Hybrid Entrepreneurship

Management Science has an interesting paper on Hybrid Entrepreneurship with empirical data that a large fraction of entrepreneurs start off in a hybrid mode – keep the day job will working on a new venture:

In contrast to previous efforts to model an individual’s movement from wage work into entrepreneurship, we consider that individuals might transition incrementally by retaining their wage job while entering into self-employment. We show that these hybrid entrepreneurs represent a significant share of all entrepreneurial activity.

What drives satisfaction in virtual teams?

As you have probably noticed, management of virtual teams and co-development across multiple organizations is a favorite topic of mine.  Here is a very interesting paper from the Journal R&D Management: An analysis of predictors of team satisfaction in product development teams with differing levels of virtualness:

The purpose of this study is to empirically examine and assess the moderating effects of extent of virtualness on a variety of well-established predictors of new product development team satisfaction. We focus our study on 178 different new product development teams from a variety of industries and use extent of virtualness as a structural characteristic of the teams, measuring it on a continuum. 

The paper had three findings that I find are very important to any R&D manager (as the virtual teams pointed out, most teams become some what virtual even when the members are on different floors).

(1) relationship conflict has a more deleterious effect on team member satisfaction as teams become more virtual, mainly because it is very difficult for team members of virtual teams to resolve their interpersonal disputes; 

So, the article empirically establishes an increased need for active conflict management and effort to keep the team loose.

(2) the relationship between preference for group work and team satisfaction is moderated by extent of virtualness, such that preference for group work increases team satisfaction more as virtualness increases; 

I am not sure if I understand this.  Please help if you do.  From what I read, the people who love to work in groups are more satisfied with work in virtual teams.  Does that mean that R&D managers staffing virtual teams have to either not select or provide extra help to people who tend not to like work in groups?

(3) goal clarity and familiarity are not moderated by extent of virtualness, but have a significant direct effect on team satisfaction.

Pretty straight forward – for virtual teams to succeed, goals need to be extremely well communicated.  They also need to be effectively communicated across discipline, organizational and cultural boundaries.  This to me is the biggest challenge to codesign.  I am not sure if I have found effective tools and processes to address this challenge…

Cost overruns and schedule delays of large-scale U.S. federal defense and intelligence acquisition programs

Project Management Journal in the paper Causal inferences on the cost overruns and schedule delays of large-scale U.S. federal defense and intelligence acquisition programs provides some interesting data on cost and schedule overruns in USG programs:

For example, statistical data from a recent Government Accountability Office (GAO) report (2008a) on 95 weapons systems found that the total cost growth on these programs was $295 billion, and the average schedule delay was 21 months. These large numbers represent a growing trend in cost overruns and schedule delays since the GAO began tracking these metrics in 2000. For comparison, the estimated total cost growth in the year 2000 of 75 DOD programs was $42 billion, normalized to fiscal-year 2008 dollars.

 The author indicates three reasons for the overruns ineffective human resources policies and practices, consolidation of the aerospace industry, and too many stakeholders:

A study was undertaken to understand why cost overruns and schedule delays have occurred and continue to occur on large-scale U.S. Department of Defense and intelligence community programs. Analysis of data from this study infers the causes of cost overruns and schedule slips on large-scale U.S. federal defense and intelligence acquisition programs to ineffective human resources policies and practices, consolidation of the aerospace industry, and too many stakeholders. 

Specifically, he posits that ineffective human resource policies lead to inexperienced personnel both in contractors and customers, people rotate through jobs too frequently, and there are too many contractors involved.  I can imagine that most of these are realities of the current economic and cultural environment.  Just as Toyota found out, these come from inability for R&D management tools and processes to deal with that environment and increasing complexity.

The author also posits that too many stakeholders lead to frequent changes in requirements.  I am not sure if the environment that leads to requirement changes is going to change any time soon.  I guess that means that the R&D managers need to come up with processes to deal with requirements changing effectively – without adding cost overruns and schedule slips…

The block diagrams that the author came up with look interesting.  However, I am not sure if I am able to agree with them fully.  It appears that he had his conclusions made first and then fit the analysis to support them…

Overall, a great article – well worth reading.

