Exam March 2013, questions and answers - Novo Nordisk - Organization Theory PDF

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EXAM!SPRING!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! BSc.!International!Business!and!Politics!!!!!!!!!!!!!!!!!!!!!!!!!!!!! KNOWLEDGE!MANAGEMENT!IN!’GLOBAL’!WORK! ARRANGEMENTS! Novo!Nordisk!R&D!centre!in!China! ORGANIZATION!THEORY!!

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Table&of&content& ! Introduction&...........................................................................................................................................&3! 1)!Background&........................................................................................................................................&4! 2)&Hofstedte!and!subcultural!differences&................................................................................................&5! 2)!Knowledge!creation!!I!Exploitation!vs.!exploration&..............................................................................&7! Conclusion&...........................................................................................................................................&10! Bibliography&.........................................................................................................................................&12! !

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Knowledge&Management&in&‘Global’&Work&Arrangements& The!issue!of!sharing!a!common!organizational!vision!across!borders;! Novo$Nordisk$R&D$centre$in$China! !

Introduction! Novo!Nordisk!is!one!of!the!world!leaders!on!diabetes!medicine!and!is!also!strongly!positioned!among!other! pharma!products.!Headquartered!in!Denmark!it!operates!in!more!than!75!countries!with!more!than!34000! employees1.!It!has!been!successful!on!its!social,!financial!and!environmental!targets,!scores!high!on! employer!satisfaction,!has!rising!market!share!and!a!generally!positive!image!globally!(Novo!Nordisk!Annual! Report!2012,!p.!4I5).!Novo!Nordisk!recently!invested!vast!resources!in!their!R&D!centre!in!China.!The! strategy!has!been!to!move!innovation!to!China!to!benefit!from!full!research!capabilities!and!ensure!a!strong! market!position!on!the!growing!Chinese!market!(Pharmatimes,!2012).! The!strategy!behind!setting!up!the!local!R&D!subsidiary!in!China!has!been!to!provide!it!with!the!required! resources!needed!to!carry!out!innovation.!Yet,!the!cultural!differences!between!the!Danish!HQ!and!the! Chinese!management!might!incur!a!constraint!on!knowledge!management!and!transfer,!and!in!order!to! benefit!the!most!from!the!subsidiary,!Novo!Nordisk!therefor!needs!to!address!this!issue.! I!will!in!this!paper!investigate!the!following!research!question:!! “Which&role&does&the&Novo&Nordisk&Way&and&the&Triple&Bottom&Line&have&in&defining&a&common&corporate& culture&in&Novo&Nordisk,&and&how&does&the&cultural&difference&between&Denmark&and&China&affect&the& implementation&of&Novo&Nordisk&innovative&R&D¢re&in&China?”&& ! In!order!to!answer!this!research!question,!I!will!illuminate!three!aspects!of!the!issue,!applying!methods! from!organizational!theory.!Firstly,!an!analysis!of!the!cultural!differences!between!Denmark!and!China!will! be!carried!out!applying!the!Hofstedte’s!modernist!approach!of!four!dimensions!of!subcultural!differences.! Secondly,!the!concept!of!exploitation!versus!exploration!in!innovative!firms!is!related!to!the!decision!of! building!a!local!subsidiary!in!China!and!thirdly!I!will!analyse!the!importance!of!the!New!Nordic!Way!and!the! Triple!Bottom!Line!with!Schultz!&!Hatch!concept!of!organizational!identity.! The!analysis!will!be!conducted!on!field!level,!seeking!to!investigate!the!circumstances!revolving!around! Novo!Nordisk’!R&D!subsidiary!in!China.!In!the!analysis,!I!will!focus!on!the!cultural!implications!of!knowledge! transfer.!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

!Novo!Nordisk!website,!”Novo!Nordisk!in!brief”,!http://www.novonordisk.com/about_us/default.asp!

