Innovation and Creativity in Organization

Essay by greentree June 2009

download word file, 16 pages 5.0

Chapter OneIntroduction to the case:Background of Saudi Aramco Health Care Services Organization (SAMSO):SAMSO is the organization within Saudi Aramco that provides health care for Saudi Aramco employees, their eligible dependents and other eligible recipients as established by the company policy.

Saudi Aramco families living in the Eastern Province of Saudi Arabia, where the company is headquartered, are treated at hospitals and clinics owned and operated by the company. These are large, modern, full-service facilities annually providing health care for thousands of employees and their dependents as well as retired Saudi employees and their spouses.'s Mission and Values:SAMSO's Mission Statement: "We are dedicated to providing professional health care services which will enhance the well being and productivity of the Saudi Aramco population"Values of SAMSO:•Courtesy•Compassion•Competence•Creativity•Continuous improvement is essential to our success(Saudi Aramco Medical Services Organization)The current situation in the SAMSO:At the request of the management of SAMSO, Organization and Industrial Engineering Department (O&IE) conducted an internal employee survey between August 26th 2000 and October 4th 2000, focusing on productivity, innovation and satisfaction of SAMSO staff other than physicians, nurses and dentists.

Questionnaire survey forms were prepared by O&IE and distributed to SAMSO by the General Medical Relations Division. Each form contains 61 questions. The questions are divided into six sections, namely: Productivity, Job and work group, Supervision, Management practices, Training, and Demographics.

SAMSO staff suggestions were:1.Improve training2.More promotion3.Respect, appreciation and recognition4.Increase salary and pay5.Enforce fairness6.Improve management and supervisors7.More encouragement and rewards8.Improve evaluation9.More technological advances10.Improve communicationWhy innovation is needed in SAMSO?Innovation is needed to:1.Improve the current situation within SAMSO.

2.Create new and different values and make contribution.

3.Create new and different satisfactions for SAMSO employees.

4.Combine existing resources in a new and more productive configuration.

5.The need for process change and process improvement.

6.The continuous demographics and population change.

7.Change in perceptions, moods and meanings of SAMSO's employees.

8.New knowledge and technologies.

9.The survival and continuous improvement of SAMSO.

10.The progression and growth of SAMSO, "Innovation is the engine of growth" .(P.Trott, 1998: 5) &(P.Drucker: 35)Chapter TwoDefinitions of Innovation and Creativity:Innovation:" is a single action but a total process of interrelated sub processes. It is not just the conception of a new idea, nor the invention of a new device, nor the development of a new market. The process is all these things acting in an integrated fashion"(P.Trott, 1998: 11)Innovation: "the introduction of new things, ideas, or ways of doing something, or a new way or idea that has been discovered". (A.S. Hornby, 2000)Innovation can also be defined in Peter Drucker's book as "changing the yield for resources" and as "changing the value and satisfaction obtained from resources by the customer". (P.Drucker, 1985)The Harvard Business Review defines Innovation as:"Innovation is the embodiment, combination, and/or synthesis of knowledge in original, relevant, valued new products, processes, or services".

Creativity: "is an adjective, it means to make something happen or exist. Creation; is the process of making something new, or of causing something to exist that it did not exist before". (A.S. Hornby, 2000)The Harvard Business Review defines Creativity as:"Creativity is a process of developing and expressing novel ideas that are likely to be useful".

The process of Innovation:Figure # 1, illustrates the process of innovation(Harvard Manage Mentor)Innovation is the end result of a creative process that progresses through six stages, as illustrated in Figure # 1. Most successful innovation is the result of a conscious, purposeful search.

(Harvard Manage Mentor)Types of Innovation:There are many types of innovations and are illustrated in Table # 1.

