the unusual structure. The CEO explains that there are plans to develop a new architecture that better reflects and supports the new way of working (C4: CEO). Thus, the organization is currently rated as standard. Online Survey The online survey data clearly supports the view that FIRECO is seen as heterarchical, as indicated by Figure 4.13. Network structure at FIRECO was supported (Figure 4.14/1). Respondents also agreed to the presence of dynamic influence at FIRECO (Figure 4.14/2). Cultural mechanisms coordinating individual actions were less clearly but still supported (Figure 4.14/3). Culture coordinating collective action at FIRECO was less but still supported (Figure 4.14/4). Finally, repondents shared the view of informality at FIRECO (Figure 4.14/5).

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Figure 4.13: Online survey: FIRECO’s heterarchicalness

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Figure 4.14: Online survey: FIRECO’s heterarchicalness per dimension

External View There has been significant interest in FIRECO’s organizational model, as reflected by a number of books and articles featuring the organization as example for successful new working priniples. This underlines the view that it differs from standard organizations. As before, for reasons of anonymity references in this section which might identify the case organizations were redacted in the digital version of this thesis.

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4.4.2 The General Nature of Innovation As shown in Figure 4.15, the respondents of the online survey rated norms and values somewhat more important for coordinating innovation activities at FIRECO than formal organization. The distribution of answers appears balanced rather than univocal.

Figure 4.15: Online survey: “Please rate the relative importance of culture and of organization for coordinating innovation at FIRECO.”

4.4.3 Summary of Case Findings Innovation approaches identified at FIRECO and those suggested by classic innovation management show striking differences in many aspects. In particular this refers to processes and structures. There are similarities in other aspects, especially in the context of culture and leadership. Table 4.22 displays the key results of analysis as to strategy and direction:

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Theme

Innovation Evidence

Strategy & direction

Table 4.22: FIRECO’s results: strategy and direction for innovation

There is a vision, which seems not to be not widely shared in the organization and probably has no guiding character. There is no formal innovation strategy or search fields. Instead, strategic direction is given by the CEO, described as visionary, creative, motivated and influential. The factual strategic direction comes from the CEO. However, this is not fully intended. The CEO encourages and trains employees to take more responsibility, also for strategic initiatives. Strategy appears to be developed more on an ad-hoc basis than through systematic analyses and planning ahead.

Comparison to IM  Not supported  Not supported  Supported  Not supported

As to strategy and direction, a vision exists but appears not to be widely shared and probably has no guiding character. There are no formal innovation strategy or search fields. Instead, strategic direction is given by the CEO, who is described as visionary, creative, and influential. Rather than based on systematic analyses and planning ahead, strategic moves seem to be more based on ad-hoc decisions. The key results with processes and structures are displayed in Table 4.23. Table 4.23: FIRECO’s results: processes and structures for innovation

Processes & structures

Theme

Innovation Evidence There is no innovation process or idea management system. Employees suggest ideas to the CEO, who assesses ideas’ potential value and decides which ones to pursue further. Formalization is kept at a minimum, organization-internal social network as central tool. Evaluation of ideas based on the following general criteria used by the CEO: Newness, financial investments, personnel resources, development time and influence on the market. The CEO holds considerable influence as to initiating and evaluating innovation efforts, which is not intended. He trains employees to take more responsibility and decide themselves. No innovation manager or innovation department. Rather, innovation is understood as everybody’s responsibility. For implementing ideas, project teams with developers, Scrum master and product owner.

Comparison to IM  Not supported  Not supported   Partly Partly   Partly Partly

With processes and structures for innovation, for capturing and realizing ideas, there is no innovation process or idea management system. Instead, employees mostly suggest ideas to the CEO, who decides which ones to pursue further. The central tool for proposing and discussing ideas is the internal social network. Idea evaluation is not formalized. The CEO uses few and general evalua-

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tion criteria for judging an idea’ potential value to the organization. Though not intended, the CEO still holds considerable influence as to initiating and evaluating innovation efforts. The notion that everybody is responsible for innovation seems to be widely shared. For implementing ideas, there are project teams with developers, Scrum master and product owner. Table 4.24 displays the key results in the dimension culture and leadership.

Theme

Innovation Evidence

Culture & leadership

Table 4.24: FIRECO’s results: culture and leadership for innovation

CEO as innovation driver: Everybody is expected to be creative. Described as visionary, he suggests most strategic ideas and acts as role model for creative initiative. Sometimes experienced as dominant, direct, and hard in his judgements, which can be daunting. CEO as power promoter of ideas using his power and network to provide resources. Central values of an innovation culture are promoted by the CEO and seem to be lived: Open-minded, informal, family-like, and helpful climate; Communication and collaboration with central role. High levels of empowerment are offered and initiative is expected. There is much self-organization already but people are still hesitant to use these freedoms and take more responsibility.

Comparison to IM   Partly Partly  Supported  Supported   Partly Partly

As to culture and leadership for innovation, the CEO acts as an innovation driver. He communicates and shows that everybody is expected to be creative. Described as visionary, he acts as a role model for creative initiative. He is also experienced as sometimes dominant and hard in his judgments, which might be daunting. He uses his power and network to provide resources, acting as power promoter. Values supporting innovation identified at FIRECO include: Competence, helpful, customer focus, independence, self-directed, teamwork, communication, and collaboration. High levels of freedom are offered and initiative is expected. At this point, employees are still hesitant to take more responsibility. Several themes have come up within strategy and direction, processes and structures, and culture and leadership. These will be discussed and evidenced in the following. Strategy and direction  Strategic direction by a visionary CEO Processes and structures  CEO as filter for ideas

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 Pragmatic approach to idea realization Culture and leadership  The CEO as innovation driver  Family-like and collaborative climate  Empowered but still hesitant to take responsibility 4.4.4 Strategy and Direction: Emerging Themes At FIRECO, the vision “Use opportunities,” was put forward by the CEO but seems not to be widely shared. As the vision or strategy were not mentioned by the interviewed employees, it can be assumed not to be of a guiding nature for innovation efforts. There is no explicit innovation strategy or search fields for innovation. Instead, strategic direction is primarily given by one of the two CEOs, described as visionary, creative, and influential (C4: Employee 1; Employee 2). Providing strategic direction to the organization appears the task of management. In contrast to most employees, the CEO describes himself as living the future: “Sometimes I describe the organization is like a video recorder in the pause mode. Everybody looks only in a static moment on the organization but my role is to organize (..) when the video recorder is on the play mode, its running and so the people are (...) frustrated when a leader like me makes new terms or describes not transparent enough decisions that’s frustrating in the pause mode.” (C4: CEO)

This view is supported by Employee 2: “He is the visionary in the company I’d say. (...) (He) is responsible for all around it.” (C4: Employee 2) She further underlines his prominent role as an innovation driver: “Let’s say the boss is very much important for this because he always has to push, push, push, give me ideas or inspiration.” Beyond inspiring employees, he appears to be the key person to actually suggests and decide on implementing most strategic ideas: “So if there is a new idea, and he has lots of ideas, then he is the guy who, yeah, sets it up and says ‘Ok let’s start it.’” (C4: Employee 2) Both employees agree that the organization is highly dependent on the CEO’s creative input, which brings positive and negative aspects: “I’d say the leader first. Or the boss. It very much depends on the leader in our case.” (C4: Employee 2) The risk is seen that the organization runs out of ideas when this visionary CEO leaves: “It depends on the boss, that’s the problem, so with somebody who is creative in this structure, who is motivated and wants to force things, it’s kind of good. But if maybe later on the management changes (...) and you have somebody not innovative, I don’t

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know if its just like a perpetuum mobile, just doing circles all the time and nothing is happening.” (C4: Employee 1)

This prominent influence of the CEO appears not to be intended. He tries to reduce it by training people to take decisions more independently: “It’s a continuously activity of training the people that everybody has the power to bring his ideas to life and help others. But when you talk with the people they miss the role, ‘We should establish people who make the decisions!’ And I talk to these people ask ‘Why? Why do you love the idea that others should make a decision, because you are better in this topic, maybe you can make the decisions and I can help you (...) that you learn to make the right decisions. And in the beginning I am your mentor and step by step I go (..) backwards and you learn to make alone. I trust you and you learn that you can trust me to make decisions.’” (C4: CEO)

The CEO himself appears to be frustrated to see that not more employees share his visionary view, which enables to cope with high levels of complexity and make strategic decisions. 4.4.5 Processes and Structures: Emerging Themes For capturing and processing new ideas FIRECO does not use a formalized idea management system. Employees and the CEO explain that usually ideas are first suggested and discussed with the boss (C4: Employee 1; Employee 2; CEO). When the CEO considers the potential value of an idea, he uses the following criteria: “newness,” then “money,” personnel “resources,” development “time” and “influence on the market” (C4: CEO). These are not established officially and appear to be used flexibly. All interviewees indicate that ideas are evaluated more on the basis of experience and gut feeling than clear criteria: “No, at the moment I don’t see any structured system for that.” (C4: Employee 1) The CEO’s influence in the context of innovative is still strong. Acting as the first filter of ideas, he needs to be convinced of an idea’s benefits. For key development projects he is involved in central decisions in the later course of development. The CEO clearly underlines that he wants people to take more and more decisions themselves, especially where they are the technically most competent individuals: “That’s why (the CEO) is continuously the decisionmaker but its wrong, yeah it’s right, but it is not the plan. The plan is that we bring more and more people in topics as the decision-makers in these topics.” (C4: CEO) Apparently, it is intended that decision power is more connected to expertise than formal power, which is not sufficiently the case yet: “You must train (..) the organization and the people continuously to understand hierarchical positions are not given from (…) the bosses or the chairmen (...). It’s a

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tricky position for me to sometimes the people miss hierarchical positions. But I train these people and say, ‘No, you need no people with decisions.’ But when I come into the room the people trust authority or some people with a leading mindset, it’s very fast that employees forget that they have the power to work on topics. You understand my challenge?” (C4: CEO)

This is assumed to be due to the organization being in a transition phase towards high levels of self-organization, where people still hesitate to take responsibility and often ask for management authority to decide for them. Other individuals, too, can get into informal positions of leadership through personality, competence, and by taking over responsibility, as reported by Employee 1: “If somebody (...) has big experience, large experience in a project of course he gets the leadership but more through respect of the other people. Not because somebody says ‘You are the leader,’ but everybody accepts you have the most experience so you are our leader, because you are the experienced person. So we create our own leaders.” (C4: Employee 1)

If an idea is supported by the CEO, it is realized in a pragmatic and flexible approach. There is no innovation process. The answers of all interviews similarly show that formalization is kept at a minimum. Used tools are the organizationinternal social network, visualization on flipcharts, and information storage in PowerPoint and OneNote files. It is underlined by the CEO and Employee 1 that “digitalization is an important enabler,” because it allows to access a larger group of potential customers and to facilitate internal communication and collaboration. (C4: CEO). Through the internal social network “everybody is able to interact with everybody” (C4: Employee 1). Software projects are realized through a Scrum-like agile process where development takes place along a number of short run “sprints” and planning at short sight. At a later stage this is planned to be used for all development projects (C4: Employee 1). At FIRECO there is no dedicated role or department focusing on innovation. Instead, it seems generally understood that everybody is responsible for innovation. Teams are set up for realizing ideas, depending on the topic at hand. The initiator is involved and others who are interested or whose competence is needed. The expertise of other functions such as marketing or talent management is used selectively (C4: CEO). 4.4.6 Culture and Leadership: Emerging Themes Everybody is expected to be creative; Employees are aware of and share this understanding: “In (the CEO’s) view it’s the responsibility of everybody. (The

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CEO) wants people who bring up new ideas, even if he tells the people ten times ‘It’s a stupid idea.’” (C4: Employee 1). Visionary and creative himself, the CEO is also described as perfectionist and sometimes dominant and critical in judging others’ ideas, both employees agree: “He always thinks very far ahead and is certain that is is right how he thinks and wants it, so it’s hard to argue against it. He is very direct in his judgement, sometimes very negative and hard, so you need the personality to stand before him.” (C4: Employee 2)

His high expectations and direct judgements, in combination with his own strength in initiating and realizing ideas might make some employees hesitate to come up with own suggestions. The CEO explains his big influence with his wide experience, knowledge of the market, holistic view, network, ability to convince the bank, position of authority, and personality. He outlines how he uses his influence to support young ideas and provides resources at a point where their potential benefits are not yet obvious: “You can make the decisions and I can help you with authority and my energy and my power that you learn to make the right decisions (...).” (C4: CEO) The employees agree: “From the very beginning. If you open his door he supports the idea from the beginning to the end, it doesn’t matter if it costs money or not.” (C4: Employee 1) The climate at FIRECO is consistently described as open-minded, informal, helpful, and family-like. The latter, as Employee 1 explains, has advantages like “you can really talk to everybody, everybody is very open-minded.” But there are disadvantages such as “the emotional things are higher, so between people, if everything is very family-based in a company.” (C4: Employee 1) The importance of teams and collaboration for innovation is underlined by the CEO: “I would say in the beginning collaboration is hundred percent and hundred percent hundred percent collaboration collaboration, because it’s a lot of misunderstandings and not known things and hidden agendas, so collaboration collaboration collaboration.” (C4: CEO)

With regard to his own role he says: “When you bring Steve Jobs to a black box without communication (..), I would predict he had never the idea like the Apple iPhone. (...) The realistic approach is that teams bring ideas to life.” (C4: CEO) That this is lived in daily corporate life is indicated by all interviewees, underlining that at FIRECO people are generally helpful and supportive of

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others. Everyone seems to feel accountable to the collective: “Because everybody has to know that we work for everybody. We don’t work for (the CEO), we work for each other.” (C4: Employee 1) A high degree of freedom is offered. People are empowered to pursue their own ideas, taking most decisions themselves where they feel competent. The initiative to use this freedom is expected and strongly encouraged by management. With two CEOs heading 180 employees, high levels of selforganization are already in place: “So it doesn’t matter if (the CEO) is there or not. Nobody cares if (the CEO) is there, everybody works and does his job and they need (the CEO) sometimes for decisions, depending on money, budget or people. But basically everybody here is like selfdriven. (...) the team manages.” (C4: Employee 1)

Still, the CEO and Employee 2 state that confronted with high levels of complexity and big freedoms, many employees hesitate to take decisions. Being afraid of making mistakes people are less willing to take risks than the management (C4: Employee 2). The CEO communicates and his actions show that he trusts people, which is understood by employees: “He has trust in the people and it’s very trust-driven. The whole company is very trust-driven.” This corresponds to the flexible work concept, where results matter more than being at the office (C4: Employee 1). As displayed in Figure 4.16, being asked to select the organization values that best describe “The way we do things here”, the 13 respondents chose competence most often, followed by helpful and customer focus.

Figure 4.16: Online survey: “Which of the following values best describes ‘The way we do things here’ at FIRECO?” (Multiple answers allowed)

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This is reflected in traits individuals should have to fit in at FIRECO. The interviewees similarly stress that potential employees should be open-minded, highly intrinsically motivated, able to communicate and collaborate, have a selfdriven way of working, and be able to work in relatively unstructured environments (C4: Employee 1; Employee 2). In a triangulating way, findings on values at FIRECO from the online survey and the interviews are compared with available documentation. On the homepage, the following values connected to an innovation culture are underlined: Communication and knowledge exchange, cooperation and helpful climate, freedom for self-initiative, trust. All these were similarly identified through the interviews. Through the online survey, in addition, the values competence and customer focus were highlighted. 4.4.7 Conclusion On the structure side FIRECO appears to be non-bureaucratic to a high degree. The freedoms that have been created through reducing coordination through hierarchy and formalization still need to be filled to a greater extent by cultural coordination. Thus, FIRECO can be called a heterarchy in a transition stage. The open-minded and cooperative climate already fits with the new structure and intended way of working. Yet employees still hesitate to take responsibility, which represents the old way of working. That the created freedom - in the context of an only partly developed heterarchical culture - does not lead the organization into a state of anarchy can be explained by the strong influence of the CEO, who currently takes responsibilities that are to be increasingly transferred to employees. 4.5

Case 5: Global Industries

Case organization 5 is called ‘Global Industries’. It is a globally operating corporation providing machinery and services in several industrial areas. The corporate employs around 300,000 people in more than 100 countries (corporate annual report 2016). As unit of analysis serves the European research center located in Munich, Germany, one of several globally distributed research centers. It was founded in 2004 and has around 250 employees as (homepage). Hierarchies in the center have been drastically reduced as part of a large-scale corporate transformation program aiming to make developments more customer-centric, entrepreneurial, and faster.

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4.5.1 Global Industries’ Innovativeness and Heterarchicalness As summarized in Table 4.25, Global Industries’ innovativeness was supported by two of the data categories and a balanced view in another two. Heterarchicalness was supported by a balanced view in four of the five data sources. As will become clearer in the detailed analysis below, the organization is currently in a transition stage towards non-bureaucratic structures and culture. Table 4.25: Global Industries’ innovativeness and heterarchicalness Interviews

Online Survey

Documents Workspace

External view

Case 5: Innovativeness Partly Partly Supported Partly Partly Partly Partly Supported Glob. Ind. Heterarchicalness Partly Partly Partly Partly Not support. Partly Partly Partly Partly

Is Global Industries Innovative? As summarized in Table 4.26, documents and external viewpoint to an innovative organization. Interviews, workspace and the online survey rather indicate a balanced view on innovativeness. Table 4.26: Evaluation of Global Industries’ innovativeness Data source Innovative Interviews Documents (org. chart, brochures, webpage) X Workspace Online survey External view (media resonance: articles, awards) X

Balanced X

Standard

X X

Interviews The three interview partners, a researcher and two principals from the European research center, unterline the importance of innovation for the organization. In the absence of clear statements that the organization is innovative, it was rated as ‘balanced’ in this data category. Compared to fundamental research, innovation is described as being “more focussed on the application and being able to bring something new that can be used,” by the interviewed researcher. At Global industries it is very important that developments can be commercialized. This somewhat limits the generally wide freedoms at the center (Case 5: Researcher, personal communication, November 28, 2016). The corporate’s business units, called “vertical organizations,” focus on commercializing solutions in the different markets. The research centers work

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across all of these as a “horizontal organization,” creating synergies. There, new technologies are developed until “new technology introduction.” This “preproduct” is handed over to the business units to commercialize the new product within another year or two (C5: Researcher; Principal 1; Principal 2; personal communication, November 28, 2016). The number of research centers and scientists strongly indicates that innovation is of major importance at the organization. Principal 2 manages global strategy in one of the technological domains. He underlines the immense research expertise assembled at the organization: “We have about 3000 to 3,500 scientists in this environment (…). In the technology space (…) it is probably about one or two percent of the world’s research community.” (C5: Principal 2) Estimating the organization’s innovativeness, the researcher remains vague: “In some areas (it) can be very innovative. I think that in some projects, maybe in some of the businesses or in the research center, there have been many nice innovative things.” (C5: Researcher) Documents The homepage of Global Industries’ research centers is regarded more innovative than standard in terms of appearance and content. There are large interactive pictures for each contribution with a black background, as well as a number of embedded videos. Impressions can be gained from Illustration 4.16.

