This post is another reflection on the to be published book by IMD Professor of Marketing, Stuart Read.
W.L. “Bill” Gore was an employee at Dupont working on Teflon applications. Very early in the 1950’s, he envisioned that Teflon was promised to a bright future as a coating material for cables in the computer industry. However, Dupont was not convinced and refused to invest.
In 1958, Gore created his own company with his wife in his basement: WL Gore & Assiociates was born. 10 years later, they were employing 200+ employees and Gore cables were used on missions to the moon.
Later as the competition increased in the cable coating industry, Bill and his son figured out a way to stretch the material so that it could be woven as fabric: Gore-Tex was born.
That’s a great success story, isn’t it?
What is also interesting with WL Gore & Associates is their unwavering commitment to Innovation. All employees are called Associates and carry the same level of authority. So Leaders can only emerge if they have followers for their projects and ideas.
Finally, Gore quantified the optimal team size and built his organization accordingly. As a result, a manufacturing plant at Gore will never exceed 150 Associates in order to keep personal engagement, commitment and accountability high.
Obviously the model has merits. But what could be some of the drawbacks? First off, production costs must remain high as there will be no plant with more than 150 associates, so production volume is capped. In order to double the production capacity, a new plant is required rather than extending the capacity of the existing one. What is true for production costs is also true SG&A costs (Selling General & Administration): as units are small, there must be a lot of overhead costs in the Gore model. Last but not least, corporate governance of a lot of small units of 150max associates must create some interesting challenges.
On the other hand, a lot of small and autonomous units makes it a lot easier to divest a business as it is not tightly intertwined and dependent upon shared resources provided by the corporation.
All together, the Gore model looks very interesting as an incubating model for a growing business started from scratch. You can keep it separated until it reaches the critical mass and then and only then integrates it into a bigger business unit. I have seen that in the past and did not understand the rationale for it. Now I do !
Creating and growing a business requires focus, attention and a mindset that varies greatly from the one commonly shown by corporate executives. So applying to innovation an organizational model that is radically different from the one we use to run mature businesses may help to ignite and sustain in major corporations a spirit of innovation and entrepreneurship that they are struggling to nurture otherwise.