Davenport, Leibold, Voelpel: Organizational design for rapid adaptability

To successfully manage gradual evolutionary change with occasional revolutionary leaps requires an ambidextrous strategic management mindset – one rooted in “loosening” the formal organizational structure for rapid adaptability. Welch’s approach to management while CEO at GE involved a minimalist approach to formal control systems – GE’s elaborate strategic planning system was simplified to focus on a few issues with a minimal degree of direction and control. Slogans such as “boundaryless”, “destroy-your-company-dot-com”, “six-sigma” and “work-out” directly influenced the culture of GE and permitted more complex patterns of collaboration with resilience for rapid adaptability and innovation in the GE ecosystem.

In order to create an organization that can resolve the paradoxes between efficiency and creativity, management should be more concerned with developing and maintaining an enterprise system guided by coherence mechanisms such as purpose, values and behavioral norms, rather than rigid conformity-based mechanisms. Four concepts are useful in formulating coherence mechanisms: identity, knowledge, modularity and networks.

Identity: An organization’s purpose must reside in the heads and hearts of its members – a shared concept of what the organization fundamentally is.

Knowledge: Information provides the medium through which an organization relates to its environment, but knowledge enables individuals within the organization to know how to react to external changes, and how to influence and shape the environment.

Modularity: Structures based on loosely-coupled, semi-autonomous modules possess considerable adaptation advantages over more tightly integrated structures. Modular structures are particularly useful in reconciling the need for close collaboration at the small group level with the benefits of critical mass at divisional or organizational levels.

Networks: Responsiveness to a wide range of external circumstances necessitates every individual to have a wide range of connections to other individuals, with the potential for unplanned connections. For example, the use of intranets and extranets to link together the different parts of the organization and outside companies, as well as customers, has the effect of blurring the boundaries between internal units and external companies. The flexibility of these linkages enables the capabilities resident within inter-firm networks to be reconfigured in order to adapt quickly to external change.

The concepts indicated above are especially relevant when considering the outsourcing of innovation and its management.