Stream Number 14 and Strategic Management

Competitive Session

Under new management, tradition of innovation and innovation of tradition: the case

of constructive disruption in a family firm

Antoine Hermens

UTS Business School, University of Technology Sydney (UTS) 1

Ace Volkmann Simpson

UTS Business School, University of Technology Sydney (UTS)

Marco Berti

UTS Business School, University of Technology Sydney (UTS)

Jesse Adams Stein

Faculty of Design, Architecture and Building; University of Technology Sydney (UTS)

Abstract

1 Corresponding author: 15 Broadway, Ultimo NSW 2007, Email: ace.simpson@uts.edu.auPh: +61 2 9514 3774 

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We investigate narrative discourses at an Australian steel foundry, as the business balances the

challenges of implementing change to remain competitive in a global environment, while maintaining

its identity and values as a ‘family firm’. Analysis of research data under macro, meso and micro

discursive categories revealed four key themes as sites of dynamic tension: 1) s tability in instability,

2) narratives of mastery, 4) intertwined identities, and 3) community centricity. We discuss how these

findings expand our understanding of the relationship between tradition and innovation within family

firms, where notions of tradition provide value as a discursive resource that can be deployed to ease

the social tensions emerging from innovation, in a paradoxical process that translates local family

connections and histories into dynamic capabilities for the firm.

Key words: dynamic capabilities, strategy in SME, strategy and culture, strategy as practiced,

value chain

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Introduction

The advance of globalisation and the rise of developing economies such as China and India have

placed manufacturing in developed economies under unprecedented pressure. The higher costs of

labour and materials, together with stricter regulatory constraints, make it difficult for manufacturers

in developed countries to maintain competitiveness, justifying downsizing and offshoring strategies.

Yet amidst these pressures, some enterprises find ways to preserve their viability and even expand.

One such organisation is KH, a family owned firm operating in the manufacturing sector that has –

notwithstanding its reliance on Australia’s weakening mining sector – transformed itself and thrives,

in an industry that is in decline: steel manufacturing. Over a ten year period between 2006 and 2016,

62 Australian foundry establishments (25 per cent) have either bankrupted or shifted operations

overseas, with further decline projected into the future (Williams 2016). Our attending to narratives

with KH revealed discursive elements (‘tradition’, ‘innovation’, ‘family’, ‘local versus global’) that

both ease internal resistance to radical innovation initiatives and sustain the firm’s dynamic

capabilities.

The case explores, the (revolutionary) s t r a t eg i c decisions management must make, with

limited resources, in balancing paradoxicall tensions (technological or business model); source

(open or closed innovation) and strategic focus (demand product push or market job lot pull) of

their innovation and manufacturing activities. The research addresses key themes of small and

medium business management such as changing management s t ructure and roles, building

social capital and market credibility and entrepreneurial strategy.

KH has the fundamental characteristics of a family firm: visibly active owners who are

emotionally invested in the enterprise and want it to endure, a culture centred upon traditional family

values of taking pride in generational proprietorship, prioritising care for customers and employees,

and promoting a collective community identity (e.g. Berrone, Cruz & Gomez-Mejia 2012; Chirico &

Salvato 2016). We argue that integral to KH sustained success has been the narrative discourse

concerning the company’s identity as a family firm. Yet, paradoxically, the owners’ commitment to

keeping KH within the family and the community has forced the CEO to introduce innovations in the

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firm’s processes and products, including a strategic shift of its core focus and self-definition. Through

ongoing ethnographic observation, interviews with 25 KH employees and analysis of company

newsletters, we investigated the role of narrative discourse in KH transformation.

Key questions that emerged through the research process concerned how narrative discourse

related to KH status as a family enterprise has contributed towards the firm’s flourishing, despite

operating in a hostile global environment that has caused so many similar organisations to close their

Australian operations. Our findings are presented under the headings of four discursive themes: 1)

stability in instability, 2) narratives of mastery, 3) intertwined identities, and 4) community centricity .

We discuss the implications of our findings for developing further understanding of discursive roles

of history and tradition in family run firms, and more generally, for supporting innovation and

manufacturing within developed economies.

Innovation and Family Business

The relationship between innovation and family firms is problematic. In addition to the positive

emphasis in family firms on tradition, community concerns and employee care; they are also

frequently depicted as backward, conservative, nepotistic and consequently “ill-equipped to develop

the organizational capability to manage large-scale, technologically advanced industries” (Carney

2005, p. 250). Decisions in family firms are distinguished by a high degree of emotional, rather than

purely rational evaluation (Sharma 2004; Zellweger & Astrachan 2008). In contrast to publicly listed

corporations where profit reigns as the supreme consideration, in family firms the profit imperative

tends to be tempered by the value invested in Socioemotional Wealth (SEW) comprised of

considerations relating to family ownership and values, care for employees and customers, and

involvement in communal initiatives (Berrone, Cruz & Gomez-Mejia 2012; Cennamo et al. 2012;

Kammerlander & Ganter 2015).

Commitment to community values gives family firms a level of trust not afforded to publicly

listed shareholder owned companies. ‘Familiness’, the specific bundle of resources that stream from

the family’s involvement in the business (Habbershon & Williams 1999; Zellweger, Eddleston &

Kellermanns 2010), can be rationalised and leveraged as a strategic asset for a company’s competitive

advantage. In this process, community values, rather than the rights of individuals, are put at the

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centre of discourse, as in a Gemeinschaft (Tonnies 2001 [1887]), where community is maintained

through strategic narratives and specific actions aimed at reinforcing a sense of ‘collective

ownership’.

The manner in which history is collectively chronicalled is crucial for family corporations, since

history’s effects are not merely descriptive but also constitutive: “family firms are organizations

saturated with a heritage that is somehow meant to be passed on and, therefore, meant to be carried on

… the past and future are constantly negotiated in the present” (Hjorth & Dawson 2016, pp. 16-7).

