The
experimental firm
The experimental firm is the organizational form most
representative of technocapitalism. The
role of the experimental firm is to reproduce creativity as rapidly and
effectively as possible. This role is essential
to sustain continuous invention and innovation. It is also vital for survival, since the experimental firm lives
or fails by the value of its discoveries.
The experimental
firm is the product of several decades of pervasive corporatization of invention
and innovation. During the late
twentieth century invention and innovation became significant components of
corporate structures. Continuous or
systematized invention and innovation turned into a major corporate goal,
particularly in the newer and more technologically advanced sectors.
The adoption of continuous invention and
innovation as a major corporate goal is creating a new ecology of
organizations. Firms in new sectors,
such as biotechnology, bioinformatics, nanotechnology, and software, are part
of the organizational ecology of technocapitalism. For firms in these sectors, research creativity, continuous
invention and innovation, and networking are vital features of daily life.
This new ecology
is different from the one created by industrial capitalism. The organizational ecology of industrial
capitalism emphasized production over all other corporate functions. Production efficiency obsessed corporate
planners and managers for many decades since the early days of industrialization. Invention and innovation were peripheral in
this organizational ecology, or at best were secondary endeavors.
Production
provided the yardstick to measure internal performance in the old
organizational ecology of industrial capitalism. The ideas of efficiency engineers ruled the corporate enterprises
of industrial capitalism during the twentieth century. Methods of economic analysis suited to that
era, such as production functions, were used to examine the mix of inputs that
went into production, and their efficiency.
Similarly, sociologists’ analyses of that era revolved a lot around
factory production and all its related processes.
New analytical methods need to be devised to understand the experimental firms of technocapitalism. We do not yet have the tools to do so, and the old methods suited to industrial capitalism seem anachronistic to analyze organizations oriented toward creativity and invention. Intangibles are very difficult to measure quantitatively, and new qualitative methods may have to be employed to understand those vital but elusive aspects of the experimental firm.
At this time,
therefore, the best that can be done is to discuss the characteristics of
experimental firms that set them apart from organizations typical of industrial
capitalism. The list of features is by
no means complete. As technocapitalism
unfolds, we will very likely discover other aspects that can be regarded as
representative of the new organizational ecology.
What are the characteristics of the experimental firm?
Experimental firms must foster, first and foremost, an internal culture of creativity. Encouraging discovery through creativity and experimentation is a major managerial goal for firms whose survival depends on producing continuous streams of new inventions. However, promoting those objectives requires moving away from the traditional tools used in firms typical of industrial capitalism.
Creating and
sustaining an internal culture of creativity is one of the most important challenges
faced by the experimental firm. There
are no charts, road maps or blueprints to follow. Often, creating and sustaining a culture of creativity becomes a
matter of trial and error, or experimentation itself, shaped by individual and
group talents, circumstances and external relations.
For some
experimental firms, emphasizing intrinsic attributes of roles connected to
creativity can help nurture that environment.
The term “intrinsic” here refers, for example, to a deliberate emphasis
on non-material aspects, such as the significance of a potential discovery to
humanity or to a specific field, the professional recognition that might be
associated with it, the emotional satisfaction, the experience, or similar
intangibles. This approach is in deep
contrast with the emphasis on extrinsic attributes in the firms that were
typical of industrial capitalism, where material rewards, such as salary hikes,
profits, stock or company cars were the main motivational tools.
Allowing more
individual and group freedom to experiment is often important for establishing
that much needed culture of creativity.
Creativity is often driven by curiosity. Allowing researchers the possibility of autonomously following
their curiosity wherever it might take them can create a lot of uncertainty,
but it can also lead to significant discoveries. Balancing this possibility with the pressure to sustain
continuous invention in firms with very limited resources is a formidable
challenge.
Second, the experimental firm is highly
dependent on networks. Networks are
vital for reproducing creativity and sustaining continuous invention and
innovation. In this regard, therefore,
research-oriented networks are a major feature of the experimental firm.
