Chapter 4 Study Questions
What is in the environment of organizations?
What are key issues in organization–environment relationships?
What are the emerging challenges of sustainability and the environment?
How do organizations accomplish innovation?
Who would have predicted that something called "cloud computing" would challenge the way software firms traditionally serve business customers? Marc Benioff did. He saw the great potential of offering software services through the Internet and started Salesforce.com, now a powerhouse in business-to-business computing. It sells online services that allow firms to track sales, update accounts, bill customers, and handle an expanding variety of customer relationship functions.
Cloud computing frees users from costly in-house hardware and software ownership. Instead, they basically "rent" services delivered from remote servers maintained by firms such as Salesforce.com. Benioff's genius in anticipating this market scored a bull's eye. His business model of on-demand computer services quickly moved from the fashion-forward stage to dead center in a popular and increasingly competitive industry.
Forward looking and confident in taking risk, Benioff recognized the opportunity in leading a shift away from selling business software as a product and toward selling it as a service. The Wall Street Journal now calls Salesforce.com "the pioneer in cloud computing." Customers buy what they want, have the opportunity to provide constant feedback, and can drop the service if they become dissatisfied. Salesforce.com even has a website called IdeaExchange where customers provide suggestions and comments to spur continued improvements. At one point they were asked to vote on a possible name change for the firm; they responded–"don't change it, we like Salesforce.com." And when the firm ran into difficulty handling computer crashes at one point, Benioff turned to a strategy of full disclosure and transparency so that customers always knew what was happening.[188]
Some look at conditions in our world and see hopeless problems; others look and see endless opportunities. Some read environmental trends and spot innovation potential; some don't look at all. Marc Benioff's accomplishment in creating Salesforce.com is a great example of business innovation in the face of risk and uncertainty. Think about it. Could this be your story someday–perhaps working in a different industry and setting, but still showing the same forward-thinking quest for innovation?
Have you noticed the interest today in adventure sports–in things like ice climbing, river running, cliff parachuting, and more? Some say it's a quest for the adrenaline rush that comes from risk; others claim the "thrill" from such pastimes is addictive. For us it introduces the topic of risk taking and the degree to which we are uncomfortable or comfortable taking action in situations that are high in uncertainty. At issue here are the psychology of risk and the question of why some of us are risk takers while others are not.
Most consider tendencies toward risk taking as good for managers and organizational leaders. After all, isn't this the way to step forward and try new things that offer great potential returns in the future?
But there's need for caution as well. Research finds that risk taking by executives in higher performing organizations is motivated by confidence. This helps them adapt and deal positively with problems as they arise. In lower performing organizations, executives are motivated to take risks more by desperation to escape existing difficulties. Because they lack confidence when problems arise, they are more likely to quickly jump from one option to the next without making real gains.
The question, as suggested in the accompanying box, comes down to this: On which side of the "risk line" do you most often fall? Are you on the positive side where risk taking is motivated by confidence and is likely to have positive staying power? Or are you on the negative side where risk taking is motivated by desperation and the likelihood is to falter when problems are encountered? As a final thought, research also links high risk taking with boredom and dissatisfaction. Does this explain what you or friends experience when engaging in risky sports or personal behaviors?[189]
Make a commitment to carefully monitor your risk patterns. Which side of the risk line are you on most often? When you take risks in your coursework, is it confidence motivation that drives the risk taking or desperation? Think about how your current risk-taking tendencies might play out in future work and personal situations. Also take advantage of the end-of-chapter Self-Assessment feature to further reflect on your Tolerance for Ambiguity, and examine your risk tendencies in conditions of Turbulence and Uncertainty.
Visual Chapter Overview
3 Environment, Sustainability, and innovation
Study Question 1 | Study Question 2 | Study Question 3 | Study Question 4 |
|---|---|---|---|
Environments of Organizations | Organization–Environment Relationships | Environment and Sustainability | Environment and Innovation |
|
|
|
|
Learning Check 1 | Learning Check 2 | Learning Check 3 | Learning Check 4 |
"I'm deeply sorry for any accident that Toyota drivers have experienced... I myself, as well as Toyota, am not perfect. We never run away from our problems or pretend we don't notice them." Toyota President Akio Toyoda, testifying before U.S. Congress
"Every single Toyota owner deserves a full accounting of what happened and what went wrong ... The U.S. government has to do a much better job of keeping the American people safe." Senator Jay Rockefeller, Chairman, U.S. Senate Commerce Committee
When Toyota recalled millions of vehicles for accelerator problems and quality defects, it wasn't just customers and the marketplace that reacted; U.S. lawmakers did too.[190] Toyota's president felt the full brunt of American anger when called to testify before the Senate Commerce Committee. Although he apologized and pledged a full and complete response by the firm, Akio Toyoda was met by claims that his firm had acted with "greed and insensitivity."
Interactions between business and lawmakers are just one example of the complex relationship that organizations maintain with their external environments. Top executives like Toyoda, and all managers, must understand what is taking place in the external environment and then make good decisions on how to run the organization and position its products and services for success.
With regard to the general environment of organizations, we are talking about all external conditions that set the context for managerial decision making. You might think of it as a broad envelope of dynamic forces that surround and influence an organization. We most often classify these forces as economic, legal-political, technological, sociocultural, and natural environment conditions, as shown by the Starbucks example in Figure 4.1.
• The general environment is comprised of economic, legalpolitical, technological, sociocultural, and natural environment conditions.
Managers must be concerned about economic conditions in the general environment, particularly those that influence customer spending, resource supplies, and investment capital. Things like the overall health of the economy—domestic and global, in terms of financial markets, inflation, income levels, and job outlook are always important. All such economic conditions affect the prospects for individual companies, the spending patterns and lifestyles of consumers, and even a nation's priorities. They are key factors to be assessed, forecasted, and considered when executives make decisions about the strategies and operations of their organizations.
