Radical Organizational Learning, Circadian Rhythms and the Broad Structure

1. Radical Organizational Learning, Circadian Rhythms and the Broad Structure Charles M. Weber INFORMS Meeting – San Diego, CA, USA October 11, 2009 Charles Weber -- INFORMS 2009

2. Abstract The theory of punctuated equilibrium associates radical change with the disruption of an organization's deep structure. An empirical study of semiconductor photomask manufacturing suggests that radical improvement in organizational performance is contingent upon synchronizing circadian rhythms across a stable broad structure of organizations within and outside the firm. Charles Weber -- INFORMS 2009

3. Acknowledgements The research that underlies this paper was funded in part by National Science Foundation Grant #0822062 (Enabling Timely Revolutions in Organizational Performance). Charles Weber -- INFORMS 2009

4. Outline of Paper • Timely Revolutions in Organizational Performance • Research Questions • Circadian Rhythms in the Value Network • Pacing Revolutions in Organizational Performance • Empirical Study of Photomask Manufacturing Industry • Research Methods • Preliminary Findings • Leading-edge chipmakers entrain value networks. • “Broad Structure” of revolutions in performance • Implications: Circadian Ecosystems? • Further Research Charles Weber -- INFORMS 2009

5. The High Tech Manufacturing Lifecycle • Urgent economic environment (Gersick, 1988) • Product output rate is performance metric (Terwiesch & Bohn, 2001) • Timely revolutions in organizational performance! • Market window open • Capacity Constraint (Bohn & Terwiesch, 1999) • Time-to-Volume Pressure (Terwiesch & Bohn, 2001) • Radical improvement in organizational performance Performance (Product Output Rate) • Market window closed • Negligible output • Market constraint • Output saturation time Charles Weber -- INFORMS 2009

6. Punctuated Equilibrium: The Classical View (Prigogine & Stengers, 1984; Gersick 1991) Revolution • Deep structure becomes unglued • Radical, frame-breaking change (Tushman et al., 1986) • Stasis, momentum • Deep structure of subsystems • Incremental change • Stasis, momentum • New deep structure • Incremental change Performance (Product Output Rate) time Charles Weber -- INFORMS 2009

7. Radical Learning Without Radical Change!(Weber, 1996-2009) TL(t/tVP)/TLmax Process Quality Learning (CI) Production Quality Learning (CI) qN(t/tVP) (1) YL(t/tVP) (4a) YF(t/tVP) (4c) YP(t/tVP) (6) Delayed Impact Q(t/tVP)/Qmax (7) Production Volume Learning (non-CI) Surge in Organizational Performance PR PD CS VP  • Subsystem Learning! tCS/tVP Product Release tVP/tVP Optimal Output tPR/tVP Venture Inception tPD/tVP Charles Weber -- INFORMS 2009

8. No Strokes of Organizational Genius!(Weber, 1996-2009) • Radical improvement in organizational performance occurs without radical organizational change. • The deep structure stays intact! • Radical change (of leadership, structure, processes and practices) always disables revolutions in organizational performance. • Managers coordinate subsystem-level learning activities to deliver timely revolutions in organizational performance. Charles Weber -- INFORMS 2009

9. Research Questions • Are timely revolutions in organizational performance just about subsystem learning? • What about external factors? • Munificence? (e.g., Tushman & Anderson, 1986) • Value networks? (Christensen & Rosenblum, 1995) • How are timely revolutions paced? • Event-based pacing? (Gersick, 1994) • Temporal pacing? (Brown & Eisenhardt, 1997) • Circadian Rhythms? (Ancona and Chong, 1996) Charles Weber -- INFORMS 2009

10. Circadian Rhythms(Ancona & Chong, 1996) • Commonly observed in nature • One component of system sets the pace for the rest of the system. • E.g., the heart sets the pace for the whole human body. • External ‘zeitgebers’ from the environment entrain the human body. • E.g., 24-hour diurnal cycle determines sleep patterns and body temperature. • Circadian rhythms in organizations • Subsystems and organizations are entrained by other subsystems, organizations and the environment. Charles Weber -- INFORMS 2009

