Executive Summary
The report presents innovation at Balfour Beatty. The company has adopted Communities of Practice to advance innovation, learning, and information sharing. For internal efforts, the company must focus on human capital management, recruitment, employee motivation, favorable leadership styles, and flexible organizational structures. Externally, Balfour Beatty must advance collaboration, knowledge acquisition, sharing, and engagement of all relevant stakeholders. These efforts will result in a culture that supports sustained innovation at the firm.
Introduction
This is a timely report for Balfour Beatty PLC. Balfour Beatty is among the leading international organizations involved in infrastructure development. The company finances develop, builds, and maintains critical infrastructures that support day-to-day activities (Balfour Beatty 2016). After 100 years of operation, the company now relies on its global knowledge to deliver infrastructures that support economies, daily lives, and most aspects of communities.
In this report, the CEO expects a culture change after mounting problems. It presents the innovation process for Balfour Beatty alongside findings involving specific aspects of innovation. It is currently observed that the construction industry has faced myriads of challenges, including flat economic growth and declines in infrastructure spending across Europe. In this regard, Balfour Beatty must deliver enhanced value to its clients. The company can achieve this goal through innovative strategies that focus on sustainability to “deliver and maintain notable value to customers and other stakeholders” (Lerner 2013, p. 1). It must therefore cut wastes to realize both fiscal and environmental benefits. Innovation strategies at the company are aimed at consistently improving business efficiency using integrated systematic techniques and other industry best practices. The company believes in creating “information silos and integrated team to deliver excellent projects in a cost-effective manner successfully” (Lerner 2013, p. 1).
Innovation Theory
This section discusses a broad range of theories, models, and tools as applicable at Balfour Beatty PLC.
One can observe different variables in construction and infrastructure development. This implies that more than a single element is responsible for innovation and diffusion processes in a given firm (Robinson 2009). Factors such as research; available scientific and technological knowledge; emerging market opportunities; and inventions have significantly influenced innovation across different organizations irrespective of their size (Bond & Houston 2003).
Innovation Communities of Practice (CoP)
It is generally observed that Balfour Beatty uses innovation model referred to as innovation communities of practice. Innovation communities of practice reflect a collaborative model that leverages innovation best practices.
It has been observed that not more than five percent of employee knowledge is essentially captured and made available to other employees across an organisation (Kaplan & Winby n.d). Based on this low rate of knowledge capture, organisations have found it challenging to “harness critical knowledge to drive strategic innovation of products, services, and operational processes found in a dynamic, fast-paced business environment” (Kaplan & Winby n.d, p. 9).
For an organisation to create value to all stakeholders – both internal and external, it must use its “collective knowledge and share intelligence to create competitive edge and industry best practices” (Kaplan & Winby n.d, p. 9). CoP is recognised as a group of major “stakeholders from inside and outside an organisation who have a common interest in a specific area of knowledge or a field of practice and meet often to learn from one another and promote personal and organisational objectives” (Kaplan & Winby n.d, p. 9). CoPs offer a collaborative environment for work team learning and knowledge sharing (Silverman 2015). As a result, employees can leverage best practices through integrating and using knowledge captured from different sources. In the end, communities of practice lead to a creation of organisational culture that promotes innovation and assists in attracting and retaining innovation-oriented workforce. Various organisational units and other partner firms, as well as individuals collaborate during meetings to advance knowledge sharing, learning and ultimately best practices that result in innovation (Cooper & Edgett 2008).
Communities of Practice are driven by “knowledge and resources derived from social networks, which advance business strategies, technology innovation, and execution” (Kaplan & Winby n.d, p. 9).
Balfour Beatty exploits cross-functional employees drawn from several business units. As a result, the company can then stretch its knowledge, thinking and acquire insights from many complementary efforts. Balfour Beatty has noted that the effectiveness of a team to contribute towards innovative projects generally depends on different factors that drive its goals, support provided by senior executives and collaborative and learning efforts, and other practices that inspire social interactions to advance goals of the community.
When one looks at Balfour Beatty innovative approaches, some few insights can be derived. First, innovation, as most cases have demonstrated, does not only take place in some specific environments. Instead, companies that have managed to create favourable innovative cultures have become leaders in innovation. As such, innovation occurs across various industries. This implies that a construction firm like Balfour Beatty can also find new ways of delivering its services and products to clients and communities. Some industries have been labelled as low tech, traditional, or mature. Nevertheless, these firms have abilities to realise increased productivity and sales by utilising technology-driven processes and products. Similarly, firms in service industries have also shown that they are extremely innovative. In fact, service sectors, which characterised most advanced economies, have led most industries in creating and delivering new innovative products and services. From this observation, organisations should consider various needs from markets and customers and current policies.
