Why does employee resistance to change ocurr and what are the outcomes of it?!

The model developed by Oreg (2006) shows the sources of employee resistance, the types of resistance and the consequences of it. (See Fig. 1). It deserves an attention since the whole process of resistance is studied and discussed. Moreover, the model is the result of empirical study made in an organization with 800 employees when the organization initiated a change. According to Oreg (2006) resistance is a complex, subjective and “tridimensional attitude towards change” consisting of affective, cognitive and behavioural components. Whenever employees are introduced a change in the organization, they put evaluations on it which is reflected in those three components. For example, affective component reflects how employees feel about the change, whereas cognitive component regards what employees think about the change. Therefore, actions taken by employees as a reaction to change are considered under the behavioural component. Three of the components are key to understanding the aspects of the resistance phenomenon.

Referring back to the figure 1, it is obvious that “potential sources of resistance lie both within the individual as well as in the individual’s environment” (Oreg, 2006). The sources that might affect the employee resistance can be as personality of an employee or the context variables, such as power and prestige, job security and intrinsic rewards. Most probably, “one of the first determinants of whether employees will accept or resist change is the extent to which the change is perceived as beneficial versus detrimental to them.” (Oreg, 2006) In line with Oreg (2006), every employee has his/her distinctive internal tendency to resist or adopt change, which in turn can predict employees’ feelings towards change. Referring to the study by Oreg (2006), when the office move was introduced to the employees, results showed that it caused as strong emotional and as well behavioural resistance like avoiding coming to the office and taking action against the move.

Frequently, organizational change effects how the power is distributed after the change. Some employees may benefit from change by assigning more prominent roles, whereas others may lose the power they employed before change. Hence, employees have reasons to go against change if they fear losing it. Despite, organizational change often leads to transforming tasks and position, thus threatening employees’ intrinsic rewards they gain from their work. Consequently, employees’ beliefs on moving to less interesting position might affect the evaluations they form on change or cognitive resistance. In addition, Oreg (2006) argues that employees’ attitude towards change is influenced by the process through which change is implemented. We agree with him while proposing that employees’ trust in their managers, how information is distributed and with what extent of quality, and social environment shape employees’ resistance to change. If employees trust their managers, receive timely and useful information about a change, they are more likely to evaluate the change positively and express desire to cooperate with it. Moreover, “when an employee’s social environment (i.e., colleagues, supervisors, and subordinates) tends to resist a change, the employee is more likely to resist as well.” (Oreg, 2006)

In accordance with ‘tridimensional conceptualization of resistance’ (Oreg, 2006), employee resistance leads to work-related outcomes, such as jobs satisfaction, employee’s intention to quit and continuance commitment. To illustrate clearly, “employees who reported being stressed, anxious, and angry because of the change, also reported being less satisfied with their jobs; those who reported having acted against the change also reported greater intention to leave the organization, and, similarly, those who reported having negative cognitive evaluations of the change when it was first introduced were also less likely to believe it is worth their while to remain in the organization.”(Oreg, 2006) As a result, ‘antecedents’ of change discussed might impact employees’ attitudes towards the particular change, while final impact might be reflected in their overall attitude toward the organization. For that reason, “resistance should be something the organization uses to improve itself and its decisions” (Oreg, 2006).

From my point of view, change is inavitable and is the part of our everyday life. Companies should focus on constant change, while incorporating employees in the change process. Due to above mentioned factors, employee resistance do and will always exist against change. The challenging part for leaders or entrepreneurs is to associate change with "something positive to organization and employees as well". Unless, employees feel the part of the change process and cooperate with management, no change can be implemented successfully.


Figure 1. The theoretical model of resistance to change by Oreg (2006).



Reference:
Oreg, S. (2006). Personality, context, and resistance to organizational change. European Journal of Work and Organizational Psychology, 15 (1), 73 – 101.

What People Really Need from a Change Leader by Mark J. Tager

Due to nowadays turbulent environment, changes in the companies are to become the necessary for sustaining competitive advantage or simply, for survival. Therefore, change initiatives should be organized and lead properly in order to get positive outcomes. Thus, the role of change leaders is crucial as for implementing the change successfully as well avoiding employee resistance. According to Tager (2004), the good leaders should

• Have a vision

• Provide motivation

• Instill confidence

• Create a direction

• Provide resources

Moreover, nowadays changing environment leads most of the leaders to move to actions directly without considering the change process, which followers should go through. In doing saw, leaders face new problems of lack of clarity, increased stress and ambiguity, a sharp need for trust and emotional support as people have to work in the different context. (Tager, 2004)

Another interesting issue is how the author describes what a good change leader should provide. He mainly states that the communication, support, openness, empathy and flexibility are the main factors that should be reflected in the leader’s actions. Moreover, to discuss the issue from the view of follower, the following gives a clear picture what followers demand from change leaders (Tager, 2004):

• Lets me know what’s going on and isn’t afraid to say “I don’t know”

• Is easy to “read” so I know where he or she is coming from

• Remains calm under fire

• Sets clear expectations, ones that are sure to change and will then be replaced
with new clear expectations

• “Hears” me—is willing to Listen

• Is willing to change the plan when things aren’t working out

• Involves me and isn’t afraid to ask for help

• Is visible and available

• Seems “together” in thought and action

Finally, Tager (2008) suggests that three major attributes should be taken into consideration by change leaders to enhance the performance of firms in “today’s turbulent work climate”. These are: flexibility, empathy and trustworthiness. Without flexible actions taken by change leaders, without empathy gained from followers and without trust between the leader and the follower, change initiatives are planned to fail.

From my point of view, change leaders are facing the challenges they have never faced before. They are key to the success of the change initiative and overcoming probable follower stress and low morale. Drawing on the guest lecture delivered by Mica, change agents should be visible any time during the change process, should motivate followers and feel confident of their competencies. Hence, building trust and empathy among followers are the vital components of successful change.


REFERENCES:
Kamm, M.W. (2008). Guest Lecture 24th of November, Middle Management - Real Life, Retrieved 2008-11-25 from Jönköping International Business School’s website:
http://jibsnet.hj.se/documents/files/download/832478114/3385827292690149047/Microsoft%20PowerPoint%20-%20Middle%20Management%20JIBS%2020081

Tager, J.M. (2004). What People Really Need from a Change Leader. Leader to Leader. vol:2004 iss:31 pg:6 -9

Visiting ITAB

After Tatiana(http://jibsabir.blogspot.com/2008/12/itab-company-visit.html) and Irine(http://entrepreneurship2008.blogspot.com/2008/11/iatb-visit.html) have talked about our visit to ITAB company, I am encouraged to add several points which were very interesting to me:

1. How carefully ITAB chooses its customers and targets its products.

2. Management is aware of fierce competition and focus on relationships with customers.

3. Exact delivery performace.

4. How they anticipate entrance in foreign markets combining cometitive times with conditions.

5. Developing trustworthy parnetships with foreign partners

6. Dealing and targeting various preferences of diverse customers

7. Offering good design with less cost.

8. high emphasis on people! Team-work and personell development is major factor within ITAB.

9. Communication between senior manager and middle manager, flat organizational structure seems to be effective given the ITAB experience

10. Automatization, not many workers in the production factory. The fact of today's reality in the world.

Finally, I would like to thank course manager to give us possibility to meet with the general manager of one of the leading companies in Sweden. I wish we have more such visits before the program ends, since learning by examples is considered to be the most effective.

Franchising in Georgia

While discussing whether franchising is a suitable growth concept for Georgian economy, I think it is better to talk about two parts: (1) franchising foreign brands and concepts in Georgia and (2) franchising within Georgian market meaning franchise is granted from the Georgian company.