The existence of a coherent narrative is not a taken-for-granted outcome in a family firm: the image of

‘family’ does not necessarily imply normative consensus, unity, and harmony, in a context where

various ‘histories’ compete as forms of control and resistance (Ainsworth & Cox 2003).

De Massis et al. (2016) investigated the manner in which long-lived family firms draw upon

historical legacy to construct paradoxical narratives of ‘innovation through tradition’ using four

building blocks: 1) the promotion of traditional knowledge, either pertaining to the history of the firm

or the industry; 2) the use of codified and tacit forms of past knowledge; 3) the pursuit of product

innovation either by altering the physical features of products or transforming their meaning; and 4)

the (re)interpretation of the company’s capabilities. An emphasis on product development could

contribute to perceptions of innovation as the offspring of localised dynamic capabilities, extending

from effective research and development practices (Eisenhardt & Martin 2000; Teece 2009, 2014;

Teece & Pisano 1994; Teece, Pisano & Shuen 1997; Winter 2003). Yet, innovation in small and

medium enterprises, as most family firms tend to be, does not exclusively manifest from research and

development, but rather frequently emerges from the introduction of advanced machinery, training

and design (Santamaría, Nieto & Barge-Gil 2009). The influence of such alternative drivers of

innovation appears particularly significant in low-medium technology firms.

Leveraging the potential of multiple innovation drivers within the context of a family firm calls

for a fluid mindset capable of “paradoxical thinking” to accommodate diverging forces, as opposed to

an attitude of trying to resolve tensions into a univocal solution (Ingram et al. 2016). Critical tensions

identified in the family firm literature include tradition and change, control and autonomy, stability

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and liquidity (Ingram et al. 2016). An organisation that typifies such tensions, as well as paradoxical

thinking, is KH, the focus of the current study.

Narrative discourse lenses

Narrative discursive analysis is an organisational studies methodology, pioneered by such luminaries

as Foucault (1977) and Clegg (1989b) among others, that seeks to unravel the ways in which

discourse orders things (Alvesson & Karreman 2000). The theoretical assumption of discursive

analysis is that reality is socially (re)constructed thorugh texts, language and rhetoric that rule

thoughts and practices, by privileging certain ways of thinking, talking, and constructing knowledge,

while dismissing others. Discourse flows through organizations via various modes of formal and

informal communication practices.

Our interest is discourse within the organizational context of KH, particularly how macro-level

social discourse is drawn upon to construct meso-level organisational narratives, and justify

transformation of micro-level relational practices.

Research Context

KH presents an example of a family owned firm operating in a developed economy, within a difficult

industry – steel making – that has been significantly disrupted by the discourse of globalisation and all

that is associated with it. While globalisation is seen to offer opportunities for developed countries to

import cheaper consumer goods and offshore manufacturing to countries with looser regulatory

controls and lower labour costs; these “benefits” often result in extensive job losses, brought on by the

closure of entire industries (Milanovic 2003). The effects of globalisation have been felt in the

provincial Australian city where KH is headquartered.

The KH foundry, along with a few other manufacturing firms, is among the city’s largest

employers, providing employment to over 150 people.

Established in 1934 as a three-person foundry business, KH has grown an international customer

base to become one of Australia’s most awarded and innovative companies. The current owners, third

generation family decedents of the company founder, attribute KHs longevity to a focus on innovation

that, since the company’s inception, has been central to its operating philosophy. Yet it is only over

the past several years that KH has begun the process of shifting its core organizational identity.

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KH is unusual, not only as a manufacturing firm flourishing in a developed economy, but also

due to its mixed management structure. Since 1988 family owned KH has employed an external CEO

to bring fresh insight, expertise and experience into the business, with the current CEO recruited in

2008. The approach has paid off. Whereas in the mid-2000s the company appeared on the verge of

collapse, in 2013 KH was ranked seventh in the Business Review Weekly “50 Most Innovative

Companies” list, ahead of some of Australia’s largest corporations. In 2014 KH invested $5 million in

upgrading its two foundries, increasing productivity by an estimated 170 per cent; launched KH 3D, a

subsidiary business providing advanced manufacturing capability through 3D printing (3DP); and

won the prestigious Endeavour Award for “Most Innovative Company in Australia”.

In researching KH, our goal was to identify how the company deployed meso-level narrative

discourse, particularly related to its family status, to justify micro-level changes as a response to

broader macro discourse concerning its survival and expansion in a challenging global environment.

Of particular interest is examining tensions in the discourse related to KH’s identity as a family firm

that may have been eroded by its unusual governance structure – where the owners hold managerial

positions hierarchically subservient to the CEO – which invites questioning of its family firm status.

Given the commitment of family firms to SEW considerations (Berrone, Cruz & Gomez-Mejia 2012),

we anticipated tensions between KH’s SEW concerns and its needs for profitability in a changing

global environment. Further, given that employees in family firms have been found to be more

trusting, committed and loyal to their family employers than employees in publicly listed companies

(Berrone, Cruz & Gomez-Mejia 2012), we were curious if loyalties would be eroded by change

initiatives typical of so-called post-bureaucratic organizations (Josserand, Teo & Clegg 2006;

McKenna, Garcia-Lorenzo & Bridgman 2010), aimed at professionalising the enterprise for improved

efficiency, effectiveness and competitiveness, particularly when the change was championed and

executed by an externally recruited CEO. KH’s extraordinary and paradigmatic characteristics make it

a rich and relevant case study for research (Flyvbjerg 2006), and we sought to analyse the

construction of narrative discourse used to manage these unique tensions to expand our knowledge of

how family firms use narratives to address the inherent tensions that underlay notions of family,

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tradition and community with apparently opposite concepts of professionalism, innovation and global-

expansion.

