Leadership - Creativity, Innovation and Strategic Change Management - Literature review Example

Leadership: Creativity, Innovation and Strategic Change Management Table of Contents Table of Contents 2 Theoretical Review 4 Creativity and Innovation: Organizational Perspective 4 Organizational Creativity and Innovation: Leadership Perspective 6 Creative Leadership of Strategic Change 10 Qatar National Cement Company: Creative Leadership of Strategic Change 11 Recommendation and Conclusion 15 Reference List 17 Introduction With the emergence of globalization and technological innovation, the business environment for organizations has become highly complicated and dynamic. Gumusluoglu and Ilsev (2009) argued that achieving innovation or enhancing creativity has become a technique for modern organizations to survive in the dynamic environment. In the last 20 years, new modes of value generation has been created due to emergence of trends such as, digitalization of marketing, sharing economy, big data revolution and others. Modern technologies in the field of biotechnology, neuroscience, genetics, environmental science and others are opening a new route for value creation for companies. In simple words, it can be said that the external business environment for companies is rapidly changing, which is why organizations need to invest strategic resources so as to foster innovation and creativity (Gumusluoglu and Ilsev, 2009). In order to survive as well as achieve competitive advantage, organizations need to focus on continuous innovation backed by organizational environment for learning and creativity. In such context, Jung (2000) argued that leadership plays a pivotal role in directing organizational creativity and innovation mentality among workforce. Hu, Gu and Chen (2013) had laid stress upon two concepts such as, “learning organization” and “strategic change management” in order to explain how leadership can guide creativity and innovation within an organization. Therefore, “learning organization” and “strategic change management” can be considered as a mediating variable to explain how the organizational leaders can help a company to achieve innovation and creativity. In the organizational context, leaders transform the personal values and self-concepts of followers through series of leadership initiatives during the change management process so as to develop the culture of innovation and creativity within an organization. Based on the above discussion, the study has selected “creative leadership of strategic change” as the central theme of this paper. On the other hand, “creative leadership of strategic change” will be evaluated in the context to Qatar National Cement Company (one of the major producers of cement and industrial lime-sand raw materials in Qatar). Qatar National Cement Company has been selected as a sample organization in this paper. Based on the results of critical evaluation, suitable recommendations will be made by the study, which can improve implementation of the change in Qatar National Cement Company. In order to develop a theoretical framework for critical evaluation for ‘creative leadership of strategic change’, the study will review the literature pertinent to the topic. Theoretical Review Creativity and Innovation: Organizational Perspective While defining organizational creativity, Woodman, Sawyer and Griffin (1993, p. 293) described it as “the creation of valuable, useful new product, service, idea, procedure, or process by individuals working together in a complex social system”. Based on the above definition, organizational creativity can be segregated into five parts such as: 1- the creative process, 2- the creative product, 3- the creative situation, 4- the creative person and 5- interaction of these above mentioned four components. Hu, Gu and Chen (2013) found that organizations can achieve creativity from three levels such as; individual employee who contributes in increasing creative potential of an organization, organizational level creativity achieved through strategic planning by the top level management and group level creativity attained through team work. Individual level creativity: In order to achieve a sustainable competitive advantage, companies need to incorporate constant innovation in terms of technology up-gradation, product/service diversification, research & development activities and others. Individual employees with certain characteristics (cognitive style, thinking ability, relevant knowledge, required skill set, personality factors, social influences and motivation) can come up with creative solutions to existing business, operational or strategic problems that are faced by an organization. Group level creativity: Hu, Gu and Chen (2013) pointed out that magnitude of uncertainty in the business environment is so large that companies cannot solely rely on creative potential of a single employee. In order to ensure achievement of creativity through a collective decision making process, organizational leaders encourage employees to share their individual creative behavior “inputs” with other members (who also have individual creative behavior “inputs”) in the group. Under the group level creativity process, the new and innovative ideas are derived through knowledge sharing between group members as well as group dynamics. Organizational level creativity: Woodman, Sawyer and Griffin (1993) suggested that organizational level creativity is a derivative of group level creativity and individual level creativity. Organizational leaders resort to “individual creative behavior inputs” and “group level creative behavior inputs” in order to frame appropriate strategy so that the organization can come up