THE BRASILATA CASE CHAPTER 4

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1 Extracted from the book: " Innovative organizations - Brazilian studies and cases" Organizer: José Carlos Barbieri Publisher: FGV, 2003 Pages: CHAPTER 4 THE BRASILATA CASE 10 This book, as we have seen, presents the conclusions of a survey conducted by the FGV/Eaesp s Forum of Innovation with the aim of enhancing the knowledge about the innovation processes in their different dimensions by means of the analysis of innovative experiences undertaken by businesses which are partners in this forum. With this aim, the survey on Brasilata tried to identify the stage in the evolution of this company as to its ability to create innovations, identifying the internal and external factors which condition such ability, as well as the most common triggering, facilitating, and inhibiting elements, especially relating to the internal environment and to the process of development of its most important innovations. The primary data were obtained by means of semi-structure interviews, which allowed the interviewees freedom to express their perceptions in a more creative fashion regarding the historical 20 aspects related to management changes and the company s innovation processes. The choice of the interview method resulted from the need to explicitly reveal the concepts underlying the opinions a nd beliefs about innovation by the staff involved with the innovation processes undertaken in the last 10 years. The steel cans industry The earliest steel cans appeared in the beginning of 19th -century. Their development was, as many others in the history of mankind, spurred by military needs, and in this instance by the requirements of Napoleon Bonaparte, who demanded a trusted process for the preservation of foodstuffs. At that time, French soldiers were dying in the battlefields not only shot by the ene my but also as a result of famine. The first steel canned foods appeared in 1812; in 1813 the British Navy and Army began to 30 use them for this purpose. The first iron cans were crafted one by one by blacksmiths and then immersed in liquid tin to be protected from corrosion. The American Civil War triggered a substantial

2 progress in the can industry, with the annual production jumping from 5 million cans per year, in the beginning of the conflict, to 13 million at its end, five years later (Garcia, 1979: ).

3 The development of steel cans was then advanced by the industrial revolution, which enabled the mechanization of can manufacturing and also the production of steel sheets with low carbon content. Thus, steel sheets coated with a thin layer of tin bec ame the primary raw material for can manufacturing. By the end of the 19th-century, steel cans built with three components (bottom, body, and lid) were made through processes very similar to today s manufacturing methods, despite a large number of important innovations which have been introduced since that time, which have enabled substantial performance enhancements, as with, for example, the use of internal varnishes beginning in 1920, the development of the electrolytic tinplate coating process beginning in 1940, and the replacement of lead-based welding with an electric welding in the beginning of the 1960s. Despite 10 these innovations, the external aspects of steel cans has scarcely changed in the last 100 years. Manufacturing process The manufacturing of metallic cans involves a series of steps, especially metal cutting and cold shaping operations. Depending on their type, cans are made three or more parts. Steel cans usually have three or more parts: bottom, body, lid, and sometimes a ring where the lid fits. The manufacturing process encompasses three phases: lithography, stamping and assembly. Lithographic labels are printed directly on the metal sheets, resulting in cans with excellent graphic designs. Stamping operations are employed to manufacture bo ttoms, lids, and rings, usually called components, in high-speed presses. In assembly lines, with lithographed sheets and components, cans are assembled. 20 Cans bodies are made of three or more components and laterally stitched welded electrically or with thermoplastics. The components (bottoms, lids or rings) are attached to the body by hooking and crimping. The most commonly used material in manufacturing steel cans is tinplate, a thin steel sheet (with a thickness between 0.15 to 0.30mm) coated with a la yer of tin to prevent corrosion. Alternatively, in some cases a chromed sheet is used, coated with metallic chrome instead of tin, and to which it must be previously applied a layer or varnish before being ready for use. Companhia Siderúrgica Nacional is the only manufacturer of metallic (tinned or chromed) sheets in Brazil. With competitive prices in the international markets, CSN exports about 30% of its production, a percentage which exceeds the domestic market demand. Because it is a mode of packaging which originated about 200 years ago, and became popular already 30 in the 19th-century, cans underwent an intense enhancing process since then. Currently, steel cans bravely face strong competition from packaging made of other materials, including plastic, al uminum etc., in order to keep its market share. It is, therefore, a mature industry and it would be already in the declining phase of its lifecycle, were it not for the recent revival of steel cans for environmental

