Moving from a Closed to an Open Culture, case studies P&G, Kellogg, and LEGO

There has been a notable disparity between the functioning of organizations that embrace closed and open culture. The main difference between a closed and open culture is the privacy of information, which characterizes a closed culture, and the ease of access to information, which describes an open culture. The ultimate way of determining the most suitable culture in any organization is by a critical analysis of the functioning of both the closed and open cultures. This paper describes the barriers that hinder a change from an unfavourable culture to a favourable one, springing a business into a success. This paper analyzes the cases of three companies, P&G, Kellogg, and LEGO, which shifted from a closed to an open culture following the advantages related to the same. A critical explanation of what an open culture entails and how to shift from an open culture has been addressed.

A confirmatory factor analysis method has been used to analyze the previous research concerning shifting from an open to a closed culture. The existing research has proved that it is possible but difficult for the management to facilitate a productive shift. As a result, proper planning has to be made, and the stakeholders have to exercise patience during the shifting and implementation phases. A simplified explanation has been based on Lewin’s change model, which details the stages that an organization goes through before the attainment of the desired results. The three critical steps are unfreezing, change or moving and refreezing or institutionalization. Every company that intends to shift from a closed to an open culture must embrace the fact that it must do away with the status quo and introduce a change based on the status quo and the desired results to realize the desired state.

Lewin’s Change model to an Open Culture is very significant in this research study as it embraces the fact that there have to be some distortions in the management structure of the organization. For every firm to realize a successful change, there has to be a specific time frame between the beginning and the end of the shift. The customers that each company expects to serve have variable expectations, and to conform to the patterns and the desired output structure, the company must undergo some changes in the structural outfit. The surest way for a company to align with the changing patterns of the world is by employing some changes in their functionality.

Generally, this paper suggests that to shift from a closed to open culture, there is a need to have a critical understanding of the issues that will need to change. The stakeholders' responsiveness to the change directly relates to the degree of efficiency resulting from the switch. As a result, every company that desires to change must employ careful and extensive research on the possible outcomes alongside the expectations. The relationship between the senior and the junior stakeholders dictates the willingness of the employees to adapt to change. As a result, this paper explicitly suggests that an excellent organizational relationship would be a significant catalyst that aids development. Literature gives some critical definitions of an open and a closed culture, but every organization has to define its expected internal and external behavior in its transactions.

The Importance of Open Innovation in Organizations

Open innovation is a method planned to speed up innovation and create new ideas through partnerships. However, usually, firms think internally. They develop technologies and products on their own. If the firms create the idea that they can invent everything by themselves, then OI has a long road to success. OI needs a ″a culture where collaboration, knowledge sharing, co-development, etc., are highly valued″ (Balsamo 2007, p. 8). OI Shakes company manages to effectively and efficiently share resources with other partners and units of the business. (Mortara, Minshall, 2009). OI teams play an important role by connecting different business functions. It is also done by facilitating the involvement of the innovation process, R&D, and top management during the procurement process.

These teams also accomplish several other activities, such as establishing partnerships with external collaborators (commercial partners, universities, government institutes, and research centres). BP's OI team has built a network of inventors where skills and resources can function as complementarities to help fast-track research activities. (Mortara, Minshall, 2009). The importance of open innovation cannot be underestimated, especially considering its prospective linkage with the success of a business.

The firm's usage of ideas from external sources is mainly a result of applying the concept of open innovation in the marketing paths. The boundaries of a firm that employs open innovation are relatively permeable, and the ideas can be easily transferred (Chen & Liang, 2011). Open innovation revolves around the insourcing of ideas (including technological ideas) from outside. Inbound and outbound open innovations help in the creation of and provision of market products and services and provide help to other companies, respectively (West et al., 2006). Open innovation is relatively relevant to a company’s development since it uses diverse sources of knowledge, such as the Internet. Generally, it applies the ancient view of “two are better than one” and maximizes the use of the available knowledge and expertise.

Every business progresses over time and has its time of maturity. Extending the lifetime of a product is a short-term solution, but companies ought to make new business inventions and explore new technological fields. It is only after extensive market research that a firm can determine the best ideas and policies to better their products. Open innovation gives room for extensive research through borrowing ideas from within and without the organization (Chen & Liang, 2011)

Creating an Open Innovation Culture

Mortara and Minshall (2009) recommended two options that can help create an open innovation culture:

• The team shall oversee the implementation within the firm that is built and developed to oversee the principles developed at the central position in the OI culture. This is also done by creating links in business that are not related but have common skills applied.
• Be prepared in a manner that the units will not have a similarity in the culture shared. There will be different sub-cultures within the firm to control the units.

The barrier to OI implementation -The Not-Invented-Here syndrome

OI teams help to manage partnerships with new companies even when there are internal disagreements on their success. The teams make available their company's existing tools to partners. OI team employees and partners should be motivated to cooperate fruitfully. However, some barriers prevent the proper implementation of the OI team. The Not-invented-here (NIH) syndrome stance leads the company members to refute externally developed ideas such as technologies and knowledge (Mortara&Minshall, 2009). To control and prevent this syndrome, organizations should motivate their employees such that any idea is positively accepted.

The motivation techniques include:

(i). Regulative. In this technique, staff with achievements get rewards
(ii). Appreciative: This technique emphasizes a high degree of accountability and autonomy for the staff (Mortara, Minshall,2009).

