Strategic Solution for Homeshop

Assignment 3.4 Final Report Group 2 - Yellow Paper Shen Liu 4012615 Mirthe monninkhof 4250303 Ad van der Veer 1355902 Pieter Vegt 4052900 Youge Xiao 4257219

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Executive Summary

An extensive fact analysis has been done on the Homeshop case. Several initial problems have been defined, by analyzing all the stakeholders and the roles they play in the innovation process. The first problem is that the P&L (Purchase and Logistics) department plays no part in the overall innovation process, while they actually have the most influence on the Franchises. The second problem is the difference in the values of the IDT department and Franchise department. The IDT department wants to innovate and improve the processes for the Franchises partners, but the Franchise partners do not understand the strategic value of the ideas at all. The IDT department does not take the values of the Franchise partners into account. The latter part is the main problem of Homeshop, but it is not refined enough. A deeper understanding is needed of the real underlying problem.

From the fact analysis and literature study on change management, the overarching problem can be stated, which is: How to change the homeshop innovation process so that the boundaries become less rigid and crossboundary dialogue is improved. This problem can be separated into three parts. The first part is the lack of boundaries, which occurs between Franchise partners and IDT department.This results in sticky knowledge.

The second part of the problem are the narrow boundaries of the departments, which results in people trying to constrain the actions of others to fit the established repertoire. And the last part of the problem has to do with ineffective intervention, which states that the IDT department and the production department do not effectively intervene.

The proposed solution for the company is to shift the conversation of the different department, eventually changing their routine and their way of learning. Our solution proposes the use of ‘conversations’ to implement this social mechanism, enabling the the flow of knowledge and ultimately prevent rigid boundaries in the NPD process. This is done using the Kolb learning cycle (Kolb, 1984) as a guideline for the whole NPD process. There are four stages in shifting the conversation i.e. initiation, understanding, performance and closing. These four conversational stages can be linked to the different stages of the NPD process and the kolb learning cycle. A proposed solution would be to assign the PR manager as an interpreter/mediator to guide the conversation between different departments in each of the phases. It is the PR manager’s job to facilitate the events through the innovation process. The implementation is done in seven phases and many iterations will be done. The idea is that this approach in innovation will become a routine for Homeshop, enabling succesful and mindful changes.

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1. Introduction The aim of this report is to carry out a solution and an implementation plan for the ‘HomeShop’ case based on the previous factor analysis and problem definition. First of all, we did a fact analysis on the problem scenario of ‘HomeShop’ case. In order to gain good understanding of the problem setting, a visualized overview is given of the business ecosystem. Secondly, the core problems of the HomeShop case are specified and visualized. We believe there are three parts of main problem of HomeShop: Lacking boundary objects or spanners, boundary are too narrow and ineffective interventions. Finally, we came out several solutions and an implementation plan based on discussions in the Fishbowl sessions and literature study.

2. Fact analysis In order to understand the business ecosystem we will briefly address the involved stakeholders of the HomeShop case. First of all, the internal stakeholders (part of HomeShop) are discussed.

The structure of Homeshop resembles the classic functional organisation hierarchy (Project Management Institute, 2000). At the top level of hierarchy there is the Board of Directors. Continuing to the second level of hierarchy, there are multiple departments: First of all, there is the Information and Resource Management (IRM) department (which has a central role in the innovation strategy of the company). Secondly, there is the Business department, which is involved with the large-scale rollout of new concepts. Thirdly, there is the Purchasing and Logistics department, which is the biggest department of the company. And finally, there is a Marketing department.

From this point on, the lower levels of hierarchy are specified for the IRM department only. This is the department in which the actual process for innovation takes place.

The IRM department contains an Architecture and Planning (AP) group. Also, the AP group contains different teams, where the Innovation and Development Team (IDT) is the team that has been assigned to build on the realization of innovative concepts. The director of the AP group and the IDT is one and the same person. He/ she is also reporting to the board of directors.