4 reasons, since besides being fully recyclable, steel degrades naturally when discarded in the open. In Brazil, steel cans are also important because its raw material is entirely obtained in the domestic market and produced out of an abundant natural resource, which assures a certain price stabil ity because it does not its depend on imports. The Brazilian steel cans market The Brazilian packaging industry achieved the following results in 2001: 6.3 million tons and the equivalent to US$8.2 billion, representing 1.8% of the GDP. The participation o f the steel packaging sub-sector (cans, aerosols containers, pails and barrels represented 13.2% of the domestic market (Datamark, 2003). Steel packaging units with a capacity of up to 25 liters, in the form of cans, 10 aerosols, and pails, are utilized for a wide range of products, with edible oil and processed food representing their largest market, closely followed by chemicals, especially paints, varnishes, glues, and solvents. The most intense competition among materials is in the food market, exemplified in the trend whereby tin is being replaced by plastics, tetra brick, aluminum or glass, for a number of products which were traditionally packaged in steel cans, such edible oil, tomato sauces and powder milk. There are in Brazil about 50 companies manufacturing steel cans, some of them regional and small - sizes. Among these, there are currently a few integrated businesses, and the largest among them is Nestlé, which manufactures cans for its own products. About 10 business firms are middle - and largesized companies, and the leader, Cia. Metalúrgica Prada, commands roughly 15% of the entire 20 market, measured in terms of consumption of metallic sheets. Between them, the 10 largest companies are responsible for about 75% of the supply. One feature in this indu stry is the specialization by type of packaging, as shown in box 1, and by region, in this case due to the price/cost relationship incurred for transporting these items.

5 <<marcador de lugar para Quadro 1 <<<PÁG. 80>>> Setor de latas de aço: principais empresas...>> Box 1 Steel can industry: main companies and type of packaging (2003) Type of packaging Aerosols Buckets Canvas Two-component cans for drinks Lids and corks Companies Brasilata and Prada Brasilata, Prada and Cervi Aro, Brasilata, Bertol, Braf, CBL, Cervi, Esperança, Femepe, Iguaçu, Latal, Matarazzo, Mecesa, Meister, Módulo, Mococa, Novalata, Olvebra, Palmira, Paulista, Prada Renda, Renner, Rio Industrial, Rojek, Trevisan e Valença Metalic Aro, Mecesa, Renda, Rojek, Silva Pedroza, Silva Portela, Tapon Corona e Whitecap Source: Datamark data abridged and updated by the authors (2003:72). No trend is detected, among users of steel cans, to manufacture internally the packaging they need, largely to the deverticalization processes based on the concept of core competence. Also, advances in process technology, especially in lithography, require frequent updating, rendering integration an unfeasible option. The greatest challenge comes from the substitution by packaging made with other 10 materials, as stated above, and of how easily it is to get into this market, for the barriers to entry in this industry are essentially the financial resources needed to install a new productive facility, since the process technology is developed in the capital goods and chemical raw materials industries. Sources of technology in the industry The manufacturers of steel cans represent an industry dependent on suppliers, according to the Bell and Pavitt classification, being a sector with small - and middle-sized businesses users of technology developed by firms in a different economic industry, as shown in chapter 1 (Bell e Pavitt, 1993: ). Technological changes in this industry are almost always developed by the manufacturers of machines, equipments, and productive inputs. Their technological trajectory is defined in terms of 20 cost cuts, and the opportunities for the accumulation of technological knowledge are focused in enhancements and modifications in production methods, and only occasionally in the product design.