11. Innovating Like Clockwork: The CMOS Process Technology Supply Chainhttp://www.itrs.net 2nd Order Sup- pliers Lenses, components, materials, software, chemicals are developed on the Moore’s Law schedule. 65 nm 45 nm 32 nm 22 nm 16 nm 1st Order Sup- pliers CMOS Process Supply Chain Lithography and process tools, photomasks, wafers, photo-chemicals are developed on the Moore’s Law schedule. “Sandy Bridge” CoreTM “Nehalem” “Haswell” CY 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Chip- Makers present CMOS process architecture follows Moore’s Law Comp. μA Value Chain Charles Weber -- INFORMS 2009

12. Pacing Revolutions in Organizational Performance • Do the circadian rhythms of suppliers determine the timing and durations of timely revolutions by manufacturers? • Do timely revolutions by manufacturers force their tool suppliers to undergo timely revolutions as well? • How about the suppliers of subsystems that go into the tools? Performance (Product Output Rate) Tool Supplier Tool Subsystem Supplier Manufacturer time Charles Weber -- INFORMS 2009

13. Empirical Study of Photomask Manufacturing • Ideal industry to study timing in high tech industries. • Photomasks are within semiconductor value network. • Photomask generations align with semiconductor process generations. • Photomasks contain the patterns that are printed onto microchips. • They must be ready and available before chips are printed. • They are very difficult and expensive to make. • They must be written onto quartz • This requires sophisticated e-beam writing tools and inspection tools. • Tools and quartz plates must be ready for manufacturing before photomasks can be produced in volume. Charles Weber -- INFORMS 2009

14. Research Methods • Initial survey determines needs and practices of photomask manufacturers. (Berglund, Weber, Gabella, 2009) • Case study research (Eisenhardt, 1989; Yin, 1994) • 8 cases; 25 case interviews to date. • Semiconductor process generation constitutes case. • Composite sequence analysis (Miles & Huberman, 1985) • Determines sequence of events that is required to enable timely revolutions in organizational performance • Lots of Secondary sources including … • SIA International Technology Roadmap for Semiconductors • http://en.wikipedia.org/wiki/Intel_Tick-Tock • http://www.intel.com/technology/tick-tock/index.htm Charles Weber -- INFORMS 2009

15. Preliminary Findings • Leading-edge chipmakers entrain mask makers (as they do tool makers). • Most leading-edge chipmakers have internal mask shops for leading-edge masks. (Williamson, 1985) • Tool makers and mask makers entrain followers among chipmakers. • Followers among chipmakers do not have internal mask shops have for leading-edge masks. • Mask makers (and tool makers) enable timely revolutions in chipmakers when masks and tools become available • “Broad Structure” in the semiconductor value network • enhances mutual munificence of participants. Charles Weber -- INFORMS 2009

16. Pacing in the Photomask Value Network Entrained Timely Revolution Process Research Spike Zeitgeber: Leading-edge chipmaker Pilot Development Spike Mask tool subsystems ready for mask tool Mask tool ready for mask making Masks ready for chip production Charles Weber -- INFORMS 2009

17. The Broad Structure of Photomask Manufacturing Within Same Company Mask Shop for Leading-edge Masks Leading -edge Semiconductor Manufacturer Mask Tool or Material Maker Mask Tool or Material Maker Mask Tool or Material Maker Mask Tool or Material Maker Mask Shop for General Purpose Masks Following Semiconductor Manufacturer supplies entrains Mask tool makers also make semiconductor tools. The photomask market is not very large (~$3B/year). Mask tool/material makers respond to large, leading-edge chipmakers. Followers are indirectly entrained by leaders. Performance surge delayed -- competitive advantage for leaders. Charles Weber -- INFORMS 2009

