Nypro the Internal Market for

Nypro The internal market for innovation in Nypro is highly competitive. The company encourages innovation at both the individual and plant level. At the individual level, the company seeks to encourage top performers to remain with the company by bringing them into an equity plan. The company feels that by giving top performers equity in the company, they will be encouraged to stay. Performance ratings are part of the formula for determining equity.

The degree to which innovation is specifically incorporated in the performance measures is unknown, but the underlying theory is that top performers are mostly likely going to be the main sources of innovation in the company. At the company level, innovation is encouraged by fostering a culture of intense internal competition. Plants compete with each other, such that a plant that is seen as an innovator is revered by the other plants, who will then emulate the best practices of the innovator.

This encourages plant managers to foster innovation among their ranks -- each plant is an incubator for innovation (Birkinshaw & Hood, 2001). The corporate culture also supports innovation at the company-wide level. This competition encourages individual members of the company to innovate in order to achieve the highest performance ratings and in order to stand out as an excellent performer. In addition, the culture of innovation and competition plays a role in attracting the types of workers who are oriented towards innovating and towards winning.

This reinforces the drive for innovation within the company. Competition is encouraged through the use of information. Lankton has the information compiled and distributed throughout the company. Comparisons are always between plants or units, rather than individuals or vs. past performance. This highlights the need to be better than the other plants. Another element of the internal market for innovation at Nypro is the orientation to delivering results for the customers.

This creates two tiers of innovation -- those that benefit Nypro directly and those that benefit Nypro indirectly by benefiting the firm's customers. This is important because it drives Nypro's managers to continue to create innovation rather than become complacent that their own internal processes are strong, avoiding innovation inertia (Moore, 2005, 1).

The company does not reach the stage of "mature main street" where it is operating well and content to do so, but rather the internal competition between plants and top talent keeps the company at the "early main street" level where it is seeking to leverage innovation for strong growth. This mirrors the efforts of Lankton to keep Nypro as a whole at that level (Moore, 2005, 2). In total, Nypro becomes focused on innovation as an end rather than a means. It does not directly reward innovation, but rewards it indirectly.

Innovators become stars in the company, and a track record of innovation is eventually rewarded with equity in the firm. It is an honor within the firm to be a plant that received visitors from other plants who seek to emulate innovation. This is important, because there is no long-term source of competitive advantage for any plant as a result of innovation -- the need for standardization of inputs and outputs precludes innovation from being a source of long-term advantage. Instead, the only long-term reward is prestige. 2.

The leader of a firm can play a key role in innovation, by setting the tone for the organizational culture and by making innovation a priority, as has been the case with Apple in recent years (CNBC, 2007). Lankton manages the process of innovation at Nypro in a couple of key ways. The first is by promoting the corporate culture of competition. He is intensely competitive and communicates that to the employees. His degree of competition attracts competitive people, which improves the overall competitiveness of the organization.

In addition, Lankton utilizes organizational structure in order to encourage competition. Although Nypro must maintain global standardization, the organizational structure allows for the different operations to function as "peninsulas" (Birkinshaw & Hood, 2001) wherein they are in communication with head office, but are free to seek their own solutions to problems that have been identified by the customers.

This allows for the firm's customers to feel more comfortable communicating issues as well -- the hypothetical company in China can talk to Nypro Shenzhen about an issue knowing that Shenzhen will work to solve it. If the customer's Chinese subsidiary had to go through head office channels, that issue might never reach Nypro. The independence to meet customer needs is something that Nypro can utilize to improve communication flow with all of its customer's facilities, which adds value to the customer experience.

This tactic has also worked well for other companies that deal exclusively with major partner/customers, such as Intel which has continued to innovate its chips in response to demand from its major customers (Intel, 2009). Another tactic that Lankton uses to drive innovation at Nypro is to base much of the corporate strategy around innovation. This itself sets the tone for the company. This is one of the most important things a CEO can do to encourage innovation -- set the tone that innovation is a top priority.

For Nypro, Lankton has built the organizational structure around innovation, as well as human resources policies. He talks about it -- he wants people at the company to think about it. This ingrains innovation as part of the culture, and reinforces that culture every day at Nypro. 3. NovaPlast represents an opportunity to maintain a rapid growth rate. It appears to meet the needs of both Nypro and the customers, who are demanding decreased lead times for orders. The technology will eventually be rolled out across the entire company.

What Lankton needs to determine is the best way to conduct this rollout. He can reward top-performing plants with a NovaPlast machine, or he can purchase enough for all of his operations in the initial order. Another option would be to build a plant that only used NovaPlast machines. A final option would be to not use a NovaPlast machine at all. The decision needs to be made in keeping with the company's established culture and the operational objectives of Nypro.

If a single NovaPlast plant is built, this will not meet the needs of either NovaPlast or its customers. The company's customers are global and expect the same level of service and quality from each plant -- that will not be the case if one plant has NovaPlast and the others do not. In addition, the internal competition between Nypro plants will be skewed. The NovaPlast plant will outperform, leading the others to want NovaPlast as well. If they are refused, they will be condemned to always losing.

For competitive people, this would not be satisfactory -- Nypro could lose some staff and have the remaining staff become disengaged from innovation because of the inherent disadvantage. If NovaPlast is not purchased, then Nypro will face a situation where its competitors may use the NovaPlast machine to outperform Nypro. This option, which would see NovaPlast at only one plant, will put the machine to the test in the internal competition.

The downside is that Lankton appears to see the merits of the NovaPlast now -- the internal competition would be a waste of time because he already knows that NovaPlast is a significant technology improvement. The final option provides all firms with NovaPlast. This does not discourage innovation, but rather allows the internal competition to continue on even footing. The organization will not be.