Type of InnovationExampleProduct InnovationThe development of a new or improved productProcess InnovationThe development of a new manufacturing processOrganizational InnovationA new venture division, a new internal communication system, introduction to a new accounting procedureManagement InnovationTQM (total quality management) and BPR (business process re-engineering)Production InnovationQuality circles, just-in-time (JIT) manufacturing system, new production planning softwareCommercial/ Marketing InnovationNew financing arrangement, new sales approach, e.g. direct marketingService InnovationTelephone financial serviceTable # 1(P.Trott, 1998: 14)Chapter ThreeTools and Techniques associated with the identification of areas with potential opportunity:As a result of findings in the SAMSO survey. A task force of SAMSO management and key employees was established. The task force consisted of 15 to 18 members that looked into the current position of SAMSO in order to identify key strengths and opportunities of SAMSO and also to identify its competitive position. The task force used three techniques; they are the Problem Analysis, PEST Analysis and SWOT Analysis. The findings of the group are summarized in steps A, B & C.

Figure # 2, illustrates the techniques used in identifying SAMSO's potential opportunityA-Problem Analysis:This approach was fulfilled by the SAMSO survey. It starts with identifying potential needs and problems of the organization and its employees. These needs and problems might be either explicit or implicit. This type of approach demands a full understanding of the employee (customer) needs and the technologies or skills that can be developed to satisfy them. (Wickham, 1998)B- Auditing SAMSO's Environmental Influences:The analysis of environmental influences is the: "Analysis of the structure of the environment builds on the insights already developed through nature of the environment analysis to establish the present and future opportunities and threats facing the organization" (Richardson and Richardson, 1992: 26)PEST Analysis:"PEST analysis involves identifying the political, economic, social and technological influences on an organization". (Johnson and Scholes, 1999: 104)PEST analysis is used to analyze the macro environment or the indirect environment. PEST is very useful in helping to identify; forces that affect the structure of the organization, and in examining different impacts of the external interferences on an organization.

A-Political/ Legal:In this case we consider the legal system, environmental protection, taxation policies, foreign trade regulation, employment laws and government stability according to (Johnson and Scholes, 1999: 105)By applying some of these on SAMSO's strategies, it shows that SAMSO follows the laws of Saudi Aramco and Saudi Arabia, such as the employment laws. SAMSO also follows the environmental protection laws on its activities. Some of the other laws that Saudi Aramco follows are:•There are no personal income taxes in Saudi Arabia.

•There are ten-year tax holidays for manufacturing products.

Raw materials and components can be imported duty-free and the protection of private ownership is recognized. (Journal of Business and Industrial Marketing, Vol. 16 No. 1 2001)B- Economic:By mentioning the economic factors we mean the business cycle, interest rates, money supply, inflation, un-employment, disposable income and energy availability and cost. (Johnson and Scholes, 1999: 105). The economical situation in SAMSO is directly related to Saudi Aramco, which is directly related to the economy of Saudi Arabia and vice versa. This is because the wealth of Saudi Arabia mainly depends upon the export and selling of crude oil and gas, in other words on the performance of Saudi Aramco, and on how well it manages its income and expenditures. Some of the main factors that affected the Saudi Arabian economy in the past 10 years are the gulf war, but the economy is improving gradually. As a result of that one of the major strategies of Saudi Aramco is to conduct and manage all company activities so as to maximize company's long-term profitability and to effectively utilize company's capital, operating cost controls and financial management practices.

C- Socio-cultural:Socio-cultural analysis means analyzing the environment's population demographics, income distribution, social mobility, attitude to work and leisure, and levels of education demographics. (Johnson and Scholes, 1999: 105)Population demographics:There are 60,000 employees that work in Saudi Aramco and come from 99 different countries. The population of Saudi Arabia has been increasing by an estimate of 3.2 percent per year, which is one of the world's highest growth rates; this has in return affected the number of Saudi Arabs working in the organization. (Journal of Business and Industrial Marketing, Vol. 16 No. 1 2001)Income distribution:This has been greatly affected as a result of the Gulf War and also as a result of the increase in the number of graduates and postgraduates among Saudi Arabs and the increase in the employment competition, this has increased the number of Saudies applying for jobs in SAMSO and Saudi Aramco.