Consider the practice of offshoring, which involves the outsourcing of work and jobs to lower cost foreign locations. One of the dominant trends over the past decade, it has resulted in the loss of many domestic jobs and been a source of great political debate and social concern. But economic signals are now showing signs of another shift; onshoring or reshoring is moving some jobs back home. Rising labor costs in foreign countries, higher shipping costs, complicated logistics, complaints about poor customer service, public criticisms about destroying local jobs, and economic incentives offered by communities are causing some global firms to transfer jobs from foreign locations and create new jobs at home.[191]
Another economic trend facing executives of national and global brands is the growing number of communities around the country that are advocating "buy local" themes. Activist citizens and government leaders are claiming that the local economy benefits more in job gains and amount of money circulating when people shop at "local" businesses as opposed to outside "big chains." Starbucks is among those trying to address this challenge through a practice known as unbranding — where stores owned by chains are advertised with local nonbranded names.[192] If you go to 15th Ave. Coffee & Tea in Seattle, for example, it's really a Starbucks-owned café, even though this corporate ownership isn't noticeable to a customer. Starbucks spokesperson Ann Kim-Williams says that the strategy of unbranding offers an "amplified focus on local relevance" and that "we hope customers will feel an enhanced sense of community."[193]
• Offshoring is the outsourcing of jobs to foreign locations.
• Onshoring or reshoring is the return of jobs from foreign locations as companies establish new domestic operations.
• Unbranding occurs when stores owned by major national and global chains are advertised with local nonbranded names.
Managers must also stay abreast of developments in legal-political conditions in the general environment. These are represented by existing and proposed laws and regulations, government policies, and the philosophy and objectives of political parties. In the aftermath of economic recession, U.S. lawmakers are discussing many issues such as regulation of banks and the financial services industry, foreign trade agreements, and protection of U.S. jobs and industries. Corporate executives follow such debates to monitor trends that can affect the regulation and oversight of their businesses. As a result of Toyota's quality problems, featured earlier, U.S. lawmakers quickly decided to tighten car safety regulations and consider legislation that would require all cars sold in the United States to have "black boxes" that would record crash data.[194]
Legal-political conditions in the global business environment vary from one country to the next. Just as foreign firms like Toyota have to learn to deal with U.S. laws and political conditions, so too must U.S. firms adjust to the legal-political environments of foreign countries. Not too long ago, for example, the European Union fined Microsoft $1.35 billion for antitrust violations involving the practice of bundling media and Windows software and making the source code for interoperability unavailable to competitors.[195]
Airline Industry Flies Through Economic Turbulence
One of the lingering impacts of the economic recession is a continuing commitment to cost control by organizations. It used to be that most airlines could count on business travelers for 50% or more of their revenue. Tough times and new technologies have changed that. Many companies are cutting travel budgets, asking employees to fly "coach" when they do travel, and making it possible for them to travel a lot less by using videoconferencing. Airlines have resorted to a variety of new pricing schemes, including baggage and preferred seating charges, to try and reverse the revenue losses.
National policie on Internet censorship —the deliberate blockage and denial of public access to information posted on the Internet, also vary around the world. And, global firms face many dilemmas in dealing with them.[196] Google faced a running series of problems dealing with Chinese laws that restrict access within China to Internet sites deemed off limits by the government—things with political content or pornography, for example. When Google complied by engaging in censorship of its Google.cn site, the firm was criticized for reneging on its avowed commitments to information freedom.[197] When Google decided to stop censoring and leave China, others, including some Chinese citizens, criticized the firm for abandoning efforts to promote information access in the country. A Google spokesperson said: "We have a delicate balancing act between being a platform for free expression and also obeying local laws around the world."[198]
• Internet censorship is the deliberate blockage and denial of public access to information posted on the Internet.
Speaking of the Internet, perhaps nothing gets as much attention these days as developments in the technological conditions in the general environment. Nobody doubts that we are in the midst of a continuing technological revolution that affects everything from the way we work to how we live and how we raise our children.
The role of technology in organizations is advancing as rapidly as the use of YouTube, Facebook, Google Maps, and "apps" on our smartphones. Did you know that customers of USAA, a financial services firm for military families, can take photos of checks, use an iPhone app to send them to the bank, and then spend the money from their account within minutes?[199] And are you aware that we are now spending more time in the world of social media than with e-mail?[200] Indeed, one of the growing concerns of employers is just how much time their "tech savvy" employees spend browsing the Web and engaging in online diversionary pastimes. After finding out that 70% of workers spent over an hour a day watching Webbased videos, one employer said: "I almost fell out of my chair when I saw how many people were doing it."[201]
Social media are now all the rage, but for employers it's both a problem and an opportunity. In a survey of 1,400 chief information officers, only one out of ten said his or her firm allowed employees full access to networking sites while on the job.[202] One concern is for too much "social not working," while another is for protecting the privacy of privileged information and communications. The term Enterprise 2.0 describes how organizations use social networking and blog technologies to open up communications, while still keeping the focus on work and protecting the privacy of information exchanges. An example is Yammer, a corporate communication tool built around the question: "What are you working on?"
• Enterprise 2.0 is the use of social networking and blog technologies in the workplace.
Also on the employee side of the technology equation is the issue of work-life balance. Do you realize how easily technology drives the penetration of work responsibilities into our non–work lives? How often, for example, do you hear people complaining that they're "never free from the job," and that their work follows them home, on vacation, and just about everywhere in the form of the ubiquitous notebook or netbook computer and smartphone device? And, don't forget that technology is playing an ever-increasing role in recruiting. A CareerBuilder.com survey reports that some 45% of executives said they visited social-network sites of job candidates and about one-third of them found information that caused them to not hire the person.[203] On the other side of the issue, U.S. Cellular reports that it saved $1 million in just one year by using LinkedIn.com to find job candidates rather than hiring through headhunter firms.[204]
The sociocultural conditions in the general environment take meaning as norms, customs, and demographics of a society or region, as well as social values on such matters as ethics, human rights, gender roles, and life styles. Patterns and trends in these sociocultural factors can have major consequences for organizations and how they are managed.[205]
In respect to age demographics, managers should stay abreast of differences among generational cohorts—people born within a few years of one another and who experience somewhat similar life events during their formative years.[206] On the issue of technology, for example, the aging Baby Boomer generation is a "digital immigrant" group that has had to learn about technology as it became available. But the Millennials or Gen Ys, along with their younger counterparts the iGeneration, are "digital natives" who grew up and are growing up in technologyenriched homes, schools, and friendship environments. This affects everything from how they listen to music and watch TV and movies, to how they shop, to how they work and learn. Characteristics often described for the digital natives are ease of multitasking, desire for immediate gratification, continuous contact with others, and less concern with knowing things than with knowing where to find out about things.[207]
• Generational cohorts consist of people born within a few years of one another and who experience somewhat similar life events during their formative years.