As for the first one, franchising foreign brands in Georgia is utilized for a long time and is found to be efficient. We have franchises of famous brands in the world such as McDonalds, Mavi jeans, Mango, Sisley, Kodak, Apple and others. Georgia is developing country and it is limited with its abilities to grow internally as firms are constrained with their managerial capacity to grow internally according to Penrose (1995). At the same time, Georgia lacks an environment favorable for innovations and it is constrained with its financial resources. For that reason, it might be said that franchising is useful concept for expansion of Georgian economy. In addition, Georgian people are open to new brands and favor foreign brands due to their perception of high quality of popular foreign brands. This in turn, puts high demand on franchising famous world brands, mainly apparel and technologies. But, franchising fees are mostly significantly high, that’s why prices at franchises are very high in Georgia. For example, McDonalds in Georgia has triple prices compare to McDonalds in USA. On a macro level, we might question whether franchising contributes to the growth of Georgian economy since high prices paid by customers should be compared with taxes paid to the government by franchises.

Furthermore, I will emphasize more on the franchising concept within Georgian market since I have more theoretical knowledge and practical experience how franchising leads to growth of the firm, thus impacting on the country’s overall economy. Before I came to pursue my degree at JIBS, I worked for the company “Elit Electronics” founded in Batumi, Georgia. The company was started 12 years ago and now has nearly 40 shops in all big cities and almost all regions of Georgia. It is the leader supplier of household appliances and electronics throughout Georgia. After reading the article by Shane (1996), I found out that using franchising concept by Elit Electronics was the right strategy for growth of the company. Most importantly, due to lack of market transparency in Georgia many still do not know that some of Elit Electronics shops are franchised and not owned by the company. Moreover, I did not know that before I started to work in their management team. The process went so:

First, the company developed the concept of shop design, service offered, salespeople outfit, training and development, after-sale service and then put all those in “handbook”, which was then protected by copyright. The company was successful in determining the intellectual property they own and protecting them from copying. Then, when the owner, who was one person, saw that his company was constrained with managerial capacity as the company started to grow at a high rate. According to Penrose (1955), a firm’s growth is constrained by the speed at which it can expand its managerial capacity. This was the case in Elit Electronics; entrepreneur with only 3 or 4 young BBA graduates was managing the firm. Then, as firm sales increased and demand was placed from regions; it was time to expand. But, here comes the problem of adverse selection and moral hazard in addition to increased monitoring costs. Adverse selection happens when an employee misrepresents his/her true abilities and moral hazard is when an entrepreneur can not assess whether his/her employees is performing good or not. It would have happened in case Elit Electronics decided to grow internally, while increasing monitoring costs and taking entrepreneurs time in traveling to the regions to check how shops are designed, salespeople dressed, products displayed, etc. Since the owner of Elit Electronics did not have so much time to monitor employees, he had to hire new managers, thus introducing the probability of adverse selection and moral hazard. To avoid misrepresentation from the employee and underperformance, constant monitoring should be done by entrepreneur. But, the faster the company grows, more selecting and monitoring costs will be incurred.

Most importantly, I am convinced that owner of Elit Electronics did not know about Agency theory but did behave what agency theory suggests, replacement of wage contracts with HOAs (Hybrid Organizational arrangements) like franchising that provide residual claimancy to employees, in turn avoiding the problem of adverse selection and moral hazard. Despite, my practical experience in Elit Electronics supports Shane (1996) stating that qualified individuals tend to see buying a franchise as more valuable. That happened in the case of Elit Electronics: due to many requirements from Elit Electronics in developing the shop and many steps involved in operating under the name of “Elit Electronics”, only experienced and qualified individuals came to ask for franchise and enter into negotiation. At last, franchising concept used by Elit Electronics reduced increasing rate of monitoring cost associated with growth of the firm and allowed the company to grow faster. Now, it has 40 shops all over Georgia, most of them is franchise and the company enjoys the economies of scale by buying household appliances and electronics in bulk from suppliers. Elit Electronics is one of the examples of firms whose probability of survival was increased by focusing on and employing franchising concept in Georgia.

Finally, high survival rate of Elit Electronics in its 12 years of existence contributed to expansion of Georgian economy. As firm grew, more franchises were granted and created thus leading to monetary contribution to Georgian economy. It is worth mentioning, there are other Georgian companies employing franchising growth strategy, leading to more companies formed in Georgia and activities and markets getting wider. In sum, franchising concept might be considered as a suitable growth concept for Georgian economy.


REFERENCES:

Penrose, E. (1955). Limits to the growth and size of firms. The American Economic Review 45(2), 531-543

Shane, S.A. (1996). Hybrid organizational arrangements and their implications for firm growth and survival: A study of new franchisors. Academy of management Journal, 39(1), 216-234

http://www.elitelectronics.ge/index.php?m=275

Reflection on the Guest Lecture by Kamm M. W.

Nowadays, the role of middle management is still debated. Whether a middle management can be considered as a “strategic asset” is a matter of discussion. Up to date, middle management is perceived as additional costs to the organizations, ones who slow down decisions and also as blockers of information by top down models of change. In addition, middle managers are described as resistant to change. Opposing to this, Balogun (2003) in his article “From Blaming the Middle to Harnessing its Potential: Creating Change Intermediaries”, state that middle managers play a great role in change implementation and also, are capable of contributing at strategic level. According to Balogun (2003) middle managers are change intermediaries rather than “implementers” or simply, “change recipients”. The author emphasizes on middle manager’s interpretation of change and affirms its importance for actual change outcome and organizational survival.

Mica Wulff Kamm, the Head of Global Product Management at TeliaSonera, after working 11 years as middle manager, believes that “in knowledge intensive industries middle managers are definitely needed”. From the lecture, we could see that she is very enthusiastic and proud of being middle manager for so long. She believes that middle managers are not just implementers of plans coming from senior management and she thinks that middle managers are able to “influence” senior managers in designing strategies and initiating a change in the company. She seems to be a good leader since she inspired us by using real examples from her work experience and tried to influence our perception of middle management. In theory, Balogun (2003) states that middle managers:
• Use their position within the organization and their contacts externally to gather and synthesize information for senior managers on threats and opportunities
• Encourage fledgling projects within their own department to help facilitate adaptability within the organization
• Use resources at their disposal to champion innovative ideas and business opportunities to senior managers.

In practice, Mica has provided us with the example of introducing a product line by TeliaSonera, which was initiated by middle management team and supports the above theory. According to Mica, middle management depicted the introduction of competitor product for specific market segment and saw it as threat and at the same time, as an opportunity. They developed the competing plan for overcoming competition and maintaining leadership in the whole market and “influenced” senior management to introduce suggested product. This example clearly shows that middle management is not in the middle of strategic and operational level, rather it plays great role in maintaining innovativeness and competitiveness of the company.

Referring to Westley’s article “Middle Managers and Strategy: Micro-Dynamics of Inclusion”, middle managers in large bureaucratic organizations are “viewed as suppliers of information and consumers of decisions made by top-level managers.” Consequently, top management is perceived as responsible for strategy sense-making, excluding the importance of middle manager’s involvement in “strategic conversations” (Westley, 1990). Even though inclusion of middle managers in strategic processes does not guarantee satisfaction, the author suggests that middle managers should not only be “feelers of rules” but also “framers of rules”. This in turn leads to empowerment of middle managers in the organization meaning they have dominant position as in strategic conversation as well in coalitions in the organization. Moreover, middle managers are more enthusiastic and energetic if they are not excluded from “hierarchy of coalitions” and they can negotiate rules with senior managers (Westley, 1990). Significantly, empowerment is under the groups of values shared in TeliaSonera. Mica emphasized the vitality of empowering middle managers in order to foster innovative thinking in the organization, which is another value within TeliaSonera. In addition, Mica believes that in order to be successful as middle managers we need to “choose our boss carefully” and “the organization, equally carefully.”