The IDT exists of 14 members and three different types of employees (regarding their functionality): 1. Innovation Managers. They lead the team through the innovation process.

2. Architects. They are responsible for the IT frameworks that are required in the realization of new concepts.

3. PR Manager. The task of this person is to involve employees in the idea generation phase.

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We now have specified the framework of internal stakeholders to the HomeShop case. However, there is still a list of very important external stakeholders. These are addressed below: 1. External innovation partners: Most of the generated ideas come from external innovation partners.

2. Franchise partners: The Franchise partners of HomeShop are the main link to the customers. They embody a ‘touchpoint’ for sales (just like the online shop is a touchpoint for sales). Also, within the Franchise partners we can distinguish a group of Innovation Friends, which are first in their implementation of new concepts. Moreover, an important stakeholder group, which is part of the Franchise partners, are the employees that sell the HomeShop products to the customers.

3. Suppliers: Mainly supply products for sale to the Purchasing and Logistics department.

4. Consumer research department: This is an external research agency that supports in the evaluation of people’s reaction on the shopping floor during a trial.

A visual was created that shows the internal and external stakeholders that are involved (figure 1). Also, the related hierarchy is visualized.

Innovation process Now that the stakeholders have been addressed a brief example of the innovation process is specified. Also, this process is visualized in figure 1.

1. Ideas are collected through the platform of the innovation studio (e.g. ideas proposed by the external innovation partners.

2. The IDT evaluates the ideas.

3. The Innovation Manager (IM) selects one of the ideas.

4. The IDT develops the selected idea.

5. The IM presents the concept to the Board of directors.

6. The concept is approved (or turned down) for trial by the board.

7. The concept is showcased in the innovation studio and istudio. Parallel to that, the concept is tested at one of the Franchise partners.

8. The trial is evaluated by the IM and an evaluation report is written.

9. The evaluation report is presented to the rest of the organization (also Franchise partners have access to the document).

10. The Board of Directors assigns the Business department to provide a large scale rollout for the con cept.

11. The Business department approaches the Franchise partners for rollout of the concept.

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Figure 1 - Business Ecosystem of Homeshop

Internal Stakeholders EXternal Stakeholders

Board of Directors CIO

Innovation Process 10

Purchasing & Logistics Department

Information & Resource Management Department

Business Department

Marketing Department

6 Approve 5 Present Architecture & Planning Group AD Director

9 Evaluation Report

Architects

Innovation Managers (IM) 7 2 Evaluate

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Innovation & Development Team (IDT)

4 Develop

3 Select

PR Manager

Trial

8 Evaluate

6 Display

INTERNAL Innovation Studio

EXTERNAL

1 Collect

Externa Partners (IBM MS)

Franchise Partners (Innovation Friends)

Suppliers

Employee

Customers

4

Consumer Reseachers

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Our initial problem is that we identified for the HomeShop case is about the non-corresponding values of the IDT and the Franchise Partners (visualization). The aim of IDT is to improve services for the customers through technological innovations. Nevertheless, they are not aware that newly developed concepts should not only appeal to customers but to the Franchise Partners too. The fact that IDT ‘neglects’ the values Franchise Partners results in resistance when it comes to the point of the concept rollout and separates IDT from the rest of the company.

Another core issue that should be addressed is the fact that the largest department of HomeShop, the Purchasing and Logistics department, is not involved in the process of innovation. This is a shame as involving this department will result in access to very interesting insights about suppliers and the Franchise Partners. Right now it seems as if the Purchasing and Logistics department is accommodating to the needs of these stakeholders on their own account. When the insights of the P&L department are bundled with IDT significant improvement can be booked when it comes to the innovation process.

Figure 2 - Main Problem

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3. Problem Statement H2: How to change the Homeshop innovation process so that boundaries become less rigid and cross-boundary dialogue is improved?