Social Mobility:There are many Saudies who have moved from the northern, western, southern, and central regions of Saudi Arabia to live in the eastern province of Saudi Arabia in order to work SAMSO and Saudi Aramco, Saudi Arabia's biggest and wealthiest company.

Attitude to work:The attitude of Saudi Arabs towards work has changed dramatically in the last 20 years, as a direct result of the increase in the number of Saudi Arab graduates and the increase in job competition, and also due to the effect of the gulf war on the wealth of the Saudi people.

Levels of education:As mentioned earlier that the percentage of Saudi Arab university graduates has vastly increased within the last 20 years, this in return had increased the numbers of Saudies applying for new jobs in Aramco and SAMSO.

D- Technological:In this type of analysis the following should be considered; spending on research, focus on technological effort, new discoveries and developments, speed of technology transfer and rates of obsolescence. (Johnson and Scholes, 1999: pp 105)Spending on research:SAMSO does not invest much on research funding.

Industrial and technological effort:Aramco spends vast amounts of money on acquiring and obtaining latest technologies and most advanced equipments company wide. (Saudi Aramco Dimensions, 1994)New discoveries and developments:SAMSO is quite poor in research and development.

Speed of technology transfer:A weakness occurs in certain technological areas such as the electronics and computing and this made these industries exposed to foreign competition. Saudi Arabia's future prospects in engineering do not look too promising either. (Journal of Business and Industrial Marketing, Vol. 16 No. 1 2001)C- Identifying key opportunities and threats:"It is only at this stage of analysis that a sensible assessment can be made of the major strengths and weaknesses of an organization and their strategic importance. The analysis then starts to be useful as the basis against which to judge the future course of action" (Johnson and Scholes, 1999: 189)SWOT analysis:"SWOT analysis summarizes the key ideas from an analysis of the business environment and the strategic capability of an organization" (Johnson and Scholes, 1999: 189)SWOT stands for strengths, weaknesses, opportunities and threats. The procedure for the analysis is as follows:A-Identifying key changes in the environment of an organization.

B-Identifying the organization's strengths and weaknesses or opportunities and threats.

Next SWOT analysis will be applied on Saudi Aramco.

A- Key changes in the environment of SAMSO:1-Integration and joint ventures, like the integration of SAMARIC with Aramco and also the joint venture with other oil producing companies like Star Enterprise, Ssang Yong and Petron, as I have mentioned previously. (The Arabian Sun, 1996)2-The increase in the Saudi Arab population by an estimated 3.2% per year. (Journal of Business and Industrial Marketing, Vol. 16 No. 1 2001)3-An increase in the level of education in Saudi Arabia and among Saudi Arabs and the high numbers of university graduates who need work.

4-The implementation of saudisation to all the companies in Saudi Arabia including Saudi Aramco and SAMSO, thus increasing the percentage of Saudi Arabs working in the organization.

5-The risk of dismantling SAMSO and the expanding private medical care for Aramco employees and their dependents in order to minimize costs.

B- Identifying SAMSO's strengths and weaknesses and opportunities and threats:Strengths of SAMSO:1-SAMSO is going to be inspected by the Joint Commission International Accreditation. Which is an internationally organized authority on quality of care standards.

Saudi Aramco Medical Services Organization has requested that the Joint Commission International, (JCI), Oakbrook Terrace, Illinois, USA, conduct an accreditation survey of SAMSO facilities for the purpose of ensuring compliance with international standards for health care. Consultation visits were conducted in 2001, with a follow-up survey planned for September 2002.

