Commonalities
To begin with, both categories have been affected by the external context. For both systems, institutional setup has played a role in the first two steps,
desirability and
feasibility. In the case of Quality Management/Production Systems, bridging institutions on the international and the national level have influenced the degree of desirability and feasibility by standardizing the innovation and by inspiring, educating, and encouraging innovation in local firms and organizations (Cole
1999; Lundgren and Alänge
2000). In the case of GIS, the institutional setup of Silicon Valley seems to have influenced the firm in relation to local norms about organizing for openness and networking (Steiber and Alänge
2013c). Silicon Valley also provides access to knowledge via local universities (Stanford University and the University of California, Berkeley) and to “intelligent” capital via a knowledgeable business angel network and a venture capital industry.
In the case of Quality Management/Production Systems, the desirability and feasibility of an innovation are also affected by user networks and by international and national fads related to these organizational innovations, in combination with market demands on ISO 9000 certification. Google’s founders have been driven primarily by perceived global opportunities facilitated by the development of the Internet. However, they are also driven by an ambition to develop a dynamic “innovation engine”—a goal that aligns with the culture of innovation and start-ups that is more prominent in Silicon Valley than in many other places around the world. GIS also seems to have been influenced by other innovative firms, such as 3M (Google has a “20 percent rule” that gives engineers the right to take time off from regular work to pursue their own ideas; the older equivalent at 3M is the “15 percent rule”), and by researchers in Silicon Valley. Examples of researchers who have been active in the area and who may have influenced the creation of GIS are Brown and Eisenhardt (
1997,
1998), who have discussed firms’ capabilities to renew themselves in fast-changing industries, and Tushman and O’Reilly (
1997), who have emphasized the importance of ambidexterity or focusing on new areas for innovation while simultaneously benefiting from present operations. Another example is Chesbrough (
2003), who has discussed the importance of “open innovation.” Today, as a result of a rapidly changing environment and shorter product life cycles, there are reasons to speculate whether the next fad (Abrahamson
1996) after quality and Lean will be continual innovation.
27 If so, the desirability and feasibility of innovation-oriented organizational development will only increase.
History and norms also played an important role in creating desirability around and a perception about the feasibility of Quality Management/Production Systems. For example, the roots of TQM can be traced back to the 1930s and 1940s, when statistical theory was applied to quality control in US production. Quality control and management were taken to Japan after World War II by Americans such as Deming and Juran. The term total quality control (TQC) was introduced by, but what was called TQC in Japan grew into a more comprehensive concept that was further developed from the 1960s to the 1980s. The focus widened from the quality of products and production processes to the quality of all processes within an organization and in its relationships with customers, suppliers, and society (Ishikawa
1985). In the 1980s, US companies and government agencies, having observed Japan’s success, introduced their own quality initiatives, now called total quality management (TQM), which became the center of focus for the Western quality movement. The introduction of the Malcolm Baldrige National Quality Award in 1987 brought TQM forward in the USA, but it also served as a role model for an international quality movement (Lundgren and Alänge
2000). The historical development of TQM has therefore had an effect on the creation, diffusion, and sustaining of this innovation that evolved across continents.
In addition to history, national values can also influence the way organizational innovations develop. Although the US input was substantial, TQM, Lean, and TPS originated and developed initially in Japan, and one relevant question is whether Japanese national values favored the development of the prevailing Quality Management/Production Systems. The initial rapid introduction of quality principles has been explained by a strong motivation to catch up after World War II, in combination with the Japanese pragmatism that introduced new ideas that had been shown to work in practice (cf. the Meiji Restoration in the late 1800s and early 1900s). Many of these ideas originated in the USA or Europe but were first combined and tested in a Japanese context. What was unique in the Japanese Quality Management/Production Systems approaches was expressed in TPS as a focus on the “reduction of cost through elimination of waste,” on “treat[ing] workers as human beings,” and on “build[ing] a system that will allow the workers to display their full capabilities by themselves”—including “having the right to make an improvement on waste” (Sugimori et al.