The different groups, teams and departments play different roles in home shops innovation process. Each of these have their own boundaries, which enables them to focus on their own activities without being concerned about everything and anything (Dougherty & Takacs, 2004). In the case of HomeShop these boundaries are lacking in certain aspects making them too Rigid which burdens the Innovation process:

A. Lacking boundary- objects or spanners The different (Evaluation) reports function as boundary objects between the different communities of practice inside HomeShop, allowing knowledge to be shared more easily (Brown & Duguid (2001).

These boundary objects do not function properly for the Franchise Partners, resulting in sticky knowledge. This is illustrated by the following quote from one of the interviews: “The business plan however does not consist of a cost indication for the implementation, the costs for change however is one of the most important issues to make sure the innovation can actually be rolled out...”

Figure 3 - Lacking boundary

B. Boundaries are too Narrow Boundaries are drawn too narrow which results in people trying to constrain the actions of others to fit the established repertoire. Fun is destroyed, as is the propensity for innovation (Dougherty & Takacs, 2004). This is shown by the following quote: “Franchisees argue that only the IDT can do things without following organizational rules. The IDT members in their opinion “have the luck of being in a preferred position of the upper management” Figure 4 - Narrow boundaries

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C. Ineffective Interventions Interaction between the NPD (IDT) department and Production department are needed to cope with ongoing changes. These interactions frequently have the character of an intervention from one process to another (Smulders, de Caluwé & van Nieuwenhuizen 2003). Often participants do not have enough empathic insight in the character of the other process and in the learning behavior of its participants (Smulders 2004). This problem is also recognized in HomeShop as illustrated by the following quote: “The IDT members and its directors however argue that they usually try to early involve the Franchise Partners, but not always immediately receive a positive reaction back from their side.”

Figure 5 - Ineffective interventions

4. Solution Many new ideas enter the IDT department, either from partners, employees or franchisees but only a few make it to the final implementation phase. As Zahra and George (2002) explain this is an indicator of Homeshop’s low absortive capacitiy. We believe this is due to the lack of a sufficient Social Mechanism connecting the potential to the realized side. Our solution argues the use of ‘conversations’ to implement this social mechanism, enabling the the flow of knowledge and ultimately: prevent rigid boundaries during the NPD process.

As the company advances through this innovation process it should attempt to complete the entire learning cycle of kolb (Smulders, 2004). We suggests several distinct points along this process in which conversations (or interventions) take place in order to create necessary boundaries where none existed: between the IDT and the franchisees. These conversations must create habitual activity as to change the routines of both parties (Feldman & Pentland, 2003), and thus, ensure a successful innovation process. The innovations process then becomes a network of shifting (and dynamic) conversations with several explicit properties: Each conversation should... be a dialogue - Communication between IDT and the Franchisees is now largely a monologue in which one disseminates knowledge in hopes of the other party to receiving it. Rather, it should be a dialogue enabling both parties to step out of their daily discourse to provoke the a shift of conversation. (Smulders et al, 2003) focus on the proactive - The subject of the conversation should always be about possibilities and what is needed to get it done. This proactive attitude instead of reactive (complaining) increases the velocity of the change (Smulders et al, 2003) while also maintaining a fun and enjoyable atmosphere.

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be heedful - In being heedful, conversation participants are mindful of the big picture as their situated activities are more likely to integrate with the other’s. A teamplay boundary should be created. So not only by having a playful atmosphere, but also making sure the conversation ‘game’ is fully defined. This means: Clear Roles, Clear objectives and a common view. be a routine activity - The conversations should take place in recurring predictable intervals for each innovation process to ensure performance during the NPD process (Levinthal & Rerup, 2006). As these conversations happen often boundaries are lowered as practice is shared reducing the stickiness of knowledge (Brown & Duguid, 2001). Also, empathy is created facilitating the participant’s understanding of each others learning styles (Smulders, 2004). but have dynamic content - As the conversations itself are routine, the content is certainly not, and requires mindfulness in order ensure ‘ongoing opportunity for variation and selection’. It is dynamic in nature and changes due to many factors and variables.