Methodology

With discursive analysis in the organizational context there is no need to construct complex research

instruments – all the intricacy a researcher could want for is available in the mundane discourses of

organizational life (Grant & Hardy 2004). The discursive texts that form the basis of our study include

field observations and discussions, interviews, and company newsletters. We used a three level

discurive framework (LeGreco & Tracy 2009) to identify the influence of macro discourse on meso-

level naratives and justify mico-level transformations of workplace relations (Alvesson & Kärreman

2000). We interpreted the macro-level of analysis as concerning Discourse that informs a specific

zeitgeist (‘spirit of the times’), as is the case with discourses of globalisation and family firms

(LeGreco & Tracy 2009). We framed our meso-level analysis as concerning organisationally

constructed narative themes informing policies and strategies. Finally, we framed micro-level

discourse as justying transformations of interpesonal workplace relations and processes.

The research emerged from the long-standing relationship of one of the members of the research

team with the KH CEO, even before he took his current position with KH in 2008. As the CEO grew

into the role, the significance of KH as a paradigmatic case of family firm undergoing transformation

and succeeding in a difficult global manufacturing environment became increasingly apparent.

Frequent (almost weekly) phone calls discussing KH and its transformation were followed by several

field trips to Bendigo to observe firsthand the introduction of innovative processes and technologies

that were revitalising the firm. Seeking to gain a broader perspective on the transformation, in 2015

the research team was expanded, and a series of interviews were conducted with company staff. Due

to KH’s regional location, access was limited to five days when the additional members of the

research team could be on site to interview staff and observe practices. Ultimately the interview

sample comprised of 25 employees (workers and managers) who provided semi-structured interviews,

each lasting an average of 50 minutes. Additionally, the team accessed narratives produced by the

company on its website, press releases, news reports and 60 issues of internal newsletters from

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between 2013-2015. During the interview process, interviewees were asked to describe the history of

their relationship with KH, and comment on topics related to any transformation they have observed

over the past several years, the key drivers of this transformation, and whether they perceived any

employee resistance to recent changes. They were also asked about the basic factors underpinning

KH’s survival, and the significance of its status as a family business with a long history. The

interview process accordingly involved collecting organizational discourses as interviewees

responded with their own individual narratives of KH’s past history, present development and

possible future.

The field-notes, interview transcripts and KH newsletters were analysed to identify discursive

themes at the macro-meso and micro levels (Alvesson & Kärreman 2000), following standard

methods for building grounded theory (Glaser & Strauss 1967; Strauss & Corbin 1997). Over a period

of some 3000 hours, this source material was coded into key themes and subthemes, both through

individual and group efforts of comparing emergent themes arrived at through engagement with the

data sources. Setting the various themes and subthemes against each other revealed levels of

competing discourses at play in KH’s efforts to balance the contradictory narratives of managing

change and transformation, while also maintaining a historical traditional identity as a ‘family firm’,

as encapsulated in the company’s paradoxical slogan, “a tradition of innovation”.

Findings

Analysis of the findings revealed four emergent narrative themes at our three levels of analysis. At the

macro-level were competing systemic issues interpreted within KH as concerning: 1) stability in

instability. At the meso-level were discourses promoting the company’s endurance and innovation

through: 2) narratives of mastery and 3) intertwined identities. Finally, at the micro-level, radical

changes to organisational practices were justified on the basis of narratives promoting: 4) community

centricity. Each of these themes includes several subthemes (Table 1), for which we provide exemplar

quotes (Table 2). While we propose that these themes can provide insight into the dualistic processes

of managing transformation and tradition in a family-owned firm, we also acknowledge the

limitations of abstracting complex context-specific data into simple generalizable categories (Langley

1999; Lynchnell 2011). Conversely, it can equally be limiting to insist that each individual’s

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experience is unique and thereby ignore patterns of similarity found in respondents’ shared

experiences. We also acknowledge that interrelatedness and overlap in explanations is also influenced

by the level of abstraction that we select as researchers (Weick & Westley 1999).

_______________________

Insert Table 1 About Here

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Insert Table 2 About Here

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Discussion

The discourses that emerged in this study (categorised as: stability in instability, mastering

materiality, intertwined identities and community centrality) can be generalised to inform strategy for

manufacturing organisations to manage, survive and flourish in a developed economy. Globalisation

has disrupted the way companies and nations conduct business, presenting both benefits and costs

(Banerjee 2008; Clegg & Baumeler 2010; Milanovic 2003). A family company such as KH –

operating as a foundry in a developed economy – is particularly exposed to globalisation’s negative

impacts.

At KH the owner-managers and the CEO constitute an integrated system where the ‘disruptive’

dynamism provided by the CEO, is tempered by the sense of continuity offered by the owners-

managers. The asset of ‘familiness’, the specific bundle of resources that stream from the family’s

involvement in the business (Habbershon & Williams 1999; Zellweger, Eddleston & Kellermanns

2010), is recombined and amplified through the agency of a CEO who introduces an engineering

culture of standardisation, automation and knowledge management that, while retaining the traditional

foundry identity, projects the firm in a different direction as an innovative engineering enterprise.

Paradoxically, it is the narrative related to family values and a strong sense of a traditional community

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that makes the rationalisation possible. In this process, community, rather than individuals, are put at

the centre, as in a Gemeinschaft (Tonnies 2001 [1887]), where community is maintained through

strategic narratives and specific actions aimed at reinforcing a sense of ‘collective ownership’.

