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IB829 Innovation & Creativity In Organisations

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  • Course Code: IB829
  • University: University Of Warwick
  • Country: Australia

Question:

Objective: We would like you to choose an organisation or firm to which you have access, or which you know well, and develop a plan for improving creativity and innovation within the organization. It may help to consider yourself a “Creativity and Innovation Consultant.”

You have two main tasks, both of which will require a thorough analysis of the organization, the application of information from the module, and additional outside research specific to the problems your organization faces.

Tasks:

  • Analyse their strengths and weaknesses in their creative and innovative processes

  • Propose an action plan, based on what you have learned in the module, to improve their creativity and innovation
 

Answer:

Introduction

Pepsi Company is among the largest manufacturer of snack and crisp with very high annual sales. The company is also known for its manufacture of carbonated drinks. However, Pepsi Company is not only known for the products it manufactures but also for their methods of production. The company is very creative and innovative in their activities where the company invented various brands of sale instead of selling one particular product.

There are various critical drivers of innovation in the company and among them are strategy and structure. There is a very complicated relationship between structure and policy in the company. The primary plan of PepsiCo was to enter the new rapidly growth markets, to achieve this. PepsiCo had to restructure their organizational structure twice within four years (Alvesson, 2016). To successfully implement this strategy, the leadership of PepsiCo had to continuously evaluate, adapt and implement new policies across the PepsiCo structure that supported the primary approach. This would not have been an easy task. It required a lot of creativity and the management of the company had to consider several factors.

  • The current PepsiCo structures may not be able to cope with the new radical change.
  • The type of structure selected is imperative to the success of the change.
  • The new structure must allow the resources of the organization to implement the selected strategy. It must not limit their implementation options.
  • The complexity of the change required to be managed to ensure the successful implementation of the restructuring.

Another key driver of creativity and innovation in Pepsi Company is Product innovation. Product innovation is essential to many companies and firms because of competition. Since the environment is dynamic, product innovation is a strategic priority for many businesses and businesses. It assists the management of firms to plan for the future of their products and services. Product innovation increases research and development of companies. Product innovation is necessary for the preparation for economic growth. The market often responds positively and rapidly to new products and services. However, not all the commercialized products are successful in the stock exchange. Radical product performance is the success of the product innovation in the market area.

The company also came up with a new organizational structure as a creative way of improving business operations. A new corporate structure provides new opportunities for employees, although it can be argued it also presents new threats. It’s imperative that the employees must be consulted and included when planning the restructuring. Employment moral can’t be ignored by the leadership of an organization. Organizations require buy-in from their employees. To increase buy-in, organizations may develop rewards systems for their employees. This practice is highly recommended when an organization embarks on a radical change.

Innovation cannot happen without the presence of talent which means the business has to approach recruitment of new employees more strategically especially when it comes to nurturing individuals from diverse environments. However, the majority of talented individuals increasingly prefer to start their businesses rather than joining an already established business. For this, PepsiCo has to emphasize to potential recruits that the company will be able to create a change for them. The company hence built a design and innovation center in the lower parts of Manhattan, New York which notably made for this focus. The center is staffed with about 70 designers recruited from some of the best design schools and design companies.

However, the company still faces challenges in the effort of spreading diversity across the business. Some of the difficulties were realized when the company was looking for a recruit to do a very senior job, and a whole bunch of candidates was all men hence the company had to create some diversity by finding a female candidate which they couldn’t. Managers of the company realized that it’s not that easy to develop difference and one requires a strategy where unless one brings it to the consciousness, the difference cannot happen organically.

 

Influence of Creativity and Innovation on PepsiCo

Creativity and innovation have influenced the activities and business operations of the company positively by increasing their production and hence their annual sales. PepsiCo focuses heavily on the novelty of their packaging technologies. The company has made an exciting step by filing a patent to make paper bottles. The idea of making paper bottles is apparently not new. The Green Bottle Company in the UK introduced the first paper bottle in the year 2007 in the storage of milk. The manifest by PepsiCo proposes a different method of production. High levels of carbonation will cause Pepsi not to be served in these bottles since they may prove to be problematic in the design of the packaging (Banerjee et al., 2016).