As the position of these conversations during the innovation process should now be clear we have yet to describe the actual content of these conversations. As is stated above this content varies between the different conversations and is hard to predict as ‘the script is being written while the play is being performed’ (Ford, 1999), but it can be argued on which factors and variables this dynamicness is dependant: The Nature of the Innovation - The innovation can either be incremental (exploitive) or radical (explorative) (O’Reilly & Tushman, 2011). This level of novelty is important for management of knowledge across boundaries (Carlile, 2004) during the conversation. It could also be dependant on the form of innovation: Technology Driven, User Driven or Design Driven (Verganti, 2009).

The Nature of the Involved Parties - Different franchises from different countries come with different values, views, habits. This is actually a good thing and should be enforced, instead of using the same participants (and language) over and over again (Innovation partners); It reduces resistance to the required conversational shift. (Ford, 1999).

Phase of the NPD process - As these conversations take place throughout the entire NPD process different phases require different interventions (Smulders, 2004).

It should be clear by now that the actual content of the conversations should be approached in a mindful manner. We believe the PR manager should be responsible person for shaping the conversation adequately for the possible different combination of factors described above.

We believe the PR manager is a suitable candidate for this as his current function is already concerned with the involvement of the different parties: PR manager: “responsible for Public Relations (PR) of the IDT, The PR managers put a lot of effort in engaging employees in the generation phase, and with growing success. ….. However, according to the PR managers, there still can be made a lot of progress, especially by attracting the other franchisees and people from other branches.”

Carlile provides a framework in order to deal with the complex task of shaping a conversation: The PR manager should determine if the conversations requires either a Transfer, Translation or Transformation of the participant’s knowledge and choose the appropriate rules, objectives and boundary objects. In practice this will mean the PR manager receives a lot more responsibility during the innovation process, so he’ll need to to step up his game... literally (Dougherty & Takacs, 2004).

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5. Developing an innovation proposal for an online shop

Now that we have defined the theoretical principles in how our solution will enhance the Homeshop innovation process, next an example of a Homeshop innovation process is given. In the example, we use the proposed process of conversations to establish a successful innovation with the idea of the online store. Also, a visual is shown in which the NPD innovation process and supporting conversations are mapped over the Kolb learning cycle.

Franchises

Franchises

Concrete Experience

Conversations Conversations Active Experimentatin

IDT

Reflective Observation

Conversations

Abstract Conceptualization

Franchises

Conversations Franchises

Figure 6 - 1. Kolb learning cycle within IDT 2. Supporting conversations between IDT and franchises

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First of all, as a boundary spanner the PR manager will facilitate events of conversation throughout the innovation process. This innovation process exists of different conversational stages. It is the job of PR managers to initiate, maintain, and complete conversations, bringing new conversational realities into existence in which new opportunities for action are created and effective action takes place. (paper conversations) Below, the innovation process for the online store is specified: 1. Initiation / ideation The first step of the process is about the idea initiation and generation. (Smulders et al, 2003 ; Smulders, 2004) In former innovation processes, employees and franchisees were able to contribute to this phase by submitting their ideas at the ‘Innovation Studio platform’.

Franchises

However, in case of the online store idea generation we approach it differently. Next to merely submitting ideas (monologue type of conversation), a representative group of Franchisees is invited to visit the IDT office (the ‘board of Franchisees’) and participate in a collaborative ideation session. This will allow a dialogue between IDT and the Franchisees, enabling to shift the focus and construct a new reality. Thereby, making a start towards change. (Ford, 1999)

1 IDT

Conversations

Figure 7 - Phase 1

The PR manager facilitates this collaborative ideation session. It is his/her task to create a setting (type of conversation) that is supportive for the ideation phase. In the ideation for online store ideas, an example conversational tool could be collaborative paper prototyping. This allows brainstorming on content for the web shop, but also the web shop architecture. It is the PR managers’ responsibility to define the paper prototype method it in a way that will enable both Franchisees as IDT members to actively participate in the ideation session.