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1)!Background! & Novo!Nordisk!has!had!an!affiliate!in!China!since!1994.!Its!motivation!to!establish!the!firm!in!China!was!a! recognition!of!the!strategic!importance!of!being!present!on!the!Chinese!market.!Originally!the!subsidiary! was!an!implementer!of!orders!from!the!head!quarter!in!Denmark,!but!in!2001!it!was!decided!to!move!R&D! to!China!(Harðardóttir,!p.!81).!The!industry!Novo!Nordisk!operates!in!is!a!highly!innovative!environment,! which!requires!flexibility!of!the!organization!in!order!for!subIunits!to!be!able!to!come!up!with!new! procedures!and!products.!However,!at!the!same!time!cultural!alignment!and!shared!corporate!vision!is! crucial!for!the!organization,!to!ensure!that!all!employees!world!wide!feel!aligned!to!the!same!strategic! goals!(Tidd!et!al,!p.!7).! Novo!Nordisk!has!developed!a!description!of!the!values!and!ambitions,!which!characterize!the! organization.!It!sets!the!direction!for!all!employees!within!and!is!“a!promise!employees!make!to!each!other,! and!to!stakeholders!outside!the!company”2.!!A!value!can!e.g.!be!“Our!ambition!is!to!strengthen!our! leadership!in!diabetes”,!“We!never!compromise!on!quality!and!business!ethics.”!Or!“We!offer!opportunities! for!our!people!to!realize!their!potential.”!(Novo!Nordisk!annual!report!2012,!p.!19).! As!a!complement!to!the!core!values,!Novo!Nordisk!operates!with!a!significant!sustainable!profile,!which!is! enhanced!in!the!Triple!Bottom!Line!(TBL)!business!principle.!This!triangle!represent!the!three!dimensions! which!Novo!Nordisk!steer!to!set!goals!for,!i.e.!financial,!social!and!environmental.! The!TBL!creates!value!in!three!ways;!Firstly,!it!makes!Novo!Nordisk!more!adaptive!to!changes!in!its!business! environment,!Secondly,!it!strengthens!competitiveness!and!third,!it!can!serve!as!an!engine!for!business! development!(Novo!Nordisk!annual!report!2012,!p.!19).! The!NNW!was!restructured!in!2011!in!order!to!avoid!too!much!“topIdown”!management!in!the! organization,!and!rather!having!a!more!flexible!approach!to!the!core!values,!giving!room!for!individualized! interpretations,!which!might!occur!globally!due!to!the!cultural!differences!in!the!subIunits!of!the! organization3!(Business.!dk,!2011).!However,!the!principles!behind!NNW!as!well!as!the!Triple!Bottom!Line! still!functions!as!primarily!steering!objective!for!the!entire!organization!worldwide.!An!example!is!the!TBL! triangle!occurring!on!the!front!page!of!the!Chinese!subsidiary’s!website!(www.novonordisk.com/cn).! !

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!(Novo!Nordisk!annual!report!2012,!p.!19)! !http://www.business.dk/medico/globalIvaekstItvingerInovoInordiskItilInyIvision!