Illustration 4.16: Excerpts from Global Industries’ homepage

As to content, ‘innovation’ appears as the dominant theme of the website. The major categories “Invention,” “Innovation,” and “Impact,” are all tightly linked to developing and launching new and better solutions. Contributions primarily relate to new discoveries presented by the organization’s researchers. In the section “Intentors,” visitors are introduced to employees, presented as “many

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of the world’s brightest, most inquisitive minds in science and technology.” Major innovations are highlighted on an interactive timeline (homepage). In a presentation by the organization agile rather than classic bureaucratic principles for innovation are presented, mostly introducing the change program for more customer-centric and fast developments. The organization’s principles and values at the time of data collection, called “Beliefs,” also mentioned in the interview with Principal 1 (see section 4.5.3), have substantial overlaps with those associated with heterarchical organization. The second principle “Stay Lean to Go Fast” relates to a low level of rules and procedures, which are one central element of bureaucracies. “Learn and Adapt to Win” reminds of the learning orientation and constant adaptation associated with heterarchies rather than detailed analysis and planning ahead in bureaucratic structures. “Empower and Inspire Each Other” relates to the importance of empowered and selfresponsible employees and collaboration with others. “Deliver Results in an Uncertain World” refers to a high performance orientation and the context in which non-bureaucratic principles are especially valuable, in highly dynamic environments. The first principle, “Customers determine Our Success” has not been described as typically heterarchical value so far, but might be identified as one from the comparison of cases (documents). Workspace The organization is rated as balanced in terms of innovativeness as reflected by workspace. The offices at the European research center were regarded standard rather than innovative. Corresponding to this, Principal 2 reports that, “most of us have offices where we have one or two people in the office with their own space.” (C5: Principal 2) In contrast, Global Industries’ corporate offices in the Silicon Valley are more “fancy” and “have a lot of open office space” (C5: Principal 2). The new office building at the European site is similarly based on such modern work concepts. Online Survey As can be seen in Figure 4.17, the online survey respondents express a balanced view on Global Industries’ innovativeness. With an average value of 3 the organization is rated as balanced in this data category.

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Figure 4.17: Online survey: Global Industries’ innovativeness

External View Numerous awards and articles strongly indicate that Global Industries is innovative. As before, for reasons of anonymity references in this section which might identify the case organizations were redacted in this version for open access. Is Global Industries Heterarchical? As summarized by Table 4.27, interviews, documents, the online survey, and external view revealed a balanced view on the research center’s heterarchicalness. Workspace was rated as standard. Table 4.27: Evaluation of Global Industry’s heterarchicalness Data source

Heterarchical

Balanced

Interviews

X

Documents (org. chart, brochures, webpage) Workspace Online survey External view (media resonance: articles, awards)

X

Standard

X X X

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Interviews The hierarchy at the research center is consistently described as “flat” by the three interview partners. Still, they admit that individuals who are higher in the hierarchy have more influence. Thus, the organization is rated as balanced in this category. Principal 2 describes that the hierarchy at the center has only few layers: “We do have a relatively flat structure. It really means that many of us are, particularly in the research, only one or two steps from the CTO. So, when I am in a 3,500 to 4,000 thousand people organization and my CTO is only two or three steps away, that is flat.” (C5: Principal 2)

While the structure is one part, this particularly refers to a culture where people dare to raise their view and are heard, as Principal 2 underlines: “It is not that you just do things because you are at a point in the hierarchy, but culture actually asks you to say something if you have an opinion, and you know something.” (C5: Principal 2) On the other hand, individuals higher in the hierarchy have a bigger influence on important decisions. In strategy development, the technology leaders bring their input and decide on the future focus points (C5: Principal 2). Which of the suggested ideas are selected is decided by “a board of seniors and principals and chiefs,” as Principal 1 reports (C5: Principal 1). The Researcher admits that “but yes, there is always a hierarchy, yes.” (C5: Researcher) Documents The homepage includes several hints that the organization applies certain aspects of a non-bureaucratic-hierarchical structure and culture. Also indications for standard-hierarchical practices can be identified. Thus, the data points to a balanced view in this category. As major restructurings at the research center were ongoing and confidential at the point of data collection an organization chart could not be provided. On the global research homepage in the section “Inventors: Meet our people,” researchers are presented in a rather unusual and informal way. While they look standard at first sight, when the cursor is moved to their profile, the pictures change to others where the persons make a funny face (homepage). In contrast, the presentation of organization leaders gives the impression that hierarchy is still present and regarded important. At the top of the page is a large white writing on black background: “LEADERSHIP,” followed by “research centers rely on the guidance of visionary leaders (…).” The picture next to the

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text used to show 12 leaders in dark suits in front of the organization logo (homepage). Workspace As described in the section on innovativeness, the new workspace concepts underway to be applied at the European center feature “a lot of open office space” (C5: Principal 2). It can be assumed that this is meant to foster communication and collaboration, and transparency. These values are more characteristic of heterarchical than of bureaucratic-hierarchical organization. At the time of data collection, however, workspace appears more standard than heterarchical. Online survey The results of the online survey give a mixed picture of Global Industries’ position on the bureaucracy – heterarchy spectrum, as can be seen in Figure 4.18. Across the five dimensions of the heterarchy consisting of five items each, the six respondents chose most often those options that indicated a heterarchical or highly heterarchical organization. A balanced or less heterarchical view of the organization was still frequently expressed.

Figure 4.18: Online survey: Global Industries’ heterarchicalness

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As can be seen in the more detailed results in Figure 4.19, in four of the five heterarchy dimensions the value chosen most often was 4 on the 5-point scale. Network structure at Global Industries was slightly supported (Figure 4.19/1). Dynamic influence apparently polarizes (Figure 4.19/2). Of all dimensions, the view that values and norms coordinate individual actions at Global Industries was most supported by the respondents (Figure 4.20/3). The presence of culture coordinating collective action was somewhat supported (Figure 4.20/4). There is a mixed picture as to Informality (Figure 4.20/5).

Case 5: Global Industries

Figure 4.19: Online survey: Global Industries’ heterarchicalness per dimension

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External View External sources give insufficient indications to assert heterarchical principles. Thus, a balanced view is assumed in this category. The following is a selection of newspapers and magazines that have featured articles on Global Industries applying non-bureaucratic principals. Mostly these focus on the recent change program to more agile developments, building on non-bureaucratic principles. As before, for reasons of anonymity references in this section which might identify the case organizations were redacted in the digital version of this thesis. 4.5.2 The General Nature of Innovation The respondents of the online survey rate cultural norms and values somewhat more important for coordinating innovation activities at Global Industries than formal organization, such as processes and structures (Figure 4.20).

Figure 4.20: Online survey: “Please rate the relative importance of culture and of formal organization for coordinating innovation at Global Industries.”

4.5.3 Summary of Case Findings Of all cases, the innovation practices of the corporate bear most resemblance with those suggested by innovation management. Still, there are considerable differences to classic approaches, particularly with processes and structures. The key results as to strategy and direction are displayed in Table 4.28.

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Table 4.28: Global Industries’ results: strategy and direction for innovation

Strategy & direction

Theme

Innovation Evidence

Comparison to IM

Corporate vision, which changes on a regular basis. It appears to have a Supported guiding character for developments. Technology strategy and technology search fields, which are scanned for Supported important developments to better focus investments in technology. Technology strategy developed as a report for the CTO and head of global research based on the input of technology leaders; researchers can influSupported ence strategic direction by initiating and realizing initiatives. Yearly ex-ante strategy development and ad-hoc initiatives based on Partly Partly identified and tested opportunities.

With strategy and direction, Global Industries has a corporate vision. Even though it changes on a regular basis it appears to have a guiding character for developments. Further, there is a technology strategy and technology search fields. These are scanned for important developments to better focus investments in technology. The strategy is developed for the Chief Technology Officer (CTO) and head of global research based on the input of technology leaders. Researchers can influence actual strategic direction by initiating and realizing strategic initiatives. Beyond the yearly ex-ante strategy development there are ad-hoc initiatives based on identified and tested opportunities. Table 4.29 displays the key results with processes and structures. Table 4.29: Global Industries’ results: processes and structures for innovation

Processes & structures

Theme

Innovation Evidence

Comparison to IM

No fixed process, multiple channels and methods are used, selected Not supported situationally. Idea selection based on “gut feeling” of “knowledgeable persons,” no fixed evaluation criteria. Not supported

Seniors and principals decide which ideas are pursued further, partly in review meetings. Whole research center responsible for technology development and innovation, the bulk of people being researchers, supported by few innovation managers and coaches, and cross functional project teams for realizing ideas.

Supported

Supported

As to processes and structures for innovation, there is no fixed process from idea to launch. Instead, multiple channels and methods are chosen situational. Rather than by applying fixed evaluation criteria, ideas are selected based on the gut feeling seniors and principals. The whole research center is responsible for technology development and innovation, comparable to an R&D or innovation

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department. The majority of people are researchers, who are supported by few innovation managers and coaches. The key results in the theme culture and leadership are displayed in Table 4.30. Table 4.30: Global Industries’ results: culture and leadership for innovation

Culture & leadership

Theme

Innovation Evidence Top management communicates the need for change and actively triggers structural and cultural changes, e.g. aiming to foster entrepreneurial behavior. Principals decide on resources provided for ideas and projects, connect people, remove barriers for teams and empower them, use their selling skills as mentors for ideas. Empowerment of teams in startup initiatives; freedoms granted by leaders also depending on self-initiative of employees Innovation supportive values: Customer-centricity, success, diversity, curiosity, learning orientation, communication, welcoming change, accepting failure, trust by management.

Comparison to IM Supported

Supported Supported Supported

With culture and leadership for innovation, the corporate’s top management communicates the need for change and improvement. Principals decide on resources provided for ideas and projects, connect people, remove barriers for teams and empower them, and act as mentors for ideas. Through startup initiatives researchers are intentionally empowered. Still, the freedoms granted depend also on the self-initiative of employees. Innovation-supportive values and norms identified at Global Industries include customer-centricity, success, diversity, curiosity, learning orientation, communication, welcoming change, accepting failure, and trust by management. Some significant themes emerged within strategy and direction, processes and structures, and culture and leadership strategy, process, and culture: Strategy and direction Freedoms and a guiding vision Sources of innovation Strategy development process Opportunities for employees to influence strategic direction A mixture of strategy development and ad-hoc initiatives Processes and structures Multiple paths from problem or opportunity to technology introduction Great freedoms in the early ideation phase and efficient engineering phase

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Idea selection: No fixed criteria but tradional structures Methods for supporting the early innovation phase Responsibility for innovation: Many researchers and some innovation managers Culture and leadership The role of leaders in innovation: Network, remove barriers, and trust Values for innovation: Customer focus and success Diversity, curiosity, and learning orientation Empowerment Failure culture and trust by management Welcoming change and being flexible 4.5.4 Strategy and Direction: Emerging Themes Principal 2 describes the vision as cross-functionally developed future target: “A vision in a way is a declared target that you can see in the future. And that has to come from a multitude of different contributors, from the technology management, from the marketing, from the outside input” (C5: Principal 2).

He describes the vision of the organization: “We are, as a company, we are calling ourselves the world’s largest digital industrial company. So, we are seeing ourselves as being driven a lot by what is happening digitally today.” (C5: Principal 2) The vision developed by the headquarters, apparently changes on a regular basis: “That was the vision, now it is this one here. Let’s see what comes next.” (C5: Principal 1) All interview partners refer to contents of the current vision at different points in the interviews. Thus, it is assumed that the vision has a guiding character for developments. Within that vision the researchers are very free in what to work on: “We have a lot of freedom, also a lot of freedom of innovation here in the research center specifically.” This freedom, however, is to some extent limited by the need to commercialize developments within reasonable time (C5: Researcher). Developments at the research center are triggered from two directions: First, the businesses define their needs based on customer feedback and competitive analysis. This incremental, more short-term oriented R&D has a share of around 60 to 70 percent. Triggered by external developments, the focus of the remaining 30 or 40 percent of R&D lies on more radical developments, “that are completely disrupting, hopefully” (C5: Principal 2). Through a “structural scan” of the Internet and fairs and through personal relations relevant key trends and developments are identified. Further, external

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speakers are engaged to give inspiration (C5: Principal 1). Beyond that, the importance of cooperating with externals in innovation is stressed (C5: Principal 2). As mentioned before, customer focus is very important at Global Industries and “you always have to listen very carefully.” On the other hand, the researcher points out that, “sometimes the customer doesn’t know always what they need.” Therefore, “it’s also very important that you try to think a little bit beyond the customer.” (C5: Researcher) The responsibility of Principal 2 is to manage global strategy in the organization’s electric domain. This involves, “to collect information from all of our leaders in the technical space to really come down to the right roadmaps and strategy plans.” (C5: Principal 2) For the CTO he brings together the technology leaders and makes sure they decide on the future focus points. He describes the strategy development process: “So usually, early in the year, we sit down and look at what has changed in the longer perspective on certain technology paths say for the next ten years. We will have an outlook from which I identify where we have to do more or less, and then towards the end of the year we bring this more and more towards a project portfolio for the next year. Then, it starts again.” (C5: Principal 2)

Further, strategic groups have been set up aiming to make “smarter decisions on where we want to develop something and invest.” These investigate areas important to the organization like, “Where is energy going to? Where is transportation going to? Where is healthcare going to?” Next, each of these areas is broken down into smaller components. These groups are typically staffed crossfunctionally (C5: Researcher). Defining strategic direction, Principal 1 reports, “There is a very hard, mostly unfair and brutal debate until you define the direction, but when it is defined, everybody stands behind it. All of the people support it.” He explains that this is typical American and reflects the culture from the US headquarters (C5: Principal 1). For innovation, not only the ability not only to find appropriate solutions is very important, but also to ask the right questions, as pointed out by Principal 2. He strongly underlines the value of experienced researchers in this: “They know from the exposure with the technology what the real needs are, and those guys have the real value for a organization. They trigger innovation.” As Principal 1 confirms, “we still ask every person to bring in.” He details how researchers can participate in shaping strategic direction: “Every year you can submit an idea (…) and then you get money to do so, and then you report (…) where it led to.” (C5: Principal 1)

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Next to the above described ex-ante strategy developments based on systematic analyses, factual strategic direction also evolves more naturally. Principal 2 describes the example of digital solutions, which is now a central part of the organization’s vision and strategy: “Our company at some point had one of the ‘ah-ha!’ moments. (...) we were doing it, but we didn’t have a business for it. (…) So, it was just natural that at some point you decide that we are trying to build a path and (..) trying to make this more organized.” (C5: Principal 2)

4.5.5 Processes and Structures: Emerging Themes How innovation is being handled at the research center has changed considerably, in particular with the new leader introducing new approaches. The researcher sums up: “It used to be very much Six Sigma based, so a lot of like precision over long product cycle times and now it’s very, very short.” Before, the plans outlining the intended steps referred to several years. Now researchers are required to show results far earlier: Within few months they need to show the first proof of concept (C5: Researcher) Similarly, the new, more agile way of handling innovation is outlined by Principal 1: “Just fly, make it work. Then, try to reach your goal again and at the end say, ‘What happened?’ and try to find out what you could do better next time. (...) We don’t have a fixed process on how to do that. It is not that you say, ‘First you have to…’ We are using individual and arbitrary and chaotically the skills of each person.” (C5: Principal 1)

He underlines that “the change is that there is no process anymore, that it is individualized a little bit. Just figure out whatever could help you to think freely or differently or be creative.” (C5: Principal 1) There is now a multitude of channels and new chances for realizing innovations, as the Researcher compares, sometimes coming with the disadvantage of higher complexity: “In the past we had only a few channels that we had to go through with these resources. Now we have a lot more, it’s more complex and more people, though at the end it opens also a lot of new opportunities that we didn’t have before. So it’s a tradeoff sometimes.” (C5: Researcher)

A drawback of less controlled environments is the risk of a lack of orientation or inefficiency: “You have to be careful that you are not getting lost in that ‘easy-going’, so you have to find the right path.” (C5: Researcher)

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Researchers are very free in the early innovation phase of idea generation: “So usually creating ideas, you can create many ideas, there is no limit.” Ideas might come up through observation, questioning, reading and customer contact. Generating ideas, he underlines, is “always in groups (…), it’s always a lot of discussions with a lot of colleagues.” (C5: Researcher)

There is a number of possible ways to suggest an idea: “It is very different. You can hand it in on a platform, you can go to your lab manager, you can go to a business guy, you can come to some seniors or chiefs and say, ‘This is an idea,’ you can sell it in the team.” Another way to start initiatives is in formal project groups. Even if there is no budget for realizing an idea it might be pursued further if approved by the team (C5: Principal 1). Principal 2 clearly differentiates between “the phase of innovation generation in terms of getting the ideas” and the subsequent “engineering part.” The latter is a process where it is checked: “Is it scalable? Is it in cost? Does it fit with our product line?” In this part of technical realization the focus lies on fast and costeffective implementation (C5: Principal 2). Decisions on personnel and financial resources being granted for developments are stronger guided by expected results (C5: Researcher). Where initially one of the more short-term oriented businesses has a problem to solve, respective ideas developed at the research center are “typically not so difficult to sell because they really need your help.” In contrast, with more future-oriented ideas “you have to really put a lot of work in to sell that idea.” This is because the potential might be less clear and there is typically no business unit to directly take over the idea (C5: Researcher). In “the traditional way,” according to the Researcher, ideas are filtered by “a couple of people that are very knowledgeable in that area.” More specifically, he points that in “decision-making, (...) there is actually some people that would actually make the end decisions of how the resources will be distributed.” He admits that “but yes, there is always a hierarchy, yes.” (C5: Researcher) This is still the case also with the new approaches, as confirmed by Principal 1. Which of the suggested ideas are selected is decided by “a board of seniors and principals and chiefs.” (C5: Principal 1) How they decide is on purpose not specified: “But this is not fixed where we say these are the criteria and then we give points, because we found that often the criteria don’t meet the needs. For example, with new technology we have no clue about, how can we rate it? We cannot. It is just a gut feeling where we say, ‘Go for it, why not?’” (C5: Principal 1) Which other methods are used in innovation is not fixed either, but decided situational:

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“It is not used in a structured way. It is used in, I will not say chaotic, but in an amorphous way. When you feel there is a need to do so, use it, and especially when you see that people get stuck.” Intentionally, “we are not using it as a formal process because it blocks too much.” (C5: Principal 1)

Rather, “there is a bit of push and pull here with what we are trying to do.” Being trained on those methods, the innovation manager assumes, people automatically use methods like TRIZ, Design Thinking or agile project management (C5: Principal 1). There is no one best way as to online and offline ways of collaboration in innovation. For sharing information similar to ‘Twitter,’ findings can be posted and shared with interested colleagues. Still, personal interaction is seen vital (C5: Principal 2). Aiming at shorter development cycles, the organization applies lean and entrepreneurial approaches adapted from startup and software development environments: “So, when it comes to the early stage of innovation we want to be entrepreneurs, we want to be a startup, we want to declare teams to be startups, internally.” (C5: Principal 2) The approach has been used for seven or eight years (C5: Principal 1). When a startup is kicked off, “It is a very open space but in most cases you start running and you try to define with your vision.” It is essential to have a motivated and capable cross-functional team. In moving forward the teams need to stay flexible: “If you realize that this path doesn’t work, then I want to realize that early on and move to another path.” (C5: Principal 2) As a rough project structure, the startup like teams are reviewed every two or four weeks. They share what is working well and what not and where support from leadership is needed. As Principal 1 reports, there is “often a very mixed group of stakeholders,” including the “managers or leaders” from the businesses and from other sites. There are group decisions, however, politics do play a role: “Well, in the end, the guy who has the money decides, but often they are running a CYA strategy, ‘cover your ass’. He is asking all of the other guys around, ‘What do you think?’ and if everybody just goes, ‘Yes, sounds good,’ then we go ahead.” (C5: Principal 1)

He details that people are careful not to be pinned down if something advised by them fails. Thus, “the challenge is always get personal hidden agendas out of this stuff.” (C5: Principal 1) The majority of researchers have the primary task of coming up with and realizing ideas. Beyond that there are roles focusing on supporting innovation, such as “Local quality management manager in innovation management,” “Coaches,” supporting the internal startup teams, or “Global strategy leader”

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(C5: Principal 1). Innovation managers “are here (...) to support teams” and “to help them on how to do it, to provide methodologies, to provide support, to provide connections, to provide outside fair information.” Further, they are asked to facilitate workshops with “a neutral stance” (C5: Principal 1). 4.5.6 Culture and Leadership: Emerging Themes The main role of Global Industries’ management as regards innovation is consistently seen in creating a favorable environment for people to initiate and realize innovation initiatives. Focusing on networking, the researcher suggests that “the role of the leaders, I think, is a lot about bringing the right people together.” (C5: Researcher) Regarding the internal startup activities, Principal 2 sees the main task of management in creating the right conditions for teams to perform: “I think that is actually the task of modern management. (…) Take away the stress from the outside and make sure the team can actually move towards the right thing.” (C5: Principal 2)

If management gets involved, it does so through raising questions, for example if an idea really creates value for customers. Rather than getting involved, equally Principal 1 expects from management to show a trustful attitude of: “‘Do it, I support you, I trust in you.’ That is the essence (…) have trust and let them run.” (C5: Principal 1) Beyond that, seniors may have the role of “mentors” for researchers’ ideas. As in the past some researchers had great ideas but were not able to present and sell their ideas successfully, they now have the possibility to “take an advocate in the form of a principal or a senior,” whose task is to promote the researcher’s idea (C5: Principal 1). The respondents to the online survey most often associated “How things are done” at Global Industries with customer focus and success, as depicted in Figure 4.21. The organization’s principles and values, called “Beliefs” (documents, see section 4.5.1) correspond to the approaches for innovation and values emerging in the interviews and online survey. The first principle of these beliefs, “Customers determine Our Success,” was strongly supported by the online survey, customer-centricity being the value selected most often by respondents. The customer as source of developments was also a theme that came up strongly in the interviews. The principles “Stay Lean to Go Fast” and “Learn and Adapt to Win” relate to the described lean startup procedure, requiring researchers to experiment and learn fast. “Empower and Inspire Each Other” relates to

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the importance of empowered and self-responsible employees and collaboration with others, described in the interviews. Collaboration also comes up in the online survey (Figure 4.22). Finally, “Deliver Results in an Uncertain World” (documents) refers to a high performance orientation, mirrored by the key value success, which was identified through the online survey. The pressure on researchers to deliver developments that are commercialized by the business units, as described in the interviews, equally relates to this orientation towards results and success.

Figure 4.21: Online survey: “Which of the following values best describes ‘The way we do things here’ at Global Industries?” (Multiple answers allowed)

Beyond that, Global Industries is described as “very diverse” by all interview partners, referring to the diversity in people, technologies, and applications (C5: Researcher; Principal 1; Principal 2). A strong learning orientation, which includes questioning the status quo and openness to potential new solutions, is described as characterizing (C5: Principal 2). Curiosity as basis for learning is strongly emphasized as a requirement for researchers: “Technical expertise in a certain area, has some broad basic technology level and is absolutely curious. Curiosity in my view is the most important part.” This requires also people who dare “doubting the status quo and looking for something else.” (C5: Principal 2)

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At the core of the new culture triggered by the global change program is creating value for the customer through asking everybody to act entrepreneurially. With internal startup initiatives, “We want to generate this kind of spark and this kind of ownership with the people.” (C5: Principal 2) For the researchers to use their potential they need to be given greater freedoms by management: “You want to empower them so that they can act and learn fast, reduce risk, and move.” Empowerment refers to more freedom granted to teams: “The people by that are actually much more free and they are given more self-authority, also as a team to move something.” (C5: Principal 2) High levels of freedom are not granted from the start but are earned, depending on the level of experience and proven abilities: “So it’s not everything automatic, I think (…) you have to prove yourself a little bit, too.” It then lies with this person's leader to grant more freedoms and responsibility (C5: Researcher). While external startups face high levels of uncertainty and pressure, the advantage with internal teams is that “we can catch them if it doesn’t work and say, ‘Okay, not this time, try another one.’” A failure culture, Principal 2 stresses, is an essential part of the aspired entrepreneurial culture: “All of this can only work when failure is not a negative thing. The thing is if you want a success, wrong as it sounds – you want to fail early. So, you want to see and you want to learn fast, and early learning on something is not good, as you always have to see that the vision and the targets stays.” (C5: Principal 2)

Showing that failure is accepted as a way of learning can be regarded one key aspect of creating an atmosphere of trust among employees: “I think that is the most valuable asset for innovation, that the management has trust.” More specifically, the combination of trust by management and curiosity by employees is regarded essential: “If you omit one of them, nothing will work. If you don’t trust your people, you are killing curiosity. Somebody does their job and that’s it.” (C5: Principal 1) To create this atmosphere of trust the responsibility to start lies with management: “It is a management task. In my view, management has to start.” It is a matter of trust, if researchers are allowed to spend time working on initiatives they believe in, even if not officially approved (C5: Principal 1). “Change is a typical thing” at Global industries, as reported by Principal 2. Even more, he regards the ability to change beyond technology as a key to their enduring success: “I think it is the secret of (Global Industries) in a way that over the years (…) we are able to not only find all of these new markets and technologies that we are buying, selling or getting rid of, but we are also able to change in our culture.” This requires that, “certainly the leaders have to change. Everybody is changing.” (C5: Principal 2)

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The researcher confirms that coping with frequent changes is essential when working at the research center: “I think here you have to be flexible, to be working with this company because things are very dynamic and change a lot.” People preferring a very structured environment might find this difficult (C5: Researcher). 4.5.7 Conclusion Facing competitive pressures and far-reaching technological changes particularly through digitalization, the corporation is currently in the midst of a major structural and cultural transformation. Aiming for faster and more customer-centric developments, an entrepreneurial structure and culture is fostered, particular in the research organizations. As part of this, hierarchies in the focal research center have been drastically reduced and a multitude of more flexible processes and methods for innovation are being tested, adjusted, and offered to researchers. These changes appear to be not fully established yet. There are startup structures on the one hand, and hierarchical decision-making and organization politics within those. Similarly, empowerment and trust are granted to startup teams. These need to be earned by employees, with greater freedoms granted by leaders after initiative and abilities have been proven. Global Industries and its European research center are making considerable and consistent efforts to adopt non-hierarchical and non-bureaucratic approaches, particularly for innovation activities. With major characteristics of a more “traditional” corporation shining through at this point, these still need to be fully established and more fully lived up to.

5

Results of the Cross-Case Analysis1

In this chapter the findings on innovation management across the five case heterarchies are presented. Initially, the general nature of innovation across the cases is described. Next, innovation practices in heterarchies are presented along the themes of strategy and direction, processes and structures, and culture and leadership, while being compared with what might be expected in more familiar ‘classic’ innovation management. The findings are highlighted in a summarized form before the detailed results are described. 5.1

The General Nature of Innovation Across Cases

Across cases respondents to the online survey (n=37) rated cultural norms and values to be more important for coordinating innovation activities at their organizations than formal organization, such as processes and structures (Figure 5.1).

Figure 5.1: Online survey results across cases: “Please rate the relative importance of culture and formal organization for coordinating innovation.” 1

1

The results were partly previously published in: Schoellhammer, S. and Gibb, S. (2017) and Schoellhammer, S. and Gibb, S. (2020). © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2_5

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The respondents from Home Care Network, People Software, and Digital Transformers show the highest reporting of cultural coordination as opposed to organizational coordination. The results of Global Industries and FIRECO still point to a predominantly cultural coordination of individuals and the collective, though less strikingly. All organizations are well beyond the medium of the scale. Referring back to research question 1) in chapter 1.2, this strongly indicates that innovation at the case heterarchies is predominantly influenced by cultural mechanisms rather than by formal processes and structures. 5.2

Innovation Across Cases: Summary of Findings

The cross-case findings are shown in a summarized form in Table 5.1. Where the five case organizations are found to have a classic innovation management approach, the respective field is marked with a check mark symbol and dark background, light background and a cross if otherwise.

Strategy & Direction

      Common self-conception / organization purpose guides new developments (found in cases 1,2,4 )       Some elements of strategy applied, but more often no explicit (innovation) strategy or systematic search fields (cases 2,3,4)  Employees have and use influence on strategic direction (1,2,4,5)       Combination of ex-ante and emergent strategy (1,4,5) or primarily adhoc initiatives (2,3), strongly driven by customer needs and      experimentation

Processes & Structures

Aggregated findings

      No official innovation process, but multiple channels (all cases)  Idea selection mostly based on few rough criteria, gut feeling, rapid experimentation (all cases) and through discussions (2,4)       Employees with far-reaching freedoms to move initiatives and decide (all cases); Everybody leads and follows (1,2,4); Management with     prominent influence on selecting ideas (3,4,5)  Innovation as everybody’s responsibility (all cases), no innovation     managers (2,3,4) or few innovation facilitators (1,5)

Culture & Leadership

Dimension

Table 5.1: Aggregate results across cases per theme Cases 1 2 3 4 5 PE HO DI FI GL

      Management strongly encourages innovation (all cases)  Management uses power to support innovation: Providing budgets and using its network (all cases)       High levels of empowerment / freedoms granted (all cases) filled by individual and team responsibility (1,2,4,5)      Innovation-supportive values: Innovation and experimentation, teamwork, communication and feedback, open-mindedness,      flexibility, customer-focus, self-directedness, trust (all cases)

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Culture and leadership in the heterarchies largely corresponds with practices associated with classic innovation management. It is noticeable that there are differences in the practices associated with processes and structures, and, slightly less so, those related to strategy and direction. This overall picture, what seems initially to be exposed, is not in itself surprising. More interesting to see was the extent to which there was variation amongst the heterarchies. The differences among heterarchies on innovation management, for they are not uniformly similar, are a subject for later analysis. In more detail, referring to research question 2a) in chapter 1.2, with strategy and direction, in most of the heterarchies a common self-conception or organization purpose guides new developments. In some of the heterarchies some elements of strategy are applied, but more often there is no explicit innovation strategy or systematic search fields. Whereas strategy development is classically seen as top management task, in the heterarchies employees have and use influence on strategic direction. Innovation management suggests ex-ante strategy development, where systematic analyses, strategy development and planning ahead precede realizing the strategy. Strategy at the heterarchical cases is most often a combination of ex-ante and emergent strategy or primarily ad-hoc initiatives, strongly driven by customer needs and experimentation. As concerns research question 2b) as described in chapter 1.2, for processes and structures, the most striking contrasts with classic innovation management are that none of the heterarchies has an official innovation process. In the heterarchies, multiple channels for realizing ideas are selected situational. Rather than applying clear criteria, idea selection is mostly based on few rough criteria, gut feeling, and rapid experimentation and through discussions. In these cases innovation is seen as everybody’s responsibility, with few innovation facilitators in some of those. Employees have far-reaching freedoms to move initiatives and decide themselves. Anybody can lead and anybody follows, depending on individual competence and the topic at hand. Leaders still have a prominent influence in selecting ideas to pursue further. Relating to research question 2c) as in chapter 1.2, leadership in the heterarchies takes the role of an innovation driver. This involves strongly encouraging innovation, particularly by communicating its importance for the organization. As suggested by the classic view, leadership has the role of a power promoter, providing budgets and using their wider network to support innovation. Values identified at the case organizations widely correspond to those associated with an innovation culture in classic textbooks of the discipline: Innovation and experi-

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mentation, collaboration and teamwork, communication and feedback culture, open-mindedness, flexibility, customer-focus, self-directedness, and trust. Table 5.2 summarizes the findings on innovation approaches in each of the five case study organizations, along the themes of strategy and direction, processes and structures, and culture and leadership for innovation.

Case

Table 5.2: Individual case organizations’ innovation practices by theme

1

2

Corporate innovation system Strategy and direction

Processes and structures

Culture and leadership

Common vision is internalized and guides developments; other sources: customer needs, technological developments Organization strategy and team strategies guide developments, product roadmaps Collective strategy development process: Everybody can contribute Combined approach of yearly strategy meeting, continuous working groups and ad-hoc initiatives Common purpose of organization guides innovations; Sources of innovation: Changes in legislation, customer needs No strategy No strategy development; CEO does not see himself as the one to give strategic guidance No ex-ante planning of new developments, ideas come up and are tested

No innovation process, but multitude of channels for realizing ideas, some official, some in the shadow Idea selection: partly systematic with portfolio management, KPIs, partly based on gut feeling, customer interest Cross-functional committee prioritizes customer requests; Fuzzy ideas may be pursued further in the shadow Few facilitators, many creatives, everybody feels responsible for innovation No process for innovation; Problems and ideas are discussed on the intranet and within teams, tested and implemented on a larger scale No selection criteria; Implicit: practicability, customer interest No management decisions, not even involvement; employees discuss and come to a consensus No innovation manager; Everybody feels responsible for innovation

Management challenges the status quo, communicates importance of innovation, provides trust Management uses power to provide resources Empowerment and high levels of responsibility for innovation by employees: Everybody leads and follows Values: collaboration, democratic, self-directed, commitment, responsibility, openminded, trust CEO communicates importance of innovation, acts as role model CEO provides resources for innovation, budget for all ideas High empowerment, individual and team responsibility Innovation supportive values: Innovation, teamwork, knowledge sharing, openness, trust

Innovation Across Cases: Summary of Findings

3

4

5

A very general vision, which seems not widely shared and probably has no guiding character No formal innovation strategy or search fields Strategic direction given by the CEO, described as visionary, creative, and influential More ad-hoc strategy development than through systematic analyses and planning ahead The common purpose and behavior orientations guide developments The ‘core’, customer problems, technological developments trigger innovation CEO and two other strategic people responsible for business development, entrepreneurial CEO, everybody can contribute Combination of ex-ante portfolio discussions and more opportunity-driven initiatives and experimentation Vision, changes regularly, but has a guiding character for developments Technology strategy and search fields to better focus investments in technology Technology strategy based on the input of technology leaders; researchers can influence strategic direction by own initiatives Yearly ex-ante strategy development and ad-hoc initiatives

No innovation process or idea management system; employees suggest ideas to the CEO, who decides which ones to pursue further; central tool: internal social network Few and general evaluation criteria, not formalized Though not intended CEO still holds considerable influence as to initiating and evaluating innovation efforts No innovation manager; Everybody is responsible for innovation No formal innovation process: Initially online discussion, followed by a number of innovation workshops in varying constellations Idea selection through discussion; mostly based on gut feeling and early customer feedback. The person responsible for a certain topic decides, others have the opportunity to contribute The founder and CEO takes specially responsibility in innovation, however, everybody can contribute No fixed process, multiple channels and methods selected situational No fixed evaluation criteria but decisions based on gut feeling of knowledgeable persons Seniors and principles decide which ideas are pursued further, partly in review meetings Whole research center responsible for technology development and innovation; the bulk of people being researchers, supported by few innovation managers

177 Everybody is expected to be creative, CEO as role model, partly hard judgments CEO uses power and network to provide resources and guard innovations High level of freedom offered and initiative expected; people hesitant to take more responsibility Values: Competence, helpful, customer focus, independence, self-directed, teamwork, communication Founder and CEO with strong entrepreneurial spirit, underlining the importance of innovation CEO provides capacities for innovation, uses network to test new ideas Increasing empowerment and employees with individual responsibility for topics Values: experimentation, open-minded, team spirit, communication and feedback culture, knowledge sharing, transparency Top management communicates need for change and actively triggers structural change Principals decide on resources for projects, connect people, remove barriers for teams, act as mentors Empowerment of teams in startup initiatives; freedom granted depends on initiative Values: Customer-centric, success, diversity, curiosity, communication, change, accepting failure, trust

178 5.3

Results of the Cross-Case Analysis Strategy and Direction for Innovation Across Cases

Table 5.3 displays identified attributes for innovation within the theme of strategy and direction. Explanations of each are provided along with illustrating example statements. A more comprehensive presentation of results is found in the subsequent text section. Table 5.3: Attributes of heterarchies: strategy and direction for innovation Attribute

Explanation Common understanding of the Guidance organization’s reason for existthrough organence, sometimes called vision, ization’s purserves as scope for employees’ pose self-organization. Some elements of strategy or no systematic approaches

Mostly no clear organization or innovation strategy, partly elements of it, such as product portfolios and roadmaps.

Ideas for innovations primarily originating in observing cliCustomer ent’s needs or new challenges needs and faced in customer projects, problems as balancing customer-triggered primary source developments and less clear of innovation but potentially more radical initiatives as key challenge.