The role of emotional, rather than purely financial, considerations in decision-making is both

implicitly and explicitly expressed in the KH narratives. For KH to join competitors in pursuing cost-

cutting strategies (e.g. by shifting production overseas) would have required renouncing their

corporate identity as a family firm. Conversely, clinging to a fading past would likely have led the

company towards closure. KH has addressed this challenging dilemma by adopting a strategy

characterised by systemic absorption of external tensions. KH has interiorised the dilemmas

(continuity versus change, tradition versus innovation, community versus productivity, local versus

global) through reasoned discursive processes that see the differences recast as positive dynamic

oppositions, thus embracing a form of “paradoxical thinking” (Ingram et al. 2016). Accordingly, the

disruption caused by the introduction of new technology and product innovations is linked with a past

tradition of technical mastery. Likewise, being global becomes a cause for pride in the local

community. Individual knowledge capture is made instrumental in supporting a sense of community.

And automation and process standardisation, including the introduction of drug and alcohol testing, is

valued not only for enhancing productivity and empowering employee voice but also for preserving

employee wellbeing. This narrative of positive dynamic oppositions is reinforced and embodied in

tangible objects and outcomes, such as the e-manuals, the products, the look and feel of the shopfloor,

and the diversity of the workforce. Interestingly, these narratives were not necessarily planned as

much as they emerged from the pivotal juncture of the relationship between the family owners and the

innovative externally appointed CEO.

Despite being rhetorically packaged as ‘a tradition of innovation’, KH strategic approach

diverges from De Massis et al. (2016) findings of the usual narrative strategies successfully employed

by other long-lived family firms for interiorising and interpreting past tradition. In the paradigmatic

case of KH, where the family firm narrative has been leveraged to minimise resistance to process

innovations involving knowledge capture and automation, and the shift towards engineering and the

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development of new patented IP and 3DP capabilities, do not contradict, but rather expands upon De

Massis et al.’s findings (Figure 1).

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Insert Figure 1 About Here

_______________________

While KH draws upon its history as a family firm to communicate trustfulness and stability, it

draws upon its “tradition of innovation” narrative to support disruptive transformation. KH

paradoxical narrative related to tradition and innovation finds embodiment in the materiality of metal

axes and 3DP, which operate as a talisman or symbol, communicating that KH will survive in the

high-cost, high-competition manufacturing environment, because of its history as an innovator, and

this continues into the present with strategic investments in ‘the future’ through 3DP. As a talisman,

3DP has ideal characteristics: it connects a traditional past (producing tangible objects by

transforming fluid into solid three-dimensional form) with an imagined, though somewhat fictional,

future. The costly, slow and cumbersome realities of today’s 3DP (which most frequently uses fused

deposition modelling and selective laser sintering) may not be that suitable for mass-production (just

yet). It is, however, the very idea of 3DP that seems to prompt a flurry of crystal-ball gazing (Ratto &

Ree 2012). The imagined future appears to combine the rigour of science with the mysterious ‘magic’

of apparently producing a solid object effortlessly, as if out of thin air.

Importantly, KH does not envisage its future as merely a jobbing factory, or even as part of a

global supply chain, emphasising instead the innovation of new products that can be filed as patents

under KH intellectual property. The strategy involves hiring engineers and designers who possess a

thorough understanding of relevant technologies, materials and competitor products, rather than

simply aiming to produce the same traditional KH products well. KH is thus embracing the challenges

of globalisation through a traditional mastery of materiality: a deep understanding of materials and

form in the steel-making process. That mastery of materiality, however, is being reformulated

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strategically as advanced manufacturing, through the company’s embrace of emerging technologies

(such as 3DP) and its increasing emphasis on engineering.

At KH the potency of tradition is not so much deployed for legitimising new products in the eye

of the customers, or for providing a repository of knowledge to incrementally renew product

offerings, as for reassuring and smoothing the transformation of practices and the development of a

new identity, based on different capabilities. While KH emerging identity as an international

engineering company coexists and interplays with its ancestral identity, it is mostly divorced from its

reservoir of traditional tacit and codified know-how. Reference to past history and to traditional

values including SEW community benefits are therefore mostly drawn upon as a dialectic resource for

making precarious tactical leaps look like the ‘normal’ extension of well-worn strategies, keeping the

organizational boat steady in the rough waters of potential disruptive conflicts.

Knowledge capture, a critical element for enabling company endurance, often causes tensions

with employees. By integrating “the specialized knowledge of multiple individuals” (Grant 1996, p.

114), a company can operate as a “repository of capabilities” (Kogut & Zander 1992, p. 396). A key

problem to organizational knowledge capture is persuading staff to take an active part in the

knowledge translation process (Lepak, Smith & Taylor 2007). Employees have a vested interest in

protecting the know-how that enables them to capture value from their employer (Lepak, Smith &

Taylor 2007). When individual workers control corporate expertise they are viewed as sources of

value creation, increasing their bargaining power. Some companies bypass dependence on employee

expertise by making that expertise redundant (e.g. by radically innovating production methods). While

KH has partially adopted such a bypassing strategy, full adoption would involve both enormous costs

and the renouncement of traditional community values. KH has rather addressed problems of potential

resistance by framing their knowledge capture initiative as an innovation aimed at supporting,

simplifying and improving the work of employees; making it easier for them to produce quality

products and lessening the likelihood of producing rejects. A similar narrative logic is seen applied

with regard to legitimising automation on the shopfloor.

Traditional labour process theory (Noble 1984) predicts that employees engaged in manual

labour would likely resist automation for fear that their position may be replaced by machinery.

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Threats to implementing automation and systemisation, include employee resistance and, sometimes

even sabotage (Prasad & Prasad 2000). By contrast, employee perceptions of KH as a community

asset rather than an exploitative capitalistic enterprise, has aided staff support for automation.

Staff support is has also held for the introduction of drug and alcohol testing, a new ‘norm’

regulating behaviour presented as “representative” or important for protecting common employee and

firm interests from ignorant mistakes (Gouldner 1955). Indeed, as a consequence of these changes the

workforce has experienced a material improvement in working conditions (reduction of accidents,

cleanliness of the shopfloor), together with a reduced dependence on potentially problematic personal

relationships with individual experts.

