technological and organizational dynamics (tinkering with firm...

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DIMETIC March 26, 2009 - Strasbourg, BETA

Stefano Brusoni

KITeS-CESPRI, Bocconi [email protected]

www.cespri.unibocconi.it/brusoni

Technological and Organizational Dynamics

(tinkering with firm theory)

Later, i.e. now

Issue 2How do new problem ‘frames’ come into being?

– ‘Technological’ frames – the case of radical process innovation � robotization

– ‘Organizational’ frames – the case of radical managerial innovation – Six Sigma

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FIRST QUESTION: the making of MIRS (B&P, OS 2006)

� Very mature� Major technological innovation in 1920s followed by shake out

(Klepper and Simons, 1996)� Radial revolution in the late 1960s and acquisition s of US

firms (Sull et al. 1996)� Very concentrated sector (top 10 firms have over 85 % of sales

in 2000)

� Very odd recent history. � Rapid increase in market segmentation� Revamping of innovative efforts

� Microelectronics as the fastest growing patent clas s (Acha and Brusoni (2005)

� Rapid diffusion of radical process innovations (Bru soni and Sgalari, 2005) �� MIRS

Akron workers, about 1910.

Traditional Manufacturing Process

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MIRS, Milano Bicocca, about 2000

Innovative manufacturing process

From deposition of layers in flat From deposition of layers in flat ……

…… to deposition of small tapes on a rigid drumto deposition of small tapes on a rigid drum

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VulcanizationOne dayVulcanizeroperator

Vulcanization

Plant operator

Building, phase 2

Half a day

Plant operator

BuildingTwo/three days

Plant operator

Building, phase 1

Process engineer

Final design of components

One week

Process engineer

Definition of building process

Tire design: size, tread, etc.Definition of building process.Final design of components

Product engineer

Tire design: sizing, tread, etc.

Choice of materialsProduct engineer

Choice of materials

Product engineer

Initial design of components (e.g. sidewall)

One day

Tire designer (single point of responsibility)

+ specialists (e.g. mould designers)

Initial tire design

One day

Product engineer

Initial tire design

DurationResponsibleActivitiesDurationResponsibleActivities

Innovative ProcessTraditional process

Traditional tires manufacturing

‘Modular’ know-how and designprocess; ‘non-modular’production process

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Innovative tires manufacturing

Integrated know-how anddesign process; modularproduction process(and product)

SECOND QUESTION:the role of knowledge integration capabilities

• Pirelli was not the technological pioneer– It was actually far behind Michelin in 1997

• Yet, Pirelli won the technological race.– How did it happen?– Brusoni and Cassi (2009) Reinventing the Wheel

• Pirelli’s development effort relied on a network which was more integrated than Michelin’s.

• To operationalize integration � structural cohesion

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• Building blocks

– Knowledge transfer literature. From which we take the notion that both connections among people and the presence of key individuals which act as ‘reservoirs’ or repositories of knowledge embedded in organizations is key (Argote and Ingram, 2000)

– Complex adaptive systems literature. From which we take the notion problems (i.e.s strategies) are made up of many interconnected elements (Kauffman 1993, Rivkin 2000, Fleming and Sorenson 2001).

• ‘[T]he structure of the network of knowledge elements can guide the process of recombinatory search for new inventions, and thus directly affect the utility of such inventions’ (Yayavarmand Auja (2005, p. 4). – Collaborations among individuals involved in innovative activities

within two different firms – Successful knowledge integration requires the presence of focal

individuals that connect and integrate interdependent areas.

How do new ‘problem frames’ come into being?

Structural cohesion:

A group of individuals is cohesive if it is resilient to the removing of nodes.

• Moody & White, ASR 2003

Cohesive Blocking. The identification of cohesive groups can be applied recursively in order to identify subgroups nested in the original group

This recursive procedure permits to:

• see overlap between groups at the same hierarchy level, since individuals are allowed to be members of different groups (horizontal integration)

• identify cohesive groups and their position related to the others (vertical integration)

Cohesion corresponds to Harary’s node connectivity: the minimum number of actors (nodes) who, if removed, would disconnect the group (network).