However, PepsiCo still owns various brands such as Tropicana, Gatorade, and Naked Juice and the company also has a partnership with Starbucks which offers ready to drink beverages. All these are possible areas where the idea of paper bottling may be applied. A move like that will encourage other businesses to produce innovative recyclable products to reduce the amounts of plastics in dump sites. The company also saw it also creative to make the drinks aromatic on one of their packaging manifest applications. The plan was to make their products smell more natural to the consumers.

In the previous years, PepsiCo had put less senior executives in charge of innovation where they kept innovation at the brand level. However, a recent move by PepsiCo was the hiring Luke Mansfield, a previous employee of Samsung Electronics. Luke was hired to be the VP of Global Innovation in the company where PepsiCo’s President Brad Jakeman said that the company had decided to elevate innovation to a VP-level role. Brad said that this showed their significance in their commitment to innovation and also the shifts experienced in the consumer demand for beverages all around the world (Caniëls & Rietzschel, 2013).

As the majority of the food companies around the world, PepsiCo is also prone to allegations and controversies meant to attack some of the company’s brands. A good example is an event in February 2011 where the company was accused of adding carcinogenic substances in their products. In the present times where consumers are well aware of the various issues surrounding production such as health, social and ethical issues, such controversies will negatively impact the confidence the shareholders and consumers had on the operations of the company. The increase in competition also poses a critical challenge to the company wherewith stiff competition; factors such as legal battles may arise (Ceserani, 2011). An environment with such problems requires the company to be very creative and innovative when dealing with such issues.

 

An interview assessment

An interview with the company’s CMO Seth Kaufman discussed the primary operations of the company and how the company is using innovation to stay ahead in the marketing world. The CMO confirmed that the main factors that make the company stay ahead are the constant evaluation of new technologies and a qualified innovation team. Among the questions asked in the interview include how the company got into marketing. Seth said that they had always been interested in the influencing of consumer behavior and hence creating an impact on the response.

Seth said that in the many years of working for PepsiCo, a lot of factors have changed where this is triggered by the fact that consumer demand is rapidly evolving (In Ashkanasy, In Wilderom & In Peterson, 2011). The methods and way of communication have changed hence the company finds it significant to develop regarding how they interact and engage with their consumers. Seth also added that the company has an innovation team that has actual diversity, not visible diversity but the difference is seen in both the set of skills and their background. Hence, as the CMO, the creation of the right culture and the breaking down of various barriers to support the innovative team is very important. The company creates an environment that allows the team to prosper, and hence it becomes stronger.

Seth also discussed intensely the company’s innovation team where he gave an example of how the company makes progress through performing actions. The PepsiCo creator is a group of the innovative organization that mainly deals with the marketing innovation. The group sets an example for entrepreneurs, looks at new upcoming trends in technology, are responsible for finding new partnerships, testing of new equipment and seeing what lost ideas they can bring back. The group possesses more of foresight rather than insight.

The company has also created the PepsiCo Fast Pitch which comprises internal teams that are responsible for creating ideas intensive on driving sales, establishing new streams to generate revenue or creation of content and they then pitch them to the company’s leadership who the decision whether to fund the ideas or not. The group comes together with a team of very passionate individuals, and if the team can sell their plans to the management, the management offers them with the required resources. The process improves the level of creativity and innovation in the company and maintains the agility, experimentation and the entrepreneurial spirit of employees. The idea also empowers the employees where they learn to take action on their ideas and not just to talk about them.

Seth also discussed the methods that the company uses to evaluate the new emerging trends of technology thrown at them all the time. He emphasized that the company tends to be considered more of leaders than followers. He continues that the company may find it harder and harder since technology affects various platforms (Venkataraman & Summers, 2017). The company believes in people and the ideas they provide which in this case helped by pushing the company a little beyond their comfort zone. The company invests resources in these new technologies where they focus more the people and then the platform.