Differing degrees of strategic direction through management

Employees’ influence on strategic direction

Example statements “(…) you have a reason for existence, that is the idea of the core or the purpose. (…) Why does the world need us?” (Digital Transformers) “Everyday you can reflect on what you are doing and if have a good idea on how you can improve it, then you should just try it even though we don’t have a strategy on that. We don’t have a strategy on anything.” (Home Care Network) “I wouldn’t say that most of the time they are the most innovative, but of course there are a lot of innovations coming from these (large customers’ needs) (…). That’s sometimes even an issue (…) that they’re overwhelming everything else because they (…) pay our salaries and therefore we have somehow to balance that.” (People Software)

“Everyone can innovate, so I am not an innovation strategist from a practical view” (Home Care Network) Wide span regarding the de“He is the visionary in the company I would gree of and directness of influsay. (…) He is responsible for all around it.” ence on strategic direction held (FIRECO) by management, from indirect Business development “is certainly driven by to substantial. the entrepreneurial spirit of the CEO, because she just is an entrepreneur, full-blooded.” (Digital Transformers) “We changed our business model two or three Employees have and use their times in our business history and all of these opportunities to take influence times employees were driving this change, not an innovation lab and not the management.” on factual strategic direction. (People Software)

Strategy and Direction for Innovation Across Cases Strategy as a combination of Combination of ex-ante analyses and planning ex-ante planahead, and initiatives of an ning and adexperimenting character, with hoc initiatives a clear emphasis on the latter.

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“And then we just did it without a lot of market research, with just saying this is more or less something to try out, you have to make a minimum viable product and see how the market reacts.” (People Software)

5.3.1 Guidance Through the Organization’s Purpose In innovation management, a vision serves as starting point for a more detailed organization strategy and innovation strategy, typically developed in severalyear cycles at the top of the organization. A vision describes a general desirable picture of the future or what the organization aims to reach and, thus, is meant to guide innovation initiatives (Vahs and Brem, 2013; see section 2.3.4 for details and further references). In most of the heterarchical case organizations, there is a common understanding of the organization’s purpose, which provides guidance for innovation. Beyond that, direction is given through common values and norms. At the small organization Digital Transformers, there is explicitly no vision but a common ‘Core,’ describing why the organization is needed and exists. This common purpose, constantly developed further, is regarded more enduring compared to a classic vision. Together with central values and behavior orientations it provides a scope within employees can move and decide themselves, the basis for high levels of self-organization. Similarly, at the large heterarchy Home Care Network the common purpose, called vision, guides innovation initiatives. The vision at People Software, the other full heterarchy, unites both purpose and a more future-oriented vision. In addition, at Digital Transformers and People Software, guidance is provided through commonly developed, explicitly written down and actively applied common values and behavior orientations. A vision in the most classical sense is found at Global Industries, the large corporate ranked as the least heterarchical of the cases. Even though it is changed by the headquarters on a regular basis, it appears to have a guiding character for developments. At FIRECO, the SME heterarchy, a very general vision mentioned by the CEO appears not to be widely shared and assumedly does not have a guiding character for developments. Regarding the content of the purpose or vision, in three of the five cases there is a striking fit with the organizations’ non-hierarchical working culture and structure. Home Care Network strives to empower their clients through self-

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organization and cooperation. The internalized purpose of People Software is to empower people to run organizations. Similarly, Digital Transformers aims to lead and design the networked digital ways of working, both experimenting and living such approaches internally and enabling their clients. 5.3.2 Some Elements of Strategy or No Systematic Approaches In classic innovation management a clear innovation strategy and search fields are deducted from the overall organization strategy to focus and guide ideation and new product development (Stern and Jaberg, 2010; see section 2.3.4 for details and further references). The case organizations give a mixed picture in this regard: Three of the studied heterarchies do have one or more elements of a strategy, such as search fields, roadmaps, and product portfolios. Two of them do not apply systematic approaches for scanning the environment and planning ahead strategic organization moves. There is purposefully no such thing as a strategy at Home Care Network, the full heterarchy. Still, teams of employees may develop their own goals without involvement of the headquarters. Similarly, at FIRECO there appears to be no clearly formulated strategy or search fields. Instead, strategic direction is given by the CEO, described as visionary, creative, and influential. In contrast, the SME full heterarchy People Software uses more systematic ways to set the strategic corridor: Next to an overall organization strategy, there are team strategies, and product roadmaps that guide developments. The most comprehensive strategy is described at the least developed heterarchy, Global Industries. Beyond the corporate strategy, there are technology search fields, 10years projections of technology paths leading to technology strategy plans, and roadmaps, and yearly product-portfolios to focus investments in technology. Within the frame set by the common purpose, vision, or strategy, orientation for innovations comes from different sources. At the majority of the case organizations, customer needs and problems are the primary source of innovation. Beyond that, technological developments trigger innovation at most of them. At Home Care Network, inspiration for improvements primarily comes from observing client’s needs during daily work. At Digital Transformers most innovations originate in new challenges faced in customer projects. Balancing customer-triggered developments and less clear but potentially more radical initiatives is described as key challenge at People Software. Similarly researchers at Global Industries go through cyclic developments, with increasing and decreasing shares of business-triggered developments and free R&D. As developments

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based on customer requests are often incremental in nature, it is seen as important to look beyond what customers ask for. Technological developments, also transferred from other areas of application, are a source of innovation in most of the case organizations. Systematically screening for such developments is only applied at the research center of the corporate, though. Changes in legislation are a starting point for innovations. 5.3.3 Direction by Management with Significant Influence by Employees In classic organization and innovation management literature and practice developing the strategy is a top management task (e.g. Cooper and Edgett, 2010; see chapter 2.4.4 for details and further references). In all case organizations, everybody in principle has the chance to contribute and take influence on formal or factual strategic direction. There is a wide span, however, regarding the degree of influence held by management and by employees. On the one end of the spectrum, at Home Care Network, where there is no strategy development, the CEO does not see himself as the one to give strategic guidance. Thus, factual strategy emerges from initiatives started by employees. At People Software strategy is developed in a yearly collective strategy development process where everybody in the organization is asked to contribute. The CEO and two other strategic people are responsible for strategy and business development at Digital Transformers. As full-blooded entrepreneur, the CEO has key influence on initiating and finally deciding on strategic topics, but everybody has the chance to contribute. Particularly where far-reaching consequences are expected or where it is important to have everybody on board, the whole team is involved, for example in portfolio discussions. At FIRECO, strategic direction is primarily driven by the visionary CEO, who sees very far ahead, comes up with most strategic ideas, and decides which ones to drive towards realization. Thus, the innovativeness of the organization is regarded highly dependent of the personality and knowledge of the CEO. However, he tries to reduce his prominent influence and appears frustrated that not more people are able or willing to take strategic and creative initiative. On the other end of the spectrum and closest to classic organization and innovation management, the technology strategy at the corporate Global Industries is developed for the Chief Technology Officer and head of global research based on the input of the technology leaders; The knowledge of experienced researchers is seen as vital in asking the right questions and in shaping factual strategic direction. Thus, they are encouraged to initiate and realize strategic initiatives.

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5.3.4 Combination of Ex-Ante Planning and Ad-Hoc Initiatives In classic organization and innovation management, strategy development is an ex-ante activity, based on systematic analysis and planning (Stern and Jaberg, 2010; section 2.3.4). In most of the studied heterarchies, strategy is a combination of ex-ante analyses and planning ahead on the one hand, and initiatives of an experimenting ad-hoc character on the other, with a clear emphasis on the latter. At the one end of the spectrum, the full heterarchy Home Care Network has no ex-ante strategy at all and factual direction results from ideas coming up and being tested. Similarly at FIRECO, strategic direction appears to be more of an ad-hoc than systematic nature. In contrast, the small Digital Transformers, the SME full heterarchy People Software, and the corporate Global Industries do view ahead in yearly strategy development and portfolio planning, while still allowing for and strongly encouraging spontaneous initiatives. Often less clear in the beginning and more radical in nature, the focus lies on quickly developing a first presentable version of the innovation to get feedback from customers at an early stage. 5.4

Processes and Structures for Innovation Across Cases

Table 5.4 gives identified attributes within processes and structures for innovation, explanations of each, and illustrating example statements. The more comprehensive presentation of results is found in the subsequent text section. Table 5.4: Attributes of heterarchies: processes and structures for innovation Attribute

No clear organizational separation of innovation and routine processes (ambidextrous organization), certain inefficiencies are accepted to the advantage of innovation.

Example statements “I guess we are, let’s say, between innovative agile and chaotic (…). We spend, let’s say, 10 percent of our energy in tensions and frictions, which would probably be better in an efficient system, but we get benefits like a highly innovative feedback culture.” (People Software)

No clearly defined process but many options how to move from No innovation idea to launch that employees process, but a can choose from situational, multitude of including Design Thinking, possible paths for online idea platforms, internal moving from idea start-up initiatives, or realizing to launch ideas in the shadow organization.

“(…) just fly, make it work. Then, try to reach your goal again and (…) try to find out what you could do better next time (…). We don’t have a fixed process on how to do that.” (Global Industries) “And we have a lot of ways, (…) But looking at these four or five, they are all different in how they start, how they develop and so on.”

Organizational tendency towards innovation with accepted drawbacks as to efficiency

Explanation

Processes and Structures for Innovation Across Cases

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Internal social network facilitating knowledge exchange and collaboration

Internal online platforms are used to share, discuss and select ideas, partly described as central enabler for collaborating for innovation.

Visual, experimentation and team-based creative methods

A number of methodologies are used to support creativity, with an emphasis on visual, experimentation and team-based methods such as Design Thinking.

Idea selection based on intuition

Which ideas are pursued further is more based on gut feeling and experience than systematic evaluation criteria.

Consensus through discussions

Idea selection evolves organi- “(…) the organization goes into discussion cally, where people come to a and then something develops, which works consensus through discussions. and which is good.” (Digital Transformers)

Management with considerable influence on decisions

Considerable influence by management on idea selection, partly not intended. Less based on position and more on experience, overview of interrelations, and market knowledge.

“If there is a new idea – and he has lot’s of ideas – then he is the guy who sets it up and says ‘Ok, let’s start it.’” (FIRECO) Which ideas are selected is decided, “by a board of seniors and principals and chiefs” (Global Industries)

Management expects and employees feel that everybody is responsible for innovation, from their own area of responsibility to the overall business model, depending on individual abilities. Partly no innovation managers, partly few innovation facilitators supporting many creatives through workshops and methodological skills, mindset, and outside information.

“In our work environment it’s totally clear that you have to develop yourself and make innovations, because you will not survive if you are not doing it.” (People Software) “That is actually more the task of everybody. Yes, it is actually taken up from all sides.” (Home Care Network) Innovation managers “are here (…) to support the teams,” and, “to help them on how to do it, to provide methodologies, to provide support, to provide connections, to provide outside information.” (Global Industries)

Innovation as everybody’s responsibility

Few innovation facilitators supporting many creatives

“Most ideas are shared on the web, it’s just like a Facebook. They describe what they are doing, they say they have good results and all the teams pick up on it (…).” (Home Care Network) “(…) letting them build with Lego bricks everybody has to do something. (...). So all the time I need to gather perspective from different people and everybody needs the same airtime, has the same saying, which is like a democratic approach and participative approach.” (People Software) “But this is not fixed where we say these are the criteria and then we give points, because we found that often the criteria don’t meet the needs. For example with a new technology we have no clue about, how can we rate it? We cannot. It’s just a gut feeling where we say, ‘Go for it, why not?’” (Global Industries)

Overall, the heterarchies show a clear tendency of their organization towards supporting innovation. Drawbacks in terms of efficiency resulting from more

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discussions and frictions are accepted in favor of an innovation-supportive environment. The majority of cases do not organizationally separate innovation and routine operations, except for the corporate with dedicated research centers. 5.4.1 A Multitude of Possible Paths for Moving from Idea to Launch At the heart of classic innovation management as described in the literature is a systematic innovation process for effectively and efficiently steering innovations from idea generation and selection through development to market launch. Typically this covers a number of sequential phases or stages separated by review gates (Cooper, 2013; see chapter 2.4.5 for details and further references). Of the five case organizations none has an official innovation process. Rather, at most of the heterarchies there is a multitude of possible paths for moving from idea to launch that people can choose from situational. With five described channels, the SME full heterarchy People Software applies the widest spectrum of approaches: On the one hand they have a Design Thinking process, a procedure for handing in ideas on an open online platform, and certain steps for handling customer requests and prioritizing resources. On the other hand, more fuzzy ideas driven by the vision might be realized in a more experimentation-based approach, while ideas are even developed and realized in the shadow, that means in employees’ free time and out of the official channels. Similarly, at Global Industries, the large organization, researchers are very free in the early innovation phase. The earlier six-sigma based innovation process with long cycle times and a focus on precision was abolished, because it was considered to block too much. People can now suggest an idea to their lab managers, bosses or business units, apply for a budget in a two-phase process on a yearly basis, realize it as part of an internal startup initiative. Further, they may suggest ideas in formal projects groups, where they might be pursued further even without the management being aware. While the new proceeding is seen as more complex and requires people to find the right path, more opportunities can be used and developments are faster. Only at Global Industries an early innovation phase with great freedoms for researchers is clearly separated from a more structured engineering phase and a focus on fast and cost-effective implementation. At the two SME heterarchies a Scrum-based agile process is used to develop ideas into marketable solutions. At the two service-based heterarchies with short value chains, development takes place over a number of workshops or by testing ideas on a small scale.

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At FIRECO, the developing SME heterarchy, ideas are first suggested to the CEO, who decides which ones to pursue further. At the small full heterarchy Digital Transformers, problems and ideas tend to be initially discussed online, followed by a number of innovation workshops in varying constellations of people. Similarly at Home Care Network, problems are often posted and discussed online until a consensus is reached. Preferred ideas are then tested in some of the teams, who share the results on the intranet. Other teams might then pick up on the idea and make it spread on a larger scale. Due to very low overhead costs, there are sufficient budgets to support all suggested ideas in experimentation. All organizations use an internal social network for suggesting and discussing ideas, described as central enabler for innovation by four of those. The main advantages are seen in facilitating internal communication and collaboration, particularly at Digital Transformers, where people work from dispersed locations. Rather than substituting, however, it is used to complement face-to-face collaboration in innovation workshops. In terms of methods to support the early innovation phase, Design Thinking or a modification of it, is applied at Digital Transformers, Global Industries, and People Software. In addition, Lego Serious Play and Canvases are used to facilitate workshops at the latter, all non-digital methods focusing on visualization, experimentation, and team collaboration. The internal start-up approach applied at the corporate is based on the Lean Startup concept (Ries, 2011). 5.4.2 Idea Selection Based on Intuition and Some Rough Criteria Innovation management recommends systematically evaluating and selecting ideas on the basis of clear technology, market related, and specific criteria (Cooper, 2013). In none of the case organizations, clear evaluation criteria are consistently applied for selecting ideas. Mostly, ideas are selected based on gut feeling and customer interest. Even more, at Global Industries, on purpose no clear criteria are used, as these are considered not helpful. Rather, decisions are based on the gut feeling of “knowledgeable people,” which means seniors and principles. Also at the other organizations idea selection is likely to be mostly based on the intuition of experienced organization members. The CEO of FIRECO reports to decide based on rather general, not formalized evaluation criteria such as newness, required financial and personnel resources, expected development time and market impact. At Home Care Network and Digital Transformers employees come to a consensus through discussions, in a naturally evolving selection of ideas. Implicitly

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certain criteria are likely to play a role, most importantly practicability and customer interest. Thus, at most of the heterarchies rapid experimentation and gaining early customer feedback is used to test and select ideas. Only at People Software, and only in some of the channels for innovation, ideas for solving customer requests are prioritized systematically based on key performance indicators (KPIs) and business cases calculated by portfolio management and strategic fit. Still, also ideas with no business case but support from a lot of people might be developed into a prototype to get market feedback. 5.4.3 Management with Considerable Influence on Decisions In classic innovation processes, ideas to be pursued further at different stages of idea maturity are typically selected by management in review and decision councils, often called gate meetings (Cooper, 2013). Also at most heterarchical case organizations, influence by management or leaders on idea selection is considerable. Partly, this is not intended and management tries to give more responsibility to decide to operational people. This influence might less be based on management’s position and more on their experience, broader overview of interrelations, and knowing the customers. Only at Home Care Network, the large full heterarchy, the CEO explicitly does not decide or even get involved in decision-making. Rather, employee teams come to a consensus through discussions. All ideas are provided budget to be tested and implemented if proven promising. The biggest overlap with classic innovation management is found at Global Industries, considered the least heterarchical of the case organizations. There, seniors and principles decide which ideas are pursued further, partly when approached directly and partly in official review meetings. Decisions are officially group decisions, but finally the responsible for the budget decides. Often politics play a role in these decisions. Similarly, in the one systematic channel of People Software, the SME full heterarchy, there is a cross functional committee, representing all major stakeholders including someone from management, deciding which customer requests are prioritized. Even if not approved, more fuzzy ideas or initiatives in the shadow may be pursued further. Initially, people suggest their ideas and other signal their interest by formal, i.e. electronic or informal voting, i.e. raising hands. If enough people choose to follow, the initiator becomes the leader for that idea. Though not intended, at Digital Transformers and FIRECO, considered developing heterarchies, the CEOs still hold considerable influence as to initiating

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and evaluating innovation efforts. In both cases the CEO tries to reduce influence and give more responsibility to people. At the small organization, through establishing what they call ‘leadership in topics,’ the CEO aims to get go from central control more and to give more responsibility to employees. This means that the responsible person for a certain topic decides, while everybody can contribute in the discussions, depending on the topic and creative potential. However, in terms of strategic innovation topics often the CEO is the responsible person who has the final word. Similarly at FIRECO, the CEO encourages employees to take more responsibility. However, he appears frustrated to see that people are hesitant to take decisions and often ask for decision makers. This is explained with the organization being in a transition stage, where people still have to learn self-organization. Still, people who are regarded competent and do take over responsibility get into informal positions of leadership, by being followed by their peers. Similarly, that everybody leads and everybody follows depending on the topic, is also described at People Software and Digital Transformers. 5.4.4 Innovation as Everybody’s Responsibility In classic innovation management there are clearly defined roles, describing tasks, competences and responsibilities for innovation. Typically, this includes innovation managers or innovation management departments that may have different tasks and responsibilities around the innovation process, such as developing or facilitating the development of innovation strategies and trend-based search fields, being responsible for setting up and developing further the innovation process, collecting and evaluating suggested ideas, and facilitating innovation workshops (Vahs and Brem, 2013). Across all studied heterarchies, there is agreement that innovation at their organization is everybody’s responsibility. This means that everybody is responsible for developing further his or her focus area. Further, everybody has the possibility to suggest and run innovation initiatives. This may be rather selfexplaining at the research center of Global industries, where the majority of personnel are researchers focusing in some way on developing new technological solutions. This deep understanding seems to be lived in all the other organizations, too, also spreading to departments further away from product development, such as talent management or accounting. Beyond that, at all of the organizations anybody has the chance to get involved in discussing ideas on the internal social networks. At the two SME heterarchies anybody can choose to get involved in topic related circles where inno-

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vation initiatives can be initiated. Depending on topic and creativity, people at the small organization may contribute to innovation topics in workshops, while everybody can choose to participate. Who has which responsibility is on purpose left a bit open at People Software, as this fosters frictions and discussions. The official role of innovation managers only exists in the large organization Global Industries, where those support the researchers by neutrally facilitating innovation workshops and providing knowledge about trends and other inspiration. Further, there are coaches supporting the cross-functional internal start-up teams and a “manager for global strategy” in a technological domain. Under the name “methods expert,” there are few facilitators for innovation also at the full heterarchy People Software. Supporting the many creatives, they run workshops e.g. developing product visions with customers and aim to bring methodological skills and a certain mindset of creative confidence into the organization. For software development at FIRECO, there is a Scrum master to support the project teams. At FIRECO and Digital Transformers, the CEOs still take specially responsibility in innovation by initiating and driving most strategic initiatives. 5.5 Culture and Leadership for Innovation Across Cases Attributes of heterarchies as to culture and leadership for innovation are displayed in Table 5.5, along with explanations and illustrating example statements for each of those. The more comprehensive presentation of results is found in the subsequent text section. Table 5.5: Attributes of heterarchies: culture and leadership for innovation Attribute

Explanation Management consistently underManagement lines the importance of innovacommunicates tion and encourages entrepreimportance neurial behavior of all employand encourees; Management with entrepreages innovaneurial background, acting as tion role models.