6 Box 1 in chapter 2 shows the underlying features in this industry, according to the authors referred to above. Typical businesses firms in the industry have contributed very little to the innovations they require, except innovations of an incremental character, usually related with productive processes. But the advances achieved become hardly contained in the businesses where they emerge, because they are disseminated to the rest of can manufacturers within the machine and equipment industry. Also, clients exert strong pressure for lower prices, which result in lower margins and, consequently, in scarcity of funds for technological development activities. Given this strongly adverse scenario, Brasilata has opted for a strategy aiming at product inno vation, a practice not in line with the typical trajectory of companies in a sector dependent on suppliers, 10 because the most consistent path would be to focus on cost -cutting, less by its own choice, but mainly due to an extremely price-sensitive clientele. In other words, Brasilata strives to achieve technological leadership as a means to support its strategy for product differentiation, which in this case means a constant search for innovations that may add value to its products. According to Porter, this leadership requires the introduction of pioneering innovations in products and in other activities, to increase its value for buyers (Porter, 1989:168). This kind of strategy requires that business firms be able to generate absolute novelties and protect them from imitations, something unthinkable for a firm in a dependent industry, such as the manufacture of steel cans packaging. The company Brasilata, a wholly-owned Brazilian company, is the third largest operation in the Brazilian steel cans 20 industry; it employs 900 staff in its three operating units in São Paulo (SP), Estrela (RS) e Rio Verde (GO). In 10 years, its growth was dramatic, doubling the annual consumption of steel: in 2003 its input reached tons and gross sales amounted to R$80 millio n. The company started operating as Indústria e Comércio de Estamparia Brasung Ltda., a manufacturer of tinplate lids for cosmetics packaging, established in 1955 in São Paulo. Three years later, it became a corporation and started manufacturing cans for b iscuits and the electrodes. In 1963, it was bought by its current controlling group, and in 1965 it took over Estampbrás, incorporating the area of lithography and beginning an expansion of its activities with the manufacture of cans for paints and chemicals. Also in that year, the name of the company was changed to Brasilata. In the 1970s, the company bought Metalúrgica Brasilina S.A., a traditional 30 manufacturer of cans in São Paulo. The geographic diversification started in the beginning of the 1980s with the acquisition of Killing Reichert S.A. Metalgráfica in Estrela, in the southern state of Rio Grande do Sul, thus adding cylindrical and conical pails to its line of products. In 1992, Brasilata built its third unit in Rio Verde,

7 Goiás, to cater for the demand of packaging for edible oils, due to the growth in the production of soya and soybean processing in the Brazilian Mid-West. With the acquisition of Crown Cork Embalagens s assets in 1999, Brasilata started manufacturing aerosols in its Estrela facil ities, which has been expanded in order to reach Mercosur country members. At the end of this growth and diversification trajectory, Brasilata consolidated its presence in the Brazilian market as a manufacturer of complex steel packagings, i.e., those typically made of more than three components lid, ring, body, and bottom used as packaging for products of progressive consumption, where the container must protect the original properties of a product even after first being opened, so that the cans must withstand being opened and closed multiple times. 10 The management model The company s management model has the following characteristics: participation of all levels, with roots in the strategic planning itself; definition of objectives for each stakeholder; continuous enhancement and collective learning. In 1991, Brasilata introduced a staff participation in results scheme (almost four years before the mandatory legislation was passed) and even when faced with crisis, such as in the beginning of that decade, the company has always tried to retain its labor force. This management model is the basis for its innovation processes in product and process, and has been responsible for the company to be granted all the awards conferred to business firms in the indust ry, as shown in box 2. For Brasilata s board, the most important award was to be chosen as one of the best places to work in Brazil in the years 2000, 2001, and 2004, according to a survey by the 20 international institute Great Place to Work, in partnership with the Brazilian Exame magazine. <<marcador de lugar para Quadro 2 <<<PÁG. 83>>> Prêmios recebidos pela Brasilata>> Box 2 Prize awards to Brasilata National awards Sitivesp-Supplier of the Year-prize awarded by the Sindicato de Tintas e Vernizes do Estado de São Paulo, by vote with the participation of all members. In 15 annual events, beginning in 1989, when the prize was first awarded, Brasilata was selected as winner for 14 times (in every year, except in 1997). Sherwin Williams-Supplier of the Year-Prize awarded by Grupo Sherwin Williams. In 30 seven annual events since 1998, Brasilata has been chosen for six times since Tintas Coral-Supplier of the Year award created by Tintas Coral in 1989, discontinued in In seven events, Brasilata was chosen as the winner for six times.