In addition, middle manager’s role in emotional balancing during the transition in the organization has granted high significance (Huy, 2002). While tension in the transition exists on the individual level, middle manager’s low emotional commitment to change might cause organizational inertia and high commitment but no attendance to employee emotions might lead to chaos. For that reason, middle manager’s plays a great role in emotional balancing and facilitating organizational adaptability, “developing new knowledge and skills”. (Huy, 2002)

Finally, my personal opinion regarding the role of middle management is that they are essential part of organizational success and innovativeness. As they are “bridge” between senior managers and low-level employees as well they might be “initiators” or “creators” of new products or strategies. I strongly agree with Mica in that “middles can influence seniors” in a way that being as middle manager stays ambitious and motivating position in the organization. In sum, I would like to share Mica’s suggestions derived from her real life experience to assist you in “stepping out” sometimes and “influencing” seniors:

• Be there when the ground shakes
• I’m good when my co-workers are visible
• If I do a good job I’m not needed in the end




REFERENCES:

Balogun, J. (2003). From Blaming the Middle to Harnessing its Potential: Creating Change Intermediaries, British Journal of Management, vol. 14, 69-83.

Huy, N. Q. (2002). Emotional Balancing of Organizational Continuity and Radical Change, Administrative Science Quarterly, 47(1), 31-69

Kamm, M.W. (2008). Guest Lecture 24th of November, Middle Management - Real Life, Retrieved 2008-11-25 from Jönköping International Business School’s website:
http://jibsnet.hj.se/documents/files/download/832478114/3385827292690149047/Microsoft%20PowerPoint%20-%20Middle%20Management%20JIBS%2020081124.pdf

Westley, F. T. (1990). Middle Managers and Strategy: Micro-Dynamics of Inclusion, Strategic Management Journal, Vol. 11 (5), 337-351.

Have you ever thought to be a middle manager?

The role of middle managers is a subject of discussion. Some think that they are executors of the already developed plans and strategies; some suggest that their role in change management is increasingly important, while many others believe that middle managers can step out and influence senior management. My personal opinion regarding the role of middle managers is that they are very important people in the organization. They facilitate communication within the organizational structure; they are needed to guide and coach many those employees senior managers are not able to (lack of time and more emphasis on strategic planning). Moreover, they are the ones contributing to successful change in the organization.

From my point of view, they are not only change receivers and executors; rather they may be the drivers of a change. Significantly, Balogun J. & Johnson G. (2004) discuss how middle managers influence organizational transition but never mention that they might be the “change initiators”. They emphasize more on the interpretation of change by middle managers and how this interpretation develops, change and impact on the organizational transition. Whereas, Furnman, A. (2002) states that “middle managers have a pivotal role in organizational change. They are often both the instigator of change as well as the target of change programmes.”

After those theories, I was not sure if middle managers could influence the senior management strategy making and future directions of the organization. But, the guest lecture led by Mica Wulff Kamm gave me the insights and the practical examples how she would step out and influence the change in the company. She gave an example of launching a product line initiated by middle management in response to competitor’s actions. She pointed out that senior management would have done that but some time later, while they saw the threat, worked out the plan and influenced the senior management to instigate a new product development.

Overall, I liked the guest lecture on middle management since one of the successful middle manager talked to us and shared the experiences. In her final suggestions for future managers, discussed how important it is to choose your boss carefully. Unless you have a boss who lets you step out sometimes and influence, you can not be a successful middle manager. Also, she recommended choosing the organization equally due to great differences in management practices and the organizational structure. Finally, to be an influential middle manager we need to be involved highly in the change, we need to be part and the driver of it.

REFERENCES:
Balogun, J. & Johnson, G. (2004) “Organizational Restructuring and Middle Manager Sensemaking”. Academy of Management Journal. Vol 47, 523-549.

Furnham, A. (2003) “Managers as Change Agents” Journal of Change Management. Vol 3, no 1, 21-29.

Kamm, M.W. (2008). Guest Lecture 24th of November, Middle Management - Real Life, Retrieved 2008-11-25 from Jönköping International Business School’s website:
http://jibsnet.hj.se/documents/files/download/832478114/3385827292690149047/Microsoft%20PowerPoint%20-%20Middle%20Management%20JIBS%2020081124.pdf

What if more SMEs use Benchmarking as a Strategic Tool?!

After we discussed several strategic tools for SMEs in class, I found benchmarking to be one of the most significant tools. Benchmarking is not the practice which requires the deterioration of the flexibility and the smallness of the SME. Most importantly, benchmarking is easily achieved or successfully used in SMEs due to its flexibility. If benchmarking suggests the firm to restructure and usually, its usage leads to constant organic changes, then SME is more flexible to change constantly rather than large organization with its “big”, more or less “formal” structure.

According to Monkhouse (1995) “Strategic management” and “change management” are becoming synonymous due to huge emphasis and importance of continuous improvement and change in SMEs. Almost all organizational or SME business development models focus and suggest continuous growth and reinvention in SMEs. Specifically, internal organizational development is valued. Whereas, benchmarking is one of the strategic tools which assist in internal development of organizations, processes, functions, tools and techniques. Most importantly, leadership practices, people management and other critical assets can be compared and benchmarked mostly involving organizations from different industries. Benchmarking can be used at strategic as well as operational and tactical levels. One of the most significant outcomes of benchmarking is the establishment of “networks” that lead to innovation in SMEs - “Developing a network of knowledge transfer mechanisms amongst customers, suppliers and manufacturers may lead to greater innovation comparison to less effective knowledge sharing company routines, providing a situation of competitive advantage” (McAdam R., & Kelly M. 2002 p.12).

In addition, I would like to share with you the empirical evidence by McAdam R. & Kelly M. (2002), where they connected three SMEs with each other, three of them agreeing on free exchange of information and advices.

From the beginning, the Company 1 had a problem of employee commitment and loyalty in addition to customer dissatisfaction. Whereas, Company 2 had an experience in building teams within the firm, motivating employees, leading to more loyalty and commitment. While, Company 3 was rated high on customer satisfaction and it was known for its practice in meeting customer expectations. What happened after the benchmarking was used is that Company 2 and 3 shared their practices and provided advices to Company 1, leading to performance improvement, particularly in building employee commitment and customer satisfaction.

Finally, I would point out that Benchmarking is continuous and systematic process rather than done with intervals or some frequency. It allows improving performance gaps in SMEs and triggers new strategic thinking in entrepreneurs or owner-managers. Benchmarking practices lead to innovation in SMEs if it is used systematically and continuously. At last, it could provide a SME with a situation of competitive advantage.


REFERENCES:
McAdam R., & Kelly M., A business excellence approach to generic benchmarking in SMEs, Benchmarking: An International Journal, Vol.9 No. 1, 2002.

Monkhouse E., The role of competitive benchmarking in small to medium-sized enterprises Benchmarking for Quality Management & Technology, Vol. 2 No. 4, 1995, pp. 41-50.© MCB University Press, 1351-3036

Are SMEs “little big businesses”???

I would like to share my thoughts about the module on “Managing the SME” by Friederike Welter. I found it very interesting to learn about the specifics of SMEs. From the module literature and the lectures, It is very obvious that SMEs are not “little big businesses “and need to be managed differently than large organizations. Before this module, I never thought about the relationship between the size of an organization and strategy making, business development, finance and risk management, and crisis management. If we take these management practices and concepts from the perspective of Small and Medium Size Enterprises, we see that they should be modified or fitted with the characteristics of SMEs.