Get Immediate Value from Your New Hire

HBR has some excellent advice on Get Immediate Value from Your New Hire:

  1. Start Early:  Start as early as possible in the process to expose your new hire to the organization’s or unit’s culture and to explain how work gets done. 
  2. Get Them The Right Network: The first thing a manager can do is ensure that the new hire understands how important the informal or ‘shadow’ organization is in getting things done
  3. Get Them Working: Giving them real work immerses them in the way things function at the organization. This doesn’t mean you should let them “sink or swim”; definitely provide the support they need. 

This are useful reminders for both manager hiring new team members and team members getting involved in new organizations.  My success in several organizations has been hampered by lack of understanding of informal / shadow networks.  One interesting observation: Supervisors in companies with strong shadow organizations were much more reluctant to explain them!  And some principles to Remember:

Do: Hire for cultural fit as much as for capabilities and skill; Introduce your new hire to ‘culture carriers’ and ‘nodes’; Explain how work actually gets done at your organization 

Don’t: Let a new hire stay in ‘learning’ mode for too long; Assume your new hire can’t be productive from the start; Rely on the org chart to help explain lines of communication

Does innovation improve with external collaboration?

The article Effects of Supplier and Customer Integration on Product Innovation and Performance in the Journal of Product Innovation Management has some empirical evidence on impact of co-design and information sharing with suppliers and customers:

After surveying 251 manufacturers in Hong Kong, this study tested the relationships among information sharing, product codevelopment, product innovativeness, and performance with three control variables (i.e., company size, type of industry, and market certainty). 

The findings seem to indicate a direct, positive relationship between supplier and customer integration and product performance. However, there are a couple of key learnings: For brand new product families (that have not yet percolated through the supply-chain), it is much more important to partner with the emerging customer to learn and perfect the product.  On the other hand, for improving existing product lines, it pays to work with suppliers.  Information sharing with existing customers is not that important, but customer intimacy is:

The empirical findings show that product codevelopment with suppliers improves performance, mediated by innovation. However, the sampled firms cannot improve their product innovation by sharing information with their current customers and suppliers as well as codeveloping new products with the customers. If the adoption of supplier and customer integration is not cost free, the findings of this study may suggest firms work on particular supplier and customer integration processes (i.e., product codevelopment with suppliers) to improve their product innovation. The study also suggests that companies codevelop new products only with new customers and lead users instead of current ones for product innovation.

How To Be An Innovative Leader

Forbes.com had an article with three pointer towards how to drive innovation (How To Be An Innovative, Not Just Business, Leader):

  1. Reframe the challenge. 
  2. Focus on the customer experience.
  3. Practice rapid prototyping. 
Of the three, I find the first one of most interest.  We often forget to ask about the challenge itself and that in itself limits the possible solutions we come up with:

Innovative thinking can be used to redefine, or reframe, a problem. This is not a cosmetic or semantic change; it is a process of reexamining the situation. … By reframing problems, you uncover new places to innovate, or new angles to take. To reframe your challenge, ask powerful questions, challenge assumptions and bring in multiple perspectives. … He reframed the challenge away from fixing a past problem and toward differentiating the product and the company for the future. That was a vision that could focus and motivate the whole team. 

Here are a few more tips from another article in Forbes – Innovator’s Nirvana:

–Get strength at the top. “You can change business models,” said Miller, “but changing culture requires leadership.”

–Watch timing. The change may be great, but are all the support systems there? Remember what you innovate has to exist in an ecosystem to thrive.

–Communicate discovery for open innovation. The discoveries of Alcatel-Lucent’s scientists frequently end up in products far from their respective specialties.

–When ideas just keep failing despite tweaks to the prototype, have the guts to admit you were wrong. Just because it’s different, that doesn’t mean it was right. That judgment is more important. Plus admitting that and going on to try other new things can actually make you braver

Innovation’s Dirty Little Secret

The Businessweek Article Innovation’s Dirty Little Secret talks about how many organizations pay lip-service to Innovation:

Recently I spoke with a group of executives from a $3 billion division of a large industrial company. They were faced with a mandate from the chief executive to expand the firm’s service revenue from 20 percent to 33 percent. That’s almost $400 million in new revenue, yet when I asked how many people were on the team, the leader replied meekly: “Two.”

