Institution: University of Amsterdam
Bachelor’s Thesis Topic: What is the Role & Impact of Leadership on Innovation Capacity and/or Results to ensure Growth through new Products/Services for the (SME) Organization?
Specialization: Management and Leadership in the Digital Age Thesis Supervisor: Peter Beerten PhD
Author: Felix van den Oetelaar Student Number: 11873841 Date of Submission: June 22nd, 2020
Statement of Originality
This document is written by Student Felix van den Oetelaar who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
Team structure is an important factor with regards to innovative capability. However, most research concerns itself with a single component of team structure. In order to gain a better understanding of the relationship with innovative capability we draw on existing literature about various team structure components to identify four ‘second order independent
variables’ which play a role in the relation between team structure and innovative capability. We propose that most separate components of team structure can be organized in such a way that they positively relate to innovation. Therefore, we hypothesize that team structure relates positively to innovative capabilities of SMEs operating in the service sector. We test this hypothesis by use of semi-structured interviews and a questionnaire on team characteristics, conducted at a project team within a SME. The results seem supportive of the hypothesis since all four second order independent variables relate positively to innovative capabilities. This outcome suggests that, when composing a team for innovative purposes within a SME, team structure should be considered from a multi-layered perspective in order to provide the best potential for innovative success.
1. Statement of Originality ... 2
2. Abstract ... 3
3. Introduction ... 5
4. Literature Review ... 7
4.1. Identifying key concepts ... 7
4.2. Research gap ... 12
5. Method & Data ...14
5.1. Design ... 14 5.2. Sample ... 15 5.3. Procedure ... 15 5.4. Analysis ... 16 6. Results ...18 7. Discussion ...22
7.1. Discussion of the results... 22
7.2. Limitations of the study ... 24
7.3. Future research ... 24
7.4. Practical implications ... 25
7.5. Team structure & innovative capabilities in SMEs ... 25
8. Conclusion ...26
9. References ...27
10. Appendix A ...31
11. Appendix B ...32
Introduction
Like the newest iPhone or fashion trend, innovation is that magical ingredient that we are continuously seeking in order to fulfill our needs. Partly due to globalization, markets are getting more intertwined, barriers to fulfill a firm’s potential torn down and profit potentials are rising exponentially. McKinsey Quarterly reported that “more than 70 percent of the senior executives in a survey we conducted, say that innovation will be at least one of the top three drivers of growth for their companies in the next three to five years” (Barsh, Capozzi, & Davidson, 2008). This is also why according to Jansen et al. it is a primary responsibility of the leader to look for and exploit new innovative opportunities in order to reach a favorable position in the market (Jansen, Vera, & Crossan, 2009). It seems needless to say that innovation and different aspects of how managers approach it are hot topics.
With this relevance of innovation come many challenges and questions that leaders need to answer in order to create effective insights into this topic. This paper is part of a group research effort with a common goal of analyzing this topic from different perspectives including strategy, structure, culture, skills, ambidexterity and leadership style. We chose these specific areas to research based on the McKinsey 7S model; which is a framework designed to examine businesses from their strategy, structure, systems, shared values, style, staff and skills. It was developed in the 1980s by business consultants Robert Waterman, Thomas J. Peters and Julien R. Phillips with the vision to be implemented by businesses, business units and teams to look at the seven key internal elements to assess if they are aligned in order to further the organization's ability to achieve its goals (Waterman, Peters & Phillips, 1980). Together, our combined research questions will give a solid overarching framework of the role and impact of leadership on innovation capacity and/or results to ensure growth through new products/services for Small and Medium-sized Enterprises (SME) and large organizations.
One of the most critical tasks for survival and sustainability of competitive advantages of firms in today’s highly competitive business environment is effective management and utilization of innovative capabilities (Baumann, Mantay, Swanger, Saganski, & Stepke, 2016). However, the majority of business organizations struggle to succeed in these tasks (Lisboa, Skarmeas, & Lages, 2011). For example, in a study conducted among two similar groups of SMEs in France and Argentina using a predefined Potential
Innovation Index (PII) it turned out that over 55% of the companies were evaluated as having low innovative performance (Galvez, Camargo, Rodriguez, & Morel, 2013).
So, it is clear that the lack of innovative capabilities in SMEs is a significant problem in the business environment as SMEs are vital to global economic growth and an important factor in the economy and employment of any country (Ebrahim, Ahmed, & Taha, 2010). Much research has been done on the individual and organizational level of innovation but over the past decades companies have shifted to a much more team-based structure
(Anderson, Potocnik, & Zhou, 2014). Since project or innovation teams within a firm are the individuals responsible for successful implementation of the innovation strategy, they are a very important component. Could the way in which project teams are structured positively relate to the innovation processes of SMEs and help ease the constraint in growth which they are facing?
This study aims to highlight the significant importance of innovation teams and will specifically try to identify the relation between the strategic structuring of teams and their impact on innovative capabilities of firms. But since business organizations differ in many ways this research will be focused towards optimal innovation team structures within SMEs who operate in the service sector. This leads us to the research question: How does team structure relate to the innovative capabilities of SMEs in the service sector?