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Networks are structurally cohesive if they remain connected even when nodes are removed

Source: Moody and White (2003), fig.1 p.108

0 1 2 3

Structural Cohesionexamples of different connectivity level

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Patent Data: Pirelli and Michelin

702 (100)831 (100)552 (100)747 (100)Total

180 (25.6)137 (16.5)25 (4.5)20 (2.7)Not connected

68 (9.7)93 (11.2)--Indirectly connected

128 (18.2)186 (22.4)17 (3.6)27 (3.6)Directly connected

326 (46.4)415 (48.9)510 (92.4)700 (93.7)Technological Content(3 digit IPC class)

InventorsPatentInventorsPatent

PirelliMichelin

Selection criterion

Network of inventors capture the structure of knowledge!

Pirelli vs. Michelin – Number of patents

0

100

200

300

400

500

600

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

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Michelin vs. Pirelli – connectivity

0

0,1

0,2

0,3

0,4

0,5

0,6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Pirelli Michelin

Michelin – Giant Component Formation

0

10

20

30

40

50

60

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

SECOND GIANT COMPONENT

FIRST GIANT COMPONENT

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Pirelli – Giant Component Formation

0

10

20

30

40

50

60

70

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

FIRST GIANT COMPONENT

SECONDGIANT

COMPONENT

Michelin – C3M inventors and GC

0

5

10

15

20

25

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

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Pirelli – MIRS inventors and GC

0

5

10

15

20

25

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Michelin: vertical integration

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Pirelli: vertical integration

Pirelli vs. Michelin: horizontal integration

PIRELLI Layer 7:

Stronger Overlap Among Groups

MICHELIN Layer 4:

Weaker Overlap Among Groups

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Pirelli vs. Michelin

• Pirelli succeeded in catching up with Michelin because it relied on a more integrated knowledge base.

• By ‘more integrated’, we mean three distinct characteristics of the network:

1. More connected, i.e. a larger number of node is reachable by theothers

2. A core-periphery structure ‘vertically’ centred around the MIRS development team, i.e. an increasingly cohesive groups nested inside each other, with the deepest group including MIRS’ project leader

3. An horizontal structure which also exhibit some extent of integration, i.e. many overlaps among cohesive blocks at the same hierarchical layer.

Pirelli vs. Michelin(an NK interpretation)

• Compared to Michelin, Pirelli bet on a higher K

• This higher K is reflected:– In the new way of organizing tire design and production– In the adaptation process (landscape is to some extent

endogenous)– In the organizational structure (networks of inventors)– In the strategy (new products, new processes, new niches, new

customers)

• At the same time, robotized processes decouples market evolution from manufacturing processes– Rugged landscape, but not coupled.

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THIRD QUESTION: how does ‘integration’ happen?

• Pirelli vs. Michelin– What knowledge integration ‘looks like’– Very top down

• But how does it happen really?– Longitudinal, qualitative study of the

implementation of a new managerial architecture

– Six Sigma

Do Organizations Dream of Electric Sheep?With Anna Canato , Imperial College Business School

It is the basic condition of life, to be required to violate your own identity’(Dick, P.K. ‘Do androids dream of electric sheep?’)

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Research theme

• How do established organizations reinvent themselves?– Loads about technological innovation– Little on managerial and organizational innovation

• Practical relevance: companies engage constantly in renewal initiatives, with mixed results.

• Theoretical relevance: micro-dynamics of organisational and institutional change are still under-explored.

Imperial College Business School ©

Empirical setting

Imperial College Business School ©

Adoption of new procedures

Adaptation phase

Organizational change (e.g. new CEO)

Departure of the change leader

Established procedures

Two key analytical building blocks:

• organisational routines

• organisational identity

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Organisational routines

• Routines are recurrent and repeated patterns of behaviour, learned over time, which capture the actual ways in which activities are carried out in organisations (Cohen & Bacdayan, 1994), embodying the solutions to problems solved in the past (Nelson and Winter,1982; Feldman, 2000)

• Routines set roles, rules and responsibilities (Nelson and Winter, 1982, Cohen & Bacdayan, 1994)

From a static to a dynamic view of routines

D’Adderio

Nelson & Winter

Simon

1958 2008

Static

DynamicFeldman

Cyert & March

Cohen & Bacdayan

Pentland

Cohen

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Building blocks of organisational routines

(Pentland & Feldman, 2003 and later)

Ostensive dimension

Rationale of the routine as perceived by individuals

Artefactual dimension

Procedures, documents, design tools that embed rules and specifications

Performative dimension

The actual performance when a specific actor applies a given routine

(1) Codified into

(2) Inform behaviour

Research questions

• Routines are related to both change and inertia• To understand when routines lead to change, and

when to inertia, we propose to look inside and acrossroutines

• Routines are a composite concept which include heterogeneous elements– How do the ostensive, performative and artefactual

elements of routines interact, during phases of cha nge?

