Leadership in the Innovative Organization

In the context of the increasing globalisation of value chains the management of both manufacturing and service firms find themselves faced by contradictory pressures to reduce costs whilst at the same time engaging with customers and suppliers in product improvement and innovation. For advocates of lean production methods the answer is often to be found in a check-list approach to rationalising the present modes of value creation within any organization. Much can be gained by combining such approaches with modes of continuous improvement or kaizen. As Nonaka and Takeuchi (1995) have brilliantly illustrated, the most successful of Japanese firms have achieved their ability to adapt and to innovate through the uses of internal and external appropriation of tacit knowledge. For these authors this implied not only a 'bottom-up' structure of formal organization but also a means of listening and translating experiential knowledge into codifiable product and process designs. In the Japanese context this was seen as being brought about by the day-to-day integration of group decision making into operational management as well as the use of special project teams. The application of the methods has proved much more problematic for Western managers, although Japanese transplants have been relatively successful in the same Western context. In this paper I suggest that leadership styles and the formal organization of knowledge creation have to be seen as being congruent both in their aims and in the manner in which they are operationalised. Managers have also to begin by recognising the basis for the psychological contract held with outside customers, suppliers and other organizational members. Quality, especially in service fields, is often in the eye of the beholder!