Fueling Innovation Through New Organizational Forms

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By Karthikeyan Iyer

The shapes and forms of organizations are changing. The reasons for the changes are multi-fold.

R.A.I. D'Avini argues (in Hypercompetition) that these changes have been necessitated by the phenomenon of hypercompetition that characterizes the nature of disorder, stress and unpredictability that is confronting modern organizations. In The Employment Relationship: Key Challenges for HR, P. Sparrow and C.L. Cooper argue that this phenomenon has arisen from the shift in economic growth cycles from the post-war economy to the new economy based on technological drivers of information, communication and technology. In the Handbook of Organization Culture and Climate, N.M. Ashkanasy et. al. identified that along with competitive drivers, changes to organization form and shape have also been influenced by social factors – primarily the organizational culture and climate, with its emphasis on attitudes, values, feelings and social processes. Organizational culture and climate are greatly influenced by the leadership of the organization. At the same time they also get impacted by prevalent cultures and climate in other organizations as well as by overall trends in social culture.

Irrespective of the specific factors driving organizational change, it is clear that new organizational forms have emerged. These new forms offer insights for organizational design and change and are key drivers for innovation and growth.

New Organizational Forms

Several new organizations forms have been suggested, including the following:

• Post-bureaucratic and post-modern organization
• Re-engineered corporation
• Virtual organization
• Boundary-less company
• Network organizations
• Modular organizations
• Fractal and modular factories
• Atomized organization
• High-performance or high-commitment work system
• Knowledge-creating company
• Ambidextrous organization
• Distributed knowledge system
• Learning organization
• Collaborative organization

All of these "new" forms of organizations seem to share some common features identified in "Organizations Unfettered: Organizational Form in an Information-intensive Economy" (Academy of Management Journal, 2001) by J. Child and R.G. McGrath, differentiated from the regular bureaucratic, hierarchical form of organization, shown in Table 1.

These new organizational forms reflect the following challenges:

1. Interdependence: Organizations are more dependent on the fortunes and actions of others.
2. Disembodiment: Organizations cannot be sure that they will perform better just by owning important assets.
3. Velocity: The speed at which organizations have to function effectively has accelerated.
4. Power: Power in organizations now resides in the location of knowledge.

While new organizational forms (clubbed together) offer a stark contrast to the regular hierarchical organizational form, there are a few distinct types of new organizational forms that have been the subject of much interest and study. Broadly, these may be classified as:

1. Ambidextrous
2. Collaborative
3. Learning
4. Emergent

Ambidextrous Organization

In their article "The Ambidextrous Organization" (Harvard Business Review, 2004) C.A. O'Reilly and M.L. Tushman look at simultaneous exploration and exploitation as a means to sustained performance and growth. The contexts and rhythms of exploitative and exploratory businesses are different in the ways shown in Table 2.

In order to successfully compete, exploitative and exploratory businesses should separate and create project teams that are structurally independent units, each having its own processes, structures and cultures, but integrated into the existing management hierarchy (i.e., connected at the top). Innovative organizations should ambidextrously pursue a portfolio of innovations including:

1. Incremental innovations: Small improvements in existing products or operations
2. Architectural innovations: Technology or process changes to fundamentally change a component or element of business
3. Discontinuous innovations: Radical advances that may significantly alter the basis for competition in an industry

Collaborative Organization

These organizations look at collaboration as the means to achieve organizational goals. There is great emphasis on team-based structures. Information pathways and flows among teams, horizontally, vertically, internal and external are widened and the boundaries and intersections are exploited for value creation and innovation.

Table 3 illustrates three levels of collaborative work systems from Beyond Teams: Building the Collaborative Organization by M.M. Beyerlein et. al., each level increasing the organization's capacity to serve its customers, employees and owners with an increase in investment and results (moving from left to right). 

Learning Organization

These organizations focus on experimentation and learning as the key goals to be pursued. Knowledge (and thereby change) is expected to be continuously created. Quoting Ikujiro Nonaka from his article "The Knowledge Creating Company," (Harvard Business Review, 1991): "To create new knowledge means quite literally to re-create the company and everyone in it in a nonstop process of personal and organizational self-renewal. In the knowledge-creating company, inventing new knowledge is not a specialized activity – the province of the R&D department or marketing or strategic planning. It is a way of behaving, indeed a way of being, in which everyone is a knowledge worker – that is to say, an entrepreneur."

Pursuit of Perfection

Learning organizations use the following building blocks to institutionalize learning (defined by J.K. Liker in The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer):

1. A supportive learning environment
2. Concrete learning processes and practices
3. Leadership behavior that reinforces learning

Learning organizations tend to focus on systemic problem-solving as the means to competitive excellence according to P.M. Senge in The Fifth Discipline: The Art and Practice of the Learning Organization. Learning and knowledge are transparently shared with the environment as a long-term strategy for sustained growth and innovation (Nonaka 1991).

Emergent Organization

Emergent organizations follow living system principles with a focus on evolution. Boundaries are ephemeral and created and destroyed as relevant. The organization is extremely receptive to change and thrives on adapting to and creating change.

The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations, by O. Brafman and R. Beckstrom, describes emergent organizations as characterized by extraordinary decentralization. They have also therefore been described as open or boundary-less organizations or structures. In "The New Principles of a Swarm Business" (MIT Sloan Management Review, 2007) P.A. Gloor shows that the behavior of emergent organizations is seen to bear similarities with swarm behavior seen in the natural world, e.g., the intelligence embedded in the behavior of swarms of ants.

Much of recent evolution of social networks as a consequence of the growth in size, utility and connectivity of the Internet is being studied from the perspective of learning and application to organizations. For instance, the development of user communities or information communities has opened up multiple avenues for new businesses and business models (eBay, Google Ads). Eric Von Hippel shows that organizations have looked at emergent strategies to identify new products or services through lead user innovations in Democratizing Innovation. There are also interesting explorations of how a relatively small number of key opinion influencers in social networks can determine the overall outcome or direction of change for that network, as described by noted author Malcolm Gladwell in The Tipping Point: How Little Things Can Make a Big Difference.

Conclusion

New forms of organizations have emerged in the recent past in response to or as a reflection of changing trends in business and social ecosystems. They can be broadly classified into ambidextrous, collaborative, learning and emergent forms. Each of these forms provides unique and interesting insights into factors influencing organizational design, change management and acceleration of growth and innovation cycles. 

About the Author:

Karthikeyan (Karthik) Iyer is a founder-director of Crafitti Consulting, an innovation and strategy consulting firm focused on facilitating Lean, and inventive and systems thinking to co-craft innovation in global enterprises. He has more than nine years of experience in the IT industry and has consulted on innovation in processes, product strategy, technology, intellectual property and organizational innovation capability. His areas of interest include innovation culture and chaos theory, open innovation, inventive principles and technology evolution trends. Mr. Iyer is pursuing his post-graduate diploma in IPR (National Law School India University, India); he has a Bachelor's degree in computer engineering from Mumbai University, India. Contact Karthikeyan Iyer at karthikeyan.iyer (at) crafitti.com or visit http://www.crafitti.com.