Module 11: Innovation and Change Case Study: W. L.

Gore & Associates

MGMT 51 5 !all "#1" Tea$ " %ove$&er '( "#1" Tea$ Me$&ers:
Conway, Ashley Heasty, Mark Johnson, Laura McDonald, Adrian Sarkis, Christine

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Business Goals Gore's business philosophy incorporates three beliefs and principles: a. The company can and should offer the best- alued products in the mar!ets and mar!et segments "here it chooses to compete b. #uyers in each of its mar!ets should appreciate the caliber and performance of the items it manufactures$ and c. Gore should become a leader "ith uni%ue e&pertise in each of the product categories "here it competes. Gore "ishes to e&pand its organi'ation "hile maintaining the uni%ue organi'ational design "hich has made Gore successful in the past. The challenge for (.). Gore and *ssociates is in terms of its gro"th o er the ne&t one to t"o decades. The founder and +hairman of the #oard$ (ilbert Gore$ died in 1,-. lea ing the company to be headed by his son as /resident and his "ife as 0ecretary-Treasurer. There is currently no second-in-command or designated successor. There is similarly no corporate-"ide mission or code of ethics statement and the only formalities that e&ist are done so based on the re%uirements of the la"s of incorporation and other legal regulations.

S.W.O.T. Analysis The follo"ing 0(1T analysis captures the !ey strengths and "ea!nesses "ithin the company and describes the opportunities and threats facing (.). Gore. Strengths +ompany 0tructure 2 Gore had al"ays had a short pyramid structure$ "hich consisted of a president and secretary3treasurer 4p. 5.56. Gore7s lattice organi'ational structure promotes creati ity$ initiati e$ and helps de elop beneficial relationships bet"een employees. 1rgani'ational structure corresponds "ith research based nature of the company: 0peciali'ed niche products are possible because of the lac! of bureaucracy and associated o erhead$ *ssociate commitment$ and the use of product champions 4p. 55.6. 8t has numerous patents and a team of patent la"yers to maintain its competiti e ad antage. /roduct 9e elopment 2 )ac! of bureaucracy$ less o erhead$ associate commitment$ and the use of product champions are factors that are attributed to the profitable de elopment of products. :uality /roduct 1fferings - Gore ; *ssociates product line is responsible for a long list of company successes and accolades and has also helps them achie e notoriety for %uality products. 0ome of Gore7s products include G1<=-T=> ascular grafts$ medical patches to heal bro!en hearts by mending holes$ G1<=-T=> filter bags$ G)89= dental floss$ and G1<=-T=> fabric gear 4p. 555-5.6. 2

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*ssociate 0toc! 1"nership /rogram - Gore has an *ssociate 0toc! 1"nership /rogram. This gi es employees a sense of o"nership regarding the success of the company as a "hole. Mar!eting - Mar!eting for G1<=-T=> has been described by retailers as ?unbeatable.@ 0ome retailers praise the mar!eting and ad ertising efforts as the bestA 0porting Goods #usiness maga'ine describes Gore ;*ssociates' mar!eting as BunbeatableB. 0mall /lant 0tructure - The purpose of maintaining small plants "as to accentuate a close-!nit atmosphere and encourage communication among *ssociates in the facility 4p 55C6. This strategy "as successful because Gore "as ran!ed the Cth best company to "or! for in *merica by Dortune 4p 55E6. 8ndustry )eader - 8ndustry leader ran!ed among top 555 pri ate companies in the F0 and se enth best company to "or! for in *merica by Dortune in Ganuary 1,,-. Dinancials of +ompany - The +ompany is debt free and has only used industrial bonds for building facilities at a ta& free rate.