In respect to social values, managers should be aware of how shifting currents and trends affect such things as reputation management, product development, and advertising messages. There was a time, for example, when the pay of American CEOs wouldn't have gotten a lot of public attention. No more. With a depressed economy and wide gaps between the average worker's pay and the average CEO's, complaints are flying. Public values are showing increasing intolerance of perceived pay inequities. We have reached the point where Congressional discussions have been held on executive pay, many articles are regularly published to report the pay of corporate executives, and a growing number of firms are facing shareholder resolutions asking for more input on executive compensation.[208] And on the customer side of things, it wasn't too long ago that research was reporting that only about 10% of consumers would "go out of their way to purchase environmentally sound products."[209] But dramatic shifts in energy prices and increased attention on global warming seem to be quickly increasing consumer preferences for "green" products— everything from automobiles to energy to building materials to the food we eat. Research also shows that many consumers are now willing to pay more for ethical products such as fair trade coffee.[210]
Research Brief
Generations Show Differences on Important Values
With our economy facing the implications of dealing with an aging workforce, scholars Jean Twenge, Stacy Campbell, Brian Hoffman, and Charles Lance decided to investigate value differences across generational cohorts–groups of individuals born about the same time and experiencing similar life events during their development years. The authors recognize that with a large number of retirements looming and with more seniors remaining in the workforce, it is important to understand how values may differ among generations in the same workplace and what the implications might be for managing them.
Twenge et al. focused their attention on comparing Baby Boomers (born 1946–1964, grew up during the Vietnam War and civil rights movement) with Generation X (born 1965–1981, saw fall of the Soviet Union and advent of the AIDS epidemic) with Generation Y or the Millennials (born 1982–1999, grew up digital and saw major corporate ethics scandals). They examined data gathered as part of a program called Monitoring the Future, which has surveyed high school seniors each year since 1976.
The main findings of the study were in values toward leisure, with GenX increasing over Boomers and Millennials further increasing over GenX. The researchers interpret this as a growing desire for work–life balance. Extrinsic values for money and status, however, increased for GenX and then decreased for Millennials. Data for intrinsic (meaning from work), altruistic (helping others), and social (relationships) values all showed a similar decline from Boomers to GenX to Millennials.
Because values are important influences on behavior, the researchers conclude that different generations may need different handling in the workplace. GenX and Millennials may be attracted to work settings that offer work–life balance and support leisure pursuits, things often associated with alternative and more flexible work scheduling. The researchers do caution that the data are old and that we shouldn't assume that values within the generational cohorts haven't shifted with time.
Reference: Jean M. Twenge, Stacy M. Campbell, Brian J. Hoffman, and Charles E. Lance, "Generational Difference in Work Values: Leisure and Extrinsic Values Increasing, Social and Intrinsic Values Decreasing," Journal of Management Online First (March 1, 2010): www.jom.sagepub.com.
The latter discussion leads directly into consideration of natural environment conditions. Debates about being "carbon neutral," "green," and "sustainable" are big issues on our campuses, in our communities, and in our everyday lives. You can look around and easily spot any number of initiatives to reduce paper usage, recycle, use local produce, and adopt energy saving practices. In business you'll find that industries like renewable power are creating new job opportunities in "green-collar" employment. New business practices are also emerging. For example, Timberland is labeling shoes with a carbon rating to show how much greenhouse gas was released during production, while SABMiller has set a goal of reducing by 25% the amount of water needed to brew a liter of beer.[211]
Without doubt, we increasingly expect businesses to supply us with environmentally friendly products and to operate in ways that preserve and respect the environment. When they don't, public criticism is likely to be vocal and harsh. Just recall the outrage that quickly surfaced over the disastrous BP oil spill in the Gulf of Mexico and subsequent calls for stronger government oversight and control over corporate practices that put our natural world at risk.[212]
There is now growing interest in the notion of sustainable business, where firms operate in ways that both meet the needs of customers and protect or advance the wellbeing of the natural environment. What makes a business "sustainable" is that how it operates and what it produces have minimum negative impact on the environment and helps preserve it for future generations.[213] A truly sustainable business operates in harmony with nature rather than by exploiting nature. Hallmarks of sustainable business practices include less waste, less toxic materials, resource efficiency, energy efficiency, and renewable energy. We'll explore these issues of environment and sustainability further in a later section of this chapter. For now, Management Smarts 4.1 shows that a commitment to environmental social responsibility offers benefits to both organizations and society.[214]
• Sustainable business both meets the needs of customers and protects the natural environment for future generations.
In contrast to the general environment conditions, organizations and their managers deal everyday with the specific environment or task environment. It comprises the actual organizations, groups, and persons with whom an organization interacts and conducts business. You can picture it as standing between the level of the general environment and the boundary of the organization itself.
• The specific environment, or task environment, includes the people and groups with whom an organization interacts.
• Stakeholders are the persons, groups, and institutions directly affected by an organization.
Members of the specific or task environment are often described as stakeholders, first described in Chapter 3 as the persons, groups, and institutions affected by the organization's performance.[215] Stakeholders are key constituencies that have a stake in how an organization operates; they are influenced by it, and they can influence it in return. Figure 4.2 shows that the important stakeholders for most organizations include customers, suppliers, competitors, regulators, advocacy groups, investors or owners, and employees. "Society at large" and "future generations" are also part of the stakeholder map; they introduce, among other things, concerns for sustainability and the natural environment.
Top-level decisions are often made with an analysis of the extent to which the organization is creating value for and satisfying the needs of its multiple stakeholders. For example, businesses create value for customers through product pricing and quality; for owners the value is represented in realized profits and losses. Businesses can create stakeholder value for suppliers through the benefits of long-term business relationships. For local communities this value can be found in such areas as the citizenship that businesses display when they use and contribute to public services. For employees, value creation takes such forms as wages earned and job satisfaction. Businesses can even create value for competitors by stimulating markets and innovations that didn't exist before.
The interests of multiple stakeholders are sometimes conflicting, and management decisions may have to address different priorities and trade-offs among them. Some years ago, for example, researchers asked MBA students what a business's top priorities should be. Some 75% answered "maximizing shareholder value," and 71% responded "satisfying customers." Only 25% mentioned "creating value for communities," and only 5% noted "concern for environmentalism."[216] It would be interesting to repeat the survey to see if today's students would give more priority to society at large and future generations as stakeholders, and to more sustainable business practices.
