Paradoxical Tensions and Innovation in Inter-organizational Strategies: A French case study

Transcription

1 Paradoxical Tensions and Innovation in Inter-organizational Strategies: A French case study Purpose The purpose of this study was to propose an analysis through the lens of paradox in inter-organizational strategies with a goal to create a joint innovation. In the past decade, a growing number of academic studies has emerged with rethinking strategic management of organizations through the prism of paradox (Quinn and Cameron, 1988; Poole and Van de Ven, 1989; Bouchikhi, 1998; Clegg, 2002; Perret and Josserand, 2003; Smith and Lewis, 2011). Paradoxes are omnipresent in organizations (Josserand and Perret, 2000; Jarzabkowki et al., 2013). A growing number of voices are calling for a renewal in strategic practices to find the correct balance between two opposing poles (Poole and Van de Ven, 1989, Josserand and Perret, 2000; Smith and Lewis, 2011; Jarzabkowski et al., 2013; Dameron and Torset, 2014). Smith and Lewis (2011) defined a paradox as Contradictory yet interrelated elements (dualities) that exist simultaneously and persist over time; such elements seem logical when considered in isolation, but irrational, inconsistent, and absurd when juxtaposed (Smith and Lewis, 2011, p. 287). For example, the tension between flexibility and efficiency or between collaboration and control can be considered as paradoxical. The authors demonstrated that paradox can be a powerful level for change (Hampden-Turner, 1990; Perret and Josserand, 2003), a resource for the organization (Hampden-Turner, 1990; Joffre and Koenig, 1992; Handy, 1995), and act as a guarantee for the dynamism of organizations (Smith and Lewis, 2011). Some have found the paradox as an essential challenge to understand the processes and organizational practices (Smith and Lewis, 2011; Jarzabkowki et al., 2013). Prior studies have demonstrated the inevitability and necessity of paradoxes for strategy practice (Watzlawick et al., 1975; Poole and Van de Ven, 1989; Lewis, 2000; Perret and Josserand, 2003; Smith and Lewis, 2011; Jay, 2013). Nevertheless, the majority of research about paradoxical tensions focused on intra-organizational strategies. Analyzing paradoxical tensions within interorganizational strategies provides the opportunity to study multiple paradoxes, beyond of only one organization (in the continuation of Bloodgood and Chae, 2010), and of only one group of actors (in the continuation of Smith and Tushman, 2005). This research seeks to identify paradoxical tensions during a merger with a view to create a technological innovation. Mergers are more and more conceived to develop competitive advantage through developing new technological innovations (De Man and Duysters, 2005). The still high number of mergers and acquisitions is a sign of the pace of today s business climate where traditional knowledge is not sufficient to assist managers in making sound decisions. This analysis comes also from the observation of the complexity and difficulty to identify multiple impacts of a merger in literature (King et al., 2004). This research aims at analyzing paradoxical tensions in inter-organizational strategies responding to the goal of creating a joint innovation. Why and how paradoxical tensions respond to the goal of creating a joint innovation in inter-organizational strategies? The present study makes one key contribution in exploring this question. We proposed a model (a reading grid) to observe paradoxical tensions in inter-organizational strategies on three different levels: strategic intent (1), structure of the relationship (2) and partner relationships (3). Rethinking strategy under the prism of paradoxes allows to unveil the complexity of strategies and organizations. It is a way to escape from a simplified and reducing managerial thinking (Martinet, 2006). Paradoxes appear as an opportunity to help managers to navigate through the complexity of organizations. Paradoxes could be a way to adapt and transform strategy practice by gaining perspective on the organizational complexity of a merger.