1977). In TQC, this was expressed in terms of involving everyone in continuous improvement and thoroughly applying learning cycles and standards. Ishikawa (
1985 p 91) pointed out that “in Japan the vertical line authority relationship is too strong for staff members such as QC [quality control] specialists to have much voice…our approach has always been to educate everyone in every division and to let each person implement and promote QC.” Summarizing the characteristics of Japanese TQC, Ikezawa et al. (
1987) also emphasized top leaders’ involvement, policy deployment, the use of QC circles and QC audits, and what once was perceived as unique to Japan (Ishikawa
1985 p 5)—namely, a national agenda (conferences and quality awards) promoting the diffusion of the organizational innovation. However, even this national approach was emulated both in the USA and in other Western economies.
In the case of GIS, what role have history and norms played? There are reasons to believe that the creation, diffusion, and sustaining of GIS was influenced by the history and norms of Silicon Valley, as some characteristics of GIS can also be found in other companies in the area (Steiber and Alänge
2013c). According to AnnaLee Saxenian, a foremost expert on Silicon Valley, new ways of managing firms appeared early there. Two of its early flagship companies, HP and Intel, were organized and run quite differently from most firms from the start. Saxenian (
1994) (p 50–51) described Hewlett-Packard’s approach as follows:
“Based on teamwork, openness, and participation…This management style, which was characterized by trust in individual motivation, a high degree of professional autonomy, and generous employee benefits, came to be known as the HP Way.…the company provides employees direction … yet employees are expected to create their own ways of contributing to the company’s success. Hewlett and Packard…encouraged managers to “wander around”…initiating unplanned conversations. The physical setting…encouraged informal communication…By institutionalizing the notion that good ideas could come from anywhere, Hewlett and Packard also pioneered a decentralized organizational structure…to preserve the flexibility and responsiveness of start-ups, they established…semi-autonomous business units.”
In a study of 37 Silicon Valley firms, Bahrami (
1992) (pp 38–40) found area companies employing management methods that conferred strategic advantages. She reported that the firms were “experimenting with new organizational arrangements” that helped them “manage novelty and continuous changes in product designs, competitive positions, and market dynamics.” For example, Bahrami noted that the flattening of hierarchies was common and that the companies had dualistic systems and “were both structured and yet chaotic,” a design meant to strike a dynamic balance between stability and flexibility. The flexibility was attained primarily through temporary teams for a wide range of activities, including product development. GIS was created in this context, where rapidly changing markets have forced companies to search for ways to succeed through continual innovation.
A second factor is the nonexistence of a traditional market for organizational innovations. With regard to diffusion channels replacing a traditional market, there seems to be great similarity between the case of Quality Management/Production Systems and that of GIS. In both cases, external ideas came primarily via top management movement (between firms) and the board. However, it is interesting to note that in Google’s early years, the company’s founders preferred employees who did not have long track records in the business sector (Steiber and Alänge
2013a); hence, relatively few ideas based on business experience could have come from this group. The founders wanted to build an organization free from what they perceived as the bad behavior characterizing the business sector at the time. Instead, they felt that their own ideas were more feasible in relation to building the organization they desired. This phenomenon can also be found in the case of Toyota and its “green field” approach when the company decided to build its own factories in the USA after mixed experiences in a joint venture with General Motors.