Management aims to create the Management environment for people to be as moderators innovative, facilitating, inspiring, connecting, rather than directing.

Example statements “Everyone can start an innovation. (…) What we always try to do is show that everyone can start something and we will support it as good as possible.” (Home Care Network) “ (…) I have at least a very strong mind that I want everybody to participate in the innovation process.” (People Software) “I am more facilitating, giving impulses, feeling some things, bringing topics to the table (…). It’s not so much a lonely decisionmaker” (People Software). “But really leadership? I wouldn’t call him the big boss. This is not how he acts, no. (…) He is our boss, but at the same time our colleague.” (Home Care Network)

Culture and Leadership for Innovation Across Cases

Management as power promoter for innovation

Situational leadership based on competence and being a role model for others

Management supports innovators with their authority, network, experience, and budgets.

Everybody leads and follows, depending on the competences required in a certain situation. People are made leaders by others following them, seeing them as a role model in what they do.

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“You can make the decisions and I can help you with authority and my energy and my power that you learn to make the right decisions.” (FIRECO) “We have a lot of reserves to use for innovation (…). If you want to do something you can just do it.” (Home Care Network) “every culture works best if everybody leads and everybody follows and everybody knows when what is necessary.” (People Software) “If somebody (..) has big experience (…) he gets the leadership, but more through the respect of the other people, not because somebody says, ‘You are the leader.’” (FIRECO) “If you are doing the right things, you will be seen by others as a role model and as a leader. It’s the result of what you are doing.” (Home Care Network)

People are granted the freedoms to pursue initiatives they believe Empowerment in and how they consider it ap/ Freedom propriate without management interference within certain scopes.

“We have a lot of freedom, also a lot of freedom of innovation here” (Global Industries) “The people by that are actually much more free and they are given more self-authority also as a team to move something, there is more trust given.” (Global Industries)

Responsibility

Freedoms are filled by people choosing own initiatives and driving those topics proactively, take decisions themselves or get help where necessary, accepting responsibility for consequences rather than blaming others.

“the attitude has to be there, the selfresponsibility attitude. That you are not waiting for others to tell you what to do and how to do it.” (Digital Transformers) “You cannot go to work with an attitude like ‘I work from 8 to 12 and after me the deluge!’ That is not working. (…) we could close down the thing within a week.” (Home Care Network)

Trust

Shows when management lets people use their time on own initiatives, without being fully aware what these are. People are encouraged to run initiatives acting and deciding selfresponsibly, also in the risk of failure.

“He has trust in the people and it’s very trustdriven, the whole company is very trustdriven.” (FIRECO) “I think that is the most valuable asset for innovation, that management has trust. (…) If you omit one of them, nothing will work. If you don’t trust your people, you are killing curiosity. Somebody does their job and that’s it.” (Global Industries)

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Intrinsic motivation

People are needed who are primarily motivated by the joy of what they are doing rather than the results of their actions such as paycheck or climbing the career ladder.

Pull-principle for tasks

“ (…) a bit this pull-principle to say (…). If Responsibility is not assigned, it’s not driven, responsibility is not assigned but people choose and take ownartificially, but there must be somebody who ership in the topics they are says, ‘I am up to this, I will do this now.’” interested in and capable of. (Digital Transformers)

“When you are burning for something you like to finish and you like to move it forward, you like to invest much more than your eight hours a day. We want to have people who love their jobs.” (People Software)

Conditions for effective selfOrganizing for organization include clear rules, selfinfrastructure, and competence to organization work in a non-standard work environment.

“You have to have clear rules that are really followed through (…). Then you have to have infrastructure like (…) collaboration tools, information transparency and so on. And then you have to have these competencies, that means you have to get trained, you have to learn to work in here.” (People Software)

Innovation

Innovation as a core organization value, meaning that developing further and creating new solutions to one’s own work area and processes, products, the whole business model is seen as normal for the majority of employees.

“People are coming up with ideas, not only in the products and not only in the areas that I was responsible for, but for the whole company. (…) I think that’s something that’s in our DNA.” (People Software) “In our business innovative means that we are again and again prepared to integrate new impulses, work with new methods, new insights, new technologies. (…) make something new out of that, not to stick to conventions.” (Digital Transformers)

Experimentation

In the light of a promising opportunity there is a tendency to take action and quickly test its potential rather than spending time on systematic market research and development.

“It should be fast, we have this approach to have speed, not to let matters rest long, simply trying things out, simply test and see. And when it doesn’t work you have to leave it again.” (Digital Transformers)

Open-minded

Being open to new ideas of others, reflecting own behavior, “(…) very open and flexible, open in thinking challenging the status quo, look- in different directions and connecting topics.” ing for always better solutions, (Digital Transformers) connecting topics.

Ambiguity tolerance

Concurrently accepting seemingly contradictory aspects, particularly understanding and being able to cope with a range of

“We have a culture that has the whole span from a temporal dictator to a base democracy, we have everything in there.” “That means that you have on the one side

Culture and Leadership for Innovation Across Cases leadership styles in one organization, or being able to work in a relatively unstructured environment where roles and procedures are not clearly defined.

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democracy, but on the other side also elected leaders that you have to follow, that’s ambiguity.” (People Software) “(...) because there are people who want to work with less borders but they are not able to. You have to be able to do it. You have to find your own borders.“ (FIRECO)

Flexibility

Adapting to new insights facing “I think here you have to be flexible (…), market and technological uncer- because things are dynamic and change a lot.” tainties and frequent changes. (Global Industries)

Failures accepted

“We can catch them if it doesn’t work and say, Early failures are seen positive as ‘Okay, not this time, try another one.’ (…) All they provide learning opportuni- of this can only work if failure is not a negaties on the way to the target. tive thing. (…) if you want a success (…) you want to fail early.” (Global Industries)

Collaboration / team work

“That we succeed to really work as a team, Individuals in the organization really. (…) We take care of each other.” (Digicollaborate, help, and take care tal Transformers) of each other.

Mutual accountability

Employees are aware that they “(…) everybody has to know that we work for cannot reach goals on their own everybody. We don’t work for (the CEO), we but mutually depend on each work for each other.” (FIRECO) other.

Family-like

“(…) it almost feels like a family, I have to Helpful and open atmosphere say. Everybody can contact and talk to everycompared to that experienced in body. You always get an answer, you get help a family. fast, yes.” (Home Care Network)

Communication culture

High requirements regarding people’s communication skills, including discussing, giving and taking feedback, handling conflicts, internal and external networking.

Feedback culture

People are expected to address certain behaviors of colleagues or leaders which may be not in line with expected behaviors and values without blaming.

“From this communication and participation process automatically something develops, because here is a culture where you can just freely express your ideas, where we have a discussion culture.” (Digital Transformers) “We need people who are a lot respectful to each other, (…) because there is no one who saves you or has formal power to calm it down.” (People Software) “When somebody notices a behavior of a colleague that is in conflict with the value compass, to just address it. Not to say,’You have not behaved correctly,’ but just to address it to reflect why that has actually happened like this.” (Digital Transformers)

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Transparency

Sharing

Customer focus

Results of the Cross-Case Analysis Information necessary for employees acting self-responsibly is made available, e.g. organization and market information, who works on which topics or ideas. It is common to make own insights public to colleagues and partners, use own experience to help others, fairly divide jointly created intellectual property in collaborations. People are primarily driven by the needs and problems of the customer when initiating and driving changes, selecting ideas based on early customer feedback.

“Everybody always writes what they do, what draft level it’s on, and you have a good mindset of how the company develops, what the topics are, where I can put my idea, and so on.” (Digital Transformers) “(…) to have this demand that knowledge that is created in collaborative projects simply belongs to both parties, there is not this dividing. (…) It simply belongs to all that are involved.” (Digital Transformers)

“We all have the same goal in mind, well and that’s the well-being of the client, that is my objective.” (Home Care Network)

“Our unique selling proposition (…) or main Culture as The democratic culture is seen as asset is not the software, for me it’s the culUnique Selling a unique differentiating ad- ture, that’s why we can compete against OraProposition vantage against competitors. cle, against SAP with much bigger teams.” (People Software) When recruiting new colleagues “And more often than not we have people it is more important that they fit applying for a job where we say, ‘Okay well, Recruiting for the culture than that they com- (…), we don’t think that this person will fit the cultural fit pletely fulfill the requirements of role, but will probably fit the culture.” (People a certain role. Software) “Obviously we try to make crystal clear what we mean with democracy. So we have a constitution, we write about what means decisionThe culture is purposefully deActive making (…). That’s a good basis but it doesn’t veloped by making central values measures to turn into behavior. We trained people in the and norms explicit, and extendevelop the onboarding (…). Then we have some feedsively communicating and trainculture back sessions and so on, but (...) we want to be ing them. much better in training, so train what it means to take a decision, (…) to take ownership.” (People Software)

Classic innovation management describes management’s role as that of an innovation driver. This involves communicating the importance of innovation, encouraging people to be creative, and recognizing innovative performance. Further, management is expected to act as a role model and support the values associated with an innovation culture (Stern and Jaberg, 2010; see chapter 2.4.6 for details and further references).

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Similarly at all case organizations, management aims to foster a culture of constant renewal and to create the necessary conditions for people to come up with and realize new ideas, acting as innovation driver in many of the beforementioned aspects. More specifically, management strongly communicates the importance of innovation for the organization and encourages people to be creative in all the heterarchies. In all cases except for Global Industries, the CEO has a strong background in initiating major innovations in the past or still today, thus, acting as entrepreneurial role model. However, someone who is seen as a role model is followed by others and, thus becomes a leader, rather than the other way around. The CEO at FIRECO expects and encourages everybody to be creative. However, sometimes experienced as dominant and hard in his judgments of ideas, his own force and visionary spirit might be daunting to some employees. Also at Digital Transformers, the CEO and founder is a full-blooded entrepreneur and most innovations of a strategic nature are strongly driven by her. At the corporate, the need for renewal is communicated by top management with structural and cultural changes actively triggered by the headquarters, particularly through a major global change program. 5.5.1 Management as Power Promoter Further, in classic innovation management, top management is expected to use the power connected to the position to support and protect innovations. Management’s role of a ‘power promoter’ for innovation involves providing budgets, mentoring, and shielding developing initiatives from opponents, primarily within in the organization. At all case organizations, management does provide resources in the form of capacities and budget for innovations. The network of management is used to support innovations at three of the five organizations, FIRECO, Digital Transformers, and Global Industries, to connect people within and beyond the organization, and to test ideas with customers. Sheltering innovations from dominating routine operations appears not to be necessary in the generally innovationsupportive climates of the heterarchies. At the two SME heterarchies management shows that they stand behind ideas, which have not yet proven their value. Similarly, at Global Industries, principles and management may act as mentors for ideas, helping researchers by ‘selling’ their idea internally. At a later stage, they use their power to remove barriers for teams to concentrate on actual innovation tasks.

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5.5.2 Empowerment and Individual Responsibility In classic innovation management, empowerment and responsibility by employees for innovation is described as an important part of an innovation culture (Vahs and Brem, 2013). At the heart of all the case organizations’ selfconception is working in an independent and self-directed way. This requires on the one hand, high levels of freedoms and trust granted by the organization or management and, on the other hand, for filling those freedoms, high levels of individual and team initiative and responsibility from employees. At all heterarchical case organizations, management strongly encourages people to take initiative and responsibility in topics they are interested in. Consistently, responsibility takes the form of a pull-principle where people choose the areas where they want to engage, rather than assigning responsibilities to people. Generally, those individuals suggesting ideas are the ones to drive these topics. Further, at Digital Transformers, people can apply for available new customer projects. At FIRECO and People Software, employees can choose to engage in topic-related circles. Taking responsibility in the case organizations refers to employees taking decisions themselves where they feel competent to do so, without management intervening, but also bearing the consequences of those decisions. At Digital Transformers, taking responsibility also means getting help if a certain task cannot be solved by the responsible individual or team. In all case organizations, management clearly sees it as their task to create the right conditions for people to act in a self-organizing way or entrepreneurially. At People Software, being heterarchical from the start, employees showed very high initiative and responsibility by driving a major strategic turn of the organization, which at that time had not been seen as necessary by the management. At the SME there is the view that everybody is able to take responsibility. It is the task of management to create the right conditions so that people are also allowed to and want to act self-directly. Prerequisites are seen in clear rules, infrastructure such as collaboration tools and information transparency, and the competence to work in this environment, fostered for example through training. While in a small organization, this might be implicitly clear, in an organization of a certain size, rules on how to work need to be made explicit and intensely trained to enable people to participate and take over responsibility. At Digital Transformers, through what they call “leadership in topics” employees are increasingly empowered to take individual responsibility. This helps the CEO letting go more from being in central control. The small organization’s

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formulated purpose and behavior orientations create a scope within which employees can decide independently. Already now everybody leads and everybody follows, depending on who feels and is regarded competent by the others in which topic. At the corporate Global Industries, teams are explicitly empowered to pursue innovation topics in start-up initiatives. However, management is involved in the form of a review committee, where important decisions are being taken. Even more, beyond this channel, freedoms granted by leaders need to be earned and also depend on the experience and self-initiative of employees. The degree of self-organization preferred by people differs, which is taken into consideration at Digital Transformers and People Software. At the small organization, this is considered more implicitly when tasks are being allocated. At the fully developed SME heterarchy, people can choose every year at which level of self-organization they like to be managed, in addition to being led according to each individual’s preferences by their “people coaches”. A precondition for people to use those freedom is that they have a self-driven way of working, being highly intrinsically motivated, which is stressed at most case organizations. The general expectation on employees to be self-driven and take responsibility to drive one’s topics, including developing their areas further in a rather unstructured environment, can lead to a high degree of pressure from the group of peers. All case organizations make the impression of high performance cultures, where pressure to perform comes from collective norms and mutual accountability rather than bosses setting goals and controlling results. A further necessary condition for self-initiative and responsibility shown by employees is that management has trust in those. At the heterarchies, trust granted by management shows in various ways, particularly in giving employees possibilities to influence strategic direction, leaving organizational roles and processes relatively open for people to fill and shape those themselves, leaving also important decisions to employees without interfering, accepting that ideas are realized in the shadow, with resources dedicated to initiatives not approved or even without management being aware. At FIRECO, where people still hesitate to take decisions themselves, even being most competent to do so, people might not yet have sufficient trust in management that ideas or cases of failure are being judged benevolently. High levels of self-organization appear not to be a natural state, not even at the heterarchical case organizations. Rather, enabling people to use offered freedoms and fill those with initiative and responsibility appears as a constant chal-

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lenge, where management puts considerable efforts in fostering this kind of culture. In particular at FIRECO, where the change has been made from a standardhierarchical to a self-organizing organization, the CEO is frustrated to see that people still ask for somebody to make decisions for them, despite being empowered to a high degree. He considers his efforts in training people to take more responsibility as constant struggle against the organization falling back to its old model or into anarchy. This is confirmed by People Software and to some degree by Home Care Network, even though considered full heterarchies where individuals and teams act very independently. Even there, communication and training is necessary to make people ‘unlearn’ certain behaviors that they bring to the heterarchy, having been socialized in traditional-hierarchical organizations. 5.5.3 Innovation-Supportive Organizational Values In classic innovation management an innovation culture is regarded essential for corporate innovation performance. Innovation-supportive values and norms suggested by classic textbooks and empirical findings comprise openness and flexibility, quality of internal communication, competence, inter-functional cooperation, responsibility of employees, appreciation, and risk-taking (Stern and Jaberg, 2010; Hogan and Coote, 2012). Very similarly, at all of the case organizations, a range of corporate values and norms are in place, which are considered to be supportive of innovation, most importantly innovation and experimentation, open-mindedness, flexibility, accepting failures, collaboration, communication and feedback culture, transparency, knowledge sharing, and customer-centricity. First, innovation and experimentation are typical behaviors at all case organizations. A common attitude and behavioral norm of constantly improving is described under different terms: innovation (Home Care Network, Digital Transformers), creativity (FIRECO, Digital Transformers, People Software), acting entrepreneurially, welcoming change, learning orientation, looking for always better solutions (Global Industries), challenging the status quo, constant improvement (People Software). At all organizations, people are encouraged to come up with and pursue ideas for new or improved solutions in products and all other areas, such as accounting or talent management. Innovation as expected behavior is understood and lived. For people to show innovative behavior also requires that failures are accepted, which is explicitly mentioned and stressed by Global Industries. However, failure cultures can be assumed to be in place in the other heterarchies, too, as