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2)&Hofstedte!and!subcultural!differences& & Analysing!the!cultural!differences!between!China!and!Denmark!is!basis!for!evaluating!the!possible! constraints!the!culture!might!have!on!knowledge!management!between!the!Chinese!R&D!centre!and!the! Danish!HQ.! Geert!Hofstedte!conducted!a!study!in!the!1970’s!of!the!significance!of!national!cultures!on!IBM,!sprung! from!the!notion!that!organizations!are!subcultures!of!larger!cultural!systems.!He!categorized!the!patterns! of!the!national!subcultures!into!four!dimensions,!respectively!power!distance,!uncertainty!avoidance,! individualism!vs.!collectivism!and!masculinity!vs.!femininity!(Hatch,!2006,!p.!181).!By!making!the!dimensions! quantified,!the!approach!serve!as!a!usable!management!tool,!enabling!to!clearly!identify!where!the!crucial! differences!between!various!cultures!are!to!be!found.!! China!and!Denmark!differ!considerably!on!a!range!of!those!measures!(http://geertIhofstede.com/).! Following!is!an!analysis!of!the!four!measures!for!China!and!Denmark,!an!assessment!of!how!this!might!have! affected!Novo!Nordisk!actions!in!China.!The!country!specific!details!are!extracted!from!Geert!Hofstedte’s! website,!searching!for!Denmark!and!China:! Power&distance&measures&the&acceptance&of&hierarchy&and&unequal&distribution&of&power,&wealth&and& prestige&(Hatch,&2006,&181).&Denmark!is!low!on!this!dimension!compared!to!China!(18!vs.!80!points),!having! a!very!egalitarian!mindset,!based!on!notions!of!independency,!equal!rights,!accessible!superiors!and!that! management!facilitates!and!empowers.!This!goes!hand!in!hand!with!a!direct!and!informal!communication,! as!well!as!respect!based!on!expertise!(http://geertIhofstede.com/denmark.html).!The!Chinese!culture!is! opposed!to!this!accepting!inequality!and!individuals!are!influences!by!formal!authority!and!sanctions! (http://geertIhofstede.com/china.html).& For!Novo!Nordisk,!the!difference!between!the!notions!of!power!in!China!and!Denmark!introduce!possible! tensions!between!the!traditional!hierarchical!structure!in!China,!and!the!more!informal,!Danish! management!style.!Novo!Nordisk!has!as!one!way!sought!to!overcome!this!issue!by!ensuring!that!employees! in!China!are!trained!according!to!Danish!management!principles,!yet!at!the!same!time!employing!local! Chinese!managers!who!may!interpret!the!NNW!so!it!fits!with!the!traditional!management!style!in!China.!A! video!for!intern!use!interviews!a!Chinese!R&D!employee,!“Linda!Yang”!who!states!“In!most!of!the!Chinese! companies!(…)!hierarchy!is!the!thing!you!have!to!follow,!but!working!in!NN!I!didn’t!feel!that!too!much”!(…)! “We!are!open,!we!have!freedom!to!work,!to!talk,!to!play”!(Video,!Novo!Nordics!Way).& Uncertainty&avoidance&Low&uncertainty&avoidance&cultures&often&fosters&innovation,&differences&of&opinion& and&eccentric&or&deviant&behaviour.&High&uncertainty&avoidance&is&rather&fostering&rules,®ulations&and& control&(Hatch,&2006.&P.&184).&Danes!are!low!on!this!dimension!(23),!being!very!curious!and!accepting!low!

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structure!and!predictability.!This!is!reflected!in!a!humoristic!nation!high!on!innovation!and!creative! innovation,!as!well!as!a!work!culture!open!for!the!sentence!“I!do!not!know”!(http://geertI hofstede.com/denmark.html).!China!also!has!a!relatively!low!score!(30),!having!an!adaptable!and! entrepreneurial!culture!paired!with!flexibility!to!rules!(though!there!should!in!general!be!adhered!to)!and! pragmatism!(http://geertIhofstede.com/china.html).!! Novo!Nordisk!acknowledged!the!innovative!and!adaptive!potential!of!the!Chinese!culture,!yet!it!originally! fostered!the!Chinese!subsidiary!as!production!site,!and!then!gradually!gave!responsibility!for!more! innovative!tasks!to!the!Chinese!management4!(Blueprint!for!Change,!China,!p.!4).!The!employees!were! assigned!job!rotation!and!internships!to!other!subsidiaries!in!order!to!foster!an!innovative!environment! (Pogrebnayakov!&!Kristensen,!2011,!p.!36).! Individualism&vs.&collectivism&is&the°ree&of&interdependence&a&society&maintains&among&its&members.&It& has&to&do&with&whether&people´s&selfSimage&is&defined&in&terms&of&“I”&or&“We”&(http://geertS hofstede.com/denmark.html).&Denmark!scores!74!on!this!measure,!being!a!very!individualistic!culture! where!people!care!mainly!for!themselves,!and!communication!is!very!direct!(http://geertI hofstede.com/denmark.html).!China!scores!20,!as!it!is!a!very!collectivist!society!where!the!group!matters! more!than!the!individual.!The!family!is!highly!preferred,!whereas!commitment!to!the!organization!is!low! (http://geertIhofstede.com/china.html).! The!management!sought!to!overcome!this!cultural!gap!e.g.!by!including!the!Chinese!families!in!the!firm’s! activities!through!“Family!Days”,!making!sure!to!mark!birthdays!and!anniversaries!etc.!The!aim!of!this! strategy!should!be!to!develop!a!feeling!of!commitment!to!the!organization!of!the!Chinese!workers5.!Parallel! to!this,!Novo!Nordisk!wanted!to!implement!the!Danish!business!values!to!higher!extent!in!the!Chinese! subsidiary,!by!bringing!in!Danish!senior!managers!with!the!task!of!forming!the!Chinese!worker’s!business! culture!to!adhere!with!the!global!standards!of!Novo!Nordisk,!offering!e.g.!expanded!medical!and!insurance! compared!to!local!Chinese!firms!(Heymann,!2010,!p.!194).!The!managers!stated!the!importance!of!a! healthy!workIlife!balance,!leaving!in!reasonable!time!and!take!vacations!to!the!workers,!which !is!not!the! norm!among!Chinese!firms.!This!strategy!was!grounded!on!the!belief!that!those!benefits!would!foster! healthy!workers,!which!on!the!bottom!line!would!be!a!gain!for!Novo!Nordisk!(Heymann,!2010,!p.!195).!& Masculine&vs.&feminine&The°ree&of&separation&between&gender&roles&in&a&society.&Masculine&cultures& emphasise&e.g.&career&advancement&and&earnings,&and&feminine&societies&e.g.&interpersonal&relationships& (Hatch,&2006,&p.&184).&Scoring!16!Denmark!is!considered!a!feminine!society,!appreciating!a!balance!between! work/life,!and!supporting!decision!making!through!involvement.!Conflict!solving!is!based!on!long!discussion! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 4

