Desperately Avoiding Bureaucracy: Modularity as a Strategy for Organisational Innovation

Back in the 1960s, it was established that bureaucracy and innovation tend to oppose each other. However not many “innovative” organisations have managed to banish bureaucracy altogether. Topicus, a young software house in the Netherlands, has done this. It has developed an organisational strategy that creates a “spin-off” whenever the organisation becomes too large and is in danger of losing its innovative edge. Topicus has been very successful with this strategy – it has been one of the fastest growing software houses in the Netherlands since its inception, a period which includes the “IT crash”. In general, setting up new organisations is risky, however the new “spin-off” organisation is supported by many resources in every phase of the spin-off process, which makes it a successful organisation. This paper shows that this strategy is effective in an immature environment (when there is no dominant player) but it is not the best strategy when it comes to creating large scale software products or dominating a market. In this paper we illustrate how new organisations that have similar characteristics could consider this growth strategy. The theoretical significance of this research is that it describes a novel strategy for organisational growth. The practical significance is that it provides an approach for high-tech companies to maintain innovation while growing. The strategy seems to be especially applicable when the product that the organisation develops is knowledge based, such as software. Knowledge is easily transferable and employees are fairly rewarded with this strategy, and therefore highly motivated.

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