An Analysis of the Organization Structure, Creative Climate and Management Process of Knowledge Creation in the Innovation Implementation of BMW and Rolls Royce

Table of contents

Nowadays with the technology, especially IT technology, development, the business environment is becoming more quickly changing, and the competition is becoming severer, business organization therefore must introduce appropriate innovation strategy. BMW, as a leading automobile producer, continuously concentrates on the innovation to meet customers’ need. This essay discusses the innovation implementation in BMW through the analysis of its organization structure, creative climate and the management process of knowledge creation.

Creativity and ideas generation

Tidd et al (2000) states, the innovation is a business process of turning opportunity into new ideas and of putting these into widely used practice. In term of the nature, there are five major types of innovations: novelty, competence shifting, complexity, robust design and continuous improvement. While in term of the extent of change, innovations can be divided into incremental, radical and transformational models. Innovation deals with the change related to product, service and process, and the innovation management involves people, product, process and technology.

The innovation process argued by Tidd et al (2000) is first, scanning the environment to find the opportunities or threats; second, deciding what should be done responding to the environment; third, planning and obtaining resource to handle the change; last, implementing the innovation.

Introduction of creativity

Creativity is the basics for innovation. Gurteen (1998) defines the creativity as “generation of ideas whereas innovation is about putting these into action”. Two key elements of creativity are knowledge creation (KC), and ideas generation.

There is no widely accepted definition for KC, some definitions are described as following: “the ability to originate novel and useful idea”(Marakas, 1999), and when a firm acquires and adopts knowledge from others, it modifies knowledge to make it suitable”(Bhatt, 2000). The approach to KC is knowledge cognition, which is divided into distributed cognition and social constructionism.

A firm, to avoid the danger of reductionism by a single concept in knowledge creation, should adopt a multiple perspective approach to KC. Another reason for multiple concepts in KC is the diversity of knowledge types. There are also different descriptions to taxonomy of knowledge, a typical model created by Matusik and Hill (1998) is: tacit, explicit, individual, collective, private, public, component and architectural.

The ideas generation process stated by Rochford (1991) is 1. identifying and collecting ideas; 2. screening and evaluating those ideas. Ideas screening must be vigorous, for the cost putting the ideas into the practice, and the low successful rate of the innovation, which from the ideas generation (figure 1.). The resources of ideas generation are customer needs, salespeople, competitors, market directions, technology development and company culture.

Background of BMW

BMW group has one of the strongest brands in the world, and it enthusiastically retains the image of stylish, luxury and high quality automobiles. BMW group occupies the position in the world automotive market that any carmaker should envy. From 1990 to 1999, BMW’s deliveries rose from around 450,000 to 1200,000. In the meantime, its turnover grew from 13 billion euro to nearly 35 billion euro. The proudest thing to BMW is that it makes about twice as much money on each car compared with GM and Forts, although they had built more than it had. Now BMW group holds BWM, Rover, Mini, MG, Rolls Royce and motorcycle series of products, and it possesses plants in Europe and North America.

Innovation analysis in BMW

The organization structure and the internal culture are two essential elements to support the innovation. To quickly adapt the fast changing environment, the organization should have the characteristics as: flexible structure with organic and mechanistic mix, key people or teams, especially top people, focusing on the innovation and a proper creative climate.

Organization structure

Innovation is becoming more corporate wide, which needs an organization more organic. So business process reengineering (BPR) is necessary to any organization that wants to cope with the dynamic environment and keep ahead of the competition.

For years, BMW is well known on its conservative management. The organization structure in BMW at that time was a typical machine bureaucracy. Labors are confined in the classic divisions. From 1970’s the successful Japanese automobile companies introduce a new work structure concept-lean manufacturing, which stimulates BMW to change its organization structure and focus on the integrated activity. Firstly, BMW implemented a principle of interdivisional project organization in its Research and Engineering Center- FIZ in the late of 1980’s.

Then in 1998, BMW introduced a process-oriented organizational structure in the whole group. The tasks of product concept development and design are to be combined with sales, marketing and materials purchasing in a new task area bearing the title “Market and Product”. Product engineering is to be combined with the tasks of manufacturing planning and production to form a new “Engineering and Production” task area. All of the restructure enables BMW to respond to the changing conditions while maintaining its competitiveness.

The key people for innovation

The success of idea generation is very rare, and successful innovation needs key individuals to harmonize the innovation process. In BMW, from the top management level, people constantly concentrate on the innovation strategies. For instance, the top management of BMW set up a strong environment policy to improve the fuel economy of its cars through research and development. That is why hydrogen-powered and electric car occupy so important position in its future strategy.

Creative climate

Organization culture is the base in which innovation thrives. Establishing creative climate involves appropriate organization structure, proper communication flow, motivation system, training policy. appraisal system and deployment of strategy

In BMW, the favorable creative climate can be reflected firstly from its R&D facility. FIZ is the biggest automobile research center in Europe. Around 6,000 engineers, designers, model builders, computer experts and scientist of various disciplines work here, however, the use of the automobile is just one of a multitude of topics covered.

In BMW, people introduces a product database system: a significant benefit of integrated automatic design is the provision of a centralised database containing design and manufacturing related information on each product. This can be accessed by various functional groups – engineering, marketing, purchasing, finance, manufacturing, and servicing – and provides all necessary data on each product.

BMW also reduced physical distances of information flows in product development. In FIZ, the nearly 6,000 engineers, none of whom has to walk more than 150 metres to talk to a colleague. BMW allows a first-concept designer to discuss easily with a production-line engineer (the building houses prototype production lines) the manufacturing practicalities of even an outline design idea.

Besides employees, BMW also encourages customers involving in the product innovation. Every year, BMW gets huge amount of new ideas from all the channels. However, compared with its Japanese competitors, which receives a piece of advice from each employee a week, BMW should motivate its employees more actively.

Motivation is import factor to keep a creative culture in an organization. In BMW, there is a satisfying reward system for the accepted suggestion. Moreover, BMW encourages its people to develop their professional and personal skills to enable them to meet its organizational goals. An integral part of its business strategy is a “learning organization” approach, which supports achievement of development and career potential for employees.

The management process for knowledge creation

There are three models of management processes for knowledge creation: up-bottom model, such as the X-ray machine in GE; bottom-up model, such as the invention of ‘post-it’ pad in 3M; and middle-up-down model such as the Mini-Copier invention in Canon. The different management processes for knowledge creation come from the different styles of management and form different types of knowledge accumulation. The top-down model deals primary with explicit knowledge, the bottom-up with tacit knowledge, and middle-up-down with both types of knowledge.

In BMW, people adopt middle-up-down model. First, the top management articulates the features of the new products, although the new concepts are vague in this stage. Then, the R&D people combined with the production-line engineer do the detailed work, and make the new ideas available. Last, the new products are put into the production lines and eventually appear in the market. The concept of the new product is tacit, but it should be articulated by the strategy. The innovation then is the process turning tacit knowledge into explicit, or the process of externalisation.


In general, BMW has done well in the innovation implementation. This paper mainly discusses the innovation system within the group, however, many external factors, like government policy, also influence the innovation implementing within BMW. Focused on the quality and kept itself with the popular style, BMW pays a lot of attention on the innovation management.

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