This conversation illustrates what often becomes the missing link in the quest for business success: customer service.[217] Contrast it with the case of a customer who once called the Vermont Teddy Bear Company to complain that her new mailorder teddy bear had a problem. The company responded promptly, she said, and arranged to have the bear picked up and replaced. She wrote the firm to say "thank you for the great service and courtesy you gave me."[218]
Customers are always key stakeholders, and they can be very demanding in desires for low price, high quality, on-time delivery, and great service. A Harvard Business Review survey reports that American business leaders rank customer service and product quality as the first and second most important goals in the success of their organizations. A survey by the market research firm Michelson & Associates showed poor service and product dissatisfaction ranking first and second as the reasons customers abandon a retail store.[219] Imagine the ramifications if every customer or client contact with an organization were positive. Not only would these people return again and again as customers, but they would also tell others and expand the company's customer base.
Many organizations now use the principles of customer relationship management to establish and maintain high standards of customer service. Known as CRM and introduced in the chapter-opening example of Salesforce.com, this approach uses the latest information technologies to maintain intense communication with customers as well as to gather and utilize data regarding their needs and desires. At Marriott International, for example, CRM is supported by special customer management software that tracks information on customer preferences. When you check in to a Marriott hotel, your past requests for things like a king-size bed, no smoking room, and Internet access are likely already in your record. Says Marriott's chairman: "It's a big competitive advantage."[220]
• Customer relationship management, or CRM, uses information technologies to communicate with customers and gather data tracking their needs and desires.
Just as organizations need to manage their customers on the output side, supplier relationships on the input side must also be well managed. Any organization deals with a complex set of suppliers who provide it with finances, information, and material resources. How well the supplier relationships are managed can have a major impact on operating efficiencies and business profits. The concept of supply chain management, or SCM, involves the strategic management of all operations linking an organization and its suppliers through purchasing, transportation logistics, and inventory management.[221] The goal of SCM is to achieve efficiency in all aspects of the supply chain while ensuring on-time availability of quality resources for customer-driven operations. As retail sales are made at Wal-Mart, for example, an information system updates inventory records and sales forecasts. Suppliers access this information electronically, allowing them to adjust their operations and rapidly ship replacement products to meet the retailer's needs.
• Supply chain management, or SCM, involves management of all operations linking an organization and its suppliers, such as purchasing, transportation logistics, and inventory management.
Note
✓Learning Check
Study Question 1
What is in the external environment of organizations?
Be sure you can ✓ list key elements in the general and specific environments of organizations ✓ define sustainable business ✓ describe how a business can create value for four key stakeholders ✓ give examples of potential conflicting interests among stakeholders for a business in your community ✓ explain customer relationship management and supply chain management
Understanding an organization's external environment is one thing; making good decisions to best deal with the opportunities and threats it poses is quite another. In today's challenging times, managers continually wrestle with the notion of competitive advantage, the challenges of environmental uncertainty, and the quest for organizational effectiveness.
One of the goals in managing the organization–environment interface is to achieve competitive advantage —something that an organization does extremely well and that gives it an advantage over competitors in the marketplace.[222] This concept is discussed further in Chapter 9 on strategic management. For now, the notion of competitive advantage may be best summed up as an answer to this question: "What does my organization do best?"
• Competitive advantage is something that an organization does extremely well, is difficult to copy, and gives it an advantage over competitors in the marketplace.
Legendary investor Warren Buffett is often quoted as saying "sustainable competitive advantage" is what he first looks for in a potential investment. Examples of what might attract Buffett as an investor and that represent the essence of competitive advantage include Wal-Mart's inventory management technology, which enables a low-cost structure, and Coca-Cola's brand management, which helps maintain a loyal customer base. As a prelude to further discussion in Chapter 9, you should recognize that competitive advantage in general can be pursued in the following ways.[223]
Competitive advantage can be achieved through costs —finding ways to operate with lower costs than one's competitors and thus earn profits with prices that one's competitors have difficulty matching.
Competitive advantage can be achieved through quality —finding ways to create products and services that are of consistently higher quality for customers than what is offered by one's competitors.
Competitive advantage can be achieved through delivery —finding ways to outperform competitors by delivering products and services to customers faster and on time, and by developing timely new products.
Competitive advantage can be achieved through flexibility —finding ways to adjust and tailor products and services to fit customer needs in ways that are difficult for one's competitor to match.
As managers pursue competitive advantage, their decision making is often complicated by environmental uncertainty —a lack of complete information regarding what exists in the environment and what developments may occur. This uncertainty makes it difficult to analyze general and task environment conditions and deal with stakeholders' needs. The more uncertain the environment, the harder it is to predict future states of affairs and understand their potential implications for the organization.
• Environmental uncertainty is a lack of information regarding what exists in the environment and what developments may occur.
Two dimensions of environmental uncertainty are shown in Figure 4.3.[224] The first is the degree of complexity, or the number of different factors in the environment. An environment is typically classified as relatively simple or complex. The second is the rate of change in and among these factors. An environment is typically classified as stable or dynamic. The most challenging and uncertain situation is an environment that is both complex and dynamic. This is perhaps what faces automobile, financial, and housing industry executives today. High-uncertainty environments require flexibility and adaptability in organizational designs and work practices, as well as an ability of decision makers to respond quickly as new circumstances arise and new information becomes available.
A basic indicator of management success in dealing with complex and changing environments is organizational effectiveness. It is a measure of how well an organization performs while using resources to accomplish its mission and objectives. Theorists analyze organizational effectiveness from different vantage points.[225]
• Organizational effectiveness is a measure of how well an organization performs while using resources to accomplish mission and objectives.
The goal approach looks at the output side and defines organizational effectiveness in terms of achievement of key operating objectives such as profits and market share.
The systems resource approach looks at the input side and defines organizational effectiveness in terms of success in acquiring needed resources from the organization's environment.
The internal process approach looks at the transformation process and defines organizational effectiveness in terms of how efficiently resources are utilized to produce goods and services.
The strategic constituencies approach looks at the external environment and defines organizational effectiveness in terms of the organization's impact on key stakeholders and their interests.
