in an iPod world

Organization Design with Toys

Yesterday, my class discussed Sony case. The case covers how the traditional organization structure that Sony had with product silos led to its failure to respond to digital challenges. Instead of discussing the case, I ask the students to build 3D representations of Sony to explore the problems deeper. Then, we discussed how Frank Gehry uses his projects as a way of organiz-ing, drawing on "From Organization Design to Organization Design-ing". Based on the ideas from the discussion, they modified their models to develop concrete suggestions for Sony. Here's a brief summary of their works.

Group 1: From Walls to Spaghetti

This group was trying to depict the "walls" separating different product groups and redundant knowledge resources (represented in different colors of Play Doe). They discussed the possibility of "back-channel" rogue communication attempts among engineers which are often thwarted by the management (you can see a small black tube through a wall in the back). The senior management sits on the top of the wall, not really connected to the day-to-day reality of each product groups.

Their revised model resembles Spaghetti organization. But, in fact, it is more like a matrix structure with a couple of twists. Each chunk of Play Does in different colors represents a community of knowledge. Each circle represents a convergent projects. Different color lines represent design visions that pull certain members out of their own home base (communities of knowledge) to join these projects. They felt that the firm still needs some type of central unit that coordinates these de-centralized efforts, which is represented with the Play Doe can in the middle. They identified that a key challenge here is preventing the central coordination unit becomes the innovation Nazi, enforcing the central vision. Yet, at the same time, separate project teams need some type of resemblance in order to maintain the sense of identity as a firm. Also, they kept the bended construction paper after removing the wall -- noting that the scars from old structure will likely remain.

Group 2: From Vertically Integrated Silos to Core Integrative Platform

This group represented each product group within a small circle. The tall structure in the middle of each circle represents a vertically integrated product structure that is managed within the narrow band. What is not shown here (because I took the picture before they finalize it) is that the location of senior management. The group built a high tower in the middle of these circles to place all the senior management. Again, similar to Group 1, that was meant to represent the isolation of central management from the grounded realities of each product group.

Their revised model shows a series of convergent product built on a shared platform (represented by a large flat panel). The three circles in the middle represents three core integrative capabilities that they identified (they did not specify those capabilities). These elements represent the core of the organizational structure - that remains stable. The periphery structures with different products are dynamic teams are brought together for specific innovation opportunities. These ideas are crowdsourced within the firm. The strength of their models was that they tried to represent both product and organization structures simultaneously, trying to explore relationships between the two.

Group 3: From a Maze to Whirlwind of Innovation

This group represented the old structure with a maze. This was meant to represent a micro-level experience of an individual engineer who had a break-through idea. He or she might want to have a conversation with another engineer from different product group, but finding the right person feels like an impossible task. Each product group again has redundant resources. Senior management is gathered in an isolated location (HQ).

The modified vision again was represented from a ground-level view from an individual engineer's perspective. Here, each Play Doe can represents a community of expertise. The firm has established an integrative design process by which individual ideas can be swirled into a whirlwind of innovation that is propelled by a design vision. The product (represented as a lump of Play Doe of mixed colors) shows a complex mixture of different knowledge resources (both in and outside of the firm). Unlike the other two groups, they focused on a micro structure of the new organization design.

Evolution of Charlie Bit Me

This is a short video clip that I put together for my class last night. It shows many different adaptations of Charlie Bit me video, which was originally posted in March 2007. Since then, this 55-second video has been watched almost 130 million times. A quick search on You Tube with "Charlie Bit Me" produces 13,900 different videos. Through this clip, I wanted to show the nature of unbound innovation with digital technology to my students. You see how Charlie evolves move to different countries, ages, and gender over time. Then, you see a group of kids doing Charlie. Then, you see a series of animations including Charlie Brown, Unicon, and even Lego characters. It ends with a hip-hop remix of Charlie video and a live performance by a using the track.

two videos that I will show tomorrow in class

video clips shown in class

Web 2.0 - This shows how web 2.0 is working.


This shows how 2D bar code work to bring digital and physical reality together.

This shows an implementation of augmented reality using iPhone.

Books that we are reading in my Scientific Inquiry of Management Research

These are the books that we will be using as main textbooks for this semester.

The followings are the books that we read partially.

Rick Wagoner's resignation and the failure of a management model

On Monday, Rick Wagoner of GM finally stepped down. Many have already written about the failure of his leadership, which oversaw the rapid decline of market share from 33% to 18%, and the drop of stock price from $70 to meager $4. He is blamed for the demise of the GM's early electric car, EV1. He was also blamed, rightly or wrongly, for not being able to restructure GM, which apparently was the reason that he was dismissed.

I hope that the resignation of Rick WagoWagonerner is a sign of a bigger change. That is, a change of management model from the one that is based on narrow quantitative and financial calculations of shareholders' value to the one that focuses on creating real values by making extraordinary products and services (in this case, cars). I believe such a change requires more than simple personnel change. It requires a much deeper change in the way we train our managers and the way they think.