In the early 2000s, the Google founders’ negative perception of earlier business experience started to change. This owed partly to active board members such as John Doerr but also to the board’s requirements for a professional CEO, a role that was later taken up by Eric Schmidt, who had CEO experience with technology firms. In addition to the movement of senior people and the use of board members’ experience and networks, both cases used highly experienced experts or consultants when developing the organization and conducting a first trial. In mid-2000, the top management team at Google began to regularly use the support of Bill Campbell,
28 known as “the Coach,” to create a good management team and to build an organization that was able to attain both innovation and operational excellence. In the case of Quality Management/Production Systems, experienced experts or consultants have been used in several cases in the first trial phase. To cite another example, Scania’s top management decided to go to the source, hiring Toyota to train both its internal personnel and external consultants in TPS (Alänge and Steiber
2009). Using experienced firms to support other organizations is also common in the early phase of TQM diffusion, where national quality organizations demanded that award winners serve as role models (via, e.g., the Malcolm Baldrige National Quality Award and similar awards given in other regions and countries). Hence, as discussed above, the local institutional setup in the form of industry and standardization structures served as a source of ideas and resources. A similar facilitating role has not yet been found in the case of GIS, although some firms, such as 3M, have functioned as role models of innovation for decades. However, several institutional processes point in this direction: one comprises the ongoing efforts to develop an ISO standard of innovation management; another initiative is the private/public Innovation Engineering System that, with inspiration from Deming and Six Sigma Black Belt approaches, aims at developing an innovation culture in the USA, cooperating with the National Institute of Standards and Technology (NIST)
29 (Steiber and Alänge
2013d).
Third, with regard to internal context, the final criterion used in both cases seems to have been a strong belief in the benefits of the organizational innovation. According to Alänge and Steiber (
2009,
2011), the top management teams in the adopting firms were convinced of the benefits of TQM, TPS, or Lean. In some cases, the belief—and therefore desire—was present from the time a new CEO was appointed, while in other cases, external information and education, together with imitations of recognized role models, created a desire and a sense of feasibility and therefore a belief in the innovation. In Google’s case, the founders’ beliefs about how best to design an organization for innovation existed from the start. The company’s two founders were convinced that in order to foster innovation, they must invest in a strong innovation-oriented culture, as well as in the right people and in a structure that was flat, open, and transparent, allowing for effective communication between employees. Traditional investment calculation models were not used in these decisions. Interestingly, however, Google has since become very data-driven even in its human resources decisions. Since 2004, the company has based its decisions for the organization’s reinvention on data collected through internal projects—for example, on the key habits of leaders who create great team results and on employees’ attitudes and behavior. Google’s request for data underlying an organizational change could be viewed as a kind of calculation model. In order to conduct these studies and analyses more effectively, Google hired experienced PhDs in organizational development.
30
Top management’s involvement was crucial for the first trial, implementation, and sustaining of both Quality Management/Production Systems and GIS. In both cases, these leaders were clearly committed to organizational development. In the case of GIS, top management was also the primary creator and driver of change, and the board played an important role in both cases. In two of three cases, boards were actively involved in diffusing and sustaining the Quality Management/Production Systems (Alänge and Steiber
2009), by providing top management with ideas, training, and resources related to TQM, Lean, and TPS. In Google’s case, Steiber and Alänge (
2013a) have stated that the board played an important role in steps such as desirability, feasibility, and implementation by contributing concrete ideas and support to implementation. Examples include allocating 20 % of employees’ time to pursuing their own ideas, as well as the performance and evaluation system. In addition, the consistency of board members over time means that the board played an important role in sustaining organizational innovation. However, a board can also hinder the creation, diffusion, and sustaining of an organizational innovation by failing to share the vision of top management, failing to understand organizational innovations and their benefits, and failing to ensure that innovation is sustained across a change in CEO, as was also found in two of the three cases that Alänge and Steiber (
2009) examined.
Finally, there is a need to consider organizational innovations and their creation, diffusion, and sustaining in a context in which the innovation is influenced and dependent on the previous historical organizational development of each specific firm. Both Quality Management/Production Systems and GIS are continually reinvented, but they are also path dependent and are influenced by previously implemented ideas. This means that the three concepts of creating, diffusing, and sustaining are intertwined for both categories of innovations.
Differences
The differences between the two categories primarily involve the innovation itself and factors in the internal context that are affected by the different natures of GIS and the Quality Management/Production Systems. Discussing differences in the innovations makes clear that all of the organizational innovations studied are tacit and more or less corporation-wide by nature. They are also the result of several minor organizational innovations that combine to form comprehensive organizational innovations. However, there is a significant difference between Quality Management/Production Systems and GIS.