It is significant that KH, like other small to medium-sized family firms (Holten & Crouch 2014),

has comparatively low (almost non-existent) union membership. A sense of collectivity and worker

security appears to be formed through the notion of a traditional family community, rather than

through opposing management. It is also notable that the clear group boundaries (together with the

relevant, consensually established and well-monitored rules governing the use of common knowledge

at K), closely mirrors the conditions identified by Ostrom (1990 as important for successfully

managing community resources.

KH’s transformation has not been incremental (adding new products and capabilities to the

historic core) but radical. The original model, founded on a ‘mastery of craft’, has been replaced with

a model founded on a ‘mastery of process’. The former model is characteristic of the traditional

metalworking activities, particularly moulding and casting, in a foundry workshop. The complexity

and unpredictability of the process, reliant on employees’ tacit knowledge, traditionally transferred

through long apprenticeships in a professional guild, makes foundry technology heavily experience-

dependent. To compete in the new globalised market, KH was required to redefine its value

proposition, improving the reliability, quality and quantity of its outputs, while keeping costs under

control. KH’s transformation thereby comprised of a radical shift towards the ‘mastery of process’,

emphasising the codifiability and transferability of information, and the development of engineering

and product innovation capabilities.

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In sum: KH’s identity as a family firm, with strong roots in its local region, is strengthened by

narratives of tradition and continuity, reinforcing the notion that workplace relations are not merely

based on economic considerations but are founded on fundamental principles of responsibility,

resolve and reciprocity, thereby mitigating perceived conflicts of interest among employees and

employers in the transformation process. Further, dynamic tensions between tradition and innovation

is materially embodied in the relationship between CEO and owners, a relationship representing a

form of distributed leadership where the CEO is the creative-disruptive driver of innovation, while the

family members are the integrative and ‘conservative’ force preserving the company’s commitment to

community.

The KH case suggests that the narrative discourse of family firms (and conscious companies

more generally), with their focus on SEW, gives rise to a dualism within the firm in relation to risk.

On one hand, the intertwinement between community and family firm identity make failure more

difficult to accept, generating a greater risk aversion. On the other hand, higher stakes might increase

the willingness of such companies to fight back more fiercely and consider alternative strategies,

contributing to a ‘survival bias’. This appears to be the case at K: faced with the option following

competitors in moving production overseas, thereby taking on financial risks and possibly losing

family values and identity, KH opted for an apparently more radical and innovative approach,

paradoxically made sense of, through the ‘tradition of innovation’ legend.

The case study also demonstrates discourse as a mode of power. Here we think of discourse as an

interrelated web of social relations, social ideologies, and social agency, framing what people will or

will not do (Brown, Colville & Pye 2015; Hardy & Phillips 2004). The three, micro-meso and macro,

levels of discourse present in our data might be viewed through Clegg’s (1989b) ‘circuits of power’

framework, comparing power to electricity that flows through three distinct but interacting circuits:

the episodic (interpersonal relations), the dispositional (institutional practices) and the facilitative

(broader social norms). Clegg’s three circuits interact, are mutually constituted through ‘obligatory

passage points’, through which the taken-for-granted nature of the rules, norms and discourses that

constitute practices, are mutually negotiated and fixed. In the current study, big ‘D’ discursive

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narrative in the facilitative circuit related to globalisation, manufacturing and family owned

enterprise, was seen to influence the small ‘d’ dispositional circuit of organizational narratives related

to tradition and innovation, legitimising change initiatives in the episodic circuit of employee work

relations. Specifically, it is striking how the CEO wielded power by constructing dispositional and

episodic level discourse that informed narratives in relation to the implementation of significant

changes in KH’s corporate policies, practices and core identity. This case provides a preliminary

analysis of discourse as a mode of power within the context of a family firm, a relationship that offers

promise for further exploration in future studies.

Conclusion

The family firm discourse sees the enterprise enact a different set of priorities over mere profit

maximisation, and hence choose to continue production in a developed economy when it seems

apparent that de-localising offshore makes better financial sense. On the basis of this discourse,

management and employees further construct KH’s change initiatives as benevolent moves to protect

employees and the community. Employees have consequently embraced rather than resisted the

introduction of what otherwise might have been perceived as controversial policies of standardisation,

knowledge transferability and radical innovation. Thus the construction of an almost pre-modern

‘community identity’ narrative – centred on traditional values and the preservation of uneconomical

products – is paradoxically also instrumental in enabling a strong innovation drive.

The study contributes new insight into narrative discourse as sociomaterial practices embedded

within power relations, as well as furthering understanding of family firms, change management,

innovation and manufacturing in a developed economy. It also addresses the call to “develop a

thorough understanding of the value of the past in innovation” (De Massis et al. 2016, p. 94),

indicating the possibility of a path towards innovation in SMEs based on the sustainable exploitation

of intangible assets through narrative discourse related to community relationships and organizational

(and familiar) identity.

The case also connects managerial and technological components of innovation with discursive

resources and practice. KH’s history does not provide an actual repository of know-how and methods

that can be directly employed as a platform for innovation (as in the cases described by De Massis et

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al. 2016), nor is this a case wherein new technologies (e.g. 3D printing) are seamlessly integrated with

existing low-medium technologies (Freddi 2009). Despite all accounts indicating numerous elements

have contributed to a radical break with the past (new activities and actors, different strategic

priorities, different work conditions and workplace aesthetics etc.), a discourse of continuity and

familiarity has been employed to create a subject: the firm as a close knit community, locally rooted

but responding to globalisation through innovation that is framed as a natural evolution of traditional

craftsmanship. While the factual connection with past events and characters might be tenuous, the

strong narrative provides the social lubricant needed to ensure acceptance of the initiatives of easing

the tensions deriving from knowledge capture and automation, increasing diversity and off-shoring

trends, and changing the emphasis from manufacturing to design. This case demonstrates how

management draw upon big ‘D’ macro-level Discourse to shape meso-level narratives of the firm and

justify transformation of micro-level work-practices. More specifically the case demonstrates the

construction of meso-level narratives related to community values incorporated into micro-level

corporate change initiatives, demonstrating that organizational transformation and innovation for

enhanced economic returns need not depend upon organizational and human disruption. Rather, such

organisational transformation may involve a social process of ‘constructive disruption’ through

collaborative discursive innovation.