Networks are important to find the talents, knowledge and resources that firms do not have internally. Internalizing all the resources needed to sustain continuous invention and innovation is usually beyond the possibilities of most experimental firms. Financial constraints are a formidable challenge in this regard. Often, the kind of talent or specific expertise needed for a research project may not even be marketed. This means that conventional personnel searches may be unsuited to find such talent. In those cases, joining a network of firms can provide the only feasible means to access the needed expertise.
Research networks
are usually relational in character, and tend to be oriented more toward
collaboration and sharing than competition.
This relational aspect is based on trust, the fundamental lubricant of
most dealings where private or highly sensitive knowledge is involved. Without a good measure of trust, the network
relations of the experimental firm could not exist. Serious breaches of trust can collapse a research network, with
the potential failure of some firms.
Networks provide
research partners for major projects.
Research alliances are created through networks. Networked research alliances can be very
supportive of new firms, helping secure financial resources and market niches,
along with the talents, knowledge and hardware needed to undertake complex
projects. Many new, highly innovative
firms would not be able to survive without the support that networks provide.
Third,
multidisciplinarity of talent and creativity is another important
characteristic of experimental firms.
This means that the talent needed to sustain continuous invention and
innovation cannot be assembled from a single scientific or professional
field. A substantial diversity of
talent and creativity from many different fields, or in some cases from
expertise that may not yet even be institutionalized or marketed, is often
needed in experimental firms.
In many
biotechnology firms, for example, it is common to find researchers from
biology, medicine, pharmacology, chemistry, software engineering, genetics,
computer engineering and medical technology, working together on research
projects. In software firms, graphic
artists, linguists, computer engineers, educators, psychologists, financial
experts and marketing specialists often work with software engineers to create
specialized applications. In the
emerging area of nanotechnology, it is possible to find physicists, electrical
engineers, software designers, chemists, computer engineers, biologists,
physicians, medical technologists and biopharmacologists working together to
try to come up with new discoveries.
This complex mix of research talent distinguishes the experimental firm from the organizations that were typical of industrial capitalism. In those organizations, research talent often came from one or two professional fields. In automotive factories, for example, research personnel were drawn from the field of mechanical engineering. In aerospace companies, researchers were mostly from aerospace or mechanical engineering, while in chemical companies they were drawn from chemistry or chemical engineering, and so on. The research units of the firms of industrial capitalism were therefore a lot easier to staff and manage than those of the experimental firms of technocapitalism.
Multidisciplinary creativity also often leads to multi-purpose discoveries and innovations. Mobile telephones, designed by teams of electronic engineers, industrial designers, telecommunication engineers, software designers and computer engineers, for example, can function as computers, telephones and global positioning devices. Some supercomputers, a product of collaborative work by computer engineers, software designers, biologists, chemists and microprocessor engineers, can be used for biotechnology research as well as nanotechnology, astronomy and business data processing. Multidisciplinary talent in the experimental firm can therefore lead to multidimensional uses.
Fourth, fluid authority and
cross-functional links are features of the experimental firm. This characteristic is vital to support
creativity and the free flow of ideas.
As a result, research activities often have to be organized so that they
have strong links with various other components of the firm.
Researchers in the experimental firm
often have cross-functional objectives.
Laboratory research may, for example, carry over into regulatory testing
and production. For many projects,
involvement of researchers with customers may be important, to obtain feedback
that can help target the next effort at discovery and innovation. Very often, therefore, research cannot be
confined to the laboratory, but must spill over into other areas of the
firm. In the experimental firm,
therefore, compartmentalization of expertise is often an obstacle to creativity
and to continuous invention and innovation.
This cross-functional quality of the experimental firm introduces many challenges to longstanding bureaucratic practices. Establishing fluid authority might require subverting the established organizational hierarchy by, for example, eliminating the division of authority between units or even inverting them. Those subversions of authority can become necessary and frequent, in order to assemble the talent needed for projects and let ideas flow easily between various units and research teams. The result is that individual places in the organizational hierarchy may become fluid, leading to greater uncertainty over roles and responsibilities.