Although innovation is a vital business practice, it is still heavily discussed how it should be measured and quantified. The main goal of this study is to contribute to this discussion, and it is important that as much knowledge as possible is gathered and combined so that it can give managers, directors and investors better insights on the ideal innovation team structure for their organization(s).
In the following sections an in-depth literature review will identify the key concepts which will form the basis of this research. This is followed by the methodology of the research. An analysis of the obtained data will be performed, and the results will be
presented. Finally, the results will be discussed and a conclusion to the research question will be drawn.
Literature Review
Before we can begin with the study a clear theoretical framework has to be established in which the problem, objective and key concepts regarding this research question are identified. The issue that we are discussing in this paper concerns the lack of innovative capabilities in SMEs and the objective is to study the relationship between team structure and innovative capability.
Identifying key concepts
Innovation
Innovation can be seen as a very broad overarching key topic for this research. The term innovation was relatively undiscussed until the start of the twentieth century and has evolved into a very important concept in a variety of academic fields since then. It is believed to be a combination of the contradicting terms imitation and invention which have been a point of discussion since the days of Greek philosopher Plato. Today the term innovation is regarded to have a large number of definitions. A review of these definitions has led to a combined definition of innovation and will be the first building block of this research. Innovation is “the creative process whereby new or improved ideas are successfully
developed and applied to produce outcomes that are practical and of value” (Taylor, 2017, p. 131).
Small and Medium-sized Enterprises (SMEs)
It is remarkable that, just as with innovation, there is no universally accepted definition of SMEs. International organizations and governments of countries use different criteria to categorize organizations as an SME. It is most common to use quantitative measurements for this categorization (Berisha & Pula, 2015).
In order to avoid ambiguity, we will adhere to one definition of SMEs throughout this research. This definition being the definition provided by the European Commission which is based on number of employees and the turnover or balance sheet total; an organization is categorized as a SME when it has less than 250 employees and turnover is equal to or smaller than 50 million euros or the balance sheet total is equal to or smaller than 43 million euros (European Commission, 2012). In this definition so called Micro enterprises are included as well but represent a significantly low portion of business relative to SMEs.
Innovative Capability
Over the recent years the number of studies on innovative capabilities has increased significantly. In fact, there have been so many different studies on the topic that there is not one broadly accepted definition of the term innovative capability (Gopalakrishnan & Damanpour, 1997; Perdomo-Ortiz et al., 2006). According to Saunila (2016) innovative capability at least has the following features: 1. Innovative capability represents the potential to produce innovations. 2. Innovative capability aims to add value. 3. Innovative capability requires continuous improvement. 4. Innovative capability is an internal capability. Lawson and Samson (2001) define innovation capability as “the ability to continuously transform knowledge and ideas into new products, processes and systems for the benefit of the firm and its stakeholders.” (p. 384). This definition has much support (over 1800 citations) but the debate about a single concrete definition continues.
Drivers of innovative capability
There are multiple drivers of innovative capability. A widely researched measure is a firm’s ability to exploit current innovative capabilities while simultaneously exploring new ones (e.g., Atuahene-Gima, 2005). Another influential driver of innovation was identified by Wang and Cheng (2013): strategic human resource management and in particular, high-performance work systems contributing to both incremental and radical innovative capabilities. Furthermore, the Innovation Performance Framework is believed to be successful in identifying four key concepts to assess a firm innovative capability. These concepts are product innovation strategy; portfolio management; idea-to-launch process; and culture and leadership (Edgett, 2014a). A key takeaway from the literature is that innovative capability is foremost an indication of the innovative potential a firm has rather than the actual innovative performance.
Homogeneity & Heterogeneity
Edgett (2014b) stated “The ways in which project teams are structured and leveraged are fundamental to product innovation success.” (p. 10). Multiple studies have been
conducted regarding project teams and their various forms and structures. First of all, trade-off in functional heterogeneity in innovation teams is a discussed topic: this trade-trade-off concerns the choice between homogenous teams, which promote the solidarity, satisfaction and thus innovative capabilities on the one hand and heterogenous teams, which mainly
promote creativity and thus innovative ideas from innovation teams, on the other (Drach-Zahavy & Somech, 2001).
Furthermore, De Visser et al. (2010) carried out in-depth research on the use of functional teams versus cross-functional teams in New Product Development (NPD) projects. The functional team approach allows different departments (e.g. R&D and marketing) to work on the same project individually while the cross-functional team structure brings experts of different fields together into one team, thus diversifying the knowledge pool while simultaneously increasing interdepartmental communication. This increases the probability of innovative success and therefore innovative capability. Although the cross-functional team structure seems superior, the empirical literature is very contradicting and many studies find nonsignificant results (Gebert, Boerner, & Kearney, 2006). De Visser et al. also bring in an important moderator namely the level of product innovativeness. The level of product innovativeness can range from incremental innovation to radical innovation with the latter having the highest degree of innovativeness. It is believed that early-stage cooperation between departments (in particular marketing and operations) improves the performance of low-innovative projects but worsens the process of radical innovation projects. In addition, different theoretical backgrounds can lead to the emerging of subgroups which hinder
communication and spark undesired conflicts. This is where a leader or manager plays a vital role in sustaining the group dynamic and mediating cross-functionality, in order to achieve a positive relation with innovative potential (Gebert et al., 2007).