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• Table 1 Themes, Categories and Clusters

Discursive Level First order categories Clusters Discursive

Themes

Macro

Disruptive globalisation Disruption

Stability in instability

Security in family ownership and values

StabilityCommunity Relations (incl.government and media)

Meso

Tradition of Innovation

Mastering Materiality

Narratives of Mastery

Steel Axes

3D Printing

EngineeringMastering Production & Strategy

New Product Development

Awareness of Competition

The Principal/s (Family) Dynamic Principal Agent Relations

Intertwined IdentitiesThe Agent (CEO)

Micro

Protection Against Injuries

Eliminating ThreatsCommunity Centricity

Reducing reject products

Positive Acceptance of Drug and Alcohol Testing

Positive acceptance of automation

E-Work ManualsKnowledge Capture

Quality systems

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Table 2 Narrative discourse Themes, Categories and Exemplar Quotes

Macro-Level

1. Stability in Instability

1.1. Disruption

1.1.1. Disruptive Globalisation“… the way we were going was probably not sustainable into the future, and that we were now part of a world economy, and that we were competitors on the global scene and not just-- we weren’t just in our own little world in [country]… the foundry industry was coming under enormous pressure because of that situation where they had to become more competitive, because people could go overseas and buy products for a cheaper price.”“… the guys on the floor know that foundries have been closing left, right, and centre, both here and in New Zealand, so the word gets out, they play with-- they interact with people who are working outside. A lot of good people haven't got jobs.”“I would say the driving factor would be globalisation. We’re no longer dealing with another foundry down the road, we’re directly competing with Chinese and Indian products … and even the US. … For us, our biggest competition are US brands who also manufacture in China.”

1.2. Stability

1.2.1. Security in Family Ownership and Values“I'll be honest - I don't know if anyone else tells you - the best thing for this company to do would be fold and go to China. They'd make more money, loads more. And that's it, they would make more money, but they want to invest, they want to help out.”“It's about your commitment, KH’s commitment to keeping the foundry here, in Australia, despite global pressures and trends and what's behind that.” “I think the benefit is that KH doesn’t have to keep shareholders happy, so if [the owner] just gets his salary every month … he does a lot for the community … I often wonder if he just keeps the doors open to keep the people employed in the community happy.”“The only thing that keeps me not worried about [company closure] is ‘cos the owner comes to work every day. He’s loyal. … He comes every day. … That makes me feel at ease because he enjoys, he doesn’t have this business for money, he has this business because he enjoys it, obviously. … He knows so much about it … I think he was a patternmaker before he bought this. … So he loves it. … I have faith that he’s gonna be here.”1.2.2. Community Relations (including government and media)“I like the fact that it’s a family company and if it’s got a lot of involvement in the community. I see that as valuable, personally.”“If you look at our mission statement, it’s all about sending people home better than they were when they started here, and it’s all about interacting with the community, things like that.”“… a lot of my job involves stuff with schools and lower socioeconomic school kids, the programmes that we-- and yeah, I’ve got a job description; you wouldn't find that in the job description, but it’s a highlight of mine, to see kids just-- and you know, [the leadership] believes in investing in kids.”

Meso Level

2. Narrative of Mastery

2.1. Mastering Materiality

2.1.1. Innovation as Tradition“I’ve only been here for three years. But it’s very clear that KH has been an innovative company for eighty years! … I enjoy sitting with the owners of the business on occasion, and chatting about the past. They tell me of things their father did, back in the fifties, and that was when some

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of the stuff they were doing was groundbreaking in the fifties. So I think it’s ingrained in the culture of the business that you change to survive.”“I’d had more time to talk to the likes of G [owner], so I know probably a little bit more than most people. … we talk about this, that, and the other, making axes and … what they made during the war, what the company was making at different times. So I've probably got more of a history than a lot of other people, only because I've got access to [the owner].”“There's always been this tendency to want to be-- or be prepared to be innovators and be the pioneers … I think there's been an inherent … family trait to want to be ahead of the game, to try new things, not to get stuck in a rut.”2.1.2. Steel Axes“Look, that’s a product I suppose we don’t sell a lot of, and with a reject rate of 50 per cent you’re probably not making any money. That would probably come directly from [the owners], I would say. ‘No, it’s always been this way and we're going to keep making them.’ We do have a really good name in racing axes … there’s not a good market for it. Yeah, no, I don't know why they do that. That’s the prerogative when you’re the owner, I suppose, isn’t it? I can, therefore I will.”

“I think the best way to explain it is when I first started with the company in ‘08, I grew up thinking my Dad made axes, because that’s all I really -- as a kid, we knew that he took an axe to the Easter Show, because we sponsored the Easter Show wood chopping. So it was an axe, and dad used to say to us, ‘It’s, like, 3 per cent of the company. There’s so much more,’ but as a kid, that was just what we associated with. But yeah, it’s definitely bigger than I think we grew up thinking it was.”