• Organisations are complex systems of interconnected routines– Does change proceed evenly across routines? How do w e

explain changes within and across routines?

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Methods

• Theory elaboration study (Lee, 1999)

• Inductive research design, based on the analysis of organisational members’understandings and use of specific artefacts and procedures

• Three year field study on the implementation of Six Sigma at Nexus, global developer and marketer of industrial and consumer products, currently part of Fortune 100

Data sources

Objective for the analysisData sources

Gain knowledge about the history of the company and the overall organisational context

Internal and external documents• Corporate biographies (5)• Books and reports about the company

• Archive of internal magazines

• Business press coverage

Build trust and deepen understanding of company’s features

Non participant observation• 26 weeks of non participant observation

Elicit understandings of

• current company’s features

• introduction of new procedures

• change outcome

Interviews• 59 in UE

• 17 in US headquarters

• Conducted in 2005, 2006, 2008

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Sampling (and a note on qualitative sampling)

• Sampling and causality (not generalization)

• Nested strategy– Why this company? � big, old, successful and ‘insular’– Why this division? � typical example of large divisions– Why Six Sigma? � the new process-based architecture– Why these routines within it? � typical examples (no production

though)– Which individuals? � pre- and post-Six Sigma experience

(On causalities)(M&H, chapter 6)

• Why do we have graffiti on subway cars?– Because kids want to

express their identity

• Why do they want to express their identity?– Because they are alienated

• Why are they alienated?– Because they have no jobs

• Why do they have no jobs?– Because they are unskilled.

• Why do we have graffiti on subway cars?– Because cars are not

protected in their yards at night

• Why are they not protected?– Because the transit budget

does not permit it.

• Why … ?

Sampling and causalities

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Timeline of the study

Six Sigma implementation in Nexus (2001-2005)

Adaptation phase (2005-2008)

Nexus

New external CEO bring initiative for renewal

Departure of the CEO

Data collection and analysis

DEFINE

Identify the problem area

Scoping: When starting a project it is necessary to detail its boundaries and objectives

Deepening: Decision making shall be backed by accurate data gathering

Norming: Every project must respect predefined terminology and phases, the same in the entire organization, globally

MEASURE

Collect data

ANALYZE

Compare results with benchmarks

IMPROVE

Find, plan and implement solutions

CONTROL

Monitor and maintain the gains Structuring: Best young talents enter the Black Belt division

Six sigma methodology Routines we observed in Nexus

SIX

SIG

MA

DIV

ISIO

N

Mon

itors

and

con

sults

Six

Sig

ma

impl

emen

tatio

n

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Findings

• Focus on four specific routines, based on analysis of interviews

1. Scoping2. Deepening3. Norming4. Structuring

• NOTE: all observed routines present substantial differences from the way Nexus worked before Six Sigma and all were subjects of intensive training(‘indoctrination’) programs

The organization relied on tenure and experience as the main drivers for promotions. There was not a company level high talents’ program.

The way it was in Nexus before, each person had a highly multitude of experiences, lot of different jobs, you walked your way and experience was the ultimately the driver for leadership

Structuring : Best young talents enter the Black Belt division, which monitors and consult on Six Sigma (and improves their careers

The organization relied on a much decentralized model, where divisions and geography had a high level of autonomy. At individual level, a person was required to be innovative and entrepreneurial, and conformity to rules was never emphasized.

This company never really told me what do to. It gave me freedom and trust, and I have used it. Many successful projects I managed were result of me disobeying to my managers

Norming : Every business process must respect predefined terminology and phases, the same to the entire organization, globally.

People were used to rely on a ‘belly’ driven approach, informed by everyone mix of experience and creativity.

