Facilitating Innovation through Organisation

We are back for the second round of discussion with Yves Karcher, former VP of Engineering for consumer computer devices at Logitech. In this week’s post, Yves talks about the importance of aligning company organisation with the innovation strategy.

 

Tilo Peters: Agility is something companies have trouble with because it feels unsubstantial to them. How do you change a company culture from planning a product development cycle for 4-5 years to changing as soon as indicators are telling that you are heading in a weak direction?

Yves Karcher: Part of Logitech was in box 1 (Ed. Note: remember the paradigm of boxes from last week’s post). There is an alignment with strategy, there are policies to guarantee zero defect and there are skilled people who are rewarded based on consistency. This is one type of the “Star Model.” (Ed. Note: framework for organisation design developed by Jay M. Galbraith) But then there are parts of the same company that need to run on a different star model prioritising performance like the game division of Logitech or speed like the mobility division. Some companies have a box 1 organisation which is great but they are not prepared yet to design an organisation to run something completely different.

Jay Galbraith said that an organisation should be designed to last just long enough until its replacement comes around. He is a strong advocate of an ever-changing nature and believes that one entity should not be bound to a single organisational paradigm per say. What has been your experience?

When I share my experience, this is also what comes outs. An example could be a cigarette maker who is working on e-cigarettes. This is a total disruption for them since they are no longer buying just tobacco, but also microprocessors, memory and plastics. It’s a fundamental shift and requires a full realignment of this part of the organisation to be successful. And if they would do it right, that part will blossom and the core business will progressively decline.

The product they are selling is a commodity and then they start producing and selling a device. And sometimes it is produced at a loss. It’s the razors and blades model, where the blades that are inserted have a much higher value proposition than the razor itself.

Yes, and I am sure there are many possibilities in the future, you may even have an app on your phone which measures how much you consume and what taste you want to have for the cigarette you smoke. What is important to me, is that when a company recognises it needs to change, it does it in an organised and rigorous way. They could do it from the guts and say: “this person seems like a nice a person and let’s find him a job” and construct an organisation around a person rather than constructing an organisation with a strategy in mind. I’ve seen that at Logitech and in other companies. It is difficult to take a clean sheet and design an organisation that makes sense in terms of structure, people, process, rewards. Invariably, if it starts with people, there will be frictions elsewhere.

You talked about the star model and it being a fundamental way of viewing and designing an organisation, how do you use it to implement innovation?

It’s an excellent model which is an excuse to talk. It’s a template and it’s an excuse to stand up and have a conversation, look at different scenarios and spot alignments. I always start with the strategy. Every company, every business unit has its own strategy depending on the environment it is in (harsh? predictable?). When we spend some time talking about strategy, it is already fantastic because it allows people to agree where they want to bring the company. Then look at what we change and what we keep. Can we keep the current structure? Does it make sense? If not, ok, let’s redesign it? Are we going to do it centralised? Regional? Matrix? Can we add start-ups to the company? These decisions are directly linked to strategy. But very often companies stop there, without putting in place the processes so that innovation sticks and continues. If we say we need regular technology showcase meetings, what does regular means? How do we select and rate the ideas? Processes answer these questions. On the other hand, we need to think what kind of people we need to implement the strategy? Do they understand where they fit? What kind of skills are we looking for? And how are we going to make it interesting for the people? It is all about going back and forth in the star model and see what fits in where. After 2 hours, we already have a much better idea, which will need further refinement and a change plan. How do we translate that into action? Which way to communicate the plan? How to manage the people and how do we mitigate the resistance if there is some?

Does this have to be top-down for the entire organisation? Can it have different star model configurations for a business unit or even a sub-section of the business unit? Or does it have to be iterative?

I have been working with the finance department of a pharmaceutical company. We did a star model just for the department because very few people can actually do a full corporate star model for an entire pharma company. The aim  for the department was to see the strategy and how it will evolve because of the changes in regulations, cheaper labor etc. We were able to do something very pertinent, spot broken links and bring some immediate improvement because we had the right people on the board. I also have seen start-ups to ask me to do a star model to help them secure a funding. Investors will ask question about organisation. And we were able to explain how they were going to use the funding.

Can you use the star model even at the project level?

A particular project is part of the strategy execution and I would expect a star model at a higher level. But when I think about it, we need to organise the project, set priorities, define what people we would need. Yes, I could imagine using a star model to bring the people together and start performing.

 

Join us next week for the final talk about “Inspiring Innovation through Failure”.