!This!issue!will!be!elaborated!later!in!this!paper!in!the!analysis!of!exploitation!vs!exploration! !(http://novonordisk.com/careers/working_at_novo_nordisk/novo_nordisk_geographical_sites/china_uk.asp).!

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till!consensus!is!reached!(http://geertIhofstede.com/denmark.html).!In!China,!(66),!values!are!more! masculine,!with!a!success!oriented!culture,!where!work!in!general!is!prioritized!over!leisure!time.! The!careerIoriented!nature!of!Chinese!workers!demands!advancement!opportunities,!which!Novo!Nordisk! has!sought!to!meet!e.g.!by!offering!English!courses!at!the!production!plant,!or!implementing!advancement! opportunities!starting!from!the!machine!operator!to!regular!career!paths!within!the!organization! (Heymann,!2010,!p.!196).!In!addition,!Novo!Nordisk!adopted!training!programmes!providing!the!benefit!of! talents!with!commitment!to!the!organization!(Pogrebnayakov!&!Kristensen,!2011,!p.!36).! The!above!four!dimensions!serve!as!a!useful!analytic!tool,!yet!it!is!important!to!bear!the!awareness!of!the! limits!the!modernist!approach!to!culture!introduces!due!to!its!objective!approach,!as!research!of!culture! most!likely!will!take!form!depending!on!the!observers!own!values!and!cultural!asusmtions!(Hatch,!2006,! p.190).!

2)!Knowledge!creation!!W!Exploitation!vs.!exploration!! Knowledge!is!the!most!important!resource!of!Novo!Nordisk,!and!one!of!the!main!challenges!the!firm!faces! is!recruiting!and!training!of!talented!staff!in!the!organization!(Pogrebnayakov!&!Kristensen,!2011,!p.!36).! Knowledge!management!is!traditionally!bound!to!the!cybernetic!theory!of!feedback!control,!where!the! purpose!of!control!is!to!adjust!for!differences!between!desired!and!actual!performance.!The!control! process!is!characterized!by,!1)!setting!an!organizational!goal!for!the!overall!strategic!plan,!2)!applying! standards!at!each!level!of!the!organization,!3)!monitoring!performance!against!targets!and!4)!asses!and! correct!deviations!(Hatch,!2006,!p.!260).!This!approach,!however,!might!foster!hegemonic!structures!that! constrain!innovation!with!its!defined!boundaries,!as!innovation!is!exactly!doing!things!in!a!new!way!(Hatch,! 2006,!p.!313).!Knowledge!management!is!a!crucial!competitive!measure!for!firms!working!in!innovative! business!as!Novo!Nordisk.!In!the!past!decades,!the!pharma!industry!has!offered!impressing!growth!rates,! yet!searching!for!new!drugs!has!become!a!more!complex!process!and!the!competition!within!the!industry!is! fierce!(Tidd!et!al,!2005,!p.!1).!! James!March!formulated!the!two!modes!of!organizational!learning,!respectively!of!exploitation&and! exploration.&Exploitation!meaning!utilizing!already!existing!knowledge!and!resources,!and!exploration! referring!to!methods!of!experimenting!and!conducting!research.!The!latter!represents!methods!to! organizational!change!and!flexibility&(Hatch,!2006,!p.!313).!Subsidiaries!in!emerging!markets!range!from! implementers&to!innovators ;!Innovators!distinguished!by!their!ability!to!generate!knowledge,!as!oppose!to! implementers,!which!only!manage!the!inflow!of!knowledge!from!the!parent!company!(Pogrebnayakov!&! Kristensen,!2011,!p.!31).!The!ability!to!manage!innovation!requires!selfIsufficiency!of!the!subsidiary,!which! is!obtained!through!access!to!resources!as!well!as!managing!several!stages!of!innovation,!and!the!ability!to! develop!new!innovation!processes.!