The JCI is the primary, internationally recognized authority on quality of care standards, appropriate for medical practice at SAMSO. SAMSO has participated in several JCAHO surveys and incorporated JCI quality standards, and must maintain continuity in improvement efforts. Aramco and thus SAMSO is a multinational company with 99 different nationalities of employees. This has a great impact on learning process and development of the company. (Saudi Aramco in brief)3-Saudi Aramco and SAMSO uses the most advanced and sophisticated equipment and facilities, this creates an excellent work environment among its staff and higher quality work. (Saudi Aramco in brief)4-Aramco and thus SAMSO invest in developing its employees and encourage them to continuing education. (Saudi Aramco in brief)5-Aramco's income from selling crude oil and gas contributes to more than 60% of the national budget of Saudi Arabia.

Weaknesses of SAMSO:1-The management system, rules and regulations of Saudi Aramco and SAMSO were formed sixty years back by a group of Americans veterans. The laws are highly bureaucratic; changes by the new generation of managers are taking place but very slow.

2-Being a government owned company, Saudi Aramco and SAMSO has no control on its earnings from selling oil and gas. The Saudi government sets its annual budget based on the company's earnings and expenditures.

3-A company like Aramco situated in a highly unpredictable and volatile political region, makes it harder for its expatriate employees to stay for a long time in the company.

4-Another weakness is the great and complete dependency of SAMSO on expatriate and foreign employees and also on contracting companies to perform their work. This is due to the lack of skills and expertise in the technical and clinical knowledge, in addition to the shortages in good secretarial skills coupled with sufficient English-speaking skills among Saudi Arabs. (Journal of Business and Industrial Marketing, Vol. 16 No. 1 2001)Opportunities for SAMSO:1.SAMSO quality of care and its enhancement may lead to more emphasis on it to be as a secondary and tertiary health care provider in the eastern region of Saudi Arabia.

2.In the future SAMSO can metamorphose into a reference center for health care.

3.In the future SAMSO can play a major role in eastern province health care programs.

Threats for SAMSO:1.Low price health care availability by the private sector (private healthcare institutions).

2.SAMSO depends on Saudi Aramco in its budget. Saudi Aramco Aramco's budget comes from the selling and export of petrol and gas. Oil will be the major energy souse for the next 10 years to come; this should make Aramco look for alternative resources in the near future.

3.The threat of political uncertainty of the entire Middle East.

Chapter Four:The cultural requirements for embedding the strategy of Innovation and Creativity in SAMSO:Organizational Culture:"Is the deeper level of basic assumptions and beliefs that are shared by members of an organization, that operate unconsciously and define in a basic taken-for-granted fashion an organization's view of it self and its environment". (Johnson and Scholes, 1999: 58)The current culture of SAMSO:SAMSO clearly suffered from low employee productivity, low job satisfaction, employees complaining from having bad supervision and of the lack of expertise in their leaders, poor management practices, high costs of medical care, low employee morale, and also insufficient training and continuous improvement. It also suffers from the following:1.Entrepreneurship: failure of the management to capture and evaluate new innovative ideas from employees, diminished reward systems for new ideas and reduced resources allocated for innovation, have all resulted in the lack of entrepreneurship and innovation in the company.

2.Business and R&D strategies: there is a poor understanding in the importance of research and development and its relation to business strategy and competitive organization. Which has led to the undermining the under funding for R&D.

3.Incompetent management: management having rigid ideas, failure to sense the needs of their employees, and failure to develop and train their employees to be better workers, have resulted in low productivity, low work quality and low employee morale.

What is the Innovative organization?The Innovative Organization: "the innovative organization needs to be a creative organization; innovation requires the act of creation in order to give rise to something new, be it a product or a system". (P.Trott, 1998: 35)Characteristics of an Innovative Organization:This can be summarized in table # 2.

