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HBS Case Innovation and Collaboration at Merrill Lynch Essay

In a rapidly changing world, organizations need to continually identify new opportunities beyond existing competencies if they are to survive and prosper. Customers also increasingly want customized products. Customer service has become a hygiene factor and customer loyalty is now being driven by faster innovation, rapid concept-to-market and product co-creation. This has led to the extension of the collaboration paradigm to customer facing functions in the supply chain, namely the product design and prototyping phase. Collaboration is becoming a new and important source of competitive advantage.

Historically, analysts in the investment bank tended to work independently. Especially, in the beginning of 1990s, the globalization overwhelmed the market and investor became to think that they should not just invest in the local market, but invest in the international market. With this change of clients’ attitude, the investment bank became to feel the need of innovation of their working style. Under these situations, Merrill Lynch decided to create totally different style of research report, the capital structure report which was only possible with the collaboration of international-market, cross-sector, and cross-asset analysts.

The First Capital-Structure report about the U.S. Cable Industry covered seven companies. It was the first try of collaborative work in Merrill Lynch, so it didn’t have any clear guide lines for the effective team work. There was no clear goal of team work, and also there was no motivation for the participant. Analysts from different sections were asked to get together one day, and asked to make a capital structure report. Without any clear goal, and without the structure and system of team work, the whole procedure proceeded very inefficiently. It took lots of time to get the final report, but the quality of report was not satisfied. In other words, its try to change was innovative, but the team work itself was not so much “value-addable”.

The second Capital-Structure report about U.S. Utilities covered 5 companies. This time, it seemed like there were clear goals; “The idea from get-go was that people would be able to pick up this thing and start generating trades from it. That was goal number one. The second goal was to have the report sitting on people’s desks for a good period of time as a reference guide to how different parts of the capital structure impacted each other and affected valuations and potential opportunities” In addition, the participants in this project worked pretty closely together already.

However, these were not enough for the effective collaboration. They were still not motivated to the project a lot, and the more commitment might have been called for. This means that they still didn’t have specific goal to head for. Absence of specific goal naturally brought lots of debates which slow the progress. When the team finished the project, the report got a lot of positive feedback from clients. And it seems that Merrill Lynch met its goal in the beginning. However, without the specific goal of what they should achieve, and with the lots of information they should mix all together, “it was a grinding exercise” to reach on the final result.

The Third Capital-Structure Report was about auto companies. At this time U.S. specialists and Europe specialists worked together. Analysts did not need much convincing because they already knew the need for this collaborative work. There were lots of energy and enthusiasm already. In addition, this third project started with a plan; they knew what they want to achieve specifically and they also had the clear deadline. The whole procedure was progressed very smoothly from this step to the next. As a result, Sales heard from a client that “the value-added ideas contained in the report are original, differentiate Merrill from the rest of the Street, and give them another reason to pay Merrill commissions.”

Even though Merrill Lynch learned lots of things undergoing the upper three cases, there still are many issues remained. The project might have been more timely and had a clear leader. To achieve the further successful innovation and collaboration, there are many important things Browning as the director of the research department should have thought about.

As a leader for change, Browning should set the theme by communicating inspiring visions, which provide a picture of the future combining poetry and prose, imagination and pragmatism, drawing on destination, dream, prize, target, message, and first step. So, first, as a leader Browing must be secure about team’s charter, mission, goals and objectives to team members. And employees must believe a certain level of individual effort will lead to achieving the corporation’s standards of performance. So Browing should set stretch goals which they energize people. And Browing must confront the key questions that must be answered and then communicate the inherent truth that inspires.

The communication of that inspiring vision is arguably the indispensable condition. So For this, he should launch internal website for his innovative project and this website will help team members expedite project’s vision communication as well as timely information access. To be specific, formally, the analysts can share information about each sector regularly through email, e-news letter, and regular cross-sector meeting. For example, the equity analyst can have the summary about current bond market or derivative market weekly or biweekly. Also, through inner-information session for cross-asset collaboration report the analyst could have a chance of analyzing pros and cons of the collaboration report.

Second, for effective communication, Browning has to build the trust and respect in the innovative project team. Informally, just as Fleishman insisted, through casual lunch or regular dinner, cross-asset analysts could be close to each other, and all-of-sudden they could be collaborating. And this interaction would encourage meaningful dialogue around issues of compelling importance to analysts. To develop solid foundation and mutual trust, face-to-face interaction is needed. In addition, just as Hezig recommended, having new hires rotate for a period of time before getting allocated to do research might be a useful tool for effective communication. New employees not only could be comfortable with cross-asset resources, but also could have close relationships with cross-asset colleagues.

Third, Browing has to build the culture which voluntarily stimulates voluntary collaboration. So he has to pay attention to structure a collaborative innovation team which can add flexibility to planning and control systems. Without flexibility, analysts can stop their creative and productive ideas. So Browing need to consider this flexibility in a long term goal. Creative collaboration respects and honors the talents and contributions of each person involved, regardless of rank, seniority or expertise. Organizations that are serious about collaboration make sure there is a safe environment for taking the risks that are necessary for creative collaboration.