Weaknesses )attice 0tructure - This organi'ation may not translate into the ne&t generation of leadership by nonfamily members. He" employees often ha e difficulty adIusting to the lattice organi'ation$ and a customer of Gore once stated$ Bthe lattice has its problems "ith the day-to-day nitty-gritty of getting things done on time and out the doorJit's frustrating to find a lac! of continuity@ 4p 55--5,6. Management 2 The +ompany has ne er had titles$ hierarchy$ or any of the con entional structures associated "ith enterprises of its si'e. They ha e also ne er had a corporate"ide mission or code of ethics statement. Gore's management style has been referred to as BunmanagementB 4p 55C6. 8nno ation 2 The introduction of ne" fabrics posed challenges because it "as difficult for the company to come up "ith other ne" brands. Hame 2 Many consumers !ne" Gore ; *ssociates as G1<=-T=>. This made it difficult to branch out and create products under the Gore name. Dabric 9i ision 2 Gore7s fabric di ision is susceptible to mar!et forces$ including recessions and fashion ?fads.@

Opportunities 1rgani'ational =n ironment - *n organi'ational en ironment "hich encourages e&perimentation can constantly create ne" products and mar!eting strategies /TD= - The uni%ue properties of /TD= ha e been the cornerstone of success for the company. The opportunities for gro"th are limitless and only re%uire the researchers to continue to apply the properties to ne" products and finding ne" mar!eting enues. =lectronic /roducts 9i ision - The Gore electronic products di ision has a history of anticipating future customer needs "ith inno ati e products 4p 5556. 3

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*ge of *merican /opulation - The aging population of *merica has increased the need for healthcareA *s a result$ Gore has in ested in the de elopment of additional medical products and the medical di ision is gro"ing 4p 5.56 1ptical +oncepts - <ecently$ the company purchased 1ptical +oncepts 8nc.$ a laser$ semiconductor technology companyA 8n addition$ Gore is in esting in test-mar!eting a ne" product$ guitar strings "hich "as de eloped by its *ssociates 4p 5..-5.C6 +reati e *d antage 2 The *ssociates maintain that the profitable de elopment$ production$ and mar!eting of such speciali'ed niche products are possible because of lac! of bureaucracy and associated o erhead$ *ssociate commitment$ and the use of product champions 4p 55.6.

Threats <igorous <ecruitment3Training /rocess 2 (hen people apply at Gore and *ssociates$ they are first screened by personnel specialists and then as many as ten references are contacted before a person is identified as meeting the basic criteria. #efore they are hired$ an associate must agree to sponsor them. This limits the pool of applicants significantly 4p. 5.16. *fter training for about a month$ the employee is left on his3her o"n "ith little direction$ "hich does not suit e eryone 4p. 55E6. Fnion Threats - =mployees ha e attempted to unioni'e in the past. This could se erely affect the lattice structure at Gore. +ompetitors 2 3M$ #urlington 8ndustries$ *!'o Hobel Dibers$ and 9upont ha e brought out products to compete "ith Gore-Te& fabrics. =arlier$ the toughest competition came from firms that iolated the patents on Gore-Te& 4Gore successfully challenged them in court6. *n ob ious threat$ of course$ is "hen the patents are going to run out 4p 55.-55C6 1 erdependence on /TD= - 9ependence upon one chemical product$ /TD=$ is the biggest threat. 8f an ad erse outcome should be disco ered similar to asbestos and the induction of mesothelioma in e&posed "or!ers could cripple the company. 0imilarly$ if the ra" materials used to produce the product should become scarce$ then the company could face an economic do"nturn. 1 erdependence of Fpper Management - 9ependence upon t"o family members to head the entire corporation "ithout a designated successor is the second biggest threat. The company is pri ately held "ith all *ssociates ha ing an o"nership sta!e in its success. )eaders are allo"ed to re eal themsel es naturally "ithin the organi'ationA ho"e er$ business la" "ill re%uire a named successor other"ise the fate of the corporation "ill find itself being determined by a Iudge.

Root Causal Analysis Problem #1: Gore and *ssociates7 )ac! of 0tructure Causes Gore "anted to !eep the creati ity that had built the company "hile still gro"ing. E

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*ssociates sometimes did not !no" "here to start "or!ing due to the lac! of structure 4p. 55E6. )ac! of hierarchy regarding appro al for products throughout testing. 8nconsistency from customers7 perspecti es regarding a rapport "ith particular associates. The unstructured en ironment presents a problem as the company gro"s. 8t is currently at C$555 employees "orld"ide$ and the ?lattice organi'ation@ may start to become un"ieldy as the company e&pands further. Gore has helped to mitigate this problem by !eeping plants small so that employees !no" each other better and communicate easier$ but changing responsibilities and commitments can create confusion and may cloud effecti e inter-plant communication and customer relations.

