Tratos - Culture of Innovation

Maurizio Bragagni

Culture of Innovation Survey of Tratos, a cable manufacturing company

Culture of Innovation Survey of Tratos, a cable manufacturing company Presented by: Maurizio Bragagni In partial fulfilment of the: Executive Master of Business Administration Degree Submitted for: Business Mastery Project Presented to: Professor Davide Ravasi Professor in Strategic and Entrepreneurial Management Faculty of Management Cass Business School City University London

London 5th May 2016

TABLE OF CONTENTS List of tables and figures ................................................................................................................................... 6 Acknowledgments .............................................................................................................................................. 7 List of abbreviations ........................................................................................................................................... 8 Executive summary ............................................................................................................................................. 9 1 INTRODUCTION ............................................................................................................................................ 11 2 INNOVATION .................................................................................................................................................. 15 2.1 DEFINING INNOVATION ............................................................................................................................ 15 2.2 INNOVATION A COMPETITIVE ADVANTAGE ......................................................................................18 3 CULTURE ...........................................................................................................................................................20 3.1 DEFINING CULTURE ....................................................................................................................................20 3.2 WHY BOTHER WITH CULTURE? ..............................................................................................................21 3.3 WHAT IS THE CULTURE OF INNOVATION?..........................................................................................22 4 CABLES INDUSTRY ......................................................................................................................................24 4.1 RADICAL AND INCREMENTAL INNOVATION IN THE CABLE INDUSTRY...................................24 4.2 OVERVIEW OF THE CABLE INDUSTRY ..................................................................................................27 4.2.1 Forces driving competition in the global cables market .........................................................31 4.3 KEY SUCCESS FACTOR ...............................................................................................................................36 4.4 TRATOS SUCCESS FACTOR .......................................................................................................................36 5 METHODOLOGY ...........................................................................................................................................38 5.1 OBJECTIVE OF THE STUDY .......................................................................................................................38 5.2 SURVEY ...........................................................................................................................................................38 5.2.1 Pilot Survey ................................................................................................................................................39 5.2.2 Survey Results ..........................................................................................................................................39 5.3 WORKSHOP ...................................................................................................................................................40 5.3.1 First workshop ..........................................................................................................................................40 5.3.2 Second workshop ...................................................................................................................................40 5.4 EXPLANATION OF THE SURVEYS USED AS A BASIS FOR THE TRATOS QUESTIONNAIRE .43 5.4.1 The Building Blocks of Innovation Survey .....................................................................................43 5.4.2 “Climate change perception questionnaire” ................................................................................43 5.4.3 Questionnaire on Tratos perception of innovation.. .................................................................42

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6 ANALYSIS AND RESULTS ..........................................................................................................................44 6.1 SAMPLE ...........................................................................................................................................................44 6.1.1 General remarks .......................................................................................................................................44 6.2 RESULT ANALYSIS........................................................................................................................................45 6.3 DETAILED ANALYSIS ...................................................................................................................................48 6.3.1 The highs and lows .................................................................................................................................49 6.3.2 The differences ........................................................................................................................................50 6.3.3 The Italian culture ...................................................................................................................................51 6.4 WORKSHOPS.................................................................................................................................................52 6.4.1 Culture of Innovation Academy Workshop 26th February 2016 ............................................52 6.4.2 Culture of Innovation Board workshop 14th March 2016 .........................................................54 6.4.3 Workshop conclusion ............................................................................................................................58 6.5 REPORT RECOMMENDATIONS ...............................................................................................................59 7 CONCLUSION .................................................................................................................................................60 List of Appendices Appendix 1 - Tratos Group - Culture of Innovation Survey ...............................................................62 Appendix 2 - Letter to accompany Culture of Innovation Survey ..................................................67 Appendix 3 - Analysis Tratos Group Culture of Innovation Survey ................................................68 Appendix 4 - Innovation Survey: Factors..................................................................................................77 Appendix 5 - Innovation Survey: Elements .............................................................................................78 Financial Times: In pursuit of an EMBA for that global perspective ..............................................84 Bibliography ........................................................................................................................................................86

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LIST OF TABLES AND FIGURES LIST OF FIGURES: Figure 1: Transitioning from an old technology to a new technology .........................................18 Figure 2: Billions Euros Turnover of cable manufacturers – Prysmian Annual rpt 2014 ........27 Figure 3: Global cables market category segmentation: % share, by value, 2014(e) ..............28 Figure 4: Global cables market value: $ million, 2010–14(e) .............................................................28 Figure 5: Global cables market value forecast: $ million, 2014–19.................................................29 Figure 6: Global cables market geography segmentation: % share, by value, 2014...............29 Figure 7: Change in Wire & Cable Consumption by region ..............................................................30 Figure 8: Forces driving competition in the global cables market, 2014.....................................31 Figure 9: Drivers of buyer power in the global cables market, 2014 .............................................32 Figure 10: Drivers of supplier power in the global cables market, 2014 ......................................33 Figure 11: Drivers of degree of rivalry in the global cables market, 2014....................................34 Figure 12: Factors influencing likelihood of new entrants in global cables market, 2014 ....34 Figure 13: Factors influencing threat of substitutes in global cables market, 2014 ................35 Figure 14: Market Presence V Product Portfolio Range - Prysmian Annual rpt 2014..............37 Figure 15: Innovation radar ...........................................................................................................................42 Figure 16: Results Survey Graph..................................................................................................................46 Figure 17: Variance between sites in survey results ............................................................................51 Figure 18: Organisational Structure ...........................................................................................................57 LIST OF TABLES: Table 1: Measure of company’s innovative culture ..............................................................................45 Table 2: Comparison of Tratos’ strengths and weaknesses ..............................................................47 Table 3: Variance between sites in survey results .................................................................................50 Table 4: Internal communication tools .....................................................................................................58

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ACKNOWLEDGMENTS “This may seem a strange way to begin with an autobiography. A confession: I hate having to use the first person. Nearly everything I have done in my life has been accomplished with other people.” (Welch 2003). Yet when you write a book like this, you are forced to use the narrative “I” when it is really the “we” that counts.

I want to mention everyone who has helped to shape my character, my values, and my career. My ancestors: those with whom I got the honour of sharing a part of their lives; My great-great-grandmother Emilia; my great-grandmothers Giuseppa and Rita; my great-grandfather Silvestro; my grandfathers Amleto, Amerigo and Pietro; my grandmothers, Maria, Viviana, Marina, (I was surrounded by love); my parents - my loving mother Giovanna and my father Germano (the only man that I have ever envied); my sister Sara, my brother-in-law Vincenzo (who has more than once reviewed this work); my nephews and nieces - Tommaso, Luca, Rita, Teresa; my loving wife Alessandra, my daughters Giulia Maria, Lucia Maria, Elena Maria and Anna; my family - my uncles Marcellino, Fulvio, Gabriele; my aunties - Anna, Silvana, Giulia; my Godchildren - Daniele, Fabio, Elettra; my parents in law: Franca and Pino; my teachers - in particular my English high school teacher Prof. Burroni, Prof. Rizzo, Prof. Teti; my bookteachers- Don Luigi Giussani, Jack Welch, Mervyn King, Warren Buffett, Winston Churchill; my priests – Gilfredo, Evio, Virgilio, Juan Carlos, Severino, Francesco; my classmates in school and Universities - Domenico, Francesco, Federico, Rocco, Luca, Massimo, Teresa, Conor, Costa, Vivien, Maria, Roberto; my bosses - Albano, Marta, Ennio, Elisabetta; my mentors in business - Silvano, Alfredo, John Light, John Cooper, Thomas, Neil, Jeanette, Bridgett, Ottonel, Stephan, Leonardo, Alberto and Prof. Roberto Ruozi; my Cass supporter- Lorraine; my guardian angels - Elena, Martina, Enrico, Lucrezia, Sally, Denise and Paolo; my truth-seekers in the academy- Prof Paul Dobson, Prof. Ajay Bhalla, Prof. Gianvito Lanzolla, Dr. Alessandro Giudici and Prof. Davide Ravasi, in particularly for his patience: my cluster mates- Simone, Sergio, Piero, Raffaella; my colleagues and believers at Tratos - James and Rodger Card, Kevin, Peter, Jon, Philip, Cindy, Veronica, Zilah, Rainer, Craig, Andrew, Barbara, Vincenzo, Francesco, Alan, Kath, Sue, Gianfranco, Chris; the Tratos shareholders/owners, who have given me their trust; and my friends from all the walks of life.

“No man is an island, /Entire of itself, /Every man is a piece of the continent, /A part of the main. / If a clod be washed/away by the sea, /Europe is the less. /As well as if a promontory were. /As well as if a manor of thy friend’s /Or of thine own were: /any man’s death diminishes me, /Because I am involved in mankind, /And therefore never send to know for whom the bell tolls; /It tolls for thee.” (Donne 1624)

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LIST OF ABBREVIATIONS AIEE AL BASEC CAGR CEO CH CU DOC EHV F4E GE ICF IEEE IMQ JCMA KN kV LME NPD OECD PPL QSTNS R&D US

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American Institute of Electrical Engineers Aluminium British Approvals Service for Cables Compound Annual Growth Rate Chief Executive Officer Chesterfield Copper Department of Commerce Extra High Voltage Fusion For Energy Agency General Electric International Cable makers Federation Institute of Electrical and Electronics Engineers Instituto Italiano Del Marchio Di Qualita Japan Construction Mechanization Association Knowsley Kilovolt London Metal Exchange New Product Development The Organisation for Economic Cooperation & Development Paper Polypropylene Laminated Questions Research & Development United States

EXECUTIVE SUMMARY Tratos had to break with traditional market places and products to grow - by building unique business modules, forging direct stakeholder relationships (customers, suppliers) and refusing to deal with distributors or agents.

In short it has survived and flourished for 50 years thanks to a focus on innovation.

As CEO, I lead a business that is part of one of the fastest-moving commercial environments, a sector driven by innovation and repeatedly defined by the art of the possible.

The business is cable manufacturing, but at Tratos we do it differently. Innovation is one of the pillars around which the business has grown. There’s still much to do - to find out more about innovation in business, and how a culture of innovation can be nurtured. The best was to do this was to look at the best practice in the space, and apply the thinking to Tratos to establish how deep innovation was ingrained and what more could be done to encourage it.

We talk to our customers, we deal with them directly. That means we can establish, firsthand, their technical needs. This direct line to customers’ technical people creates the opportunity to produce radical technological solutions alongside our customers.

As a result, Tratos stopped selling a cable product, and began selling innovation-led solutions.

By identifying the hot spots for innovation within Tratos earlier, and facilitating an easier route to practical innovation, how might that accelerate the business? The survey results provided a clear path to better innovation.

For instance, the survey of Tratos employees saw the company rated highly externally (3rd out of 18) on innovation, its disciplined approach to innovation and its ability to develop new capabilities from its work (6 out of 18).

Yet employees ranked certain individual components of success poorly. Its inability to minimise rules, polices and bureaucracy; its accountability of responsibilities and decision-making and entrepreneurialism (exploring opportunities) and `the action-orientated company’ (the ability to avoid analysis paralysis by exhibiting a bias towards action when a new opportunity is identified).

Employees also ranked the company’s leader poorly on engagement; the engaging factor (3.16) ranked lowest among the 18 factors and in particular, it scored very poorly in Italy (2.84) and in the UK (2.84), yielding below the average Innovation Quotient of 3.50.

Employees did not take the initiative in the innovation process (ranked 48 out of 54 elements), perhaps partially because leaders did not coach them (ranked 50 out of 54 elements). A large number of employees felt leaders did not provide feedback and support (ranked 48 out of 54). Nor did they feel the company rewarded individual participation in potentially risky opportunities, irrespective of the outcome (ranked 54 out of 54).

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Yet to survive and flourish, in the most difficult of environments, Tratos has focused on niche markets and on that all-important innovation. In the 1900s it developed fibre optical products, in the 2000s it produced cables for mobile applications, such as reeling cables for port cranes, and specialised in high speed products. In 2010s Tratos won an innovation award for supplying the Superconductor cables for the world-stage Energy Fusion project referenced earlier.

Cables are made from raw materials and compounds managed and controlled by large organisations, so the bargaining power of the suppliers is significant.

Tratos invested in its own compounds to achieve additional control and competitiveness. It fuelled diversification and dominance in niches by investing heavily in alternative products.

Tratos’ decision to engage on a differentiation platform included introducing radical technology to previously uneconomical markets. Due to years of competition on price, several markets had become innovation wastelands. Companies were losing money, and the markets were in decline. Tratos turned this to advantage, revitalising the most depressed markets with carbon fibre innovation for overhead conductors, overtaking existing players.

Based on the previous analysis and my experience of the industry, I can identify two principal ways to achieve success in the cable manufacturing industry: large economies of scale or innovation.

Add to this, access to a highly-skilled workforce and real insight into your business and you have something really powerful to bring change and step up to even greater innovation.

The future coming from the past - (pictured left: Egidio Capaccini, Tuscany, 1950s)

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1 INTRODUCTION This BMP aims to analyse the culture of innovation in Tratos. To achieve this I have principally used the studies of Rao Jay and Weintraub Joseph, “How Innovative Is Your Company’s Culture?” (Rao and Weintraub, 2013) (Chapter 5.4.1).

Since the beginning of the EMBA, I was moved by “…understand(ing) how to manage Tratos in a period of enormous change for the company and the industry in which it operated following the deregulation of the European telecoms market in 1994.” (Moules, 2014).

Especially, as I expressed during my interview in the FT newspaper of September 28th, 2014 when asked: What have you learnt from your time at Cass? “I thought that one of my company’s strengths was its ability to adapt and respond quickly to opportunities or market changes: the existing informal working practice and the ‘just make it happen culture’ encourages flexibility and an entrepreneurial approach. “During these years, I made massive changes in several sectors: [including] production, management, purchasing, IT systems and in particular I tried to change the firm’s culture. In the process, I found that all my assumptions were wrong. I now understand the company lacks the structure required to manage risk effectively, support long-term growth and optimise performance. Changing things will require a programme of training and development to address real culture change.” (Moules, 2014) This desire for exploring, understanding and experimenting has been with me since the beginning of this adventure and I want to use this opportunity to investigate the Culture of Innovation in Tratos. It is an experiment and it must be considered as such but at the same time, I have to clarify two main limitations I found in working on this research: a practical one and another connected with my job.

The first (and practical one) was the maximum number of words I could use. Only 15,000 were allowed to develop this subject, with all the academic aspects involved – and it is involved! A literature review on Culture and Innovation, Survey, Analysis of the Industry – included to foster better understanding of the sector environment – the Subject and the Importance of Innovation for a Cable Manufacturer and then on to the Survey’s Methodology, Analysis and Conclusion.

In order to condense, in some cases I sacrificed the fullness of the explanation for a more natural and shorter reading to highlight the core element of this job: the analysis and the conclusion of the survey. The summaries in the first chapters have been kept concise.

Consequently, I have not explored the academic discussion between climate and culture in this submission, although it was part of the background work. To help navigation and keep words to a minimum, when I refer to ‘climate’ it is interchangeable and relates to one block of the Rao and Weintraub survey and the second survey I applied, “climate change perception questionnaire”, (Abbey, 1981).

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The second limitation was my position in the company. As CEO of Tratos Ltd, I could not investigate the company culture in the first person. For authenticity of data collection, people had to be free to answer truthfully without worry or fear of consequences. To guarantee the anonymity and independence of the data collection, I appointed Jeanette Purcell Associates, an independent consultancy, to carry out the survey and collect the data to my brief. At the same time and for the same reasons, I also selected the quantitative method to analyse the organisational culture, including interviews with key personnel and inviting direct observations.