All approaches to organizational effectiveness—goal, systems resource, internal process, and strategic constituencies—should be assessed as a package in order to gain a full picture of the organization's performance. If we go back to the Toyota case of massive vehicle recalls, for example, "effectiveness" was a core theme when the firm's CEO, Akio Toyoda, issued his public apologies while testifying before the U.S. Congress. Toyoda said: "I would like to point out here that Toyota's priority has traditionally been the following: first, safety; second, quality; and third, volume. These priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before." He later suggested that the volume goal became inappropriately dominant in corporate decision making as Toyota expanded rapidly while trying to gain market share around the globe.[226] If anything, this case suggests that goals pursued without consideration of strategic constituencies and customers may cause executives to falsely conclude that all is well even when it is not.
Organizational effectiveness also needs to be evaluated on a time line, rather than as just one point in time.[227] In the short run, the focus is on performance effectiveness in goal accomplishment and performance efficiency in resource utilization. In the medium term, effectiveness involves adaptability in the face of changing environments and development of people and systems to meet new challenges. And in the long run, effectiveness may be described as achieving continued prosperity under conditions of uncertainty.
Note
✓Learning Check
Study Question 2
What are key issues in organization–environment relationships?
Be sure you can ✓ define competitive advantage and give examples of how a business might achieve it ✓ analyze the uncertainty of an organization's external environment using degree of complexity and rate of change ✓ describe the systems resource, internal process, goal, and strategic constituencies approaches to organizational effectiveness
Climate change, carbon footprints, alternative energy—renew, recycle, conserve, and preserve; the link between people, environment, and sustainability has many facets. So, should some assessment of environmental impact be included in a fullrange definition of organizational effectiveness? At PepsiCo, for example, CEO Indra Nooyi has said that her firm's "real profit" should be assessed in the following way: Revenue less Cost of Goods Sold less Costs to Society. "All corporations operate with a license from society," says Nooyi. "It's critically important that we take that responsibility very, very seriously; we have to make sure that what corporations do doesn't add costs to society."[228]
The notion of "costs to society" raised by Nooyi links back to the triple bottom line of organizational responsibility discussed in Chapter 3—assessing economic, social, and environmental performance.[229] You might recall it as a focus on 3 Ps of organizational performance: Profit, People, and Planet. The relevance of the 3 P's to the present discussion of environment and sustainability is highlighted by ISO 14001, a global quality standard that requires certified organizations to set environmental objectives and targets, account for the environmental impact of their activities, products, or services, and continuously improve environmental performance.[230] Its relevance is also reflected in one of the guiding Principles for Management Education as set forth in a United Nations' sponsored forum of global educational leaders: "We will develop the capabilities of students to be future generators of sustainable value for business and society at large and to work for an inclusive and sustainable global economy."[231]
• The triple bottom line assesses the economic, social, and environmental performance of organizations.
Nonprofit Rallies Pennies for Peace
Can you imagine an American building rural schools in the tribal regions of Pakistan and Afghanistan? Meet Greg Mortensen who founded the Central Asia Institute and Pennies for Peace to do just that. Author of best-sellers Three Cups of Tea and Stones into Schools, Mortensen turned a mountain-climbing adventure into a lifelong commitment. His nonprofit organizations are focused on human sustainability. They have helped more than 28,000 children, 18,000 of them girls, who receive education in places where a Westerner has to tread carefully and with cultural awareness.
• The 3 Ps of organizational performance are Profit, People, and Planet.
• ISO 14001 is an international quality standard requiring organizations to set environmental objectives and targets, account for environmental impacts, and continuously improve environmental performance.
What, for example, do you think of when you read or hear about J. W. Marriott Corporation? For most of us, it's a hotel chain focused on customers and profits. But for residents in Boa Frente, an isolated village in Brazil's interior Amazon region, Marriott is a sponsor of better education and health care. It's a partner in a United Nations plan that rallies the support of global businesses to help save the remaining rain forests through a program called REDD—Rules for Reducing Emissions from Deforestation and Degradation.[232] In Boa Frente this means not only getting new schools, health clinics, and infrastructure, it also means continuing education for the citizens about the natural environment and sustainability. Aderbal de Oliveira, a village leader, says: "The forest has riches. We must be its guardians." And in respect to its role in the project, Marriott's Vice President Arne M. Sorenson says: "We decided to be a leader in this space. It makes us a better brand and increases customer loyalty."[233]
Rising oil prices, concerns for greenhouse-gas emissions and use of toxins, public values on climate change and clean energy, poverty and income disparities—all of these forces and more are driving the conversation about our planet and sustainable development today.[234] The range of issues stands at the interface between how people live and how organizations operate, and the capacity of the natural environment to support them. We want prosperity, convenience, comfort, and luxury in our everyday lives. But, we are also aware that more and more attention must be given to the costs of these aspirations and how those costs can be borne in a way that doesn't impair the future.
• Sustainable development makes use of environmental resources to support societal needs today while also preserving and protecting them for future generations.
The term sustainable development describes practices that make use of environmental resources to support society today while also preserving and protecting the environment for use by future generations. The World Business Council for Sustainable Development, whose membership includes the CEOs of global corporations, defines sustainable development as "forms of progress that meet the needs of the present without compromising the ability of future generations to meet their needs."[235]
Real Ethics
Corporate Greens Take on Global Warming
Get ready—you'll be reading and hearing a lot more about "corporate greens." No, we're not talking about a new political party; we're talking about a growing voice from the business community that it really does care about global warming and is going to do its share to respond to the threats. There's emerging consensus not only that global warming is harming our planet even faster than expected, but that sustainable innovations by business are needed to deal with it.
As concerns for global warming build, so, too, do pressures for change in traditional business methods. More business leaders seem to be taking the challenge seriously. Ryan Wright is manager in charge of utility and sustainability at the Bellisio Foods plant in Jackson, Ohio. You may not think there's a lot that can be done to "green up" a manufacturing facility, but he's found the way. A large treatment plant digests food waste, using bio-organisms to create the methane that becomes fuel to run the factories' boilers. Wright believes the process cuts CO2output by 43,000 tons per year by saving on costs of natural gas and transporting waste to a landfill. Although the price of the system was $4.65 million, he says: "It's a great project; we're proud of it: it's the right thing to do."
You Decide
Is it ethical for a business to pursue anything but "carbon neutrality" in today's world? Should businesses sacrifice profits by doing more than is legally required to fight global warming?
Alternatively, is it ethical for a firm to highlight its environmentally friendly practices if they are undertaken primarily to avoid government regulation or ad-verse publicity? In other words, does it make a difference from an ethics standpoint if a firm does "good things" for selfish reasons?
