Comparison with best practice transfer

Given that piloting involves the creation of templates, it is important to show how piloting is similar to or differs from best practice transfer and replication; the other main bodies of research where templates are employed (see section 2.1).

I found that piloting differs from best practice transfer in some significant ways.

Firstly, piloting consists of initially encapsulating the new global practice within a working template in the form of an embedded routine and then this template is replicated within MNC subsidiaries through sequential subsidiary-by-subsidiary adoption. The template and associated implementation methodology contains the knowledge that is needed by the organization to leverage economies of scale and scope across the MNC through the introduction of the new practice. In contrast, best practice transfer consists only of the replication of an existing routine i.e. does not speak about template creation (e.g. Nelson & Winter, 1982;

Jensen et al., 2003; Jensen & Szulanski, 2007; Szulanski et al., 2004; Szulanski, 1996). In addition, in best practice transfer the template only refers to the routine itself and there is no mention of the methodology. In piloting the methodology is an essential piece of the template as this provides the information needed for replication.

Secondly, I found that the relationships between the knowledge source (i.e. the pilot) and the subsidiaries are also different from those found in best practice transfer. The data showed that subsidiaries are not judging the worth of the pilot based on the trustworthiness of the source to complete the transfer of proven knowledge to the subsidiaries or in the sense that the results of the new practice are visible, stable and measurable (Szulanski, 1996; Szulanski et al., 2004;

Zander & Kogut, 1995). Rather subsidiaries are looking at the attributes of the pilot location in terms of the capabilities of the people in the functional domain of the new practice and business coverage. I have termed this the “credibility” of the source to differentiate it from the concept of trustworthiness. Credibility here refers to a perception or belief that the location selected for the pilot has the capability to create an appropriate template that will eventually yield economic benefits. I suggest that because during the early adoption phase of intended

strategic initiatives there is only limited evidence of performance benefits, the subsidiary managers gather and process data on the attributes of the pilot location instead. If managers in the subsidiaries see that the pilot(s) has been conducted in a credible location(s), they are more likely to be positively disposed to the strategic initiative.

This suggests that at least part of the adoption decision is based on status-driven processes where organizations gather and process data on the stable attributes of early adopters and will imitate large or prestigious peers to cope with environmental uncertainty (Fombrun & Shanley, 1990). This is consistent with descriptions of trait-based imitation as a factor that can provoke mimetic isomorphism (DiMaggio & Powell, 1983; Miner & Haunschild, 1995).

Thirdly, rather than creating a “proven” template in the sense that there are concrete and visible performance results (Nelson & Winter, 1982; Szulanski, 1996), my data show that piloting only has to demonstrate that the template is feasible or workable. Feasibility is not an important concept in best practice transfer because of the assumption of the pre-existence of a single template that embodies a set of routines that is deemed superior to internal alternative practice and known alternatives outside the company (Kogut & Zander, 1992;

Nelson & Winter, 1982; Szulanski, 1996). In contrast, in piloting I found that there was only limited evidence of the performance benefits of the new practice at the point in time when the decision was taken to roll out the initiative to further subsidiaries. In a sense the template created in the pilot could be termed to be

“immature” in the sense that it was only in existence for a very limited amount of time before replication took place and was not fully institutionalized. Using the terminology of Szulanski (2000) the template had only really reached a state of satisfactory performance where the pilot location could start to use the knowledge. It had not yet reached a point of complete integration where the knowledge was entirely routinized.

It is also interesting to compare these findings to social learning theories (e.g.

Bandura, 1986; Rogers, 2003) and observational learning theories (e.g. Greve, 1995). Social learning suggests that organizations can do more than just observe the responses of network peers, they can also vicariously evaluate the outcomes peers have obtained and benefit from the lessons they have learned.

On-going relationships provide channels for sharing useful information and a heightened motivation for doing so (Kraatz, 1998). As describer in Chapter 2, this view of learning through the diffusion of information through networks is regarded as a central tenet of knowledge transfer theory (e.g. Hansen, 1999;

Szulanski, 2000; Tsai, 2002). It is also consistent with outcome-based imitation modes described in institutional theory where mimetic isomorphism takes place in response to imitation of practices that have previously produced positive outcomes for others (Miner & Haunschild, 1995).