8 Paint e Pintura-Supplier of the Year-annual prize awarded by this trade magazine in the paints and varnishes segment. I made events since 1999, Brasilata was declared the winner for six times. Embanews Technology-Annual prize awarded by the specialized magazine Embanews for technological innovations in packaging which Brasilata has won 49 times since Embanews-Business of the Year-annual prize awarded by Embanews magazine to the best company in the Brazilian packaging industry. Brasilata was the winner in 2000, and until 2004 it was the only steel can manufacturer to be awarded this prize since it was created in Prêmio Artesp-Best Paint Packaging-Brasilata was chosen as the winner of this award in 2001 through Prêmio Abre-Design de Embalagem Bric-á-Brac-Brasilata was awarded the prize in 2002 for its Fechamento Biplus. Brasil Premium-the Brazilian government awards this prize every year to 10 products and bedding technological innovations which may potentially increase Brazilian exports. Brasilata s Fechamento Plus was one of September winners in the first edition in Fechamento Biplus won the second edition in em Best Businesses to Work for in Brazil-Award sponsored by Exame magazine and by the international institute Great Place to Work. Brasilata was selected as for three 20 times, in 2000, 2001 and International Awards Cans of the Year-annual award sponsored by the London magazine The Canmaker, in the cans manufacturers world conference. Brasilata awarded the prize in five occasions: 1999 (St. Louis, EUA)-Silver award in the General Line/Industrial category, with a square can with horizontal ridges; 2000 (Brisbane, Australia)-Fechamento Plus was awarded the Gold Prize in the General Line/Industrial category; 2001 (Denver, EUA)-silver award in the Prototype category, with the round 900-ml can for hazardous products; (Singapore)-gold award in the Ends, Caps and Closures, with Ploc Off Closure; 2004 (Denver, EUA)-silver prize in the Ends, Caps and Closures, with Bat-Plus closure, and bronze award in the General Line/Industrial category, with the 5-liter can <???>UN<???>. Latincan-annual prize awarded during the Latin American Congress of metallic packaging manufacturers. Established four years ago, this prize was awarded to Brasilata in three instances:

9 2001 (Cancun, Mexico)-gold award in the General Line, with Plus Closure; 2002 (Rio de janeiro, Brazil)-gold prize in the General/Line category, with Biplus Closure; 2003 (São Paulo, Brazil)-both prize in the Foodstuffs can category with Ploc Off Closure. Worldstar Award (Barcelona, Spain)-Brasilata was awarded the prize in 2003 with Biplus Closure. Brasilata does not operate a R&D center or unit, as usual in a technologically -based or P&D intensive industry, but displays a high rate of innovation, with not only small enhancements in products and 10 processes, but also with big innovations, such as Fechamento Plus (Closure Plus), which will be referred to in detail later in this book. Its technological area is the factory floor itself, and everyone may participate in some form by means of the system of idea gathering scheme implemented with the introduction of the just-in-time system. Therefore, suggestions are encouraged and thank ed for, even when they do not translate into anything practical. Product and process innovations are born in this environment where, resembling a permanent brainstorming process, people exercise their creativity and feel confident in offering their contribution, because they acknowledge that the company is also concerned with their well-being. In Chanlat s words (1992:68-73), the concern with the welfare of institution, characterized in the individuals by loyalty, engagement, participation, and work well d one, cannot develop if the institution itself is not concerned with its people. This company puts in 20 practice, to use this author s words, a collective ethics based on the concern for others and for the community which it serves. The historic path of the management model Brasilata s management model was the result of a learning process which evolved by successive approximations and began in the middle 1970s. This trajectory can be seen in the timeline shown in figure 1. The company belonged to Grupo Heleno e Fonseca, owner of an important civil construction group in the city of São Paulo. Brasilata s current superintendent was hired as financial manager by the group s flagship company in In 1977, when the then Brasilata s superintendent left the company, the financial executive was transferred to head the financial board. As the company had no superintendent, he took on this role temporarily, but then became the permanent superintendent, until 30 today; he also became a minority stockholder in the compan y. With the replacements of the director superintendent the following changes were implemented in the company: beginning of change in the managerial approach, as a result of the director superintendent s age and personal profile.

