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Tibor Dőry

Innovation and excellence

Management methods for innovation transformation

Corporate excellence and success

Excellence and success mean different things to every business leader. In my conversations with executives, there were small business owners for whom getting through the next month or fiscal year was both a serious challenge and a success. But even in larger organisations, there is no single interpretation of excellence and success or their significance. For those working in industrial production, operational excellence and efficiency are the priority, and generally, the larger the organisation, the further removed the managers are from operational activities. Thus, at their level, the amount spent on social engagement, employee welfare expenditure, or even employee satisfaction levels may be the measure of success. The theoretical insight that only revenue and profit matter is much more nuanced at the enterprise level.
In recent decades, one of the hot topics in business literature has been the interpretation of corporate and organisational excellence and the identification of its various components and factors. One of the classics on the subject, the book In Search of Excellence by Peters and Waterman, was published more than four decades ago, in 1982, and still conveys important messages today. Tom Peters worked for the McKinsey management consulting firm from the 1970s and quickly became a partner. He launched a major research project examining the organisational and implementation capabilities of companies, while his colleagues in the New York office organised the research project around strategy. This is how he met Waterman, and their joint work resulted in the McKinsey 7-S model, which appears in every management textbook, and then in the book In Search of Excellence.
Peters and Waterman (1982) measured corporate excellence using six indicators, three of which show the rate of corporate growth and long-term wealth creation over a twenty-year period, while the other three show changes in return on capital and sales. The following six financial indicators were examined for 62 large American companies with revenues of more than USD 1 billion from 1961 to 1980:
  1. Growth in asset value;
  2. Share price growth;
  3. Market value to book value ratio;
  4. Average return on total capital;
  5. Average return on equity;
  6. Average return on sales.
 
It is worthwhile for today's business leaders to consider the above indicators and examine their development over several years in the case of their own companies, as well as to compare trends with the best companies in the sector. Even such simple benchmarking can be used to assess the effectiveness and international competitiveness of one's own organisation. The 7-S model itself encompasses the criteria for success that lead to excellence, divided into two categories:
  • Hardware: 1. Structure and 2. Strategy.
  • Software: 3. Systems, 4. Shared values, 5. Skills, 6. Staff, and 7. Style.
 
In their research, Peters and Waterman observed that all factors in the model are interrelated. Company leaders achieve better results on the path to excellence if they focus on the seven S's rather than on two hard factors. Real change in large organisations depends largely on how well managers understand and manage the complexity of the 7-S model. In addition, the 7-S framework draws managers' attention to the fact that "soft is hard", i.e. the "soft" factors are what really matter. However, in many cases, these soft factors are not sufficiently valued by company management, which mostly considers them intangible and difficult to manage. Instead, they focus on key performance indicators (KPIs) and often neglect the soft factors, which are crucial on the path to excellence.
 
Figure 3. McKinsey 7-S framework
Source: McKinsey.
 
The questions related to the 7-S framework provide important guidance for company managers on the individual elements of the model, which are worth reviewing and discussing with management from time to time:
 
1. Strategy
  • What strategic steps has the company taken in the recent period to improve its position and competitiveness?
  • What are the most challenging environmental trends affecting the company's future plans?
  • Do employees understand the essence of the corporate strategy and feel that the strategic goals apply to them as well?
 
2. Structure
  • What principle or logic guides the design of the organisational structure?
  • How would you describe the organisational structure in terms of functionality?
  • What are the advantages and disadvantages of the current organisational form?
  • How could it be further developed in the future?
 
3. Systems
  • What systems does the company use on a daily basis?
  • How do you view the diversity of the company's functions?
  • What is your opinion on the level of integrity of the systems? Is there room for improvement in the systems?
  • Do you find these systems effective in terms of their performance?
 
4. Style
  • Does management receive timely and adequate information about sensitive issues?
  • Are there formal or informal processes in place to facilitate the handling of employee complaints and the raising of issues related to their feedback?
  • Do managers promote teamwork and an organisational atmosphere based on mutual trust?
  • How great is the power distance? How distant are managers from employees?
  • Is management open to new ideas from lower levels?
 
5. Employees
  • What efforts does the company's management make to offer employees long-term career prospects?
  • Does it prefer external or internal recruitment?
  • What are the most important motivating factors for employees?
  • Are the application of corporate values and the code of conduct in their daily work included in the performance targets of employees?
 