(Smulders, 2004) Although the focus of this stage is on initiation/ideation, the ultimate goal is to through a short but complete cycle of the conversation stages (initiation till closing). This enables to conclude the ideation phase with the deliverable of a new first order-construct. This will serve as input for the follow up conversation of understanding.

2. Understanding / concept development

Figure 8 - Phase 2

IDT

Secondly, after wrapping up the ideation phase, IDT will continue with the concept development phase.

In this phase, IDT has a dominant and leading role as visionary experts in NPD. (Smulders et al, 2003 ; Smulders, 2004) Nevertheless, the Franchisees will still have a consulting role in the dialogue of understanding.

2 Conversations

Before the start of the online shop innovation cycle, IDT did not involve the Franchisees in the concept development at all. This has caused a low acceptance of proposed innovations, as IDT failed to communicate or integrate strategic goals of Franchisees in their concepts.

Franchises

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Therefore, in this phase it is the PR managers’ responsibility to monitor the process of concept development and to integrate conversational events between IDT and the Franchisees. This enables a continued dialogue, where the Franchisees still feel involved. Moreover, by consulting the Franchisees, IDT can identify gaps and flaws in their concept. Integrating the Franchisees’ feedback, or at least involving them in the concept development will significantly increase the chance of acceptance and thereby the chance on successful launch at the end of the innovation process.

In the specific case of developing the concept of the online shop, you can think of a conversational tool that supports in mapping opportunities and concerns that relate to a concept. Again, it is the responsibility of the PR manager to facilitate this conversational tool in a way that allows communicating in a common language (understandable for both IDT and the Franchise partners). Thereby allowing to construct a new first-order reality for the concept. Again, this deliverable will be the established by going through a complete cycle of conversation stages (focusing on understanding). Also, the deliverable will be the input for the follow up conversation of performance. (Ford, 1999) 3. Performance / product development

IDT

In the third stage of conversation on performance, IDT carries out a trial. In former Homeshop innovation processes, the Innovation Managers individually evaluated the trial, after which a report was created in with recommendations for the roll out of the proposed innovation. Again, we can conclude that Homeshop failed to establish a dialogue, although essential for innovation processes of change in organizational contexts.

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Conversations Franchises

Figure 9 - Phase 3

For the innovation process of the online shop we do it differently. Again, the PR manager defines an appropriate type of conversation, which can still be a trial. But instead of one-sided evaluation from IDT, again the board of Franchisee partners is invited to establish a dialogue around the trial activity. This will allow a multi perspective evaluation, which will be a much better input for the closing phase of implementation. (Smulders et al, 2003; Smulders, 2004; Ford, 1999) 4. Closing (conversation paper) / implementation (kolb&inverventions)

Franchises

Finally, the innovation process moves towards an operational process in implementation phase, where the closing conversation is carried out. In former Homeshop innovation processes this activity was nonexistent. IDT was involved in ideation and concept development but not in the implementation. The nonexistence of the NPD implementation phase is an important contributor to former failures in innovation.

(Smulders et al, 2003)

Figure 10 - Phase 4

Conversations

4 IDT 11

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Again, for the innovation process of the online shop we will apply a different approach. First of all, we will be able to use the multi perspective trial evaluation (over the former mono-perspective evaluation report) as input for production preparation and ramp up. (Smulders et al, 2003 ; Ford, 1999) Also, when the proposed concept of online shopping will be implemented, Franchise partners will need to adjust/change their existing operations in retail. As their expertise is in operations, they need help/intervention from the IDT team as innovation experts to realize the required change in the Franchise retail strategy and operations.(Verganti, 2009) Like in the previous conversation stages, it is the responsibility of the PR Manager to facilitate an appropriate type of conversation that will allow these interventions in a supportive way. For example, by using an empathizing approach in tuning IDT’s type of intervention to towards one that is preferred by the Franchise partners (the receivers). (Smulders et al, 2003 ; Ford, 1999)

6. Implementation plan In order to make this new approach of innovation processes a natural routine of the Homeshop company, first they themselves need to go through this conversational process for change.

