Designing research organizations for science innovation

Designing research organizations for science innovation

441 Designing Research Organizations for Science Innovation Barbara Simpson and Michael Powell Introduction Organizational innovation has been a per...

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441

Designing Research Organizations for Science Innovation Barbara Simpson and Michael Powell

Introduction Organizational innovation has been a persistent theme amongst scholars, researchers, consultants and practising managers for several decades. Rapid development of information and transport technologies has led to an environment of shortening product cycles and growing complexity. The natural corollary to these developments has been a mounting awareness of the need for continuous sustainable innovation. This pressure is felt acutely in science research organizations, whose very raison d'eÃtre is creative innovation, or the generation of new knowledge.1 It is these science research organizations, and in particular issues relating to the effectiveness of their organizational designs, that are the focus of this article. The stimulus for this study was the radical restructuring of the New Zealand government's research laboratories in 1992. Motivated by the market ideology of the New Right, the government set about transforming its traditional science provider departments into more commercially focused entities called Crown Research Institutes (CRIs). This transformation process presented us with a unique opportunity to observe a natural experiment in externally-driven organizational redesign. In particular, it has allowed us to explore the appropriateness of different organizational designs for the provision of science research in an environment that is subject to new and increasing forces of competition. The analytical approach that we have adopted follows the work of Hinings and Greenwood2 who invoke the concept of organizational archetypes as interpretive schemes that provide insights into the process of change. In their view, an archetype is a synthesis of systems and structures that re¯ects Pergamon www.elsevier.com/locate/lrp

PII: S0024-6301(99)00055-2

In these times of rapid environmental and organizational change, there is increasing demand for sustainable, continuous innovation. Science research organizations, which operate at the cutting edge of creative innovation, require organizational designs capable of supporting this growing trend. This article identifies four distinct design archetypes, which are then integrated into a comprehensive typology for the analysis of science organizations. Case studies of a set of eight comparable research institutes in New Zealand highlight the various design options available to science organizations as well as the performance implications of these options. # 1999 Elsevier Science Ltd. All rights reserved

underlying values and, as such, provides a force for coherence in an organization. Change between archetypes involves a shift in the fundamental beliefs and values that are held within an organization. Hinings and Greenwood suggest that there are multiple tracks available to organizations undergoing inter-archetypal change. Firstly, the `reorientation' track involves a transformation in which the structures and values of one archetype are completely displaced by those of another. At the opposite extreme, the second option is the `inertia' track, where the existing structures and organizational processes are entirely consistent with the values of the organization, and any change is designed to retain this internal coherence. Finally, on the `excursion' Long Range Planning, Vol. 32, No. 4, pp. 441 to 451, 1999 # 1999 Elsevier Science Ltd. All rights reserved Printed in Great Britain 0024-6301/99 $ - see front matter

442 track, the values and structural elements of two or more archetypes coexist. Hinings and Greenwood see this track as a dynamic state that must ultimately be resolved in favour of one or other of the archetypal forms. Building on these ideas, we have drawn on existing literature to identify four familiar, yet distinct, organizational approaches to science innovation, each of which we then develop as a coherent design archetype. These archetypes are integrated into a comprehensive typology that provides the basis for our analysis of the strategic design choices made by New Zealand's CRIs in their quest for greater effectiveness in a new, market-driven environment. We also explore the performance implications of these choices over the ®rst ®ve years of the CRIs' existence.

Four Design Archetypes In this section of the article, we introduce and develop each of the four organizational archetypes, `Solitary Genius', `Technology Push', `Market Pull' and `Multiple Project'. They are presented in a sequence that parallels the evolution of organizational thinking over the past century. It is important to note, however, that the older forms have not been superseded, and in fact examples of all four archetypes are readily identi®able in contemporary science research organizations.

Solitary Genius

Perhaps the most abiding and popular image of science is that of a slightly unworldly individual, usually male, who devotes long hours working in almost total isolation ``spinning inventions out of his intellectual and psychic innards''.3 Inspiration and insight come in sudden and unexpected ways, and the new knowledge generated in this process cannot be foretold. Parallels between this model and the traditional view of the entrepreneur are compelling. It is the challenge and excitement of discovery more than the eventual outcome that motivates the scientist. The progressive development of specialist expertise is the ultimate reward for the intense dedication demanded by this process of discovery. Although the scientist may work with a team, the primary role of team members is to provide support to their eminent leader rather than to actively collaborate in the process of discovery. The desire to work autonomously is a de®nitional characteristic of scientists,4 and independence of thought is strongly sanctioned by the profession. The Nobel Institute reinforces this model of science by rewarding the singular achievements of individuals who have pursued this committed path towards new knowledge. Thus the `Solitary Genius' archetype is built Designing Research Organizations

around the autonomous activities of individuals who strive for personal reputations based on their ideas and inventions. The role of management is to provide for the needs of the individual, but otherwise to stand back and allow the creative process to unfold at its own pace. There is a sense that the scientist is an artisan pursuing a personal path that has a spiritual or mystical quality to it. Although this may seem a rather outmoded organizational form, it is still very much alive within the traditional university environment as well as many national and private research laboratories. However, the rapid growth and increasing complexity of science and technology has demanded an alternative approach to science innovation, an approach that promotes the collaborative development of ideas and the shared use of specialist facilities.