6. Skills
  • What are the core competencies?
  • What are the most important soft skills expected of employees?
  • Are internal training programmes aligned with shared values, e.g. ethical business, high quality?
  • Is knowledge sharing within the organisation supported? Are there processes and systems in place to facilitate knowledge sharing?
 
7. Shared values
  • Does management regularly review and evaluate corporate values?
  • Do senior managers communicate these values and the code of conduct to employees? Do employees accept this?
  • Is there an intangible, shared value that brings the entire organisation together? If so, where does it come from and how did it develop?
 
Peters and Waterman (1982) summarised their research and many years of observations from their work as consultants to large companies in eight points. They believed that the application or disregard of the following statements fundamentally distinguishes innovative organisations from average companies and plays a decisive role in the success of individual companies. These success factors are listed below:
Encouraging action and emphasising the importance of experimentation. Companies' decision-making approach may be analytical, but too much detailed analysis can hinder problem solving. Thus, their approaches to solving problems and challenges are often experimental, and they address them immediately or within a relatively short period of time by creating cross-functional teams that may include external partners such as customers or suppliers. The motto of many such companies is: "Do it, fix it, and try it!"
Proximity to the customer. Companies can learn a lot from those they serve. They provide excellent quality, unparalleled service and reliability – things that work and last. Successful companies truly listen to the voice of the customer and use that feedback to make continuous improvements and develop new products and services.
Autonomy and entrepreneurial spirit. All employees – not just those working in R&D – are expected to be creative and innovative in their daily work. Innovative companies support many entrepreneurial leaders and innovators within the organisation. They do not try to restrict everyone, but rather allow creative energies to flourish, encourage practical risk-taking and support new attempts.
Achieving productivity through people. Employees are expected to come up with ideas to reduce waste and increase productivity within the company, with the appropriate framework in place, e.g. encouragement to participate, empowerment and rewards, remuneration.
Practical and value-driven. The company's philosophy, vision and values are seen as the main guiding principles and are much more important for day-to-day activities and challenges than technological or economic resources. At the same time, managers are expected to visit and familiarise themselves with production halls and supplier sites on a regular basis.
Sticking to the core business. Excellent companies stay close to the business they know and do not engage in activities that are far removed from their core business. Several company leaders urge caution in this regard and emphasise that it is not worth buying a company that we do not know how to run.
Simple, flat and lean organisation. The underlying structures and systems at excellent companies are elegantly simple. Their senior management is also lean, and often fewer than 100 senior managers are able to run global companies with tens or hundreds of thousands of employees and revenues of many billions of dollars.
Excellent companies are both centralised and decentralised. On the one hand, they give autonomy to workers in production plants and those involved in product development. On the other hand, they are fanatically centralised around a few core values that they consider important. Their employees may be considered brainwashed, as they are adaptable and compromising, but their commitment to the company and their reliability cannot be questioned.
 
In summary, we can say that excellent companies are, above all, brilliant in their basic operations. The tools, machines and equipment they use in their operations do not replace thinking, which is why knowledge capital and the highly skilled employees who possess it play such an important role. Excellent companies work hard to keep their processes simple in a complex, chaotic and constantly changing world. They are persistent. They insist on top quality. They flatter their customers and serve them to the utmost. They listen to their employees and treat them as adults.
Most of the above criteria for excellence are not surprising. In fact, they are almost obvious. Almost everyone agrees that a company's employees ("human capital") are its most important asset, but beyond the slogan, average companies do not really exploit the innovation potential inherent in human resources. Excellent companies are different in this respect; they truly live up to their commitment to people, as they prefer action – any action – to countless meetings, committees and endless studies. They treat quality and service standards as a fetish and insist on regular initiative. They do not expect salvation from a select few thinkers and developers isolated from production and service, but from every single employee.
 
Innovation and excellence

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2026

ISBN: 978 963 664 182 5

Menedzsment

The aim of the book "Innovation and Excellence" is to inspire and encourage company leaders, managers, and experts to initiate and implement innovation transformations with the help of professional literature and corporate case studies. Another important goal is to help develop the innovation capabilities of small and medium-sized enterprises in particular by sharing simple, proven management methods that can be tested in practice.

The first part of the volume reviews the factors of corporate excellence and success, then highlights the possible sources of innovation, with a focus on the role of users and employees. The empirical section presents a detailed description of the supportive role of the workplace environment and creative working conditions based on corporate case studies (AUDI, BOSCH, MELECS). The volume concludes with a description of selected tested practical methods and management techniques that readers can try out in their own businesses.

Hivatkozás: https://mersz.hu/dory-innovation-and-excellence//

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