Leadership, Innovation and Organisational Performance?

1. Leadership, Innovation and Organisational Performance? Andrew Μ. Pettigrew, OBE, FBA, PhD Professor of Strategy and Organisation Saïd Business School University of Oxford Andrew.pettigrew@sbs.ox.ac.uk Presentation to Stavanger Innovation Summit 15th June 2009

2. Our journey… • The Contrary Position • Leadership, Complementary Innovation & Performance • Leadership, Innovation and Performance in BP • Key Messages for Leaders and Leading Change

3. The contrary position… • Performance is largely shaped by external conditions – economic, market and technological factors. • Leaders are faced by many internal constraints. Leaders as pawns not potentates. • People attribute and thereby exaggerate leader effects to make sense of complex, confusing events. • Leaders magnify followers attributions by managing impressions. • Luck and chance are key determinants of performance.

4. New Forms of Organization:4 Themes • Greater Permeability of Organization Boundaries, the development of networks, webs, co-operative relations, alliances and clusters • Compressing the structural and cultural features of hierarchy through delayering, downsizing, and building more co-operative forms of managerial style • Associated drives to develop more creative, agile, learning forms (competition as an innovation contest) • The Linguistic turn from organization to organizing

5. The primary questions ? Progress How far have new organisational forms been implemented? ? Performance What are the performance effects? ? Process What are the managerial processes?

6. Progress and performance questions Process questions Research method • Four surveys in: • UK • Continental Western Europe • Japan • USA • 18 Case studies in • 8 UK • 10 Continental Western Europe

7. changing structures changing boundaries changing processes Three dimensions of change

8. Decentralise structures Project forms of organizing Delayer Horizontal & vertical communication Develop strategic alliances processes boundaries Invest in I.T. Practice new HR Downscope Outsource The multiple indicators

9. Key Outputs The Innovating Organization (Eds) Andrew Pettigrew and Evelyn Fenton London, Sage, 2000 Innovative Forms of Organizing: An International Perspective (Eds) Andrew Pettigrew et al. London, Sage, 2003

10. Dualities in changing • Living with hierarchies and networks • Greater performance accountability upwards and greater horizontal integration sideways • Empowering and holding the ring • Centralising strategy and decentralising operations • Standardising and customising

11. Dualities in changing • Discipline to identify knowledge and the good citizenship to share knowledge • Balancing continuity and change “to change the world one must live with it” • Continuous innovation requires platforms of relative stability • Delivering a complementary and contextually appropriate set of innovations (not latest fad)

12. benefitsof complementary innovations? What are the

13. Strategic complementarities • “Doing more of one thing increases the returns of doing more of another” Milgrom and Roberts, 1995 • Investing in one practice makes more profitable investing in another, setting off a potential virtual circle of high performance

14. Two key propositions The Positive Proposition: • Changing only a few of the system elements at a time may not come close at all to achieving all the benefits that are available through a fully co-ordinated move The Negative Proposition: • Partial moves may drive down performance

15. The 3 Dimensions Structure Processes Boundaries The 4 Systems System 1 (S+P+B) System 2 (S+P) System 3 (P+B) System 4 (S+B) Systemic change: Europe, Japan and US, 1992-1997 Europe 30.3% 74.9% 44.9% Europe 13.0% 25.1% 34.2% 16.4% Japan 6.2% 53.7% 30.7% Japan 1.2% 4.7% 18.7% 1.6% US 16.5% 82.3% 57.0% US 8.9% 12.7% 46.8% 11.4% • Very few companies adopting whole system of change

16. The 4 Systems System 1 (S+P+B) System 2 (S+P) System 3 (P+B) System 4 (S+B) Systemic change and performance: Summary of regression results Pooled Sample of Western Firms ++ - - UK + -- - US + -- One symbol, + or -, indicates weak positive or negative significance; two symbols, ++ or --, indicate strong positive or negative significance. • The adoption of a full set of changes (System 1) increases the probability of improving corporate performance • The adoption of partial systems (System 2 and System 3) is likely to reduce performance

17. Performance gains require doing many practices together Performanceeffectsdepend upon wholesystemthinking andaction

18. BP:Complementary Innovations & Performance 1990 – 1999 H O R TO N S I M O N B R O W N E

19. Leading and Complementary Innovations • For Leaders • For Leading Change Key Messages:

20. Key Messages (1) • Leader Qualities of Holistic Thinking and Holistic Action 2. Beware of Attempts to Improve Performance through Singular Changes 3. Building the Complementary Changes The Integrated Systems of Mutually Reinforcing Elements 4. This Approach Points to the Importance of: Strong, Aware and Engaged Central Direction Bottom Up Approaches are Handicapped in Delivering Complementary Change

21. Performance Extent of Change Key Messages (2) 5.Be Prepared for the Dangers of Transitions and the Perils of the 'J' Curve Things May Get Worse Before They Get Better Need For Strong Leaders To Survive Transition Processes

22. Key Messages (3) 6.Partial Changes may be Politically and Emotionally Easier to Contemplate, but Encourage Long Term Declines 7. Beware of Complementary Traps: Sticking With the Old System that Works 8. Learning is Crucial, But it is Also a Challenge Complements May Be: 9. Building the Complements and the Capabilities that Underpin them Takes Time and Courage • Hard to Understand • Hard to Implement • Hard to Imitate

23. Key Messages (4) 10. Building Complements Requires Customization 11. The Virtual Cycle of Complementary Change Needs to Stay In Motion Leading Change is a Continuous Process 12. The Crucial Importance of: • Duration of Leader in Post • Careful Management of Leader Succession • Leading Continuity and Change • The Importance of Inter-Generational Leader Effects