Technology Push

The term `Technology Push' is commonly used to describe the process of science innovation in which inventions emerging from basic science research eventually lead to a ¯ow of new products and processes into the marketplace.5 This model is familiar, for instance, in arguments supporting space research, where it is assumed that downstream consumer bene®ts will eventually ¯ow, although there is no way of predicting what these will be at the time the research is undertaken. The associated organizational archetype is characterized by objectives and motivations similar to those of the `Solitary Genius'. In particular, there is a strong emphasis on the progressive re®nement of specialist expertise. Building reputation within the science community is paramount, so performance is measured in terms of reputation-building achievements such as publications and patents. Where the two archetypes differ, however, is that `Technology Push' organizations rely upon collegial interactions to cultivate expertise. Thus, for instance, new recruits to a `Technology Push' organization can reasonably expect that the ongoing development of their expertise will be fostered through their associations with more experienced colleagues. From an organizational perspective, the development of expertise is promoted by functional departmentalization. For a `Technology Push' organization this is re¯ected in the formation of discipline-based groups of researchers.6 Thus, scientists from a particular discipline account for their time and results to a more senior scientist, or science manager, who holds decision-making authority. This formal structure, which groups people of similar disciplinary interests and training, reinforces the informal structure that arises from the socialization that scientists experience during their training at university, where this same division of interests is commonly the structure of choice.

443 As with the `Solitary Genius' archetype, the nature and timing of results from research efforts are unpredictable and uncontrollable. Consequently, management tends to focus on the acquisition and maintenance of inputs, both human and capital, required to generate new knowledge. Management style needs to be ¯exible in order to accommodate serendipitous ®ndings and chance events, but the critical factor required to make this organic style of organization operative is a high level of individual commitment to supporting the interests of the working community. There can be little doubt that many pivotal advances in science and technology have been generated by `Technology Push' organizations. However, this separation from the business world is a luxury that the modern corporation cannot afford.7 Since the early 1960s, a chorus of critics has deplored the poor market responsiveness of the `Technology Push' organization.8,23 Teece laments the dif®culties faced by many inventors whose competitors and imitators are more likely to pro®t from an innovative idea than the inventors themselves. He suggests that `Technology Push' organizations must protect themselves against this loss of bene®t by developing alliances with manufacturers and market players.9

Market Pull

The equally familiar `Market Pull' model for innovation stands as an antithesis to `Technology Push'. It explicitly recognizes the market, rather than scienti®c expertise, as the sole arbiter of innovation requirements.5 To be effective, an organization conforming to the `Market Pull' archetype forms deliberate strategies based on a rational analysis of market signals. Consequently it is the entrepreneurial and marketing personnel, rather than the science professionals, who take key roles in shaping innovation within the organization. The `Market Pull' organization is designed to maximize the ef®ciency with which it can respond to diverse markets. Typically, human and capital resources are grouped together on the basis of the outputs they produce,6 as opposed to the input orientation of the `Technology Push' archetype. This grouping also facilitates the rapid assimilation of market feedback on products. The membership of a product group tends to be stable over time and will include non-science professionals who have special skills in, for instance, ®nance or marketing. The objective in mixing different skills together in cross-functional teams is to broaden the group's expertise. Clearly this represents a radical departure from traditional models for organizing science in that the formal productbased structure cuts across the informal disciplinebased groupings of colleagues. This deliberate

breaching of traditional boundaries has the potential to open up new lines of communication and to generate new insights and associations. The `Market Pull' model places considerable emphasis on the need to evaluate the market and to measure the production of outputs. Whittington associates this style of organization with classical management practices and a mechanistic model of organization.10 The pertinent features include topdown management, a focus on ef®ciency, short-term planning, and pro®t maximization as the ultimate objective. Furthermore, internal competition is encouraged as a means of maximizing productivity. A serious criticism of this model in terms of its innovation potential is that the mechanistic style of organization inhibits creativity. Furthermore, Hamel and Prahalad point out that in focussing on the conscious needs of a current customer group, market analysis is neglecting their unconscious needs as well as the needs of unidenti®ed customers.11 In its pure form, then, the `Market Pull' model is somewhat restricted in its ability to generate sustainable innovation.

