Dynamic Tension in Innovative, High Technology Firms: Managing

Rapid Technological Change Through Organizational Structure

by Claudia Bird Schoonhoven and Mariann Jelinek

For high technology firms, to survive in contemporary economic competition,

eternal innovation is the solution of survival. Survival depends on maintaining a
steady stream of innovative microelectronic products manufactured in high
volume by frequently changing state-of-the art technologies. In this article the
authors ask how organizations that must continuously innovate over time can
manage the dominant competitive issue of innovation. Their focus is on how
companies create a stream of innovations that are commercially successful.
The authors examine how companies organize for innovation by conducting a
longitudinal study from 1981 to 1988 of 5 highly innovative US electronic firms
(Intel, National Semiconductor, Texas Instruments, Hewlett-Packard and Motorola
Semiconductor) that manufacture and compete in the semiconductor
components, systems and computer marketplaces. These companies are all
highly successful in creating rapid innovations over time. The authors recorded
changes and shifts in the companies products, markets, technologies and
organizations. They interview more than 100 high technology managers and
engineers Interviews from the top to bottom of organizations and discover that
they do not view the organizing process as simplistic, but as complex
organizational processes unlike models from contemporary management
textbooks.
Today's textbooks describe organizations as either organic, and thus
appropriately structured for innovation and change, or mechanistic, and thus
appropriately structured for steady-state technologies and environmental
stability.
Commercial success is a function of an organization's innovative ability as well as
its ability to efficiently produce what is has created. The market test that
determines success for these companies. This imposes a dynamic tension on the
organizations to be simultaneously clearly structured for efficiency while adapting
to organizational modifications required by changes in their technical and market
conditions. The old organizing formulas do not work because they underestimate
the complex set of activities with which high technology companies must
simultaneously contend to be successful, and thus for which they must be
organized simultaneously. Also, electronic firms compete in environments that
require both innovation and efficiency, thus dynamic tension is created by
external and internal conditions.
The pace of technological development is so fast that entire existing product lines
can be obsolete within 2 years. To cope with the pace of technological
development, the authors found 4 key aspects of structure in these companies
that interact to coordinate the many complex activities required in constant
innovation: (1) a dynamic tension between (2) formal structures and reporting

relationships, (3) quasi-formal structures, and (4) informal structures of the

organization. Central to success in the high-technology markets of today is
innovation, technical excellence, manufacturing efficiency and market success, or
predictability towards near-constant change.
WhenSome literature from the past: Innovation is best served by organizing
according to principles of "organic management" (Burns and Stalker, 1961).
Communication between people from different ranks tend to resemble lateral
consultation rather than vertical command (Burns and Stalker, 1961). Four
separate dimensions of organic structures are implied.: (1) ambiguous reporting
relationships, with an unclear hierarchy; (2) unclear job responsibilities; (3)
decision making is consultative and based on task expertise rather than being
centralized in the management hierarchy and (4) communication patterns are
lateral as well as vertical (Schoonhoven and Eisenhardt, 1985)
According to Burns and Stalker (1961), when firms want to survive, organic
structures are useful for coping with unstable conditions. However, the
interviewed firms in the research display well-articulated structures, definite
reporting relationships and clear job responsibilities. The two differences between
the theory and the data of the research are that (1) these innovating
organizations reorganize frequently and by changing the responsibilities and
reporting relationships. (2) The other difference is that a dynamic tension is
inherent in semiconductor and computer firms faced with changing markets,
technologies and manufacturing processes.
DynamicOn the one hand, they require continuity, control and integration
between functions and departments, and on the other hand changing
environments and technologies require organizational adaptability and flexibility.
This is called the dynamic tension: ability to be both flexible and systematic to be
efficient. The highly innovative companies changed their structures from one
clear structure to another when problems arise, while maintaining a dynamic
tension among organizational elements. Reorganizing is an adaptation to a
changed environment and technical circumstance for which the company is no
longer appropriate.
Frequent reorganizations (changing the formal structure of the organization to
adapt to environmental change) and a dynamic tension between flexibility and
efficiency (ability to be flexible through reorganizations and systematic enough to
produce efficiently). Employees expect change. The change process is
participative, TMT sketches major changes, but middle/lower management
determine the structural change in their divisions. Such organizations are claimed
to be self-designing organizations, which is possible because people are highly
self-critical (leads to a willingness to reorganize) and because of awareness of the
environment (to which context do you need to adapt).
Quasi formal structures: extensive use of committees, task forces, teams and
dotted-line relationships (for information). Change frequently and are used for
problematic circumstances that require additional managerial time. However,
costs as well as benefits, because it takes time and energy.

Informal structures: strong norms and practices which guide interaction,

regardless of position in the hierarchy. Collegial environment.
Issue of company size: break down the company into several smaller business
units.
They key to continued innovation success is to be found in careful management
of structure. This includes re-examination of formal structures considering
changing technology and market needs. This provides a signal to employees that
change is good and is to be managed and adapted to changed conditions. Clear
organizational structures, frequent reorganizations and an extensive use of quasistructure contribute significantly to the long-term innovative abilities of the high
technology companies we have studied.