Businesses benefit from more democracy
For several years now, new communication media have allowed companies to involve their employees in the search for innovative solutions to specific problems. Tools such as in-house social media permit these “crowdsourcing” strategies. A novel aspect, however, is the use of such methods for corporate strategy development, an area traditionally considered as confidential. In a basic research project funded by the Austrian Science Fund FWF, a team headed by strategy researcher Kurt Matzler has now explored how companies handle such new methods and what advantages they derive from them.
Groups of people are more intelligent
“One basic assumption behind the project is the notion of the ‘wisdom of the crowd’,” explains principal investigator Kurt Matzler. “It has been shown that under certain conditions a group of average people can be much more intelligent than even the best experts.” Matzler lists several prerequisites: “This process requires a great diversity in points of view. Another condition is independence. Each member of the group must have the opportunity to contribute their knowledge, regardless of their position in the company. In addition, it must be possible to access decentralized knowledge, for example from staff members in contact with customers, and, finally, such knowledge must be collected in a meaningful way.” If these conditions are fulfilled, Matzler notes, it becomes possible for groups of ordinary people to develop very intelligent solutions. Since many companies already have the digital technologies needed to involve large numbers of employees in practical fashion, this approach has been used for quite a long time in the field of innovation. “In the area of strategy development, however, the advent of this approach marks a major cultural change,” explains the researcher. “In the past, strategy was something exclusively reserved for top management. But now we see that companies are becoming more open, and some even involve outsiders, although there are risks attached.”
External knowledge necessary
Matzler and his team set out to investigate these cases more closely. “We looked into what motivates companies to do this,” says the researcher. “We conclude that the speed of change and the complexity of any given situation today are usually so high that external knowledge is needed to develop a sound strategy.” This applies above all to business model innovation. "One rarely needs to reinvent the wheel, in many cases it is more about copying and transferring successful solutions from other industries. Those who are ready to open up can achieve a lot here,” says Matzler. The approach has another advantage: staff commitment increases when they are involved. “Studies show that 60 to 80 percent of strategies are never implemented, or at least not in their initial form. One of the reasons for this is the lack of staff buy-in,” says Matzler. The involvement of those affected increases the success rate of strategies.
Not entirely without risk
Matzler admits that this open strategy development can be risky, but underscores the advantages: “There are companies that attach more importance to access to new knowledge and higher speed than to the risk that someone might copy them. Obviously, this approach is not appropriate for highly sensitive areas. In addition, Matzler emphasizes, even if companies do employ such strategies, the final decision still lies with the management. Hence what is at stake is democratizing the process, not the decision-making itself.
Comprehensive case study
In concrete terms, the research team conducted 30 case studies, accompanied by a survey of about 200 companies, and closely followed a handful of concrete company projects. The results were predominantly positive. “The central finding is that the quality of the strategy and the speed of defining it increase significantly. Moreover, we saw that the process triggered completely new ideas,” notes the researcher.
Personal details Kurt Matzler is a Professor of Strategic Management at the University of Innsbruck. Matzler, who studied business administration, is one of the most quoted strategy researchers in Europe. His research interest lies in strategy, innovation and leadership. Matzler is an enthusiastic cyclist and has participated four times in Race Across America as a team member.
Publications
