How organizations facilitate innovation through management and organizational structure?
A case study of Tesla Inc.
In this dynamic business environment, it is compulsory for the organizations to make new changes in their processes, products and services to remain competitive in the market. In relation to this, management and organizational structure are crucial to develop a creative environment within the organization that facilitates innovation within the organization. The main purpose of this essay is to explain the activities and processes taken by the management to promote creativity in its products. This essay critically discusses how organisations facilitate innovation through management and organisational structure with the consideration of Tesla Inc. It is a UK based automobile company that manufactures and supplies automobiles, energy storages and solar panels. Its product portfolio shows that company is innovative and launches new and creative products consistently. This company is headquartered in Palo Alto, California. It was founded in 2003 by Martin Eberhard and Marc Tarpenning and named after Serbian-American inventor Nikola Tesla. Its main products are electric cars, lithium-ion battery energy storage, and residential solar panels (Tesla, 2017).
Innovations at Tesla
Tesla drew attention, when it produced Tesla Roadster, first electric sports car in 2008. Further, it also manufactured standardized and innovative vehicles like the Model S, which got the rank of the best selling plug-in electric car in 2015 and 2016. Due to creativity in its products, it is considered as the second largest electric car manufacturer after the Renault-Nissan Alliance. Further, it focused on cost effective products and launched Model X at low cost that helped it to penetrate into the markets. In addition, the company has introduced high powered superchargers for its vehicles to make them more usable (The Conversation, 2016). Moreover, it has also launched a destination charging program that is focused on the fast charging to the customers. Apart from this, the firm also focuses on the incredible power and zero emissions in its products that have increased its popularity as innovative automobile company across the world. Now, it is oriented towards the production of future vehicles including driverless cars and flying cars (Tesla, 2017).
Management and Innovation
Tesla has positioned itself in the electric vehicles market due to its exceptional creativity and impeccable technological competiveness. Regarding this, the management of the firm has contributed significantly as they are decision makers and strategy planners who have facilitated the innovative work culture within the organization to produce creative products. Even, management has focused on the development of future vehicles as they have invested in selling long-range electric automobiles and gas-powered vehicles along with the new technologies with the focus on future vehicles (Tesla, 2017).
The management is oriented towards technology upgrading, acceleration, transition and sustainable energy while designing and production of its vehicles. Tesla focuses on new and different ideas and tries to meet the new demand with emphasis on differentiation and low cost. In relation to this, Blue Ocean Strategy theory also depicts that traditional competition-based strategies (red ocean strategies) are required, but these are not sufficient to sustain high performance in the competitive business environment. Firms need to go beyond the competing as they need to create blue oceans (Bourletidis, 2014). In relation to this theory, the management of Tesla believes in getting success by creating blue oceans of uncontested market space. It is opposed to “red oceans” where it is matter for the competitors to get dominance (Kim & Mauborgne, 2017).
According to Red Ocean strategy, the firms focus on differentiation or distinctive cost position, but in Ocean strategy, there is no market boundary and industry structure as industry players may reconstruct market boundary and industry structure by their actions and beliefs (Kim & Mauborgne, 2014). In Tesla, the management is not limited to market boundaries and industry structure as it has planned to introduce future vehicles that were only dream in earlier time. The management does not let existing market structures restrict their thoughts. According to the management, extra demand is largely untapped. The management has developed mission of accelerating the world’s transition to sustainable energy and vision of creating the most compelling car company of the 21st century by driving the world’s transition to electric vehicles. It means that the mission and vision are also developed by the management with focus on the innovation aspect (Carlson, 2013). In order to achieve mission and vision, the management focuses more on the use of sustainable energy through production of electric vehicles. For this, the management tries to generate an environment that could promote technology emergence, R&D and new product development. Both statements of the firm reveal the focus of the management towards the production of electric automobiles and related products to grab market opportunities regarding renewable energy. In order to produce sustainable vehicles, new technologies and techniques are invented by the firm to introduce features in its vehicles for the reduction in carbon emission leading to innovative products (Vance, 2015). Apart from this, the management of the firm communicates the idea of innovation to make it believable by people and work on this idea to embody it. In relation to this, the Diffusion of Innovation (DOI) theory also holds that diffusion is the “process by which an innovation is communicated through specific ways over a period of time among the concerned parties”. In order to adopt something, it is required for an individual to perceive the idea, behaviour or product as new or innovative. Management of Tesla works on this area and communicates its innovative idea like flying cars to make it diffusible (Statista, 2016). Its corporate values like always do the best, improve forecast accuracy, respect and encourage people, learn every time and respect the environment are crucial for the emergence of innovation its products (Fehrenbacher, 2015). Focus of the management on these values enables to promote a culture that facilitates the innovation. The management also adopts a democratic approach that allows the employees to convey their ideas and opinions on the products and services of the firm. It enables the management to know better ideas for innovation that leads to production of innovative products. Regarding this, participative leadership theory also states that participation of the involved people in decisions enables the firms to get better ideas and improve the decision making. The management of Tesla believes in the capability of the employees for responding the changes and market trends that leads to innovation (The Conversation, 2016). At the same time, such culture helps it to respond the current issues and challenges speedily with emphasis on innovation. It is because employees are allowed to think outside the box and share their ideas to the management. In addition, this management culture enables to rely on new ideas and solutions which are recommended by employees, suppliers and other business partners to manufacture new and innovative products (Hoyer et al., 2010).
