Talk about the historical organizational development through leader as an architect framework. How the entrepreneurial design created a competitive advantage for the company and dive into their exploitative business strategy.
Critical Tasks- The company ability under the McKnight era to retain the legacy from the classic era of technological innovation, market responsiveness, and institutionalized entrepreneurship played a big part of strategy and identity to perform. The establishment of product-market explosion within 3M through creation of Central Research Laboratory (CRL) which led to a technological development program within the organization by McKnight was critical. The Technical form which was setup to facilitate grass roots scientific communication across horizontal and vertical organizational boundaries within the 3M. This was a smart move as it establishes clear channels of communication. Another role this move played was relay the concerns of the scientific community within the organization to the top management.
Formal Organization- The organization procedure during the McKnight era was setup to operate on highly diversified portfolio of businesses built on broad and expanding technology base. While developing the process of developing its product line of coated abrasives and pressure sensitive tapes, 3M amassed a strong knowledge of material technologies and an impressive capability in the precision coating process. McKnight experimented with a new organization form by creating an adhesives division and giving a division general manager full responsibility for its operation. He reorganized the entire company into seven divisions, each with its own research lab, production operation, and sales force. Over the years, divisions proliferated, driven by the company’s growing product and market diversification, and by a management philosophy that retained its strong bias towards small entrepreneurial units. This formed the company’s “grow and divide” philosophy.
People- McKnight to maintain stability encouraged employees such as Salesmen to provide feedback to production people, plant engineers and technologists to routinely discuss new product designs and pull researchers into customer’s plants. This philosophy encouraged those employees with good ideas to pursue them, not only because niche markets were profitable, but also because many products and technologies subsequently found applications never dreamed of by the original entrepreneur. To develop and retain such good employees, 3M managed its human resource practices in a way that ensured entrepreneurs were recognized and appreciated. A “dual ladder” career track allowed those employees who wanted to develop in research, engineering, or marketing to progress while pursuing their professional interests. Achievement was rewarded not only by promotion but also by recognition. The greatest achievement for a 3M scientist, for example, was to be inducted into the Carlton Society, an honor reserved for those who had made the most exceptional scientific and technical contributions to the company. As the importance of team efforts increased, these too were recognized through the company’s Golden Step Award Program. Even more powerful than such formal awards was the informal recognition given to successful entrepreneurs through the oft-repeated stories of major accomplishments that converted mortals into semi-legendary figures. One of the common themes in the many stories of innovation that circulated through 3M was the way in which individual persistence and commitment triumphed over management indifference or organizational rejection.
Culture- In the culture carefully positioned within the company, opportunities were generated by both external demand and internal capability. Externally, expanding product applications led to new customer needs that created new development opportunities. Internally, the culture encouraged employees to recognize how existing products, processes, or technologies could be leveraged into new market opportunities.
The success at 3M is based on research and experimentation within 3M, it also establishes product differentiation as the key to commercial success. This is how the organizational design was setup by McKnight as soon as he took over and this is what makes the company’s organizational structure entrepreneurial. The way it reflects company's values is that they have fit this entrepreneurial design into a large mindset and realized their corporate capability. They have successfully commercialized their research from labs and spent million of dollars from the beginning. E.g., the wetordry. They have successfully taken their numerous existing products to new international markets first through a conglomerate strategy and then through independently handled subsidiaries. This entrepreneurial approach made them build new organizational procedures and re-iterate through them. The innovation and expansion culture created a conceptual culture within the organization where unit of progress was easy to track.
Their competitive advantages that emerged from their design were that the market oriented, technologically based development instuitionalized in formulating 25% of its sales coming from products introduced within the five-year period. When one product idea would fail, a new product line would emerge as a side product from it due to the established persistent and explorative methodologies existing within the company. Through these efforts and other formal channels and forums, the company was able to maintain the vital networks of informal contacts that connected its scientific community. The relationships were strengthened by a strong norm that encouraged any company scientist to contact any other to discuss a problem or ask for advice or help. As a result, even as the company grew, technologies continued to diffuse rapidly, becoming adapted and refined as they did.
3M can be defined as a ambidextrous organization as it like other similar organizations created business units that grew separate from the parent company and were managed by a completely independent management although influenced by the parent company.
Lou Lehr’s major focus after becoming CEO was on reorganization to allow more cross-unit coordination, a new emphasis on formal strategic planning, and the expansion and leveraging of 3M’s technological base. In 3M’s biggest reorganization in 30 years, the new CEO decided to collect the entire portfolio of 42 divisions and 10 groups into four business sectors based on their related technologies. The one that resembles one of any ambidextrous organization structure.
We could say that this is Exploitation as it is about improving and refining products and processes that are already in the company portfolio and involves choice, production, efficiency, selection, implementation, and execution.
The strategic intent was to facilitate the development and diffusion of technologies across closely related divisions, was supported by giving each sector its own laboratory. In the new configuration, the Central Research Laboratories were to concentrate on long-term basic research that would lead the company into entirely new businesses; the new sector labs had a mandate to focus on the core technologies that would drive medium term (five to ten year) growth in the businesses they supported; and the division labs were to continue to work on developing the new products and processes with immediate application or potential. All these steps show the scope of an exploitative business.
It both strengthened and weakened 3M. Let’s consider.
This strengthened 3M as it provided a new impetus to innovation that boosted the key measure of sales from products introduced over the past five years over the 25% level again, which had dropped. The new organization structure, planning process, and funding policies can be said to have had an enduring impact on 3M’s product and process development.
Weakening metrics: In contrast to 3M’s 14% average annual growth in both sales and earnings during the 1970s, in the first half of the 1980s the average annual sales growth fell to 5% while net income remained essentially flat from 1980 to 1985.
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