So, how do we define SMEs? Actually, we talked about two criteria in the class as qualitative and quantitative criteria. European Commission defines it as “An enterprise which employs less than 250 people; has an annual turnover of less than €50m and/or balance sheet assets of less than €43m; and has no more than 25% of its capital or voting rights owned by a larger firm or public body.” This would be considered as quantitative criteria and whether SME is independent business or owner-managed or not can be regarded as qualitative criteria. In addition, SMEs are particularly focusing their operations on single product or service. Srinivas (http://www.gdrc.org/sustbiz/what-are-smes.html) associates SMEs with three words: Small, Single and Local. Small, according to the number of employees, capital and assets, and turnover. Single, as having one owner and maybe producing one product or providing single service. Local, as having the market localized where they also have an office. It is also very important to distinguish SMEs from large organizations when analyzing the economical importance and the impact they have on the society. “SMEs are socially and economically important - they represent 99% of an estimated 23 million enterprises in the EU and provide around 75 million jobs representing two-thirds of all employment. SMEs contribute up to 80% of employment in some industrial sectors, such as textiles, construction or furniture. “(http://www.gdrc.org/sustbiz/what-are-smes.html).

After we know that SMEs are not “little big businesses” and the importance of SMEs on the economy, it is very attractive to know more about the characteristics of SME. Derived from the module, I can characterize SME as small and flexible enterprise with informal structures. SME has few employees and limited resource base while resulting in big difference in output size comparing with large businesses. Significantly, SME often has one person as the owner and the manager of the company known as owner-manager. Consequently, he/she (owner-manager) is mainly responsible for most decisions and furthermore, delegation is low or absent within the company.

Taking the definition and the characteristics of SMEs into consideration, we need to design strategies, develop business development plans, construct financial and risk management scenarios, and deal with crisis in a different way than we behave in regard to large organizations bearing in mind that SMEs are not “little big businesses”.


REFERENCES:
Srinivas H, (2008). What are SMEs? The Global Development Research Center, Retrieved
2008-11-26 from http://www.gdrc.org/sustbiz/what-are-smes.html
Welter F., (2008) Lecture 10th of November, Strategies and Strategy making in SMEs Retrieved
2008-11-11 from Jönköping International Business School’s website:
http://jibsnet.hj.se/documents/files/download/338583202/4045835152691469727/lecture%201_strategies_module%20managing%20sme_ibc%202008.pdf

Management of Multiple Innovations

Management of multiple innovations is a significant phenomenon due to high demand on firms to introduce something radical rather than solely focusing on incremental advancements or improvements over time. Innovation can be an essential source of maintaining sustainable competitive advantage (SCA). Therefore, the power of innovation leads to its’ importance in strategic management. Importantly, management of radical innovations is given more attentions since it is perceived as critical to the long-term survival of many today’s firms. In addition, management of radical innovations requires management techniques different from those used in management of incremental innovations. Despite, when it comes to understanding what hinders and what enhances innovativeness in the firm, it is better to look at multiple innovations radical and incremental innovations. After analyzing articles by McDermott, C. M. (2002), Brown, R. (1991) and Damanpour, F. (1991), it is can be suggested that managerial attitude toward change is essential to effective innovation in the firm, while centralization hinders innovation. But when analyzing the characteristics that enhance or hinder innovativeness of the firm, it is useful to analyze whether the firm is for-profit or not-for-profit, manufacturing or service, in order to better understand the characteristics. In addition, Damanpour (1991) suggests considering the scope of innovation while analyzing determinant-innovation relationship, due to increasing practice of multiple innovations in today’s firms. Finally, it is interesting to discuss whether particular innovation is regarded as radical or incremental by the firm or the market. The following figure shows the S-curve of innovation and small S-curves for each market:


What these small S-curves shows is that the firm should consider that each segment should be treated solely while moving upwards or enlarging market size by entering others segments after the product has reached its limit on the small S-curve. Another important point here is that company may regard this innovation radical first when it is introduced to the market and then, view it as incremental since it advances the product for each segment. While each segment may perceive the innovation radical since it enters into new “market”. For example, first calculator was big and was mainly designed for scientists. Then, it was advanced and with less size for accountants. Consequently, pocket size became attractive for public use, particularly at schools. This example shows how a firm might treat each segment by moving upward, whereas entering directly to the mass market (public) might result in failure. Mainly due to the fact that public may not know how to use the product or why it is useful. At last, analyzing small S-curves in that figure may suggest that after firm introduces radical innovation and the first segment accepts it, then entering into another segment may be less risky and less uncertain. The following figure shows how risk is moving down, which is in agreement what I have said earlier about the perception on radical vs. incremental innovation.


To summarize, management of multiple innovation is very important for the firm’s SCA and for understanding the determinant-innovation relationship. At the same time, analyzing diffusion of innovation with small S-curves may lead to risk and uncertainty reduction. Also, firms may find it useful while avoiding entering mass market and focusing more on each segment.

REFERENCES:
Brown, R., (1991) Managing the “S” Curves of Innovation. Journal of Marketing Management Vol 7. pp.189-202

Damanpour, F., (1991) Organizational Innovation: A Meta-Analysis of Effects of Determinants and Moderators, Academy of Management Journal, Vol. 34, No. 3, pp.555-590

McDermott, C. H., O’Connor, G. C., (2002) Managing radical innovation: an overview of emergent strategy issues. The Journal of Product Innovation Management. Vol.19. pp.424-438

How Vital is the Existence of IP in Encouraging Innovation ?!

In my previous posts I have talked about environment, tools and government policies necessary to foster entrepreneurship and innovation in a country. At the same time, I discussed how entrepreneurial activities and innovations lead to economic development of a country. Therefore, I want to continue discussing the topic by introducing the subject of intellectual property laws. From my point of view, existence of intellectual property (IP) laws in a country plays a great role in encouraging creativity and innovation. And to clarify how it does, let’s start to define intellectual property. According to Barringer and Ireland (2006), ‘intellectual property is any product of human intellect that is intangible but has value in the marketplace.’ It is called “intellectual” property because it is the product of human imagination, creativity and inventiveness (Barringer & Ireland, 2006). And mostly it is the result of hard work and risky behavior considering the time and money spent on it. Now, imagine that a company or a person owns some kind of intellectual property which is there and others can simply copy. How will it influence the future behavior of that firm or that person? Will the firm of the person be willing to spent time and money on the product which is easily copied by competitors and does not help to gain competitive advantage? Logical answer is most probably not. That’s why intellectual property rights were introduced and granted under the intellectual property laws. Barringer and Ireland (2006) propose that ‘intellectual property laws exist to encourage creativity and innovation by granting individuals who risk their time and money in creative endeavors exclusive rights to the fruits of their labors for a period of time.’ It is obvious that entrepreneurs are more motivated to create something new, invent and innovate more to gain first-mover advantage or competitive advantage when they are granted exclusive rights on their intellectual property. Besides, taking into consideration that innovations and entrepreneurial activities lead to economic development, the importance of intellectual property laws becomes critical. Another positive aspect of intellectual property laws is that it assists individuals make well-informed choices. Whenever a consumer sees the H&M shop, he/she knows what to expect from the shop since only H&M is permitted to use the trademark for cloth, shoes, jewelry and etc. Most importantly, intellectual property can be source of income through such ways as licensing. Licensing incomes further motivate companies to be more creative and innovative since large portion of income generated is from granting others rights to use their intellectual property for some fee. Finally, I want to mention one caution involved in intellectual property protection that it is up to the entrepreneur to take advantage of them and to safeguard his or her intellectual property once it is legally protected (Barringer & Ireland, 2006). No one is going to protect your intellectual property if you as an entrepreneur do not take care of it. That's why it is suggested that companies do intellectual property audit to monitor if their intellectual property is adequately protected. To sum up, existence of intellectual property laws becomes critical factor or element in creating innovative environment in a country, which then leads to its economic development.