The management of Tesla adopted slogan i.e. “the end of compromise” that reflects the focus on providing the flagship models without compromising with quality and performance. The management of the firm focuses on the development of organizational culture that is based on the attributes such as constantly innovate, the reason for first principles, think like owners, move fast, do the impossible, etc. that leads to innovation in the products (Fehrenbacher, 2015). This innovation based culture developed by the management helps to create advanced electric vehicles. The focus of the management on reason from first principles is significant to determine the root causes behind any issue to introduce the innovations in new products. The management also provides employee training for improving their skills and knowledge to introduce new changes. It highly invests in the development of employees as they could use better skills and knowledge in product development (Cooper, 2015). The management of the firm heavily invests in R&D to integrate innovation into its processes and products. It has been making investment highly in R&D over the last years that facilitate innovation. It has invested in R&D by three times of traditional automobiles (Williams, 2016).
The management of Tesla adopts risk taking approach by taking risks in making innovations resulting in high success. Even, the stakeholders and Original Equipment Manufacturers did not consider the idea of production of electric vehicles against petroleum cars, but the management of the firm took risk and manufactured these innovative products (The Conversation, 2016). The key risk behind this idea could be failure to adopt innovative cars by the customers. But this risky concept was based on the fusion of technology, internet of things and sharing economy and artificial intelligence that led to successful innovation. But, the management of Tesla has taken the initiative like the Strategic Artificial Intelligence Research Center that helped for the development of policies in mitigating risks to these technologies (Statista, 2016).
Organizational Structure and Innovation
Tesla adopts a functional organizational structure that ensures the proper execution of the directions and instructions with participation of each employee in the product innovation. For instance, Tesla has a structural group that includes chairman & CEO, finance, technology, engineering, sales and service and legal departments that properly handle related functions to bring innovation (Tesla, 2017). Tesla is divided into different segments that are based on the functions during the process of managing its functions (Cheney, 2011). The efficiencies of the organization are increased by following this structure of functional group. This is the way; management of the functional group is highly effective and simple to manage. Functional structure seems of the highly successful in reputed organizations that manufactures highly product volumes and also at lower prices. Such companies can achieve the production at low cost due to functional structure and its efficiency (Kauerhof, 2016).
Function-based hierarchy involves function teams or specialized workforce for particular tasks that is effective to make perfection in the processes and products also. Due to specialized skills and knowledge, the firm is able to execute the new ideas and develop innovative products. Apart from this, centralization with empowerment within the organizational structure is also significant to have managerial control and high employee morale and motivation that contribute to innovation in products and services. In relation to this, Harper (2015) also stated that it is effective for the management to sustain managerial control on the whole organization through decisions that are taken by the teams. It helps the firm to implement new strategies throughout the organization at great pace as per the market demand. This structure enables the firm to pool the specialists that enhances the coordination and control to bring new innovations. At the same time, Ashkenas et al. (2015) also stated that centralized decision making is effective to enhance an organizational perspective across functions and use the managerial and technical talents efficiently. It also facilitates career paths and professional development in specialized areas that is necessary for the execution of innovative ideas. The use functional structure allows the firm to divide the employees into departments having specialized skills and knowledge and perform the related tasks with perfection. They communicate to each other and meet the new requirements properly to through better coordination and control. It also creates better opportunities for the team members to learn new skills and capabilities that tend to create highly skilled specialists and lead to incorporation of innovation (Meyer, 2017). Such structure also helps the firm to adopt Blue ocean strategy by focusing on differentiation at low cost. It is because this structure allows for grouping everyone that serves a specific function into one department to keep costs low and create efficiency. It means the firm can differentiate its products at low cost.
Overall, it can be stated that management and organizational structure of Tesla play an important role in facilitating innovation. Management adopts better practices and policies and develops an innovative organizational culture that leads to emergence of innovation. At the same time, organizational structure of Tesla is functional that helps to bring specialization and develops skilled workforce resulting in introduction of new ideas and innovative products.
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