Development of an innovation action plan

In the establishment of an innovation strategy plan, one has to follow various steps that will enhance the creation of an effective method. The measures include:

  • Knowledge sourcing
  • Knowledge transformation
  • Exploitation

Knowledge sourcing

Knowledge sourcing is the process where one gets the required knowledge to undertake an innovation process. Various factors should be considered where particular information is collected about the company. In our case, the cultural organization of the company is a factor to consider in the development of an innovation plan.

 

Organizational culture

Culture means a series of shared beliefs and values that assist the members of the firm or company to understand the existing regulatory norms. Corporate culture contributes to the process of product innovation. In many organizations, these values and beliefs follow a given framework that facilitates teamwork towards innovation of new products (In Ashkanasy et al., 2013). These values include competition values, the orientation of customers and competitors in the firm, firm's learning orientation and finally the firm's values about investment in the upcoming technologies. In competition values, there is the competing values framework model, which shows that managers to make choices to control tensions organizations. It allows flexibility and control in the organization.

There exist many types of culture in the firm. The adhocracy type is flexible and has the willingness to take chances. It helps to enhance creativity and entrepreneurship. The market type produces competitive behaviors within the organization. These behaviors include aggressive product development, expansion programs, brand building, and price competition. The clan type builds relationship behaviors in an organization (In Plucker, 2017). These behaviors include superior customer services and strong internal selling force. The last culture is the hierarchy that produces routines that assist in smooth operations of the firm.

Adhocracy culture contains the values of innovation, entrepreneurship, and external orientation. It is the foundation for radical product innovation. Customer orientation helps in the creation of stronger customer value based on the nature of the products. Customers assist in solving the problems that arise from product innovation. Information from the customers helps in shaping the kind of changes in firms.

There exist two kinds of customer orientation, responsive orientation, and proactive direction. Sensitive customer orientation deals with solving customers' needs with the current technology and advancement. However, forms that use this approach may get a challenge on the technologies they use. In proactive orientation, many firms have intelligence that assists the management to know the customers' needs. There is anticipatory intelligence on customers that focuses on understanding the potential and future needs of customers (Kittlaus & Fricker, 2017).

Firms should combine both responsive and the proactive customer orientations. Sometimes responsive orientation generates incremental innovations. Incremental innovations help to reduce the risks of the firm. It acts as a driving force that produces funds necessary for radical innovations. Proactive orientation help in developing market intelligence for the development of fundamental innovations (In Alvesson, 2016). It sets the foundation for a future measure of cash. The measure of the money is a critical component that drives the stock prices.

Culture affects the behavioral norms in product launch strategy. For instance, Pepsi's executive may develop a new strategy to enhance competence, but the culture of the firm may be a barrier to realizing this project. Culture also affects the organizational structure and composition. The culture in the organization must offer room for changes that enhance product innovation. Since the society is dynamic, there should be room for technological advancement in the marketplace.

 

Knowledge transformation

After gathering this information, the knowledge should be transformed into actions. The innovative plan is to create a product launch strategy. Product launch strategy is the mechanism through which the company communicates its value proposition to a given group of customers. It is the key to adoption of new products by the customers. Product Launch Strategy becomes difficult when customers have little experience with the new products. In organizations, this component is costly and risky (Treffinger et al., 2013). The most crucial part of this model is commercialization process and the development of the product.

Product Launch Strategy as a process follow the following steps, selecting the target markets, establish a marketing procedure, predicting capital results and formulating a system for adjustment and control. Launch strategies should advocate the diversity in product innovation and the available markets. Pepsi Corporation has utilized the organizational culture to enhance product innovation. Through learning the demands and the desires of her customers, they produce products that are of quality making their changes relevant.