References:
Barringer, B. R. & Ireland, R. D. (2006). Entrepreneurship: successfully launching new ventures (pp. 278-300). Upper Saddle River, NJ: Pearson Education.

WHY some nations are Poor, while other are Rich...

The discussion on entrepreneurship and economic development in my older posts shows that both are highly linked to each other. Moreover, it is obvious that entrepreneurial activities lead to an economic development of a country. I also talked about the importance of university spin-offs and how university spin-offs lead to high economic performance of a country. It is mostly evident in countries encouraging collaboration between private companies and university research departments. From my point of view, it is hard to encourage university spin-offs before the environment necessary for productive entrepreneurship is present. For that reason, I think a country should develop favorable environment for entrepreneurial activities and then, encourage company owners to cooperate with universities to increase overall level of economic stand.

Finding answer to the question proposed by Powel (2008) ´´in what countries do you get rich by inventing a new product, and in what countries do you get rich by wresting control of government from your rivals?´´, helps us understand why some nations are so behind and others are introducing radical innovations almost every day. Everyone would agree that entrepreneurs are in almost all countries, but process of economic development is not observed in every country. Is that because of resource scarcity, labor availability or something else? Powel (2008) calls it existence of an institutional environment rewarding entrepreneurial activities. In addition, he emphasizes on the presence of private property rights and economic freedom in a country. I would strongly support his idea and apply the concept to my country’s environment and economic stand.

Most importantly, I have lived and experienced an environment where working in the government gave people and authority, while entrepreneurs or small business owners had a few incentives. Mostly they had to share net income or profit with the government either paying directly government officials or financing ´´government´´ projects. This system definitely affected the existence or creation of such private businesses and was conducive to entrepreneurship. Small business owners never considered to grow and did not exploit opportunities. On the other hand, my country, Georgia, is endowed with natural resources and labor is not constrained with their abilities and are very adaptive to new environment. So, we come to the point where we can freely state the importance of institutional environment. Besides to those factors mentioned, people would have capital in form of cash and never use it to finance private entities due to government policy and environment. At the same time, demand on financial services, particularly on bank services was low. But let’s look at the current environment of Georgia after famous Rose revolution and change in government policy. We could observe that every single person starts to form a business, exploit opportunities in the rapid developing market and also, try to create new markets. Some people started to save money in form of deposits at banks and others demand credit or loans from banks to develop something new or enter existing markets. Therefore, many commercial banks are founded and competition gets high. Thus, leading to low interest rates on loans and new service packages are introduced. As a result, entrepreneurs find it easy to finance new venture growth and their desire to market products internationally becomes achievable. Besides, as a result of changes in government policy, government introduced subsidy programs for entrepreneurs in some sectors of economy, particularly in agriculture. Entrepreneurs are highly motivated to come up with innovative ideas and get low-percent credit. Further increasing country’s economic development. Another significant trend observed in the country is that people started to specialize in narrow fields instead of broad fields such as law and economics. They recognize existing opportunities in IT management, BA and engineering, while in past environment being a lawyer or economic theory specialist seemed cool and advantageous for getting employed.

Finally, economic freedom indicator in Georgia is 69.2%, meaning that the economy is 69.2% free. Even though, it is ranked as the world’s 32nd freest economy, we could observe that property rights are undeveloped and judicial corruption still is the great problem in the country. On the other hand, business freedom, trade freedom and other significant components of economic freedom indicator are quite high. (see figure 1).

Figure 1. retrieved from http://www.heritage.org/Index/country.cfm?id=Georgia

References:
Powel, B. (2008). Making Poor Nations Rich/ Entrepreneurship and the Process of Economic Development. Stanford: Stanford University Press.

Is that only entrepreneurs' willingness to grow???

From my postings you could conclude that the topic on Growing Pains struck me the most. At this time, I want to go back to the post, where I mentioned that sometimes entrepreneurs are not willing to change or they might not trust others (mostly managers) and do not delegate responsibilities, which further does not allow a firm to grow. I would like to add here that most entrepreneurial companies fail to grow or have hard time to survive due to the limited nature of entrepreneurial resources. As Penrose (1955) describes, firms are inhibited in their ability to expand due to lack of entrepreneur’s interest in experimenting or a lack of their confidence in dealing with new and unfamiliar lines of activities. When limited demand appears on the existing products and services of a firm, management or entrepreneur has to has to introduce something new, either create a new product or develop a new market. For those to be accomplished, versatile type of management is required, while according to Penrose (1955) those services are not likely to be equally available to all companies. From my point of view, this point can be applied to the case of entrepreneurs failing to recognize and overcome growing pains in the their companies. From my personal experience, I have seen small family businesses in my country being highly satisfied with their existing products and owners mostly like to remain in their field of specialization. Moreover, they lack the interest in experimenting new lines of activity and lack confidence in their ability to deal with something ´´new´´ and ´´uncertain´´, respectively. To conclude, there are many characteristics of the firms and the entrepreneurs that constitute the failure of dealing with ´´growing pains´´ when they arise. Significantly, the nature of entrepreneurs meaning their willingness to change might determine the extent of future growth of a firm.


References:
Penrose, E. (1955). Limits to the growth and size of firms. The American Economic Review 45(2), 531-543.

Innovation through CSR

The importance of Corporate Social Responsibility (CSR) is enhanced when it comes to hypercompetitive markets. In nowadays hypercompetitive markets, companies are finding difficult to survive and engage in practice of Corporate Social Responsibility. Some companies try to "do good" and also "do well", which means that while their commitment to society development is high, their sales are going up.
In past, companies focused solely on financial performance, but now their interest and commitment into CSR has increased dramatically. What happens is that interest and commitment of those companies is highly rewarded by their customers by being loyal and decreasing their price-consciousness. As a result, companies’ customer base enlarges and sales profits go up. That can be regarded as one reason companies might be interested in pursuing the concept of CSR. Another reason might be the pressure from company stakeholders such as customers, local NGOs, and government. For example, governments might introduce laws or rules prohibiting certain practices to promote safer environments, etc.
What is more challenging and interesting, companies can gain competitive advantage by practicing CSR concept or simply by being "shaper of society". Such companies are 100% committed to promoting social welfare and by doing so further increase competition in the market. Usually, entrance to the market is blocked since new entrants do not possess such amount of resources to compete with mature organization with highly developed social programs. Here comes the most interesting question as "is innovation hindered in such mature organizations with CSR or adversely, it is encouraged?"
From my point of view, such large organizations engage in innovation and creativity through launching new programs, new products and combination of both by integrating Corporate Social Responsibility into their day-to-day activities. Employees are more encouraged to think about innovative "bundle of products and benefits" company can offer to its customers in a way that it reflects company’s commitment to social benefits. Most importantly, employees of organization promoting CSR are the part of that larger society that is served by their organization. Consequently, employees are much more motivated to be creative and innovative.

Further critical discussion of "Growing Pains"...