Organizational RequirementsCharacterized byGrowth orientationA commitment to long term growth rather than short term profitVigilanceThe ability of the organization to be aware of its threats and opportunitiesCommitment to technologyThe willingness to invest in long-term development of technologyAcceptance of risksThe willingness to include risky opportunities in a balanced portfolioCross-functional co-operationMutual respect among individuals and the willingness to work together across functionsReceptivityThe ability to be aware of , to identify and to take effective advantage of extremely developed technologyAdaptabilityA readiness to accept change'Slack'The ability to manage the innovation dilemma and provide room for creativityDiverse range of skills A combination of specialization and diversity of knowledge and skillsTable # 3, Characteristics of an Innovative Organization(P.Trott, 1998: 35)Requirements that are needed for SAMSO to be an Innovative Organization are:The following suggestions are needed to implement an innovative and creative organization culture in SAMSO:1.Improving the Management and Leadership skills:oClose understanding of the needs of their employees.

oImprove the current performance appraisal system to from 180 degrees to 360 degrees. In that it covers the employee, his peers, his supervisors, and his customers.

oSupervisors and leaders should encourage the formation of teams and task forces to encourage team spirit and improve the work quality within SAMSO.

oThey also can encourage the formation of "virtual organizations" which are relatively loose collections of different individuals who are brought together at different times and in different ways to achieve some specific goals.

oManagers and leaders should encourage team building and the formation of task forces for mire effective work results.

oEncourage inter departmental training, and sharing knowledge and experiences between employees.

oThe management should encourage and reward new ideas and have an open door policy.

oDevelop and implement an employee recognition program. And give incentives and rewards for hard workers and excellent employees and other programs, such as "employee of the month recognition programs" and others.

oEncourage and develop leadership skills in staff that have the potential for that.

oEncourage shared values between employees and organization.

oContinuous development and self-development of employees.

oMotivate employees in many ways to encourage the continuous flow of creative ideas within the organization. These ideas are not only needed for the development of new and valuable services, but also for the solution of ever changing and ever more challenging business problems.

Harvard Business School, Harvard Business Case Note, January 1996, Strategy and Innovation:oStrategy sets general business direction and therefore direction for innovative efforts.

oEstablishes the resources available for particular businesses.

oDecides competitive stance of innovation direction; leader/follower, radical/incremental innovation.

oMore attention should be paid to marketing.

3.Monitoring and Developing Technology Knowledge:oEffective use of outside technology and scientific advice.

oLinks with universities.

oMonitoring of patent applications.

oLinks with specialist Research & Development organizations.

oPartnerships and Alliances.

This is illustrated on Figure # 3 # 3, Illustrates the Innovative Process in SAMSOChapter Five:Barriers to Innovation:1.Management: often act as a shield to employee creativity.

2.The organizational structure:a.The structure of divisionalised organizations often works against interdisciplinary communication. Methods of enhancing this communication include multidisciplinary teams as a formal method.

b.For example, innovative and creative ideas can arise from areas other than a Company's research and Development (R&D).

3.Maintaining the rigid pattern of thinking: mindset and rigid thinking prevent creative and innovative thoughts.

4.Managing the creative process: if people are told what to do then innovative ideas will cease to occur. Ideas come and arise from groups and informal communication.

5.Isolation of top management6.Short term horizons and objectives7.Accounting practices and counting mistakes8.Excessive rationalism9.Excessive bureaucracy10.Inappropriate incentive for employees and lack of motivation Implementation Issues:In order to shift SAMSO from its current situation to the desired innovative situation as was mentioned in "chapter Four", there should be a change in SAMSO's management and leadership skills, Strategy to innovation, and the development of technological capabilities. Driving and resisting forces usually accompany any change process. In order to achieve the desired change, SAMSO change agents and innovation pioneers need to convince the higher management of SAMSO and try to persuade them of encouraging and propagating innovation in SAMSO. They also need to convince the employees who are at the other end of the organizational ladder on the needs and benefits of innovation. Gray & Starke describe the contingency approach for dealing with resistance to change. This approach is illustrated in (Table # 3). The table describes six methods for dealing with resistance to change and the situation in which the method is most effective. These approaches are portrayed as follows:A-Education and communication: This can be done through carrying out lectures and seminars to increase awareness of the change process and through providing more facts and information about the desired change situation and the benefits for both employees and company.