Conversations about sustainable development often refer to environmental capital or natural capital.[236] It represents the available storehouse of natural resources that exist in the form of atmosphere, land, water, and minerals, that we use to sustain life and produce goods and services for society. In this sense, sustainable development practices in management would be evaluated on the basis of their contributions to preserving environmental capital for future generations while tapping it for the present. The possibilities range from investments in alternative energy sources such as solar, wind, and algal biofuels, to water conservation efforts, to electronically monitoring energy usage for better decision making and control, to using more energy efficient building designs and materials, to changing work styles and schedules to be more energy efficient, to use of teleconferences to replace physical travel, to many more options.[237]
• Environmental capital or natural capital is the storehouse of natural resources—atmosphere, land, water, and, minerals, that we use to sustain life and produce goods and services for society.
The importance of environment and sustainability was highlighted by the theme for the 2009 annual meeting of the Academy of Management—"Green Management Matters." Green management is defined as managing people and organizations in ways that demonstrate and achieve "responsible stewardship of the natural environment." Another way to put it is that green management treats people and resources in ways that give high priority to sustainable development and nurturing of environmental capital.[238]
• Green management is managing people and organizations in ways that achieve responsible stewardship of the natural environment.
You will find green management reflected in a wide variety of green projects ranging from the use of new technologies to reduce energy consumption to changes in basic operations and practices to avoid or minimize adverse environmental impact. Procter & Gamble estimates that it has reduced energy use by 40% and cut 3 million sheets of paper from its annual consumption by outsourcing with Xerox to provide what is called "managed print services."[239] And, each Disney movie studio now gets quarterly performance scorecards on waste created as well as energy and water consumed.[240]
You will also find green management reflected in an increasing variety of green products. A notable example is the fully electric vehicle, which some suggest will make up 40% of new car sales by 2050.[241] You will also find green management reflected in green marketing, which is pursued by companies hoping to better educate a full range of stakeholders about the importance of sustainability. Robert Iger, CEO of Disney, says: "When you have the unique opportunity that our company has [to reach millions of children], and you can teach them the importance of behaving in a more responsible way from an environmental perspective— it adds up."[242]
Before leaving this discussion, it's important to recognize that the notion of sustainability in management can be made much broader than a focus on the natural environment alone. Scholar Jeffrey Pfeffer offers a strong case in favor of giving management attention not only to issues of ecological and environmental sustainability—traditional green management themes, but also to social and human sustainability—the People part of the 3 Ps.[243] He says: "Just as there is concern for protecting natural resources, there could be a similar level of concern for protecting human resources ... Being a socially responsible business ought to encompass the effect of management practices on employee physical and psychological well-being."[244]
Pfeffer's concerns for human sustainability link back to the importance of employees as stakeholders, and to managerial concerns for their job satisfaction and quality of work life. Specifically, he calls attention to issues and practices like those highlighted in Management Smarts 4.2. They illustrate how management actions can have major consequences for the health and mortality of the people whose everyday work fuels the organizations of our society.[245] You should find many ideas in the chapters ahead that reflect Pfeffer's call for managers to respect and value people in organizations, and to recognize that good managers can make a positive difference on human sustainability.
Note
✓Learning Check
Study Question 3
What are the emerging issues of sustainability and the environment?
Be sure you can ✓ explain the triple bottom line and 3 Ps of organizational performance ✓ explain the link between business activities and sustainability goals ✓ define the terms sustainable development and environmental capital ✓ give examples of sustainability issues today ✓ explain and give examples of green management ✓ discuss human sustainability as a management concern
If competitive advantage and sustainability are goals when executives and leaders manage the organization–environment interface, innovation is one of the major keys to accomplishing them. Innovation is the process of coming up with new ideas and putting them into practice.[246] And to stay successful, individuals and organizations alike must change and adapt through innovation even as the environment changes around them. As IBM's CEO Samuel J. Palmisano says: "The way you will thrive in this environment is by innovating—innovating in technologies, innovating in strategies, innovating in business models."[247]
• Innovation is the process of taking a new idea and putting it into practice.
Top CEOs know that innovation doesn't come easily; it has to be nurtured, championed, and supported as a core organizational value. Innovation killers like lengthy development times, poor coordination, risk-averse cultures, avoidance of customer feedback, and more, have to be dealt with. Mechanisms and resources that allow innovation to prosper have to be put into place. For example, BMW relocates engineers and designers to a central location for face-to-face product development; GE measures and tracks innovation records; 3M expects its "old timers" to pass along stories and values associated with the firm's long-standing commitments to innovation; and Procter & Gamble has created a new vice-president position for innovation and knowledge.[248]
When you think innovation, products like the iPad, Kindle e-reader, Post-It Notes, and even a Super-Soaker water gun might come to mind. Or you might think about self-scanning checkouts at the grocery store, online check-ins for air travel, or your favorite smartphone app. All are part and parcel of a whole host of business innovations that are convenient tools to streamline tasks, increase communication, and provide entertainment. But don't forget about innovations that tackle social responsibility. Some seek sustainability in relationship with our natural environment, while others address social problems such as poverty and disease.
Innovation in and by organizations has traditionally been addressed in three broad forms. (1) Product innovations result in the creation of new or improved goods and services. (2) Process innovations result in better ways of doing things. (3) Business model innovations result in new ways of making money for the firm. Consider these examples taken from annual listings of the world's most innovative companies.[249]
• Product innovations result in new or improved goods or services.
• Process innovations result in better ways of doing things.
• Business model innovations result in ways for firms to make money.
Product Innovation —The Blackberry from Research in Motion ushered in a new era of handheld mobile devices; Apple introduced us to the iPod, iPhone, and iPad world; Amazon brought us the Kindle and launched a new era of e-readers; Facebook made social media part of everyday life; Tata Group of India introduced a $2,500 car—the Nano—for low-income earners.
Process Innovation —Southwest Airlines continues to improve operations supporting its low-cost business strategy; IKEA transformed retail shopping for furniture and fixtures; Amazon.com keeps improving the online shopping experience; Procter & Gamble added design executives to its top management circle; LG Electronics keeps improving its world-class supply chain.
Business Model Innovation —Virgin Group Ltd. uses "hip lifestyle" to brand over 200 companies, from airlines to communications to space travel; Starbucks continues to turn coffee selling into a global branding business; eBay created the world's largest online marketplace; Google thrives on advertising revenues driven by Web technology;
Salesforce.comsells software not as a product, but as a service.
