1. Leadership, Innovation and Organisational Performance? Andrew Μ. Pettigrew, OBE, FBA, PhD Professor of Strategy and Organisation Saïd Business School University of Oxford Andrew.pettigrew@sbs.ox.ac.uk Presentation to Stavanger Innovation Summit 15 th June 2009

2. Our journey… The Contrary Position The Contrary Position Leadership, Complementary Innovation & Performance Leadership, Complementary Innovation & Performance Leadership, Innovation and Performance in BP Leadership, Innovation and Performance in BP Key Messages for Leaders and Leading Change Key Messages for Leaders and Leading Change

3. The contrary position… Performance is largely shaped by external conditions – economic, market and technological factors. Leaders are faced by many internal constraints. Leaders as pawns not potentates. People attribute and thereby exaggerate leader effects to make sense of complex, confusing events. Leaders magnify followers attributions by managing impressions. Luck and chance are key determinants of performance.

4. New Forms of Organization: 4 Themes Greater Permeability of Organization Boundaries, the development of networks, webs, co-operative relations, alliances and clusters Compressing the structural and cultural features of hierarchy through delayering, downsizing, and building more co-operative forms of managerial style Associated drives to develop more creative, agile, learning forms (competition as an innovation contest) The Linguistic turn from organization to organizing

5. The primary questions ? Progress How far have new organisational forms been implemented? Performance ? ? What are the performance effects ? Process ? What are the managerial processes?

6. Research method Four surveys in: UK Continental Western Europe Japan USA 18 Case studies in 8 UK 10 Continental Western Europe Progress and performance questions Process questions

7. Three dimensions of change changingstructures changingprocesses changingboundaries

8. The multiple indicators processes Horizontal & vertical communication Invest in I.T. Practice new HR boundaries Outsource Downscope Develop strategic alliances structures Decentralise Project forms of organizing Delayer

9. The Innovating Organization (Eds) Andrew Pettigrew and Evelyn Fenton London, Sage, 2000 Innovative Forms of Organizing: An International Perspective (Eds) Andrew Pettigrew et al. London, Sage, 2003 Key Outputs

10. Dualities in changing Living with hierarchies and networks Living with hierarchies and networks Greater performance accountability upwards and greater horizontal integration sideways Greater performance accountability upwards and greater horizontal integration sideways Empowering and holding the ring Empowering and holding the ring Centralising strategy and decentralising operations Centralising strategy and decentralising operations Standardising and customising Standardising and customising

11. Discipline to identify knowledge and the good citizenship to share knowledge Discipline to identify knowledge and the good citizenship to share knowledge Balancing continuity and change “to change the world one must live with it” Balancing continuity and change “to change the world one must live with it” Continuous innovation requires platforms of relative stability Continuous innovation requires platforms of relative stability Delivering a complementary and contextually appropriate set of innovations (not latest fad) Delivering a complementary and contextually appropriate set of innovations (not latest fad) Dualities in changing

12. benefits of complementary innovations? What are the

13. Strategic complementarities “Doing more of one thing increases the returns of doing more of another ” “Doing more of one thing increases the returns of doing more of another ” Milgrom and Roberts, 1995 Milgrom and Roberts, 1995 Investing in one practice makes more profitable investing in another, setting off a potential virtual circle of high performance Investing in one practice makes more profitable investing in another, setting off a potential virtual circle of high performance

14. Two key propositions The Positive Proposition: Changing only a few of the system elements at a time may not come close at all to achieving all the benefits that are available through a fully co- ordinated move Changing only a few of the system elements at a time may not come close at all to achieving all the benefits that are available through a fully co- ordinated move The Negative Proposition: Partial moves may drive down performance Partial moves may drive down performance

15. Systemic change: Europe, Japan and US, 1992-1997 The 3 Dimensions StructureProcessesBoundaries The 4 Systems System 1 (S+P+B) System 2 (S+P) System 3 (P+B) System 4 (S+B) Europe30.3%74.9%44.9%Europe13.0% 25.1% 25.1%34.2%16.4% Very few companies adopting whole system of change Japan6.2%53.7%30.7%Japan1.2%4.7%18.7%1.6%US16.5%82.3%57.0%US8.9%12.7% 46.8% 46.8%11.4%

16. One symbol, + or -, indicates weak positive or negative significance; two symbols, ++ or --, indicate strong positive or negative significance. Systemic change and performance: Summary of regression results The 4 Systems System 1 (S+P+B) System 2 (S+P) System 3 (P+B) System 4 (S+B) Pooled Sample of Western Firms ++-- UK+--- US+-- The adoption of a full set of changes (System 1) increases the probability of improving corporate performance The adoption of partial systems (System 2 and System 3) is likely to reduce performance

17. Performance gains require doing many practices together Performance effects depend upon whole system thinking and action

18. BP:Complementary Innovations & Performance 1990 – 1999 1990199119921993199419951996199719981999 H O R TO N S I M O N B R O W N E

19. Leading and Complementary Innovations : Key Messages: For Leaders For Leaders For Leading Change For Leading Change

20. Key Messages (1) 1. Leader Qualities of Holistic Thinking and Holistic Action 2. Beware of Attempts to Improve Performance through Singular Changes 3.Building the Complementary Changes The Integrated Systems of Mutually Reinforcing Elements The Integrated Systems of Mutually Reinforcing Elements 4. This Approach Points to the Importance of: Strong, Aware and Engaged Central Direction Bottom Up Approaches are Handicapped in Delivering Bottom Up Approaches are Handicapped in Delivering Complementary Change Complementary Change

21. Key Messages (2) 5. Be Prepared for the Dangers of Transitions and the Perils of the 'J' Curve Performance Extent of Change Things May Get Worse Before They Get Better Need For Strong Leaders To Survive Transition Processes

22. Key Messages (3) 6. Partial Changes may be Politically and Emotionally Easier to Contemplate, but Encourage Long Term Declines to Contemplate, but Encourage Long Term Declines 7. Beware of Complementary Traps: Sticking With the Old System that Works System that Works 8. Learning is Crucial, But it is Also a Challenge Complements May Be: Complements May Be: 9. Building the Complements and the Capabilities that Underpin them Takes Time and Courage them Takes Time and Courage Hard to Understand Hard to Implement Hard to Imitate

23. Key Messages (4) 10.Building Complements Requires Customization 11. The Virtual Cycle of Complementary Change Needs to Stay In Motion Stay In Motion Leading Change is a Continuous Process Leading Change is a Continuous Process 12. The Crucial Importance of: l Duration of Leader in Post l Careful Management of Leader Succession l Leading Continuity and Change l The Importance of Inter-Generational Leader Effects