Multiple Project

The `Technology Push' and `Market Pull' archetypes are both based on the premise that innovation is a linear process. The fundamental difference between the two models is that one focuses on the creative, inventive aspects of innovation while the other attends to the ef®ciency with which market needs are met. Rothwell and Zegveld propose that both models ``have increasingly been regarded as extreme and untypical examples of a more general process of coupling between science, technology and the marketplace''.12 Similarly, Schoonhoven and Jelinek assert that neither `organic' nor `mechanistic' styles of organization (which we have associated respectively with `Technology Push' and `Market Pull' innovation processes) will work for innovating organizations.13 Various compromise designs have been reported which claim to combine the bene®ts of `Technology Push' and `Market Pull'. The majority of these revolve around splitting responsibility for the initiation and production of innovations into separate departments,14 which are then structured and managed appropriately for their assigned tasks. The dif®culty with these compromise designs is that, by separating the initiation and implementation phases of innovation, they promote the development of distinct cultures which, in turn, may create barriers to the development of vital linkages within the organization.15 In an attempt to overcome these communication dif®culties, matrix designs combine discipline-based and product-based management systems. However, in practice, either one or other of Long Range Planning Vol. 32

August 1999

444 TABLE 1. Comparison of science organization archetypes on key dimensions Solitary Genius Technology Push

Market Pull

Multiple Project

Unit of organization

Individual

Discipline

Product

Project

Management focus

Support

Inputs

Outputs

Relationships

Leadership

Inventors

Science managers Marketing and `Inventrapreneurs' finance managers

Control and coordination

Autonomous

Organic

Mechanistic

Network

Performance measures

Reputation

Excellence demonstrated by refereed publications

Productivity demonstrated on the bottom line

Excellence and market relevance demonstrated by customer satisfaction and return business

the discipline or production lines of management tends to dominate.6 A more fruitful alternative design is represented by what we have labelled the `Multiple Project' archetype. Sveiby alludes to this form of organization in his description of knowledge-based companies.16 Similarly, DeFillippi and Arthur's case study of the independent ®lm-making industry exhibits many of the characteristics of this archetype.17 However, the archetype name, `Multiple Project', has been chosen to differentiate between a permanent organization designed to accommodate an ongoing and ever-changing collection of projects, from the single-project, temporary organization re¯ected in the ®lm-making example. This archetype is able to balance the needs of specialization and the needs of the market, and is both creative and ef®cient. In many ways this form de®es conventional strategic management wisdom. So, for instance, in terms of the classical parameters of organizational design, the `Multiple Project' archetype is more readily de®ned by what it is not. Indeed, perhaps the most apparent characteristic of this organizational form is its constantly changing structure. The basic unit of operation within this archetype is the project team, comprising a group of specialists each of whom brings unique skills to bear upon the solution of a particular, well-de®ned problem or issue. In addition, the team structure allows for onthe-job learning so that less experienced members have the opportunity to develop specialist skills by working alongside experts. Once the problem has been solved or particular skills are no longer required, team membership changes. Thus the internal boundaries within the `Multiple Project' form are ¯uid and ephemeral. We describe the individual organizational citizen as an `inventrapreneur', a person who combines specialist expertise with a breadth of experience arising from frequent interactions with customers as Designing Research Organizations

well as market specialists and experts from other ®elds. A high degree of integration and cross-communication is critical to hold such a highly mobile form of organization together.18 Typically this coherence is provided by developing shared values and a strategic vision which makes the purpose and direction of the business explicit. This demands effective relationship and communication skills.

An Integrated Framework of Archetypes

Our discussion so far has elaborated on the four design archetypes that dominate the literature on new knowledge creation in organizations. Table 1 provides a summarized comparison of these archetypes on several key dimensions. The four models are appropriately described as archetypes because each represents a distinct and coherent organizational form, which in turn re¯ects an underlying system of values and beliefs. The critical distinctions between the archetypes relate to the types of communication linkages that are emphasized in their respective designs. It is these connections that provide the fertile ground where innovative ideas are seeded. Speci®cally, collegial connections are the relationships between scientists within the same, or related, disciplines, while market connections refer to relationships between experts and the users of expertise. Either type of relationship may exist within organizations (for instance, market connections creating an internal market) or across organizational boundaries (such as collegial connections that span the global science community). Together the four archetypes constitute a typology for science organizations. Figure 1 demonstrates the integration of the archetypes into a framework using collegial connections and market connections as the de®ning dimensions. The `Technology Push' form is designed to develop expertise and excellence through collegial connections that bring disciplinary peers together, whereas the `Market Pull' design

445 High Technology Push

Multiple Project

Solitary Genius

Market Pull

Collegial Connections Low Low

High

Market Connections

FIGURE 1. An integrated framework of design archetypes for science organizations emphasizes market connections through inter-disciplinary interactions that broaden the experience of organizational members and enhance market responsiveness. The `Solitary Genius' stands in stark contrast to both of these models because, in its emphasis on autonomy, it discounts connections of any sort. All extraneous distractions are eliminated so that the inventor may turn his or her attention inwards. Finally, the `Multiple Project' employs a complex web of collegial and market connections to develop effective communications both internally amongst project members and also externally with strategic partners and end-users. We will now illustrate the application of this integrated framework in an analysis of the structures and processes adopted by New Zealand's CRIs. But ®rst, we will describe the radical environmental change to which the newly formed CRIs were required to respond.