Culture and collaboration

The culture of a business is critical in enhancing successful collaboration with external partners where all partners can gain satisfactory results. Open innovation requires a business to operate in an open culture (Prudhomme van Reine, 2015). Successful open innovation will be efficient when the company's internal culture is open and supports collaboration and knowledge sharing without hesitation. However, in SMEs, implementing open innovation is difficult because of the diverse cultural issues in their operation and locations. Such issues are usually overcome in big companies as they are more eager to collaborate with other partners in their diversities (Prudhomme van Reine, 2015).

According to Prudhomme van Reine (2015, p.74), it is difficult to sustain the closed model due to rapid investment increases, which are essential for R&D. The challenge is also encountered as a result of workers' increase in mobility and the knowledge that is significant in capital ventures. Any companies looking for external partners in an attempt to prevent the challenge of affecting their performance. Creating the right between closed and open innovation requires taking advantage of the external and internal networks of the company (Prud'homme van Reine, 2015).

Culture and top leadership constitute the building blocks of a performing company. Leaders are often aware of how important it is to develop and support a culture which contributes to the company's growth (Hitt et al., 2011). However, they also understand that changing culture requires time and hard work. The challenge, therefore, has prompted the need addressed in this research to investigate the barriers that hinder changing from an unfavourable culture to a favourable one that springs business into success. A research methodology that helps to learn from the cases of multinational companies that have successfully shifted from a closed culture to an open culture is presented in the next chapter with the help of Lewin's change model and a conceptual model that identifies factors that influence open culture.

Conceptual model

Managers/leaders, employees, values, open communication, collaboration, knowledge, and motivation are the elements needed to implement an open culture inside or outside companies. However, some of these elements can also be a significant hindrance to implementing an open culture. A right balance should be found to ensure all the elements push in the same direction; otherwise, change may never be realized or may take longer than it is supposed to take to be achieved.

Conclusion

Changing a business from a closed to an open culture requires proper preparation and understanding of all the issues that must be changed. The process of switching from a closed culture has turned out to be in the interest of many companies in pursuit of better performance. Companies with open cultures have better room for innovation and collection of ideas useful in formulating projects and plans to improve their performance and growth rate. The changes are hindered by different issues about the employees and their relationships with each other and the other stakeholders when performing their duties. Companies consider closed cultures unfavourable, so they look for means and plans to assist in the change process.

Closed and open cultures have different procedures when implementing a change in any of the various fields necessary for the smooth operation of a business. Businesses take open cultures better than closed cultures. In the three examined cases, there has been a significant improvement in the period taken to implement projects due to better sources of information from all the departments. It was also discovered that some companies don't feel secure when operating with open cultures due to the availability of information about the company to anybody in a department that makes strategic decisions. Often, the employees require critical information about the company which makes some stakeholders insecure and uncomfortable when the info availed to the company employees keeps its operations at stake. Another risk cited by companies that are negative about open cultures is the availability of information on their strategies to win significant market shares, which increases their competition and reduces the effectiveness of their open cultures. However, innovation was considered a significant milestone in enhancing a company's success. Therefore, open cultures were preferred by most companies since their steps and procedures of implementing and designing new projects are readily handled by the personnel with precise information and room to share ideas.

Despite the cited difficulties, most companies are ready to move from closed to open cultures, intending to improve their market share and overall performance. Employee motivation is the most significant challenge experienced in the change process. Companies manage to overcome the problem by having a stable management/leadership that understands their needs and their role in meeting the companies' objectives. Big companies want to have in their work environment rather than having a closed culture. Strategies to implement an open culture require proper planning and understanding of the factors that need to be considered when applying the change. However, it requires time and effort from the managers/leaders and employees. Factors influencing the implementation of open culture, including values, open communication, knowledge, collaboration, and motivation, must also be analysed and analyzed.

The three case companies (P&G, Kellogg, and LEGO) are doing well by following their set approach but still need to continue enhancing the change. The three companies have Managers/Leaders with a vision and employees with the right training and techniques. They are also ready to accept every change that is necessary for the company. The company's values support the company itself and the workforce, where employees receive and behave accordingly. Open communication facilitates smooth information flow in these companies, and everyone can access necessary data and instructions. Knowledge should always be up-to-date. When the company has the right information, changes can occur quickly. Collaborating correctly with people from within and outside the company with the proper knowledge can be successful when the environment is free and supports their ideas. The creation of new products still has restrictions on IPs in some of the companies even with the successful implementation of the changes. Motivation is the source of their empowerment for the workforce to continue the excellent work.

REFERENCES

Balsamo T. (2007). Open innovation: The importance of Culture (Electronic version). Berkeley Innovation Forum,1-27.

Mortara L. & Minshall T., (2009). Briefing: Creating an environment for open innovation (Electronic version). Institute for Manufacturing.

Chen, D. N., & Liang, T. P. (2011). Knowledge evolution strategies and organizational performance: A strategic fit analysis. Electronic Commerce Research and Applications, 10(1), 75-84.

Prud’home van Reine P. (2015). A networking culture to benefit from open innovation – a comparison between technology and business services industries in The Netherlands (Electronic version). Journal of Innovation Management, 71-105.

West, J., Vanhaverbeke, W., & Chesbrough, H. (2006). Open innovation: a research agenda. Open innovation: Researching a new paradigm, 285-307.

Hitt M.A, Ireland R.D, Simon D.G, TrahmsC.A, (2011). Strategic Entrepreneurship: Creating Value for Individuals, Organizations, and Society (Electronic version). Academy of Management Perspectives, 57-76.

Prud’home van Reine P. (2015). A networking culture to benefit from open innovation – a comparison between technology and business services industries in The Netherlands (Electronic version). Journal of Innovation Management, 71-105.