More and more today you will also hear and read about sustainable innovations or green innovations. They occur as businesses create new products and production methods that tackle the sustainability issues just discussed in the last section. The goal is to have minimal negative impact on the natural environment or, even better, actually improve it.[250]
• Sustainable innovations or green innovations help reduce the carbon footprints and environmental impacts of organizations, their practices, and products.
At Procter & Gamble, for example, researchers found that customers' major energy consumption of its laundry products occurred as they used warm or hot water for washing.[251] The firm created Tide Cold Water laundry detergents to eliminate the need for hot water washes. P&G's goal is to have $20 billion in sustainable innovation products on the market by 2012. At Vodafone, estimates are that in one year new videoconferencing technologies eliminated the need for 13,500 flights and lowered carbon emissions by some 5,000 tons. Sierra Nevada Brewing Company blends purchased natural gas with biogas from its water treatment plant to fuel generators for heat; when solar power is added to the mix, the firm generates 80% of its power and also reduces air pollution. And at Wal-Mart, CEO Lee Scott has set a very high green innovation goal; he wants Wal-Mart to eliminate waste totally.[252]
Real People
Muhammad Yunus Fights Poverty with Social Business Model
For Muhammad Yunus, Nobel Prize winner and noted social entrepreneur from Bangladesh, a world without poverty may be a dream, but it's a dream that he has long been pursuing. He's CEO of Grameen Bank, an innovator in microfinance that provides loans to poor people with no collateral. The bank has loaned over $7.5 billion to date and now employs 27,000+ people.
Poverty is, unfortunately, a part of our global environment. You can find it in your local community, and it's an international concern. A large proportion of the world's population lives in poverty—at least a billion people live on less than one dollar per day. According to Yunus, twothirds of the world's population has no access to banks. He says: "The way the banking institutions have been designed and built is based on certain criteria which poor people don't fulfill."
As an economist in Bangladesh, Yunus developed the Grameen Bank to help poor people start and operate small businesses. Recognizing that many poor couldn't get regular bank loans because they didn't have sufficient collateral, Yunus came up with the "microcredit" idea to lend small amounts of money at very low interest rates and with the goal of promoting self-sufficiency through operating small enterprises.
By design, the vast majority of loan recipients, 97%, are women. Yunus says: "we saw real benefits of money going straight to women—children benefited directly and women had long-term vision for escaping poverty." Each loan recipient becomes part of a local group of similar borrowers who agree to support and encourage one another. They pay the loans off in weekly installments and a borrower only gets another loan when the first is paid off successfully. The system works; the repayment rate is 98%.
The Grameen Bank model has been replicated in more than 40 countries, including the United States. Yunus continues to pursue poverty initiatives, including a commitment to "social business." In his book Creating a World Without Poverty, he defines a social business as one that accomplishes a social goal and in which profits are reinvested in the business rather than distributed as dividends to the owners.—-
Although the tendency is to view innovation in a business and economic context, it's important to remember that it applies equally well when we talk about the world's social problems—poverty, famine, literacy, diseases, and the general conditions for economic and social development. As Dipak C. Jain, the former dean of Northwestern's Kellogg School of Management, says: "Our primary goal should be producing leaders of real substance who put their knowledge to work in ways that make the world a better place."[253]
Check the profile of Mohammad Yunus and the Grameen Bank featured in the Real People box. On one level what Yunus has accomplished is a business model innovation—microcredit lending. But at another level it is a social business innovation —which might be described as pursuing business innovation with a social conscience. Yunus did this by using microcredit lending to help create small enterprises and fight poverty. In this case the underlying business model directly addresses a social problem. And it's a very good benchmark. As management consultant Peter Drucker once said: "Every single social and global issue of our day is a business opportunity in disguise."[254]
• Social business innovation finds ways to use business models to address important social problems.
Whatever the goal, whether it be new product, improved process, unique business model, sustainability, or social benefit, the innovation process begins with invention —the act of discovery—and ends with application —the act of use. Consultant Gary Hamel describes it in these five steps of what he calls the wheel of innovation.[255] Step 1 is imagining —thinking about new possibilities. Step 2 is designing —building initial models, prototypes, or samples. Step 3 is experimenting — examining practicality and financial value through experiments and feasibility studies. Step 4 is assessing —identifying strengths and weaknesses, potential costs and benefits, and potential markets or applications. Step 5 is scaling — implementing what has been learned and commercializing new products or services.
• Reverse innovation recognizes the potential for valuable innovations to be launched from lower organizational levels and diverse locations, including emerging markets.
One of the newer developments in the innovation process is reverse innovation. Sometimes called trickle-up innovation, it recognizes the potential for valuable innovations to be launched from lower organizational levels and diverse locations.[256] The concept got its start in the world of global business where firms take products and services developed in emerging markets, often subject to poorer economies with pricing constraints, and use them elsewhere. GE, for example, has found expanded markets for handheld and portable electrocardiogram and ultrasound machines that sell for a fraction of the price of larger units. The smaller units were first developed in India and China, and then moved through reverse innovation into the United States where both their mobility and low prices made them popular with emergency units. Management scholar C. K. Prahalad praises reverse innovation while calling emerging market settings "laboratories for radical innovation."[257]
Infosys Innovates by Improvisation
India's Bangalore-based Infosys Technologies is one of the top technology firms in the world. It also thrives on a classic Indian approach to innovation known as jugaad. A slang word in the local dialect of Hindi, jugaad means innovating through improvisation and focusing on meeting immediate customer needs. When an Indian villager turns an irrigation pump into a diesel engine that he can use to drive a farm vehicle, this is jugaad—nothing fancy, based on available resources, and yet good enough to get the job done. It's all about "affordability and scale," says one Indian executive.
In business, commercializing innovation turns new ideas into actual products, services, or processes that can increase profits through greater sales or reduced costs. For example, 3M Corporation generates as much as one-third or more of its revenues from products that didn't exist four years ago. Product innovation is a way of life for the firm, and its success relies on the imagination of employees like Art Fry. His creativity turned an adhesive that "wasn't sticky enough" into the blockbuster product known worldwide today as Post-It Notes.
• The process of commercializing innovation turns new ideas into actual products, services, or processes to increase profits through greater sales or reduced costs.
