Daily Archives: November 21, 2016

Business, Innovation, Management

Innovation Portfolio Management (IPM) at 3M

The notion of Innovation Portfolio Management (IPM), is primarily correlated with the process of provisioning corporate’s resources through its portfolio of new services and products that are aligned with the business strategy (Meifort, 2016). Thus, and to ensure superior control of growing rivalry, corporates must have an efficacious IPM in place that would safeguard a constant pipeline of innovative and quality products (De Maio et al., 1994).

In this article, I will be addressing 3M company, with a target to grow into the most innovative company across the world, through utilizing an extensive variety of Knowledge Management Systems (KMSs), facilitating a suitable working environment, as well as effectively motivating its people (Brand, 1998).

In line with preceding objective, 3M realized that its structure should be a reflection of company’s portfolio management, that is principally built on two main verticals: acquisitions and restructuring. Therefore, in terms of restructuring, the company decided back in 2013 to be divided into five divisions. And through that move, it facilitated the path for 3M to attain significant reductions in terms of operational cost by improved effectiveness, throughput and scale. Moreover, it has as well assisted the company to effectually recognize industries that actually boost development and innovation. As a result, 3M disclosed a recent statement that it is stripping its business in the static control domain, in order to pay extensive consideration to further innovative and profitable business opportunities (Forbes, 2015).

While regarding acquisitions, then 3M and through its strategy is considering them as an essential move for progression, growth of products’ portfolio and reinforcing its global presence, with a target to allocate a hefty budget of as high as $10 billion on acquisitions through the year 2017 (Forbes, 2015). And with that regards, I will bring two recent examples. The first one goes back to July 2014 when 3M secured a large presence in the Japanese market, through buying 25% of Sumitomo Electric in a move that helped the company to fully acquire the joint venture enterprise Sumitomo 3M, and eventually have a bigger control in world’s third largest economy (Reuters, 2014). Speaking of the second example, then 3M realized the high potential in the healthcare IT segment with a potential to reach $66 billion by the year 2020. Accordingly, they have acquired back in February 2014 Treo solutions, a company that is specialized in providing comprehensive business intelligence systems for healthcare suppliers and users (3M News, 2014).

Speaking of the R&D and it is impact on 3M’s portfolio and products growth, then the company announced in its last year’s sustainability report (3M, 2015), that 30% of company’s sales are generated out of the products that were developed over the course of last 5 years. As a result, and due to company’s belief in R&D’s significance in market dominance, 3M’s management decided to allocate almost 5.6% of company’s profit on R&D activities, and to increase the allocated ratio to 6% by the year 2017 (Forbes, 2015).

Conclusion:

After considering the foregoing elements of 3M’s portfolio management, that is accompanied with a set of innovative and distinguished range of products, we can realize how 3M managed to maintain its competitive edge and even dominate a substantial pricing power, that helped the company to sustain growth and maintain a significant influence in the market.

References:

3M (2015), ‘Sustainability Report’. Available online from: http://multimedia.3m.com/mws/media/1064170O/3m-2015-sustainability-report.pdf. [Accessed on November 12th 2016].

3M News (2014), ‘3M to Acquire Treo Solutions‘. Available online from: http://news.3m.com/press-release/company/3m-acquire-treo-solutions. [Accessed on November 12th 2016].

Brand, A., (1998), ‘Knowledge Management and Innovation at 3M‘, Journal of Knowledge Management, Vol. 2, Iss 1, pp.17 – 22. Available online from: http://dx.doi.org/10.1108/EUM0000000004605. [Accessed on November 12th 2016].

De Maio, A., Verganti, R., and Corso, M., (1994), ‘A Multi-Project Management Framework for New Product Development’. European Journal of Operational Research, 78, 178–191. Available online from: https://goo.gl/3DkGj7. [Accessed on November 12th 2016].

Forbes (2015), ‘3M’s Key Growth Levers: Portfolio Management, R & D, Business Transformation‘. Available online from: https://goo.gl/XKGa83. [Accessed on November 12th 2016].

Meifort, A., (2016), ‘Innovation portfolio management: a synthesis and research agenda‘, Creativity and Innovation Management, 25, 2, pp. 251-269, PsycINFO, EBSCOhost. Available online from: https://goo.gl/L3dFdc. [Accessed on November 12th 2016].

Reuters (2014), ‘3M to buy Sumitomo stake for $885 million to control Japan business‘. Available online from: http://www.reuters.com/article/us-3m-japan-idUSKBN0FL1XU20140716. [Accessed on November 12th 2016].

Business, Innovation, Management

Innovative Culture at Google

The principal foundations of Google’s corporate strategy were always connected to diversification. Google accomplished its diversification strategy over a series of acquisitions, innovations as well as corporate entrepreneurship. Which subsequently empowered Google to extend its contributions and reduce its rivalry. Therefore, and as industry front-runners, Google utilized aggressive strategies that were reinforced by continuous innovation of its product lines, in addition to its growth into other businesses like mobile, blogging, news, phones, maps and health (Finkle, 2012).

Furthermore, Google supplied internet users with the top significant search results on as many subjects and themes as possible. This comprised outsourcing attempts of international professionals and penetrating new markets through delivering its services and range of products in foreign languages. Moreover, Google’s strategy on the business level was as well a comprehensive recognition strategy, since it presented characteristics that were not available by other search engines, such as translating from one language into another, while still providing the most relevant search results (Finkle, 2012).