Some organizations like IBM clearly seem to invest a lot in Innovation and have found ways to make it successful (I am not sure what is innovation in a transformation from product to service business…)

Rosabeth Moss Kanter’s October 2009 Harvard Business School case study, ‘IBM in the 21st Century: The Coming of the Globally Integrated Enterprise,’ details many acts carried out by the leadership team during the company’s fabled transformation from a product to a service company. Executives were prepared to put big money where their mouths were when it came to supporting service-based ideas, such as ‘Innovation Jam,’ or such businesses as ‘On-Demand’ software, and strong messages about the importance of services were sent.

One last interesting learning from Kaiser – it is a great approach to make sure high risk high reward projects actually get implemented:

when a promising innovation project is about 50 percent complete, she brings together representatives from information technology, patient services, and facilities management to assess how to scale it across the company’s vast system. By evaluating the “O-Gap”—that is, the space between pilot and operations—this group takes into consideration everything from process realignment to environmental modifications, as well as the training requirements needed to foster wide adoption of the change. 

Strategy for maintaining proprietary information in R&D outsourcing

R&D management journal has laid out an interesting strategy for managing Information leakage in innovation outsourcing:

This paper studies an R&D outsourcing contract between a firm and a contractor, considering the possibility that in the interim stage, the contractor might sell the innovation to a rival firm. Our result points out that due to the competition in the interim stage, the reward needed to prevent leakage will be pushed up to the extent that a profitable leakage-free contract does not exist. This result will also apply to cases considering revenue-sharing schemes and a disclosure punishment for commercial theft. 

Take away in this case is that the before the R&D matures and revenue sharing begins, the contractor has an incentive to maximize revenues by “leaking” the information.  Rewards and or punishment for leaks need to be higher during the R&D phase and can be moderated at manufacturing stage.

Then, we demonstrate that in a competitive mechanism where the R&D firm hires two contractors together with a relative performance scheme, the disclosure punishment might help and there exists a perfect Bayesian Nash equilibrium where the probability of information leakage is lower and the equilibrium reward is also cheaper than hiring one contractor.

This is very interesting.  If we have two contractors than probability of leakage is lower! Sounds counter intuitive on the surface, but clearly there is some logic to it – if rivalry can work in internal R&D teams, it could help with external collaborators as well.  May be R&D managers can consider Coloplast’s approach?

You’re Getting a Bonus! So Why Aren’t You Motivated?

An interesting article from HBR You’re Getting a Bonus! So Why Aren’t You Motivated? lays out  two factors that reduce effectiveness of bonuses as a motivator in R&D teams.  R&D managers must keep both in mind while determining the best way to motivate teams into improving performance – especially when teams are virtual.

1.The connection between values and behavior. Typically, bonuses are tied to financial achievement —they’re paid out when a certain benchmark is hit such as yearly company revenue, earnings per share, or department revenue targets. But the connection between the outcomes you truly value and the behaviors you want to see from employees can be far from obvious.

This is very true in large R&D organizations.  I have worked with many companies were even large bonuses did not encourage right behavior because there was no direct link between individual performance and bonuses.  Several companies attempted to address this using a flow down of corporate performance requirements into individual goals.  However, this is extremely difficult to do – how does one link a success of a research project that may enable a new subsystem which in turn might have an impact on several future products to bonuses?  Even when the bonuses were tied to behaviors, the second problem prevented good outcome: 

2.The connection between a worker and his/her direct supervisor. Plenty of research has shown that the most important influencer of workers’ performance, for better or worse, is the dynamic between them and their bosses. For example, research into workplace deviance by Lance Ferris of Singapore Management University shows a higher level of outright deviance among employees who feel they’ve been treated rudely or unfairly by their immediate supervisors. By the same token, there is nothing more motivating than recognition that comes directly from the higher-up who knows your work best: your manager. At that close range, a reward is a relationship-builder. Administered more remotely, as bonuses are, it’s only a transaction.

I would add to this factor:  In several companies, the bonuses were decided at the division level and the supervisors were just handed a “decision” to communicate.  This made it quite difficult for the supervisor to even explain rewards, much less guide behavior!  May be it is time to consider other approaches to motivate teams?