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When!building!up!the!new!R&D!subsidiary!in!China,!the!management!of!Novo!Nordisk!sought!to!explore! new!knowledge!rather!than!exploit!existing,!acknowledging!the!potential!of!medical!technology!in!China! (Tseng!2009,!in!Pogrebnayakov!&!Kristensen,!2011,!p.!34).!The!actions!taken!by!Novo!Nordisk!has!been!e.g.! specializing!the!subsidiary,!choosing!management!with!local!and!inIcompany!experience,!using!local! innovation!talent,!arranging!job!rotations!and!securing!centralized!R&D!management!(Pogrebnayakov!&! Kristensen,!2011,!p.!36).! Access!to!local,!specialized!knowledge!is!the!main!benefit!from!moving!production!abroad,!yet!there!are! potential!negative!aspects!such!as!critical!mass!effects!and!communication!constraints!(Birkmose!&! Popovici,!2011,!p.!25).!In!addition!spreading!R&D!on!many!sites!introduces!a!risk!of!removing!the!COP! benefit6!which!is!usually!seen!from!collaboration!of!many!researchers,!as!well!as!the!close!cooperation!with! the!parent!firm.!(Birkmose!&!Popovici,!2011,!p.!30).!One!way!the!management!has!sought!to!benefit!from! the!potential!of!local!COP’s!is!through!Lean7!systems.!In!workshops!at!the!Chinese!production!site,! management!asked!employees!questions!about!processes!in!order!to!increase!efficiency.!Yet!at!first,!the! Chinese!workers!were!completely!unfamiliar!with!the!process!of!stating!their!opinion!to!the!management! (Heymann,!p.!194).!Similar!to!this,!Novo!Nordisk!has!met!some!challenges!in!terms!of!their!Chinese! operations,!as!team!work!and!collaboration!is!not!a!part!of!the!Chinese!work!culture,!yet!being!crucial!for! Novo!Nordisk’!activities!it!has!been!necessary!to!adopt!the!“Danish!way”!in!China!(Birkmose!&!Popovici,! 2011,!p.!29).!Yet!employee!satisfaction!has!been!very!high!among!Chinese!workers!(Blueprint!for!Change,! 2011).!An!example!is!Chinese!Linda!Yang,!with!a!content!face!expression!in!the!video!on!the!NNW!for! internal!use,!“We!discuss!with!our!colleagues!how!to!best!carry!out!an!experiment”!(Video,!Novo!Nordics! Way)8.! However,!studies!indicate!that!the!link!between!corporate!strategies,!organizational!culture!and!innovation! in!global!firms!is!not!necessarily!manageable,!but!is!intertwined!in!spontaneous!and!continuous!processes! (Yoo!&!Ginzberg,!p.!83).The!Chinese!subsidiary!provides!Novo!Nordisk!with!great!potential!for!exploration! of!future!innovation,!but!it!offers!a!challenge!of!communication,!as!substantial!technology!transfer!as!well! as!transfers!of!ideas!and!concepts!is!necessary.!Hence,!in!order!to!make!different!units!function!efficiently,! it!is!essential!to!have!effective!communication!systems!and!significant!investment!in!networking!among! employers!and management!across!borders!(Boel,!2007,!in Harðardóttir,!p.!81).!Continuous! communication,!whether!through!email,!telephone,!virtual!or!face!to!face!meetings,!it!is!crucial!to!develop! and!promote!a!collaborative!culture!between!researchers!independent!of!their!nationality!or!work!location! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 6

!Communities!of!practice,!(Hatch,!p.!129)! !Current!Lean!Manufacturing!Process,!(Heymann,!p.!193)! 8 !This!is!an!intern!video!of!Novo!Nordisk!and!therefore!not!a!neutral,!reliable!source!

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