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experimentation as typical way to test ideas and learn rapidly is mentioned at the majority of cases, Digital Transformers, People Software, Home Care Network, and Global Industries. Customer focus is described a central value at Home Care Network and Global Industries. Also at the other case organizations customers are key partners in innovation: With customer needs and problems as the most important source of innovation, as an early filter for ideas through experimentation and feedback, for paid developments or joint developments. Being one prerequisite for people to show innovative behavior, the climate at the case organizations is consistently described as open-minded. At Digital Transformers, for example, this refers to being flexible in one’s thinking, able to connect different topics and open to others’ views. Open-mindedness is also required when facing high diversity, with lots of different nationalities being found at Global Industries and People Software. At both organizations, diversity also relates to the spectrum of innovation approaches used, and additionally at the corporate, to the multitude of technologies and markets being covered. Openmindedness can be regarded one aspect of ambiguity tolerance, required to a high degree at the heterarchies for several reasons. First, the organizations and their people are faced with rapid changes in terms of technological and market environment, organization, and products. Thus, people are required to come along or even initiate and drive those changes. Especially with fuzzy initiatives where the potential is unclear in the beginning, it is necessary to stay flexible. On the other hand, roles and work processes are not very structured and people are required to find their own way to being effective and making their contribution to the organization. At People Software in particular, people must be able to cope with the wide leadership spectrum from democracy to temporary dictatorship, which is considered a further aspect of ambiguity. Initiating, developing and implementing innovations are joint efforts at the case organizations. Thus, collaboration and teamwork are consistently described as central principles. Only at Global Industries, these are not identified as being among the key values, even though ideation is often done in groups and start-up initiatives are run by dedicated cross-functional teams. Effective collaboration in teams requires a sense of mutual accountability, that people are aware of their interconnectedness and can rely on each other, being mentioned at many of the heterarchies, FIRECO, Digital Transformers, and Home Care Network. As a result, people are helpful and take care of each other. In addition, the need to coordinate themselves within the team requires

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people to be very open to each other, in particular regarding who can contribute what and when. These aspects might partly explain why the climate at most case organizations is described as personal, informal and even family-like. Collaboration essentially requires strong communication skills, as found at People Software, Digital Transformers, and Home Care Network. This is particularly the case where there is no boss to end conflicts ‘per ordre di mufti,’ but those have to be sorted through discussions among colleagues. Even if more discussions do result in certain inefficiencies, occurring frictions also bear creative potential. That is why at People Software, these are even fostered by purposefully leaving responsibilities a bit open. At Home Care Network, there are regional coaches supporting the self-organizing teams in case of conflicts they cannot solve themselves. At Digital Transformers, a lot of discussions are online, where everybody can follow and make up his own mind. Face-to-face communication is still regarded vital, especially in innovation workshops at Digital Transformers and People Software or Global Industries’ internal startup teams. A feedback culture is an important part of this discussion culture, particularly at Digital Transformers and People Software. Initially, the intention of electing people in leadership positions at the SME full heterarchy was to support that feedback is given to leaders in order to challenge the status quo, which now happens all the time. Further, effectively collaborating for innovations requires transparency, a further value explicitly described as typical by Digital Transformers, Global Industries, People Software, and Home Care Network. This has different connotations. First, transparency regarding strategic organization goals, customer knowledge, or project information is a condition for people to take responsibility, coming up with own initiatives and taking their own decisions. Second, it is important to make transparent who works on what to avoid double work and connect to those working on related topics, stressed by Digital Transformers and Global Industries. Third, transparency helps building trust in employees and giving them more responsibility, as particularly the case at Digital Transformers. Employees own networking, leaders who are connected to individuals in different parts of the organization and beyond, and internal social network tools help the heterarchies keep the overview of who works on which topics, to connect to others, and to share knowledge. Sharing knowledge extends beyond the organization-internal network, where new solutions are jointly created with customers or other partners, as at Digital Transformers. Also at Global Industries it is stressed that using external

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knowledge for innovation and co-innovating with partners is becoming increasingly important, which requires to let go attitudes of ‘not-invented-here.’ Their special organization culture is understood as vital for future competitiveness by most of the studied heterarchies, and even considered their ‘Unique Selling Proposition’ at People Software. Thus, consciously working to keep and develop further the culture is seen as a very important task, mostly driven by management and talent management. This involves defining the core values and behavior orientations, being a role model in living those, training people, encouraging certain behaviors and giving each other feedback. A further essential part of fostering the culture is hiring the right people, which is seen as central success factor and major future challenge. At most of the case organizations, candidates are more hired for cultural fit or mindset than for technical expertise or fit for a particular position. In all cases but the corporate, the teams finally decide who fits in and is being hired, as they are the ones who will have to get along working with that person later on. 5.6

Conclusion

Culture and leadership in the heterarchies largely corresponds with practices associated with classic innovation management. There are differences in the practices associated with processes and structures, and, slightly less so, those related to strategy and direction. While this was anticipated, the extent to which there was variation amongst the heterarchies was more surprising. As to strategy and direction, the heterarchies give a mixed picture with some elements of classic theory and practice applied but more often using less systematic and structured approaches. In most of the cases the common organizational purpose guides developments. Factual strategy takes most often the form of a mixture of planning ahead and spontaneous initiatives or an emphasis on the latter. In terms of processes and structures for innovation the heterarchical organizations show striking differences to standard innovation management approaches and among each other. Innovation practices in the heterarchies are coordinated more by cultural values and norms than by formal management. None of the heterarchies had an official innovation process, an element which is integral to classic innovation management, mirroring the bureaucratic principles of centralization and formalization. The heterarchies do appear to largely dispense with these central characteristics of bureaucracy, both in their general functioning and

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in managing innovation. What they further have in common is multiple channels for realizing innovation rather than a formal innovation process. They also share that there is not only one way, to varying degrees they all use different ways flexibly: hierarchy and democracy, KPIs and gut feeling, strategy and ad-hoc initiatives or experimentation. Beyond that, at all organizations everybody feels responsible for innovation rather than separating innovation and routine tasks with dedicated innovation departments. In heterarchies many of the functions of formal coordination mechanisms of clearly defined processes and structures are fulfilled by common values and norms. The heterarchies are distinct performance cultures and with mutual accountability. In the absence of ‘bosses’ with formal authority people face considerable pressures to deliver from their peers. As was anticipated, the cultures of the heterarchies in this sample show striking similarities among each other and largely correspond to the innovation-supportive values and norms suggested by classic innovation management, such as experimentation, teamwork, communication, empowerment, transparency, and trust. Variance in the detail of organizing the heterarchical way, in terms of processes and structures, is seen though the principle appears similar; less local shelter, more demanding exposure, greater innovation. The cultures of the heterarchies have values and norms similar to the sheltered domains of classic innovation management, but their structures for innovation do differ. The cross-case comparison suggests that there is no single way of heterarchical organization, or of facilitating innovation in such a context. Rather, there are different approaches to enabling innovation in a heterarchical way.

6

Discussion of Findings, Implications and Further Research

In this chapter the findings from the research project are discussed. First and foremost these are summarized in the picture of innovation being exposed rather than sheltered in heterarchies, which is embedded and explained in the final conceptual model. Next, a number of implications are provided on what can be learned from heterarchies in terms of facilitating corporate innovation. Such practices are summarized on the individual, project team and organizational level. Finally, suggestions for further research are outlined. 6.1

Discussion: Innovation in Heterarchies

6.1.1 Innovation Exposed Rather Than Sheltered Though the importance of an innovation-friendly culture and leadership is acknowledged, in classic innovation management innovation is still to a large part understood and practiced as being formally planned, steered, and controlled (Vahs and Brem, 2013; Cooper, 2013). As was foreshadowed from the outset, heterarchies do seem to largely dispense with the characteristics of bureaucracy, centralization and formalization, both in their general functioning and in fostering innovation; in the terms being used here this is removing shelter and ensuring exposure, as shown in the final conceptual model (Figure 6.1).

Figure 6.1: Final conceptual model

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2_6

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Specifically, this means that innovation activities in the case organizations are more coordinated by cultural than by formal organization and management. This is underlined as none of the case research heterarchies here had an official innovation process, which is prescribed at the heart of classic innovation management (Vahs and Brem, 2013; Cooper, 2013). This clearly contrasts with classic innovation management, rooted in the bureaucratic principles of centralization and formalization (chapter 2.4.7). Innovation with less emphasis on formal processes and management might not be fully generalizable to organizations without the overall values and norms of such a culture. Heterarchy does not mean doing without organization; rather the institutional ‘appearance’ of what organization is looks different. If the organization as a whole has norms and values consistent with innovation, which heterarchies do, then sheltering and all goes with that in conventional bureaucracies is not necessary; ‘exposing’ innovation in this way is not a high-risk policy. Innovation will survive and thrive. The sheltering, if it is thought of this way, has moved its boundary; from the narrow sheltering of innovation to the broader sheltering of for personal and team initiative and responsibility, within certain guidelines, in the organization as a whole. The scope for moving independently might still involve guidelines, but this offers a multitude of options rather than prescribing details, across all tasks and aspects of organization. While the cultures of the heterarchies show similarly the values and norms associated with an innovation culture (see section 2.4.6), their structures for innovation do differ. The cross-case comparison suggests that there is no single or one best way of heterarchical organization, or of facilitating innovation in such a context. Rather, there are similar ways of organizing heterarchical, with different approaches to enabling innovation in a heterarchical way. Still, the principle is the same; less shelter, more exposure, greater innovation. Heterarchies appear holistically innovative, accepting certain challenges to efficiency. What they also have in common, apart from less formalization and centralization, is that there is not only one way, they use different ways flexibly: hierarchy and democracy, strategy and ad-hoc experimentation, multiple channels for realizing innovation rather than one official innovation process. This could be central of heterarchical organization for innovation: the multitude of approaches to choose from as individuals think the situation requires. In heterarchies many of the formal coordination mechanisms of clearly defined processes and structures are replaced by common values and norms. The study has shown that these widely correspond to values and norms associated

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with an innovation culture. While in small organizations these might be implicit, embedded and taken for granted, in larger groups who need to coordinate their work, it might be necessary to explicitly define and train for these. The heterarchies are distinct performance cultures and with mutual accountability. Still, leadership still plays an important role for innovation in heterarchies. There is a lot of what can be described as responsible ‘little’ leadership rather than a concentration on ‘big’ leadership confined to a few people. Several themes being highlighted in this section will be discussed in more detail in turn. 6.1.2 Multiple Rivalling Principles within Strategy, Organization and Leadership

What the case heterarchies share is that they employ multiple, potentially ‘rivalling’ principles rather than prescribing just one best way for handling innovation, like an official innovation process that innovation must take from idea to launch. Stark describes “multiple rivalling principles of evaluation” as typical for heterarchies in terms of organizational values and idea selection (Stark, 2009). According to theory this increases the chances that the best option is selected from a diverse range of options (ibid.). On a higher level, Herbst (1976) describes “the capacity for multi-structured functioning” as one of the central characteristics of non-hierarchical organizations, as opposed to bureaucratic-hierarchical structures, “based on the principle of a single rigid structure.” (Herbst, 1976, p. 9) Beyond the overall authority structure, the study has shown that this can be observed in all investigated themes: innovation strategy, organization and leadership. The heterarchies employ within one organization both elements of strategy, like product portfolios and ad-hoc experimentation. As to processes and structures, there are multiple channels for realizing ideas, some official and formal and some in the shadow organization; Idea selection is partly based on KPIs and partly on gut feeling and customer interest. In terms of leadership, heterarchies integrate democracy, dynamic or natural leadership and hierarchical decisions. Which option to choose in terms of strategy, process methods, or leadership style varies and is decided situational. In accordance with Stark’s theory it is suggested that this bunch of approaches in one organization, while bringing more ambiguity, complexity and discussions, increases the chances that the most appropriate elements of strategy, innovation methods, leadership styles, and innovative ideas are tested, selected and implemented. Handling these principles, which appear partly conflicting in na-

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ture, within one organization is assumed to demand high levels of ambiguity tolerance from involved individuals. In practice an important success factor and challenge will be to know or agree on which of these various options within strategy, organization, and leadership is appropriate when. This should depend on what is considered most beneficial from the perspective of the team or organization, rather than an individual. 6.1.3 Differences within the Organization of Heterarchies The cultures of the case organizations show highly similar values and norms, though their structures for innovation differ among each other. As described in 6.1.1 the heterarchies share that there is no one best way of enabling innovation, within each organization and among several heterarchies. There appear to be differences between heterarchies as to the variety or spectrum of organizational options to draw from. This is particularly striking when comparing the two most developed heterarchies People Software and Home Care Network. People Software is characterized by a large organizational spectrum: from hardly regulated to articulated organization for self-organizing innovation. The latter includes explicit and trained values and norms, formal elections of leaders, rules on who is involved in which kind of decisions and multiple defined channels for innovations. This is not to be understood as generally more structured, but as having a greater spectrum of potential structures to choose from. The same organization welcomes that ideas are selected based on gut feeling, pursued in the shadow and tested through rapid experimentation. In contrast, the large service provider Home Care Network appears to employ less organizational options from that spectrum. Operations and innovation activities generally appear to be of a very low degree of centralization and formalization: There are no bosses except for the CEO, who does not see himself and is not regarded as someone to provide direction for innovation to others. The way from idea to launch is not described and no formal selection criteria are applied. In summary, at Home Care Network there is a clear emphasis on team-based and non-bureaucratic practices, whereas People Software far more highlights the variety of different approaches, which explicitly include temporary hierarchies and formalization. Rather than a one-fits-all approach, adequate heterarchical structures and cultures need to fit individual organization contingencies. This corresponds to the understanding in classic innovation management, which needs to be tailored to

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individual organization requirements, including competitive environment, product-specific, or organization-internal factors (Tidd, 2001; Ortt and van der Duin, 2008). The adequate variety of organizational options for self-organizing innovation might particularly be contingent on the complexity of an organization’s supply chain. The more complex product development and production, the more structure-options to choose from might be required in addition to the strong cultures coordinating individual and joint efforts in heterarchies. This is line with Laloux’ description of different types of so-called ‘teal organizations’. Based on the length and complexity of the organizations’ value chains, he distinguishes several subtypes with varying degrees of complexity (Laloux, 2014, p. 325). What is suggested here in addition, however, is that what differs is not organizations’ general degree of structure but the variety of potential structural options, a constitutive element of heterarchies (Crumley, 2008). The study has shown that the variety of structural options can be understood far more widely than just changing flexibly between hierarchical and democratic authority structures. 6.1.4 Holistically Innovative Heterarchies This balancing of conflicting principles in heterarchies takes place on an even higher level: They balance innovative exploration and efficient exploitation on all levels, rather than having separate functions for these opposing activities. This calls into question the idea or practice of the ambidextrous organization, where innovation and routine activities are suggested to be clearly separated by different departments, with processes, structures and cultures adjusted to the requirements of the apparently opposing activities (Benner and Tushman, 2003; more details in section 2.4.5). In bureaucracies, where the focus lies on ensuring efficiency and reliability in routine processes, potential innovations can be viewed as undesired exceptions. Within the shelter, in separate centers or units, conditions favorable for exploration activities supporting classic innovation management are intended to be created, with strategy, processes and leadership within them aligned to support innovation. This unit is meant to serve as a ‘safe space’ or incubator in an early stage of potential innovations, where these are sheltered from the bureaucratic apparatus (O'Reilley and Tushman, 2004). For this reason organizations tend to operate seperate R&D or innovation departments, or even innovation labs located outside the mainstream organization (Buvat et al., 2017). Outside this unit, the mainstream organization is designed to ensure reliability and efficiency, primarily by formal organization structures and

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procedures and, to a less degree, informal bureaucratic principles (left side of Figure 6.2).

Figure 6.2: Affirmed assumptions and detailed model on innovation in heterarchy

In stark contrast to that, it was supported by the cases in this study that there is no need to shelter innovations in heterarchies. This is due to the generally innovation-supportive climate, with innovation and experimentation, along with other values of innovation cultures, being strong corporate values, found central to all studied heterarchies. As a consequence, there is no clear need to separate innovation and routine, in terms of strategy and direction, processes and structures, and culture and leadership. This is in line with existing theory on innovation in heterarchy (Reihlen, 1996; Stark, 2009). Rather than balancing innovation and efficiency, which need to be integrated (O’Reilley and Tushman, 2004); it was supported by this study that heterarchies act as holistically innovative organizations (right side of Figure 6.2). Each individual and team, with varying emphasis, is required to balance and integrate innovation and efficiency. Corresponding to the general norm, employees as a matter of course make smaller or more fundamental improvements in their own areas, contribute to new products or to changes in the overall organization direction. While efficiency is desired, heterarchy’s strength and overall preference is clearly towards innovation, as supported by previous theory and empirical data including this study. Inefficiencies from discussions and experimentation are accepted in the light of the advantages of an innovation-friendly overall environment. The risk of course would be the inversion of the challenge to hierarchical organization; it has to shelter innovation, where heterarchies may have to ‘shelter’ efficiency. Another related point is that the heterarchies by large do not appear to clearly distinguish between incremental and radical innovation or the early and late

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phases of innovation, as suggested consistently by classic innovation management (Gassmann and Sutter, 2009; Tidd and Bessant, 2009; Vahs and Brem, 2013). Only the research center of the corporate, the least heterarchical among the five cases, describes two distinct phases of innovation, with different approaches supporting free ideation and efficient implementation. This does not imply that such a distinction is not made in heterarchies, but not on the formal organizational or process level. Most certainly it is left to be decided by individuals and teams driving innovation initiatives, which approach is regarded appropriate under which circumstances. In their empirical test of the ambidextrous organization, Durisin and Todorova (2012) found that also the analyzed ‘standard’ organizations did not distinguish between incremental and radical innovation initiatives, even though theory would suggest so. It is hypothesized that this upfront evaluation of prospective innovatiness and adopting different approaches according to the different requirements of incremental and radical inituatives is problematic in corporate practice (Durisin and Todorova, 2012). Even though faced with the same challenges, individuals in heterarchies might be more used to moving in ambigious environments and deciding situational, which approach appears most promising under which circumstances. 6.1.5 Better Fit between Heterarchical Structures and Innovation Culture Heterarchy’s strength in supporting innovation, it seems, results from the exposure of there being a good fit between certain kinds of values and norms across strategy, structure and culture. This makes innovation more likely, and more likely to be sustained. Thus, it is assumed here that establishing and keeping an innovation-friendly culture, though equally suggested by classic innovation management, is more ‘natural’ and likely the less bureaucratic and the more heterarchical an organization is, because the whole organization emphasizes innovation, while accepting certain drawbacks in terms of efficiency. While innovation-friendly values and norms are prescribed by classic innovation management (Stern and Jaberg, 2010; Vahs and Brem, 2013), they appear to be hard to embed and sustain in most contexts. This is supported by a recent Capgemini study, highlighting that investments in innovation centres are not translating into improved innovation performance. The authors report that reasons lie in corporate cultures, which do not likewise support innovation: “Many organizations do not have a culture where employees are empowered to experi-

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ment, test and learn, and deploy their ideas at pace.” (Buvat et al., 2017, pp. 610) Especially at large organizations, where formalization and centralization are needed to coordinate many individuals and teams, there are tendencies that all activities evolve to increasingly the fit with bureaucratic structures. This is to the disadvantage of innovativeness (see chapter 2.3). Establishing and having an innovation-friendly culture, though suggested and espoused by classic innovation management, is never going to be enough for greater innovation; it is more ‘natural’ and likely the more heterarchical an organization as a whole is. This might be related to the organizational dilemma with regard to innovation management in bureaucracies (Pfeiffer, Schütt and Wühr, 2012), as described in chapter 2.4.5. Organizations can be viewed as integrated bundles of formal and informal organization that correspond to each other and are strongly interrelated. Formal organizational structures implicitly contain and convey meaning, such as assumptions on the nature of human motivation. Hierarchical structures implicitly imply the notion that higher-ranking individuals are more competent to make important decisions and lower-ranking individuals need to be tightly supervised (McGregor, 1960). Organizations with a bureaucratic-hierarchical formal organization typically have hierarchical cultures. Organizations with a non-bureaucratic formal organization are assumed more likely to have a corresponding informal organization. It is assumed here that traditional bureaucratic organizations need to balance the aspired informal, heterarchical innovation culture and formal bureaucratic structures, potentially facing greater contrasts and conflicts between opposing informal and formal structures. Thus, their organizational dilemma might be rooted in a misfit between the desired informal organization, especially on the innovation process level, and the formal organization, especially on the organization level of bureaucracies. Jaworski and Zurlino argue that both formal and informal organization needs to be aligned towards the goal of innovation (Jaworski and Zurlino, 2007). Realizing this by separating strategies, structures and cultures for exploration and exploitation is suggested by theory (O’Reilley and Tushman, 2004), but appears to be problematic in managerial practice (Durisin and Todorova, 2012). In contrast, heterarchies show how formal and informal organization is aligned to support innovation on all levels.