with an innovative solution for the existing problem. However, Gumusluoglu and Ilsev (2009) were unable to find any sharp demarcation between organizational level creativity and the other two types of creativity. According to these scholars, organizational level creativity is an internal concept, which should not be considered as external strategic choice. Gumusluoglu and Ilsev (2009) and Hu, Gu and Chen (2013) have used the concept of “strategic learning” to understand the dynamics of organizational level creativity. In the latter part of the study, concept of “organizational learning” will be applied for realizing ways in which the leaders can influence organizational level creativity and organizational innovation. Presently, the question is whether “organizational creativity” and “organizational innovation” is the same thing or they have ‘regressor-regressand’ relationship. Gumusluoglu and Ilsev (2009, p. 464) have defined organizational innovation as “the tendency of the organization to develop new or improved products/services and its success in bringing those products/services to the market”. Based on the above definition, it can be said that organizational innovation is conceptualized as the intention or mere tendency of organizations to move ahead of competitors by way of offering new products/services to customers. Woodman, Sawyer and Griffin (1993) factorized organizational creativity as a subset of the broader domain of innovation, while organizational innovation is a subset of the wider concept of strategic change management. Then again, Oke, Munshi and Walumbwa (2009) had slammed the concept that “creative ideas should be nourished by organizational leaders for sake of art”. Rather, Oke, Munshi and Walumbwa (2009) pointed out that without full implementation or commercialization, creative idea has no value in the organizational context. Oke, Munshi and Walumbwa (2009) suggested that a creative idea can be transformed into innovation through full implementation or commercialization. Based on such arguments, Hu, Gu and Chen (2013, p. 150) defined organizational innovation as “the whole process through which an organization integrates external and internal resources, conceives, proposes, screens, adopts, and finally implements ideas, products, services, procedures, and processes that are novel and useful to the organization”. The study has found two distinct demarcation points between organizational creativity and organizational innovation. Demarcation Point 1: Organizational creativity focuses on streamlining the process for generating new ideas regarding the value proposition of products or services. On the other hand, organizational innovation concentrates upon adopting, proposing, screening, implementing or commercializing the new ideas regarding value proposition of the products or services. Demarcation Point 2: Organizational creativity involves intangible as well as tacit knowledge resource capability to instigate the creation of new things. On the contrary, organizational innovation focuses on ways to integrate the gained resource capability into the process map so as to develop new products/services. Using the Bayesian probability assumptions, organizational creativity and organizational innovation can be interlinked. For example, organizational creativity works as a driving force as well as strategic resources for ensuring full implementation and success of organizational innovation. Hu, Gu and Chen (2013) examined the product innovation dimensions of different organizations and had realized that degree of resistance towards state-of-art innovation is low for the organizations with high creative quotient. Organizational Creativity and Innovation: Leadership Perspective While doing research on a similar kind of topic, Hu, Gu and Chen (2013) examined the relationship between organizational creativity and innovation in regards to the leadership style. Wang and Rode (2010) also put their effort in determining the precise leadership style that instigates organizational creativity and fillip innovation. Wang and Rode (2010) and Hu, Gu and Chen (2013) had identified two leadership styles as relevant in the context of organizational innovation and creativity. These two leadership styles are Transformational Leadership and Transactional Leadership. However, in statistical analysis of the predictors of learning organizations, Lang (2013) indicated that Transformational Leadership has significant amount of impact on all seven dimensions of the learning organization such as: 1- continuous learning, 2- inquiry and dialogue by the organizational members, 3- developing a collaborative team environment, 4- integrating the systems to share as well as capture learning, 5- empowering people to take decisions, 6- developing a transparent communication channel between organizational members and 7- developing future leadership for learning. Although Lang (2013) has emphasized more upon the transactional leadership as a key driver for continuous organizational learning, the scholar had failed to explain how transactional leadership can help organizations to maximize its creative potential for achieving innovation. In case of transactional leadership, the organizational leaders promote compliance of subordinates through punishments and rewards. In most cases, transactional leadership focuses on the group supervision or organization performance, but fails to engage with employees. Hu, Gu and Chen (2013) also realized that transformational leadership is more competent that the transactional leadership in explaining ways adopted by the leaders to help organizations maximize its creative potential for achieving innovation through mediators such