Problem #!: 0usceptibility to *d erse =n ironmental Dorces Causes Dad for Iogging suits collapsed in the mid-1,-5s <ecession of 1,-, <eduction in purchases of high-end athletic apparel Mainframe computer business declined in early 1,,5s Problem #": )eadership uncertainty Causes +urrent +=1 #ob Gore has not sho"n interest in grooming a successor once he retires or dies. Kis leadership has shaped the organi'ational culture$ but he "ill not be around fore er. (ithout a formal hierarchy e&cept for +=1 and secretary$ it is difficult to get a sense of "ho the ne&t +=1 of Gore and *ssociates "ill be. This could lead to tensions among *ssociates and possibly damage customer relationships.

#uestions an$ Assumptions (e assume Gore and *ssociates is "illing to ma!e some structural changes to help the company gro" and e&pand "hile still maintaining the creati ity in the company. (as or has a suitable successor for #ob Gore e er foundL Kas Gore and *ssociates e er considered ha ing to change their organi'ational structure if they e er become ?too big to remain small@ and for the )attice structure to no longer effecti ely "or!L The emphasis in the case "as on the corporate culture and e&treme e&ample of the unstructured and unmanaged organi'ational design. #ased on the fact that this company generates more than M1.1 billion in annual re enues and operates in multiple countries "ith a ariety of languages$ "e "ill assume that the infrastructure is in fact more formal than presented. The core company may be informal in structure$ but "e "ill assume that there is a s%uadron of contracted specialists that maintain the formal 5

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functions of such a corporation. These specialists "ould include attorneys in international business$ patent$ and employment la"$ accountants$ construction firms "ho are building each of the chemical production plants and ensuring they are compliant "ith building and en ironmental regulations$ and many other corporate operation specialists. Re%ommen$ations The internal frame"or! based on a lattice structure has been successful for (.). Gore ; *ssociates for the last 55 years. The company has had the same +=13president for t"enty years "ith no second-in-command or successor. 8f something "ere to happen to the current +=1$ the company could possibly be negati ely affected. Ho one li es fore er$ but corporations are gi en immortality as long as they are legally maintained. *s such$ this organi'ation needs to prepare itself for the ne&t generation of leadership. 1ptions include becoming a public corporation$ legally handing it o er to another family member or *ssociate$ or positioning itself for a merger or ac%uisition. Gore and *ssociates "ants to maintain their creati e$ unstructured atmosphere but also needs to incorporate some sort of structure to continue to gro" and e&pand. Gore and *ssociates should consider building some !ind of structure to their organi'ation. They should consider an ambide&trous approach to their organi'ation. *n ambide&trous approach defined by the te&tboo! means ?to incorporate structures and management processes that are appropriate to both the creation and the implementation of inno ation@ 4p. E1-6. Gore and *ssociates should consider building a higher pyramid structure of management "hile still maintaining an unstructured research and de elopment department. =mployees could still ha e the freedom to e&plore and de elop ne" ideas "hile the company "ould be more structured. Gore should also de elop some formali'ed and "ritten rules$ procedures$ and an ethics code may be necessary to cement organi'ational cohesion in a global en ironment. Ko"e er$ Gore can maintain elements of its unstructured design: the freedom employees are gi en to e&periment and pursue ideas is responsible for Gore7s inno ati eness and success$ and should be preser ed. * board of directors$ "hich includes #ob Gore and Nie e and at least one to three other directors selected out of the *ssociates$ should be part of the organi'ational structure. * leadership team should be created that "ill be groomed to ta!e o er the operations of the domestic and international branches of the corporation and ha e legal3formal authority to generate contracts. Great work overall! See my inline comments.