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6.1.6 Leadership for Innovation in Heterarchies In heterarchies, in the absence of ‘bosses’ with formal authority people face considerable pressures to deliver from their peers, which is in line with earlier findings (Bednall et al., 2018). Even though presented as alternative to hierarchicalbureaucratic structures and cultures, leadership has an important role in heterarchies, and also in the context of innovation. Leadership in heterarchies is an innovation driver and power promoter, echoing and delivering what is espoused by classic innovation management, more through ‘little’ leadership than ‘big’ leaders. In the most distinctive of the heterarchies, leadership has the role of a moderator and connector between firm and major stakeholders, and with regard to the innovation process. Where the founder has a strong entrepreneurial background and is still strongly involved in initiating and driving major strategic initiatives, this is particularly the case, although this might be double edged. On the one hand, the entrepreneurial spirit can be inspiring to others. On the other hand, fulfilling this might be daunting for employees, taking responsibility for innovation. On the operational level innovation in heterarchy is not leadershipless. Supporting the prior theory on natural leadership and dynamic influence structures in heterarchies (Reihlen, 1996), it is common in the case organizations that everyone may lead and follow, depending on the task and required competences. Leaders in heterarchies only become and remain leaders through others following them and seeing them as role models. It has been verified by this study that leadership influence in heterarchies depends far less on position and far more on knowledge, ability to moderate and connect people in their network, knowledge of important stakeholders, acting as role models and trust earned. Hierarchical leadership is bound to formal and stable positions, whereas the influence of leaders in heterarchies is much more dynamic and might take effect in some situations and not in others. This can reduce the risk that power is misused by few people at the top. With influence depending on peers prepared to follow, trust and support has to be continuously earned by heterarchical leaders. The awareness of this dependence might lead to more responsible behaviors. Compared to hierarchical contexts, heterarchies express a fundamentally different understanding of leadership. This might be realized in a more formalized manner with people in elected leadership positions or more informal with hardly official ranks and titles. Leaders are not regarded as ‘better’ or ‘higher’ or ‘more important’ than others. Rather, they depend on and aim to help the team and collective of employees, to contribute to the common goal to best serve customers,

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not the other way around. Leadership practiced in heterarchies is likely to correspond to what has been described as “cooperative,” “non-controlling,” “empowering” leadership or “servant leadership” (Greenleaf, 2002; van Dierendonck, 2010; Yoshida et al., 2014). This is in line with previous empirical studies, where the before-mentioned leadership-styles are found to be positively related to innovation (Rosing, Frese and Bausch, 2011; Ogbonna and Harris, 2000; Bednall et al., 2018). There might be the legitimate fear that with these freedoms there will be internal politics and nepotism, where individuals bring others on their side not to the best of the collective but for their individual interests. This might indeed be the case where cultures allow for it. Thus, like with other behavioral norms, it should be clearly stated, trained and exemplified what is expected behavior to support that cliquism is opposed by the majority of people and those who show deviating behavior are not followed. Balancing how the freedoms of heterarchy are filled with suitable common norms and values and individual and team responsibility remains a key factor of successful heterarchies and a major challenge for others intending to adopt similar cultures. 6.1.7 The Absence of Competition for Hierarchical Positions and Innovation In heterarchies there is no ladder to climb up. Instead, people develop their skills and offer them to the organization. If there is demand for those competencies from peers they can continue to contribute those. If not, they are required to find other organizational demands for which they can bring value or leave the organization. Like this, ‘career paths’ are very flexible in heterarchies as it comes to contents, that is activities to perform or competencies to bring in. The same is the case with getting into informal leadership positions, as described before. Anybody can become a leader in a certain situation if others are prepared to follow. However, such positions are not fixed or often not tied to titles that would be meaningful in the outside largely bureaucratic world. For people aiming to leave heterarchies this can make it difficult to compete for certain jobs, as they cannot show a track record of common hierarchical ranks and titles. In bureaucratic organizations, over their career individuals aim to climb the ‘hierarchical ladder.’ Higher hierarchical positions are generally attractive, as they are connected to more decision power, higher salaries, additional benefits, and higher status. Alternative career paths for experts or project managers are offered, particularly in large organizations. However, it can be assumed that there is still a very strong preference among most people to compete for ever

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higher-level leadership positions. In hierarchical bureaucracies, people tend to compete for rare and desired leadership positions, usually tied to more power, status, and financial benefits. This was found to be detrimental for innovation (Anderson and Brown, 2010). Where this is not an option, there are less incentives to hide knowledge from others, showing only one’s best side to the boss, claiming positive results for one’s own merits and talking bad about colleagues, or in general: doing what assumedly benefits the own career rather than the collective. In a context where the competitive element between people is far less present like in heterarchies, norms and values of an innovation culture are far more likely to develop, particularly cooperative behavior, influence assigned based on competence, but also experimentation and accepting failure. Thus, the absence of competition for hierarchical positions can be a clear advantage for developing central values of an innovation culture, such as teamwork, knowledge sharing or admitting and learning from failures. In essence, the research findings were summarized in the picture of innovation being exposed rather than sheltered in heterarchies. Further, it was outlined that heterarchies share the characteristic of having multiple rivalling principles within strategy, processes and leadership. Differences within the heterarchies as to organizing for innovation were discussed. Centrally, heterarchies were presented as holistically innovative organizations, which is potentially rooted in a better fit between heterarchical structures and innovation culture. Finally, leadership for innovation in heterarchies was discussed, highlighting the absence of competition for hierarchical positions. 6.2

Implications: Lessons from Heterarchies

6.2.1 Organization Context Innovation as it has been exposed here in heterarchies in the double sense, rendered visible and seen to be unsheltered, has many implications. The picture of and learning from the heterarchical case organizations is ‘self-evident’ to some extent. A good fit between strategy, structure and culture does exist which can enable greater innovation. Innovation-supportive practices have been described in the literature (Amabile, 1988; Shipton et al., 2006; Jaworski and Zurlino, 2007), but apparently are not easy to realize in practice. Often leaders or employees in other contexts with different alignments among strategy, structure and culture claim that they would like to act differently to attain greater innovation.

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To grant more decision power, take more responsibility, if only the circumstances that hindered them were different; the boss, higher bosses, rigid processes, limited budget, the general situation. These are the costs of being nonheterarchical; challenges with mutual trust, teamwork, experimentation and accepting failure. Considered individually, the innovation practices found in heterarchies might not be either new or ‘uniquely heterarchical’ in themselves; but they might be better integrated in heterarchies to achieve innovation. That is one area that needs further research. Another is the extent to which there are lessons for nonheterarchical contexts. Promoting exposure for innovation in that context might have quite different outcomes; shelter has a purpose, and exposure can be fatal in some conditions. That organizational shelter can be reformed; reduce formalization and centralization. At the same time the freedoms this entails need to be sustained through cultural coordination mechanisms. Approaches based on heterarchical principles can help organizations better use the creativity and intelligence of the collective of employees for the benefit of increased innovation performance. This is particularly desirable for organizations operating in fast-paced, competitive environments and with predominantly knowledge-intensive and non-routine tasks. The example of the Home Care Network case indicates that also organizations in less dynamic contexts may benefit from heterarchy and its advantages in attracting, retaining, and utilizing human potential and enabling innovations. However, becoming a heterarchical organization on a large scale can be considered a lengthy, difficult and risky transformation process. That is a path few are likely to take. Alternatively, organizations aiming for increased responsiveness and innovation performance might consider implementing heterarchical aspects on smaller scales. It is assumed here that to some degree the practices found in heterarchies can be transferred to organizations that are not mainly or wholly heterarchical. Suggested implications for fostering innovation are described in the subsequent text sections and summarized in Figure 6.3. With increasing reach of influence, these are presented for the individual, project team and organizational level.

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Figure 6.3: Implications at the individual, project team and organizational levels

6.2.2 The Individual Level At the individual level leaders in ‘standard’ organizations might learn from heterarchies to adopt a general non-hierarchical leadership style, to support selforganization, to help individuals shape their roles and responsibilities, and to encourage individual responsibility for innovation. It is true that leaders in any organization are to some extent restricted and their behavior shaped by the surrounding organization and leadership culture (Schein, 2004). Yet any leader might choose not to make use of the potentially available formal instruments and informal power mechanisms coming with hierarchical positions. Instead, the innovation-supportive practices exemplified at the investigated case heterarchies can equally be adopted by leaders in more traditionally structured organizations. By providing employees with transparency, trust and freedoms to move and decide, opportunities for taking influence, and rewarding creative initiative and performance, each individual leader can to some extent support the development of an innovation-friendly climate and reduce the negative effects of bureaucratic organization in her or her sphere of

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influence, that is in the relation to the individual employee. Leaders taking responsibility in creating these conditions are seen as prerequisite for employees in turn taking responsibility for making use of those. It makes sense to point to what granting freedoms means in practice, lessons that can be learned from differences between some of the more and the less developed investigated heterarchies. Leaders might tend to claim that their people do have all freedoms. Still, they are wondering, many of them keep discussing every detail with the boss rather than deciding themselves. One central requirement for people feeling truly empowered and taking ownership is that leaders do to not only transfer tasks and responsibilities to employees, but also decision power. Further, employees accepting and taking responsibility further necessitates leaders to provide them with far-reaching information - against the widespread notion that ‘Information is power’ - restrain from checking and getting involved during the process and accepting the consequences of empowered employees’ decisions. Finally, a general openness as well as a learning and failure culture is central here. Where employees fear that their leader will harshly criticize or even punish them in the event of failure or when the results differ from own expectations, innovative behavior is less likely (Sanders and Lin, 2016). Under such circumstances it is natural for employees to safeguard themselves by syntonizing every detail rather than taking responsibility, deciding and taking the consequences themselves. Trust is equally required from the other direction, employees need to trust leaders that their initiative is truly allowed and appreciated. In a wider sense this relates to the concept of psychological safety, as suggested by Sanders and Lin (2016). Employees are more likely to suggest and implement new ideas to their colleagues and leaders when they share the belief that their organization has a “psychologically safe climate,“ where they can take risks associated with innovative behavior and do not have to fear negative consequences (ibid., p. 42). Apparently heterarchies bring high expectations regarding the skills of leaders, particularly the required spectrum of leadership styles. It might be an option to follow the example of one of the case heterarchies and split the traditional role into ‘Manager’ and ‘People coach’ or ‘Interior minister’ and ‘Foreign minister’ (Case 1: Employee 1). Some individuals with a corresponding skill set focus on representing a group or department to stakeholders inside and outside the organization, and to some extent still plan and control. Others concentrate on the inside of teams, help moderating conflicts, coach and develop team members.

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Self-organization is a central working principle in heterarchies. It is likely to work best where overall strategy and direction, processes and structures, and culture and leadership are all aligned to support a highly self-responsible working style. Still, it is certainly not confined to heterarchies, but can be practiced within more standard bureaucratic organizations. Suitable individuals or teams and tasks need to be identified and provided with a supportive environment. Not every individual equally strives in an unstructured environment and enjoys working self-responsibly; similarly not everybody is equally creative (Egan, 2005). At the same time not every task or area of responsibility equally requires or benefits from creativity to the same extent. Thus, on the individual level, leaders can let individual employees choose at which level of self-organization they prefer to be managed. Some very self-responsible individuals will hardly require or want any support and control from their supervisors, while others perform better when activities are discussed with or even prescribed by the boss in detail. This requires leaders being able to draw from a bunch of leadership styles, applying the most adequate one for each individual and situation. The freedoms with which individual employees are led will depend more on their personal maturity and task-related degree of ambiguity than the overall organizational model. Heterarchies, as inherently human-centered organizations, serve as good examples in adjusting to the abilities and preferences of individuals. Still, also more bureaucratic contexts provide opportunities to better adjust roles and responsibilities to the individual employee. In fact, also in many cases of ‘standard’ organizations the tasks and responsibilities that employees actually perform do not fully correspond to those described in detail in the official job description. This leaves flexibility both for the advantage of employees and organization; Employees have the opportunity to bring in their individual strengths and interests more than was foreseen in the role. Unforeseen topics are taken on and solved even though not covered in the official list of tasks. This might be further fostered by applying a pull-principle for task allocation, as seen in the case heterarchies; To varying extents employees might be offered to choose from a ‘task pool’ to work on those topics they are most interested in and capable of, which facilitates intrinsic motivation and personal responsibility. Further, people can be encouraged to bring in further strengths and interests beyond their current tasks, as long as these match organizational needs. Further, employees’ individual responsibility for innovation can be fostered in all kinds of organizations. Rather than just fulfilling daily operations, leaders might offer them to take ownership in also developing further their areas of re-

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sponsibility. In all fields individuals can be encouraged to identify problems with the status quo, gain inspiration for improvements from other fields, and experiment with alternative solutions. As a possible development action those having particular creative potential might be offered to participate in special trainings to gain skills and tools helpful in creative work. Creative initiative, performance and responsibility should be particularly appreciated. 6.2.3 The Project Team Level Second, heterarchical principles can be fully applied at the project team level: teams of highly motivated individuals apply for running internal startup initiatives, building on experimentation and early customer feedback. This allows particularly motivated and capable employees to use far-reaching freedoms with individual responsibility without the hurdles associated with reducing hierarchical levels on a large scale. Guidance should be provided through a strategic corridor, defined by the organizations’ core purpose. It is essential for teams to have a clear goal in mind whereas on the way to that goal outside interference by management should be reduced to a minimum. To help teams concentrate on developing the contents they can be supported by methods coaches who guide them along the flexible process, e.g. with Lean Startup (Ries, 2011) or Design Thinking (Schmiedgen et al., 2015). These incorporate many of the values and norms of heterarchies and innovation cultures, in particular customer centricity, experimentation, learning from failures, and teamwork. Such methods might help organizations replace bureaucratic norms ingrained in management gate meetings or detailed evaluation criteria. Where the overall organization is not heterarchical it is important to effectively shield those teams and their innovative initiatives from the mainstream organization with opposing interests, like short-term profits, and principles, such as efficiency. Involved individuals should be able to fully concentrate on running these initiatives rather than doing those on top of their regular tasks and responsibilities, which would create strains from conflicting interests and overwork. As agile developments are particularly important in R&D or IT departments, in those areas it can make sense to run a significant number of projects in the suggested way. To make sure that all important perspectives are considered optimally such teams will be staffed cross-functionally. To further support that heterarchical norms like teamwork or knowledge sharing take effect in teams previously working in classic hierarchy, successful cooperation rather than individual achievements should be rewarded.

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6.2.4 The Organizational Level At the organization level heterarchies teach to align individual and team efforts in innovation by a common organization purpose or reason for existence. While strategy development is a typical top management activity, heterarchies show that the collective intelligence of the workforce can be effectively integrated for developing strategic direction. In contrast to the common practice of preparing extensive strategies based on common up-front systematic analyses and planning ahead, organizations might follow heterarchy’s example in emphasizing spontaneous initiatives with experimentation. With processes and structures a multitude of channels should be offered for realizing ideas rather than clearly prescribing just one, by a formalized innovation process. Minimum formalization and justification should be required from individuals and teams starting and driving such initiatives. An internal social network platform as well as topic-related circles allow everybody to participate in innovation and facilitate information exchange and collaboration among people across the organization. Corresponding to the individual and project level, it is suggested that this depends less on formal organization and more on how this is incorporated in common values and norms. First and foremost leaders must accept and encourage that employees pursue ideas they believe in, largely based on gut feeling and experimentation, by channels they consider appropriate, often without the management being fully aware, not to speak of being in control. First and foremost this requires trust granted by management. For people to use those freedoms and tools, further aspects of an innovation supportive culture, as found in the case heterarchies, needs to be fostered. This requires management to show that innovation is important and everybody’s task through communication and actions, such as providing sufficient budgets and capacities for innovation. Most importantly the central values and norms of heterarchy and innovation cultures are to be encouraged, exemplified, and rewarded: Internal and external collaboration, communication and feedback culture, open-mindedness, transparency, experimentation, accepting and learning from failure, early customer integration, empowerment and trust by management, complemented with individual and team responsibility. If an innovation culture like in the case heterarchies is seriously aspired, this is likely to require a farreaching cultural change or transformation process (Denham and Kaberon, 2012).