The difference is that now, for every activity, we want to know what the result would be, and we want a measurable item, a number. We have never done this before, to go for numbers

Deepening : Decision making shall be backed by accurate data gathering

Project’s scoping was quite vague and was adjusted over time

In the old Nexus it was normal to have a statement like: ‘We are starting this campaign to increase sales’. Now we are far more specific than that, we write: ‘This campaign aims to increase sales of x % in the next three years using online advertisements’

Scoping : Before starting a project it is necessary to detail its boundaries and quantifiable objectives

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New artefacts initiate process of routine change

• Routines are forcefully changed in Nexus through the implementation of Six Sigma procedures

Ostensive aspect

Artefacts Performative aspect

Six Sigma

(1) Codified into (2) Inform

behaviour

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Use of new artefacts: emerging problems

• Problems are not related to ‘efficiency’ issues (e.g. lack of utility, lack of training, lack of clarity or similar issues) – Very disappointing given our original expectations– NOTE: this is a consistently successful company

• Rather, informants made constant reference to the consistency ofthe new procedures vs. ‘what we are’

“To apply the entire methodology is not feasible. It simply does not fit the way we are and we are used to work”

“We don’t need efficiency because we are based on continuous innovation. If one brings rationalization to this company, then he kills our way of being “

“Now we need to build a dress by our own, a dress that fits us “

Organisational identity

• Organisational identity considers the features perceived by organisational members to be central, enduring and distinctive of their organization (Albert and Whetten, 1985)

• By providing sense of coherence and continuity organizational identity supports decision making during moments of profound change (Albert & Whetten, 1985, Dutton and Dukerich, 2001, Corley and Gioia, 2004, Ravasi and Schultz, 2006)

• Cognitive perspective. Few recent contributions introduce the need to consider identity and practices (Nag, Corley and Gioia, 2007, Birnholtz, Cohen and Hoch, 2008)

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Nexus’s identity traits

FairnessNexus treats all people equally

Nexus is a mom to its employee

Nexus maintains a positive organizational climate

FlexibilityThere is not a best way to do things

Different units do different things

Autonomous contributionIt is better to ask for forgiveness than for permission

Personal bootleg projects are encouraged

…challenged by Structuring

…challenged by Norming and Structuring

…challenged by Deepening, Norming and Structuring

© Imperial College Business School

The outcome of change

Structuring

Norming

Deepening

Scoping

OutcomeFairnessFlexibilityAutonomy

Organisational identity traits

Rou

tines

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Structuring

Norming

Deepening

AcceptedNo clashWeak clash

No clashScoping



Rou

tines



Structuring

Norming

ModifiedNo clashWeak clash

Strong clash

Deepening


No clashScoping



Rou

tines

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Structuring

Partially rejected

No clashStrong clash

Strong clash

Norming


Strong clash

Deepening


No clashScoping



Rou

tines



RejectedStrong clash

Strong clash

Strong clash

Structuring

Partially rejected

No clashStrong clash

Strong clash

Norming


Strong clash

Deepening


No clashScoping



Rou

tines

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A model of routine change through identity adaptati on

Ostensive dimension

(1) Codified into

Performative dimension

(3) Refuse/ Modify/Accept

(2a) Inform

Six Sigma

Organizational Identity

Artefactual dimension

Organisational identity

(4) Adaptation(5) Inform

(2b) Inform

Discussion

• We have analysed a case of conflict between a set of new artefacts and established identity traits– The latter were embodied in the ostensive aspect of old

routines

• The tension between the old –established- and new –proposed- ostensive aspects is revealed observing which artefacts are accepted, which modified and which rejected � performative aspect of routines

• In turn, the process of acceptance of new artefacts lead to integrate changes in the established organisational identity

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Conclusions (on third question)

• Link the literature of routines with organisational identity to explain how –and which- routines change– Corporate renewal, their pains and sorrows– Role of consultants, and what they leave behind

• A framework of routine change that exploits organisational identity to understand source of change and inertia– Conceptualise organisational identity as a

pragmatic concept– Look at firms as systems of interconnected routines– Conflicts in goals, interest (future: routine as

truces)

Conclusions

• Problems– And frames

• Search– Local and heuristic

• Modularity– Technologies and organizations

• Together, these three elements allow for the rapid development of an empirically grounded, theory-driven understan ding of the joint dynamics of technologies and organizations.

• Open issues– Operationalization of ‘NK’ categories

• Interplay of qualitative research and simulation models– Organizations as evolving ‘role structures’

• Interplay of qualitative research and social network analysis

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Thanks!

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