(Levinthal & Rerup, 2006) In this process of organizational change, a design consultancy company could guide Homeshop to go through the stages of initiation, understanding, performance and closing. However, here the content of the conversations is already more predefined (establishing a routine ofP conversational processes) compared to the future content of Homeshop conversations for innovation.

In fact, Homeshop will go through an implementation phase where the consultancy is representing the role that the PR manager will have once the organizational change in innovation is established. (Ford, 1999) In this process of implementation, different activities and phases can be defined: Phase 1 Creating organizational awareness about the conversational process for innovation.

Phase 2 Preparing the PR manager for the task as boundary spanner by job adjustments. You could think of the PR manager becoming more a part of multiple ‘boundary groups’ that are involved in innovation processes (e.g. being more involved with the Franchise partners and internal departments like Purchase and Logistics).

Phase 3 Providing the PR manager with multiple conversational tools that are often used in specific stages of conversation. (brainstorms, modeling, discussion, role playing, empathy etc.). Moreover, the PR manager will be trained as a conversation facilitator.

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Phase 4 Running a fictional (non-commercial) process of conversation with two involved parties within the company.

Phase 5 Preparing Homeshop for more complex innovation processes by running a fictional process of conversation with multiple (e.g. 5) involved parties, both internal and external. (Carlile, 2004) Phase 6 Evaluate the experiences of the trials and making final adjustments in guidelines for the Homeshop innovation process of conversation (Smulders, 2004).

Phase 7 Running the first innovation process based on the conversation approach, where the consultancy will offer final guidance to bring the approach into an operational routine status.

Visualization As a metaphor for the communication between IDT and the franchisees, we used gears. The different gears represent the different routines that IDT (middle gear) and the franchisees (black gear) use. In order to get them aligned the PR-managers comes in as a boundary spanner. They are represented by the gears in between.

Figure 11 - Conversations

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References

Brown, J. S., & Duguid, P. (2001). Knowledge and organization: A social-practice perspective. Organization science, 12(2), 198-213.

Carlile, P. R. (2004). Transferring, translating, and transforming: An integrative framework for managing knowledge across boundaries. Organization science,15(5), 555-568.

Dougherty, D., & Takacs, C. H. (2004). Team play: Heedful interrelating as the boundary for innovation. Long Range Planning, 37(6), 569-590.

Feldman, M. S., & Pentland, B. T. (2003). Reconceptualizing organizational routines as a source of flexibility and change. Administrative Science Quarterly, 48(1), 94-118.

Ford, J. D. (1999). Organizational change as shifting conversations. Journal of Organizational Change Management, 12(6), 480-500.

Goleman, D. (2000). Leadership that gets results. If you read nothing else on managing people, read these bestselling articles., 2.

Kolb, D. A. (1984). Experiential learning: Experience as the source of learning and development (Vol. 1). Englewood Cliffs, NJ: Prentice-Hall.

Levinthal, D., & Rerup, C. (2006). Crossing an apparent chasm: Bridging mindful and less-mindful perspectives on organizational learning. Organization Science, 17(4), 502-513.

O'Reilly III, C. A., & Tushman, M. L. (2011). Organizational ambidexterity in action: how managers explore and exploit. California Management Review,53(4), 5-22.

Project Management Institute. (2000). A guide to the project management body of knowledge (PMBOK guide) (Vol. 2). Project Management Inst.

Smulders, F., CaluwĂŠ, L., & Nieuwenhuizen, O. (2003). The last stage of product development: Interventions in existing operational processes.Creativity and Innovation Management, 12(2), 109-120.

Smulders, F. E. (2004). Co-operation in NPD: Coping with Different Learning Styles. Creativity and Innovation Management, 13(4), 263-273.

Verganti, R. (2009). Design driven innovation: changing the rules of competition by radically innovating what things mean. Harvard Business School Press.

Zahra, S. A., & George, G. (2002). Absorptive capacity: A review, reconceptualization, and extension. Academy of management review, 185-203.

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