During the review of the literature, I approached the study of Rao and Weintraub (2013) on “How Innovative is your Company’s Culture” (the concept based on six building blocks: resources, processes, values, behavioiur, climate and success). These authors have created a survey to measure the innovation culture inside a company. I immediately selected the questionnaire as my primary hypothesis of this work. Rao and Weintraub’s approach is based on the imperative that organisation culture is the principal driven factor of innovation, over any other factor (national, environmental, etc.). This was in contrast with Schein’s position (2010) that organisational culture is also influenced by several other factors including: national culture and government policy.

For that reason, I integrated the Rao and Weintraub survey (Chapter 5.4.1) with 15 statements collected from a “climate change perception questionnaire”, used by Forehand (1963) and Paulillo (1977), and adopted in the analysis of Abbey (1981) ‘technological innovation in the semiconductor industry’. I used this additional survey to measure the confidence or, better, the employees’ perception of company stability, (first integration). I thought that I needed a verification of the Rao Weintraub statement and “climate change knowledge questionnaire” helped to verify employees’ understanding of changes (Chapter 5.4.2).

The second addition was 12 statements around the philosophy of innovation based on the research of Sawhney and colleagues: “The 12 different ways for companies to innovate” (Sawhney, Wolcott and Arroniz, 2006) (Chapeter 5.4.3).

I included 12 sentences to help verify Tratos employees’ perception of innovation; whether Tratos it is seen as a product innovator only, or a 360° innovator (Chapter 5.4.3). The choice of statements was arrived at through my knowledge of the industry.

As I said at the beginning of this chapter, I have always used the Cass Study of my daily work, so I organised two workshops to gather comment on the survey results (Chapter 5.3). The first one was held with senior management and the second one with Tratos Ltd’s board members.

The reason for this selection was, again connected with my position as CEO. I wanted a proper discussion, an honest debate and I needed people I felt confident would give free rein to their intellectual honesty. In addition this work has helped form the strategy leading to tactical implementation for building a true culture of innovation at Tratos (Chapter 6.4).

It was important to encourage acknowledgement of “culture innovation” with senior members of Tratos participating in the events. For that reason, I handed over the role of chair for the events to our consultant partner Jeanette. Because of the dynamics of this group, the discussion was more concentrated around the organisation’s structure than the imple-

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mentation of culture innovation. However, structure has an important part to play and all participants agreed on the value of the information resulting from the survey.

Tratos’ score as an innovative company was 3.50 out of a possible high of five (Chapter 6.2). According to Rao and Weintraub’s tool, the results classified Tratos as an innovative company, not an extreme one (4 to 5 score), but an innovative one (3 to 4 score) nonetheless. The results also show that the international offices scored a higher value (3.85) against (3.24) Knowsley and (3.39) Italy. Seeing our innovation-hub factories with a low score leads me to suspect that external factors could modify perceptions. This hypothesis is confirmed by the “Work Climate Survey” (Abbey & Dickson, 1983), International offices score 3.91, Knowsley 3.13 and Italy 2.95. It means, in my opinion, that the variant in scoring from 2.95 (Italy) to 3.23 (other parts of the company) may be a national perception of the wider environment with nationality influencing attitudes. A futher study is needed, but the similar results from members of staff in Italy (whether from members of the sales team, worshop floor or technical team) tends to indicate that different climate conditions influenced the results. (Chapter 6.3).

We believe the ‘country’ factor influences the organisational culture at Tratos. In this instance, either the Rao and Weintraub survey has limitations or exceptions or the sample selected for the Tratos survey was not sufficient. However, the main scope of the study is “data-supported picture of where the company culture is high and weak and then focus on specific areas where improvement is most needed and most likely to pay off”. As the authors suggested in their article “a better strategy is to focus on few things and leverage their success into a broader transformation over time.” (Rao and Weintraub, 2013).

During the workshops we identified strengths and weaknesses and ranked the results from 1 to 6 (the blocks), from 1 to 18 (the factors), and from 1 to 54 (the elements).

According to this survey, the employees gave the company high marks on enable1 (ranked No.1 out of 18 factors), capture2 (ranked No.2 out of 18 factors), external success (ranked No.3 out of 18 factors), learning (ranked No.4 out of 18 factors), enterprise (ranked No.5 out of 18 factors) and people (ranked No.6 out of 18 factors).

We ranked poorly on the individual components of success (ranked No.15 out of 18 factors), and they also ranked very low for simplicity (ranked No.16 out of 18 factors), and entrepreneurial (ranked No.17 out of 18 factors).

Employees ranked the company’s leader badly on engaging the rest of the workforce; the engage factor (3.16) ranked lowest among the 18 factors, in particular, it scored very poorly in Italy (2.84) and in the UK (2.84).

Tratos’ employees, according to “The 12 different ways for companies to innovate”, (Mohanbir, Wolcott, Arroniz, 2006) ranked the company 3.46 with no significant distinction between sites (International 3.48, UK 3.42, Italy 3.48) (Chapter 6.2).

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Enable and capture has been marked both 3.75 Enable and capture has been marked both 3.75

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Therefore, I wanted to discuss the results with my senior staff in the workshops, to engage all of them in progressing the work together. I wanted to follow the advice of the authors behind our source survey, who suggest “Show, not sell, persuasion works best in these situations, along with healthy dollops of encouragement to early adopters”. (Rao and Weintraub, 2013).

The workshops produced several recommendations for changes to enforce and improve the innovation culture.

In particular, they suggest championing innovation through better internal and external communication, improving the working climate – real and perceived - from the Knowsley and Pieve sites, reducing the company bureaucracy and improving the recruitment process.

They also recommended enforcing and developing strengths such as the shared drive for success, a sense of enterprise, responsiveness to change and flexibility (Chapter 6.4.3).

After a healthy discussion of the survey results by the board, we have also decided to implement the Tratos Academy: a training programme coupled with increased delegation, coaching, support and feedback systems, and most of all by changing behaviours (Chapter 7).

A key result has been senior management and Board’s acknowledgement of facts based on data, rather than personal perception. We know where we stand and the main factors that can influence the culture of innovation. Work continues and I am sure this will help us write the second 50 years of Tratos’ success.

Image created to celebrate Tratos’ 50th Anniversary

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2 INNOVATION “Innovation” has had different meanings: a product-based definition was proposed by Barnett as the “invention of something new” (Barnett, 1953); a more organisation-oriented definition was instead proposed by Shepard who “considered an organisation to have innovated when it learns to do something it did not know how to do before” (Shepard, 1967).

Carroll saw innovation as a social process of organisational adoption in contrast to a scientific discovery (Carroll, 1967). Mansfield proposed innovation as “first use ever” of a new product (Mansfield, 1963); Zaltman et al. defined innovation as “the propensity to adopt any idea, practice or material artefact perceived to be new by the adopting unit”. (Abbey, 1981).

More recently, the question of what exactly innovation is, was re-proposed by Sawhney and colleagues. These authors reported: “although the subject has risen to the top of the CEO’s agenda, many companies have a mistakenly narrow view of it. They might see innovation only as synonymous with new product development or traditional research and development. But such myopia can lead to the systematic erosion of competitive advantage, resulting in firms within an industry looking more similar to each other over time”. (Sawhney and Wolcott 2006).

To avoid this, Sawhney and colleagues proposed to anchor the discussion on the customer outcomes that result from innovation, and they suggested that managers think holistically in terms of all possible dimensions through which their organisations can innovate (Chapter 5.4.3). Accordingly, they defined business innovation as “the creation of substantial new value for customers and the firm, by creatively changing one or more dimensions of the business system” (Abbey, 1981) (Chapter 5.4.2).

Thus, a modern definition of innovation must consider not only product development but the impact that any change might generate in value creation. Today, companies capturing higher created value apply a different concept of innovation to the market. They either introduce a completely new technology that destroys the existing one (e.g. digital photography on celluloid) or a new strategy for selling the same product (Ryanair).

To describe the first behaviour, CM Christensen introduced the term “disruptive innovation for a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors” (Christensen, 2003).

When a different strategy changes the rules, introducing a new way of playing the game (e.g. Ryanair) we are facing strategic innovation. To this end, this specific type of strategic innovation is “disruptive strategic innovation” – “namely, a way of playing the game that is both different from, and in conflict with, the traditional way” (paraphrased) (Charitou

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and Markides, 2003). In Schumpeter’s words, “radical innovations shape big changes in the world, whereas “incremental” innovations fill in the process of change continuously.

Schumpeter proposed a list of various types of innovations: introduction of a new product or a qualitative change in an existing product; process innovation new to an industry; the opening of a new market; development of new sources of supply for raw materials or other inputs; changes in industrial organisation” (paraphrased). (Schumpeter, 1934).

These definitions also make it clear that innovative activities emerge from the application of intangible assets that integrate knowledge, skills, and technologies in the development and commercialisation of products and processes (Intangible assets are those that do not have a physical or tangible existence, such as goodwill, brand value, patents). (Organisation for Economic Cooperation and Development (OECD), 2010).

Schumpeter’s ideas have been adopted by The Organisation for Economic Cooperation and Development (International organisation helping governments tackle the economic, social and governance challenges of a globalised economy) and they were included in the Oslo Manual. “The Oslo Manual is the foremost international source of guidelines for the collection and use of data on innovation activities in industry”, (OECD, 2010).

In the Oslo Manual the definitions of innovation are: “The implementation of products or production and delivery processes with new or significantly improved characteristics. The third edition of the Oslo Manual extends the definition to include new organisational methods in business practices, workplace organisation, or external relations” (OECD, 2005).

“DOC defines innovation as the design, development, and implementation of new or altered products, services, processes, organisational structures, and business models to create value for the customer and financial returns for the firm practicing innovation (DOC, 2008)” (Oslo Manual, 2010).

Both definitions recognise the strategic application of knowledge in all innovation activities and the importance of commercialisation activities in facilitating financial returns to the innovative firm and social returns to consumers.

However, authors agreed that a successful innovation is one that returns the original investment in its development plus some additional interest (e.g. increased revenue) (Mascarenhas, 2013). Innovation produces an economic return and it can come from any direction.

There is both technological and process innovation. “The combined activities within the innovation process are the route to useful, new, marketable products and services and/or new production and delivery systems”, (Burgelman, 2009).

The review of literature points out three types of innovation: incremental, radical and architectural.

Incremental innovation involves the adaptation, refinement, and enhancement of existing products and services and production and delivery systems. The new incremental product can co-exist with the actual one. In cabling, for instance, incremental innovation is the aluminium conductor against the copper power cable. The introduction of aluminium metal,

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instead of copper, aimed to reduce the financial cost because both metals are exchanged on the LME. Cable in copper has a better transmission of power, if it has the same cross section, than a cable in aluminium; in fact, the equivalent ten sqm in copper is a 16 sqm in aluminium. However, aluminium is a third cheaper than copper, and in particular weight is 2.6 Al against 8.9 Cu. Both products are still used; aluminium power cable did not replace the copper power cable.

Radical innovation involves entirely new product and service categories and production and delivery systems. Innovation is radical when it is based on a disruptive technology - a new product that makes the existing one obsolete.

In the cable industry, for instance, fibre is replacing copper cables in the telecommunications market. The fibre optical cable transfers signals at the light speed. The copper cable transfers signal at the speed of electrical impulses. As mentioned in chapter 4, B3, a copper telecommunication factory, went into bankruptcy because it was unable to change its production process.

Architectural innovation involves reconfiguration of the system of components that constitute the product. “Manufacturers may well take the opportunity to refine and improve some parts, but essentially the changes will be minor, leaving the components to function as they have in the past but within a newly re-designed and re-configured system.�(Henderson, Clark 1990). No examples of architectural innovation in the cable industry were found.

Image created to celebrate Tratos’ 50th Anniversary

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2.2 Innovation a competitive advantage These different innovations (described above) are also related by an important dynamic, a technical innovation ‘S-shape’. According to Golder and Tellis, at a certain point (t) a new technology enters in the market, with lower performance than the old technology (Figure 1). However, the new technology “begins to improve rapidly in consumer benefit, and it ascends on its S-curves. At point (b), the product becomes a radical product innovation”, (Golder and Tellis, 1997) with the strength to render existing products obsolete. Otherwise, it becomes merely a substitute. At the core of any innovation, there is an enabling technology, and at the origin of those technologies are inventions or discoveries.

Figure 1: Transitioning from an old technology to a new technology According to Chandy and Tellis (1998), there are several reasons why innovation, and in particular radical innovation, is important. Firstly, “radical innovations have the capacity to destroy the fortunes of firms (the example of B3). Hard-won customers quickly desert an incumbent firm when a radical innovation provides better performance per dollar than the incumbent’s current products. Costly investments made over the years suddenly become useless because they cannot be applied to the new generation of products. Skills that built a firm’s success can quickly become obsolete. Radical product innovation can be the source of competitive advantage to the innovator.

Some authors argue that radical innovations are increasing in frequency (Foster 1996)”. In the cable industry, I noticed it, with the introduction of new types of material such as nano polymer – a material that is being talked about by those involved in traditional manufacturing processes (Chandy and Tellis, 1998).

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Several researchers support the positive relationship between innovation and success. For example, Hall, Jaffe and Trajtenberg (2001) found that the average number of citations per patent contributed to the explanation of a firm’s market value.

However, “new US consumer product projects fail 95% of the time (Clancy & Stone, 2005), and industrial product launches fail about 40% of the time”, (Stevens & Burley, 2003), (Belassi, Kondra, Tukel, 2007).

In an attempt to overcome such high levels of project failure, Belassi, Kondra and Tukel investigated the effects of organisations’ culture on the performance of new product development (NPD). Using data from 95 US institutions, the study provided evidence of significant effects of organisations’ culture on NPD projects.

Also, after studying innovation among 759 companies based in 17 major markets, researchers Tellis, Prabhu and Chandy (2009) found that “corporate culture was a much more important driver of radical innovation than labour, capital, government or national culture” (Tellis, Prabhu, Chandy 2009).

From the above assertions, it is clear that innovation is primarily influenced by organisational culture. Understanding innovation is fundamental for a firm’s survival, in particular, radical innovation, so it is imperative understand organisational culture.

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3 CULTURE The idea an of organisation’s culture being recognised as having a value is a relatively recent phenomenon. Until the mid-1980s, organisations were, for the most part, only thought of as a rational means by which to coordinate and control a group of people. Various authors analysed how the behaviour of a company is perceived by employees – specifically its internal environment and work climate conditions (Abbey 1981).

In his bibliography Straight From The Gut, Jack Welch, just appointed GE (General Electric) CEO, in 1981, stated “(...) I did know what I wanted the company to “feel” like. I wasn’t calling it ‘culture” in those days, but that is what it was”. (Welch, 2003).

Organisational culture was introduced in literature by Hofstede (1997), Deal and Kennedy (1982), Schein (1984), O’Reilly and Chatman (1996). Hofstede defined it as the set of shared assumptions that is often unstated. “Culture as mental software, however, corresponds to a much broader use of the word which is common among social anthropologists: this is ‘culture two’. In social anthropology, ‘culture’ is a catchword for all those patterns of thinking, feeling, and acting (...).More than just those activities supposed to refine the mind are included in ‘culture two’, but also the ordinary and menial things in life: greeting, eating, showing or not showing feelings, keeping a certain physical distance from others, making love, or maintaining body hygiene” (Hofstede, 1997).

Deal and Kennedy (1982) defined organisational culture “as the way things get done around here”. They argue that it is culture at individual, team and organisational levels that creates the context for practice. (Deal and Kennedy, 1982).

According to Schein: “Organisational culture is the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems”, (Schein, 1984).