Team formation
Another theory on team formation suggests that a team should possess 10 roles within it in three domains: learning, organizing and building. Examples of these roles include “the Experimenter”, “the Collaborator”, and “the Director”. These roles can be seen as attributes and one team member can possess more than one attribute. If all these roles are present the team should be in a strong innovative position and thus have a high innovative capability (Kelley & Littman, 2005).
Team meetings
Drach-Zahavy & Somech (2001) concluded that frequency of team meetings and performance have a positive relationship. It turns out that the teams who meet regularly are more engaged and feel a greater responsibility for the project. Also, frequent team meetings
result in more disagreements which mainly stimulate critical examinations and viewpoints from different angles.
Organic & Mechanistic structures
Meadows (1980) tested a model developed by Burns and Stalker in 1961. The model was originally designed to test the relationship between organizational structure and
innovative potential, but Meadow tested the model on small work groups (3-10 persons), making his research applicable to the current study. The model describes 2 classifications of structure, the “organic” structure and its extreme opposite the “mechanistic” structure. An organic structure is characterized by integrative decision-making, no clear boundaries in authority and influence and a situational approach. In other words, an unstructured team structure. The results showed that the model is applicable to small work groups and that the degree of ‘organicity’ correlated significantly and positively to innovativeness.
Team hierarchy & Autonomy
Innovation is driven by external factors as well as internal factors. The foremost source of internal factors within firms is the Research & Development (R&D) team. R&D teams are responsible for idea generation and coordination and thus fulfil a vital role in the innovative outcomes of firms. Strategic R&D team structuring is critical for optimal
performance and it can be done in several ways. Some firms use a hierarchal organizational structure which usually goes with a centralized R&D team structure. The centralized R&D structure is characterized by Single Teams and are best at developing new but standardized services for multiple clients. In contrast, other firms maintain a more flattened organizational structure which is paired with decentralized R&D teams. Instead of Single Teams these firms deploy Multiple Teams. Decentralized R&D teams are more effective for focusing on fewer but larger clients with specific service needs. A decentralized team in its turn can take two forms; an autonomous form or a formal form. Multiple Teams with Autonomous (MTA) decision making are more versatile as they are in the position to make their own decisions where Multiple Teams with Formal (MTF) decision making work on their own but must follow predetermined protocols and rules in the decision-making process. It is believed that teams who are more customer orientated perform more optimal when given more autonomy (MTA structure) and teams which focus on the internal and administrative processes are more efficient when using a formal (MTF) decision making structure (Vendrell-Herrero, Bustinza, & Opazo-Basaez, 2020).
Holacracy
In 2015, management scholar Brian J. Robertson introduced a new organizational business model called Holacracy. It is meant as a replacement for the old-fashion
bureaucratic model and aims to transform a business towards a decentralized, autonomous and organic peer-to-peer business structure. The four core concepts of Holacracy are 1. Organic Flexible Organization 2. Efficient Meeting Procedures. 3. Autonomous Team and Individuals 4. Integrative Decision-Making. The first core concept revolves around clear roles and accountabilities and aims to eliminate corporate politics. The second concept mainly entails a focus on continuous improvement and systematic check-in’s during team meetings to ensure efficiency. The third concept generally aims to create high autonomy among team members. The fourth core concept is a standardized way of decision making and the main implication here is a systematic approach to decision making. More specifically, the autonomous team members should define a problem and prepare a possible solution after which structured rounds of questions, critique and feedback are given by other team members (Chen, 2017).
Savage et al. established a positive relation between the use of Holacratic Engineering Management (HEM) and employee innovation. They found that the implementation of HEM yielded higher Intellectual Property outcomes per employee than before. Some well-known companies such as Zappos and Google have already started implementing Holacracy within their organization (Savage, Franz, & Wasek, 2019).
The Innovation Value Chain
The Innovation Value Chain theory can be used as a guide for managers who find their company struggling with their innovative activities. The Innovation Value Chain
describes three phases in the ideation process of an organization. In the idea generation phase it is important to collaborate within, across and outside units. In the idea conversion phase, the emphasis is on screening, funding and developing ideas and the idea diffusion phase focusses on spreading and implementing the ideas. Each phase has its own characteristics, key questions and performance indicators. Managers should focus on the weakest link between one or multiple phases and try to improve this aspect by for example building external networks or providing cross-unit funding (Hansen & Birkinshaw, 2007).