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The absence of competition for hierarchical positions can be a clear advantage for developing central values of an innovation culture, such as teamwork, knowledge sharing or learning from failures. From this we can learn that organizations aiming to create innovation-supportive environments should place serious efforts on reducing competition between people, even in the context of hierarchical bureaucracy. Alternative career paths for experts are offered in many large organizations, but these need to be regarded truly equal to climbing the hierarchical ladder. As a prerequisite, the understanding of what it means to be in leadership positions needs to be clarified. The traditional notion needs to change that the higher in the hierarchy, the better. A commitment to the principles and trainings in servant leadership might help spread non-hierarchical leadership behavior. To translate into lived practice, related behaviors need to be exemplified by top management, incentivized and rewarded consistently. Some representatives of the traditional, hierarchical paradigm are likely to be unable or unwilling to make the fundamental changes in leadership behavior. With those in influential positions, a successful transformation is unlikely. Further, individuals that incorporate the desired non-hierarchical and innovation-supportive norms and values should be purposefully hired. Having understood the central importance of corporate culture, heterarchies exemplify purposeful cultural development through hiring for cultural fit more than for maximum person-role fit. Spreading knowledge and the desired mindset within the organization can be further fostered through trainings on self-organization or creativity techniques. Depending on the aspired reach of cultural change, large parts of the workforce should go through such trainings at least once on the outset of change, while new entrants are acquainted with these skills and mindset during on-boarding. The heterarchies make us aware that shaping the desired culture is a constant effort: Even the most developed ones participating in this study, taking various measures to foster heterarchical mindsets and behaviors, suggest that even more training is needed. More bureaucratic organizations can deduct from this that developing and keeping innovation-supportive organization cultures needs full commitment and constant efforts.

Further Research 6.3

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Further Research

The aim of this explorative case study research is analytical rather than statistical generalizability. Accordingly, on the basis of the cross-case conclusion the ‘exposure’ of innovation in heterarchies is possible. While findings from these cases and cross-case analysis have limited generalizability, they are strong in the triangulation, which has established the central findings. The greatest generalization challenge is that most organizations are still and will likely continue to be standard-bureaucratic. Because the management of innovation in heterarchies is also shared with and similar in some respects to that of traditional kinds of organization, in the spirit of analytical generalization it is possible to explore the findings and lessons for others in the more common and still prevalent organizational forms in which hierarchies persist but are under review to enable better innovation. To advance greater innovation as found in the cases does not mean becoming a heterarchy, but there are lessons in how to provide the right kind of ‘exposure’ in those contexts to better use the creativity and intelligence of the collective of employees, particularly those operating in fastpaced, competitive environments and with predominantly knowledge-intensive and non-routine tasks. As outlined in turn, future research should include more quantitative measures of exposure, innovation and heterarchy, providing for generalizability of associations among variables. Further worthwhile research agendas might cover more specific innovation practices in heterarchies, the role of size and industry for the suitability of heterarchical organization, the transformation from traditional-bureaucratic to heterarchical structures and cultures, and human resources practices in heterarchies. 6.3.1 Generalizability If the conceptual model proposed here is to be validated and strengthened as generalizable beyond these cases, it will be necessary to test some of these themes as hypothesize about heterarchies using more quantitative methods and measures (Yin, 2015). To allow for a more precise measurement it might be helpful to more uniformly operationalize and measure innovation than was considered reasonable researching a number of organizations with rather diverse backgrounds as to size, products and industries (see section 3.4.1 on construct validity).

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Discussion of Findings, Implications and Further Research

6.3.2 Specific Innovation Mechanisms in Heterarchies Further, this study has shed light on a very broad area, covering innovation strategy and direction, processes and structures, and culture and leadership in heterarchies. Further research might focus on some of the identified principles and explore those in more detail. For example, how do individual projects develop from idea to launch under the conditions of heterarchy? Or how are ideas selected in the context of fluent influence structures? Even leading-edge heterarchies like the ones investigated in this project have just started experimenting with alternative approaches, compared to the long history of bureaucracy. These ‘mavericks’ can be regarded early adopters of nonbureaucratic organization (Rogers, 2003) and even their current practices must be assumed far from being optimized. Thus, both existing heterarchies and other organizations that might follow their example would benefit from more detailed insights. For example how to train the skills to work and innovate in the highly ambigious environments of heterarchies might be a worthwhile question to investigate, as even developed heterarchies were found to face considerable challenges here. 6.3.3 The Role of Size and Industry In the startup phase heterarchical or organic organization is prevalent and natural (Greiner, 1997). A viable question could be how organizations can grow from these naturally heterarchical structures into a medium-sized or even large organization without losing the advantage of innovation-supportive structures and cultures. Future research might focus on the development of heterarchical structures and cultures over time, for example using a longitudinal approach. The case heterarchies in this study have different backgrounds as to size and industry. Interview partners from all five heterarchies were convinced that the model could work at any organization size. Several ones claimed that its applicability would not depend on the conditions of a certain industry. Still, many examples of non-bureaucratic firms are small and have an IT background. Thus, it would be viable to test whether size and industry-specific factors play a role in the suitability of heterarchical organization. 6.3.4 Transformation to Heterarchy? The overwhelming majority of organizations are noways organized as some hybrid form of hierarchical bureaucracy. Thus, assumably most relevant for practi-

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cioners would be insights on the actual experiences and learnings of organizations that have gone through the transformation from standard-bureaucratic to heterarchical organization. The cases in this thesis can only provide some hints here, as the change to heterarchy was not the focus of research and because the data was collected at one point in each organization. Longitudinal studies might be better suited to shed light on the success factors of change processes towards heterarchy. 6.3.5 Human Resource Management Practices Heterarchies are holistically innovative organizations, with strong values and norms being paramount for this innovativeness and general success. Thus, heterarchies offer opportunities to extend existing knowledge on how HRM can foster innovation. As has become apparent in the previous discussion, heterarchies as inherently ‘human centered’ organizations both strongly benefit from and underline the importance of insights and practices from the area of HRM, such as measures to develop culture and leadership. One the one hand, there seems to be wide awareness among the heterarchies that their innovativeness and success depends strongly on their cultures. Thus, such measures may already be well-accepted and applied. Still, heterarchical principles might be further supported by HRM than is currently the case. For example how can the strong values and norms of heterarchies be fostered more effectively? Heterarchies and other organizations aiming to move towards less formalized and centralized structures and cultures would benefit from answers to how employees who are socialized in traditional contexts can be enabled to work more effectively in highly ambigious environments. On the other hand, the central importance of culture and leadership in heterarchies in general strongly underlines the importance of HRM in fostering such innovation-friendly climates in all kinds of organizations. A crucial question might be how the values and norms of heterarchy can be fostered without the favorable conditions of heterarchical structures and cultures on the organization level. Last but not least, research into practices that aim at using and increasing human potential within organizations that claim not to have HRM might help look beyond the classic views and approaches to HRM and inspire potential new directions.

7

Conclusion

If the focus lies on ensuring efficiency and reliability in routine processes, innovation needs the shelter, in separate centers or units, conditions favorable for exploration activities; with strategy and direction, processes and structures, and culture and leadership within those aligned to support innovation. Limitations in terms of flexibility of classic innovation management are known. Balancing the planning, steering and control and the necessary freedoms for creativity in inherently ambigious and complex undertakings remains challenging. Non-bureaucratic, heterarchical forms of organization have long been posed to better foster innovation than bureacracy. ‘How’ innovation happens in heterarchies, the interaction of non-hierarchical organization and innovation management, has remained obscure to this point. To expose innovation management in heterarchies, to uncover and explore it, was the aim of this thesis. The core question guiding the research was how strategy, structure and culture shape innovation management in heterarchical organizations. Beyond being of interest in itself this can expose how other organizations that are not fully or mainly heterarchical might learn from this. Using a multiple case study approach, this project set out to highlight and compare findings across five case organizations with differing backgrounds as to size and industry. Answers to the research questions The innovation practices of heterarchies have been described and explored. Innovation exposed in heterarchies reveals a different approach than classic innovation management, with a range of implications. Most importantly, they dispense with the hierarchy and shelter usually ‘protecting’ innovation. Heterarchies appear holistically innovative, accepting certain challenges to efficiency. The metaphor of ‘exposure’ was used to describe this, that in these contexts innovation does not need the shelter from bureaucracy. In heterarchies there is a better fit between informal innovation culture and formal organizational structures and, as a result, greater innovation. As was anticipated innovation in heterarchies is more coordinated by common values and norms than by formal organization and management. Culture and leadership in the heterarchies largely corresponds with practices associated with classic innovation management. It is noticeable that there are differences in © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2_7

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the practices associated with processes and structures, and, slightly less so, those related to strategy and direction. This overall picture, what seems initially to be exposed, is not in itself surprising. More interesting to see was the extent to which there was variation amongst the heterarchies. There is variance in the detail of organizing the heterarchical way, in terms of processes and structures. Apparently, what less shelter and more exposure means can vary. More specifically, as to strategy and direction, innovation in the investigated heterarchies tends to be more directed through a common organizational purpose than a classic vision. Direction for those initiatives is less based on a detailed innovation strategy deducted from the overall company strategy, typically developed by top management. Instead, factual strategy results from a mix of ex-ante planning and ad-hoc experimentation, with a clear emphasis on the latter. Leaders still have a strong influence on strategic direction also in the heterarchies. However, the cases share that anybody in the organization has the chance to take influence on it. As to processes and structures for innovation the cases have in common that they illustrate a range of possible paths and methods to innovation rather than prescribing in detail the responsibilities and procedures for innovation, as suggested by classic innovation management. Strikingly none of the investigated heterarchies has an official innovation process, which is at the heart of classic innovation management. While the classic view suggests separating innovation and routine procedures with specialized roles or departments, this is not the case in the heterarchies. Rather, these can be described as holistically innovative. In heterarchies driving smaller and major initiatives is everybody’s responsibility. The freedom created with reduced formal organization is channeled to innovation primarily by cultural mechanisms. These take the form of strong innovation-supportive values and norms such as customer-centricity, experimentation, and teamwork. Freedoms and trust are granted and filled with individual and team responsibility. These norms and values in these heterarchies widely correspond to what is often espoused and prescribed in classic innovation management literature as innovation culture. This general innovation-friendly climate allows such organizations to dispense with the hierarchy and shelter usually ‘protecting’ innovation. This conceptual framing of heterarchies management of innovation is unsurprising and ‘self-evident’ to some extent. A good fit between strategy, structure and culture does exist which can enable greater innovation. Considered by themselves, the innovation practices found in heterarchies are not either new or

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‘uniquely heterarchical’; they appear better integrated in heterarchies to achieve innovation. Promoting greater and equivalent exposure for innovation in other contexts might have quite different outcomes. Shelter has a purpose, and exposure can be fatal in some conditions. Not sheltering one thing does not mean there is not need for shelter for other things. Shelter points might move, but still be required, if not locally for innovation then elsewhere. Pragmatically, it is possible for innovation management’s organizational shelter to be reformed; to reduce formalization and centralization. At the same time the autonomy this produces needs to be sustained through cultural coordination mechanisms. Becoming a heterarchical organization as a whole, is a lengthy, difficult and risky transformation process, a path few are likely to take. Alternatively, organizations aiming for increased innovation might consider implementing heterarchical aspects among teams and key individuals. Contribution to Knowledge This thesis is contributing to (a) the study of innovation and general organization combined, (b) the operationalization of the area of study through the strategy and direction, structures and processes, culture and leadership model adopted, and (c) the methods used to obtain qualitative data on both heterarchy and innovation management. The contribution to knowledge here is evidence that: Heterarchies support innovation; They do so more by cultural norms and values than by formal organization; Largely dispose of formalization and centralization both in general and for innovation, as for example an official innovation process; Expose rather than shelter innovation, in the light of a generally innovationsupportive climate; Vary regarding strategy and organization for innovation, both among each other and within themselves, with similar values and norms; Leadership takes the role of an innovation driver, but anybody can lead and follow. Methodologically the contribution is providing multiple case studies and cross-case analysis, in an area of study where these are lacking, while combining study of the areas of innovation and non-bureaucratic organization together. The aim of the explorative case study research was analytical generalizability. Accordingly, cross-case analysis was completed, and on the basis of that the cross-case conclusion is that the ‘exposure’ of innovation in heterarchies is de-

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scribed and verified. Findings from the case organizations cannot be generalized statistically with this is limited number of cases. Because the management of innovation in heterarchies is also shared with and similar in some respects to that of traditional kinds of organization there is scope for other generalization, to derive lessons for others. These have been discussed as the pragmatic reform of shelter, with learnings at the individual, project team, and organizational level. The limited number of cases studied does restrict generalizability, strong in the triangulation which has established the central findings. Research across cases and with more quantitative operationalizations and exploration of ’exposure’ is top of the agenda. The greater generalization and transfer challenge is that most organizations are still and will likely continue to be more standardbureaucratic. To support innovation as found in the case organizations does not mean becoming a heterarchy, but there are lessons in how to provide the right kind of exposure in those contexts to better harness the creativity and intelligence of employees, particularly those operating in fast-paced, competitive environments and with predominantly knowledge-intensive and non-routine tasks. The more innovation is exposed, the more that exposure may help to advance innovation. Innovation in the Future Bureaucracy, with hierarchy of authority at its heart, has for long been questioned but nonetheless prevailed. As such it can be regarded still as the prevalent paradigm in organization studies and real business life. Any change from bureaucracy to a post-bureaucratic paradigm cannot be expected to take place in short-term. Theories on post-bureaucratic alternatives have been discussed for half a century since Burns and Stalker’s Organic Organization (Burns and Stalker, 1961). In the innovation context it is known that new approaches for innovation are increasingly sought and adopted by large companies, in the form of internal startup initiatives (Ries, 2011), or Design Thinking (Schmiedgen et al., 2015). This reflects an appreciation of the disadvantages of bureaucracy being identified and at least addressed on a limited scale by large organizations faced with pressures to continuously innovate. With increasing numbers of real-life organizations built on heterarchical principles, there are reasons to think that the time has come for those alternatives to spread more widely, from individual maverick organizations to more mainstream practices adopted in varying degrees by a wider share of organizations:

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High pressures on organizations in many industries to constantly innovate and change, where bureaucracy reaches its limits and performs worse than heterarchy. People expect more than before cooperative forms of leadership, with transparency, trust, and opportunities to actively shape their job and organization (Ng, E., Schweitzer, L. and Lyons, S., 2010). Organizations that do not offer those will face considerable disadvantages in competing to attract and retain the best talents. Digital technologies enabling communication and cooperation across department, hierarchical and firm boundaries in network forms of organization. The hierarchical chain of communication and control is proving less effective and efficient than direct, lateral communication between experts in and outside the organization. Knowledge on these heterarchical principles may help more effectively facilitating innovation in different types of organizations. Further leading-edge players may aim to develop into holistically innovative organizations comparable to heterarchies, taking identified elements in terms of strategy and direction, processes and structures, and culture and leadership as an example. Due to the hurdles that come with moving from hierarchical bureaucratic to heterarchical organization it is likely that heterarchical principles will gain ground mainly in certain people, projects or departments. Required to keep up with fast paced developments, the areas of R&D and IT are assumed most likely to adopt those, already today. Hybrid forms of bureaucracies with an increasing share of heterarchical elements are likely to emerge. This is particularly the case in industries disrupted by more agile and innovative actors, where there may be a pervasive spread of heterarchical structures and cultures. This could have the effect, ultimately, of transcending the mechanistic organization of the bureaucratic age, creating organizations, which will be more ‘human’ than before, a better fit people’s social and individual needs rather than the other way around (Werner, 2013). From the practical need for greater innovation through the adoption of heterarchy there might be new foundations forming for work organization that fulfils both economic and social needs for more people in more organizations in more ways than has been possible in the past.

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Concluding Statement Compared to classic principles of formalization and centralization, innovation practices identified in heterarchies appear closer both to the inherent characteristics and requirements of innovation and human motivation and creativity. Developing and sustaining such an environment, where innovation needs no shelter, appears to be both highly challenging and highly rewarding at all levels, with frictions and innovation performance at the team and organization level, and ambiguity and personal fulfilment at the individual level. Organizations that see innovation at their core and are dedicated to human development not as the means but the end of their efforts at least to some extent, are likely to adopt such principles to better use the creativity and intelligence of their people. The extensive commitment and efforts required to balance innovation and efficiency mainly through development of culture and leadership are likely to be a considerable struggle for many mainly bureaucratic organizations. Most people are and remain widely socialized in hierarchical-bureaucratic contexts such as schools, universities, and other employers. It is unlikely that managers socialized in traditional hierarchical bureaucracies will make the required shift in mindset and leadership behavior. For employees, truly taking responsibility in uncertain environments can be both energizing and self-fullfilling or dreadful. It is likely that many prefer their certain place in the hierarchy, valueing order, security or prestige over great freedoms with ambiguity. Less dynamic or competitive markets are likely to still enable bureaucratic hybrids to prevail. Rather than a major shift from bureaucratic to heterarchical we can expect to see those bureaucracies leave the competitive stage that fail to fulfil to changed market environments with innovations; markets for products and services, or for qualified personnel. Highly intrinsically motivated, independent and idealistic individuals now have an increasing number of alternatives, work contexts that from the beginning and in principle for anybody offer freedoms and responsibility, team spirit and personal development over climbing the hierarchical ladder with increasing spheres of influence and reputation only towards the top. It is likely that with the spread of non-bureaucratic organizations such individuals will increasingly come together in ‘safe spaces’ for innovation and innovators, such as heterarchies, which particularly thrive in highly dynamic industries.

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List of Research Interviews Case 1: Assistant (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 2nd May 2016. [Reviewed interview notes taken from memory] Transcript available. Case 1: CEO (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 2nd May 2016. [Audiotape] Transcript available. Case 1: Chairman (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 2nd May 2016. [Audiotape] Transcript available. Case 1: Employee 1 (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 2nd May 2016. [Audiotape] Transcript available. Case 1: Employee 2 (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 2nd May 2016. [Audiotape] Transcript available. Case 1: Employee 3 (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 20 May 2016. [Audiotape] Transcript available. Case 2: CEO (2015): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 21 December 2015. [Audiotape] Transcript available. Case 2: Employee (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 31st March 2016. [Audiotape] Transcript available. Case 3: CEO (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 16 December 2016. [Audiotape] Transcript available. Case 3: Consultant (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 11 November 2016. [Audiotape] Transcript available.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 S. Schoellhammer, Innovation Exposed, https://doi.org/10.1007/978-3-658-29335-2

244

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Case 4: CEO (2015): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 18 December 2015. [Audiotape] Transcript available. Case 4: Employee 1 (2015): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 14 December 2015. [Audiotape] Transcript available. Case 4: Employee 2 (2015): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 14 December 2015. [Audiotape] Transcript available. Case 5: Principal 1 (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 28 November 2016. [Audiotape] Transcript available. Case 5: Principal 2 (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 28 November 2016. [Audiotape] Transcript available. Case 5: Researcher (2016): Organizational and Cultural Innovation Mechanisms in Heterarchies. Interview with author, 28 November 2016. [Audiotape] Transcript available.