This month’s research monograph, a longitudinal case study entitled Creativity in the Printing Industry: The Context of Organizational Change (PICRM-2008-02), is authored by Shalini Khazanchi, Ph.D., Assistant Professor at RIT’s E. Philip Saunders College of Business, Holly Slay, Ph.D., Assistant Professor at Seattle University’s Albers School of Business and Economics, and Mathew Sheep, Assistant Professor at Illinois State University’s College of Business. The purpose of this monograph is to explore how mergers and acquisitions influence creative processes within printing companies after the merger or acquisition occurs.
By Shalini Khazanchi, Holly Slay and Mathew Sheep
The printing industry is undergoing numerous changes. The advancement of digital technologies has profoundly impacted the ways in which information is conveyed to consumers and has given people the ability to produce documents on their own, thereby limiting reliance on traditional print companies. As a result of these changes, printer device manufacturers are developing new technology that would make printing more efficient and cost-effective. Similarly, in response to these changing market trends, print suppliers are attempting to reposition themselves as a communications or marketing partner/service provider as opposed to solely a print or commodity supplier. Becoming a marketing partner or communications company involves going beyond taking print jobs to offering a wide range of print products and marketing solutions to consumers. Thus, printing companies—manufacturers and suppliers alike—are striving to grow and sustain creativity and innovation to keep their competitive advantage in an industry faced with many challenges.
Organizations routinely use mergers and acquisitions to both grow and enhance innovation. Not surprisingly, merger and acquisition activities within the printing industry have increased dramatically in recent years. In the first half of 2004 alone, there were 275 mergers and acquisitions within the industry. A number of the high-profile merger and acquisitions were aimed at providing service or product innovations. Thus, one of the ways printer device manufacturers can develop new printing technology is through merging with or acquiring companies that have a desired printing technology or the knowledge base to develop one. Similarly, print suppliers also rely on mergers and acquisitions to acquire the ability to provide wide range of print solutions, related products, and other marketing solutions across various printing mediums.
In order to study creative processes following mergers and acquisitions, a research setting of companies that were undergoing or had undergone a merger and/or acquisition in recent years was required. A printer manufacturer, which will be referred to as Company A, was poised for acquisition by a larger company. This gave the researchers the unique opportunity to study the creative process immediately following the change because Company A was undergoing acquisition at the start of the study. Thus, Company A served as an “extreme case” in which creative engagement after acquisition was more likely to be visible, making it a suitable sample for the purpose of the study.
In order to eliminate potential biases in the findings—given that the data collection was immediately following the acquisition—the researchers collected data at another organization, which will be referred to as Company B. Unlike Company A, Company B is a print supplier that had acquired several smaller print suppliers several years ago with the intention to offer print products and solutions across various print mediums.
Longitudinal case study design was utilized. Data was collected at different points of time over a period of one year. Multiple sources were used for the data, including two rounds of interviews with management and employees at both companies, archival information, and the observation of corporate meetings.
Data analysis will involve two stages: (1) deriving codes inductively from the interview transcripts and (2) assigning codes to categories based on similarities in the codes. Research is currently in the first stage of the analysis, which includes deriving codes inductively or assigning first order codes. Once the first order coding is complete, the researchers will then analyze the coded passages for second-level categories, a process that has been referred to as “meaning condensation”.
In the Findings section, some of the first-order codes are presented and explained. These codes provide some initial insights into the changes in the printing industry and their impact on micro-creative processes in the context of organizations within the printing industry. The findings to date are also presented graphically in the form of summary models, one to summarize the analysis for Company A (Figure 1) and another for Company B (Figure 2).
Figure 1. Proposed model for Company A: Reacquisition of a spin-off by the parent firm
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Figure 2. Proposed model for Company B: Acquisitions of smaller firms by the parent firm
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Company A: Printer Device Manufacturer
After acquisition, the acquiring companies emphasize the need to commercialize the new technology on a large scale and to make profits. In other words, there is pressure from the acquiring company to be profitable or, as reported by many respondents from Company A, the need to be “a sustainable business.” It is important to note that the companies are acquired because they have been successful in developing a new printer or printing technology. Now they are faced with a new challenge of managing creativity while undergoing a profound organizational change: an identity-shift from a product development company to a commercialization or sustainable business organization.
From development to commercialization of a printer device. With commercialization, employees reported a shift in organization priorities to a focus on being more cost-effective and on improving the current product as opposed to developing a new technology or product. Often, such a shift was seen as a natural progression associated with a change in the nature of what it means to be creative. At other times, the shift was seen as constraining creativity.
Fragmentation challenge. An identity-shift to being a “sustainable business” raises two types of challenges. There is an increase in the number of activities that need to be undertaken in order to successfully commercialize the newly developed printer device. We refer to the increase in the amount of activities as activity fragmentation.
The second challenge is referred to as product fragmentation. In an attempt to become a sustainable business, print device manufacturers increase product lines by making incremental changes to the newly developed printer, then releasing them as new versions. It is important to note that an increase in product line is not same as developing a new product. This strategy is often used to get the maximum mileage out of the investments made in developing a product. The increases in product lines or versions, however, was reported as influencing the extent to which employees can cognitively focus and/or identify with their work, thereby affecting both cognitive and emotional creative engagement.