O’Reilly and Chatman (1996) defined organisational culture as “a system of shared values (that define what is important) and norms that identify appropriate attitudes and behaviours for corporate members (how to feel and behave)” (for similar definitions, see (Kotter and Heskett, 1992); (Rousseau, 1990); (Gordon and DiTomaso, 1992).

More recently, Ravasi and Schultz (2006) wrote, “organisational culture is a set of shared assumptions that guide what happens in organisations by defining appropriate behaviour for various situations”.

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Belassi: “researchers use a range of theoretical approaches and assumptions and often interpret similar culture phenomena in different ways. Within organisational culture literature, there appears to be a fundamental disagreement over theoretical perspectives. (..)The lack of paradigm consensus aside, the study of organisational culture contributes a great deal to understanding how organisations operate.” (Belassi, Kondra and Tukel 2007).

I wanted a practical approach. During a review of the literature, I was captivated by O’Reilly and Chatman’s idea that culture is to measure a characteristic of organisations (O’Reilly and Chatman, 1996).

When I found the Rao and Weintraub survey (chapter 3.3), I decided to adopt it. It was the answer to measuring the level of innovation culture inside of Tratos.

3.2 Why Bother with Culture?

“Culture matters because it is a powerful, tacit, and often unconscious set of forces that determine both our individual and collective behaviour, ways of perceiving, thought patterns, and value. Organisational culture in particular matters because cultural elements determine strategy, goals, and modes of operating.” (Schein, 2009) Organisations produce cultures that are organised in structure, process, values and behaviours that characterise and govern them. Culture matters because if it is ignored, it rules the firm instead of the CEO. According to Schein: “culture is not based on a superficial model, but built on deeper, more complex anthropological models. Those models refer to a wide range of observable events and underlying forces, such as: observed behaviour, behavioural regularities when people interact, group norms, espoused values, formal philosophy, rules of the game, climate, embedded skills, habit of thinking, mental models, and/or linguistic paradigms, shared meaning, root metaphors or integrating symbols, formal ritual and celebrations. The concept of culture implies structural stability, depth, breadth and patterning or integration” (Schein, 2010).

In particular “structural stability” means stability in the group. For Schein, the strength of a culture depends on how long members of a group have been together, and how stable and homogenous the group has been. With the term depth, the author explains that culture is the deepest, often unconscious, part of the team and it is, therefore, less tangible and less visible. On breadth, Schein describes culture as able to pervade and influence all the aspects of how an organisation deals with its primary tasks, various environments, and internal operations. Finally, culture implies that rituals, climate, values and behaviours tie together into a coherent whole, and this pattern of integration is the essence of what Schein means by culture (Schein, 2010).

Cultures can generate inertia - as described by Michael T. Hannan and John Freeman (1984) -that could be an obstacle to innovation. “(...) For broad classes of organisations, there are adamant inertial pressures on structure arising from both internal arrangement (e.g. inter-

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nal politics) and from the environment (e.g. public legitimation for group activities)” (Hannan and Freeman, 1984). Unless the company is regularly orientated to learn and adapt itself to new external conditions, culture can be an obstacle to change.

3.3 What is the Culture of innovation?

After reviewing literature in the fields of organisational dynamics, leadership, behavioural science, corporate entrepreneurship and innovation, Rao and Weintraub found theoretical frameworks and models that described the organisational culture and a culture of innovation. Specifically, they reported that while looking for instruments and assessment tools that were reliable, they “found extensive research and models from academia, consulting firms and enterprises themselves, spanning more than 30 years” (Rao and Weintraub, 2013).

In particular, the works of Christensen (1997) demonstrated the importance of resources, processes and values in innovation. Schein’s (2010) work showed the importance of past success and its impact on values and behaviours. As Rao and Weintraub (2013) report: “our thinking about the survey’s basic framework was heavily influenced by Christensen’s and Schein’s work”. In fact in their studies, Rao and Weintraub considered the observed behavioural regularities when people interact described by Schein in Organisational Culture and Leadership, (Schein, 2010, chapter. 3.2).

Briefly, the studies of Rao and Weintraub led to the identification of 54 elements and 18 factors that were field-tested for more than two years for statistical validity and executive acceptance as both a diagnostic and actionable tool. Data was gathered from 1,026 executives and managers in 15 companies headquartered in the U.S., Europe, Latin America and Asia.

Rao and Weintraub went on to build a survey framework that they propose as “a new assessment tool (that) can help pinpoint your company’s innovation strengths and weaknesses” (Rao and Weintraub 2013).

The survey is composed of six blocks (values, behaviours, climate, resources, processes, success), 18 factors (values: entrepreneurial, creativity, learning; behaviours: energise, engage, enable; climate: collaboration, safety, simplicity; resources: people, systems, projects; processes: ideate, shape, capture; success: external, enterprise, individual) and 54 elements (chapter 5.4.1).

“Values drive priorities and decisions which are reflected in how a company spends its time and money” (Rao and Weintraub, 2013). Values, the authors explain are more measures of what leaders do and where they spend their time than of what they say. Innovative enterprises depend on being entrepreneurial, promoting creativity and encouraging continuous learning. In particular, they are action-oriented and avoid analysis paralysis. Ambiguity is tolerated when pursuing new opportunities as this encourages greater exploration of possibilities to create new things. Most importantly, failures are seen as learning opportunities, and people are not afraid to fail, even when they encounter great adversity.

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Behaviours in pursuit of innovation are telling. For leaders it means being ready to kill off existing products to replace with new and better ones; listening and accepting confrontation with stakeholders, supporting the vision and energising employees, to adapt to new situations and to be ready to take decisions and risks when it is necessary. Leaders persist in the innovative approach during adversity. For employees, it means remaining flexible, persistent and adaptable. It means maintaining a high level of capability and devotion; following the firm through what may be difficult times. If the individual doesn’t like change and challenges, then it may be better for them to seek new employment. (Rao and Weintraub, 2013).

Rao and Weintraub define Climate control as the lifeblood of the workplace culture (Chapter 1). An innovative firm encourages independent thinking and risk-taking, rewarding the innovators at any level, with freedom and money, making an ecosystem of safety and stability, promoting diversity and helping teamwork. Trust, integrity and openness are background requirements. The most innovative companies recognise that people engaged in transformation cannot be distracted by the risk of the decision. Otherwise, they will never engage with new ideas (Rao and Weintraub, 2013).

Resources include three main factors: people, systems and projects. It means hiring the best quality talent and remunerating them appropriately. An innovative firm encourages communication and good relationships with suppliers and customers. At the same time, it needs to allocate adequate resources in space, money and time (Rao and Weintraub, 2013).

Processes are the routes innovations follow as they are developed. Ideas can come from anyone, so the innovation catchment group should be as broad as possible. A filter can then define the ideas, and prioritise to ensure delivery in a reasonable timeframe. The realisation or shape of an idea must follow soon after, with the underline to `fail smart’ - innovative firms stop projects quickly based on predefined failure criteria. They learn and move on (Rao and Weintraub, 2013).

Innovation success can be measured at three different levels: external, enterprise and personal.

Externally - customers believe the firm is innovative from its actions, or the innovation adopted may result in a better financial performance in comparison with competitors. Innovative companies reward people independently by their outcomes, (remuneration for their participation in a risky opportunity), stretching and building competencies by their involvement in new initiatives. On a personal satisfaction point, innovative firms support the involvement of the individual in innovative initiatives (Rao and Weintraub, 2013).

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4 CABLES INDUSTRY “The story of the gradual evolution of electrical wires and cables from early experiments in electrostatics telegraph to super tension power, superconductivity and optical fibre telecommunication cables, is fascinating”. (Paraphrased) (Black, 1983).

It is a journey of radical and incremental innovations. The companies that were unable to keep up with the pace went bankrupt. The most recent ones were B3 cables in 2012 and AEI in 2013. In some cases an incremental innovation transformed into radical innovation, in another case, the effects of radical innovation have not been noted, because the legislator forced the company to share the innovation with its competitors, to preserve competition on the industry.

4.1 Radical and incremental innovation in the cable industry Many of the industry’s processes have been around since ancient Egypt, for instance the drawing of wire and use of dyes in cables. Some other processes have been left behind, for instance, stranding vegetable fibres into rope (Black, 1983). However, the cable industry, as it’s known today, began with Michael Faraday, who discovered the principle of the dynamo in 1831 (Black, 1983). Even though it was only useful after the discovery of the voltaic cell by Alessandro Volta (1800) that made a continuous and reproducible electric current available (as used by Grammes in 1871), it is still noted as the birthplace of the industry.

Faraday’s concept enabled a satisfactory and economical source of electric power. In 1844, Morse sent his first telegraph message; Telegraph Construction and Maintenance Company (Telcon) made the 1865 and 1866 transatlantic cables (as its forerunner Glass, Elliot & Co).

In 1857 and 1858 a telegraph line was laid cross-Atlantic Ocean, U.S. to Europe, using Gutta percha electrical cables, protected by rubber and vulcanised bitumen insulation. In 1861, the Pony Express gave way to the superior reach of the US’ coast-to-coast telegraph service.

The telecommunication revolution started (Black, 1983).

In 1876, Alexander Graham Bell patented the telephone (invention) and the telegraph industry was “disrupted” by the new technology creating a new telecommunications industry (Chandy and Tellis, 1998).

At the same time, Edison developed Edison’s bulb (invention), adopting the words of Adner, “The light bulb on its own was a miraculous invention but needed the development of the electric power network to turn it into a profitable innovation.” (Adner 2012).

By the end of 1879, Merlo Park was illuminated with Edison’s bulbs. His energy transmission relied on a wire - and cables were in demand. Two radical innovations (telephone and bulb)

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Tratos’ investment in Knowsley, Merseyside, UK

produced two industries: telecommunications and energy (Market Line Nov. 2014). Entrepreneurs began setting up cable manufacturing facilities.

In 1872, Gian Battista Pirelli founded Pirelli, the leading manufacturer in the cables industry today. Callender’s (now Prysmian Cables), formerly an importer and refiner of bitumen for roads, began manufacturing insulated cables in the 1880s at its Erith site on the Thames.

British Insulated Cables’ arrived in 1890 with the British Insulated Wire Company at Prescot, near Liverpool (Moore, 1999).

Industry growth was linked to developments in each manufacturer’s country and incremental innovations drove product improvement and diversification. In 1890, Ferranti (Pirelli) developed 10kV tubular cable and introduced paper insulation technology.

In 1894, student Marconi began experimenting with radio waves. Incorporating the earlier scientific work of Henry R. Hertz and Oliver Lodge in electromagnetic radiation, he developed a basic wireless telegraphy. Though not a scientist, Marconi recognised the value of wireless technology and convinced investors. In 1897, he received his first English patent.

A radical innovation entered the market and the cables industry had to adapt. In 1914, Hochstadter’s work enabled distribution voltage to be increased to 33 kV. In 1926 Emanueli (Pirelli) introduced pressurisation, resulting in fluid-filled paper cables for a voltage of 66 kV upwards. In the 1930s, PVC insulation was trialled in Germany and in 1943 the first three-core 132kV pressure went into service (Moore, 1999).

After the dynamism during two world wars, the cable industry matured, with several mergers and acquisitions. In 1945 British Insulated Callender’s Cables (BICC) was formed by the merger of long established firms - Callender’s Cable & Construction Company Limited and British Insulated Cables. The UK was the worldwide industry leader.

The post-war reconstruction and the second industrial revolution (the ‘50s) heralded a new era and new technologies. In 1949, the mass-impregnated non-draining cable arrived in the UK (BICC) to overcome the problems of drainage. The solution used oil-rosin impregnated cables installed on slopes. PVC and then thermoset insulation for wiring cables followed.

PVC for power cables arrived at the end of the decade. Aluminium sheaths were developed, initially for pressure-assisted wires. Aluminium conductors were gradually adopted for pow-

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er cables, first 275kV FF cables (1954), in operational use by 1959. In the 1960s, significant distribution economies were obtained with combined neutral and earth wires (England/ France +100kV submarine DC link inaugurated in 1961). The first 400kV FF cable was operational by 1969 (Moore, 1999).

In 1966, Tratos was established by Ing. Egidio Capaccini. The name comes from the amalgamation of Tra (Trafileria) and Tos (Toscane), which means Tuscany Drawing Mills. In 2011, Ennio Bragagni Capaccini said: “Every end marks a new beginning”. For my Grandfather, Egidio Capaccini, that end was the culmination of WWII. His hometown in Southern Tuscany was almost destroyed. With little or no work available, he travelled to Argentina to find a job. After a year of working a regular job, Egidio was offered employment in a cables factory.

He swiftly rose to become general manager, and a shareholder, before coming home with dreams of starting a business of his own.

In 1966, he established Tratos Cavi Spa. He employed workers from the remnants of the textile industry that had once flourished in Southern Tuscany. Their experience proved useful when it came to covering the cables with textile. The business expanded over the years and Tratos cables quickly gained a reputation for being exceptionally well-made.

Revolution in Persia and access to new raw materials provided fresh impulse to the industry and in 1978 thermoset insulation began to be more widely used, mainly XLPE, as an alternative to paper insulation. Benefits also extended to large commercial applications up to 15 kV and higher voltage experimental installations, including transmissions up to 132kV. By the 1980s, the telecommunications market had introduced optical fibre into overhead lines.

Tratos became the European telecommunications cables market leader, and in 1987, began production of fibre-optical cables for world markets. The expanded company became a major supplier of energy, transport and infrastructure, oil and gas, petrochemical, mining, tunnelling, and fire resistant cables (Moore, 1999).

The energy sector saw widespread use of XLPE in the 11-13kV range with significant quantities installed for transmission voltages of 66-240kV. The discovery of high-temperature superconducting materials was harnessed to alleviate the effects when cables are involved in fires. The new cables offered reduced flame propagation, low smoke emission, reduced emission of noxious fumes and corrosive gases and combinations of these characteristics.

In the 1990s, optical fibres enjoyed widespread use in overhead lines. Polymerics were extended to EHV and the commercialisation of PPL followed, with practical demonstrations of superconducting cables. Globalisation drove cable industry maturation and 1999 saw the end of British market domination. BICC slimmed-down and sold off businesses (Moore, 1999).

Game-changing technology arrived in 2000 with the introduction of superconductor cables for the higher power transmission Iter project (radical innovation). In 2005, Pirelli spun off its cable operations, (now Prysmian). With mergers and acquisition, Prysmian became the worldwide industry leader, and technologies developed in its Italian factories went global.

In 2008 Tratos’ innovation won the superconductor order for Fusion for Energy, a unique project reproducing the sun’s fusion reaction.

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4.2 Overview of the cable industry To better contextualise the innovative landscape Tratos occupies (chapter 4.4), I have reviewed the industry using the Five Forces of Porter (Porter & Kramer, 2011). To do it, I have used the most recent and available data from MarketLine (November 2014), Uvais Lyman (2015), and ICF (2014).

A critical foreword is that the cable industry has always been regulated due to its importance for economic growth. The government has controlled competition, standardising products and applications.

Several organisations unify the cables market worldwide. The largest and global association is ICF (International Cable Makers Federation), that has almost 100 members, including Tratos, from nearly 40 countries. Members are from large companies with factories or subsidiaries in several countries. The two most dominant groups, Prysmian and Nexans’ 2014 combined sales figures total €13.2 billion (US$14.2 billion) (Fig.2). They hold the largest geographic “footprints” in the industry, but many other members have operations in multiple countries worldwide.

The oldest cable association is IEEE evolved from the American Institute of Electrical Engineers (AIEE), which started in 1884, Sycable of France began in 1917, the Wire Association International in 1930, and the JCMA of Japan in 1948.