as, organizational learning. Hu, Gu and Chen (2013) linked transformational leadership with organizational creativity and innovation through organizational learning. Therefore, the study will critically evaluate the role of transformational leadership in instigating organizational innovation and creativity. Prior to that, the concept of ‘learning organization’ needs to be rationalized. Senge (1990) was the first scholar who had formally proposed the concept of ‘learning organization’. Obviously, the common belief is that an organization is not a living thing; hence, it cannot learn anything by itself. Senge (1990) had also acknowledged the fact that the ‘strategic learning’ of an organization can be done through its members. While defining the concept, Senge (1990) suggested that the learning organizations are those who acquire knowledge from the external as well as internal environments. These organizations use such knowledge to not only survive in the competitive business environment, but also to gain innovative and competitive advantage. Organizational learning can be facilitated through various knowledge channels such as: 1- benchmarking the industry’s best practices and making them norm of the business, 2- use customer feedback and criticisms to generate urgency of change among the organizational members, 3- learn from failures as well as success of the competitors and 4- use feedback of employees and their knowledge inputs as the tacit resources (Senge, 1990). The learning organizations exhibit four distinct characteristics that distinguish them from the other organizations. Characteristics 1: Learning organizations develop a culture of trust and informal knowledge sharing by removing the communication barriers among employees. This type of organizations continuously support and encourage the employees to boost their creative ideas, thereby presenting an unconventional idea to foster creativity. For example, LEGO (a Denmark based toy manufacturer) had used the concept of organizational learning to support and encourage the employees for devising new product concepts. The organizational leaders in LEGO had considered the creative suggestions of employees so as to manufacture toys with appealing as well as unique value proposition for the customers (The LEGO Group, 2014). Characteristics 2: Learning organizations allow the employees to experiment with innovative ideas and commit mistakes. Contributions of the employees are valued. For example, Neilson and Pasternack (2005) had given example of innovation initiatives in Caterpillar Inc (the world’s largest mining equipment manufacturer), where the organizational leaders allowed repeated mistakes of employees in marketing activities. After a series of marketing failures, the employees in Caterpillar Inc were successful in creating an effective marketing strategy. Characteristics 3: Learning organizations continuously experiment with the new ideas and business models in order to develop ever increasing set of strategic choices. These organizations also learn from their past mistakes and rectify the previous errors so as to achieve sustainable innovation. For example, IBM (a multinational consulting and technology corporation) constantly increases its research and development bases and recruits engineers or scientists to ensure the continuous flow of innovation (IBM, 2014). Characteristics 4: In case of a learning organization, the organizational leaders disseminate the new knowledge across different functional blocks and employees. These organizational leaders encourage employees to incorporate disseminated knowledge in the day-to-day activities. For example, Lang (2013) presented an example of Canadia Bank Plc, where the frontline managers have created a knowledge forum to disseminate the new knowledge regarding banking practices or technology up-gradation or change in customer purchasing behavior to the employees. According to Senge’s (1990) conceptualization of learning organization, the modes of “distributed leadership” should be used by managers to empower the employees for contributing in knowledge sharing and innovation within the organization. Smith (2008) rightly pointed out that the concept of learning organization not only supports the transformational leadership model, but also acknowledges importance of the contingency leadership approach. Wang and Rode (2010) found that the learning organizations can easily foster a sense of creativity and innovation among their employees. However, the most difficult challenge for leaders is to create a scope for organizational learning. In such a context, Smith (2008), Wang and Rode (2010) and Hu, Gu and Chen (2013) recognized transformational leadership as the most suitable medium for boosting organizational learning. Bass (1999, p. 11) defined Transformational leadership as; “Transformational leadership refers to the leader moving the follower beyond immediate self-interests [. . .] elevates the follower’s level of maturity and ideals as well as concerns for achievement, self-actualization, and well-being of others, the organization, and society.” It is evident from the above definition that transformational leadership is characterized with four dimensions such as: 1- idealized influence or charisma of the leaders, 2- creating inspirational motivation on employees by the leaders, 3- intellectual stimulation among employees through knowledge sharing by the transformational leaders and 4- individualized consideration of the employees by these leaders. Inspirational motivation and idealized influence are displayed by the transformational leaders when they help employees to envision an enviable future and articulate the process map through which the future