Regarding the above-mentioned developments a group of young managers decided to implement a cross-functional innovation management structure aimed at:

• Overcoming passive resistance and communication barriers

• The bottom up (BU) collection of diverse innovation strategies aimed at adjusting the INNOstrategy for the Swarovski enterprise

• Developing enterprise-wide "navigation tools" (e.g., INNO portfolio)

• Utilizing competencies and skills for inventions and innovations by connecting people of diverse units and regions

• Fostering economic success by widening breakthrough innovations

• Utilizing enthusiasm for processes of innovation for increasing ability to deal with unpredictable crises.

Approximately 120 people were involved in the integrated network structure implemented for the soft governing of cross-functional strategic innovation processes. The substructures of INNOnetwork enhanced individual leadership learning, management system learning and organizational learning by changing even daily routines of single business units through the implementation of new INNOprocedures. This i-FLASH community included Swarovski staff members in the innovation process complementing the face-to-face network. The INNOnetwork structure was implemented in 5 phases over 5 years.

Swarovski's Integrated Network Structure

The internal network was established to smooth out rigid boundaries and to build new ties between competing units and innovation participants throughout the Swarovski enterprise. With regard to network structure we can differentiate between the following functions (cf. Figure 20.1):

1. Network coordinator: The vice president of innovation was elected by the members of the steering group for a period of two years.

2. Cross-functional steering group: 6 innovation managers of business units supported by the heads of R&D, product development, technical sales, and so forth, participated in half-day steering group meetings on a monthly basis implementing rules of the game and instruments for the Swarovski INNOnetwork.

3. Full day INNOnetwork meetings : These meetings took place twice a year and included 70 to 90 cross-functional experts and decision makers

4. Enabler and innovation projects: These projects where selected, started and reviewed within INNOnetwork meetings and steered via portfolio management by the INNO steering group.

5. Informal teams: These informal teams emerged from INNOnetwork meetings

6. Enlarged complementary counselor staff: This included the vice president of innovation and two external counselors and was effective as an overall navigation instrument. Staff meetings took place at the beginning and closure of each year as well as before and after each INNOnetwork meeting (monthly). Additionally, this staff generated benchmark criteria for steering group workshops which were moderated annually by external counselors.


Phase 2007: The foundation of the INNOnetwork

The idea of establishing an internal INNOnetwork was legitimized by organizational values tracing back to the founder Daniel Swarovski (1862 -1956). The term INNOnetwork stands for "innovation network." All individuals associated with the INNOnetwork were committed to continual innovation and profit maximization.

Daniel Swarovski on innovation and development.

Figure 20.2. Daniel Swarovski on innovation and development.

In the beginning of 2007 six young, competent, and internationally-experienced managers were assigned to overtake INNOmanagement functions parallel to their daily tasks in product and application management. Trying to resolve emerging issues, they frequently were confronted with passive resistance that proved unbreakable. As a result, this top management initiative came to an early halt due to barriers resulting from internal competition and distrust.

Three years earlier (in 2004) the vice president (VP) set up an innovation laboratory called "i-LAB" implementing idea management and creativity workshops. The purpose was to develop and rigorously test new prototypes. However, many developed prototypes were rejected with the comment that they were not addressing the requirements of the powerful business units. In this situation i-LAB (serving as the interface between the available technology and the demands of different business units) turned out to be a key factor in helping to neutrally coordinate and bridge the many interests within the different business units of Swarovski.

This was the context when the VP of innovation and the INNOmanagers of the business units came up with the idea to set up a steering group for the implementation of a network: All relevant participants had recognized that success could only come through the trusting and reliable cooperation among each other. From the very beginning the idea was to build upon and improve the cross-functional communication between all business units and the technology unit.

The network was to function similarly to the systemic "submarine strategy" (Willke, 2004) according to which one keeps a project confidential and talks about it when it functions well. The first stepping stone of the steering group was to negotiate and decide how the network would be structured and to develop joint roles and rules within the steering group for decision making beyond market and hierarchy. Issues were gathered from all units in order to define the Swarovski-wide innovation research fields. Deciding on a delegate for the role of the network coordinator turned out to be a very delicate issue because of company-wide competition and distrust.

The VP of innovation (i-LAB) was appointed as coordinator by a transparent election procedure and the steering group could then start cooperating on the topics of innovation. It seemed to be the self-organized manner of this steering group which made this initiative a success (Simon, 2004).

Phase (2) 2008: Standardization and Enterprise-Wide Visibility

The first objective of the cross-functional steering group was to obtain an overview of the planning status, projects, methods, deployed controlling, etc. of all business units. The consensus was that Swarovski was not lacking creativity or "know-how," but a common strategic focus across all of its initiatives.