To elaborate more on the previous topic, I totally agree that entrepreneurial firms have to make transition to a professionally managed firm at some point during their life cycle. But how easy it is for the entrepreneurs to engage in such a process and jump from one type of organizational structure to another. Moreover, are entrepreneurs willing to change? Even though, transition is necessary for their firm’s success. From my viewpoint, most of the entrepreneurs simply are not willing to change because do not want to give up doing what they think should be done only by them. Moreover, they might not trust others or “outside managers” the fate of their company. Entrepreneurs might have different perception about the growth, responsibilities and success of their companies. Another thing I would like to comment on is that even though managers perceive the importance of having trained employees or “subordinates”, they might not be willing to train and develop them with the threat of loosing the position. From my personal experience I can tell that one of the criteria people use to assess and describe managers is if they are willing and trying to develop their subordinates. Once, when I talked to one of the employees (friend of my family) of a particular company about internship opportunities in their company, she did not recommend the marketing department and drew attention to the nature of marketing manager. She pointed out that marketing manager did not like when her subordinates over performed and she felt in danger of loosing the position. Besides, from my point of view the competence of “outside managers” is the matter of discussion. Most of the entrepreneurial firms are based on ideas and beliefs of entrepreneurs. Employees who “grow” with the company, share those ideas and beliefs and carry them forward. Even if company faces rapid growth and needs transition to successfully overcome “growing pains”, how long will it take “outside manager” to learn the company, share those beliefs and start “curing”? My subjective opinion is that bringing outsiders into the company might not be the best solution to the “growing pains” facing the company. As a final point, desire of entrepreneurs and nature and willingness of managers are most critical issues while discussing transition process from an entrepreneurship to a professionally managed firm. In addition, bringing “outside managers” to fix the problems or “growing pains” might not be efficient tool.

Are they Growing Pains???

Some people in my country say that having work experience is the most important factor in development of person’s career. They say that theory plays a little role in that process. But I would never agree with them. My opinion is that we need to acquire some level of theoretical knowledge to be able to better understand real-life problems and tasks at work. The question whether entrepreneurs need theory of entrepreneurship is matter of discussion, since some still doubt if the do need. As for me, I think they definitely need and I will illustrate this by linking the issue with my personal-work experience.

Before coming to JIBS, I worked for a company which became corporation when I was there after being Limited Liability Company for a long time period. I think it was not an easy transition and it was mainly caused by the growth of the company. After one month of working there, I saw that some people felt that there were not enough time to accomplish a task, some others were unaware of what other people in the same department were doing and majority thought that meetings are a waste of time. More importantly, I noticed that there were not many good managers. Even I wondered if I could have more hours in a day to accomplish the tasks I was assigned to. My manager was highly involved in day-to-day activities of the firm and no issue was solved without first agreeing with her. Also, I could list all other problems but above mentioned ones are enough to grasp the main idea. The thing I want to emphasize is that I saw those problems there but I just saw them as facts but could not realize that they were cause by the growth of the company. Also, due to the fact that I worked there just for 4 months, I was not aware of main changes that took place in company’s previous years. So, I even did not feel that the company was growing. But now, after I read the article “Recognizing Growing Pains and Assessing the Need for Change” by Flamholtz E. G., I comprehend the company was growing and actually, it is growing at the present. Consequently, I recognize those problems as Growing Pains as Flamholtz E. G. (1990) called them. Notably, those growing pains, I saw in the company, are still there and CEO (newly changed from being called as entrepreneur) together with managers do not realize them. Moreover, they will not be able to realize those until the company will come close to so called “choking on its own growth” used by Flamholtz E.G. (1990).

Finally, I would say entrepreneur needs the theory of entrepreneurship. Considering the above case, just imagine what happens if CEO or one of the managers read the literature about Growth and Growing Pains. I am sure, they will recognize growing pains they face, and they will look back to their company situation and start to build the required infrastructure, knowledge and organizational structure to accompany growth the company is going through.

The importance of University Spin-offs...

In my last two posts, I discussed the link between an entrepreneurship and economic development. Since, I found out that entrepreneurial activities lead to economic development of a country, I became interested what kind of policies could Georgian government use to encourage economic development through entrepreneurship. But, before discussing those policies I would like to stress on the importance of university spin-offs which I found very interesting.

I always wondered why so many researches are done at universities and why they were important. I knew that universities are important entities that give education to people, which in turn allow educated people to take many opportunities as good job, high salary and etc. But, I never thought about universities contributing heavily to economic development of a country. After exploring entrepreneurship literature, I found that US or European Countries’ governments long collaborated with universities to advance economic development through entrepreneurship. For example, Land grant system introduced in US is very famous in that it led to the formation of many universities and held the idea that universities should have created knowledge so that entrepreneurs could exploit to enhance local economy. This once more emphasizes on the importance of universities as contributor to economic development through entrepreneurship. How is it achieved? The process is the following: several policies were introduced to encourage company formations to use knowledge created by faculty, staff and students of research universities, which is named as university spin-offs and in my opinion, the process itself can be considered as university entrepreneurship. More importantly, even the term ´´entrepreneurial university´´ was coined by Etzkowitz (1998) to describe universities which contributed to economic development and highlight their critical role.

Nowadays, number of university spin-offs has become large and includes some best known technology companies as Hewlett Packard, Cirrus Logic, Genentech, Lycos and Yahoo! Nevertheless, ways how university spin-offs enhance economic development are: a) university spin-offs create jobs, b) they commercialize academic inventions that would otherwise go undeveloped and c) they have larger indirect economic impact since they have multiplier effects on the economy through hiring of employees and their sourcing of supply and production.

Finally, it worth mentioning that the importance of university spin-offs becomes larger when we link the issue to the process of globalization. At present, countries focus more on competitive use of knowledge to acquire comparative advantage due to the fact that economic growth is now directly linked to knowledge accumulation rather just to capital accumulation. At last, as I read more about entrepreneurship and economic development, I see that my country yet has to go through lengthy developmental processes that should definitely involve creation of research universities, formation of lasting partnership and lastly, encouragement of spin-offs.

REFERENCE:

Shane, S. (2005). Economic Development through Entrepreneurship. Great Britain: MPG Books Ltd, Bodmin, Cornwall

O’Shea R., Allen J. T., O’Gorman C., Roche F. (2004). Universities and Technology Transfer: A Review of Academic Entrepreneurship Literature. Irish Journal of Management. 25(2), 11-29.

Do entrepreneural activities lead to Georgia's economic development?

While I was discussing the relationship between entrepreneurship and economic development in my previous post, I tried to link the issue to my country’s economic stand. My country, Georgia is developing on a rapid rate. Many foreign investments have been made during last 4-5 years. Gross Domestic Product (GDP) has been increased for the previous few years. After many years of Georgia being in budget deficit, the country has a budget surplus at the present. As a student majoring in business administration, I was always interested in the mechanisms our government could use to foster economic development. Now, when I understand the significance of entrepreneurial activities in a country for its economic development, I realize that our government has been trying hardly to encourage small businesses or start-ups in the country. This conclusion can be made from the activities and programs government has been initiating and exploiting. For example, there was a huge simplification made in tax policy, by and large taxes were decreased and certain types of tax exemptions were introduced. Another important case to be mentioned is that the government introduced several competitive programs for financing subsidies, particularly in agriculture. As a result of support from the government, we have now factories that produce fruit juices from the citruses Georgia is endowed with. Despite the efforts of the government to motivate and support entrepreneurship in Georgia using various mechanisms, I believe there is lot of to be done in future.

As a result, when talking about economic development and growth of Georgian economy, I think that the idea of Growing Pains discussed by Flamholtz, E. G. (1990) can be also applied to the governmental activities. When an economy grows on a rapid rate it should have an infrastructure that will take up that growth. If a government anticipates rapid growth, then required infrastructure must be built before it is actually necessary. I think Georgia is experiencing Growing Pains if you consider the case of tourists who are interested in Georgia and want to explore it but they face difficulties due to the lack of infrastructure and communication problems still existing in the country. After all, my advice for the Georgian government would be to build requisite infrastructure before they promote or achieve goals leading to economic growth of the country.

Reference:

Flamholtz, E. G. (1990). Growing Pains: How to make transitions from an entrepreneurship to a professionally managed firm (pp. 53-72). San Francisco: Jossey-Bass Inc.