GIS is even more tacit than the Quality Management/Production Systems are; this is because in order to encourage and sustain dynamic capabilities, as well as to become an ambidextrous and people-centric organization, Google has purposely implemented a flat, semistructured design wherein formal processes and policies are minimized while empowerment and self-organization are encouraged. In fact, Google did not even provide us with an organizational chart. This could indicate that the organization has no “blueprint.”
31 For this reason, the imitation—and therefore the diffusion—of innovation must be conducted primarily through the movement of people who have deep knowledge of the organization.
In addition, there is currently no dominant design (Utterback,
1994) for this category of organizational innovation, creating the preconditions for continual innovation in rapidly changing industries. No standardization has been created for this kind of innovation, either by international or national bridging organizations or by consultants and firms (Barsh
2008 p 3; Tidd and Bessant
2009 p 132).
The absence of a dominant design or well-known standard of organizational innovation adversely affects a number of internal factors. First, not only is imitation difficult, but companies’ external search and learning processes also suffer, despite their desire to become more innovative. At best, subcomponents of the innovation can be observed, interpreted, and potentially imitated by different companies. Every adopter must then build its own model by trial and error aimed at the integration of the various subcomponents. An alternative is that a consulting company suggests a solution for the firm. The risk of failure is high in both cases. In fact, Skarzynski and Gibson (
2008) (p 252), both management consultants who focus on supporting firms in increasing their innovativeness, made the following observation:
“The reason very few organizations have succeeded at building a deep, ongoing capacity for innovation is that most of them merely dipped their toes into the water, initiated piecemeal activities here and there, and hoped that by throwing some money at these initiatives, they would somehow bear fruit. They never dove into innovation in a serious and systemic way.”
Further, because it is difficult to observe organizational innovations, one could expect the time needed for implementation, as well as the transfer and implementation costs, to be greater in this case than in a case where the innovation is standardized to some degree. Because GIS is built on certain values and a certain culture (Ahmed
1998), moreover, the adopting firms might need to “unlearn” (Akgün et al.
2007) certain things in a way that opposes their historical management traditions (inertia) or top managers’ personal values or in a way that could threaten their political status—that is, that could create mental or political filters for adoption (Jarnehammar
1995). In addition, a semistructured organization might not be feasible in certain industries, such as those developing products that are highly capital intensive and require many years of development. For these reasons, not all firms can easily adopt GIS. Finally, the role of top management may be even more important here than it is in Quality Management/Production Systems. For example, it could be considered more challenging to sustain organizational innovation that must constantly balance chaos and structure, allow the empowerment and self-organization of employees, and quickly and constantly adapt to external changes than it is to sustain an organization built around a more traditional control-command framework characterized by highly fixed structures and formal processes.
GIS’s tacit nature means that the possible degree of standardization of this kind of innovation is lower than that present in Quality Management/Production Systems; this, in turn, could affect the diffusion of GIS. Regarding standardization, it is clear that Google itself adopted a number of standardized organizational innovations that eventually became subcomponents of GIS. Examples of these are Google’s performance and evaluation system, called Objective and Key Results (OKR, adopted from Intel) and the 20 % rule (adopted from 3M). Standardized methodologies are also evident in areas such as agile software development (e.g., capability maturity model integration (CMMI)), promoting adaptive planning and facilitating rapid, flexible response to change. Therefore, it may be possible to standardize components of GIS and, potentially, to overall major organizational innovations with characteristics similar to Google’s system—thus affecting the diffusion rate. The ongoing effort to develop an ISO standard might also contribute to a diffusion of innovation management that is similar to the corresponding diffusion of quality management and environmental management that has resulted from the ISO 9000 and 14000 standards. However, the case of Quality Management/Production Systems has shown that there might be a need to utilize various standardization attempts in parallel, such as the ongoing work describing Lean product development, primarily based on Toyota’s experiences in the automobile industry (e.g., Ward
2007).