FourSight
The same thought process for incremental improvement of innovation is incorporated in the FourSight Thinking Profile. However, this model is more suitable for application on the team-level compared to the Innovation Value Chain theory which focusses on the organizational-level. Its origin is found in the Creative Problem Solving (CPS) model developed by Alex Osborn in 1953 (Puccio, Miller, & Acar, 2019). The FourSight tool was created by professor Gerard Puccio of the Buffalo State University in 1999 and the theory is being used in practice and updated to this day. The theory evolves around four phases of the problem-solving process; 1. Clarifying the situation. 2. Generating ideas. 3. Developing a solution. 4. Implementing a plan. Each step involves a different thinking process and cognitive capabilities. It is remarkable that each consecutive step requires contrary skills; clarifying a situation (1) requires the ability to narrow down a situation to its most detailed form and thus requires very exact thinking while generating ideas (2) requires a lot of creativity to come up with potentially successful ideas. People have by nature more affinity with one or more steps. A person who prefers one of the phases over the others can be put in a category which accompanies the phases. The categories are respectively; 1. Clarifier, 2. Ideator, 3. Developer, and 4. Implementer (Puccio, 1999). The FourSight breakthrough thinking process is an objective measure since it is based on repeatable and tangible steps which teams can engage in under multiple circumstances. When the preferences of team members are established and analyzed, certain strengths and weaknesses can come to light about the problem-solving process of the team. This can provide useful insights for managers on where to put their focus to improve the process and increase their innovative potential. Team members themselves benefit as well since knowing each other’s strengths and weaknesses can help in minimizing conflicts. A study has also shown that the use of
FourSight is most effective in teams whose members are categorized as part of “Generation Y”, which most commonly refers to people born between 1981 and 1996. (DeCusatis, 2008).
Research gap
The previously discussed literature provides a solid theoretical framework and knowledge base on SMEs, innovative capabilities and team structure. However, while team structure seems to be one of the factors relating to innovative capability, previous research regarding this topic mainly studied a single component of team structure and its relationship to innovative capability rather than combining multiple components of team structure. This study aims to contribute to this research gap by approaching team structure from various
theoretical views in order to gain a more comprehensive understanding of the relationship between team structure and innovative capability. With this knowledge in mind this study will continue with its original goal of trying to test how team structure relates to innovative capabilities.
Based on the various theories and models which have been mentioned, discussed and explained such as the theory behind Holacracy, homogeneity versus heterogeneity and the FourSight model, this research aims to argue that if managers partake in consciously structuring their teams, bearing in mind the firms strategic goals, it will have a positive impact on their innovative potential.
Hypothesis: Team structure relates positively to innovative capabilities of SMEs operating in the service sector.
Method & Data
Design
The aim of this research was to examine the relationship between team structure and innovative capability. A qualitative study design was used to achieve this aim. The theoretical framework which was discussed earlier was used to guide this study and the qualitative approach through a theoretical lens. This theoretical perspective supported the study in testing and applying various theories on the sample in order to answer the research question. This approach was described and supported by Creswell (2008).
The traditional approach to this research question would have categorized Team structure as the Independent Variable (IV) and Innovative capability as the Dependent Variable (DV). However, since team structure in general is hard to measure, Team Structure is labelled as the ‘first order independent variable’. This first order independent variable is split up into four ‘second order independent variables’ which are based on the previously discussed theory in the literature review. Specifically, the theory concerning the Organistic versus Mechanistic team structure (Meadows, 1980), the concept of Holacratic Engeneering Management (Savage, Franz & Wazek, 2019), the theory about (de)centralization by
(Vendrell-Herrero et al., 2020) and the theories proposed about hetero- & homogeneity and frequency of team meetings (Drach-Zahavy & Somech, 2001). These second order
independent variables are all components of Team Structure and play their own role in the relation between Team Structure and Innovative Capability (see Figure 1).
Figure 1. Relationship between team structure and innovative capability
Sample
The sample for this research was a project team deployed by a medium sized enterprise which is currently in the process of applying a new and innovative working procedure at The Adecco Group. The sample consisted of 5 participants of which 4 were regular team members and their mentor who is not part of the project team itself but provides guidance for the team members. All participants were female and their age ranged between 20 and 35 years old. Their average years of work experience was 2.5 years. All but one participant graduated from a university.
Procedure
First, the participants were asked to complete a survey. The main purpose of the survey was to apply the FourSight model (Puccio, 1999) to the team and assess the structure and composition of the team and establish the current innovative capability. Furthermore, the outcomes might provide useful recommendations to improve the innovative capability. The traditional FourSight model uses 36 statements and the outcomes are used to score individual preference for four categories (Clarifier, Ideator, Developer & Implementer) which are paired to four steps of the problem-solving process (Clarifying, Generating ideas, Developing solutions & Implementing a plan). Initially, the creator of the FourSight model, professor Gerard Puccio (currently based at the Buffalo State University), was contacted with the goal to get access to the statements. However, since FourSight is also used for commercial ends it was not possible to obtain the statements due to copyright restrictions. Professor Puccio
Team Structure Team hierarchy Degree of heterogeneity Degree of organicity Level of Holacracy Innovative Capability
referred to one of his Dutch colleagues of the International Center for Studies in Creativities (Broekman, MSc; personal communication) and after a conversation with him it was agreed to create a custom-made (new) list of statements based on the characteristics of the process steps and their corresponding personality categories. After extensive research into FourSight, 5 statements were developed for each of the categories providing 20 statements in total (Appendix A). The participants indicated to what degree a statement was in line with their personal preferences, with the answer options ranging on a scale of five from “Totally Disagree” to “Totally Agree”. The statements were randomized and e-mailed to the participants with the request to complete these before the interview took place.
