Lack of Innovation, too much Rules and Solving them : The case of a beverage company OJuice
Category : Analysis Examples
Internal/ External Environment and Business Impacts
The internal environment in the company prefers status quo while the external environment as shown by competitors is full of innovation. Rules embraced the everyday operations of the company which contradicts to what really happen outside. Rules can be helpful in repetitive and hazardous jobs. In this case, employees have minimal probability to argue about their situation.
However, in marketing and sales team and perhaps the management team, rules can disrupt creative thinking and value judgment. As rules as based on previous events and experiences, they do not reflect the current situation. Without flexibility in breaking them once in a while if benefits would follow, rules can show adverse side. The reason why the company resulted to stagnant performance in recent years is because of its status quo and inability to develop new products.
Competitors of the company on the other hand had developed new ways in attracting the market. They are experimenting new flavors, expanding distribution and installing branding strategies in their products. The preference of the market for new products is readily available in the products of competitors. No wonder that they are able to steal some of the market share of the company. With competitors drawing their chance to succeed the competition, the growth of the company is undermined and its strategic direction towards the industry average becomes blurred.
Further, the social, technological and demographic changes in the operating setting of the company also changes. With the entrance of imported products due to globalization, it is harder for them to retain their previous leadership in the industry. Information is largely available by means of internet access and messaging. Word of mouth for new products and successful product samples can easily spread most of the market. Their preference towards the company can shrink because a new demand curve is shifted due to change in tastes and preferences. This shift is not by essence economics but rather highly marketing as the firm failed to comply with alterations in demand.
Competitors are far innovative than the company. This is because creativity is not treasured rather impeded in the latter case. In contrast, there are several advantages of the current setting in the firm. They can mass-produce which provides venue for cost-cutting endeavors while the experience in producing a limited number of product lines can bring expertise to employees and operators. In human resource aspect, the employees are somewhat motivated to some extent as they are not required to study or be trained. Their expertise and experience makes their work easy and consequently enjoyable. However, this set-up reduces the capacity of the firm to introduce newer processes that may not be as efficient as today but are far more value-creating and growth focused. Innovative organizations needed an open-door policy which is largely contrary to the case of the company.
The firm focused their strategy on cost leadership type. With this, they are creating lower-priced products with an acceptable level of quality. This strategy, however, has limited successes on volume and cost savings. It cannot hedge for possibility of expansion and growth. Without growth, an enterprise will not feel success and will live to the status quo. This is how the firm lives and operates. In the contrary, innovative organizations are lively and willing to risk some of cost savings and traditional successful procedures in favor of new approaches and growth. New horizons are a signal of success that innovative organizations are not afraid to tackle them even if it breaks the tradition. For them, tradition is the way of the past and success occurring in this period may not be as formidable as before. Therefore, to maintain leadership, newer product innovation and process re-engineering is installed not for the sake of change but for the sake of improved performance.
In certain industries where competition is intense, companies create a unique form of organizational structure. The most prominent type is the project-based organization. It is described as highly flexible, highly voluntary, largely based on individual performance, relies on cohesion of project team, get direction with the project leader and generally favorable for product development projects. There is no immediate supervisor to report on a daily basis neither departments rather employees are responsible for their association to a certain group.
In reference to the firm, this style of structure is useful in developing innovative organization and regains their leadership that is obtained decades ago. The previous problem of higher management and the two former marketing employees that are fired as the latter broke the rules repeatedly will be prevented. Most of the times, creative minds are very sitting in those people that can think originally, expressed themselves openly and hate boring habits.
The creation of project team in the firm can infuse cooperation among employees and increase the level of belongingness. Corporate-level association is less clear than group-level association. Employees can freely select their group while leaders are selected by the top management in accordance to the rules. However, the rules within the group are very flexible and binding only to the group. For example, group members may not go to office as long as they will finish their assigned tasks. As the company is currently in need of innovation to save their market share, recruiting new set of marketers and mixing them with current marketers under new open policy can likely to drive results.
There are several aspects of the organization to be changed in order to introduce the innovative framework. Employees might likely to resists especially those that aged and monitored the historical success and failures of the firm. Resistance can cause any efforts for change to be disrupted if not failed. Due to this, there are several things to consider before implementing the change idea. First, determine if the benefits of change outweigh its costs. In this area, the answer is yes because the firm is facing decline in performance for almost five years. Inability to apply solutions can lead to unsold inventory, lower liquidity and financial difficulties.
Second, Janice and other leaders must commit to the change idea. They are the ones who administer the rules and therefore the initiative must come in their action. Commitment also requires funds for training employees, replacing old machines, installing new information systems and other activities that will support the reduction in corporate rules. The need is eminent as innovative structure requires intensive performance systems to measure the gains of the business not only from a flexible organization but also to the change itself.
Third and last, auditing current, past and future performance must be in place. This will signal if the company is gaining results from its change strategy. Several criteria are required and this list is the most important; namely, employee attitude, employee performance, managerial commitment, availability of technology, comparative performance from the industry and shareholder rating. There are many stakeholders that would be affected by the change. In effect, the results must be attributed and be satisfied at least on the minimum in each.
Competitors became a successful firm because its culture fostered respect to both employees and customers while the former is encouraged to work hard and provide premium service while enjoying at the same time. Because of instilling these values into the mainstream of firm intangible features, productivity and motivation exceeded the expectations of the management and customers alike producing higher returns for the shareholders.
There are many promises of an effective and compatible organizational culture, however, it takes time especially for a new firm to adapt one and becomes a potential source of competitive advantage. In addition to this, strategic leaders are faced with different alternatives including the innovative type of culture which fosters change. Whatever the planned or unplanned culture that was built, leaders should be consistent with the strategic mission to prevent blunder from introducing one-time radical change and they should be equipped with managerial prowess and charisma to align an existing culture to the new line of firm strategies.
Using ethics in the analysis of managerial opportunism, injecting this element in the culture of the firm could minimize, if not erase, self-vested interests wrapped in a managerial decision. It can also address the problem of monetary claims attached to diversification endeavors also satisfying the manager that serves as detrimental to shareholder’s value.
With ethical practices fostered in the firm, managers and employees alike increases the value of performing organizational duties outside monetary rewards. In this state, managerial monitoring and employee turn-over can be kept at low levels because they are not only motivated but also are inspired in their work which results to shareholders’ savings. On the other hand, the same intensity, only on the extreme case, is applicable when a firm practices unethical behavior which can become a chronic organizational ailment.
Recommendation to Janice the CEO
Although may shock the entire organization, Janice has no other option but to introduce innovation into the processes and culture. Otherwise, they will confront financial difficulties while its rising unsold inventory will gradually de-motivate other stakeholders. To prevent ensuing downsizing and loss of funds, the firm must be able to create new products and hire new talents. It should maximize its laboratory but now will focus on creating new marketing-based products instead of cost-based ones. This may be the last try of the company to redeem its position in the industry. There can be issues of Janice being too opportunistic by holding power in the wrong way. She must maintain her objectivity and concentrate on how to turnaround the results of the company through innovation. It is time to bend the rules and adopt an open system policy that is beneficial to most of the stakeholders.
Hitt, M, Hoskisson, R & Ireland 2003, Strategic Management: Competitiveness and Globalization, 5th Edition, South Western; Thomson Learning, Singapore. *