can be forecasted. For example, during the strategic change management process of Procter & Gamble during the 1990s, A.G. Lafley (the Chief Executive Officer) was performing the role of a transformational leader. A.G. Lafley employed own life examples and winning moments to instill determination and confidence among change agents (Hu, Gu and Chen, 2013). Intellectual stimulation and individualized consideration are performed when the transformational leaders pay attention to knowledge sharing with the followers, consider developmental needs of the followers, provide mentoring support to these followers, delegate career growth driven assignments to them as well as encourage the employees to formulate creative solution to the problems. According to Hu, Gu and Chen (2013), transformational leadership can symmetrically or asymmetrically influence organizational innovation and creativity in a singleton manner such as, working as an antecedent. Antecedent aspect: Hu, Gu and Chen (2013) stated that the transformational leaders are charismatic in nature, which attracts followers to respect as well as admire them. On the other hand, transformational leaders encourage the subordinates to devise new ideas and take greater responsibilities. Such guidance enables followers to enhance their ability to develop visualization and creative potentials. Transformational leaders empower the employees to question outdated operating rules and develop bonding with followers through intellectual stimulation. Gong, Huang and Farh (2009) found that transformational leaders show empathy, consideration and guiding support towards the followers, which increases confidence level of the latter to challenge status quo or overcome fear of failure while experimenting with new aspects. Jung and Sosik (2002) advocated that transformational leaders provide autonomy to its followers for taking initiative, making contingent decisions without seeking permission, participating in organizational activities and transforming into a self-starter. Mumford (2002) found that transformational leadership shares positive relationship with creativity and innovation in the organizational context. High-levels of motivation, self-worth and self-esteem have been created among the employees through integration of transformational leadership. Such positive feelings among the employees in reality drive creativity and innovation. On the contrary, Eisenbeiss and Boerner (2010) pointed out that excessive intellectual intervention of the transformational leaders may hamper the autonomy of research and development department. In such cases, transformational leadership has U-shaped relationship with the creativity dimensions of the research and development (R&D) department of a company. Apart from the counter argument of Eisenbeiss and Boerner (2010), most of the other researchers have agreed with the fact that transformational leadership facilitates creativity and innovation. In the context of learning organization, transformational leadership has been also termed as the creative leadership style, which guides innovation through a strategic change management process (Hu, Gu and Chen, 2013). Hirst, Van Dick and Van Knippenberg (2009) realized that transformational leadership can also trigger inspirational motivation among the employees. Creative Leadership of Strategic Change In their seminal research works, Jung and Sosik (2002) and Hu, Gu and Chen (2013) used the term “creative leadership” as a sub-component of transformational leadership. In case of creative leadership, the organizational leaders exhibit inventive as well as imaginative qualities to find unique solutions to the existing business problems. Creative leaders are considered as those who are passionate about their idea and are able to come up with creative yet realistic solutions to the problems. These types of leaders are driven by intuitions and notion. Even so, Jung and Sosik (2002) pointed out that a creative leader might possess individualistic creative behavior, but without leadership capability, he will fail to motivate other employees to perceive in innovative ways. Hence, it can be said that individuals must mix transformational leadership style with the creative leadership style so as to motivate employees for participating in a strategic change management process driven by creativity and innovation. Kotter (1995) defined change management as a structured approach whereby processes, teams, individuals and organizations are transformed from their current state into the desired future state. The strategic change management process is guided by vision and objectives. According to Kotter (1995), strategic change management can be conceptualized as an organizational process through which the organizational leaders can pacify resistance of the employees regarding the change process. An organizational change process can be of different types such as, technical, operational or strategic. In case of a strategic change process, organizational leaders transform the organization for achieving desired competitive advantages. Consideration of the research work of Ramanujam (2003) reveals the fact that an appropriate organizational culture for creativity and innovation can only be developed through a strategic change process. In such a context, Kotter’s (1995) 8 steps of strategic change process can be used by the creative leaders to incorporate the same. Step 1: Urgency of change (generating sense of creativity and developing innovative products in accordance with the needs of a changing business environment) is realized only when organizations face problems or envision a business opportunity. Hence, creative organizational leaders need to establish