After establishing an indication of the current state of the team, semi-structured interviews were conducted which were held online through the video communication platform Zoom. Each interview took approximately 30 minutes and was recorded, with verbal consent from all participants prior to the interview, for practical reasons regarding the transcribing and analysis. The interview questions were used to gain insight in and test various theories discussed in the literature review which formed the basis for the second order independent variables. See Appendix B for the questions posed to each participant. Note that each interview was eventually different due to responses on the participant’s answers and follow-up questions which characterize a semi-structured interview.
Analysis
All the team members were asked to complete the survey, but the mentor was not. This was because the model aims to describe the strengths and weaknesses of the team when dealing with work problems. For this reason, adding the results of the mentor in the analysis would not add value since she is not involved in the work of the project itself. The response rate of the survey was 100% since all 4 team members completed it. The participants
indicated their conformity with each statement and scored points depending on their level of conformity. The higher the conformity the higher the score. The statements were regrouped according to their category and the average score on each category for all team members combined showed which steps of the problem-solving process the team has most affinity with and in which steps they could be complemented or put more emphasis on.
Once the base on the current state of innovative capability was laid, the recordings of all interviews were transcribed to make it easier to code. At the start of the coding process, a list of general concept and key words from the literature was formed to give a broad
chunks of data by labelling them with mainly in vivo open codes. The next step involved axial coding: the open codes were put into categories and overarching terms which were more theory based. Finally, the axial codes were related to the second order independent variables which stem from the core concepts of the fundamental theories of this research. The open codes and the quotations they stem from, the axial codes and the selective codes were showcased in a coding scheme (Appendix C). Finally, an explanatory scheme was formed to make a better visualization of the linkage between the data and the variables.
Results
In this section, the results of the research will be presented in a straightforward and concise way after which they will be more elaborately discussed and linked in the discussion section.
Scores from the questionnaire about the current state of the team indicated that the team scored high on all categories of the problem-solving process. The means of each category are illustrated by a bar chart to make it clearer (see Figure 2).
Figure 2. Mean scores of team members on the FourSight categories
The coding process and outcomes provided more insights into our second order independent variables and how they relate to our dependent variable innovative capability as indicated by the FourSight categories.
First of all, all participants indicated that they feel equal to each other with regard to the authority they hold. They also stated they would not change this aspect of the structure and they stated that changing the hierarchy would not stimulate innovation. Furthermore, the attitude of the manager plays a very important factor in this type of team structure. She emphasized that she wants to be seen as an equal. This managerial attitude, combined with the flat team structure, contributes to another important factor according to the participants namely a working environment in which they are not afraid to speak up, bring new ideas to the table and feel safe.
“I am not afraid to bring new input into the meetings. I think that also has something to do with safety. That is very important in our team.”
Secondly, all participants indicated that they are a very diverse team. Their educational backgrounds all lie within Social Sciences but vary a lot within that field. In addition, they all agreed that they have very different personalities which makes the team so divers. This was supported by their mentor. Although this diversity can become intense when opinions are not aligned, most team members stated that it is a good thing as the different views bring more insights and they can enrich each other. When asked if they would change the composition of the team, two team members indicated that they would like to add someone who has more experience and preferably a male.
“Regarding creativity and innovation, the diversity is more enriching. It plays a very helpful role in that.”
Thirdly, participants feel like they have a high degree of autonomy and are free to make decisions on their own. This sense of autonomy increases the involvement and motivation among the participants. They also stated that it stimulates their creativity since there are hardly any frameworks they need to adhere to. Although the team has a high degree of autonomy, they do not make every decision entirely on their own. On some occasions the team makes use of so-called integrative decision-making. But this is done through a
situational approach. Again, the manager plays an important factor in this whole process. To a certain degree she provides the freedom to her employees for trial-and-error. Participants indicated that succeeding in a task on their own followed by a compliment from their manager has made them grow as a person.
“I like having autonomy. I need it to keep my interest. So, if everyone makes choices for me, my involvement and motivation will decrease.”
Fourthly, the before mentioned factors are accompanied by frequent and structured team meetings. The team comes together twice a week for their so called ‘huddle’. This is their team meeting which always takes on the same form and follows the same steps. These huddles are also where the integrative decision-making takes place. The participants are very
positive about this meeting structure, but a repeating factor was the need for more brainstorming when dealing with more complex problems.
“You have someone who is responsible for a problem, so they come up with the decision. Or give the options, they prepare and give a new pitch in a meeting so that it goes efficiently. And then we all decide if we agree with your plan.”
Finally, this team has an unusual managerial structure. They have a traditional manager who supervises the projects they work on and in addition they have a so called ‘talent manager’. The talent manager is solely concerned with their personal growth and well-being and is seen as a mentor. Most participants indicated that they experience this as
pleasant and beneficial, but it is more seen as a luxury and not a necessity. Again, managerial attitude plays an important role in this. The team members stated that they are also
comfortable sharing personal troubles with the project manager.
“I think I am not taking full advantage of it because I can tell my manager everything too. But it is not annoying. It didn't necessarily have to be like this for me, but it's also nice to have it.”
The above-mentioned results are visualized in an explanatory scheme below (Figure 3). This illustrates how the selective codes were derived from the axial codes. For example, in the scheme it becomes clearer that Organicity has a direct relationship with Team structure as well as an indirect pathway through Holacracy.