The primary objective of creating this innovative plan can be divided into three main parts:
  • Financial objectives
  • Consumer objectives
  • Internal objectives

Financial objectives

The financial objective of this innovative plan is to grow the value of PepsiCo to its shareholders and stakeholders. The plan is also aimed at increasing earnings per share were to achieve this; we have to increase the production and hence profits. Also, the innovative plan is aimed at increasing revenue which represents the growth of the business. Increasing the income will mean that the industry is performing normal operations (Sierk, Dvora & Ida, 2011). The plan is also meant to maintain appropriate leverage for finances. The plan will create an optimal amount of debt that the company should stay within.

Consumer objectives

The product launch strategy will ensure that the company provides the best value for the cost where the consumer knows that the product they are purchasing is not the most expensive nor is it the highest quality, but it is the best deal they got. The plan also aims at providing a broad product offering. The strategy will be able to offer the best product in the industry regardless of the cost. Another objective of establishing an innovative plan is to increase the share market where through innovation and product launch strategy, PepsiCo will be able to increase the number of customers they will be serving due to increase in production and product promotion.

Internal objectives

Among the domestic purposes of the innovative plan is the production of innovative products where the company prides itself on cutting-edge and constant innovation.  The project will help PepsiCo to differentiate their products by separating some of the features of their products to make a difference (Shalley, Hitt & Zhou, 2016).  PepsiCo should shift their investments in the research and the development of innovative operations. The innovative plan also aims at improving the percentage of which new innovative products are sold.  By this, they will acquire new customers from the creation of a new market.

Measurement and evaluation success

After the plan of improving organizational culture and the product launch strategy, various changes should start to be observed in the company. The changes can be evaluated by assessing the number of sales which will have been reported for that financial year and compared with sales from the previous year. The variation observed will be the increase in earnings per share which is among the objectives of the plan. Also, assessing the market size they serve will also show the change in which the plan brings about. An increase in market size shows the innovative idea is significant and is working in favor of the company. In conclusion, organizational culture plays an essential role in the process of product innovation. It enhances competitive markets for the goods and services offered by many firms. These components of product innovation are as well critical to the success of many firms as seen in Pepsi Corporation.

 

References

Alvesson, M. (2016). Organizational culture: Volume 2. Los Angeles: SAGE Reference.

Banerjee, Banny, Ceri, & Stefano. (2016). Creating innovation leaders: A global perspective.

Caniëls, M. C., & Rietzschel, E. F. (2013). A Special Issue of Creativity and Innovation Management: Organizing Creativity: Creativity and Innovation under Constraints. Creativity and Innovation Management, 22(1), 100-102. doi:10.1111/caim.12010

Ceserani, J. (2011). Bigideas: Putting the zest into creativity & innovation at work. Staffordshire, U.K: Power & Grace.

In Alvesson, M. (2016). Organizational culture.

In Ashkanasy, N. M., In Wilderom, C., & In Peterson, M. F. (2013). The handbook of organizational culture and climate.

In Plucker, J. A. (2017). Creativity & innovation: Theory, research, and practice.

Kittlaus, H., & Fricker, S. A. (2017). Product Strategy. Software Product Management, 49-118. doi:10.1007/978-3-642-55140-6_3

Shalley, C. E., Hitt, M. A., & Zhou, J. (2016). The Oxford handbook of creativity, innovation, and entrepreneurship.

Sierk, Y., Dvora, Y. Y., & Ida, S. (2011). Organizational Culture. Cheltenham: Edward Elgar Pub.

Treffinger, D. J., Schoonover, P. F., Selby, E. C., & National Association for Gifted Children (U.S.). (2013). Educating for creativity & innovation: A comprehensive guide for research-based practice. Waco, TX: Prufrock Press.

Venkataraman, S., & Summers, M. (2017). PepsiCo: The Challenge of Growth Through Innovation. Darden Business Publishing Cases, 1(1), 1-22. doi:10.1108/case.darden.2016.000230

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