How does Entrepreneurship lead to economic development?

We all know and it is obvious that entrepreneurship is everywhere. Until now, we saw that entrepreneurship is not all about creating new companies; rather it can also be exercised in existing organizations. For this reason along with my personal interests, I became concerned with the relationship between entrepreneurship and a government. Besides, I am interested how entrepreneurial activities lead to economic development of a country.

After exploring several books, I think that entrepreneurship is directly linked to economic development of a country. To simply illustrate this, first lets look at the definition of economic development: “the institutional changes made to promote economic betterment. It is the social organizational changes made to promote growth in an economy.” (http://oregonstate.edu/instruct/anth370/gloss.html) Furthermore, economic development is “typically measured in terms of jobs and income, but it also includes improvements in human development, education, health…” (http://government.cce.cornell.edu/doc/html/MethodologyGuide_TermsUsed.htm) So, I want to emphasize on the measurement of the economic development in terms of jobs. If we look at the outcomes of entrepreneurial activities we see that as new companies are established or new products and services are offered in the market, which is the result of company expansion, more jobs are created in an economy. If it is so, job creation leads to economic development, all other things being equal. This was the simple illustration of the very deep and tough matter of discussion in the literature on entrepreneurship for the last several years.

According to Shane (2005), entrepreneurship is often perceived by policy makers as a key instrument for boosting economic development. ‘To policy makers, entrepreneurship is a good solution because it provides a relatively non-controversial way to increase the proverbial pie, creating jobs and enhancing per capita income growth. Therefore government officials frequently search for mechanisms to enhance entrepreneurial activity in their regions, whether those mechanisms are tax policies, financing subsidies or other tools.’ (Shane, 2005, p.1)

Source: Global Entrepreneurship Monitor, 2003 and International Monetary Fund

Accordingly, from this figure we see that there is a positive relationship between entrepreneurship and economic growth at the national level, which means that as entrepreneurial activities grow in a country, average GDP growth raises in that country. Besides, the most important is that the figure below shows that the benefits of entrepreneurship grow over time:

Source:http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf

And the last figure shows the significance of entrepreneurial developments not only for home countries but for the neighboring countries as well.

Source: http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf

To summarize, my strong opinion about the topic is that entrepreneurship constitutes largely to the economic development of countries applying it. Furthermore, it has positive effects also on the neighboring countries. It is evident that there is a positive relationship between entrepreneurial activities and GDP growth, which in long run leads to overall economic well-being of a country. These all, emphasizes and reflects the huge impact of entrepreneurship on the economic development of a country or a region.

References:
Shane, S. (2005). Economic Development through Entrepreneurship. Great Britain: MPG Books Ltd, Bodmin, Cornwall

Henderson J. (2006, September 19). Building Regional Economies through Entrepreneurship. Retrieved 2008-09-26 from http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf

Oregon State University (2008, April 24). Definitions of Anthropological Terms. Retrieved
2008-09-26 from http://oregonstate.edu/instruct/anth370/gloss.html

Cornell University (2006). Terms Used. Retrieved 2008-09-26 from
http://government.cce.cornell.edu/doc/html/MethodologyGuide_TermsUsed.htm

Reflection on Module Literature...

I would like to say that the piece that stuck me the most is the six thinking hats technique. It captured my interest at the lecture and made me go through the book of Edward De Bono (1999), Six Thinking Hats. I found it very interesting how parallel thinking of the Six Hats method works. I strongly agree that it is very simple concept which allows a thinker to do one thing at a time. Thus, it allows the brain to maximize its sensitivity in different directions at different times. Based on my experience, I agree with the author that it is not possible to have that maximum sensitization in different directions all at the same time. For that reason, Six Hats method provides convenience, which is the main value of the concept. Author mainly introduces the concept as an alternative to the argument system and puts emphasis on “what can be” rather than “what is”. If I relate author’s words with my personal experience, I have always seen if two people disagree, there is an argument in which each tries to prove the other party wrong. But as for the parallel thinking, which struck me the most, both views are put down in parallel. And then, in case of essentiality to choose between the contradictory positions, an attempt to choose is made at that point. Most importantly, if a choice cannot be made, then the design has to reflect both possibilities. Furthermore, I want to emphasize on the effectiveness of Six Hat technique in dealing with the “showing off” issue, which is some people enjoy argument because they can show off how clever they are, but remember, in a nonconstructive manner. While using the Six Hats method, thinker shows off by performing well as a thinker and significantly, this type of showing off is constructive. The another reason this creativity technique struck me the most is that it gets people to “play the game”, which is a very powerful form of changing behavior and more effective and quick than methods that set out to change personalities. Even though I agree with the author on the effectiveness and significance of the method, I think that it consumes some time before team members learn “the rules of the game”. Consequently, it made me think about it would be useful if author gave instructions how to “play the game”. At last, Six Hats technique made me think about my competence and possibilities in fostering creativity at my future work place with the help of the technique.

The next topic I want to discuss is The Weird Rules of Creativity by Robert I. Sutton. This article made a big influence on my understanding of creativity. I totally agree with him when telling that ideas for managing creativity and innovation are nearly all 180 degrees different from standard management practice. That’s why, what he discovered and shares with us seems weird to most of the readers. Despite this, I agree with him that in order to employ creativity, we should take our past successes and forget them, we should ignore people who have solved the exact problem we face, and we should think of some impractical things to do and plan to do them. Based on my personal experience, I found his “rules” useful. When I recall the hiring process at my previous work, I understand now I could use job interviews to get new ideas not only to screen candidates. At the same time, it would have been more efficient and effective to hire someone who made me uncomfortable according to the author. I agree on that since we would “fight” for ideas and have a better result than with someone who would obey me and support my ideas. Another important issue I agree with the article is to reward success and failure, but punish inaction. We all are human-beings and make mistakes. If we punish mistakes then people do not get motivated to try things that was not tried by some one else before and thus, eliminates creativity. But, important is we should learn on our mistakes and not make same mistake in future. Even though I agree on the most of the weird rules presented by the author, I doubt it costs a lot and many companies can not afford it. Those rules are well-shaped for large organizations and do not fit small organizations if we look at its possible costs. As we know, creativity is an activity with high variance. So, disagreement comes here when deciding how big a company should be to afford creativity. To sum up, this article made me think about weird ideas that work. Before reading this article, I would not listen to the person talking about impractical things he/she plans to do and simply, would disregard them. But now, the article made me think of some of such things myself.

Finally, I want to summarize the case study What a Star - What a Jerk. This case study gave me great insight how to deal with an employee who is nasty, hard-hearted and at the same time, top performer. The most amazing is the fact that I found advices given by four commentators to be different from each other. Consequently, this made me think about how various and diverse can be our answer to one and the same problem identified. Afterwards, this enforces the suggestions of finding different alternatives, considering many ideas and approaches before we come to the conclusion, which may affect strongly on the creativity and efficiency of an organization.