“We make the best axes in the world, we always have … all of the championship woodchoppers are using our axes. And I think that’s something we can be proud of, and it’s a heritage I don’t want to lose. I mean, it’s good to be able to turn around and say, ‘We do make great steel; there’s the proof.’ … I think if you’re making the best of something in the world, you shouldn't stop doing it, and you can always look back on it with a bit of pride. … I spent my youth making the axes. I used to mould them, forge them, work on the forging plan, so I’ve got a bit of background in making them.”

2.1.2. 3D Printing“I don’t have a real lot to do with 3D printing, but obviously I’ve been over there and looked … I think it’s gonna be good … in the future. … So it does work sorta hand-in-hand with what we’re doing out here [at the foundry]. I think it’s a big step forward. … I haven’t heard no negative comments about it before. … I think it’s the way of the future really. Who knows, in another 20 years we might be 3D printing all our castings.”

“I think it’s good too, because it makes you feel like you’re part of something that’s on the edge, something modern, not just carrying an old technology on that’s been around for years … KH is now not just a foundry, but it’s got this aspect to it that’s sort of twenty-first century.”

“… there’s not many foundries around now that are viable. Foundries are dying things, so you’ve got to stay up with it … And honestly, for a company … to stay up with it and to stay economical … they need to keep that technology there. Already, they can [3D print] steel, they can do metal. And that’s the way of the future.”

2. Narratives of Mastery (continued)2.2. Mastering Production and Strategy

2.2.1. Engineering“…we have a team of engineers that actually get in and understand what they’re doing, why we do it, and how we can improve, and that’s probably-- when you don’t have qualified people or people who are masters of their trade, you can train them to a level, but they don’t have the same vision. And I see now with the people we’ve got here, everybody has a vision of how we can improve things, and we have infrastructure in place to make change when we need to.”

“This is where one of our advantages is; we understand material and the way materials behave. Not only that, we have engineers who can deal with that and make the adjustments necessary.”

“Before I arrived … we had released a product without any testing, without any principal of engineering behind it. … We had a big failure and after that, they started hiring engineers, and now we don’t really have big problems, just teething issues, which we immediately jump on it and solve it.”

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2.2.2 New Product Development

Researcher: Hasn’t KH had a tradition of having its own products and sales teams for agricultural equipment?”

CEO: “Absolutely. That’s what made the basis of it. But fundamentally, particularly over the last 20 to 25 years, it was more-- the highest contributor to the profitability was the jobbing part of the business … And so when that started to fall away … I say only that not to disparage the past, because they have a lot to be proud of, but would that product range be competitive today as it was? Absolutely not. … you know, it was making axes, which it made very well. … but we make a very exclusive range of axes … But can we compete? … No, because fundamentally an axe is an axe is an axe. At the high end, which is a very small market, of course we’re differentiated. Could we make a business out of it? Probably not, clearly not. … So the tooling business is finished, kaput. … Yeah, it just happens that we have a foundry factory; that’s just there. We’ve got to feed that somehow. It allows us to manufacture stuff, and the manufacturing process we use is foundry.” – (CEO)

Researcher: “So you’re in the engineering business, as opposed to the foundry business?”CEO: “Absolutely. … I’m not really sure that that’s fully understood just yet.” – (CEO)

“What’s different about the KH foundry is that it has products to sell. It’s not just a foundry that people come to get something made. They have their own product range. … I guess it’s a good reason why the family is still going, where others have failed.”

“It has already shifted I think. We have moved far, very far from that idea of it [as a foundry]. It’s a product company. … Our role is really designing the product, releasing the product, designing the product, releasing the product. … It’s more like a product company.”

2.2.3. Competitor Awareness“What makes our Innovation Team good at the moment is that they do a lot of review of our competitors.”

“Basically what we do is we benchmark with the competitors … and we try to be very competitive in terms of design but also in terms of cost as well.”

“I worked for a big company called Bradken. They’re one of the market leaders, competitor to KH, make similar sort of products, ground engaging tools. So my experience from that side, manufacturing side, fits in very well with KH’s products. And so yeah, I’ve brought in mainly to help out in that respect.”

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3. Intertwined Identities

3.1. Dynamic Principal Agent Relations

3.1.1. The Principal/s

“I’m not here to comment on his (the CEOs) relationship with the owners, but that, in itself, has a uniqueness, where you’ve got the CEO reporting-- or the owners reporting as directors, but he reports—it’s unique. And they’re all different personalities, but you throw that into the pot, and now and then there’s the odd hiccup, but it works. And the KH cousins or owners take a step back and say, ‘We actually created a bit of a monster here.’ It’s all for the good.”

“And I think between D and myself now – we run the business – we’re open-minded enough to say that we need to be bringing in new technologies, new innovations all the time, to say in front.” (Owner)

“I guess this all came about when [the CEO] took on the role […]. He had the opinion that we should all have a bit of a chance to think about what we could be doing, not just doing what we’re doing. And I think he thinks that I think that they dream too much, but you’ve got to-- I guess you’ve got to have a dream, and then work towards making it a reality. With all the constraints that are put upon us in manufacturing at the moment, it’s a little bit hard, because the funds aren’t always there and the time isn’t always there.” (Owner)

3.1.2. The Agent“Well our CEO, when he come on board, he’s pushed a lot of the changes, right from the day he got here … which hasn’t been a bad thing. Like, injuries … have gone down. … Without [the CEO] I don’t think we would’a had all these changes. I think we had just been cruising along, and by now it would have been all over for us. … So I think we had to have those changes to stay in business. Without the changes I think we would have just been another foundry that had gone broke.”

“I think he’s [the CEO] been the focal point of a lot of the change in the organization.”

“The CEO has really dragged the company into the new era. He’s-- yeah, in every aspect, just about every one of the things that I’ve mentioned has been pretty much his initiative. We’ve got the owners, who are pretty laidback sort of guys, pretty happy to just let things go on.”