A Changing Environment For Science During the 1980s and early 1990s the New Zealand public sector underwent extensive and radical transformation.19 The objectives of reform were to stimulate the ¯agging economy, in part by improving ef®ciency, accountability and transparency in public sector management. The corporate governance model, borrowed from private sector business, was embodied in legislation to create ten CRIs which were incorporated as state-owned companies in July 1992.20 They were created by restructuring and reallocating the human and capital resources that already existed in two major and several minor government research departments. Prior to the reforms, these government departments had been bulkfunded by annual appropriations, and few checks or controls were in place to evaluate the returns that

the government was gaining through its investment in science. Science research departments were structured on the basis of disciplinary groupings of professional scientists and their attendant support staff, and government regulations severely restricted opportunities for these departments to develop commercial relationships with external agencies. The design features of these departments could best be described as a combination of the `Technology Push' and `Solitary Genius' archetypes. The new CRIs are required to undertake science research for the bene®t of New Zealand. Each institute is designed to address all the research needs of a speci®c economic sector, ranging from fundamental inquiry through to applied science and the provision of consulting and scienti®c services. Consequently, competition between CRIs exists only at the margins of their activities, where their target sectors overlap, although there is some competitive threat from universities and private research organizations. Government funding is allocated by means of the Public Good Science Fund (PGSF), a strategically focused, contestable pool for which CRIs and other science providers (such as universities and private laboratories) may bid. The effect of the PGSF is to create a quasi-market for science outputs. In addition, the institutes derive supplementary revenues from other market sources both within New Zealand and internationally. In pursuing these science sector reforms, the government has clearly signalled that its science providers are to become much more responsive to the market. This in turn has challenged the traditional values of the science community, and invited a reorientation away from the previously dominant `Technology Push' archetype. Of the original ten CRIs, one was disestablished in 1994, and one other declined to participate in this study. The remaining eight institutes are: . New Zealand Pastoral Agriculture Research Institute Ltd. (AGR) . New Zealand Institute for Crop and Food Research Ltd. (C&F) . Institute of Environmental Science and Research Ltd. (ESR) . New Zealand Forest Research Institute Ltd. (FRI) . Institute of Geological and Nuclear Sciences Ltd. (GNS) . The New Zealand Institute for Industrial Research and Development Ltd. (IRL) . Manaaki Whenua Landcare Research New Zealand Ltd. (LAND) . National Institute of Water and Atmospheric Research Ltd. (NIWA) Table 2 summarizes the relative positions of each of these CRIs at the time of their establishment. Variations in organizational size are re¯ected in the Long Range Planning Vol. 32

August 1999

446 TABLE 2. Establishment positions of eight Crown Research Institutes AGR Shareholders' funds (NZ$) Staff numbers Originating organizations Public funding outlook

C&F

47.0 m

10.0 m

ESR

FRI 8.5 m

GNS 15.7 m

IRL

6.2 m

LAND

16.2 m

8.0 m

NIWA 9.8 m

1109

310

299

293

252

412

328

329

2

2

3

1

1

1

3

4

ÿ 13%

+ 3%

+ 10%

+ 15%

ÿ 6%

+ 9%

ÿ 4%

ÿ 2%

establishment valuations, represented by shareholder's funds, and also in staff numbers. These range from 252 staff and a valuation of NZ$6.2 million for GNS, to 1109 staff and NZ$47 million of shareholder's funds for AGR. Restructuring involved the disestablishment of the predecessor government departments, followed by the reorganization of their component parts into output-oriented CRIs. Thus many of the new institutes brought together a mixture of cultures from several contributing departments. The number of originating organizations recorded in Table 2 demonstrates the potential for cultural heterogeneity in each of the new institutes. The public funding outlook is based on a calculated projection of each CRI's revenue expectations from the Public Good Science Fund (PGSF). The fund is divided into a number of output areas in which the government has agreed to purchase science. As part of its purchasing strategy, the government has also indicated progressive changes in the levels of funding for each of these output areas.21 The outlook ®gures in Table 2 are based on the assumption that each CRI retains the same balance of output areas in its portfolio of funded bids from PGSF, but that the total funds available in each area change according to the government's broadcast strategy. For most of the CRIs, PGSF makes up 60 per cent or more of their total revenues. Thus the public funding outlook is an indicator of the revenue opportunities and threats faced by each CRI. The only exception to this is ESR, which derives less than 5 per cent of its total revenues from PGSF. Its primary clients are government departments that contract directly for scienti®c services (as opposed to research) in the forensic and public health sectors. The objective of our study was to map the organizational design responses adopted by the CRIs in our sample, and to identify inter-archetypal change where this occurs. We have gleaned data from a variety of public domain sources including the original design documents upon which the reforms were based,22 as well as Annual Reports and Statements of Corporate Intent produced by the institutes themselves. In addition we conducted in-depth interDesigning Research Organizations