Fourth, Browing should create atmosphere where stimulates breakthrough ideas. It means that he should create norms to promote creativity. Collaborative Innovation is a new practice that improves on current practice or responds to new opportunities and challenges. Actually, many organizations are trying to build their own culture for innovation. Thus Browing needs to focus on risk taking for change. Risk taking is ‘no punishments for failure’ and ‘freedom to try things and fail’. For example, laughing at those who suggest new approaches can stop sharing information each other.

Another norm to promote creativity is openness. Openness includes open communication and help share information, open access, willingness to consult others. Browing should be careful of knowledge evaporation. He should build up internal knowledge database as an instrument at the corporate level for collecting ideas and then promoting them. And also he has to give all the relevant employees to access the database. As a result, employees who are interested in any relevant subject can give negative or positive feedback and the subject can develop in a better way. Innovation is a process, not just an output. Time out is as important as time in. If we have a problem, our brains continue to search for the solution even while we are doing other things.

Fifth, Browing should celebrate accomplishment making everyone hero. Celebrating accomplishments provides support for staff undergoing change. Just as Casea said, Browining has to convince analysts that collaborative project is additive to their franchise, that it’s not just an extracurricular activity. Financial rewards do encourage people to produce results. But the kind of ownership that really generates energy is not financial. It is emotional. Employees must feel that the rewards offered are attractive. Providing adequate pay, at the same time he could compliment the effort and result whenever he encounters. This will impart a motivating sense of personal accomplishment and little by little will build commitment to the collaboration. A solid performance management system requires due respect to both intrinsic and extrinsic rewards. So Browing should be skilled at communicating instrumental and expressive messages concurrently.

The last suggestion for Browning is to decide or delegate the suitable leader and make him control the team under strong leadership. Just as Casesa indicated, non-hierarchical relationships across divisions among analysts complicated the task since there was also no actual leader when analysts made the third capital-structure report. To maintain this innovation, Browning also has to consider human side of innovation, because even the most technical of innovations requires strong leaders with great relationship and communication skills. The good leader might pull human resource to the collaboration when needed. Just as Haggerty brought an editor in meeting to help them structure the report, the environment which makes analysts easy to collaborate would also promote the positive image of collaboration. Under good and respectful leader, the future collaboration would create more successful capital-structure report.

BIBLIOGRAPHY

AMBLER, S. (1995) “USING USE CASES: REDUCE DEVELOPMENT COSTS WITH USE-CASE SCENARIO TESTING,” SOFTWARE DEVELOPMENT, 3 (6), JULY.

BILOW, S. C. (1995) “DEFINING AND DEVELOPING USER INTERFACE INTENSIVE APPLICATIONS WITH USE CASES,” REPORT ON OBJECT ANALYSIS AND DESIGN. 1 (5): 28-34.

INNOVATION THE CLASSIC TRAPS ,SKILLS LESSONS

THE NOT-SO-SECRET INGREDIENT OF HIGH PERFORMANCE, BE A GOOD BOSS

LEADERSHIP FOR CHANGE: ENDURING SKILLS FOR CHANGES MATERS, WRITER:ROSABETH MOSS KANTER

THE NOT-SO-SECRET INGREDIENT OF HIGH PERFORMANCE, INTRINSIC REWARDS GENERALLY MOTIVATE BEST

CORPORATION, CULTURE, AND COMMITMENT: MOTIVATION AND SOCIAL CONTROL IN ORGANIZATIONS, WRITER:CHARLES O’REILLY

INNOVATION, WRITER:ROSABETH MOSS KANTER

BUILDING AN EFFECTIVE GLOBAL BUSINESS TEAM, CULTIVATING A CULTURE OF TRUST

Title :Leadership for Change: Enduring Skills for Changes Maters, Writer:ROSABETH MOSS KANTER, Page:4

 See Building an Effective Global Business Team, Cultivating a Culture of Trust, page 69

 Title:Innovation, Writer:Rosabeth Moss Kanter, Page:10

 Title :Leadership for Change: Enduring Skills for Changes Maters, Writer: ROSABETH MOSS KANTER, Page:3

Title:Corporation, Culture, and Commitment: Motivation and Social Control in Organizations, Page:15, Writer:Charles O’Reilly

 Title:Corporation, Culture, and Commitment: Motivation and Social Control in Organizations, Page:15, Writer:Charles O’Reilly

 Title :Leadership for Change: Enduring Skills for Changes Maters, Writer:ROSABETH MOSS KANTER, Page:14

 See Motivation: The Not-So-Secret Ingredient of High Performance, Intrinsic Rewards Generally Motivate Best, page 5-7

 See Innovation The Classic Traps ,Skills Lessons, page 4

 See Motivation: The Not-So-Secret Ingredient of High Performance, Be a Good Boss, page 17-18


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