V. LEADERSHIP LEARNING THROUGH ORGANIZATIONAL CHANGE

INNOVATION NETWORK

An Integrated Organizational Structure for Organizational and Management Learning

Doris Wilhelmer, Johannes Erler, and Jeff Zimmerman

COMPLEXITY CALLS FOR ITS MANAGEMENT

Increasingly the unrestricted movement of goods, services, people, information and knowledge is affecting business organizations in many ways, particularly in how businesses strategically position themselves for the future (Micklethwait & Wooldridge, 2003). Complexity management focuses on managing the impact of globalization on daily issues for business managers. Since globalization adds new types of challenges, it requires new capabilities for dealing with accelerated rates of change, higher business risks and increased uncertainty. Indeed, the same processes that worked for business in the past may no longer be enough to overcome the challenges of the future.

The worldwide recession, which was first felt in 2008, affected many organizations (and still does). Budgets were slashed, employees laid off, and hiring came to a standstill. Institutions representing the cornerstone of some industries (e.g., banking—Bear Stearns, Lehman Brothers; insurance—AIG, etc.) came crashing down, or close to it. The reality of the changed business landscape was becoming painfully clear to employees, supervisors, managers, business owners, and other stakeholders around the world.

Like so many other multinational organizations, the Swarovski enterprise was forced to take a hard look at how it conducted its business. As an Austrian-based worldwide leader in the production of fine crystal, it employed more than 25,000, had manufacturing facilities in 18 countries, and sold products at more than 1,800 stores and partner shops throughout the world. Needless to say, Swarovski was shaken by the recession.

For the year ending 2008, the Swarovski Group had revenues of €2.52 billion and had 25,998 employees. For the year ending in 2009, the Swarovski Group had revenues of €2.25 billion and had 24,841 employees (Eschhofen, 2010, p. 4). For the year ending in 2010, the Swarovski Group had revenues of €2.66 billion and 28,578 employees (Tyrolit website, 2013). By the year end of 2011, the Swarovski Group had revenues of €2.87 billion and had 31,458 employees (Swarovski website, 2013). From these numbers, 2009 was a challenging year for Swarovski (with a loss of €270 million in revenue and 1,157 jobs).

Despite the significant losses sustained by Swarovski throughout these defining years, a group of managers in 2007 had already taken some important steps before the recession of 2008 to promote something that might sustain the multinational organization throughout its impending trials: continual innovation. The need for innovation at Swarovski was a direct result of employees and managers recognizing that the current state of the company was not working. The increasing pressure on Swarovski business units to succeed in product development and service performance led to too many product duplications that increased the loss of capital resources and time spent correcting these duplications. Something had to change to help secure the long-term future of the company in an increasingly chaotic workplace. Focusing on continual innovation was Swarovski's response to its need to "zoom out" and see past the chaos that was directly in front of it. In an article (Reingold, 2009) detailing an interview with Jim Collins, the management expert and author of Built to Last (2002) and Good to Great (2001), one factor that helps good companies turn crisis into opportunity is by zooming out to see past the chaos in front of it. An excerpt from the interview summarizes it the following way:

If you talk to firefighters about the dangers of firefighting, they say that under duress there's a tendency to zoom in on the specific square area in front of you. We zoom in - go to the micro. But [some people] have the ability to do the opposite, to get above the fire, zoom out, and look at this with a whole different lens. (Jim Collins, as cited in Reingold, 2009)

By zooming out and focusing on continual innovation, Swarovski was also positioning itself for future success.

Rigby, Gruber, and Allen (2009) noted that innovation is both a vaccine against market slowdowns and a factor that rejuvenates growth. Furthermore, Rigby et al. (2009) highlight the need for innovation when they state, "Imagine how much better off General Motors might be today if the company had matched the pace of innovation set by Honda or Toyota. Imagine how much worse off Apple would be had it not created the iPod, iTunes, and the iPhone" (p. 79). In other words, continual innovation allows a company to not only capitalize on what it does well, but to also focus on new opportunities, which might help to sustain the company in the future (especially when past best-practices come up short to the present challenges). To achieve the innovation Swarovski desired, the small group of managers (who in 2007 laid the foundations for the innovation machine later known as the "INNOnetwork") had to find a way to manage the complexity inherent to a multinational company grinding its way through a world-wide recession.

Managing complexity forces managers to visualize how they will combine previously inactive resources and capabilities to form new services, products and procedures. This affects the managers' identity by transforming their traditional tasks of administering and controlling subordinates into providing more leadership by acting as coentrepreneurs, motivators and shapers of attractive possibilities and effective organizational structures. Managing complexity challenges leaders to act as change agents creating and implementing new organizational frameworks allowing them, on the one hand, to respond to urgent contextual challenges on the organizational level and, on the other hand, to initiate individual leadership learning. This mode of learning focuses on building up new routines of how to shape relations with staff members and to foster their collective capabilities.

In this chapter we will illustrate the benefits of internal cooperation networks for effectively managing circular interdependencies among participating employees (members) and business units. We will show that networks can function as integrated structures for organizational learning, network system learning, management system learning, and individual leadership learning. The case study will demonstrate opportunities of how to combine organizational and individual learning "on the job" that goes beyond the traditional drawbacks of management programs that offer out-of-date "know-how" and suffer from barriers that inhibit the transfer of individual learning to everyday behavior and routines.

 
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