Figure 4.4 shows the typical steps of commercializing innovation. It's tempting to think that the process for a product like the Post-It Note is easy, straightforward, even a "no brainer." But it isn't necessarily so. Fry and his colleagues had to actively "sell" the Post-It idea to 3M's marketing group and then to senior management before getting substantial support for its development as a salable product. And at Patagonia, its Common Threads innovation—collecting old garments and breaking them down to create reusable fibers—was almost four years in development from idea to implementation.[258]
Innovative organizations such as 3M, Google, and Apple Computer have the capacity to move fast with innovations, a skill that helps deliver competitive advantage. But how do you view Microsoft? Do you see a firm whose strategy and culture drive an innovation powerhouse? Or do you see what PC World describes as "a stodgy old corporation churning out boring software"?[259] Even though 72% of executives in one survey considered innovation a top priority at their firms, about one-third said they were not happy with how fast companies innovate.[260] Such data, along with the Microsoft example, raise an important question: What does it take to create a highly innovative organization? The answers boil down most often to strategy, culture, structure, top management, and staffing.
In highly innovative organizations, the strategy and culture support innovation. The strategies of the organization, the visions and values of senior management, and the framework of policies and expectations all emphasize an entrepreneurial spirit. The culture is driven by values that let everyone know that innovation is expected, failure is accepted, and the organization is willing to take risks. For example, one of the world's most successful low-fare airlines is AirAsia. Based in Malaysia, it is the brainchild of CEO Tony Fernandes who took his original entrepreneurial cues from the successes of America's Southwest Airlines and Ireland's Ryanair. About his firm's track record with innovations, Fernandes says: "Unlike most Asian companies, we have controlled anarchy in AirAsia. I'd rather have 6,000 brains working for me than just 10."[261]
Similar commitments to supportive strategies and cultures are found at other firms known for valuing innovation. Johnson & Johnson's former CEO James Burke once said: "I try to give people the feeling that it's okay to fail, that it's important to fail." His point is that managers should eliminate risk-averse climates and replace them with organizational cultures in which innovation is the norm. Jack Welch, former CEO of GE, says that innovation occurs when "the whole organization buys into a mindset ... that innovation is so deeply ingrained in everyone's job ... that employees arrive each day thinking, 'Is there a better way to do everything we do around here'?" And when he took over as CEO at Sony, Howard Stringer was concerned that the firm was not as innovative as it could be. He placed a large part of the blame on a cumbersome corporate culture and told the executives: "I'm asking you to get mad" and pointedly said he wanted their businesses run in more "energetic," "bold," and "imaginative" ways.[262]
In highly innovative organizations, struc-tures support innovation. One way is to form special creative units (stars in the boxed diagram) that are set free from the normal structure (shown as pyramids in the figure). Sometimes called skunkworks, these units are often given separate locations, special resources, their own managers, and a clear goal—innovation, innovation, innovation. Yahoo!, for example, has created a skunkworks known as the Brickhouse. It is basically an idea incubator set up in a separate facility where staffers, some in bean bag chairs and others playing with Nerf balls, work on ideas submitted from all over the company. "The goal," says Salim Ismail who heads Brickhouse, "is to take the idea, develop it, and make sure it's seen by senior management quickly."[263] In other words, Brickhouse exists so that good ideas don't get lost in Yahoo!'s bureaucracy.
• skunkworks are special units given separate locations, special resources, and their own managers so that they can succeed with innovation.
• An ambidextrous organization uses integrated creative teams to simultaneously be good at both producing and creating.
Another approach to structuring organizations for innovation has been advanced by scholars Charles O'Reilly and Michael Tushman. They describe an ambidextrous organization that is simultaneously good at both producing and creating.[264] Rather than assigning innovation to a separate creative unit such as a skunkworks, this approach scatters creative project teams throughout an organization. O'Reilly and Tushman suggest that by integrating the creative units, as opposed to separating them, ambidextrous organizations are often more successful than skunkworks in coming up with breakthrough innovations.
In highly innovative organizations, special information and knowledge management systems support innovation. Internally, the systems use the latest technologies to break traditional barriers of structures, time, and physical distance, and help employees collaborate. They link people and help them become known to one another, post and share information, and stay abreast of each other's expertise and latest thinking. IBM, for example, uses an internal version of Facebook known as BeeHive. Employees post profiles on BeeHive and engage in networking through the site. IBM has a program called SmallBlue that searches internal blogs, e-mail, instant messages, and files to maintain an up-to-date database of experts that can be contacted by other employees.[265]
Externally, the systems focus in innovative organizations is often on setting up mechanisms for customers to provide ideas and then getting these ideas considered for possible innovations. At Starbucks, for example, CEO Howard Schultz created the MyStarbucksIdea.com website for customers to provide suggestions on how the company could improve. Based on "Ideas" software from Salesforce.com, the site is monitored by 48 "idea partners" who facilitate the discussion and then act as idea champions within the firm. Results have led to ice cubes made of coffee so that iced coffees aren't diluted as added ice melts; shelves in bathroom cubicles to hold drink cups; and hole plugs in coffee lids to prevent splashing.[266]
In highly innovative organizations, staffing supports innovation. Step one is making creativity an important criterion when hiring and moving people into positions of responsibility. Step two is allowing their creative talents to fully operate by following through on the practices just discussed—strategy, culture, structure, and systems. Google engineers, for example, are allowed to spend 20% of their time on projects of their own choosing. The firm's CEO, Eric Schmidt, is considered a master at fueling innovation. He says: "The story of innovation has not changed. It has been a small team of people who have a new idea, typically not understood by people around them and their executives. This is a systematic way of making sure that a middle manager does not eliminate that innovation."[267]
In highly innovative organizations, top management makes innovation a high priority and does its best to fully support the innovation process. Such support is evident in strategy, culture, structures, systems, and staffing. In the case of 3M, many top managers have been the innovators and product champions in the company's past. They understand the innovation process, are tolerant of criticisms and differences of opinion, and take all possible steps to keep innovation goals clear and prominent. And, they lead in ways that encourage and allow the creative potential of people to operate fully. As GE's former CEO Jack Welch maintains, "often innovation doesn't arrive like a thunderbolt. It emerges incrementally, in bits and chugs, forged by a mixed bag of coworkers from up, down, and across an organization."[268]
Note
✓Learning Check
Study Question 4
How do organizations accomplish innovation?
Be sure you can ✓ define innovation ✓ discuss differences between process, product, business model, and social business innovations ✓ list the five steps in Hamel's wheel of innovation ✓ explain how innovations get commercialized ✓ list and explain the characteristics of innovative organizations