18. Ticks and Tocks at Intelhttp://en.wikipedia.org/wiki/Intel_Tick-Tock http://www.intel.com/technology/tick-tock/index.htm Moore’s Law 3D device ? CMOS Process Architecture 65 nm 45 nm 32 nm 22 nm 16 nm Computer Micro- Architecture ? “Sandy Bridge” CoreTM “Nehalem” “Haswell” CY 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 present CMOS Architectural Innovation Henderson Clark (1990) “old” process; new product Product Shrink Platform Extension Meyer Utterback (1997) Product Platform Renewal Meyer Utterback (1997) ??Radical Innovation? Charles Weber -- INFORMS 2009

19. Circadian Ecosystems Supplier Innovation Moore’s Law CMOS Process Architecture 65 nm 45 nm 32 nm 22 nm 16 nm Computer Micro- Architecture “Sandy Bridge” CoreTM “Nehalem” “Haswell” Complementor Innovation (Gawer, Cusumano) MS Vista CY 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 present • Is Intel the keystone of an ecosystem? (Iansiti, Levien, 2004) • Does Intel’s tick-tock clock set the pace for a significant portion of the global economy? Charles Weber -- INFORMS 2009

20. Further Research • Coming up next year: • Qualitative analysis • of sequences of events • that enable timely revolutions • in organizational performance • within the semiconductor value network. • Anticipated Theoretical Contribution • Advance towards a theory of organizational learning for value networks. Charles Weber -- INFORMS 2009

21. List of References Ancona, D., and Chong, C.-L. 1996. Entrainment: Pace cycle, and rhythm in organizational behavior. In B. M. Staw and L. L. Cummings (eds.), Research in Organizational Behavior, 18: 251-284. Greenwich, CT: JAI Press. Berglund, C. N., Weber, C. M., and Gabella, P. 2009. Benchmarking the productivity of photomask manufacturers. IEEE Transactions on Semiconductor Manufacturing (in press). Bohn, R. E. 1995. Noise and Learning in Semiconductor Manufacturing. Management Science 41(1), 31-42. Bohn, R. E., and Terwiesch, C. 1999. The economics of yield-driven processes. Journal of Operations Management 18(1), 41-59. Christensen, C. M. and Rosenbloom, R. S. 1995. Explaining the Attacker’s Advantage: Technological Paradigms, Organizational Dynamics and the Value Network. Research Policy 24, 233-257. Eisenhardt, K. M. 1989. Building theories from case study research. Academy of Management Review 16, 620-627. Gawer, A. and Cusumano, M. 2002. Platform Leadership: How Intel, Microsoft and Cisco drive industry innovation. Harvard Business School Press, Cambridge, MA. Gersick, C. J. G. 1988. Time and transition in work teams: Toward a new model of group development. Academy of Management Journal 31(1), 9-41. Gersick, C. J. G. 1991. Revolutionary Change Theories: A multilevel Exploration of the Punctuated Equilibrium Paradigm. Academy of Management Review 16(1), 10-36. Gersick, C. J. G. 1994. Pacing strategic change: The case of a new venture. Academy of Management Journal 37(1), 9-45. Charles Weber -- INFORMS 2009

22. List of References (continued) Henderson, R. and Clark, K. 1990. Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms. Administrative Science Quarterly, 35, 9-30. Iansiti, M. and Levien, R. 2004. Strategy as ecology. Harvard Business Review (March), 68-78. Meyer, M. , Tertzakian, P. and Utterback, J. 1997. Metrics for managing research and development in the context of the product family. Management Science43(1), 88-111. Miles, M. B., and Huberman, A. M. 1984. Qualitative data analysis. Sage, Beverly Hills, CA. Terwiesch, C., and Bohn, R. E. 2001. Learning and process improvement during production ramp-up. International Journal of Production Economics 70(1), 1-19. Tushman, M. and Anderson, P. 1986 . Technological Discontinuities and Organizational Environments. Administrative Science Quarterly, 31, 439-465. Tushman, M. L., Newman, W. H. and Romanelli, E. 1986. Convergence and upheaval: Managing the unsteady pace of organizational evolution. California Management Review 29(1), 29-44. Williamson, O. 1985. The Economic Institutions of Capitalism, New York: Free Press, chapters 2-4, 43-102. Yin, R. K. 1994. Case Study Research, Sage Publishing, Newbury Park, CA. Charles Weber -- INFORMS 2009