a sense of urgency among employees regarding the change process. For example, the creative leaders can use poor financial performance or losing market share of the company or fall in customer demand (probably caused due to lack of product innovation and non-availability of customized solution) as an instigator to generate sense of urgency among the organizational members (Kotter, 1995). Step 2: Creative leaders need to ensure guided coalition among the employees who share the passion for creating new products or innovative solution. This group will work as a team of creative change agents. Step 3: Creative leaders must use their transformational leadership quotients to create a vision statement for the team members. On the other hand, transformational leaders need to employ their creative quotient for framing a unique strategy to achieve the vision (Kotter, 1995). Step 4: At this stage, the creative leaders need to communicate the vision and desired level of innovation to the organizational members. Step 5: Creative leaders require undertaking effective actions by dissolving rigidity in the organizational structure or arranging training programs for the employees. Creative leaders also need to manage change resistance exhibited by the employees in this phase (Kotter, 1995). Step 6: In order to maintain motivation of the employees during a prolonged change process, the creative leaders must set short-term targets and celebrate ‘Short-term Wins’ upon target achievement with the employees. Step 7: In order to address the magnitude of change resistance, the creative leaders need to increase the number of change agents in the project and uphold their motivation levels (Kotter, 1995). Step 8: After implementation of the change process, the creative leaders should institutionalize creative practices and help the employees adapt to the creative workplace environment. Qatar National Cement Company: Creative Leadership of Strategic Change It is evident from the above discussion that leadership of creativity, strategic change or innovation does not need a completely unique set of leadership characteristics. Rather, a mix of transformational and creative leadership style can enable the organizational leaders to direct creativity, strategic change or innovation within a company. In such a context, Qatar National Cement Company has been selected as a sample organization for this study. In order to develop the functional background for further discussion, the business matrices of Qatar National Cement Company must be discussed. Qatar National Cement Company (QNCC) was established in 1965 and the company follows the guideline of Emiri Decree No.07. 43% of the company is owned by the Qatar government and government-related divisions, while the remaining 57% is under the control of private parties (Qatar National Cement Company, 2014a). Qatar National Cement Company specializes in producing Ordinary Portland Cement, Hydrated Lime, Sulfate Resistant Cement, Washed Sand and Calcined lime (Qatar National Cement Company, 2014a). Qatar National Cement Company is traded as QNCD and is listed in Qatar Exchange. QNCC is the largest producer and seller of Ordinary Portland Cement in Qatar. Organizational growth will set in from the middle of 2015, when a new production line is expected to increase the company’s overall capacity. For the interim period between 2012 and mid-2015, we expect a flat top-line and bottom-line growth for the company, as QNCC is already producing close to its full capacity. It is projected that during the financial years of 2014 to 2017, Qatar National Cement Company will earn a compound annual growth rate (CAGR) of 12.6% (Qatar National Cement Company, 2014). As of 2013, the company has earned revenue of QR 1004.08 and net profit of QR 436.059. While diagnosing the leadership positions within Qatar National Cement Company, the study has found that the company follows a rigid and bureaucratic structure. Chairman and Managing Director are positioned on top of the organizational hierarchy (Qatar National Cement Company, 2014a). Chairman and Managing Director of Ordinary Portland Cement producer direct actions of the member group employees. General Manager of the Qatar National Cement Company reports to the member group employees. Due to presence of a rigid and bureaucratic structure, the organization operates with disconnected divisions. It has been found that Qatar National Cement Company functions more in the manner of a public enterprise, as opposed to a profit driven private organization. The organizational leaders of Qatar National Cement Company are more concerned about managing the administrative operations rather than focusing on utilizing strategic resources to achieve sustainable competitive advantage. In case of creativity and innovation, the Ordinary Portland Cement producer still depends on foreign outsourced technology and reverse innovation theme. For example, the company had designed Plant No. 4 (maximum capacity of 5000 TPD clinker) with a consulting engineering support from Belgium and France. In the last ten years, Qatar National Cement Company has brought about certain technological innovations such as, Sand Washing Plant with double capacity compared to that of normal plants, automated Hydrated Lime Plant or modern Van Arkel separation of Hafnium (Hf) and Zirconium (Zr). Another similar example is that of employing state-of-art technology in order to separate zirconium silicate (ZrO2.SiO2) and baddeleyite (ZrO2) from sands (Qatar National Cement Company, 2014b). Even so, none of these technological innovations was achieved through development of a culture supporting creativity or any creative leadership initiatives by the