References:
Edward De Bono (1999). Six Thinking Hats. Unites States of America: Little, Brown and
Company.
Sutton. R. I. (2001). The Weird Rules of Creativity. Harvard Business Review, 94-103.
Cliffe S. (2001). What a Star-What a Jerk. HRB Case Study, 37-48.
Gustavsson V. (2008). Lecture September 8th: Organizational Creativity. Retrieved 2008-
09-08, from Jonkoping International Business School´s website :
http://jibsnet.hj.se/documents/index.asp?SID=11&GID=kurs_JIBD28&PID=3768451492693623091&Pagenr=2

Promoting Creativity at my start-up

“A product is creative when it is (a) novel and
(b) appropriate. A novel product is original not
predictable. The bigger the concept, and the
more the product stimulates further work and
ideas, the more the product is creative.”
— Sternberg & Lubart, Defying the Crowd

Nowadays, the importance of creativity has increased dramatically. The focus on customer service, competition, flatter organizational structures are among several organizational changes and developments that make creativity a valuable necessity. Company life-cycles are getting very short and one reason for that may be inability of many companies to exercise creativity and innovation, respectively. Creativity can be defined as an ´´ability to produce work which is both novel and appropriate´´. Being appropriate for the idea is very important, since if new idea is not connected to current idea and knowledge, it may be unimplementable. Understanding the creativity itself, I want to turn to boosting creativity at my start-up. First of all, I will try to hire people who have high self-efficacy, tend to be independent and self-discipline and also have willingness to overcome obstacles. Moreover, I will try to employ people with diverse expertise as it is highly conducive to creativity in an organization. I will not go with just supportive environment, but I will ´´find some happy people and get them fight´´(Sutton, 2001) because certain degree of adversity is necessary. According to A. Styhre & M.Sundgren (2005), ´´many creative ideas are born into hostile environment or at least an environment where different ideas are competing for scarce resources´´.

After I have a team of people, I will share organizational goals with them and make sure everyone is good with it. Then, as one and the most important factor in creativity, I will support group work, also encourage and value their individual contribution. It is also important for me to challenge them with the work assigned, challenge them with their ideas or their goals, and at the same time give them reasonable deadlines. Since I understand how criticism of new ideas damage creativity, I will develop an environment where new ideas do not get criticized, instead rewarded. In turn, this does not mean failures will be punished. Instead, failures will be also rewarded and that´s inaction which will be punished at my start-up. I agree with the idea that it is impossible to generate a few good ideas without also generating a lot of bad ideas. Therefore, creativity results from action. ´´Creativity is a function of the quantity of work produced´´(Sutton, 2001). My start-up will be the place where ideas are generated constantly and where the best ideas win.

Furthermore, Instead of weekly ´´report-ive´´ meetings, I will hold meeting with my people to exercise creativity techniques or idea generation techniques in order to promote the environment which in turn promotes creativity in an organization. I will unquestionably encourage divergent thinking called as ´´Thinking Outside the Box´´ at my start-up, since it allows thinkers think without boundaries and leads to creative problem solving. As for how I am going to stimulate divergent thinking, I will use impossibilities and role switching as suggested by Thompson (2003). Even though Brainstorming is criticized for its weaknesses leading to social loafing and so on, I strongly believe that brainstorming can be used as encouraging creative thinking and I will employ it in discussing certain cases. Another technique I would promote at my start-up is analogical reasoning. I mentioned above that I will strive to have people with diverse expertise, so they can freely and efficiently use practice of analogical reasoning. Analogical reasoning technique will lead to creativity, if people apply a concept or idea from their previous experience to the current company operations. Nevertheless, I expect my company to grow at a high rate and I will need more people, so ´´newcomer´´ will have great influence on the company team in that it motivates ´´old-timers´´ according to Thompson (2003). In addition, it does not matter how small my company building is at the beginning, It will have a place where employees can gather and share their ideas, thoughts and opinions. The most important above all is, I will coach my employees to make them use the techniques properly and in an efficient manner. So, free flow of communication and ideas will be placed at the top of the companies priorities.

Finally, I want to summarize with the model for management practice, leadership and creativity introduced by A. Styhre & M.Sundgren (2005) in their book Managing Creativity in Organizations. The model presents dynamics involved in managing organizational creativity. Authors emphasize the influence of leadership and management on creativity in organizations. However, the model offers new thinking in management practice to support creativity. I found it useful and I will take account the model implications, which suggest to use the concept of stabilizers and de-stabilizers. According to model, stabilizers are fixed repertoires of behavior programmes over time, while destabilizers are dynamic and unpredictable behaviors. Examples for destabilizers are informal networks, information sharing, thinking out of the box and intrinsic motivation, whereas examples for stabilizers can be management control, planning and extrinsic motivation. I want to point out that organizations have many stabilizers but more often lack proper destabilizers. So, I will apply this model to my start-up by recognizing, supporting and handling destabilizers and stabilizers in order to promote organizational creativity at my company.

References:
Styhre A., & Sundgren M. (2005). Managing Creativity in Organizations. Great Britain:
Antony Rowe Ltd, Chippenham and Eastbourne
Thompson L. (2003). Improving the creativity of organizational work groups. Academy of
Management Executive, Vol 17 No. 1
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09-08, from Jonkoping International Business School´s website :
http://jibsnet.hj.se/documents/index.asp?SID=11&GID=kurs_JIBD28&PID=3768451492693623091&Pagenr=2

Issue that struck me the most…

To further elaborate more on one of my posts called as ``What is the probability that a ´´young student´´ can become an entrepreneur?´´ , I want to talk a little bit about personality characteristics, which are more likely considered to be the part of an answer to the discussion topic.

Before coming to JIBS, attending lectures and reading recommended books, I strongly believed that by observing personality characteristics of a person would be one of the determinant whether a person will be an entrepreneur or not? I was sure about strength and implication personality characteristics had in answering to my question. But, now it appears that that´s not the whole story.

There is an interesting discussion made by Dollinger (1999) on this matter, stating that already for a long period of time, entrepreneurial research has recognized a number of personality characteristics that distinguish entrepreneurs from others. But still, even the most frequently discussed ones came out to be not a distinguishing characteristics of entrepreneurs. Finally, Dollinger (1999) says that `´ what distinguishes entrepreneurs from nonentrepreneurs is that entrepreneurs start new businesses and others do not´´. Moreover, I can say that Dollinger (1999) gives valid argument on this subject.

Dollinger, M. J. (1999) Entrepreneurship: Strategies and Resources (2ed., pp.25-40) . Upper Saddle River, NJ: Prentice Hall.

radical changes in my views on entrepreneurhip...

In my first post I have talked about if it´s easy to exercise entrepreneurship in my country Georgia and I strictly said that it is not! I also emphasized on gaining financial resources needed for entrepreneurship. But now, I have way different opinion regarding importance of financial resources for entrepreneurs to be successful in today´s hypercompetitive and uncertain markets. So, what did I learn and what do I think about this topic now?

I think that financial resources are valuable for creating businesses or initiating a new venture but they are not the most important factor constituting to future success of entrepreneurs. I learned that financial resources are not really nonsubstitutable. And this makes my argument more pervasive. Example for that maybe practice of bootstrapping. Few but still , through bootstrapping entrepreneurs succeed. They start very small and integrate their hard work and efforts with little capital. From my point of view, it´s synthesis of various traits of an entrepreneur, environmental conditions, available resources and so on, constitute to making entrepreneurs successful. By this post, I wanted to stress on shifts in my views on entrepreneurship and how is it affected as I read more articles or chapters of several books.

What is the probability that a ´´young student´´ can become an entrepreneur?

What is the probability that a ´´young student´´ can become an entrepreneur?

When everyone is speaking about entrepreneurship and roles of entrepreneur, one question came to my mind: is it possible to anticipate if a ´´young student´´ can become an entrepreneur and state what´s the probability that it will happen so?

I think it is very tough issue and does not have definite answer. Some people are discussing whether MBA students possess entrepreneurial skills and are motivated to take high risks in future. Others, talk about major characteristics of entrepreneurs as key issue in entrepreneurship. Nevertheless, no one stressed on if it’s likely to foresee a person´s entrepreneurial abilities and chances. As for me, it might be possible when it comes to persons who already have managerial position and sufficient observation can be made on his/her work history and personal traits. But when it come to ´´young student´´, with little work experience and educational history, we may not be able to anticipate his/her future entrepreneurial chances and affirm the probability, respectively.

Due to the high importance of this issue, I would like comments and further discussions.