Figure 3. Explanatory scheme
Discussion
This study provides a small and modest step towards uncovering a very relevant but relatively inconclusive topic: The relationship between team structure and innovative capability in SMEs. We explored multiple components of team structure in a qualitative explanatory design (semi-structured interviews). The second order independent variables and their relationship with the dependent variable will be discussed step by step in order to gain a clear overview of the study.
Discussion of the results
FourSight model
The results of the survey showed that the team scored high on all steps of the
problem-solving process. This implies that this team has a good distribution of skills and that the individual preferences and characteristics of the team members complement each other. There are no significantly higher or lower personal preferences or missing affinities which could hinder this team’s capability to innovate. The talent manager stated that during the hiring process special attention was paid to the diversity in personality profiles of the team members. We assume that this team has the potential to achieve innovative success according to the FourSight model.
Team Hierarchy
From the results it became clear that the sample team was operating in a flat team structure with low hierarchy differences and the team members have a high level of
autonomy. This team is solely orientated towards their customers and only focusses on one big client. These are all the characteristics of the Multiple Team with Autonomous decision making (MTA) structure described by Vendrell-Herrero et al. (2020). The participants
indicated that changing the structure would not increasingly stimulate innovation and none of the participants would change the current structure. This is in conformity with the existing theory. In addition, the safe environment and the support of the manager works as a stimulant for new idea generation. From this it can be derived that this type of structure has at the very least no negative impact on innovation and that it positively relates to innovative capability.
Although this team is entirely composed of females with four out of six of the team members being in their twenties, the participants still perceive the team as a very diverse team. This heterogeneity mainly stems from their varying personalities. The results show that even though tensions can build up due to different views on relevant topics, the heterogenous team provides its members with enriching and new insights when dealing with problems. This is characteristic for the trade-off between homogeneity and heterogeneity in teams as proposed by Drach-Zahavy and Somech (2001). However, the team indicated that their diversity is perceived to be more beneficial than harmful. An important note here is that the team members emphasized the lack of experience. A focus point for leaders should be the balance in experienced and unexperienced team members when forming a team. The results from this research regarding hetero- & homogeneity indicate that for innovative capacity, heterogenous teams have advantage over homogenous teams.
Degree of organicity
During team meetings the team makes use of integrative decision-making. This entails that when encountering a problem, they prepare a pitch with possible solutions and bring this up during the team meetings. The participants favor this structure since it is highly efficient, but they stated that it can have a negative effect on their innovative capability because they only consider possibilities thought of by one team member. This trade-off between efficiency and creativity is tackled with a situational approach. This means that they choose which method to use based on the problem at hand. Also taking into account the before mentioned autonomy this team has very high levels of Organicity according to the theory proposed by Meadows (1980). Meadows concluded that high levels of Organicity correlated significantly and positively to innovativeness. Statements of the participants strongly conform to this conclusion as they indicated that this type of (Organistic) structure increases their involvement and motivation and stimulates their creativity. These three factors are essential to innovative potential and thus we believe that Organicity positively relates to innovative capabilities. Thus, supporting the existing theory.
Level of Holacracy
If we combine the perceived autonomy, the organic team structure and the integrative decision-making with the frequent and structured team meetings, this team is classified as a team with a high level of Holacracy according to Chen (2018). As discussed before,
positively relate to innovative capability. This confirms the research performed by Savage et al. (2019) which implies that high levels of Holacracy positively relate to innovative
capability. Our findings support this theory.
Personal coach
All participants perceived having a personal coach in addition to their traditional manager as positive. The personal coach or ‘talent manager’ did not partake in the project itself and solely focused on the team members’ personal development and well-being. Although all members liked having a talent manager, some indicated that it was not a necessity and that they would not like to have a talent manager for a much longer period. A talent manager is most beneficial for team members with zero to little work experience and should become independent after a few years.
Limitations of the study
This study has several limitations which should be kept in mind. Firstly, the sample size was small. Therefore, this research cannot prove or reject theories with hundred percent certainty. This was mainly due to the limited timespan and resources available. In addition, the COVID-19 pandemic made firms less willing to participate in a research project since their focus was elsewhere.
Secondly, it is possible that the sample was biased since individuals systematically underestimate the originality and creativity of their own ideas (Sidi, Torgovitsky, Soibelman, Miron-Spektor & Ackerman, 2020).
Thirdly, we constructed the questionnaire which applied the FourSight model to this team ourselves. The creator of the FourSight model was contacted but we were not allowed to use the official statements due to copyright restrictions. After a discussion with one of his Dutch colleagues of the International Center for Studies in Creativities we concluded that we could create our own questions. Although the questionnaire was based on extensive research of the FourSight model and characteristics of each step and category, these questions should be further validated and extended. As such, this research has provided an alternative
questionnaire for further studies in case the original statements can not be used.
Future research
The interviews held with all team members gave a good insight into various
research should be conducted using a larger sample. A more desirable methodology would concern measuring the (experimental and longitudinal) effect of team structure on innovative capabilities rather than the current cross-sectional relationship. In addition, other aspects of team structure should be explored such as the cross-functionality within a team. Furthermore, the participants indicated that their main restraints concerned the lack of experience within their team and the need for more brainstorming. Future research should take these factors into consideration and explore their relationship with and effect on innovative capability.