Prysmian has plants in 50 countries and Nexans in 40 (Fig.2).

Source: Prysmian annual report, 2014

Figure 2: Billions Euros Turnover of cable manufacturers – Prysmian Annual rpt 2014

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Figure 3: Global cables market category segmentation: % share, by value, 2014(e)

Source: MARKETLINE According to the MarketLine power cables is the largest segment of the global cables market, with 70.7% by value and the telecommunication accounts for the remaining 29.3% (Fig.3). “The global cables market is expected to generate total revenues of $93,804.9m in 2014, representing a compound annual growth rate (CAGR) of 8.3% between 2010 and 2014 (Fig.5). In comparison, European and Asia-Pacific markets will grow with CAGRs of 5% and 10.5% respectively, over the same period, to reach respective values of $21,648.9m and $50,783.6m in 2014.” Moreover, “The global cables market grew by 9.4% in 2014 (Fig.4) to reach a value of $93,804.9 million.” (MarketLine, 2014).

Figure 4: Global cables market value: $ million, 2010–14(e)

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According to MarketLine (2014) “In 2019, the global cables market is forecast to achieve a value of $136,044.5 million, an increase of 45% from the figures for 2014. The compound annual growth rate of the market in the period 2014–19 is predicted to be 7.7% (Fig.5).” “(..)

The global cables market has experienced strong overall growth in recent years, alleviating rivalry. (..) Asia-Pacific accounts for 54.1% of the global cables market value. Europe accounts for a further 23.1% of the global market (Fig.6).”

Source: MARKETLINE, 2014

Figure 5: Global cables market value forecast: $ million, 2014–19

Figure 6: Global cables market geography segmentation: % share, by value, 2014

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According to IBIS, the Top 100 producers generated insulated wire and cable revenues of US$110 billion in 2014 representing 51% of the global market. The world insulated wire and cable market reached a total of US$215 billion in 2014 (Marketline 2014).

Some conflicting advice comes from IBISWorld, which estimates that the: “Other Wire and Cable Manufacturing industry has entered the decline stage of its life cycle, since it has begun to lose domestic and global market share. Import penetration is expected to increase over the next five years, and export growth is forecast to lose its momentum. Industry value added, which measures the industry’s contribution to the economy, is expected to rise at a compound annual rate of 1.6% over the 10 years through 2019-20. In particular, the UK economy is expected to grow at a compound annual rate of 2.2% over the same period”.

“This indicates that the industry will account for a declining share of the overall economy”.

(Uvais, 2015).

In the same line according to ISF report 77 issue on October 2015 in the last three years America’s cable market lost 2.4% in 2012, 1% in 2013 and growth in 2014 was 0%. Europe lost 11.5% in 2012, 5.1% in 2013, and 3.3% in 2014; Asia, Africa and Oceania lost 2.7% in 2012, 2.9% in 2013, and growth 0.1% in 2014; over all the world cable market lost 4.6% in 2012, 3% in 2013, and 0.6% in 2014. It is a declining market as per the chart below (Fig.7).

Source: ICF (ISF 2015)

Figure 7: Change in Wire & Cable Consumption by region

An upturn in construction and investment in power generation and transmission will be major growth drivers over the next five years, though they are not expected to propel the industry into a new growth cycle, primarily because overseas operators are set to gain both domestic and global market share (Uvais, 2015).

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4.2.1 Forces driving competition in the global cables market “Typical players (…) are well established, large (...) companies (…) able to benefit from scale economies, and (...) compete more intensely on price; increasing rivalry (Fig.8).” (MarketLine, 2014). Buyers and suppliers have significant bargaining power due their concentration in both cases they face oligopolies or monopolies, or legal cartels, (such as the copper mines in South America) that fix the premium and the prices. The attraction for new entrants is that distributors are always looking for price reductions, however these are difficult to sustain because the cost of investment is very high for very low returns.

Source: MARKETLINE

Figure 8: Forces driving competition in the global cables market, 2014

Tratos grew by building unique business modules, forging direct stakeholder relationships (customers, suppliers) and refusing to deal with distributors or agents. Innovation focused, the company facilitated direct discussions with customers to establish technical needs. This direct line to customers’ technical people created the opportunity to produce radical technological solutions alongside. Tratos stopped selling a cable product, and began selling innovation-led solutions.

Source: MARKETLINE (Uvais, 2015)

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Buyers are large organisations (BT Telecoms, National Grid, Utilities, Enel, Eon, as per figure 8), with very strong financial muscle, normally in monopoly or in oligopoly positions and with a tendency to switch, due to price sensitivity and undifferentiated products (Fig.9) (Uvais, 2015).

Figure 9: Drivers of buyer power in the global cables market, 2014

“Buyers will typically buy cables on price and the capacity to deliver. This protocol can delay or advance large projects, exposing players to reduced profit margins and the constraints of increased buyer power. There is little chance of vertical integration in either direction as buyers and market players operate very different businesses. (…) A (…) degree of product differentiation can be achieved (…), based on measurable performance. e.g. if a manufacturer produced fibre optic cables with stronger signal strength and lower gap losses, they would command more buyer attention. This would slightly weaken buyer power. Furthermore, cables are essential to each buyer’s business, (especially electricity transmission), although telecommunication companies can use wireless infrastructure as an alternative.

Buyer power in the global cables market is assessed as moderate.”

(Paraphrased) (MarketLine, 2014) To survive and grow in a difficult environment, Tratos focused in niches and on innovation.

In the 1900s it developed fibre optical products, in the 2000s it produced cables for mobile applications, such as reeling cables for port cranes, and specialised in high-speed products.

In 2010 Tratos won an innovation award for supplying the Superconductor cables for the world-stage Energy Fusion project referenced earlier.

Cables are made from raw materials and compounds managed and controlled by large organisations, so the bargaining power of the suppliers is significant (Fig.10).

Source: MARKETLINE

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Figure 10: Drivers of supplier power in the global cables market, 2014

Tratos invested in its own compounds (rubber, or Low smoke zero halogen materials), to achieve additional control and competitiveness. It fuelled diversification and dominance in niches by investing heavily in alternative products.

The large-scale of typical supplier companies means that they are usually specialists in several areas – e.g. General Cable Corporation develops and sells to several markets including energy, industrial and communications; Similarly, Nexans targets energy and telecommunication infrastructure and various industrial and building applications. These large players’ substantial geographical reach means they are less reliant on revenues from one market, reducing rivalry to an extent. However, “the investment-intensive nature of technological advancement and the need for large manufacturing facilities, does present high exit barriers, which increases rivalry (Fig.11).” Source: MARKETLINE, 2014 Tratos’ decision to engage on a differentiation platform included introducing radical technology to previously uneconomical markets. Due to years of competition on price, several markets had become innovation wastelands. Companies were losing money, and the markets were in decline. Tratos turned this to its advantage, revitalising the most depressed markets with carbon fibre innovation for overhead conductors, overtaking existing players.

Source: MARKETLINE “Despite recent global economic turbulence, growth (…) has remained strong, (…) to attract new entrants to the global cables market (Fig.12)” (Marketline, 2014).

The lure of easy profit is moderated by the difficulties that regulate the industry. Buyers must approve suppliers as well as their products. Products have to be approved by independent test laboratories. In the past a company could only operate once granted a country license describing outputs and quantity and even, in some cases, how much copper (the industry’s main element) they could import.

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Figure 11: Drivers of degree of rivalry in the global cables market, 2014

Figure 12: Factors influencing likelihood of new entrants in global cables market, 2014

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Institutes regulate and standardise the markets: IMQ (Italy) and BASEC (UK) but, once a company had passed the various tests and approvals, it benefited long-term as those high barriers to entry restricted competitors.

Any innovation must be standardised and approved by the relevant authority before it can go into service. Unsurprisingly, there are few viable substitutes for this market. The exception is Telecommunications where companies can bridge their cable infrastructure with wireless links, (cellular networks/ satellite-links). (Paraphrased) Source: MARKETLINE, 2014

Figure 13: Factors influencing threat of substitutes in global cables market, 2014

“(..) Brand loyalty in the global cables market is low. However, buyers are often heavily reliant on cables for their own business, which evens out the balance of power (Fig.12). The providers of the industry’s raw materials have seen commodity prices rise following economic recovery and prices to fall again recently (e.g. copper fell from $8,828.2 per metric tonne in 2011 to $7,332.1 in 2013). There are few raw material alternatives that boost suppliers’ power slightly. Typically, there are few alternatives available to the market. Options such as wireless links or solar panels are costly to implement without government support (e.g. solar power feed-in tariffs). Strong, recent market growth will attract new entrants to this market.” (Paraphrased) (ICF, 2014).

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4.3 Key Success Factor Based on the previous analysis and my experience of the industry, I can identify two principal ways to achieve success in the cable manufacturer industry: large economy of scale or innovation.

The first one is the traditional way of competing. It is price-driven competition and requires a guaranteed supply of raw material and significant economies of scale as the main factors.

“Having a guaranteed supply of (…..) materials such as copper and plastics is necessary for cable manufacturers”. (MarketLine, 2014). “Manufacturers need to operate their plants on a large scale if they are to offer import-competitive prices”, (Paraphrased) (MarketLine, 2014).

The second way is to survive through differentiation. It is rarer than the first one because it needs more hard work and imagination; talents that are much sought after in the cable industry. It also requires significant investment in research and technology and highly skilled workforce.

The cable industry has been characterised (as stated at the beginning of this chapter) by a sequence of radical innovations that have shaped it. Some firms have been unable to adapt themselves; and have gone out of business. “Investing in research and development is important in an industry as technologically advanced as this” (MarketLine 2014). “Having access to highly skilled employees is important in such a technical and highly skilled industry” (MarketLine, 2014).

Tratos has followed this second way since 1966, and has interpreted it via innovation, not only in technology, products, process but also through the brand and other aspects.

4.4 Tratos Success Factor Tratos is a family-owned business, strongly orientated toward exporting products around the world. The firm has four factories, three in Italy, and one in the UK. From these factories it produces the full range of cabling products from Fibre Optical cable, to High Voltage (Fig.14).

Source Prysmian annual report 2014.

Tratos supply cables for more than 45 different applications: maritime, oil and gas, railways, industry, utilities, ports, nuclear power station, submarine, and more. The company is confined by the capacity of its four manufacturing facilities, with a consequent impact on the ability to achieve economies of scale. However, Tratos has access to the highly-skilled workforce, as evidenced by the broad range of products, and the success of its research and development resource. It is renowned for its tailor-made solutions. A combination of flexibility and that highly skilled resource means it can produce to a brief and solve any issue around cable applications.

Over the years, the company has specialised in delivering innovation. As confirmation of its reputation as an innovative company, in 2008 Tratos studied, produced and delivered Fusion for Energy superconducting wire for the world ITER reactor and the Japanese JT60SA. The superconducting Cable-In-Conduit has been used in the construction of magnets for these projects.

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Figure 14: Market Presence V Product Portfolio Range - Prysmian Annual rpt 2014

ITER is a unique international project to design and build an experimental fusion reactor based on the “tokamak” concept. The project, which is currently under construction in the South of France, is to demonstrate the feasibility of energy production by controlled thermonuclear fusion, to reproduce in the earth what occurs naturally in the sun. The Fusion for Energy Agency (F4E) awarded Tratos with a contract of €49 million thanks to the company’s long record of success on delivery prototypes.

My above summary description of Tratos shows that the unique approach of this company, on examination of the industry, was to invest a significant amount of resource and money in innovation. This is one of the main motivators (since the beginning of my MBA) to investigate the elements that could affect innovation and in particular find a way to measure it and increase awareness of the Tratos approach.

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5 METHODOLOGY 5.1 Objective of the study The purpose of this BMP is to analyse the culture of innovation in Tratos, to achieve this I have principally used the studies of Rao and Weintraub (2013), “How Innovative Is Your Company’s Culture?” (Chapter 5.4.1.). Within this exercise, I wanted also to understand Tratos employees’ perception of innovation, to see if they perceived Tratos as a product innovator only or a 360° innovation company. For that reason, I have used “The 12 different ways for companies to innovate”, based on the research of Sawhney and colleagues (chapter 5.4.2) (Sawhney, Wolcott, Arroniz, 2006).

I built a survey (chapter 5.2), carried out a pilot survey (chapter 5.2.1) followed by the main research. I scored and analysed the responses and drew conclusions (chapter 7). I also discussed the survey results in two different workshops (chapter 6.4). The workshops produced further conclusions (6.4.3) and recommendations (chapter 6.5).

5.2 Survey The survey is attached in Appendix 1, with the letter of introduction for survey respondents.

During the review of the literature, I realised that Rao and Weintraub’s work was based on the premise that an organisation’s culture is the principal driving factor of innovation, (more than nationality, environmental or any other factor). The above assumption was in contrast with the overriding orientation, from Schein, that organisational culture is influenced by several external factors included: national culture, government policy, etc. Because of this I integrated the Rao and Weintraub survey with 15 statements collected from a “climate change perception questionnaire” (chapter 5.4.2), used by Forehand (1963) and Paulillo (1977), and included the analysis of Abbey (1981) ‘technological innovation in the semiconductor industry’.

I took this additional survey to measure the confidence in and in particular the perception from employees of company stability, (first integration). I felt I needed a verification of the Rao and Weintraub statement and the “climate change knowledge questionnaire” helped to ascertain the understanding of employees regarding changes.

In particular, I felt that the Italian site could be influenced by the effects of the on-going economic crisis (and I was right). During the execution of this work, I also found a fascinating tool based on the study of Sawhney and Colleagues (2006): “The 12 different ways for companies to innovate”, called the “Innovation Radar.” The tool helps understand how the company perceived innovation. Because the Rao and Weintraub survey did not look at an innovation definition, I thought that the innovation survey could be implemented with the radar tool.

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I wanted to understand Tratos employees’ perception of how and where the company innovates. Therefore, I included it in my approach (second integration). For statistical and analysis purposes I also included several other questions to help fit the approach to the shape of the Tratos business: location of work (Pieve Santo Stefano, Catania, Knowsley, etc), job roles (1. Management, 2. Sales, 3. Technical, 4. Operative, 5. Administrative) and years of service (appendix 1).

The survey was conducted from January to March 2016 across the Tratos Group. I aggregated the survey results from the three primary (our factories) locations (Pieve/Catania, Knowsley and London). In Italy, because of time pressures, the study was not extended to the work floor staff (blue collars). For that reason I subdivided the results into three groups according to the pay scale of employees, resulting in a majority of white collar colleagues, such as London (called ‘International and grouped with China, Spain, Germany, Australia and Singapore offices, etc.), Italy (Pieve and Catania), and UK (Knowsley) (Appendix 1).

I also translated the Survey into English and Italian for dual locations.

To clarify the aims and purpose of the survey and to anticipate questions the following information was also provided: 1. The survey is to measure the degree of innovation perceived by Tratos employees 2. There are no ‘right or wrong’ answers - it is only about perception.

3. The survey is anonymous.

4. The results will be communicated to all when complete 5. The survey must be completed within 30 minutes.

5.2.1 Pilot Survey Prior to the full survey a pilot questionnaire was distributed to identify issues of time, accessibility and comprehension of the questions. The sample, a cross section of male and female management was chosen, representing five different nationalities. Feedback and results were recorded to improve the execution of the full survey.

No technical problems were highlighted but the survey introduction was amended slightly to offer a more detailed explanation of how to complete it e.g. to avoid persistently choosing `middle ground’ answers.