Like many other American companies, GM's top leadership has been recently dominated by executives with deep financial background and experiences. Rick Wagoner was CFO before he became CEO. His predecessor, John Smith, grew up in GM's financial group. The new CEO also came through a similar path. He was CFO before he became COO, which was the job he had before Monday. So, what is the problem of having people with a strong finance background leading manufacturing firms? It can be summarized by a quote by Thomas Murphy, another former CEO of GM who also was CFO before he took the top job at GM. He once said, "General Motors is not in the business of making cars. It is in the business of making money." Apparently, Rick Wagoner repeated the same quote during one of his interviews in 60 minutes, although I could not verify it. This mentality of business-of-making-money sounds harmless on the surface, until one starts looking at how that idea was actually implemented. That mentality led to a strategy that GM would do whatever it could to make money, in this case easy money.

GM tasted such easy money through its financing arm, GMAC. Originally founded in 1917 in order to finance dealers and buyers, GMAC rapidly expanded its operation in the real estate financing market since 1985. In 1999, GMAC bought Ditech, which was a major player in the sub-prime mortgage market. In fact, it was Ditech who invented 125% loan. From 1999 to 2005, GMAC enjoyed record-breaking years. In 2004 alone, it made $2.9 billion of net income. (Or, at least they thought so.) GM executives must have been intoxicated by the easy money that they were making. No hard work. Just run the money and let it do its job. During that same period, however, GM's auto manufacturing business was experiencing record-breaking loss. In a three-year stretch in early 2000, GM lost $30 billion. From this analysis, it is clear that GM's problem did not start all of sudden last September. GM's big and fundamental problem was simply disguised and subsidized by the "profit" from the its sub-prime business (which in fact never made money) during the boom years. In a way, GM's executives were running a large-scale Ponzi scheme. When sub-prime market blew up, all the covers were gone. There was no more place to hide.

What does this have to do with the background of the executives? Well, everything I think. Executives with finance background think and act like bankers. They do what they learned from their MBA programs. In so doing, in the case of GM, they turned a manufacturing company into a large sub-prime mortgage player. They knew little about cars. Cars and customers are reduced to single numbers. They never knew about car in the same way that Steve Jobs can talk about iPhone and Mac. They were never in the business of making cars.

This points to an even bigger problem that we face. That is, our current business education in most MBA programs are dominated by the hegemonic control by an intellectual tradition that emphasizes quantitative skills, economic reasoning, and unshakable commitment to the shareholder value as the singular objective of companies. Since 1960's, American MBA programs have produced managers who are deeply influenced by this one-dimensional thinking. In almost every MBA program, finance is the largest major, attracting brightest students. Finance elective courses are often overbooked. Many programs require a series of finance courses as part of their "core" curriculum.

At the same time, topics like innovation, new product development and design are often pushed aside as elective courses for small fraction of students. Non-quantitative courses are often marginalized as being "soft", while quantitative courses are marketed as scientific and rigorous. It is precisely in this intellectual context that the current crisis was born. The problems of Wall Street and the problems of GM are two different sides of the same coin. They both are rooted in the same management philosophy.

What I hope to see happens out of this current crisis is a deep reflection on how we teach and train our MBA students and corporate clients. It is time for MBA programs to look into a mirror and ask ourselves "what have we done?" I hope this will change our curriculum in a way that emphasize real stuff -- material, labor, customer, products and services -- as opposed to derivatives and abstract values. I hope we begin to teach our students that we cannot simply reduce everything into numbers. We must teach them that they will never be in the business of making money, but they will be in the business of making cars, computers, new energy technology, and the stuffs that the world has yet to see. They need to learn how to think and act like designers, not like a banker. We must remind them that they are makers of the world in which we live. And, we must remind them of their responsibility that comes along with that role. (I wrote on this before.) It is time for a new management model to replace the old, broken one. But, I worry whether our schools have enough guts to do it.

key chain exercise

1. Form a group of 5 or 6.

2. Everyone should put his or her key chain on the table.

3. Each person should explain what he or she has on the key chain and why.

4. Other group member should write down words on given Post-It notes (one word per note). The words can be noun, adjective or verb.

5. Once everyone tells his or her story, the group will post all the Post-It notes on the wall, pulling everyone's notes together.

6. Create clusters of Post-It notes by grouping similar or related words together.

7. Begin to organize clusters by noting relationship among clusters. For example, try to establish X- and Y-axis. Or try to establish timeline.

8. Complete the sentence, "A keychain is ..."

Paper folding exercise

1. Do something with paper to make it stand. 

2. Make four more of them, doing different. 

3. Choose the "best" one from the five that you just made. 

4. Make it better. 

5. Look at your last model and think of ways to improve it further. 

Here are some additional pictures taken from my class. This exercise allows students to think about the entire design process -- problem definition, generation alternatives, evaluation, and refinement -- in a very short period of time. After this exercise, everyone becomes a designer. This exercise is not only effective but also fun. You can see students smiling. 

another video clip from the students

This is the second video clip from the students who went to the design study tour.

And, here's a comment from one of the students:
"It was the most worthwhile course I've taken as a student, not only in the MBA program, but also in all my years in academia. The Design Tour was a once-in-a-lifetime opportunity that many of us may never have again: to tour innovative companies and learn from internationally-recognized business thinkers and leaders. Thank you for going above and beyond what is expected of a teacher. While other professors are content to teach from a text, you took us out of the classroom and into the real world. Thank you again for taking us along for the ride---it was an amazing experience and one I will not soon forget."
I am very grateful to those who helped me to make it happen and students who took the risk and paid their own way to learn something called "design".

Design Study Tour

From May 19-22, I am taking 18 Fox MBA students to San Francisco area to visit a number of design studios. It is a part of a new course that called, Design & Innovation.