views with the CEO and at least one other senior executive in each institute to provide detailed information on structural issues. All of the data collected relate to the ®rst ®ve years of trading following the establishment of the CRIs. Any subsequent changes were excluded from our analysis.

Organizational Design Responses In our investigation of the CRIs we have explored the formal structures and processes that the institutes have adopted in response to their changed cultural and environmental circumstances. Our task was complicated by a veneer of market rhetoric widely adopted by the CRIs. Without exception the CRI managers we interviewed claimed that their institutes were client-focused and output-oriented, suggesting that they had all undergone a radical transformation, leaving behind the `Technology Push' form of their predecessor departments. In fact, however, it appeared to us, at least initially, that there was an almost universal blurring of distinction between inputs and outputs. Thus a disciplinary capability in, say, geological mapping was simply relabelled as an output (``we produce geological maps'') without any alteration to the organizational design to support this activity. To overcome this perceptual dif®culty, we have inferred the structural characteristics of each company by assessing overall reporting patterns. Table 3 summarizes the results of our analysis, as guided by the key dimensions identi®ed in Table 1.

Unit of Organization

C&F, FRI and GNS are structured into three, six and ®ve groups, respectively, on the basis of disciplinary units. These structures have remained effectively unchanged since establishment in 1992, essentially re¯ecting the disciplinary groupings in their originating organizations. For example, the GNS structure comprises science groups identi®ed as Nuclear Sciences, Hydrocarbons, Earthquakes, Geological Mapping and Geothermal and Vulcanology. These groups are drawn directly from sections of the predecessor organizations known respectively as the

447 Institute of Nuclear Sciences, the Petroleum and Basin Studies group, the Geophysics group, the Regional Geology group, and the Wairakei Research Centre. Apart from minor staff reallocations, the restructuring of GNS is, therefore, primarily an exercise in renaming pre-existing groups. In each of these three CRIs, disciplinary divisions are further sub-divided into functional groups that tend to have fairly stable membership and provide a `home base' for individual science specialists. Lip-service is paid to holding divisions ®nancially accountable as pro®t centres, but in fact most of the managers interviewed acknowledged that responsibility for ®nancial decision-making is centralized at the corporate level. Other specialist management functions (such as human resources management, marketing, strategic planning) are also located at the corporate level and are supported as business overheads by these three institutes. In sum, the unit of organization for C&F, FRI and GNS is discipline-based (see Table 3). By contrast, ESR began life with a regional structure based on four geographic locations plus a head of®ce. However, the CEO commented that this was only ever intended as a temporary measure to allow the organization to ®nd its feet. Within a year, ESR was restructured into ®ve business units focusing on the needs of particular groups of clients, such as the provision of forensic services to the New Zealand police. Financial accountability is pushed down to the level of result centres located within divisions, which in turn are managed as pro®t centres. Specialist support services are located in the corporate head of®ce, but unlike C&F, FRI or GNS, business units are charged for their use of

these services. The strong emphasis on business performance re¯ected in ESR's design can be understood in terms of the predominantly service (rather than research) orientation of this organization. IRL has similarly developed an output-based structure. Initially there were six product divisions which were strongly multi-disciplinary, but the CEO remarked that this structure spread the institute's resources too thinly, providing product breadth at the expense of focus. After three years, IRL restructured into three market-focused divisions, plus a fourth group known as the Pioneer Division. This division does not have staff permanently assigned to it; rather, staff who identify a research opportunity may transfer to the Pioneer Division for a ®nite period of time (such as two years) during which their work is funded as a company overhead in the expectation of commercializable results. The effect of the Pioneer Division is to create an R&D unit which is operated as a cost centre within a marketfocused business, where the three product divisions operate as pro®t centres. Accordingly we have classi®ed both ESR and IRL as product-based organizational structures (see Table 3). AGR and LAND have both restructured during the three year period of our study, moving to a mixed model incorporating both disciplinary and product orientations. By this means, revenue streams from fundamental research, applied science and consulting are separated by divisional boundaries. AGR, like ESR, initially adopted a regional structure which allowed business to continue whilst the future design requirements of the organization were assessed. In 1994 the institute adopted a new structure involving two discipline-based divisions which