5.2.2 Survey Results Analysis of the results is summarised in chapter 6.

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5.3 Workshop Results were analysed by executives in two workshops, carried out in London, to review the findings from the survey and to draw conclusions from the results. The results from these workshops are summarised (chapter 6.4.1 first workshops, chapter 6.4.2 second workshop) and have helped to inform this report’s recommendations. All the attendees received the results a week in advance, without any comments, with a copy of the article of Rao and Weintraub, to familiarise themselves with the subject and the methods used to frame the survey which would be the basis of the discussion.

Results were published on the company intranet a few days after completion and meetings organised seven days after publication.

5.3.1 First workshop The first workshop was attended by the sales team, technical team and executive members (Chapter 6.4.1).

This workshop, held on 26 February 2016, involved the Tratos UK management team (including sales and key administrative staff). A total of nine people attended.

The workshop considered only the results from international and UK (London, China, Germany, Dubai, Spain, Chesterfield and Knowsley) – the Italian results were not available at the time.

During the first workshop, I addressed the following questions: 1. Do the results reflect our company? Do they give a true and accurate representation of the current situation?

2. Based on these results what are the key strengths and weaknesses of Tratos regarding its ability to be an innovative company?

3. What are the key changes that are required?

4. Do we want to change?

5. What are the priorities?

5.3.2 Second workshop This workshop, held on 14 March 2016, involved some members of the Tratos UK Board.

Six people attended. The workshop considered the full results and analysis of the survey (Chapter 6.4.2).

During the first workshop, I addressed the following questions: 1. Do these results give an accurate representation of Tratos and its culture?

2. Based on these results what are the strengths and weaknesses?

3. What are the opportunities presented?

4. What are the next steps?

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5.4 Explanation of the surveys used as a basis for the Tratos Questionnaire The following three models were used as the basis for the Tratos questionnaire. In some cases the questions shown below were adapted or reworded (see Appendix 1) to improve relevance to the company and to give greater clarity.

5.4.1 The Building Blocks of Innovation Survey The Culture of Innovation questionnaire (Appendix 1) has a total of six building blocks, 18 factors and 54 elements. Survey respondents should rate their organisation on each of the 54 elements, on a scale of 1 to 5 using the following scale: 1 = Not at all 2 = To a small extent 3 = To a moderate extent 4 = To a great extent 5 = To a very great extent.

The overall average scores for elements are further averaged to provide the factor score, and the factor averages similarly result in the building block average. That average of the six building blocks is what has been called the group’s “Innovation Quotient” (Rao and Weintraub 2013)

5.4.2 “Climate change perception questionnaire” I integrated the Rao and Weintraub survey with 15 statements collected from a “climate change perception questionnaire”, used by Forehand (1963) and Paolillo (1977), and adopted in the analysis of Abbey, 1981 ‘Technological innovation in the semiconductor industry’.

I took this additional survey to measure the confidence or, better, the perception from the employees of company stability, (first integration). I thought that I needed a verification of the Rao and Weintraub statement and “climate change knowledge questionnaire” helped to verify the understanding of employees regarding changes (Abbey, 1981).

Statement: (Autonomy): Degree of freedom members have in day-to-day operating decisions.

(Conflict Vs Cooperation) Degree to which members either compete with each other or work together on the process of getting things done; extent to which members integrate their own personal goals with those of other members and the goals of the unit and the organisation.

(Supportiveness) Degree to which the organisation is interested in and is willing to support its members in both job and non-job related matters.

(Level of Rewards) Degree to which members are rewarded.

(Structure) Degree to which the organisation specifies the members and procedures used to accomplish tasks. (Performance Reward Dependency) Extent to which the reward system

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(salary, promotions, benefits, etc.) Is fair and appropriate.

(Motivation to Achieve) Reflects the degree to which the organisation attempts to excel; the strength of its desire to be number one.

(Status Polarisation) Degree to which there are definite physical and psychological distinctions between hierarchical levels in the department.

(Flexibility) Willingness to try new procedures, to experiment with change.

(Decision Centralisation) Extent to which the organisation delegates the responsibility for making decisions either as widely as possible or centralises it as much as possible.

According to the authors, answers to the above statements should be on a scale of 1 to 3: 1. Not changed 2. Has changed somewhat but not to the extent it is affecting department operation 3. Has changed significantly to the extent of probably having an effect on the way the department operates and how objectives are accomplished However, for the purposes of this survey we framed the questions so that a consistent response format could be used – i.e. Not at all; To a small extent; To a moderate extent; To a great extent; To a very great extent.

5.4.3 Questionnaire on Tratos perception of innovation The second integration, I did was add 12 statements to understand the philosophy of innovation on Tratos’ employees. The statements are based on the research of Sawhney and colleagues: “The 12 different ways for companies to innovate” (Fig.15) Source: Sawhney, Wolcott and Arroniz (2006)

Figure 15: Innovation radar

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The tool, called an “innovation radar (Fig. 15), comprises four key dimensions that serve as business anchors: (1) the offerings a company creates, (2) the customers it serves, (3) the processes it employs and (4) the points of presence it uses to take its offerings to market.

Between these four anchors, the authors embed eight other dimensions of the business system that can serve as avenues of pursuit. Thus, the innovation radar contains a total of 12 key dimensions:” (what) offering, platform, solution; (who) customers, customers’ experience, value capture; (how) process, organisation, supply chain; (where) presence, network, brand. I included 12 sentences to verify the perception of Tratos’ employees on innovation, to understand if they perceived Tratos as only a product innovator or a 360° innovation company. These statements have been identified through my knowledge of the industry (Sawhney, Wolcott, Arroniz, 2006).

Statements: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Offerings: Platform: Solutions: Customers: Customer experience: Value capture: Processes: Organisation: Supply chain: Presence: Networking: Brand:

Tratos develops innovative products and services Tratos makes different cables using the same equipment Tratos sells customised products and services Customers are always the same Tratos has a friendly interface with customers Tratos sells only cables Tratos has a continued monitoring of process efficiency Everybody in the company knows their duty Supplier selection is based on a web-based platform Tratos continuously opening new offices around the world Tratos has a system for customers to get offers Tratos’ brand means innovation

Answers to the above statements were on a scale of 1 to 5 using the following scale: 1 = Not at all 2 = To a small extent 3 = To a moderate extent 4 = To a great extent 5 = To a very great extent

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6 ANALYSIS AND RESULTS Charts showing the scores for the main categories of innovation across all three sites are in Appendix 3. A list of factors scored is in Appendix 4. A list of each element marked is in Appendix 5.

6.1 Sample Among 110 people, 99 completed the review. According to the authors of the Rao and Weintraub study, “the value of the survey increases as the sample size increases, particularly when respondents come from different corporate hierarchy and various units of the company”. Rao and Weintraub (2013).

I considered the example relevant for the analysis, as 100% of the UK staff responded and 49 of 60 of the Italian factory staff did, from more than five departments, around seven countries.

The 99 respondents can be broken down by working location. Fourteen belong to the International Offices (London), 36 from the Knowsley plant (alternatively called the UK), 49 from the Pieve and Catania plants (Italian Factories). The subdivision by job function is also relevant, 20 members management and employees from several different departments 22 from the sales, 17 from technical, 31 from operational, and 9 from administration.

6.1.1 General remarks The respondents There is evidence from the results of the survey that many respondents had a tendency to choose the ‘middle ground’ in their answers (i.e. ticking option number 3 - ‘to a moderate extent’). The effect of this was a clustering of responses around a ‘neutral’ position which made it difficult to identify any clear views (i.e. overwhelmingly positive or overwhelmingly negative) and in identifying any significant variances in opinion between the questions. I can only speculate about the reasons for this behaviour. It could be that some respondents did not feel they had the knowledge or experience required to take a view about certain questions. Another reason could be that, despite the guarantee of anonymity, there were fears about the consequences of responding negatively. A third reason could be that some respondents were not sufficiently engaged or interested in the survey and its results. I cannot know the answer and therefore must take the results at face value.

The relatively low number of respondents in Italian factories is worth noting. This may be because Italian employees were not sufficiently aware of the reason for the survey or its importance. I will consider if it is worth running the survey again in Italy at a later date to encourage more responses from this location.

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The results overall Overall the results are encouraging, showing a positive response and demonstrating that Tratos has the right environment for innovation (the infrastructure) and the drive to support innovative practices (Group Innovation Quotient 3.50 against 5). There are some particularly positive findings discussed below (capturing and enabling elements ranked 1 out of 18, with the same score of 3.75). However, there are also areas of concern and some relatively negative outcomes which may be holding the company back from achieving its full potential (engagement ranked 18 out of 18 elements).

In general, the responses from the factories (Knowsley, Catania and Pieve) were less positive (Innovation Quotient of UK 3.24, and Italy 3.39) than the responses from staff reporting to the London office (Innovation Quotient of International office 3.85). And, in general, the responses from operative and administrative staff tended to be less positive than the responses from sales and managerial staff. I have looked at the differences in responses both between sites and between job function and have concluded that the differences between sites are more significant.

6.2 Result Analysis I have scored the 54 elements according to the Building Block of Innovation Survey. Then I have averaged that result and aggregated on the 18 equivalent factors obtaining the Factor Average. Similarly, I have averaged the equivalent factor to the blocks to arrive at the Building Block Average. Finally, I have averaged the 6 Building Block Average and obtained the “Innovation Quotient” (Appendix 3 results).

Rao and Weintraub’s study creates a scale to measure the innovation culture inside the company. Up to 1 means not at all, up to 2 to a small extent, up to 3 to a moderate extent, up to 4 to a great extent and up to 5 to a very great extent.

Employees ranked Tratos as 3.50 (Tratos Innovation Quotient) out of 5. According to the scale of Rao and Weintraub’s study, Tratos has to a “great extent” a culture of innovation.

Different ranks have been obtained by the locations: 3.85 International (London), 3.24 UK (Knowsley), and 3.39 Italy (Catania and Pieve) (Table 1).

Survey Questions

London

Knowsley &

Pieve

Average

Innovative Culture Work Climate Means of innovation

Table 1: Measure of company’s innovative culture

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These various results, in my opinion, are down to two primary reasons: the external and internal environmental.

For external environmental, there are national factors that come into force. For instance, the people in Italy have not yet recovered from the last great recession (began in 2008). The climate, in which they are living, also influences their perception of the organisation. In fact, Italy scored lowest on the “Work Climate Survey” (Abbey & Dickson, 1983), (2.95) against an International (3.91) and UK score (3.13) (Table 1), even though the Italian site is the leading innovative factory of the Tratos Group.

There are a mix of internal environments, the “working climate” found in the single offices.

London is Tratos’ research and innovation headquarters and this element brings all the staff continuously into contact with new challenges that move everyone, forcing better communication and information sharing, a climate that differs from that in local manufacturing sites. In fact, the “climate block” is ranked at the 4th position in International (3.74) against the 6th for Italy (3.00) and UK (2.96).

The three elements that contradict the collaboration factor (climate block), (community (Com.), diversity (Div.) and team working (T.W.) are respectively ranked higher in International (Com. 3.86, Div. 3.57, T.W. 3.79), than in Italy (Com. 3.12, Div. 3.04, T.W. 3.20) and UK (Com. 3.09, Div. 3.17, T.W. 3.00). Another reason could be the proximity to the top decision makers; international staff members are more involved in innovation than those at manufacturing sites.

Figure 16: Results Survey Graph

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Tratos’ employees, according to “The 12 different ways for companies to innovate”, ranked the company 3.46 with no significant distinction between sites (International 3.48, UK 3.42, Italy 3.48) (Table 1).

If we consider the results under each sub-section of the Rao & Weintraub survey (Questions 1-54, Appendix 3), we get a clearer picture of where the company is relatively strong and relatively weak (Strongest highlighted in green, weakest highlighted in red, Table 2).

Tratos employees ranked high Value (3.64) and Success (3.54) at position (ranked No.1, and 2 out of 6 blocks), lower Behaviour (3.49) and Climate (3.30), (ranked respectively 5 and 6 out of 6 blocks), (Table 2), with substantial differences between the sites. International ranked No.1 Behaviour (4.05), No.2 Values (4.03), No.5 Success (3.73) and No.6 Process (3.67). The UK ranked No.1 Success (3.38), No.2 Value (3.30), No.5 Behaviour (3.15) and No.6 Climate (3.02). Italy ranked No.1 Value (3.59), No.2 Process (3.52), No. 5 Behaviour (3.28) and No.6 Climate (3.10).

The positive feedback is that Value is ranked No.1 or 2 by the Tratos’ employees, the astonishing part is that Behaviour ranked No.1 by International and No.5 by Italy and UK. Also, Success presents a polarised position ranked in top place by Italy and UK, and No.5 by International (London), where Italy and UK ranked Behaviour in 5th place.

Average Score Overall VALUES: Entrepreneurial, Creativity, Learning BEHAVIOURS: Energise, Engage, Enable CLIMATE Collaboration, Safety, Simplicity RESOURCES People, Systems, Projects

3.64

3.48 3.30

3.50

PROCE SSE S Ideate, Shape, Capture SUCCE SS External, Enterprise, Individual

3.5 3.54

Table 2: Comparison of Tratos’ strengths and weaknesses with regard to an innovative culture

These summary scores suggest that Tratos has the means (or the infrastructure) to support innovation (desire to explore new opportunities ranked No.1 out of 54 elements). In addition, the company is governed by strong values and these values relate to key aspects of innovation, e.g. entrepreneurial attitudes (ranked No. 2 out of 54 elements), a spirit of enter-

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prise (ranked No. 6 out of 18 factors), creativity (ranked No. 8 of 18 factors) and inspirational leadership (ranked No.1 of 18 factors).

On the other hand the summary scores suggest that aspects relating to the working Climate (ranked No. 6 out of 6 blocks) may be holding the company back: specifically, there is evidence of a relatively low level of trust and collaboration (ranked No. 52 out of 54 elements), decision-making (ranked No. 52 out of 54 elements) is not widely devolved and the company relies on rather bureaucratic and rigid systems and procedures (ranked No. 16 out of 18 factors).

Whilst the overall scores provide a positive picture, these summary figures hide some relatively high and relatively low scores in certain areas which can only be identified by a further analysis – these variations merit particular attention. The overall scores also obscure some of the relevant differences between sites in their responses. The next section explores the results more fully and considers the variations so that we can begin to reach some conclusions and identify some practical next steps.

6.3 Detailed Analysis Tratos’ employees ranked the company high on enabling (ranked No 1 out of 18 factors), that is the capacity of the leader to influence strategy capable to navigate the team around organizational obstacles, and his persistence to follow opportunities even in the face of adversity, with the ability to adapt action when needed.

Tratos’ staff marked high in capturing (ranked No 2 out of 18 factors), the ability of the company to launch new products, allocating resource and capabilities necessary and be flexible to execute the processes. They also ranked high for external success factor, which they ranked 3 among 18 factors and enterprise success (ranked No 6 out of 18 factors).

However, employees ranked poorly on the individual component (ranked No.15 out of 18 factors). Participation by employees in the innovation process and their rewards for involvement in risky opportunities were examined, and the ability of the company to build people’s competencies by their involvement in new initiatives, was a factor that ranked no. 54 out 54.

Employees also marked very low simplicity (ranked No.16 out of 18 factors): minimising rules, policies, bureaucracy and rigidity to simplify the workplace, accountability, responsibilities and decision-making. They also scored very low entrepreneurial (ranked No 17 out of 18 factors), the ability to explore the opportunity, create new things, the capacity to tolerate the ambiguity when pursuing new opportunities, and the action-oriented company; that is the ability to avoid analysis paralysis when a new opportunity has been identified by exhibiting a bias towards action.

