Myths & truths of innovative organisations
"The big challenge for Citilab is not to get people involved on a one-by-one basis, but to bring in groups that already exist"
Q) Give us a true and a false idea about an organization?
OK, a false one is that in an organization there should be a Research & Development unit that’s responsible for innovation. Innovation is something that very smart and very clever people do, you are either born with this talent or you acquire it, some people do it and some people don’t, and the best way to organize a group of people or a company or a non-profit (sic) is to put the people in one special department. Another false one is that innovation is “easy”, because innovation’s not necessarily easy, it requires certain types of organizational forms. Not every organization is best set up to be innovative. So, a kind of truth is that innovation works best when everyone in an organization feels that they have a possibility to be contributing in an innovative way, regardless of their position within an organization. And it follows then from that, that the unit of innovation is not a person but a group of people. It is groups and teams that innovate, and not simply “inn-o-vat-ers”. So organizations that realize that ability to put together groups of people who are different, but work together, can innovate.
Q) Are there any similarities between the Hungarian Companies and factories you studied in the 80s and 90s and Silicon Valley start-ups?
Firstly, those cases were really different, so the socialist factory case which was a very old factory, a large firm with 11,000 people was a giant state-owned enterprise. And what I was studying in the 80s was a team of people within one of the factories of the company, my start-up in Silicon Valley had 5 people when it started, it grew to 150 people in the period that we studied it so we’re comparing a very large firm and a very small one.
But, inside that Hungarian firm was a factory which had about 150 people, and 30 of those people got the right to organize work for their off-hours and at weekends. There was a very small team of 30 people and there were different types of skills, there were people who worked on horizontal lathes and boring machines, they built physical machine tools for export to Germany.
Meanwhile, the Silicon Valley people were building the tools for the digital age, they were website builders, consequently, very different. In the first case they made physical, in the second, they made digital tools. But the similarity was that within each of these teams, there was some combination of specialization and working together. There was a division of labour, not everybody knew how to use each of the machines. In the Silicon Valley case, not everyone was a programmer, not everybody was an interactive designer, not everybody was a business-strategist, not everybody was an information-architect. Each of them had their own disciplines and identities, as a kind of “community of practice”, but they worked very closely together. These people had different kinds of skills and each preserved their own idea of what is a good and valuable organization, what is a good and valuable product of that organization.
In some ways, it was this difference between the ideas that the programmers had, the ideas that the business-strategists, and the information-architects had, that allowed this firm not simply to have to react to situations “out there” in the market, but to anticipate developments and never be locked into a particular idea of what worked, in a way, not be trapped by their successes. So, there were important similarities and differences in each case.
This is an idea that will be coming out in the American Journal of Sociology, and the title of this paper is “Structural Fold”. It’s a title that’s related to another concept that’s out there in sociology, and especially in network analysis, and that’s the notion of the so-called “structural hole”.
So, let’s say you have a group of people who know each other and they have a lot of dense ties among each other. Therefore, this person is connected to that person, is connected to that person, and they are all connected to each other. If you think about it, (there is) a lot of density, a lot of ties among them; then there’s another group over here, they also have the same ties, but they don’t have any connection between each other. In network terms, there’s a hole here and so the idea was that there could be a person or some people who fill that hole, who bridges that hole. So there’s a kind of point, it’s not a point where they come in contact, it’s just a point that connects them, and ideas would flow from one to another. That’s a very good definition of what is brokerage. This one – the point – is a broker, he’s of neither one group nor another, but connects them. It’s a very interesting idea.
But the premise that we have in this paper is that entrepreneurship is different from brokerage. Entrepreneurship isn’t just about bringing an idea that has already been developed from one place, and moving it over to another place. Entrepreneurship is about generating new ideas, which is really to combine ideas from one place to another.
The idea of “fold” then, is not you just have this place of non-contact, but that the group are folded over each other and overlapped. It’s a topological feature in which the two parts of the network are folded over. In the paper, the data which we have from Hungary over a 15 year period is actually the personal ties between the largest 2,000 companies over the 15 year period. We can track the performance of the companies, and we find that the companies that have this property of “structural fold” have better performance. In this particular case, their revenues grow much faster than average, but groups that just keep dense ties don’t do as well.
Another thing that we find, groups that have this structural fold are also more unstable, they tend to break up. Groups that don’t have this are very stable and they tend not to fail. Organizations face a certain type of challenge, they could be very, very fearful about failure, don’t overlap, don’t “mix up” with other groups, but they won’t achieve high, they aren’t going to make it big. Groups that take this risk have this overlap with other groups, can achieve, but they’re also not necessarily entirely stable.
The third part of the paper is about how they manage that instability. We find that groups break up and re-combine, break up and re-combine, in patterned ways that allow them to take advantage of the structural fold, while not just breaking up and floating out into the ether of the organizational environment.
Q) “Citizens can innovate”, true or false? And, is this a realistic approach?
The answer would be yes. I´d give the same answer as to your first question. So, the answer must certainly be yes! But, adding, with the problem of innovation which isn’t easy, there are important and interesting challenges about how to do that, I think one of the important things, probably false, is that because probably everybody “can” innovate, then all that you need to do is to tell people that you’re ready for them to come in and innovate, one-by-one, citizen-by-citizen, and get involved in an organization like Citilab and they’ll be able to innovate. But, if we draw this other lesson - the true one - that it’s not individuals that innovate but organizations that innovate, then the challenge of an organization like Citilab might simply not be to involve citizens simply as citizens, but groups of people who already exist as groups. Maybe they are an informal organization, a rock band, or a group of people who are gardeners, trade-union activists or people who are concerned about the environment, and they just get involved in Citilab and use the kind of new technologies being developed here to be innovative, not just in, but with, the people here at Citilab.
