organization that has changed

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Introduction:

WE ARE LIVING in what Peter Drucker calls "the Age of Discontinuity"-a time that subjects all of us to wave after wave of fundamental change and forces us to engage in what Charles Handy calls "upside-down thinking." Virtually everything we know and all our assumptions about managerial practice are being called into question, and for good reason. The old methods are no longer working well enough. The stakes are high: the questions we must answer concern the kind of fundamental redefinition of our companies that will not only liberate and support innovation at all levels of the organization, but also spur the creation of a whole new economy.

Historically, our industrial wealth has been built on the exploitation and depletion of our natural resources. However, recent technological advances and increases in global developments are undercutting the very foundation of that economy. Rather than raw materials or physical assets, knowledge is now hailed as the new source of wealth and the basis for competitive advantage.

Many successful companies have journeyed down the path of organizational transformation. The experiences of these companies illustrate the fact that transformation takes as many shapes as there are companies. Despite differences in size, industry, and nationality, there appear to be four common themes that characterize the process and ultimate shape of the organizational transformations. They are: redefining the business and focusing on the customer; teaming and supporting nonhierarchical structures; leadership and shared values; and a change in language.

For our study, we will take a company called Oticon.

Redefining the Business and Focusing on the Customer: In one way or another, most of the organizations made significant changes in how they thought about their business and their customers. Oticon, a Danish hearing-aid manufacturer, also shifted its focus from products to customers. According to Lars Kolind, Oticon's CEO, the company is in the "quality of life [business], not the hearing-aid business." By thinking of customers as people who want and deserve the best quality of life with the hearing they have, rather than as people with defective ears, Oticon has actually redefined its entire business. Essentially, the focus shifted from medical hearing impairments to hearing and quality of life. By tapping into its core competencies in the filtering of background noise (a key issue in the design of a successful hearing aid), Oticon has been able to identify an almost unlimited new market-a hearing-normal public that would appreciate better sound quality in public spaces, such as concert halls, noisy classrooms, and auditoriums where background noise is a problem.

Teaming and Supporting Nonhierarchical Structures: Teaming across organizational boundaries appears to be a hallmark of companies in transformation. Oticon has eliminated not only functional departments but also job tides and the physical barriers imposed by office walls. Work is organized by project teams, and people join teams based on their competencies and interest. There are only three levels in the company: project sponsors (the former management team); project leaders; and project coworkers. All employees (including the CEO) are expected to work on multiple projects, with at least one in their core competency and one in which they feel they can add value based on their other competencies or interests. For example, Lars Kolind, the CEO, has recently finished working on a new training manual, and an administrative coworker with Spanish-language competency is working with a team responsible for marketing and selling a new product in Spanish-speaking countries. This flat, project-focused teaming structure has created a knowledge-based, networked organization that Oticon calls its "spaghetti" organizational structure.

Leadership and Shared Values

Like a genetic code, shared values become the shaper of organizational and individual behaviors, and when they are truly shared, order is achieved without the need for a host of external control mechanisms.

At Oticon, a set of core values to guide the work of the company emerged after hundreds of hours of discussion. These values supplanted the previous formal structures and formed the framework for the four operating principles which guide the transformed organization:

The Choice principle states that employees may choose their projects and are also free to determine what training they need, their vacation schedules, and their working hours.

The Multijob principle requires everyone to work on a project outside his or her area of prime competence. This is based on the assumption that "a top chip designer who performs a marketing function in one project becomes a much better chip designer. . . . because he sees the world stereophonically."

The Transparency principle promises that with almost no exceptions, every piece of information is available to everyone. The agility, integration, and alignment that result from this policy far outweigh any risk associated with openness.

The No Controls principle means that projects emerge based on opportunity, need, and interest. Skunk works are common and, although there is a strategic plan, it is not interpreted rigidly.5

Alignment around these principles enables Oticon to act quickly and flexibly and has already resulted in the development of many new products in the past two years. Leadership has been redefined at Oticon as well. Lars ...