2 Design/methodolgy/approach We collected data from the study of observations of paradoxical tensions in the context of a merger in the Information Technology and Communication (ICT) sector. The study was conducted within two unlisted companies: a small entreprise (called estat) and a medium-sized entreprise (called Mediametrie). The choice of a single case is justified by reference to the scientific literature (Yin, 1994): to understand a specific situation in order to enrich scientific knowledge. Also, the opportunity for an in-depth study with free access to a substantial amount of information is generally unavailable to scientific research strongly influenced our decision. The case study is based on four main sources of information: passive observations (153 days of observation over 18 months) (1), participant observation (our participant role was as an engaged merger historian and we took parts in 32 meetings as a note taker) (2), 70 semi-structured interviews (3) and the analysis of internal documents: official merger records, newspaper files, etc In total, 373 documents were collected (4). Our analysis was pursued in three main steps: Analysis of paradoxical tensions (1), Identification of different levels of analysis (2), Analysis of implications on new technology development (3). These steps correspond to the three-stage model proposed by Delbridge and Edwards (2013) for studies built on critical realist ontology: the empirical, the real and the actual. History of the merger Both companies expected to achieve their ultimate goal of becoming market leaders in audience-rating tools. The aim was to combine the specific expertise of their technologies in order to create an innovative audience-rating tool. The strategic partnership was consolidated by the establishment of a new entity called Mediametrie-eStat. This merger was based upon the principle of "equality", focused on cooperation and mutual respect. The capital of Mediametrie-eStat was equally divided: 50 percent of shares were held by Mediametrie and 50 percent by estat. The responsibilities for control and decision making were jointly organized by a two-sided management committee. This management committee was composed of two persons of each company. Culture and management specificities were maintained since no personnel has been transferred. Phase 1: The preservation of both entities. At first, the merger was regarded as a remarkable opportunity. During the first six months, there was no real changing effect on the cultural side. It was not necessary to establish a high cohesion as members of the new entity were distributed on two sites quite distant with little personal contact between them. Employees were informed that their work habits would not change fundamentally and that there would be no redundancy. Phase 2: The domination by Mediametrie on estat. Six months after the establishment of the new company, the Management Board noted that no new technology was set up because of three reasons. First, the complexity of the technical data: the process of combining technologies had been slowed down by the different ways how the separate entities dealt with the data. Secondly, there was a lack of measures to facilitate exchange between partners: the absence of a clear definition of roles and tools for monitoring, controlling and communication on the project. In addition, people perceived that the statu quo introduced in the beginning of the merger penalized decision making and innovation. From January to June 2004, the innovation project had not advanced. Board members acknowledged their inability to proceed and the necessity to have only one authority for the survival of the company. 2

3 Phase 3: The symbiosis: the equilibrium between Mediametrie and estat. In June 2004, a unanimous decision was made to give power to Mediametrie because of its economic size. As a result, estat no longer take part in decisions of Board meetings, while Mediametrie imposed its rules and operating condition (coding technology skills, roles and regulations). Conflicts during Board meetings occurred less commonly; nevertheless, the expected strategic partnership was still not achieved. Findings This study offers a reading grid of the multiplicity of paradoxes identified in a merger context in order to create a strategic partnership and to develop a technological innovation. Chart 1. Perception of paradoxical tensions in the context of a highly innovative merger (case study of estat-mediametrie) Level Paradoxical tension identified 1. Strategic intent - Need to build the future and necessity to secure the present - Need to innovate quickly and stay in statu quo 2. Structure of the - Asymmetry and equality relationship - Preservation and integration 3. Partner - Trust and distrust relationships - Convergence and divergence Explanation of these paradoxical tensions identified in the case study: 1. Strategic intent. We identified as a paradoxical tension: the need to build the future and the necessity to secure the present at the same time. Indeed, it was necessary to take chances in order to innovate (to create a competitive advantage over the duration and to keep the promise made at the market and thus to ensure its legitimacy), and in the same time, to ensure short-term profits of the company. This paradoxical tension is qualified by Smith and Lewis (2011) as Learning and performance. The actors are constrained by two poles in opposition: to explore the future (to develop the innovation jointly) and at the same time, to exploit the present capacities of the companies (to grow rich mutually) (Tushman and O Reilly, 1996; Van Der Vegt and Bunderson, 2005; Andriopoulos and Lewis, 2009). This observation is linked to the second paradoxical tension observed; the need to innovate quickly and stay in statu quo as the main interest of this merger was the creation of a joint technological innovation. Stakeholders are aware of the pressure to innovate but face problems for activate the process; the innovation process was stopped at the end of the first period (Phase 1: the preservation). 2. Structure of the relationship. Asymmetry and equality: there is a strong asymmetry between the two companies in terms of size, economic and financial weight in favor of Mediametrie. But at the same time, a complementary exists in these oppositions: the young start-up estat with a fluid and flexible management should stimulate innovation and creativity within the giant Mediametrie. Mediametrie considered estat as an equal partner by accepting a merger The strong and the weak one, the giant and the small one, are opposite and at the same time complementary. The second tension between preservation and integration (Smith and Lewis, 2011) is due to the choice of an evolutionary approach between the two companies. The choice of 3