“…since [the CEO has] come in, I think-- I mean, he's got involved in so many community organisations and the business organisations; the Industry Group, the council, the Investors Award, the-- you know, he's been in it.”

…what I like about him (the CEO) is he’s very much into the community. And a lot of my job involves stuff with schools and lower socioeconomic school kids, the programmes that we-- and yeah, I’ve got a job description; you wouldn't find that in the job description, but it’s a highlight of mine, to see kids just-- and you know, he believes in investing in kids. You just want to create a spark that—they’re the future.”

Micro-Level

4. Community Centricity

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4.1. Elimination of Threats

4.1.1. Protection Against Injuries“There’s been a huge focus on injury prevention and stuff, and we’ve seen a lot of positive benefits there, in terms of no—I’m an accountant, so I see the work cover premium coming down. That was massive when we started; people were just getting hurt. And that’s been one of the big focuses in the place, once again, since [the CEO has] come in, that no one gets hurt, people go home in a better state than when they come in.”“Physical work has gotten less and less, we’re getting more and more machinery to help us with physical labour, which helps with our injuries, obviously… our CEO, when he come on board, he’s pushed a lot of the changes, right from the day he got here … which hasn’t been a bad thing. Like, injuries … have gone down.”“… we had four or five people involved in breaking off our castings; now we have one machine doing it. And the shakeout’s the same. Having to pull hot castings out of hot sand was always hard work, and now we have the machines, the same machines doing it. So yeah, no, everybody embraces [automation]. And I think everybody particularly can see the safety implementation, that what we’re doing is primarily for safety reasons. Our biggest injury was people swinging sledgehammers; now we don’t have that anymore.”4.1.2 Reducing Reject Products “… if you make a mistake, there’s 20 of them that are lost, rejects. And that’s one of our biggest drivers as well, getting our reject rate down.”“You've got to overset-- against your—you’re hoping you won't make as many mistakes, and so your reject rates go down.”“Look around you and you’ll see all these diagrams and stuff on the wall about-- they have countless meetings in here about how, by getting more moulds into one box and eliminating extra pouring-- metal that’s poured and then not used and has to be re-melted again. So just getting more efficient in our yield and scrap and rejects.”4.1.3 Positive Acceptance of Drug and Alcohol Testing“I believe it’s the company, where you probably leave the nightclub and five or six o’clock in the morning and come straight to work. Now that’s not tolerated anymore. We’ve got the drug and alcohol problem, and to get a job, you’ve got to be clean; you’ve got to be clean on drugs, you’ve got to be clean on alcohol.”“We’ve introduced a strict drug and alcohol policy; when the employees turn up to go for work here, they agree to be tested, so we’re not getting people that—we’re getting people that are fit for work and want to be here and want to do the job.”“When we brought in our drug policy, there was more hue and cry from people in the office who thought life’s privileges were being attacked than the people on the shopfloor who were expected to complain about it. They just turned round and said, ‘No, this is our work environment. We want to be safe here. We can’t have anybody who's not 100 per cent, driving a forklift around the plant, driving crane equipment.’ So they respected it very quickly.”4.1.4. Positive Acceptance of Automation“So you’re going to see a lot more automation. But in terms of that, we’re already seeing, for every guy that was working on the floor, I reckon you’ll see just as many working in quality control, design, that sort of thing.”“Physical work has gotten less and less, we’re getting more and more machinery to help us with physical labour, which helps with our injuries, obviously.”“The pleasing thing for me as a senior manager in the business is that they don’t miss, they’re open to opportunity, they’re looking for opportunity. They’re not old school, just sitting there churning out something, hoping that they’ll survive. They’re constantly looking at ways of improving. They’re putting a lot of money and effort into automation within the foundry.”“You can actually automate a lot of the manufacturing side … the equipment that they’re putting in will improve their throughput and give them more ability to-- what do they do at the moment? They do about 30 ton a week. … Now, imagine if you can double that; you might get 150 ton a week out the door comfortably … So what that will do is their costs will-- they'll be able to drive their costs down on their products, which will make them competitive in a tougher market, especially with the imports, Chinese imports and imports in general; that's their biggest competitor at the moment, to be honest.”

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4. Community Centricity (continued)

4.2. Knowledge Capture

4.2.1. E-Work Manuals and Quality Systems“You go from an ordinary company to a very good company. An ordinary company might be what you call ‘artisan’ based, people-, individuals-driven, and it’s all up in their head. … Very often you’ve got people who’ve been working for 20 years … they’re very knowledgeable about it but it’s all up in here. <points to his head> … What’s the biggest change? It’s gone from opinion-based, to fact-based … the more we go down that road, the better it seems to improve. … And all those computer systems, it’s all about that one thing isn’t it? Searching for truth or fact, rather than just an opinion.”

“I think KH has a phenomenal – probably the best – electronic-based quality system I’ve worked with. I’ve worked at two automotive factories and two foundries … Really impressive. … have you heard of The Way We Do Things? It’s this big! <gestures> It encompasses everything, but I don’t think half the people even know what information is there. … It covers absolutely everything, petty cash to … operate something rather huge.”

“Now they’ve got the computer system going, The Way We Make Things and The Way We Do Things … before, when I first started, ‘that's your job there. Make those,’ and you had to sort of find out for yourself or rely on someone to help you, that sort of thing.”

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Figure 1 - KH as a model of narrative discourse deployed for constructive disruption

Traditional KH (Foundry) New KH (Engineering firm)

Source of competitive advantage

MASTERY OF CRAFT MASTERY OF PROCESS

Knowledge basis

Tacit knowledge (non transferable)

Codified knowledge (transferable)

Site of power Experts Systems

Key activity Casting/Forging

Industrial design/Product innovation

Symbol / talisman Metal axes 3D Printing

Social tensions due to change

Eased by:

Representative norms+

Narrative of continuity+

Family-CEO dynamic

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