Practical implications
Even though our sample was small we were still able to gain valuable practical insights regarding team structure and its relationship with innovative capability. These insights, certainly after further research, could provide managers with practical implications on how to strategically structure their project teams in order to provide them with the most attainable potential to innovate. If the team effectively utilizes this innovative potential or capability it could provide a firm with a competitive advantage over rivals.
Team structure & innovative capabilities in SMEs
The before mentioned results, which were obtained by gathering qualitative data at a medium-sized firm operating in the service sector, indicate that for this particular team strategically designing certain team structure aspects stimulates their idea generation,
complements and enriches the team members and can increase their involvement, motivation and creativity. Furthermore, the Organistic team structure on its own as well as a part of the Holacratic team structure is perceived to relate positively to innovation by the team members. This is all supported by existing theory. In addition, the four steps (Clarification, Ideation, Developer and Implementer) of the FourSight model are very much in line with the
previously defined definition of innovative capability by Lawson and Samson (2001): “the ability to continuously transform knowledge and ideas into new products, processes and systems for the benefit of the firm and its stakeholders” (p. 384). This implies that by structuring this team with members that represent all four categories their potential to innovate has increased. All four second order independent variables relate positively to the dependent variable innovative capability, this seems supportive of our hypothesis that team structure relates positively to innovative capability of Small and Medium-sized Enterprises in the service sector.
Conclusion
Previous research on the relationship between team structure and innovation mainly focused on a single component of team structure. Thus, the present study examined the combined relationship between multiple components of team structure on innovative capabilities in order to gain a more comprehensive overview. Results show that all studied components of team structure can positively contribute to innovative capabilities. Firstly, flat team structure with low hierarchy differences in which the manager puts emphasis on equality and safety stimulates the idea generation. Secondly, members of a team with a heterogenous team structure complement and enrich each other. Thirdly, a high level of organicity increases the involvement, motivation and creativity of the team. And finally, a high level of Holacracy relates positively to innovation. These results seem supportive of the hypothesis that team structure relates positively to innovative capabilities. In short, when composing a team for innovative purposes within a SME, team structure should be considered from a multi-layered perspective in order to provide the best potential for innovative succes.
As described in the introduction, this paper is part of a group research effort. The
culmination of our six distinctive research questions under the overarching theme adds to the available research on the role and impact of leadership on innovation capacity and or results to ensure growth through new products/services for SMEs and large organizations. As stated in the introduction, each individual based his or her research question on one of the seven perspectives (strategy, structure, culture, skills, ambidexterity and leadership style) from the McKinsey 7S model. Companies today rely on the continuous innovation by their employees to sustain or enhance their competitiveness in their respective industries. Therefore, this topic is of critical importance to both future and current leaders in assisting them in making
informed and data-driven decisions to better ensure success and growth within their firms. Our hope is that the qualitative research extracted from these studies will help leaders and organizations develop a better understanding of how to increase the innovative capacity of their respective organizations.
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Appendix A
This is a courtesy translation of the Dutch original of the survey statements, that were put forward on a scale of five with the answer options ranging from “Totally Disagree” to “Totally Agree”.
Clarifier
1. I notice that by nature I don't spend a lot of time defining the exact problem that needs to be solved.
2. I like to identify a problem in as much detail as possible before I start looking at possible solutions.
3. I like to think up all the pros and cons of a problem.
4. I notice that I don't often take the time to isolate specific causes of a problem. 5. I like to look at a problem from multiple perspectives.
Ideator
6. I find it difficult to find an unusual solution to a problem.
7. I don't naturally tend to come up with a lot of ideas for problems.
8. I notice that I don't have enough patience to take the trouble to refine or to adjust an idea.
9. I like to brainstorm in order to come up with as many different ideas as possible.
10. I like to use metaphors to come up with new ideas for problems. Developer
11. I like to explore the strengths and weaknesses of a possible solution. 12. I like to think about all aspects relating to the implementation of an idea,
including possible resistance from others. 13. I like to turn rough ideas into concrete solutions.
14. I like to make an action plan concerning the implementation of an idea. 15. I like to establish criteria that can be used to identify the best options.
Implementer 16. I enjoy implementing a possible solution.
17. Turning ideas into action is not my favorite part of the creative process. 18. When it comes to implementing a possible solution, I find it difficult to make
my ideas concrete.
19. I like to take the necessary steps to turn one of my ideas into action.
20. When I encounter problems, I like to go back to the thought process and look at it with a critical eye.
Appendix B
This is a courtesy translation of the Dutch original of the questionnaire. This research used a semi-structured interview approach. Therefore, these questions were the guide for each interview but multiple different follow-up and sub questions were asked to each participant. Introduction and project info
- Could you briefly describe the project you are working on right now? How many years of work experience do you have?
- What about the novelty of the project you are working on? In other words, to what extent would you describe the project as innovative?
- What is the composition of the team (education/professional background & department within the company)?
- What is the (working) relationship within the team? - How often do you conduct team meetings?