From the management end, Google’s organization model was close to other companies in the high technology domain. Google acquired many of the buildings surrounding its main head office. The location, culture, and make-up of the company were very close to that of a university or college. It was not exceptional to see many personal activities undertaken in the campus, like cycling, or playing basketball. And according to the former CEO who said in an interview few years back: “I looked at Google as an extension of graduate school; similar kinds of people, similar kinds of crazy behavior, but people who were incredibly smart and who were highly motivated and had a sense of change, a sense of optimism” (Schmidt, 2009).

The organization structure along with the associated management attitude is another evidence of Google’s policy of entrepreneurial innovation. Externally, Google is structured and managed like many other companies. It has several domains and group, with having its own dedicated hierarchy of leads, managers and directors. Nevertheless, the secret recipe for success is in its very flat management hierarchy, that has continuously tried to retain the proportion of staff to managers as high as possible. Therefore, it is not uncommon for 40 personnel to fall directly under the supervision of one executive or manager. Another distinguished characteristic of Google’s culture, is originated from its fundamental principles from the famous 20 percent time policy, which permits engineers to spend nearly a day every week following projects outside their prime zone of accountability. The maximum imperative thing about 20 percent time is not how much employees are allowed to utilize on side projects, as much as that the company inspires them to think and be innovative (Copeland and Savoia, 2011).

References:

Copeland, P., and Savoia, A., (2011), ‘Entrepreneurial innovation at Google‘. Available online from: https://static.googleusercontent.com/media/research.google.com/en//pubs/archive/41469.pdf. [Accessed on November 20th 2016].

Finkle, T.A., (2012), ‘Corporate Entrepreneurship and Innovation in Silicon Valley: The Case of Google, Inc.‘, Entrepreneurship: Theory & Practice, 36, 4, pp. 863-884, Business Source Complete, EBSCOhost. Available online from: http://eds.a.ebscohost.com.liverpool.idm.oclc.org/eds/pdfviewer/pdfviewer?sid=57893a60-6fc8-4a59-8eaf-a1364cccd309%40sessionmgr4006&vid=1&hid=4210. [Accessed on November 20th 2016].

Schmidt, E., (2009), ‘Inside the mind of google‘. CNBC Interview. Available at http://www.youtube.com/watch?v=u02h9LYYmuc. [Accessed on November 20th 2016].

Bureaucracy, Business, Holacracy, Management

Bureaucracy vs. Holacracy

As an MBA student and a close observer to general market dynamics, I can categorize the types of business changes under three main groups: 1) Episodic, 2) Continuous and 3) Disruptive (Daft 2013), with the third one being substantially critical due to its direct ties with immediate and sudden changes in market constraints, that would severely impact any business that is not well equipped for radical changes. That said, companies that are yet heavy dependent on strict bureaucracy as an internal governing system, will have a very tough time in merely surviving the growing magnitude of competitive rivalry.

Employing large number of officials in order to strictly and carefully follow the roles is a guaranteed recipe for failure. Now it might work in limited government sectors and non-profit organizations, but definitely it will not function for companies that operate on profit and loss basis. And in line with that, I can bring a very relevant example from the large pharmaceutical company, Pfizer, that exponentially inflated in terms of human resources over the course of successive mergers and acquisitions, leading to excessive increase in managerial hierarchies, and significant drop in delivering new drugs, despite the fact that R&D budgets were tripled.As a result, pharmaceutical companies are now adopting a different concept, that is based on small biotechnology setups (Daft 2013).

While speaking of companies that successfully managed to overcome bureaucracy, then Chrysler (under its flagship are both Jeep and Dodge) stands out like a very good example. Where from a company that filed for its bankruptcy and participated in the bailout program from the US government back in 2009, it miraculously turned into a profitable one in only two years after repaying its financial obligations fully to the US government. And the credit behind that success goes to the genius CEO of FCA (Fiat Chrysler Automobiles) Mr. Sergio Marchionne. So what he did was remarkably brilliant, while in the same time quite simple in principle. Where he believed in the flat organizational structure, and for that he put all of his power to fight centralization of decisions along with bureaucracy, to end up with a new setup where 25 of senior Chrysler executives are reporting to him directly, that enabled him to drastically make quicker and better decisions compared to previous failing structure that used to take weeks or even months. However, that didn’t happen without losses for some and gains for others. Where for those who resisted the change and fought to keep the company as it is, were shown the door. While others who expressed eagerness, got promoted and become official members of the new management team (Daft 2013).

Alternatives:

Since ultimate organic or mechanistic structures are going to be accompanied with several side effects, a number of alternative setups have been proposed which happen to be based on a hybrid concept, in order to get the best out of both. In line with that, I thought to briefly refer to this study published by Washington Post, which explains the possibility of operating in a hybrid operational spectrum, between holacracy and bureaucracy, through which higher levels of freedom is given to certain volume of employees, while greater level of control is being imposed on others (Washington Post 2015), which relatively sounds like a reasonable and practical blend.

References:

Daft, R. L., (2013) ‘Organization Theory and Design’. 11th edition. Mason. OH: Cengage Learning.

Washington Post (2015), ‘How to build a great company by blending bureaucracy and holacracy’. Available online from: https://www.washingtonpost.com/news/innovations/wp/2015/09/03/how-to-build-a-great-company-by-blending-bureaucracy-and-holacracy/ [Accessed on November 21st 2016].