In the observational learning perspective information is not exchanged directly between adopters or the sources of information are diffuse (Greve, 1995). In these models, contact between organizations is unnecessary for imitation to occur and decisions to adopt depend more on organizations considering and emulating firms in a similar strategic group (Greve, 1998). Organizations seek to learn from the experiences of salient others by imitating their visible actions

(Levitt & March, 1988; March, 1991). Imitation can result from the bandwagon effect where with a growing number of adopters, adoption is indiscriminate and based on fear of lost legitimacy (Abrahamson & Rosentopf, 1993; Tolbert &

Zucker, 1983). In institutional theory this is equivalent to status-based imitation (DiMaggio & Powell, 1983; Miner & Haunschild, 1995).

The above findings suggest that in piloting although trait-based imitation and observational learning is important there is also a dimension of social learning taking place. Subsidiary managers can form an opinion on the performance of the new practice, even if this is only based on feasibility rather than economic performance, allowing for a mild form of outcome-based imitation. Additionally, in social learning, organizations tend to learn most from prior adopting organizations that are similar (Kraatz, 1998)²¹. This was also a clear theme in the cases where subsidiary managers were carefully evaluating the likeness of their subsidiary to other subsidiaries in terms of elements such as organizational structure, IT systems, and business coverage. So piloting also partially has a dimension of social learning and outcome-based imitation leading to mimetic isomorphism (Miner & Haunschild, 1995).

Fourthly, I found a difference in the roles of key actors in piloting in comparison to best practice transfer. In best practice transfer the source is expected to play a major role through providing resources and engaging in social ties through which tacit and explicit knowledge migrate (Szulanksi, 1996; 2000). Examples of activities include planning the transfer, documenting the practice for transfer, implementing systems for transfer, training the personnel, helping with troubleshooting and unexpected problems and lending skilled personnel (Szualanski, 1996; Szulanski et al., 2004). This is one of the reasons for which source motivation is an important factor in reducing the stickiness of knowledge transfer.

In contrast in piloting, the managers in the pilot played a much smaller role in transmitting the knowledge contained in the template to the subsidiaries during replication because of the existence of the global team. In piloting I found that the global team play a very significant role in knowledge transfer. This included many of the items mentioned above such as codifying the new processes and practices from the pilot, being on site to help with the implementation in the subsidiary (which is the equivalent of providing trained personnel), providing assistance to answer questions, and troubleshooting emerging issues. The global team, as mentioned above, also put together a complete implementation methodology. This included elements such training methodologies and communication plans and materials to engage stakeholders. Although pilot managers were regularly contacted through informal networks to find out how the initiative was going and also for unofficial advice, the majority of formal piloting knowledge transfer took place through the global team.

Finally, although not empirically proved in this study, it appears that the process of piloting and rollout across subsidiaries is a faster process than best practice

21 Psychological research shows that similarity between actors and models they observe plays an important role in determining whether observed behaviour will be adopted, even if a new practice has not yet amply demonstrated results (Bandura, 1986; Rogers, 2003).

establishment and transfer. In piloting, senior managers did not wait for proof of economic performance in the pilots or for complete institutionalization or routinization of the practice but immediately started rollout to other subsidiaries.

This suggests an element of implementation speed. The adoption speed of strategic initiatives is important because fast strategic decisions improve performance (Baum & Wally, 2003), particularly under high velocity environments (Bourgeois & Eisenhardt, 1988; Eisenhardt, 1989b; Judge &

Miller, 1991). However, speed in piloting and rollout can have a downside for the organization if economic performance does not materialize following adoption.

In summary, piloting and initiative rollout can be seen to be distinct from best practice transfer in terms of the nature of the template, the role of the source, and the speed of transfer. Strategic initiative adoption following piloting exhibits dimensions of both status-driven and outcome-driven imitation.