TABLE 3. Summary of design responses and performance measures of eight Crown Research Institutes AGR

C&F

ESR

Unit of organization

Mixed

Discipline Product

Leadershipa

Science Science

Business

Control and coordination

Organic Organic

FRI

GNS

IRL

LAND

NIWA

Discipline Discipline Product

Mixed

Project Team

Science

Science

Business

Science Science, then Business

Mechanistic Organic

Organic

Mechanistic Organic Network

122 Q

±b

270 Q

265 Q

148 q

0140/±

3.0% t

1.5% q

4.6% t

2.7% q

3.2% t

4.6% t 8.1% Q

Performance Measures: Number 506 Q of publications per annum Average profit

2.5% Q

±

a

Based on CEO's professional background. Not reported.

b

Long Range Planning Vol. 32

August 1999

448 are engaged primarily in fundamental research, two product-based divisions which generate science applications, and a ®fth division that supplies consulting services to farmers. LAND's initial structure identi®ed four multi-disciplinary business units, by means of which the CEO intended to send important signals to staff about the culture change sought by the institute. However, the institute found that the SBU model borrowed from the corporate world was unsustainable in such a small organization. In 1994 LAND moved to strengthen the focus of its structure by rede®ning the divisional split so that one multi-disciplinary division addresses the needs of an applied client base while the remaining three divisions engage to varying degrees in fundamental and applied science research. Groups within these latter divisions are de®ned primarily in terms of disciplinary similarities. Both AGR and LAND are classi®ed as having mixed units of organization (see Table 3). NIWA is distinguished from the other CRIs by its tumultuous history. In the short time since its establishment it has had three Board Chairpersons, two CEOs, and it has turned over nine executive managers. The institute started out with a strong market orientation that was accentuated when NIWA restructured from ®ve divisions down to three in 1993. These divisions operated essentially as independent businesses, grabbing work wherever it appeared and often competing vigorously against each other. The dysfunctional climate of internal competition that evolved eventually led to a further restructuring which was designed to remove internal barriers to cooperation. The new design, which the institute refers to as `One-NIWA', is based on ephemeral project teams and is supported by a fully implemented project management system. There are no divisional boundaries that differentiate the institute internally. Consequently we have classi®ed the unit of organization for NIWA as the project team (see Table 3).

Leadership

Within this dimension we explore the extent to which the CEO of each institute had been previously socialized into the norms and value systems of either scientists or commercial managers. At the time that the CRIs were established, ®ve of the eight CEOs were recruited from within the public sector departments that had previously provided science research for New Zealand. The exceptions to this pattern were GNS, which recruited a senior science manager from Canada, IRL, whose CEO had extensive experience in industrial development projects, and ESR, which recruited an experienced commercial manager with no background in science research. Subsequently, NIWA has replaced its original scientist CEO with a commercial manager who Designing Research Organizations

also had had the advantage of sitting on that institute's Board of Directors prior to undertaking the CEO's role. Thus IRL, ESR and NIWA stand apart from the other CRIs as having leaders from non-research backgrounds, in contrast to the public service science experience, and associated values, of all the other CEOs. This difference is further emphasized at the next tier of management beneath the CEOs. For instance, ESR's corporate management group was recruited almost entirely from outside the public science sector with the objective of introducing a higher level of business skill into the institute's operations. This emphasis on business effectiveness is re¯ected in ESR's structure which vigorously promotes internal charging and internal competition for resources. In contrast, NIWA's second CEO, who also comes from a business background, emphasizes the importance of creating an environment of trust and respect to empower the institute's highly skilled staff. These values are re¯ected in the close alliance that the CEO maintains with NIWA's two Research Directors and its Operations Director; together they constitute an inventrapreneurial leadership team. The high level of trust that they share has enabled NIWA to take signi®cant business risks.

Control and Coordination

The most clearly mechanistic and ef®ciency-focused of the CRI structures are ESR and IRL, both of which describe their divisions as pro®t centres. The coordination of outputs is achieved through strict separation of these divisions. Each multi-disciplinary division provides product direction, manages its budgets, and evaluates the performance of its staff. There is rarely any need for staff to interact with members of other divisions, and indeed, turf battles were identi®ed in our interviews as an issue for both institutions. In introducing the Pioneer Division, IRL has moderated the pure product-based form, allowing entrepreneurial staff to temporarily stand aside from the pressures of production to develop new ideas. NIWA's project management system allows for the continuous monitoring of performance whilst at the same time promoting ¯exibility in team identities. Teams are developed for the duration of a project by means of networks that extend throughout the institute. This process, which is coordinated by two Research Directors, provides for a great variety of interaction and cross-fertilization of ideas amongst specialists from diverse disciplines. In addition NIWA has four business development managers reporting to the Operations Manager. Their task is to hustle for new revenue sources which draw on the full range of the institute's competencies. For the remaining CRIs (AGR, C&F, FRI, GNS and LAND), the processes of control and coordination