Team structure
- Is there a clear hierarchy within the team? - How are the roles divided within the team? - How are decisions made?
o Do you like this? (does this stimulate your creativity / Are you afraid to speak out?) - What kind of role does the team manager play within the team?
- How would you describe an effective structure of a project team? Team structure and innovation
- How are new ideas conceived?
- How do you tackle problems for which the team is responsible? - What are the strengths and weaknesses within the team?
Appendix C
This is the codebook which is composed of the quotations, open codes, axial codes and selective codes which were used during the data analysis.
Quotations
Open coding Axial
coding
Selective coding
“Regardinghierarchy I would not say she stands above me but next to me. Even though she is my manager.” (H)
Hierarchy Not above me Next to me
Equal in hierarchy Team Hierarchy
“In fact, we have a manager and 5 change agents of which 4 are trainees so a fairly flat structure so to speak” (E)
One manager
A fairly flat structure
A flat structure Team Hierarchy
“Would it still be necessary for
someone to be there, for example between me and my
manager? No, no, I'm fine, especially considering the size of us.” (M)
Not necessary for someone to be in between
Especially considering size
Does not want to change the hierarchy
Enjoys current team Hierarchy
“I could not think of anything to further stimulate innovation. Not like any other structure or anything” (M) Nothing to stimulate innovation No other structure Different structure would not stimulate innovation
Team Hierarchy beneficial for innovation
“that there is no hierarchy or at least, my manager in that sense is very clearly my manager, but she thinks it is important that we just see her as an equal.” (S) No hierarchy Manager is clearly manager Wants to be seen as equal
Manager wants there to be no hierarchy
Team Hierarchy
“You have a whole new fresh look from the manager and you have the people who
Fresh look
Different backgrounds
Diversity within team
have been in the company for a long time. And then there were a few other people on the team who also had very different
backgrounds or experiences within the company.”(H)
Experiences within the company
“I think it's just more individual differences. I am slightly less structured than other team members, so to speak. But everyone is different in this. Everyone has their own quality and as a team we complement each other very much.” (M) Individual differences Own qualities Complement each other Different qualities complementary Heterogeneity
“I think I should come back to the diversity in the team. I think that is both a strong point and a less strong point. We have different
backgrounds and ways of thinking, which can become intense from time to time. On the other hand, it really enriches you.” (S)
Diversity
Can become intense
Can really enrichen you
Diversity both good and bad Heterogeneity tradeoff “Regarding creativity and innovation, the diversity is more enriching. It plays a very helpful role in that.” (S) Creativity and Innovation Diversity Enriching Diversity more enriching Heterogeneity
“So I think the weak point of our team is that we just don't think about everything so
Weak point
Lack of experience
Most team members lack experience
critically. I think that because of our lack of experience we do not yet fully know everything about the working method.”(H)
“We also have good contact with
someone else from another Adecco Group label. And I notice when I spar with him that I look at it very differently than when I do it with our team.” (H)
Another Label
Look at it differently
New insights Heterogeneity
“You have someone who is responsible for a problem, so they come up with the decision. Or give the options, they prepare and give a new pitch in a meeting so that it goes efficiently. And then we all decide if we agree with your plan.” (H)
Responsible for a problem
Decide or give options
Efficiently
Integrated decision-making
Holacracy
“We have a team meeting twice a week. That meeting is the same way every week at the same time. And we go through the fixed meeting structure, so that all aspects that we need to discuss at that moment are discussed.” (E)
Two meetings every week Fixed meeting structure Frequent and structured meetings Holacracy
“I do not know if the pitching is the best choice for every occasion. it is a trade-off between creativity and efficiency. Trade-off between efficiency and creativity Handle it yourself
Sometimes you have to do handle a problem a bit more efficiently, so just make the choice yourself and test it, and other times you brainstorm with each other. So it will take more time, but you could perhaps turn to a more innovative idea”
Brainstorm can take longer
“You are forced to think carefully, to be able to make your own decisions, and to substantiate that. So don't just shoot, but come up with really grounded ideas. That also forces you to look critically at your own input. It is also very good for personal
development. And if you then hear "Well done" from your manager, you grow as a person. So I like it very much. Not always easy, but nice.”
Forced to make your own decisions
Good for personal development
Complement by manager
Not always easy
More autonomy
Positive effect from leadership
Organicity
“I like having autonomy. I need it to keep my interest. So if everyone makes choices for me, my involvement and motivation will decrease.” Enjoys autonomy Needs autonomy to stay interested Autonomy increases involvement and motivation Organicity
“I believe autonomy stimulates my creativity you are not offered any frameworks yet ofcourse.” Autonomy stimulates my creativity No frameworks Autonomy stimulates creativity Holacracy
“But everyone worked in spread out locations”
Working in different locations
Decentralized team Decentralization
“And there are certain actions that may be overarching that need to be taken up. But we have to be very clear about that and then divide who will do what.
Overarching activities
Have to make clear who does what
Clear task division Decentralization
“If it was completely up to me. Then I would have moments when you
brainstorm together, even if it is about something small, but just a moment in the week when you brainstorm together about an issue.”
More brainstorming
Even about small issues Fixed moment Standardize brainstorming in your team Centralization