4 preservation (Phase 1) brings the two companies to maintain their original system of organization. It was a proof of recognition and respect. The justification of the strategic objectives (joint innovation and creation of distinctive advantages) requires exchanges and interactions. Safeguarding and integration are opposite in a dialectical way: any increase in one tends to cause a reduction of the other. To be integrated involves the risk to fall into a relation of dependence, and thus a loss of autonomy. Contrary, being preserved implies autonomy and a certain degree of independence. They are also complementary since they are mutually reinforcing. 3. Partner relationships. Trust and distrust. In the case Mediametrie-eStat, the actors testify a strong confidence into each other, in particular at the beginning of the merger: strong reputation of the partners, strong belief in competences of each one, and good agreement between the shareholders (speed of the negotiations and shares 50/50 of the new company). However, mistrust was occurring: Mediamatrie wanted to control estat (Phase 2) and expected them to transmit all their knowledge. Research on paradoxes (Lewicki et al., 1998; Lewis, 2000) does not try to resolve the tensions between trust and distrust. It rather encourage to use trust and distrust like two complementary attitudes: the negative effects of trust (for example, excessive commitment and vulnerability) are neutralized or decreased by the positive effects of distrust (for example, vigilance) and vice versa. Convergence and divergence (Adler and Gundersen, 2008): Mediametrie wishes to impose its formalism, its rigor and authority, but estat was not very inclined with this kind of management. The convergence of the methods was necessary to create harmony in the new organization and to innovate together. But in same time, this convergence is a source of tensions and limits strongly the development of innovation. Contrary, divergence supports the emergence of different opinions and creativity. Originality / value This study makes three primary contributions. First, it extends the literature on paradox and broadens a theoretical identification of paradoxical tensions in highly innovative mergers. We proposed a reading grid to put in evidence all multiple paradoxical tensions that drive organizational change in the context of an innovative partnership. While the majority of research on paradoxes focuses on the tensions within a single organization, we believe that the multiplicity of paradoxes observed here may encourage the continuation of work on the paradoxical tensions in inter-organizational strategies. This tension-based representation enabled us to differentiate three levels of perception of paradoxical tensions: strategic intent (1) (the need to build the future and the necessity to secure the present; the need to innovate quickly and stay in statu quo), structure of the relationship (2) (asymmetry and equality; preservation and integration), and partner relationships (3) (trust and distrust; convergence and divergence). Secondly, our results showed that a balance has been found at every level of the analysis. We believe that actors were able to establish a dynamic equilibrium because of the development of technological innovation. Indeed, the innovation project was central to the establishment of a strategic partnership and allowed actors to stay at course through the dynamics. This proposal led us to consider the action of technology in tensions and echoes the work of Michaud (2011). The author explained that technology can play a crucial role in the tensions. This reflection leads us to perceive technology as a potential actor to achieve the dynamic equilibrium of contradictory tensions. 4

5 Thirdly, the purpose of this analysis was to bring organizational stakeholders to become aware of the complexity in which they operate since master managers must have the capacity to use paradoxes (Smith and Tushman, 2005; Dameron and Torset, 2014). As such, our argument here is that a company can adapt its strategy by identifying and positioning itself in relation to specific tensions. Such knowledge may help to inform the selection, promotion, and training strategies employed by practitioners. A practical implication of this paper is that managers should become aware of the poles of organizational paradoxes before making strategic decisions. This research is a beginning. We think that paradox in inter-organizational strategies can open news perspectives, for academic researches and strategy practices. We encourage organizations that want to perform and innovate well to successfully deal with paradoxes. 5

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