The implementation of successful communication supported by systemic counseling and governance fostering innovation was mastered by the steering group (Erler & Wilhelmer, 2010). It created a reliable base for intensive knowledge exchange across new business models about product-specific life cycles and innovative ideas for already existing products.

The internal network functioned well as a "competence source" for developing new technological roadmaps and projects, some of which were economically profitable on the world-wide market within less than a year after implementation.

Additionally, the steering group and network meetings took a step-by-step approach to negotiate the draft of a vision statement and to specify network roles and rules for network self-governance. The speedy dissemination of information about self-developed management tools (e.g., portfolio management) not only demonstrated the drive of the steering group to all members involved but also to business units. It was, thus, the right moment for the surfacing of the first "submarine."

The first "submarine" involved the steering group presenting the strategic areas, portfolio management, the "House of Innovation" and the initial innovative projects to the executive board of the company. The positive feedback of the executive board on the results gave rise to a continued and even strengthened engagement for the development of the network-architecture.

Initially rather market-oriented, the steering group embraced other topics—and in parallel also additional organizational units (e.g., R&D, product development)—that were crucial for project success. The steering group had grown stable enough to start dealing with and merging different logics behind "economy," "knowledge," and "trust" inside the network.

Phase (3) 2009-2010: The Internal Network as Crisis Manager

The global financial crisis, which fully reached Swarovski in 2009, triggered a series of measures that in particular targeted efficiency improvements, including lay-offs and reorganization. The sizes of innovation teams were cut and the pressure to manage a turn-around based on innovation mounted. It was a period of visible nervousness and operational turbulence. The crisis tested the INNOnetwork, too. It affected the cohesion of the steering group, for example, by regular meetings taking place less frequently, INNOmanagers leaving, and so forth. However, at the same time the opportunity to pause and reflect on recent developments felt like a relief, and it held the steering group together.

The steering group contacted all heads of business units directly to inquire about their current challenges—and the business heads responded. They replied with a catalogue of demands to be addressed in a short window of time. The steering group took up this catalogue and addressed it directly in the form of questions to members of the network-meeting the members during an open space format (Owen, 1997). A dramatic situation for Swarovski turned into a memorable hour of the internal network: over 70 employees resonated with the demands (of each business unit) made by the VPs of marketing and discussed various project ideas in transdisciplinary group settings. Within a very short

The D: Light Watch as an example of successful innovation.

Figure 20.3. The D: Light Watch as an example of successful innovation.

time the group created innovative and solid project ideas, all relevant outcomes of the meeting.

Interestingly, the event was successful in another dimension: it created an enthusiastic mood. Ultimately, it led to projects that delivered and were positively recognized by the top management. The INNOnetwork stood the test of time and used a significant crisis to become more visible and stronger. The INNOnetwork subsequently demonstrated that it was a tool that could be used in crisis management.

Phase (4) 2010: The Coordinator as a "Server" of the Network

The cooperation in the internal network required its own organization: A suitable form of cooperation could be found and continuously optimized through a process approach (Grossmann et al., 2007). It built up a set of rules of the game that made a clear difference to the traditional distrust and routines at Swarovski thereby creating new obligations between steering group members. These rules helped to make it easier to determine who was on the "inside" and who was on the "outside."

After overcoming the crisis the task was to keep the networking process ongoing: New members had to be integrated and introduced to the specific values and roles. And rules had to be reformulated due to new member demands. Furthermore, the cooperation patterns within the business units had to be redrawn. In this phase figuring out the benefit of network results for the individual units turned out to be very important. The coordinator was required to prove his neutrality and responsibility for the entire network and to build up acceptance for a temporary withdrawal of single steering group members without questioning their membership in the overall network-system. The network management's central coordination function, thus, started to take hold in working as a "server in the net" (Grossmann et al., 2007).

Phase (5) 2011: New Setup Demanded

The year 2011 started with a fundamental announcement: The chairman of the Executive Board of management (the most influential family member) announced plans to retire from all functions within a few months. Due to the fact that all units were reporting to an Executive Board member (also a family member) this information was accompanied by the additional announcement of a fundamental restructuring process of the overall Swarovski enterprise.

The steering group members started to gather their perspectives on why the internal network should continue to work outlining the quality and the high speed of launching innovations during the previous two years. Due to the network's visibility and appreciation, the network coordinator received several offers to proactively join potential new emerging units. Furthermore, there were several factors that turned out to be instrumental in successfully ensuring the survival of the network: (1) bringing the hidden beliefs of Top Managers into the communication of the steering group members; (2) rejecting the mix-up of the "internal network" with a traditional "department"; and (3) rejecting the mix-up of the "coordinating function" with the traditional role of a "line manager." Lastly, the network had to remember its unique identity and to draw clear distinctions between itself and its developing environment (e.g. potential new business units and future managers).

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