Employees ranked the company’s leader as poor on engaging the rest of the workforce; the engaging factor (3.16) ranked lowest among the 18 factors, in particular, it scored poorly in Italy (2.84) and UK (2.84). Employees did not take the initiative in the innovation process

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(ranked No. 48 out of 54 elements), perhaps partly because the leaders did not coach them (ranked No. 50 out of 54 elements). A large element of employees felt leaders did not provide feedback and support (ranked No. 48 out of 54 elements) (Appendix 4).

6.3.1 The highs and lows First, we look at the highs and lows. The highest scores point to the company’s key strengths – it is important to appreciate these. The lowest scores highlight areas of concern for the company, where action needs to be taken to bring about improvement (Appendix 5).

Tratos’ employees ranked the company highly on ambition – ‘entrepreneurial’ - the desire to explore opportunities and to create new things (ranked 1 out of 54 elements).

Tratos’ employees gave the company high marks on the success of innovations that have helped the company develop new capabilities (ranked No.2 out of 54 elements). They also perceived leaders were able to modify and change the course of action when needed (ranked No.3 out of 54 elements).

Tratos staff expressed satisfaction in Tratos’ innovation efforts that have led the company to better financial performance than others in the industry segment (ranked No.4 out of 54 elements).

They also believed leaders are encouraged to persist in following opportunities even in the face of adversity (ranked No.5 out of 54 elements), and for that reason the company is constantly experimenting and expanding its innovation efforts (ranked No.3 out of 54 elements).

Many employees felt that leaders did not provide support during both successes and failures (ranked No.48 out of 54 elements), as consequence people at all levels did not proactively use their initiative to innovate (ranked No.49 out of 54 elements). Perhaps because leaders did not coach and provide feedback in any innovation efforts (ranked No.50 out of 54 elements), or because they did not know exactly how to get started and move initiatives through the organisation (ranked No.51 out of 54 elements). In this situation, people did not take responsibility for their actions and they did not avoid blaming others (ranked No.52 out of 54 elements).

Probably there needs to be an improved recruiting and hiring system in place to support a culture of innovation (ranked No.53 out of 54 elements). Certainly, the perception of employees is that the company does not reward people for participating in potentially risky opportunities, irrespective of the outcome (ranked No.54 out of 54 elements).

It is important to point out that for many staff at Tratos (particularly factory employees), risk-taking, freedom and autonomy would be completely inappropriate, given the nature of their work. The relatively low scores in these areas may reflect this situation and should therefore be considered in context.

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6.3.2 The differences As part of the deeper analysis, we looked at the differences between respondents by comparing the answers across job functions and across several sites (London, Knowsley/Chesterfield, Catania, Pieve, China, Germany, Spain and Dubai). The comparison across job functions produced fairly flat distribution charts for all sections of the survey. The one exception was a slightly lower score for operatives in the ‘working climate’ section (Q55-73) where the score overall for operatives was 2.87 compared to an average of 3.36 overall. Apart from this important exception it can be assumed that, whatever their job function in Tratos, people’s perceptions are generally the same. This is an important finding, which largely rules out any suggestion that white collar, and manual workers, perceive the company in differently.

Comparisons between sites revealed more significant differences, suggesting that people reporting to the London office have a more positive perception overall when compared to both Italy (Pieve) and UK (Knowsley/Chesterfield, K&C). When considering these differences it should be born in mind that London accounts for only 14% of the respondents and does not include any operative staff.

The most significant variances between all three sites were found for the following questions: London (International)

Question

rewarded for good performance

4.54

K &C (UK) 2.25

Pieve (Italy) 2.81

4.14

2.86

Tratos are based on a person’s worth, ability and past performance

4.34

2.60

hierarchy within Tratos. We are all treated equally whatever our status.

4.14

2.60

3.93

2.49

employees during both successes and failures

for their own actions and avoid blaming others Table 3: Variance between sites in survey results.

The distribution charts provided in Appendix 3 present a clear picture of the differences between sites for each of the key sections of the survey. From these charts, we can see that flatter distributions for the categories of Success, Processes & Infrastructure are balanced by more significant differences in terms of Climate and Behaviours. Overall, the analysis confirms that perceptions in Pieve, Knowsley and Chesterfield are less positive than those in London. The difference could be explained with the ranking of the factors belonging to behaviour (which includes Energising, Enabling and Engaging).

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Figure 17: Variance between sites in survey results

Tratos’ employees rated engaging factor No.18 out of 18 factors, with a huge difference between sites (International rated 3.78, UK 2.84 and Italy 2.86). Overall the elements of engagement (support, initiative and coach), are scored at position 48, support (Int. 4.14, UK 2.74, IT 2.86), 49, initiative (Int. 3.64, UK 2.94, IT 2.86), and 50, coaching (Int. 3.57, UK 2.83, IT 2.86), among 54 elements. This is how differently employees in the International Office perceive the company - as very active in coaching and supporting the personal initiative of the individual. To counter this, people in the factories see a lack of those attentions.

This is explainable with the different functions within the organisation. International has a more commercial focus while the factories are more production orientated.

Several coaching meetings are organised during the year via Tratos Academy to educate the sales team to promote the latest innovation while the factory teams are not involved in this educational part.

6.3.3 The Italian culture Instinctively one might expect that staff working in Pieve would have a more positive perception of Tratos than their colleagues working in the UK or in the International offices.

They are closer to the company; more are long serving and have more exposure to the innovative work-taking place in the factory. However, it is important to bear in mind that, while this survey is concerned with corporate culture, it does not take any account of the differences in culture between the countries and economies. It should be appreciated that Italy today suffers from many deep-seated economic problems. Confidence in the country’s economy has been falling over the past four years and the latest indicators show a mixed outlook for Italy’s economic future. This uncertainty has an impact on employment and employee attitudes, creating job insecurity and low morale amongst the working population (as described in chapter 6.2). Such factors will almost certainly influence the way in which employees respond to the survey’s questions.

The results contrast particularly on the Climate block scored at 6th position from the manufacturing sites and 4th place for International (as described in chapter 6.3.2), and the Behav-

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iour scored in 5th position from the production sites and 1st place from International.

Nevertheless, considering all the possible explanations the company should be concerned about the differences in perception as revealed by this analysis.

6.4 Workshops Two workshops took place in London, to review the findings from the survey and to draw conclusions. The results are summarised below and have helped to inform this report’s recommendations. The format for those workshops is explained earlier in this document.

However, the work produced was more connected with organisational structure than with innovation culture implementation.

6.4.1Culture of Innovation Academy Workshop 26th February 2016 The key outcomes and conclusions from this workshop were: • The results are promising (Innovation Quotient 3.50). Tratos has invested heavily in staff (People is ranked No.6 out of 18 factors), product knowledge and external communication (Learning ranked No.4 out of 18 factors). Many staff have a strong sense of belonging and loyalty to the company (trust is ranked No.23 out of 54 elements).

•

Without change, it was felt Tratos cannot be an innovative company

•

Lack of leadership is considered a problem at Knowsley, which could explain the relatively negative perceptions coming through in the survey. This conclusion was not based on any data but just a perception, in fact the enabling is ranked No.1 out of 18 factors in each site with highest score (Int. 3.86, UK 3.54, IT 3.84), and all the results are above Innovation Quotient of 3.50.

•

Over-complicated and ‘behind closed doors’ decision-making (ranked No.50 out of 54 elements) can stifle innovation, causing mistrust and tends to be removed from management level (openness is ranked No.35 out of 54 elements).

•

The company structure is not clear (simplicity is ranked No.16 out of 18 factors).

•

Family interference can cause frustration and disrupt positive initiatives. Questioning decisions and actions that are inconsistent with the company value, is ranked No.46 out of 54 elements.

•

Communication is a major weakness - not everyone feels involved or engaged (ranked No. 46 out of 54 elements).

•

We need consistency around processes, systems and procedures (systems ranked No.12 out of 18 factors).

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General Discussion about the overall results It was agreed an analysis of responses by job function would be useful (as opposed to by working location). Responses from those reporting into the International office were generally more positive, thought partly due to a more positive internal and external environment.

Knowsley’s responses were felt less positive with possibly the meaning or importance of the survey not having been made clear to those responding. The definition of ‘innovation’ needs to be clearer. It may not necessarily mean ‘new’ but rather the processes involved with internal improvement to make things work more effectively.

A summary follows of the discussion that took place in smaller groups of those attending the day. Answers to specific questions were sought: 1) Do these results reflect our company? Do they give a true and accurate representation of the current situation?

The results were felt to be distorted between office and shop floor staff; separating them would give a clearer indication of opinions in both camps. Clearly, disparity between Chesterfield and London offices exists; Chesterfield seen as becoming a less significant part of Tratos (office and staff reduced), with Chesterfield’s future unclear in its current format. It was felt that some results reflected the company, but differences of opinion existed between factories and the International office responses. Product innovation was seen to mostly come from Italy while business innovation from London.

2) Based on these results what are the key strengths and weaknesses of Tratos in terms of its ability to be an innovative company?

(1 group commented “For this question perhaps we should divide Italy from UK”) STRENGTHS The results reflected understanding that Tratos invests heavily in staff; product knowledge is generally high as is awareness of company culture and direction (financial success is ranked No.4 and project money is ranked No.8 out of 54 elements). The company’s vision is clear with senior staff a driving and motivational force in the company (‘inspire’ is ranked No.16 out of 54 elements). For some staff, work is more than a job and Tratos is part of their life. Culture, motivation, leadership and vision were all identified as strengths.

WEAKNESSES The company structure is not clear and decisions can be taken away from board level (or this is the impression) regardless of groundswell of opinion, or what is the correct decision.

Some family decision-making (interference) can stifle innovation. Some (Knowsley site in particular) may not feel part of the Tratos family.

3) What are the key changes that are required?

Internal communication is important in delivering Tratos as an innovative company. People have to be involved in what happens, to feel part of it and the opportunity to share innovative ideas should not be ignored. Back-office staff presently do not feel involved with attention focused on the London office and Chesterfield.

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It was felt that Knowsley needs someone to lead innovation - possibly a general manager responsible for communicating, building relationships and motivating staff. Recognising the cultural difference at Knowsley and recruiting more locally rather than sending an employee from Italy should be considered.

A more structured and coordinated approach to team projects would be welcomed with more opportunity to work together with common company processes and good practice being adopted throughout the business. Changes to inter-country communication - getting to know the Italian culture, knowing who does what (family/staff tree) and more awareness (not just at family and higher management level) of company direction should be considered.

4) Do we want to change?

It was clear that there was a desire to change in order to be innovative and that it has to be visibly driven by Tratos Culture with the hope that it extends throughout the company.

Without change, it was felt Tratos cannot be an innovative company.

5) What are the priorities?

The priorities are to improve the weaknesses with particular emphasis upon communication and greater empathy from both sides of the international relationship. Leadership, specifically at factory location (Knowsley) will be important in ensuring everyone is clear on the company’s vision/ethos. As far as product innovation is concerned product prototypes and cable samples must feature in Tratos’ strategy.

6.4.2 Culture of Innovation Board workshop 14th March 2016 The key outcomes and conclusions from this workshop were: •

The generally positive results should be welcomed. Tratos is associated with a hunger for success (ranked No.1 out of 54 elements), good client relationships (ranked No.19 out of 54 elements), product innovation (prototype ranked No.27 out of 54 elements) and dedicated staff (expert is ranked No. 30 out of 54 elements).

•

Low morale at Knowsley/Chesterfield is a matter of concern, confirmed by the “Work Climate Survey of Abbey & Dickson”, Abbey (1981); International office score 3.91, Knowsley 3.13 and Italy 2.95. Knowsley Innovation Quotient is 3.24 against 3.50 for the Tratos Group. However, it should be recognised that respondents reporting to London tend to be closer to the business because of their role (sales or management) and this could explain the relatively positive results for London.

•

However, we are effectively two cultures – no one unique corporate culture - this needs to be addressed.

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•

Leadership is an issue and lack of leadership (or inconsistent leadership) contributes to a poorer working climate.

•

The nature of a family-owned business has an impact on management.

•

Opportunity now to bring the company together as one organisation with one common goal.

•

Opportunity to introduce a professional management structure where the family – as the Board - takes a non-executive leadership role and the management of the company is delegated to a senior level operational team.

•

Opportunity to introduce a series of basic practices that will instantly improve communications, engagement and motivation across the company.

The importance of the survey in terms of the future of Tratos was clear amongst the group.

The need to present the findings to the company’s owners, emphasising that the survey has been conducted independently and anonymously, was agreed. The survey is a major piece of work, providing highly valuable information. It provides the opportunity for Tratos to act on some very clear and telling results - if it ignores it then the opportunity to build a truly successful company will be missed.

Some general comments were noted about the survey in particular the low response from Pieve was seen as disappointing. It was suggested that those who had not completed the survey could be encouraged to do so in order to provide a fuller picture going forward. The analysis by job function (which shows a flatter series of bar charts) highlights that the differences in responses are more related to working location than to job role.

1) Do these results give an accurate representation of Tratos and its culture?

The group agreed that the results broadly reflect the current situation. In fact, the generally positive results were a welcome surprise.

There was concern that some respondents may not have expressed their true feelings (for fear of giving the negative view despite assurances about anonymity). However, the results must be taken at face value and we should take heart from the positive outcome.

It was agreed that there appears to be low morale at Knowsley/Chesterfield with people working at these sites apparently feeling overlooked or unappreciated. However, it should be recognised that respondents reporting to London tend to be closer to the business because of their role (sales or management) and this could explain the relatively positive results for London.

It was suggested that the relatively negative results from Pieve should be even more concerning since people there should have a deeper understanding of the company and are closer to evidence of innovation, new ideas and new product development. A higher result from Pieve would be expected.

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2) What are the strengths emerging from the survey results?

The strengths identified included leadership and drive in the UK with a positive culture and sense of belonging in the company.

There is `hunger for success’ (ranked No.1 out of 54 elements), with staff passionate and dedicated to their work. Basic infrastructure to support innovation (technical, customisation, ideas, close to customer, expertise) exists with product innovation highlighted and weaknesses with the business seen to be fixed relatively easily. Client relationships are strong as well as external communication.

3) What are the weaknesses?

Family ownership with Pieve seen as locally focused has meant Tratos is identified as two companies effectively with no unique culture. A lack of organisational structure and leadership with poor internal communications exacerbates the situation. Limited process monitoring and over-reliance of certain client relationships were also highlighted.

4) What are the opportunities presented?

There is an opportunity to bring the company together as one organisation with one common goal and to introduce a professional management structure. A series of basic practices will instantly improve communications, engagement and motivation across the company.

Tratos has already implemented The Tratos Academy with a training programme coupled with delegation, coaching, support and feedback systems, and most of all, developing behavioural change.

5) What steps should be taken to capture the opportunities?

Organisational Structure Tratos has the potential to achieve more and to win in a difficult and competitive market.

The company’s strengths will provide a strong basis for success in an uncertain climate.

However, some key weaknesses, identified by the survey, are holding the company back and could threaten its future prospects. At the heart of these weaknesses is the lack of a cohesive organisational structure with clear lines of responsibility and a strong management tier.

The introduction of a new, formalised structure is the essential first step towards addressing the company’s weaknesses and presents an opportunity to move the Tratos to the next important stage in its evolution.

The following corporate structure will allow the company to move forward and respond to the opportunities.

The recommended steps are (Fig.18):

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•

Formalise and implement a new Governance Structure for the company, allowing the owners to lead and govern and a separate executive team to deliver.

•

This structure would involve a single Board of Non-Executive Directors with overall responsibility for the Tratos Group. The Board, comprising the company’s owners (and possibly others appointed for their special expertise), would be responsible for overseeing, planning and monitoring the overall direction of the company, including strategic planning, finances and corporate governance.