449 are classi®ed as organic (see Table 3) with the primary site of organizational integration located at the level of divisional managers. Although several CRIs in this group referred to project teams, the reality appears to be that teams rarely span divisional, and hence disciplinary, boundaries. Yet most of these institutes recognize that their potential for science innovation lies in their ability to develop multi-disciplinary effort. Several institutes have introduced design initiatives that attempt to overcome the limitations of the discipline-based form. For instance AGR uses Technology Development Units (TDUs) located within the science divisions to commercialize intellectual property. Each TDU is permanently staffed by a market manager and a technologist and it contracts research from AGR as required. Another alternative adopted by several CRIs is to develop brands that deliberately cut across the formal discipline-based structure of the organization. In effect this creates a matrix-like design, but the institutes that have attempted to implement this modi®cation have all found that their formal structure remains dominant, considerably reducing the in¯uence of the brands on organizational operations.

Performance Measures

Table 3 also reports performance trends that have been drawn from the annual reports of the CRIs. Publication numbers are reported as an annual mean plus a trend arrow showing changes over the duration of our study. The most startling observation arising from these data is that neither ESR nor NIWA has ever reported publication numbers, whilst LAND provides only approximate ®gures, and even these are not given every year. In terms of archetypal distinctions, these reporting practices suggest a deliberate shift away from the norms of the `Technology Push' archetype, and a willingness to explore different ways of measuring performance. By contrast, AGR, C&F, FRI and GNS report increasing numbers of publications every year. Of this group, FRI goes to the extreme of actually listing all its publications for the year in each annual report. IRL has also consistently reported the number of articles submitted for publication in each year, though this number has been slowly declining. In addition, Table 3 reports productivity in terms of average annual pro®t as a percentage of annual operating revenues. The trend in pro®t over the ®ve year period for which data are available is indicated by an arrow. These ®gures, which have been drawn directly from the CRIs' annual reports, exclude any non-operating revenues such as interest earned on investments or proceeds from the sale of assets. The reported pro®t margins are, then, a re¯ection of operating ef®ciency. On this scale, ESR is the poorest performer in absolute terms and is still declining, while NIWA has shown a consistently high and

increasing rate of return. However, caution should be exercised in interpreting these ®gures because anomalies due to differing establishment conditions are still in¯uencing the relative ®nancial performances of the CRIs.

Discussion And Conclusions The New Zealand government's policy agenda for reforming its science sector was quite clearly to replace the structures, attitudes, values and behaviours of the old `Technology Push'-style departments with new, market-oriented research institutes. The simplest and most obvious response to this new environmental imperative is to reorient (in Hinings and Greenwood's terms2) from the `Technology Push' archetype towards `Market Pull'. However, our analysis shows that although some of the CRIs adopted this option initially, most of those are now moving away from it. Based on the summary data in Table 3, the institutes may be clustered into several groups (see Figure 2). Firstly, ESR is the only CRI ®rmly located in the `Market Pull' quadrant as signi®ed by its product-based structure, business style of leadership and mechanistic control processes. ESR is unique amongst the CRIs in that almost its entire revenue is derived from the provision of scienti®c services rather than the generation of new knowledge. Little wonder, then, that this institute does not regard publication outputs as a meaningful measure of performance. The success of ESR's reorientation is questionable, however, because it is performing poorly against the ®nancial measures that are appropriate to the `Market Pull' form. This suggests that although new values may have been adopted by ESR's senior managers, these have not permeated throughout the science staff, many of whom may still retain pre-reform values.

High

Collegial Connections

GNS C&F FRI Technology Push AGR Solitary Genius

Low

NIWA Multiple Project LAND IRL Market Pull ESR

Low

High

Market Connections

FIGURE 2. Locating the eight CRIs on the integrated framework of design archetypes Long Range Planning Vol. 32