Therefore, innovation policy initiatives should also be realised in the construction sector. Second, companies make massive investments in different innovation inputs, such as acquisition of innovative solutions (software and hardware), employee training, product or service prototyping, design development, and market research among other investments. However, these innovation inputs are not standard for all industries and, thus, differ significantly. In addition, companies should consider other non-research and development (R&D) inputs into their innovation policies. Third, it is almost impossible for companies to innovate without collaboration among employees. That is, companies create knowledge easier when employees engage in interactive processes either within or with other employees from other organisations. In most instances, they share both knowledge and technologies to facilitate learning and innovation. Evidence suggests that most firms that innovate often collaborate. Collaboration is a sustained process that can last for several years. Some notable collaborative partners are usually institutions of higher learning and research institutions. This implies that innovative firms must have a wider focus beyond their internal processes.
Fourth, uncertainty is a major aspect of most innovative solutions. It covers both fiscal and technological factors. It is almost impossible to predict how innovation will turn out even from a broader perspective. For instance, one may not be able to predict economic impacts of a given new product or service. Most firms often make serious prediction mistakes. In fact, such mistakes are common even if individuals involved are well informed, knowledgeable and adept. As such, it becomes extremely difficult to make sound investment decisions, particularly when it is difficult to explain the fiscal value of the intended innovative project. In this case, innovative policies in an organisation should not just concentrate on certain high-growth areas because of possible failures. Fifth, some firms have created clusters for competitive edge. Horizontal clusters consist of companies in a single industry, in a similar line of business, have wider distribution and appear to enjoy better economic performance. On the other hand, vertical clusters reflect relationships among companies in different industries, involved in different business activities, and specialisation, as well as input-output elements. Literature now suggests that innovative companies are now seeking for cross-border clustering. Consequently, some notable patterns built over long periods have been observed.
It is therefore important to note that such patterns could be difficult to change. In this regard, it is imperative for innovative policymakers to understand that some specific patterns exist across different business unit and externally. As such, any innovation effort should account for such variations. Sixth, another vital observation is that decision-making now goes beyond the firm. That is, multiple external stakeholders now influence internal processes of a company. In addition to collaboration mentioned above, several other variables have shaped behaviors of organisations in different ways. Social and cultural factors, government regulations, knowledge creation and management processes, infrastructure availability and organisational frameworks among others now influence internal decision-making processes.
These factors, taken together, could have critical impacts on innovative efforts pursued by a company. They can also influence the preferred innovative approaches. On this note, organisations should address certain specifics of a given system, its dynamics, and constituents. Finally, technology and scientific findings are imperative for driving innovation. In this regard, companies should consider science as the major source of their knowledge base. By recruiting more scientists in the research and development (R&D) department, many firms will create, capture, and share knowledge within and across the industry. That is, a construction firm can benefit from discoveries made by climate change scientists, for instance. Therefore, innovative companies tend to incorporate best practices derived from different fields into their practices. Thus, they do not isolate important finds that could benefit their processes.
Innovation Organisation
This section presents a wide range of internal factors related to innovation management for the designated Balfour Beatty using examples and theory.
It is imperative to note that Balfour Beatty can only crate competitive edge based on its abilities to be innovative. Traditional practices are no longer favourable in the construction sector. As such, understanding various internal factors that influence product, service and process innovation and their related consequences is vital for the company to choose the best innovation strategy (Zakić, Jovanović, & Stamatović 2008). This approach would eventually help in realisation of innovation goals. In this regard, multiple factors influence innovation at Balfour Beatty.
Innovation Culture
Innovation issues require a company to develop new ideas to overcome technical issues related to technology and market dynamics (Nagano, Stefanovitz, & Vick 2014). The internal processes should account for inputs and outputs that support innovation. Human dimension is an imperative element for consideration. The ability of employees to generate new ideas, experiences to assess ideas, intuition to engage in risks, and focusing on new approaches after failure are important aspects of any innovative culture. Thus, one can refer to social and cultural aspects of innovation in an organisation (Dobni 2008).
People
People management practices, as demonstrated through human resource management practices, should focus on leadership styles, team creation and strategic innovation (Yitmen 2007). These factors are normally responsible for developing a supportive innovation culture. In this regard, an organisation leadership styles and other HR policies and practices should be flexible; risk and uncertainty tolerant; diversified; and grant autonomy to advance creativity and appreciate innovation processes as core organisational value (Siguaw, Simpson, & Enz 2006).
The HR department continues to play a critical role in recruiting and selecting new talents to advance future innovation practices in the company. The department focuses on recruiting, selecting and retaining individuals with creative skills. In addition, the company boasts of employees with wide range sets of skills and experiences to promote creative solutions.
Motivation
Motivation is an imperative factor for innovation. Motivated employees tend to display passion for their jobs and derive personal satisfaction as they strive to break existing boundaries in search for new solutions (Shirahada & Niwa 2007). It is from this premise that Balfour Beatty should assess its influences on innovation performance bases on management policies. In this regard, human resource practices advance innovation at the company through motivating employees to engage in creative role, collaborative processes, and enhanced self-development through training and development.