management team. In most cases, the organizational leaders in Qatar National Cement Company have outsourced the entire innovation projects or sought rigorous help from consulting engineers belonging to European countries. Due to such over-dependency on technological outsourcing and innovation capability of foreign consultants, creative potential of the employees in Qatar National Cement Company has developed inadequately. Organizational leaders of the company focus more on administrative aspects of running the organization such as, monitoring attendance of the staff, signing contracts with the foreign clients and providing the financial resource to buy state-of-art technology (Qatar National Cement Company, 2014b). Due to lack of creative exposure for the organizational leaders, they fail to motivate the company’s employees to engage in the strategic change process, thereby failing to drive innovation (Luthans, 2002). While comparing leadership related to creativity, innovation and strategic change of Qatar National Cement Company with benchmark examples such as, strategic change management in Caterpillar Inc (a global manufacturing giant for earth moving and large equipment), the study has been able to present stark contradictions. Table 1: Creative Leadership for Strategic Change Management Qatar National Cement Company Benchmark Examples (Caterpillar Inc) Leadership of Creativity Bureaucratic leadership style is used by the leaders. Leaders only perform the administrative duties and depend heavily on foreign expertise to generate unique solution for the existing problem. Due to excessive hierarchy levels and bureaucratic management style, there is hardly any scope of knowledge sharing between the employees. Presence of communication barriers lowers scope for the employees so as to communicate any creative ideas to the senior managers. Strategic Planning Committee (SPC) was created by the organization to dissolve the bureaucratic structure. George Schaefer (CEO) had engineering expertise and asked each department to frame creative solution for the problem (falling demand for the products of Caterpillar Inc among customers). In order to enhance organizational learning and knowledge sharing, the leaders of SPC established knowledge community, employee portal, seminars, benchmarking industry best practices and others. Leadership of Innovation Organizational leaders greatly rely upon managers and foreign consultants to come up with ideas of innovation. These bureaucratic leaders only administrate the innovation process, without interfering into it. George Schaefer (CEO) has performed the role of a transformational leader by empowering Strategic Planning Committee (SPC) members to develop innovative product concepts. The organizational leaders also presented their ideas related to product innovation to the SPC. Transformational leaders extensively engage with the innovation projects and motivate other organizational members to do the same. Leadership of Strategic Change Organizational leaders do not entertain any need of strategic change management process properly. During adaptation of the latest technology, organizational leaders entirely depend on external project consultants from Europe. Due to the lack of connection between the members and organizational leaders, misconception as well resistance of employees regarding the change process is aggravated. George Schaefer (CEO) used the previously mentioned Kotter’s (1995) 8 step model of strategic change management. In order to lower resistance to the change process, SPC members worked as the change agents. Organizational leaders regularly communicated the vision of the change process to members and also guided the change agents. (Source: Qatar National Cement Company, 2014a; Neilson and Pasternack, 2005) Recommendation and Conclusion It is evident from the above discussion that Qatar National Cement Company seriously lacks the leadership creativity quotients. Due to absence of the creative leaders or transformational leaders with creative potentials, Qatar National Cement Company is becoming vulnerable to the macro-environmental uncertainty, obsolesce of the existing technology, emergence of the latest technology and change in customer preferences. As a result, the following recommendations are derived so as to improve implementation of the change in Qatar National Cement Company. Recommendation 1: Organizational leaders need to increase their knowledge level, educational level, skill competency and technical expertise to properly analyze the situation. These leaders should dissolve the bureaucratic organizational structure and eradicate communication gap with the employees. Lattice organizational structure should be adopted to connect cross-functional departments and facilitate cross-departmental knowledge sharing. Recommendation 2: Organizational leaders must apply Kotter’s (1995) 8 step model for identifying the change agents who have creative potentials. These members require being encouraged to discuss the innovative ideas and new product concepts. An internal team of engineers should be asked to formulate new product concepts. The organizational leaders should involve the human resource management division to develop training and development plans for enhancing the employees’ welfare and abilities. The strategic change process in Qatar National Cement Company should be managed through close integration of the organizational leaders, the human resource department and the strategic planning committee. Recommendation 3: After implementation of the change process, organizational leaders need to regularly monitor performance of the new system. 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