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03 Jun 2011

Business Case: Creating Competitive Advantage in Aluminum Manufacturing through Innovation

The students in the MSc. in Management Consulting Program at Grenoble Ecole de Management (year 2010-2011) recently completed a project for a French subsidiary of a global company that produces Aluminum.
 
The company needed best practice insights in order to maximize the innovation output of its R&D center.
The students began by defining the project scope in order to cover two vital areas of the organization that would address this business challenge.
The two areas defined were:
 
  1. Organization structure: touching on organizational design and the innovation filtering process
     
  2. Organizational culture: dealing with creating a sense of urgency in commercializing innovations, and developing a business orientation in the innovation process itself
 
The group of 15 students, spanning 13 different nationalities designed their research by defining a hypothesis that would help identify all the possible barriers the company was experiencing in creating an innovative culture. At the same time, they researched the business practices of the leading innovative companies worldwide to determine best practices.
 
The completed research process uncovered several key factors that would serve as barriers for any company wanting to create a competitive innovative culture. These are discussed below:
 
  • Communication: the “silo” effect where functional departments within the organization pursue “territorial” interests which end up compromising overall organizational goals can hinder the collaboration needed to facilitate creativity
     
  • Disengagement: this can occur where the organization’s mission and vision is not clearly communicated to all levels within the organization. This then makes it easy to pursue the “territorial” interests discussed above
     
  • Staffing: the problem here is that usually people engaged in the innovation process lack support and/or expertise in business background. This therefore creates the problem where innovations are not suited to the market requirements
     
  • Innovation filtering process: when this is market passive, that is, the R&D team are not working in collaboration with customers to define customer need expectations, again, the innovations designed will fail to match market needs and the organization will lose its competitive edge
 
Best practices show that successful companies combine the provision of free time to employees for ‘creative thinking’, working in cross-functional teams, and tailoring the reward system to support collaboration and the work done (rather than outcomes).
 
By doing this, they develop competencies and an organizational culture that gives them a better competitive advantage than their rivals.
Other differentiating practices that would facilitate innovation are: the acceptance of mistakes and encouragement of risk-taking; developing an HR policy that recruits, hires and develops innovators; setting up in place a development committee.
 
From the extensive work done on this project, the students were able to meet their objective of providing key insights into this particular business case that could also serve as a resource to other companies facing similar challenges.