August 1999

450 IRL, LAND and NIWA also initially adopted a `Market Pull' form, but in each of these cases this proved to be inappropriate for their businesses and further design modi®cations were undertaken. NIWA has ultimately reoriented to the `Multiple Project' archetype, where both collegial and market connections are supported by means of complex network processes for control and coordination. The project-based structure allows for continuously changing internal boundaries, and this in turn provides for ¯exibility in accommodating the changing demands that NIWA perceives in its marketplace. Hinings and Greenwood2 observe that reorientation involves a fundamental shift in organizational values and, as such, it represents the most dif®cult form of organizational change. NIWA's struggle to ®nd a new identity has been characterized by dramatic and radical changes which have soundly challenged traditional values. However, the sustained and relatively healthy pro®t of the institute is testimony to the success of its redesign. IRL, LAND, and also AGR are represented in Figure 2 with arrows to show that they are in the process of transition between archetypes. Hinings and Greenwood refer to this hybrid condition as an excursion, which in their view is not a sustainable organizational form. Ultimately, they suggest, the tension created when two or more archetypes coexist must be resolved by the adoption of one or other of the archetypal forms. This resolution, however, may take a long time to complete, depending on the relative strengths of the competing archetypes. IRL's design can be seen as fundamentally `Market Pull' with its product-based divisions and internal focus on competitiveness. However, the Pioneer Division serves to develop collegial connections that draw the organizational form towards the `Multiple Project' archetype. Similarly, the designs of both LAND and AGR are pulling towards `Multiple Project' by promoting both collegial and market connections, but in separate parts of their organizations. For any of these three institutes to fully reorient into a `Multiple Project' form it will be necessary to develop collegial and market connections that simultaneously span the entire organization. The progress of these three CRIs towards resolving archetypal tensions will necessarily become the subject of further longitudinal research. The three remaining CRIs, C&F, FRI and GNS, have all adopted forms that re¯ect the traditional, and comfortable, `Technology Push' archetype. Collegial connections are encouraged through discipline-based structures, and the production of scienti®c outputs in the form of published papers is seen by these CRIs as an important measure of their success. Structurally, all three have been stable since their establishment, and this stability has been reinforced by science leadership that has served to Designing Research Organizations

strengthen the traditional values of the science community rather than injecting new market-based values. In terms of Hinings and Greenwood's model of organizational change, these CRIs have exhibited inertia where, despite government intent, they have retained their traditional values and forms. Referring back to their establishment positions (Table 2), both C&F and FRI enjoyed the prospect of increasing PGSF funding, so their external resources were not under threat. Furthermore, both operate in the primary production sector which, in New Zealand, is well supported by an infrastructure that makes industry clients easily identi®able and accessible. Thus there was little impetus for change. GNS, however, was faced with rapidly declining PGSF funding and a dispersed and anonymous client base for environmental research. Such is the strength of the values and beliefs underpinning the `Technology Push' archetype that, despite these external pressures, GNS does not appear to have perceived the need for comprehensive organizational redesign. The only archetype not represented explicitly in the sample is the `Solitary Genius'. However, because the unit of organization for this form is the individual, it is possible for the `Solitary Genius' to appear within other forms. This is especially true of the `Technology Push' archetype, which has values that are sympathetic to the needs of the `Solitary Genius'. In more market-oriented organizational forms, however, there is less tolerance for extreme individualists, who are often labelled in pejorative terms as prima donnas. In conclusion, our typology of four archetypes has successfully enabled us to classify the organizational forms adopted by eight science research institutes. However, the ®ndings of this study are by no means restricted to the New Zealand setting. The forces of change faced by these institutes are similar to those experienced by public research laboratories everywhere, as they endeavour to ®nd appropriate responses to global market trends. The particular value of the New Zealand cases is that, because they were all driven by precisely the same imperatives for change, and because this change occurred within a relatively short period of time, there is a high degree of inter-case comparability. As a consequence, this set of cases represents a unique natural experiment that provides signi®cant insight into the design issues surrounding organizational transformation. Extrapolating the results further, the tension between traditional, conservative, provider-driven values and the new market pressures for increased competitiveness is equally evident in other knowledge-based sectors such as universities, hospitals and professional service ®rms. Market deregulation and the advent of an increasingly sophisticated and demanding clientele have confronted many knowl-

451 edge-based organizations with the need to become more innovative and better able to generate customized solutions. This, in turn, has promoted an ongoing debate as to how a traditional organization

could best be redesigned to meet the demands of this complex and dynamic environment. The experiences of these eight science research institutes contribute to this debate.

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Barbara Simpson is a Senior Lecturer in Organization Theory in the Department of Management and Employment Relations at the University of Auckland, New Zealand. Before her recent return to academia, she had 20 years' experience working in science research and consulting. Management and Employment Relations, The University of Auckland, Private Bag 92019, Auckland, New Zealand.

Michael Powell is Professor of Health Management at the University of Auckland. He has recently published books on the transformation of state-owned enterprises in New Zealand and articles on emergent network forms of health care organizations.

20. B. Simpson and J. Craig, A policy for science innovation: the New Zealand experience, Science and Public Policy 24/2, 70±78 (1997). 21. Ministry of Research, Science and Technology, Long-term Priorities for the Public Good Science Fund Final Report, Wellington, New Zealand: Ministry of Research, Science and Technology (1992). 22. Ministerial Science Task Group, Crown Research InstitutesÐResearch Companies for New Zealand, report of the Ministerial Science Task Group, Wellington, New Zealand (1991). 23. E. von Hippel, Lead users: A source of novel product concepts, Management Science 32/7, 791±805 (1986).

Long Range Planning Vol. 32

August 1999