Shifting goals. As a result of mergers and acquisitions, goals often change or are influenced by the acquiring company. The identity-shift from being a product development company to a sustainable business also creates a challenge of shifting goals wherein priorities and goals continually change, resulting in limited cognitive, behavioral, and emotional engagement in producing creative outcomes. When the company defined itself as a product development company, the goal was clear, singular, and driven by the motto, ‘Doing everything it takes to produce this high end printer device.’ Post-acquisition, the company was reported as being driven predominantly by the need to be profitable and as being short-sighted, short-term goals oriented, and less patient. Often, the goals and actions were driven by the motto, ‘We cannot fail.’
How do goal changes of this type impact creativity? Due to continuously shifting goals and priorities, employees reported not being able to stay focused on a given problem for a sustainable amount of time necessary for creativity, which can ultimately influence cognitive engagement. Employees also reported experiencing reduced passion, as they now cannot identify with a specific product and do not know what they are working towards.
Company B: Print Supplier
As discussed previously, Company B has always been known as a printer and, at the time of the study, was trying to reposition itself as a communications/marketing consultant. In an effort to be a “one stop print shop,” Company B had acquired several print suppliers that would allow the company to offer wide-ranging print products and solutions across various mediums. The company had been engaged in repositioning itself as a communications/marketing consultant for the two years prior to the start of the study. Many employees clearly explained how their perceptions of who they think they are as a company (what they perceived as the organizational identity) shaped the nature and the extent of their creative actions. Perceptions of organizational identity were found to serve as a frame of reference for employees’ creative actions.
Organizational identity also sets boundaries around what is acceptable or desirable behavior. Interestingly, some employees viewed the “printer company” identity as facilitating engagement in certain types of creative action, while others reported it as constraining creativity. For example, employees reported that being a printer implied offering creative ideas around press and how to “how to fold a paper in a better way,” but not around new promotion ideas for their customers.
Furthermore, we also found that one of the challenges consistently reported was the desire to hold on to the printer identity (often associated with a pre-acquisition identity) and continue taking print orders as opposed to being a consultant. While internal resistance from employees was an issue in identity change, customer expectations also influenced acceptance of the new identity.
Employees often reported resisting the new identity of being a service provider and expressed the desire to continue to engage in habitual actions – the ones that have proven to be safe and profitable. However, habitual actions limit risk-taking and developing new ideas – critical components of creativity and successful repositioning. Different divisions (originally, distinct companies that were acquired) within the company seemed to identify more with their respective divisions, print platforms, or original company and less with the company as whole. This presents a challenge for behavioral creative engagement in the form of collaboration. Individual divisions or print platforms seemed to be focused on their particular business and unwilling to collaborate with other divisions, although collaboration is necessary for enhancing creativity.
The research illustrates the importance of diagnosing (and thereby helping managers to avert) factors that impede creativity during major organizational events such as mergers and acquisitions. However, since the research and analysis is ongoing, it is not yet possible to propose new theory or prescribe new methods for managing creativity during organizational change per se. Therefore, within this section the research findings are reviewed, and recommendations are offered based on existing research.
Due to changes in the competitive environment—such as the rising use of Internet and other digital media—firms within the printing industry often develop new technologies or acquire firms to gain new technological capabilities. However, this kind of organizational change breeds uncertainty among employees as the focus of the organization moves away from familiar technology and hard-won expertise to new technologies. Employees may experience cognitive disengagement as they perceive internal competition for resources and a decrease in the value assigned to existing technologies (and to those engaged in working on these technologies). As a result, they may collaborate less with others (behavior disengagement) and withhold their ideas for innovation (cognitive disengagement).
However, disengagement may be avoided if companies develop a shared understanding of the future of the firm and articulate how both new and old technologies fit in the new strategy. It may also be possible to facilitate creative engagement even during times of uncertainty and change by developing a deep level of identification with the organization whereby employees feel connected to the firm undergoing the change. They must sense that they (and the technology they work on) are a part of the future organizational “we.” In order to achieve this, the following recommendations should be taken into consideration:
- Organizations should ensure that consequential events, such as awards or bonuses, are shared.
- Organizations must emphasize organizational membership and how everyone is “in it together.” During organizational change, companies often discontinue small events (such as company picnics, etc.) that emphasize unity. However, this may be the time when such activities are crucially important.
- Organizations may create relationships with employees that are more personal in nature.
- Organizations experiencing significant transformations should engage in intensive socialization activities where the turbulence within the competitive landscape is articulated, the new direction is made clear, and the future vision is presented as inspiring, exciting, and achievable.
Finally, organizations are not simply changing technologies. They are often changing and merging their identities. That is, what has been central, enduring, and distinct about the company is being questioned and redesigned to fit the new competitive context or a new merged entity. However, identity-shift may not always result in a new and shared identity. In fact, employees often reported residual identity (pre-acquisition identity) as frame of reference for their creative behavior that would affect both cognitive (e.g., offering ideas from the mind-set of being a printer) and behavioral creative engagement (e.g., collaborating with other print platforms). Our findings show that employees not only resisted the new identity of being a service provider, but engaged in actions/behaviors consistent with the original identity (pre-acquisition) that were proven to be safe and profitable.
Thus, creating a shared identity is important for encouraging creative engagement.
2007-2008 Research Monographs:
To read about this research in detail, download the monograph from: http://print.rit.edu/pubs/picrm200802.pdf
This article from the Printing Industry Center at RIT was originally published in the Centers affiliate-only eReview newsletter. Article Series Index.