•

The Board would be responsible for the appointment of a professional Executive Team, responsible for key operational areas (across the Group) such as Finance, Operations, Marketing, Human Resources, IT.

•

The Executive Team would be supported by departments, which deliver according to clear performance targets (departments could be country-specific).

•

A corporate Academy is established to support the recruitment, development and engagement of all employees, fostering innovative behaviours and practices across the company.

In order to move to this structure the survey findings should be presented, to and discussed with, the current ownership, outlining the opportunities and the consequences for the company of not responding or acting. I believe it may be helpful for the company to appoint an independent consultant to examine the findings and make recommendations to the family.

Figure 18: Organisational Structure

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Improve Internal Structure The introduction of the Organisational Structure suggested above is fundamental to the success of all other actions arising from the survey results. Effective communication depends on a clear structure, lines of reporting and information flow.

In the meantime some basic steps can be taken to improve internal communication which will help to alleviate some of the problems around low morale, lack of engagement and lack of understanding amongst staff (Table 4).

Internal communication tools

Responsibility

Regular Newsletter to all staff

Communications department

Monitors displaying information & updates at all sites

Communications department

TT magazine to go to all staff

Communications department

Regular Feedback on production targets

Planning department

Regular Feedback on scrap reduction targets

Planning department

Production of a “Who’s Who” in the company

Communications department

Table 4: Internal communication tools

6.4.3 Workshop conclusion The overall workshop analyses identified some company’s strengths and weakness to be addressed.

THE STRENGTHS The company’s strengths should be enhanced and exploited in any future strategy. Overall the strengths emerging from the survey include: Attitudes: Hunger for success, a sense of enterprise, responsiveness to change, and flexibility (ranked No.1 out of 54 elements).

Leadership: Tratos’ leaders take steps to respond to opportunities and in some circumstances encourage and support innovative practices (ranked No.2 out of 54 elements).

Infrastructure (The means to innovate): Tratos has some of the essential foundations in place to enable innovation, e.g. strong external relationships, customised products, flexible processes and internal expertise (see chapter 6.2).

THE WEAKNESS The negatives should be removed or mitigated to improve the company’s chance of future success. Overall the negatives emerging from the survey include:

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Climate: The differences in the scores between sites and the relatively positive results from respondents reporting to the international office suggest that there are real differences in leadership and culture across the Group, which need to be addressed. The scores suggest that staff in Pieve and Chesterfield/Knowsley are less engaged and feel less appreciated and rewarded than their colleagues in international feel. There appears to be less collaboration at Knowsley and Pieve and a sense of unfairness and status polarisation at these locations (ranked No. 6 out of 6 blocks).

Recruitment: Overall the scores suggest that there is a need to improve the recruitment, development and engagement of people at Tratos (ranked No.53 out of 54 elements).

Decision-making: There appears to be a lack of autonomy and delegation across the Group.

The decision is apparently restricted to a few senior people and this can result in a lack of empowerment and accountability (ranked No.51 out of 54 elements).

Processes: The results suggest that some product development could be improved, for instance analysis of market, assessment of risk and project planning. Besides this process monitoring could also be improved (ranked No.5 out of 6 blocks).

6.5 Report recommendations The survey’s key findings and the conclusions reached in the two workshops have helped to inform the following recommendations.

CELEBRATE SUCCESS! The survey confirms that Tratos is perceived as an innovative company with values and basic infrastructure to support further innovation, leading to growth and future success. The Company should welcome this positive outcome and take steps to broadcast the results in its internal and external communications.

BUILD ON THE STRENGTHS Tratos has some key strengths (chapter 6.4.3) which should be formally recognised and acknowledged in all plans. Tratos has what many other companies want but fail to get – it is therefore important to highlight these strengths, enhance them and exploit them at every opportunity.

SEIZE THE OPPORTUNITY TO CREATE ONE GREAT COMPANY Weaknesses (chapter 6.4.3) are holding the company back from greatness. These weaknesses are opportunities. Now that the company is aware of the areas to be fixed, there is an opportunity to grow more, improve performance and achieve significant success as a global organisation. The first step in this process would be to bring the company together as one with a formal and cohesive organisational structure and culture.

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CONCLUSION Tratos is a traditional family-owned company that is very successful in exporting its products in 36 countries, (more than 80% of the production is export-dedicated). The company has a strong executive team, mostly family members, who make all the decisions and drive implementation.

The survey gave board members, the senior management of Tratos and I the possibility to identify, classify and rank the major factors that influence innovation culture and the opportunity to have a healthy discussion on the culture of innovation. The primary acquisition, I believe, is the acknowledgement of the elements that have driven culture innovation.

The survey, also, confirmed that the company doesn’t have the bench strength among its lower management level to understand the new challenges in the industry. In fact, the Innovation Quotient of International offices is 3.85 while UK site is 3.24, and Italy is 3.39. Another explanation, for the above result, could be the people at the top or near the top - the individuals who make the decisions and control activities - tend to have a much rosier view of the Tratos organisation’s culture (as International office) than do mid-to-lower-level managers and rank-and-file employees (the UK and Italy).

I have also identified that the results are influenced by factors other than the organisational culture. National impact and perception of the domestic situation has a bearing (Italy score lowest on the “Work Climate Survey of Abbey & Dickson” (Abbey, 1981), (2.95) against International (3.91) and UK (3.13), even though the Italian site is the leading innovative factory of the Tratos Group).

The “Work Climate Survey” confirms that either the Rao and Weintraub survey has limitations or exceptions, or the sample selected for the Tratos survey was not sufficient.

The employees who took the survey gave the company high marks on external success (which was ranked 3 among 18 factors) and enterprise success (ranked 6 out of 18 factors).

However, employees ranked poorly on the individual component of success (ranked 15 out of 18 factors). Employees also ranked very poorly ‘simplicity’ (ranked 16 out of 18 factors).

They also scored very low entrepreneurial (ranked 17 out of 18 factors). Employees ranked the company’s leader badly on engaging the rest of the workforce; the engaging factor (3.16) ranked lowest among the 18 factors, in particular, it scored very poorly in Italy (2.84) and in the UK (2.84), yielding below the average Innovation Quotient (3.50).

Employees did not take the initiative in the innovation process (ranked 48 out of 54 elements), perhaps partially because the leaders did not coach them (ranked 50 out of 54 elements). A large proportion of employees felt leaders did not provide feedback and support to them (ranked 48 out of 54 elements). Nor did they think the company rewarded individual participation in potentially risky opportunities, irrespective of the outcome (ranked 54 out of 54 elements).

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The workshops, which addressed organisational structure solutions, revealed a path to enforce the innovation culture at all Tratos levels of line management.

They addressed several other potential issues, for instance that “without change, it was considered Tratos cannot be an innovative company.” Tratos has survived and flourished to date because of innovation. The work I am doing now will ensure that the company looks to new ways to innovate.

Another issue addressed at the workshop was the “lack of leadership, considered to be a problem at Knowsley, which could explain the relatively negative perceptions coming through in the survey”.

This conclusion was based not on data but on personal views. In fact, Tratos’ employees gave the company high marks, No.1 among 18 factors) on enabling and capturing (both 3.75).

On the other issue that emerged from the workshop was the lack of communication which was confirmed by employees’ perception (ranked 31 out of 54 elements), I have decided to implement a video and camera system to share immediately information at each site.

Allocating screens in meeting rooms, canteens and in the common spaces will facilitate updates on the company’s progress. The Tratos Academy has a training and behavioural change programme coupled with delegating, coaching, support and feedback systems.

The low rank given to the resource selection systems (ranked 53 out of 54 elements) opened new thinking for me; probably that the employee perception is right in saying that Tratos recruiting and hiring systems in place does not support a culture of innovation. After all, they are the results of the system in place.

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APPENDIX 1 Tratos Group - Culture of Innovation Survey The purpose of this survey is to help us understand whether Tratos is perceived as an innovative company and whether it has the systems, processes and culture to support an Innovation Strategy.

This survey involves all company employees within the Tratos Group. Your responses and comments are extremely important to this exercise. The results will be used to inform a series of transformative activities to improve innovation and encourage innovative behaviour throughout the company.

There are 87 questions and we estimate that it will take you approximately 30 minutes to complete the survey. So please ensure you have enough time to make a considered response to each question. There are NO right or wrong answers – we are simply interested in your perception of the current situation. You may feel that there is some repetition in the questions. This is deliberate. It is very important that you answer all questions!

Your answers will be completely anonymous. To ensure your anonymity the survey is conducted online. Further more Tratos has engaged an independent consultant to design the survey, receive the results and interpret the findings.

Thank you!

For each statement, please rate Tratos on a scale of 1 to 5. Using the following scale: 1= Not at all 2 = to a small extent 3 = to a moderate extent 4 = to a great extent 5 = to a very great extent

PART 2 : DO WE HAVE AN INNOVATIVE CULTURE AT TRATOS? Values Entrepreneurial

(Hunger) We have a burning desire to explore opportunities and to create new things.

(Ambiguity) We have a healthy appetite and tolerance for ambiguity when pursuing new opportunities.

(Action-orientated) We avoid analysis paralysis when we identify new opportunities by exhibiting a bias towards action.

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Creativity

(Imagination) We encourage new ways of thinking and solutions from diverse perspectives.

(Autonomy) Our workplace provides us the freedom to pursue new opportunities.

(Playful) We take delight in being spontaneous and are not afraid to laugh at ourselves.

Learning

(Curiosity) We are good at asking questions in the pursuit of the unknown. (Experiment) We are constantly experimenting in our innovation efforts.

(Failure OK) We are not afraid to fail, and we treat failure as a learning opportunity.

Behaviours Energize

(Inspire) Our leaders inspire us with a vision for the future and articulation of opportunities for the organisation (Challenge) Our leaders frequently challenge us to think and act entrepreneurially.

(Model) Our leaders model the right innovation behaviours for others to follow.

Engage

(Coach) Our leaders devote time to coach and provide feedback in our innovation efforts.

(Initiative) In our organisation, people at all levels proactively take initiative to innovate.

(Support) Our leaders provide support to project team members during both successes and failures. (Influence) Our leaders use appropriate influence strategies to help us navigate around organisational obstacles.

Enable

(Adapt) Our leaders are able to modify and change course of action when needed.

(Grit) Our leaders persist in following opportunities even in the face of adversity.

Climate Collaboration

(Community) We have a community that speaks a common language about innovation.

(Diversity) We appreciate, respect and leverage the differences that exist within our community. (Teamwork) We work well together in teams to capture opportunities.

Safety

(Trust) We are consistent in actually doing the things that we say we value.

(Integrity) We question decisions and actions that are inconsistent with our values.

(Openness) We are able to freely voice our opinions, even about unconventional or controversial ideas.

Simplicity

(No bureaucracy) We minimize rules, policies, bureaucracy and rigidity to simplify our workplace. (Accountability) People take responsibility for their own actions and avoid blaming others. (Decision-making) Our people know exactly how to get started and move initiatives through the organisation.

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People

(Champions) We have committed leaders who are willing to be champions of innovation.

(Experts) We have access to innovation experts who can support our projects.

(Talent) We have the internal talent to succeed in our innovation projects.

(Selection) We have the right recruiting and hiring systems in place to support a culture of innovation.

Systems

(Communication) We have good collaboration tools to support our innovation efforts.

(Ecosystem) We are good at leveraging our relationships with suppliers and vendors to pursue innovation.

(Time) We give people dedicated time to pursue new opportunities.

(Money) We have dedicated finances to pursue new opportunities.

(Space) We have dedicated physical and/or virtual space to pursue new opportunities

Processes Ideate

(Generate) We systematically generate ideas from a vast and diverse set of sources.

(Filter) We methodically filter and refine ideas to identify the most promising opportunities.

(Prioritise) We select opportunities based on a clearly articulated risk portfolio.

(Prototype) We move promising opportunities quickly into prototyping.

Shape

(Iterate) We have effective feedback loops between our organization and the voice of the customer.

(Fail smart) We quickly stop projects based on predefined failure criteria.

(Flexibility) Our processes are tailored to be flexible and context-based rather than controland bureaucracy-based.

Capture

(Launch) We quickly go to market with the most promising opportunities.

(Scale) We rapidly allocate resources to scale initiatives that show market promise.

Success External

(Customers) Our customers think of us as an innovative organization.

(Competitors) Our innovation performance is much better than other firms in our industry.

(Financial) Our innovation efforts have led us to better financial performance than others in our industry.

(Purpose) We treat innovation as a long-term strategy rather than a short-term fix.

Enterprise

(Discipline) We have a deliberate, comprehensive and disciplined approach to innovation.

(Capabilities) Our innovation projects have helped our organization develop new capabilities that we did not have three years ago.

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Individual

(Satisfaction) I am satisfied with my level of participation in our innovation initiatives.

(Growth) We deliberately stretch and build our people’s competencies by their participation in new initiatives.

(Reward) We reward people for participating in potentially risky opportunities, irrespective of the outcome.

PART TWO: PERCEPTIONS OF INNOVATION Autonomy

Staff at Tratos have freedom in day-to-day operating decisions (such as when to work and when not to work) Once jobs are defined at Tratos, employees have freedom to work without close supervision.

Conflict vs Cooperation

Employees at Tratos work together to get things done There is little competition between employees at Tratos

Supportiveness

Tratos is interested in its employees and is willing to support them in job and non-job related matters Tratos recognises effort and fosters a sense of belonging amongst employees

Level of Rewards

Tratos employees are rewarded for good performance

Structure

Tratos gives employees explicit instructions about how jobs are to be performed Tratos has clear organizational structures and written procedures

Performance Reward Dependency

The reward system at Tratos (salary, promotions, benefits etc.) is fair and appropriate Employee rewards at Tratos are based on a person’s worth, ability and past performance

Motivation to Achieve

Tratos employees take every opportunity to excel and achieve the best they can for the company Tratos employees are not complacent, even in the face of good profits

Status Polarisation

There is no definite hierarchy within Tratos. We are all treated equally whatever our status.

There are no special privileges for senior staff or management at Tratos

Flexibility

Tratos employees are willing to experiment and try new ways of working Tratos employees are willing to improve systems or processes.

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Decision/Centralisation

Tratos delegates the responsibility for decision-making as widely as possible Tratos does not confine decision-making and authority to upper management

PART THREE: INNOVATION POTENTIAL Offerings

Tratos develops innovative products and services

Platform

Tratos make different cables using the same equipment

Solutions

Tratos sells customized products and services

Customers

Customers are always the same

Customer experience:

Tratos has a friendly interface with customers

Value capture

Tratos sells only cables

Processes

Tratos continually monitors the efficiency of its processes

Organisation

Everybody in the company knows what they must do to perform their job

Supply chain

Supplier selection is based on a web-based platform

Presence

Tratos continuously opens new offices around the world

Networking

Tratos has a system for customers to get offers

Brand

The Tratos brand means “innovation”

PART FOUR: ABOUT YOU

86. Where is your working location (which Tratos site or office do you work at or report to?)

(Choose one only) • UK (Knowsley & Chesterfield)

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• •

UK (London) Italy (Pieve)

87. Which of the following best describes your role? (Choose one only) • Management • Sales • Technical • Operative • Administrative Thank you for taking the time to complete this survey.

APPENDIX 2 Letter to accompany Tratos Culture of Innovation Survey Dear all, Maurizio has already told you that we are carrying out a major survey of all Tratos staff to assess the innovative culture at Tratos. The results will help to inform the company’s plans to improve innovation across the company. The survey is now ready and we need to test it on a small group - you have been chosen to take part in that test. I would therefore be grateful if you would complete the survey by clicking on the button below. It will take you approximately 30 minutes so please allow enough time!

