Nypro Innovation Strategy: Culture, Leadership & NovaPlast

Internal Market for Innovation at Nypro

The internal market for innovation at 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. By giving top performers equity in the company, Nypro aims to incentivize retention. 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 most likely 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 seen as an innovator is revered by the others, who will then emulate its best practices. This encourages plant managers to foster innovation among their ranks — each plant functions as an incubator for innovation (Birkinshaw & Hood, 2001). The corporate culture also supports innovation at the company-wide level by drawing in workers who are oriented toward innovating and winning, reinforcing the overall drive for innovation. Competition is encouraged through the use of information: performance data is compiled and distributed throughout the company, with comparisons always made between plants or units rather than between individuals or against past performance. This highlights the imperative to outperform other plants rather than simply improve over prior results.

Another element of the internal market for innovation at Nypro is its orientation toward delivering results for 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 dynamic is important because it drives Nypro's managers to continue creating innovation rather than becoming complacent, thus 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. Instead, the internal competition between plants and top talent keeps the company at the "early main street" level, where it continues to leverage innovation for strong growth. This mirrors the broader effort to keep Nypro as a whole at that level (Moore, 2005, 2).

In total, Nypro becomes focused on innovation as an end rather than merely a means. It does not directly reward innovation, but rewards it indirectly. Innovators become stars within the company, and a track record of innovation is eventually rewarded with equity in the firm. It is considered an honor for a plant to receive visitors from other plants seeking to emulate its innovations. This is significant because there is no long-term source of competitive advantage for any single plant as a result of innovation — the need for standardization of inputs and outputs precludes innovation from being a source of durable plant-level advantage. Instead, the only long-term reward is prestige.

Leadership and Organizational Structure as Innovation Drivers

The leader of a firm can play a key role in driving innovation by setting the tone for organizational culture and making innovation a strategic priority, as has been demonstrated by companies such as Apple in recent years (CNBC, 2007). The CEO of Nypro manages the process of innovation in a couple of key ways. The first is by actively promoting a corporate culture of competition. His intensely competitive disposition is communicated to employees throughout the organization, attracting like-minded individuals and improving the overall competitiveness of the firm. In addition, he utilizes organizational structure to further encourage competition.

Although Nypro must maintain global standardization, the organizational structure allows different operations to function as "peninsulas" (Birkinshaw & Hood, 2001) — units that remain in communication with the head office but are free to seek their own solutions to problems identified by customers. This allows the firm's customers to feel more comfortable raising issues at the local level. For example, a customer's Chinese subsidiary can work directly with Nypro's Shenzhen facility on a problem, knowing that Shenzhen will take ownership of solving it. If that customer had to route issues through head office channels, concerns might never be adequately addressed. This independence to meet customer needs improves communication flow with all of a customer's global facilities and adds meaningful value to the customer experience. A similar approach has worked well for other companies that deal primarily with major partner customers, such as Intel, which has continued to innovate its chips in direct response to demand from its largest customers (Intel, 2009).

Another tactic the CEO uses to drive innovation at Nypro is to center much of the corporate strategy around innovation itself. This sets the tone for the entire company and is one of the most important actions a CEO can take to encourage innovation — signaling that it is a top priority. At Nypro, the organizational structure and human resources policies have both been built around innovation. By consistently communicating its importance, the CEO ingrams innovation into the company's culture and reinforces that culture on a daily basis.