Flattening the organizational hierarchy can become a necessity in many experimental firms. This can help expedite decisions, so that creativity can be quickly deployed functionally and geographically. To accomplish it, layers of mid-level authority may have to be removed. Another approach may be to remove the top layers of authority, while raising the responsibility of the lower levels. Both approaches raise substantial challenges, since often the most valuable stock of organizational memory lies at the top or middle levels. Nevertheless, the temporary or exceptional flattening of organizational hierarchies may become a necessity in cases where internal needs and external relations require rapid decisions.
Fifth,
experimental firms often cast off research groups or units from the main
organization when it suits their needs.
By letting them operate as autonomous units on a temporary basis, those
groups can chart their own course on key projects. The objective of this process is to allow specific research
groups a high degree of autonomous initiative, to pursue their projects
unencumbered by established ways or hierarchies within the firm.
One of the
important outcomes of this feature has been to create a sensitivity to anomaly
within experimental firms. An
appreciation of anomaly is often important to come up with new
discoveries. Questioning the existing order,
or the commonly accepted way of doing something, can be a means to reproduce
creativity. Tolerating anomaly by
allowing it to be done in autonomous groups helps limit the need to subvert
existing structures within the firm.
This
empowerment of a group to act on its own initiative can help firms avoid the uncertainty
created when authority becomes fluid, as noted above. It can also help avoid flattening hierarchies, and prevent the
disruption of established chains of command within the firm. More than just another way to make authority
fluid, this exceptional practice actually cuts off authority for a time, with
the tacit understanding that certain goals or outcomes are to be
accomplished.
Sixth, experimental firms often use unconventional strategies to further the overarching need to reproduce creativity and support continuous invention. In many ways, experimental firms are rewriting the repertory of corporate strategies inherited from industrial capitalism, as they aggressively seek the resources they need. Many of those strategies are questionable or have yet to stand the scrutiny of ethical and legal challenges.
One such strategy
is the attempt to capture the non-rival essence and benefits of new ideas owned
by other firms. The non-rival aspects
of new discoveries are non-excludable, in the sense that their owner often
cannot legally prevent others from using them.
Thus, for example, the functional objective behind new software can be
learned and incorporated into a competing product by another firm, but not its
specific code. Similarly, the function
of a new nanotechnology device can be learned and introduced in a different
product, but not its specific design.
There are questionable aspects of this strategy, but when successful it can confer the advantage of substantial time and cost savings in research. It can become the main objective of second-mover research groups discussed in another section of this website. When it goes wrong, however, it can result in costly lawsuits and tarnished reputations for both researchers and the firm.
Another strategy is to target research projects to capture substantial returns to volume. Inventing the first prototype of a potential new product can be very costly, requiring unique talent, trial and error, and much persistence. However, subsequent units can cost very little to be produced. Probably the best example of this situation is the case of software, where the first prototype can cost much to be designed and tested. However, subsequent copies of the software, produced by the millions, will cost no more than manufacturing a diskette. A similar situation can be found in biotechnology, where engineering a new organism can cost much in talent, time and hardware. However, once it receives regulatory approval, the new product may be produced serially at very low cost.
Spinning in, or
acquiring, existing research-intensive firms with valuable patents and
discoveries of their own is another strategy used by some experimental
firms. This strategy can help remedy a
decline in the acquiring firm’s internal ability to reproduce creativity, or it
can simply complement or add to its own capabilities. It can also be part of an effort to reduce competition, by
internalizing firms that produce rival products. Acquiring new, small and highly innovative firms is a specialty
of some experimental firms, and is often achieved by tapping into the networks
of alliances, joint ventures and outsourcing arrangements.
These are but a few of the many new strategies being deployed by experimental firms in the never-ending struggle to replenish creativity, sustain continuous invention and innovation, and survive. It remains to be seen how some of these strategies will fare when some firms grow and become larger. For now, however, it seems that the creativity of many of the experimental firms of technocapitalism does not end at the doorstep of their labs. Rather, it is spilling out into aspects that were previously the dull domain of corporate bureaucracies.
For publications on the experimental firm and related topics by this author, please see the Publications section of this website.
Copyright © Luis Suarez-Villa