B-Participation and involvement: This can be achieved though letting SAMSO management and employees have some sort of decision and voice in the change that will take place. And through participation in the change process, as becoming part of the change agents.

C-Facilitation and support: This is done through providing training for employees for accepting change, effective listening courses, providing counseling for those employees, and understanding their emotional reactions to change.

D-Negotiation and agreement: Through making bargains and trade-offs to assist and help employees affected by the change process.

E-Manipulation and co-optation: This is done through using information about change carefully and selectively and presents it to the group, or through selecting a representative (or informal leader) from the affected group to participate in the design of the change. (J. Gray & F. Starke, 1984: 567)ApproachCommonly used in SituationsAdvantagesDisadvantagesEducation & communicationWhere there is a lack of information or inaccurate information and analysis.Once persuaded, people will often help with the implementation of the change.Can be very time consuming if lots of people are involved.

Participation & involvementWhere the initiators do not have all the information they need to design the change, and where others have considerable power to resist the change.People who participate will be committed to implementing change, and any relevant information they have will be integrated into the change plan.Can be very time consuming if participators design an inappropriate change.

Facilitation & supportWhere people are resisting change because of adjustment problems.No other approach works as well with adjustment problems.Can be time consuming, expensive, and can still fail.

Negotiation & agreementWhere someone or some group will clearly loose out in a change, and where that group has considerable power to resist.Sometimes it is a relatively easy way to avoid major resistance.Can be too expensive in many cases if it alerts others to negotiate for compliance.

Manipulation & co-optationWhere other tactics will not work, or are too expensive.It can be a relatively quick and inexpensive solution to resistance problems.Can lead to future problems if people feel manipulated.

Explicit & implicit coercionWhere speed is essential, and the change initiator possess considerable power.It is speedy, and can overcome any kind of resistance.Can be risky if it leaves people mad at the initiators.

Table # 3 illustrates methods for dealing with resistance to change(J. Gray & F. Starke, 1984: 567)SummaryChapter one of this paper covered and explained SAMSO's case and the reasons for implementing an innovative culture in SAMSO.

The second chapter contained different definitions of innovation and creativity, the process of innovation and different types of innovation.

Chapter three explained the tools and techniques that were used in order to identify areas of potential opportunity in SAMSO.

The fourth chapter explained the cultural requirements for embedding the strategy of innovation and creativity in SAMSO, the innovative organization, and requirements needed for SAMSO to be an innovative environment.

The fifth and final chapter explained the barriers to innovation and implementation issues to the strategy.

References1.A.S. Hornby, (2000), Oxford Advanced Learner's Dictionary, Sixth Edition, Oxford University Press, UK.

2.Company, Aramco Service, (Spring 1994), Saudi Aramco Dimensions, USA.

3.Company, Saudi Aramco in Brief4.Company, Saudi Aramco Oil, (January 3rd, 1996), The Arabian Sun.

5.Harvard Manage Mentor, Managing for Creativity and Innovation.

6.J. Gray & F. Starke, (1984), Organizational Behavior: Concepts & Applications, Bell & Howell Company, USA7.Johnson and Scholes, (1999), Exploring Corporate Strategy, Prentice Hall, Europe.

8.Journal of Business and Industrial Marketing, Vol. 16 No. 1, (2001)9.Paul Trott, (1998), Innovation Management and New Product Development, Clays Ltd, UK10.Peter F. Drucker, (1985), Innovation and Entrepreneurship, Harper & Row publishers, USA.

11.Philip A. Wickham, (1998), Strategic Entrepreneurship: a decision making approach to new venture creation and management, Prentice Hall, UK.

12.Professor Teresa M. Amabile, (January 1996), The Motivation for Creativity in Organizations, Harvard Business Case Note, Harvard Business School13.Richardson and Richardson, (1992), business Planning, an approach to strategic management, Pitman Pub, UK.

14.Saudi Aramco Homepage, JCIA, Aramco's Web Page, Aramco Medical Services Organization17.The Innovative Organization,