If there are no problems arising from this test you will not be required to complete the survey again - your responses will be recorded as final. However, if we find that improvements or changes are necessary as a result of this test I am afraid we will have to ask you to repeat the exercise.

When you have completed the survey please let me know if you had any problems completing the survey or if anything was unclear. All comments should be sent to me at jeanette@ jeanettepurcell.com.

Please complete the test survey by Wednesday 20 January at the latest. If you could let me know when you have submitted your responses that would be helpful.

Thank you for your participation!

Jeanette Purcell

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APPENDIX 3 Analysis Tratos Group culture of innovation Survey PART ONE: CULTURE OF INNOVATON (Rao & Weintraub)

London

K&C

Pieve

AV ALL SITES

4,36

3,51

4,16

4,01

3,55

3,50

3,20

4,00

3,64

3,88

3,36

3,90

3,86

3,29

3,18

3,44

4,29

3,23

3,22

3,58

4,36

3,06

VA LU E S opportunities and to create new things. tolerance for ambiguity when pursuing new opportunities. paralysis when we identify new opportunities by exhibiting a bias towards action.

Entrepreneurial of thinking and solutions from diverse perspectives. freedom to pursue new opportunities. spontaneous and are not afraid to laugh at ourselves.

Creativity

3,60

3,19

3,26

3,54

3,93

3,31

3,53

3,59

3,93

3,63

3,82

4,29

3,14

3,49

Learning

4,05

3,36

3,61

AVERAGE SCORE (VALUES)

4,03

3,30

3,59

the pursuit of the unknown. experimenting in our innovation efforts. treat failure as a learning opportunity.

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3,64

3,64

PART ONE: CULTURE OF INNOVATON (Rao & Weintraub)

London

K&C

Pieve

AV ALL SITES

4,43

3,14

3,35

3,64

4,21

3,09

4,00

3,29

BE H AV IOU R S vision for the future and articulation of opportunities for the organisation. us to think and act entrepreneurially. innovation behaviors for others to follow.

Energize

4,21

and provide feedback in our innovation efforts. all levels proactively use their initiative to innovate.

3,64

to employees during both successes and failures.

4,14

Engage

3,52 3,33

3,54

3,32 2,83

2,86

3,09

2,94

2,86

3,15

2,86

3,25

2,86

3,16

2,84 3,14

3,49

around organisational obstacles. change course of action when needed.

4,21

3,80

3,92 3,85

4,21

3,46

3,88

Enable

4,16

3,45

3,65

AVERAGE SCORE (BEHAVIOURS)

4,05

3,15

3,28

opportunities even in the face of adversity.

3,49

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PART ONE: CULTURE OF INNOVATON (Rao & Weintraub)

London

K&C

Pieve

AV ALL SITES

3,00

3,20

3,33

3,04

3,26

3,09

3,12

3,36

3,09

3,12

3,32

3,31

3,39

3,06

3,12

3,25

3,18

3,40

3,18

3,23

3,41

2,63

3,55

3,42

2,49

3,05

CLIM AT E that speaks a common language about innovation. leverage the differences that exist within our community. to capture opportunities.

3,86

Collaboration the things that we say we value.

4,00

that are inconsistent with our values. opinions, even about unconventional or controversial ideas.

Safety

3,86 3,81

policies, bureaucracy and rigidity to simplify our workplace. for their own actions and avoid blaming others.

3,93

how to get started and move initiatives through the organisation.

3,43

3,03

2,80

3,09

3,81

2,80

2,95

3,19

3,02

3,10

3,30

Simplicity AVERAGE SCORE (CLIMATE)

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PART ONE: CULTURE OF INNOVATON (Rao & Weintraub)

London

K&C

Pieve

4,29

3,40

3,63

3,64

3,54

AV ALL SITES

RE SOU RCE S who are willing to be champions of innovation. experts who can support our projects. succeed in our innovation projects.

People

3,86

3,48 3,65

3,63

3,93

3,44

3,52

3,63

hiring systems in place to support a culture of innovation.

3,36

2,86

2,84

3,02

collaboration tools to support our innovation efforts.

3,50

3,23

3,30

relationships with suppliers and vendors to pursue innovation.

Systems

3,52

3,20

4,00

2,91

3,06

4,29

3,40

3,69

4,00

3,23

3,18

Project

4,10

3,18

3,31

3,53

AVERAGE SCORE RESOURCES)

3,85

3,36

3,50

pursue new opportunities. pursue new opportunities. virtual space to pursue new opportunities

3,33 3,32

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PART ONE: CULTURE OF INNOVATON (Rao & Weintraub)

London

K&C

Pieve

AV ALL SITES

3,22

3,30

3,24

3,26

PROCE SSE S ideas from a vast and diverse set of sources.

3,64

ideas to identify the most promising opportunities.

3,36

on a clearly articulated risk portfolio.

Ideate opportunities quickly into prototyping.

3,03

3,50

3,14

3,39

3,34

3,50

3,11

3,28

3,30

3,86

3,06

3,61

3,51

3,45

3,46

between our organization and the voice of the customer.

Shape

3,50

3,31

3,29

3,64

3,25

3,45

3,29

3,68

4,02

most promising opportunities.

3,82

scale initiatives that show market promise.

Capture

3,45

3,86

AVERAGE SCORE (PROCESSES)

3,54

3,84

3,30

3,52

3,50

3,60

3,94

3,61

SUCCE SS an innovative organization.

3,29

3,60

3,68

industry.

4,14 others in our industry.

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3,69

3,80

3,88

PART ONE: CULTURE OF INNOVATON (Rao & Weintraub)

London

External

K&C 3,63

Pieve 3,82 3,80

comprehensive and disciplined approach to innovation. have helped our organization develop new capabilities that we did not have three years ago.

3,36

3,34

4,14

3,69

Enterprise level of participation in our innovation initiatives. build our people’s competencies by their participation in new initiatives. participating in potentially risky opportunities, irrespective of the outcome.

3,50

3,69

3,36

3,94

3,53 3,93

AV ALL SITES

3,92

3,66

3,43

3,31

3,56

3,00

2,96

3,25

2,46

2,90

Individual

2,96

3,00

3,23

AVERAGE SCORE (SUCCESS)

3,38

3,51

3,54

3,24

3,39

3,50

OVERALL AVERAGE SCORE (SIX BLOCK)

3,85

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PART TWO: WORK CLIMATE (Abbey & Dickson)

London

K&C

Pieve

AV ALL SITES

AU TONOM Y

employees have freedom to work without close supervision.

2,29

2,94

4,29

3,23

3,60

4,00

3,11

CON FLIC T VS COOPE R ATION things done 58. Employees at Tratos choose to collaborate rather than compete with each other

3,04

4,21

3,38 3,24

SU PP ORTI V E N E SS 59. Tratos is willing to support employees in 60. Tratos recognizes effort and fosters a sense of belonging amongst employees

4,14

3,26

3,58

3,66

4,43

3,11

3,00

3,51

4,14

2,23

2,81

3,06

LE V E L OF RE WA RDS 61. Tratos employees are rewarded for good performance S TRUC T U RE 62. Tratos gives employees explicit instructions about how jobs are to be performed 63. Tratos has clear organizational structures and written procedures

5,54

3,43

4,09

3,63

3,10

3,39

2,40

2,85

3,11

2,60

3,10

PE RFORM A NCE RE WA RD DE PE N DE NC Y

appropriate 65. Employee rewards at Tratos are based on a person’s worth, ability and past performance

74

4,14

PART TWO: WORK CLIMATE (Abbey & Dickson)

London

K&C

Pieve

AV ALL SITES

4,21

3,60

2,96

3,59

3,86

2,83

3,35

4,14

2,60

3,15

2,80

2,81

3,11

3,43

3,33

3,52

3,64

3,36

3,21

3,40

3,36

3,00

2,51

2,96

3,29

3,14

3,91

3,13

2,95

3,33

MOTI VATION TO ACHIE V E 66. Tratos employees take every opportunity to excel and achieve the best they can for the company

S TAT US P OL A RISATION Tratos. We are all treated equally whatever our status.

69. There are no special privileges for senior staff or management at Tratos FLE XIBILIT Y experiment and try new ways of working systems or processes.

DECISION/CE NTR A LISATION

levels at Tratos WORK CLIMATE (Abbey & Dickson)

PART THREE: THE MEANS OF INNOVATION (Sawhney)

services

London

4,21

K&C

3,40

Pieve

3,90

AV ALL SITES

3,84

Platform same equipment

3,89

4,04

75

Solutions services

4,43

3,80

4,23

4,15

Customers 2,43

3,02

3,83

3,23

3,62

4,04

3,56

3,46

3,40

3,25

3,50

Value capture

Processes of its processes

3,14

3,60

Organisation 81. Everybody in the company knows what they must do to perform their job

3,50

Supply chain 2,64

2,83

2,48

2,65

3,50

3,26

2,83

3,20

3,36

3,09

3,42

3,29

85. The Tratos brand means “innovation�

3,64

3,46

3,81

3,64

THE MEANS OF INNOVATION (Sawhney)

3,48

3,42

3,49

3,46

based platform Presence around the world Networking offers Brand

76

APPENDIX 4 Innovation Survey: Factors London

K&C

AV ALL SITES

Pieve

Capture

3,86

3,54

3,84

1

Enable

4,16

3,45

3,65

2

3,63

3,82

3

3,36

3,61

4

External Learning

4,05

Enterprise People

3,53 3,93

Creativity

3,66

5 6

3,44

3,52

3,63

3,19

3,26

3,54

3,31

3,54

8

Energize

4,21

Project

4,10

3,18

3,31

3,53

9

Shape

3,64

3,25

3,45

3,45

10

Safety

3,81

3,18

3,23

3,41

11

Systems

3,52

3,20

3,33

12

Collaboration Ideate

3,50

Individual

3,09

3,12

3,32

13

3,11

3,28

3,30

14

2,96

3,00

3,23

15

3,19

16

3,16

18

Simplicity

3,81

2,80

2,95

Entrepreneurial

3,88

3,36

3,9

2,84

2,86

Engage

77

APPENDIX 5 Innovation Survey: Elements London

We have a burning desire to explore opportunities and to create new things.

Our innovation projects have helped our organization develop new capabilities that we did not have three years ago. leaders are able to modify and change course of action when needed. innovation efforts have led us to

K&C

AV ALL SITES

Pieve

4,36

3,51

4,16

4,01

4,14

3,69

3,94

3,92

3,80

3,92

4,21

4,14

3,69

3,80

3,88

4,21

3,46

3,88

3,85

3,93

3,63

3,82

others in our industry. leaders persist in following opportunities even in the face of adversity. are constantly experimenting in our innovation efforts. rapidly allocate resources to scale initiatives that show market promise.

3,82

4,29 new opportunities.

78

3,40

3,69

London

We have committed leaders who are willing to be champions of innovation.

4,29

K&C

3,40

quickly go to market with the most promising opportunities.

AV ALL SITES

Pieve

3,63

4,02

3,80

Our innovation performance is

3,69

3,60

3,68

3,29

3,68

industry.

Our processes are tailored to be

based.

We are good at leveraging our relationships with suppliers and vendors to pursue innovation. are not afraid to fail, and we treat failure as a learning opportunity. leaders inspire us with a vision for the future and articulation of opportunities for the organisation.

paralysis when we identify new opportunities by exhibiting a bias towards action.

4,29

3,14

3,49

3,64

4,43

3,14

3,35

3,64

3,20

4,00

3,64

79

London

AV ALL SITES

Pieve

the internal talent to succeed in our innovation projects.

3,86

Our customers think of us as an innovative organization.

3,29

3,60

4,36

3,06

good at asking questions in the pursuit of the unknown.

3,93

3,31

3,53

3,59

workplace provides us the freedom to pursue new opportunities.

4,29

3,23

3,22

3,58

consistent in actually doing the things that we say we value.

4,00

3,31

3,39

3,93

3,43

3,31

3,56

4,00

3,29

3,33

3,54

4,21

3,09

3,86

3,06

take delight in being spontaneous and are not afraid to laugh at ourselves.

participation in our innovation initiatives.

Our leaders exemplify the right innovation behaviors for others to follow.

Our leaders frequently challenge us to think and act entrepreneurially. move promising opportunities quickly into prototyping.

80

K&C

3,65

3,63

3,94

3,61

3,60

3,52

3,61

3,51

London

K&C

We have a healthy appetite and tolerance for ambiguity when pursuing new opportunities.

3,55

3,50

3,14

3,49

3,64

3,54

3,48

4,00

3,23

strategies to help us navigate around organisational obstacles. have access to innovation experts who can support our projects.

AV ALL SITES

Pieve

3,18

space to pursue new opportunities effective feedback loops between our organization and the voice of the customer. encourage new ways of thinking and solutions from diverse perspectives.

3,86

policies, bureaucracy and rigidity to simplify our workplace. able to freely voice our opinions, even about unconventional or controversial ideas. quickly stop projects based on

3,45

3,46

3,29

3,18

3,44

2,63

3,55

3,42

3,18

3,40

3,86

3,50

3,31

3,29

81

London

We work well together in teams to capture opportunities. have a deliberate, comprehensive and disciplined approach to innovation. select opportunities based on a clearly articulated risk portfolio.

collaboration tools to support our innovation efforts. systematically generate ideas from a vast and diverse set of sources.

3,09

3,36

3,34

3,50

3,14

3,39

3,34

3,00

3,20

3,33

2,91

3,06

3,32

3,23

3,30

3,22

3,30

3,04

3,26

3,24

3,26

3,12

3,25

4,00

3,50

3,64

3,03

We appreciate, respect and leverage the differences that exist within our community.

to identify the most promising opportunities. question decisions and actions that are inconsistent with our values.

82

AV ALL SITES

Pieve

3,86

that speaks a common language about innovation. people dedicated time to pursue new opportunities.

K&C

3,36

3,06

3,12

3,36

3,36

London

deliberately stretch and build our people’s competencies by their participation in new initiatives.

Our leaders provide support to employees during both successes and failures.

In our organisation, people at all levels proactively use their initiative to innovate.

3,00

3,64

People take responsibility for their own actions and avoid blaming others.

We have the right recruiting and hiring systems in place to support a culture of innovation. reward people for participating in potentially risky opportunities, irrespective of the outcome.

3,43

AV ALL SITES

Pieve

2,96

3,25

2,86

3,25

2,94

2,86

3,15

2,83

2,86

3,09

3,03

2,80

3,09

2,49

3,05

2,84

3,02

4,14

leaders devote time to coach and provide feedback in our innovation efforts.

exactly how to get started and move initiatives through the organisation.

K&C

3,93

3,36

2,86

3,50

2,46

2,90

83

84

85

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89

Dr Ennio Bragagni Capaccini; Italian Consul General, Dr Massimiliano Mazzanti; Eng Elisabetta Bragagni Capaccini; Eng Albano Bragagni; Dr Maurizio Bragagni - MBA

Maurizio Bragagni was born on the 20th April 1975 in Arezzo, Italy. On the 22nd October 2000, Maurizio obtained a degree in Law at the University of Pisa, and recently acquired a MBA (Masters and Business Administration) degree at the Cass Business School on the 22nd June 2016.

Maurizio has been the CEO of Tratos Ltd since 2010 and is married to his wife Alessandra since 2003. Together they have four daughters, Giulia Maria, Lucia Maria, Elena Maria and Anna.

“No man is an island entire of itself; every man is a piece of the continent, a part of the main�

John Donne, Devotions upon Emergent Occasions Originally published in 1624