Management at Work

Unstructuring Structure

Many companies have “specialized in innovative ways of saying no to innovation.”—Jim Lavoie, cofounder, Rite-Solutions

Jim Lavoie boasts an impressive résumé as an executive manager, especially in manufacturing and operations. In addition to directing test manufacturing at Xerox, he served as senior industrial engineer at Hughes Aircraft and director of operations at Emerson Technologies. With partner Joe Marino, he cofounded Analysis & Technology, a provider of engineering and information technology and technology-based training systems for the military, and served as CEO until he and Marino sold the firm for $100 million in 1999.

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Looking back in 2011, Lavoie declared that “for my whole career, I did it wrong.” What aspect of a distinguished career had left him unsatisfied? Generally speaking, organizational structure and, in particular, the kind of organizational behavior that was encouraged by the pyramid model of both manager-to-manager and manager-to-employee relations (recall the levels of management pyramid from Chapter 1). “The hierarchical pyramid,” contends Lavoie, “is a relic of command-and-control conventional wisdom—more suited to controlling information flow than fostering innovation.”

Over the years, Lavoie experienced firsthand the rapidly increasing importance of innovation to organizational survival, especially in a Web 2.0 world. All too often, however, he found that companies “specialized in innovative ways of saying ‘no’ to innovation.” Take, for instance, the “murder board”—Lavoie and Marino’s epithet for the innovation committee at a company where they once worked. Anyone with a promising idea took it before the committee, where members would bombard the hopeful intrapreneur with questions about market size and cost projections. In the end, reports Lavoie, “you’re standing in front of six fat white guys who say that they’re there to help with your idea, but what they’re doing is shooting down your relevance.”

Ironically, adds Lavoie, he prospered under the very same system: In one firm, he reports, “I made it to executive VP not by being bright, but by being theatrical.” And that, he realized, was a widespread problem with the system: “Most people,” says Lavoie, “make innovation a contact sport. Which automatically leaves out the introverts. … Innovation offsites, jams, and ‘war rooms’ have the same effect: the idea with the most theater wins and the people with the most charisma suck all of the oxygen out of the room.”

Again, Lavoie found himself calling on personal experience as an executive manager: “I had spent 30 years in highly structured organizations where good ideas could only flow from the top down. … The relationship I had with people was transactional—‘I pay you, you work. You behave, you stay.’ … In the old world, your relevance to the organization was defined more by the level of your box in the pyramid than by your actual insight.…” “The best thing for an idea,” says Lavoie, “is air, and the more air you give it, and the more people who breathe the air, the better it will become.” So Lavoie and Marino decided to start up another company, and this time they would commit themselves to “two fundamental beliefs.” The first was the conviction that the pyramid was a relic, and the second held that “nobody is as smart as everybody—good ideas are not bounded by organizational structure, but can come from anyone, in any place, at any time. … So we scrapped the pyramid and the power politics that go along with it,” explains Lavoie, “to rethink the company as a community.”

The company, called Rite-Solutions, builds advanced software for the military and defense contractors as well as consumer-gaming platforms for casinos. The company employs approximately 175 engineers, programmers, and analysts and is 100 percent employee owned. Community building begins on Day 1, when new employees are given a birthday party—to show, says Lavoie, “that you’ve arrived at a new place where you belong, you were expected, and you’re important.”

It’s on Day 2, however, that you’re invited to “buy in” to the Rite-Solutions way of doing things. You’re given $10,000 in virtual money with which you can invest in portfolios of ideas proposed by Rite-Solutions employees. You can also volunteer time to any project that you deem promising. Most importantly, you can float your own idea on one of three indices: “Savings Bonds” (for efficiency measures), “Bow Jones” (for extensions of current company capabilities), or “Spazdaq” (for ventures into new businesses or technologies). You begin by drawing up an “Expect-Us” (as opposed to prospectus), whereupon you’re assigned a ticker symbol and an offering price of $10. An algorithm then determines the daily value of your idea, which is derived from the level of interest expressed by your fellow employees. If yours is among the top ideas on the board, management will help you flesh out an official proposal, and when it’s ready, company employees can invest money in or volunteer an “assist” with your project. If your project attracts sufficient employee-investor interest, you get a project manager who may take your idea all the way through production. In that case, your name will go on the patent filing, and you—and everyone who invested in your idea—will share in the financial rewards that your product generates.

The game, which is called “Mutual Fun,” was launched in 2005 “with the aim,” as Lavoie explains it, “of making our people feel relevant to the success of the business. … and tapping their amazing intellectual bandwidth far beyond assigned ‘job tasks.’ We wanted to entrust them with the future of the company.” Besides, adds Lavoie, “if it’s not fun, it’s work; and if it’s work, it sucks.”

Does Mutual Fun produce results? One of the very first ideas on the board (ticker symbol: VIEW) proposed an application of the company’s three-dimensional visualization technology to a program for teaching Naval and security-industry personnel to practice decision making in emergency situations. In its first year, the resulting product, called Rite-View, accounted for 30 percent of the company’s total sales. “Would this have happened if it were just up to the guys at the top?” asks Marino. “Absolutely not. But we could not ignore the fact that so many people were rallying around the idea. This system removes the terrible burden of us always having to be right.”

To date, Mutual Fun has generated more than 50 innovative product and process ideas. Fifteen have been launched and currently account for 20 percent of Rite-Solutions’ total revenue. Interestingly, Mutual Fun itself has turned into one of the company’s biggest revenue producers: By building in appropriate variations, Rite-Solutions has turned its in-house game into a cloud-based application for such customers as major universities, defense-industry clients, and large corporations. In its first year on the market, 2006, Mutual Fun accounted for 50 percent of the company’s new-business growth, and it has since certified Rite-Solutions as a pioneer in the growing trend toward gamification—the incorporation of competition, reward, and other game mechanics and techniques into business applications.

Case Questions

Must also include a summary of the case above.

  1. Obviously, Jim Lavoie and Joe Marino have little confidence in the chain of command principle as a means of fostering success in today’s business world. Explain why. How would Lavoie and Marino respond to the criticism that, under their system, “the buck doesn’t stop anywhere in particular”?
  2. Says Jim Lavoie: “Being acknowledged as part of an organization’s future is all it takes for an employee to grow deeper roots in it.” First of all, explain what Lavoie means. Then consider the following questions: Do you basically agree or disagree with Lavoie? Do you think that it’s important to “grow roots” in an organization that you work for? What might it take for you to feel that you’re “part of an organization’s future”—that it’s worth it to sink “deeper roots”? What other factors might be important to you in feeling that you’re something more than a mere cog in some organizational machine?
  3. According to Lavoie, Mutual Fun is Rite-Solutions’ “Innovation Engine” (IE). Its function, he says, is twofold: (1) It generates the good ideas that “fuel a Web 2.0 environment,” and (2) it “engages the Y Generation to strive for the betterment of the organization.” What is a Web 2.0 environment? What is the Y Generation? Do you work, or are you likely to be working, in a Web 2.0 environment? What do you think you need to learn in order to succeed in such an environment? Are you a member of the Y Generation? What values do you have that reflect Y Generation values?
  4. According to one researcher on the role of gamification in business, the difference between a product created in a factory and one that is crowdsourced is that in the former case, coordination is supplied by managers. In the latter case, it is provided by a structure that emerges spontaneously through the actions of the crowd.

What about you? Are you more comfortable working with other people when the requirements of the work are handed down by someone in “authority” or more comfortable when they “emerge spontaneously” from the interactions of a group? Under which circumstances are you more “creative”? Has your experience with social media influenced your attitude toward game playing as a way of connecting or even collaborating with other people?

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