In addition, leadership styles adopted by managers usually influence the development of innovative conditions (Heskett 2007). In this case, various behavioural and organisational variables influence innovation culture, and they can be assessed quickly to identify internal challenges. Hence, Balfour Beatty concentrates on recruiting managers with transformative leadership skills, technical knowledge, administrative skill and people relation skills (Thamhain 2003). It is also observed that tension exists between creative departments and other department. As such, people management is an important factor for assessment. Individual control, flexibility and consensus on most issues are imperative for an innovative team. Controls are necessary to check against deviation from the strategy, scope, unproductive debates, and uncontrolled task execution (Perez-Freije & Enkel 2007).
Balfour Beatty also focuses on sustained efforts to advance innovation. In fact, senior executives are usually encouraged to take a leading role in search initiatives. In this regard, the company has empowered its employees to pursue innovative solutions. A lack of such power leads to low involvement in continuous efforts to sustain innovation. It is expected that senior executives should demonstrate their support through physical presence, resource allocation, sponsorship, and communication (Aasen & Johannessen 2009). By adopting this approach, managers and employees will recognise that innovation is a part of strategic objectives that aim to advance and sustain innovation.
Structure and Governance
Balfour Beatty has designed its organisational structures and governance to support innovation. The company has recognised that innovation does not occur spontaneously in a vacuum. As such, various powers found in the company have been used to advance, coordinate, decide, and execute innovative projects (King & Anderson 2002). This aspect also accounts for cross-functional issues. From a cross-functional perspective, Balfour Beatty has created teams and individuals with specific responsibilities, roles and power to accelerate innovation. This power should be sustainable.
One should also explore organisational structure and related influences to understand innovation at the company (Weippert & Kajewski 2010). Evidence suggests that it is not appropriate to distribute roles based on various work characteristics (Thamhain 2003). In addition, by assessing specialisation, the company strives to diffuse tensions that may emanate between service delivery team and functional specialists. Thus, the company focuses its energy on finding the best solutions for generating functional knowledge, but simultaneously enhances cross-functional collaboration and integration required to execute a project successfully.
Balfour Beatty has strived to improve its services and other deliverables while still work on new solutions to create best practices in the industry. Since there are limited resources for innovation experiments, the company has embarked on prioritisation efforts to ensure that it can deliver both short-term and long-term results without experiencing the risk of favouring activities with less known risks and immediate financial results (Salaman & Storey 2002). Therefore, when the company engages in risk avoidance practices, then it faces the risk of delivering poor services and being replaced by firms that are more competitive.
The term ‘ambidextrous’ has been proposed to refer to firms with several systems to conduct innovation in various areas at the same time (Nagano, Stefanovitz, & Vick 2014). Evidence however suggests that such firms display some forms of intrinsic weaknesses because of low efficiency and enhanced pace of innovation that may hinder radical innovation (Stringer 2000).
For a larger firm like Balfour Beatty, the challenge of being innovative and sustaining innovative processes could be more difficult. For the company to be considered among the top innovators, it must reconstitute power dynamics found within its organisational structures, which include resource, cultures, values and processes. The role of senior leadership is imperative for innovation governance by ensuring innovation efforts are included strategic goals, defined responsibilities, and collaborative practices (Stuck 2009).
Innovation Strategy
In this section, wide ranges of external factors related to innovation management for Balfour Beatty are explore. The company understands that the traditional construction industry is fragmented and driven by sequential processes (Forum for the Future 2003). These may include “brief, estimate, tender, re-design, re-tender, create work packages, and build” (Lerner 2013, p. 1). These practices are however wasteful. Balfour Beatty innovative strategies entail integrated project delivery and a supply chain supported by strong partners. The multidiscipline team jointly works together to deliver better solutions.
Balfour Beatty innovation strategies are mainly concentrated on sustainable innovation that focuses on new products, operational efficiency, and social performance (Balfour Beatty, 2012; Felekoglu, Maier, & Moultrie 2013).
The sustainable innovation is based on engagement, knowledge sharing, leadership, and collaboration with external stakeholders, including customers and suppliers.
It depends heavily on information exchange in which senior executives engage other external relationships at both macro and operational levels where knowledge absorption plays a critical role.
Conclusion and Recommendation
Balfour Beatty has recognised the importance of innovation for competitive edge and growth. Consequently, it has adopted a sustainable innovation strategy for new products, operational efficiency, and social performance. Collaboration is a major innovative approach for the company. Both internal and external factors reflect enhanced interdependence between organisational context and innovation efforts.
The following are key proposals to improve the innovation processes of Balfour Beatty and ensure a culture change as the CEO desires.
- Balfour Beatty should only recruit and retain best talents that can support and sustain innovation
- Organisational practices should be flexible; risk and uncertainty tolerant; diversified; and grant autonomy to advance creativity and appreciate innovation processes
- Employees require constant motivation to advance a sustained culture of innovation
- The company senior executives must support all innovative efforts, define them as strategic objectives and allocate adequate resources for innovation
- Balfour Beatty must continuously improve its relationships with external stakeholders, including communities, scientists, universities, governments, and suppliers
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