George Westerman

Organization Design and Effectiveness over the Innovation Life Cycle

Differing bases of competition in early and later stages of an innovations life cycle call for differing organization designs. Designs that fit early strategic contingencies tend to misfit later ones. Over time, innovating units must either minimize the negative effects of misfit, or make difficult changes in design. Using four paired case studies, we examine how firms address conflicts in strategic contingencies, how managers adjust to misfits, and how organizations adapt their designs. We find that firms use one of three adaptation modes, none of which is fully autonomous nor fully integrated, and all of which change over time. Each mode optimizes for one contingency while suboptimally attempting to address the other. The study suggests practical insights for researchers and managers.

Agency Conflict in Internal Corporate Innovation Contests

Crowdsourcing innovation aims to solicit a large volume of diverse ideas but inherently increases demands on resources to assess those contributions. As a result, organizations may now crowdsource the assessment of the ideas as well. However, crowd assessment of crowd generated ideas may diverge from organizational objectives. We investigate crowd versus expert assessment in the context of a recurring innovation contest at a global technology company. Textual analysis of 14,697 submitted ideas reveals agency conflict between the two assessments. Experts focus on stated corporate objectives, while the preferences of the employee crowd negatively relate to corporate direction. Topic popularity and social concerns influence crowds of employees. While experts exhibit less agency conflict than employees relative to stated corporate objectives, they are far less numerous and potentially more expensive than employee resources. We identify hybrid mechanisms that balance use of constrained expert resources with the potential assessment biases of the crowd.

Competitive Advantage in a Digital World: Toward an Information-Based View of the Firm

We develop an information-based perspective on organizational sources of competitive advantage, linking information quality theory to key tenets of strategic management. Competitive advantage resides in the capacity to sense and make sense of information, and to grow this capacity over time. We test the model through a global multi-industry dataset of 7501 respondents. We find that information and management processes can be considered strategic resources and capabilities with direct effects on performance. Furthermore, high-performing firms exhibit complementarities between information resources and capabilities that low performers do not, consistent with the concept of dynamic capabilities. Finally, we exploit a key design feature of the dataset to show that information resources are more important in domains high in explicit information content while capabilities are more important to domains higher in tacit information. This information-based view provides strategic guidance to organizations as they learn to address the ever-changing digital information reality.

Organizing for a Digital Future: Opportunities and Challenges

As the digital age unfolds, possibilities for designing, organizing and managing productive work are expected to look very different from today’s effective practices. More remains to be learned, however, about the digital organization of the future and how firms might, or even should, respond to digital developments. This report explores this issue through three questions: What is fundamentally changing because of digital? How is digital changing the opportunities and constraints of industries? How is digital changing the opportunities and constraints of organizational design? We argue that digital technologies fundamentally change human potential to access and act on a wealth of digital information. Focusing on the impact of digital technologies and digital data – rather than on the specific features of the tools themselves, we identify four interconnected, information-based capabilities underpinned by digital technologies: collection, connection, interpretation, and automation. Since the cost of acquiring or developing these capabilities is also declining, digital technologies are democratizing the potential to access information and act on it in economically and socially significant ways. As a result, competitive dynamics are rapidly changing in all kinds of industries – even those that seem removed from the effects of digital technologies! At the same time, the possibilities and challenges for organizing internally are evolving. These dual effects both enable and impel organizational leaders to rethink fundamental decisions concerning where they choose to operate in the value ecosystem (strategic choices) and how they design their internal organization (organization choices).In a digital future, all firms will confront new challenges to how they generate economic value. Firms that understand and establish strong digital capabilities will gain superior flexibility to choose where and how they play in their value networks.