10 the company was already hiring interns, and this policy was intensified after this period (the majority of current directors and managers started their careers as trainees in the company); the strong link with the university makes it easier to implement administrative changes; beginning of job rotation among work positions With the split of the civil construction group in 1980, Brasilata then came under the control of one stockholder with an almost 90% stake in the company. Despite having an individual as the overwhelmingly majority stockholder, Brasilata s management was already in the hands of professionals. This provided agility in decision-making, such as in the acquisition of its current unit in the south of Brazil. It is worth mentioning that the majority stockholder in the com pany opposed the 10 idea of bringing members of his family into the company. Thus, Brasilata benefited both from the advantages of being a family business, in terms of its agility in decision -making, and those resulting from the professionalism in its management. With the acquisition of its branch in the south in 1981, the need emerged of assigning trusted staff to key positions, especially in the financial area, which is always of the highest concern when two companies merge their assets. This favored the int ensification of job rotation among operating units, a scheme not put in practice in Brazil by then, but already implemented at Brasilata. This policy breathed new air in the cultural exchange, as a result of the interaction between the units in São Paulo and Rio Grande do Sul. The southern culture, given its strong German influence, was extremely formal, but at the same time the hardships felt before the acquisition by Brasilata resulted in that the 20 new bosses where welcomed with great expectations, because there loomed large a dismal fear that the company would continue to show bad results. Thus, an oxygenation process began, with Brasilata s culture mixing São Paulo s professionalism with the extreme formalism in the south. Additional consequences of the acquisition of the unit in the south: professional maturation, with opportunities for newer interns and employees in the company; extremely rigorous training for staff transferred to the southern branch, in order to provide them with greater autonomy, given the physical distance from the board in São Paulo. It should be noted that all these decisions were implemented against a background of a domestic economic crisis spanning the period from 1982 to In that period, the preferred business approach was job cutting, to lower costs, and failure to honor commitments with clients and suppliers, in line with the logic of putting one s interests in the first 30 place. The acquisition of the unit in the South forced the company to change its management methods. An important milestone was reached in 1985, regarding the elaboration of Brasilata s management model, for it was when the company began implementing Japanese managerial and operational techniques,

11 including kanban and just-in-time. As the implementation of these techniques triggered problems in internal communications and relationships, a consultant was hired in 1987 to provide guidance for the area of human resources and for an administrative reorganization. This initiative led to the reformulation of the company s objectives, written with the participation of directors, managers, and supervisors. This reformulation was targeted at the long-range relationship with its stakeholders according to the following overall objectives: for stockholders, sustainable pr ofitability; for employees, a policy avoiding job cuts; for clients, deferment of commitments in critical periods; for suppliers, a partnership relationship. The pioneerism was not limited to internal initiatives: in 1992, Brasilata became the first packag ing 10 company to employ the kanban system for deliveries to its main client, Tintas Coral, which was supposedly adopted as a benchmark for the transnational company Rhodia, according to a news story published at the time by the Brazilian newspaper Gazeta Mer cantil. <<marcador de lugar para linha do tempo <<<PÁG. 86 e 87>>> Linha do Tempo da Brasilata>> Figure 1 Brasilata s Timeline Directors superintendent hired Job rotation among positions Brasilata no more controlled by Heleno e Fonseca; now 80% controlled by one 20 shareholder Branch acquisition in RS Job rotation begins among units--professionals go to RS unit National crisis begins Japanese techniques adopted Participative management Staff participation begins pressing for new approach by top management Simplification Project, with emphasis in opening communication channels Long-range relationship with stockholders, clients, suppliers, staff (non-dismissal policy) 30 Participative planning Participation in results *Total annual steel input (1.000 tons) (continued) = = = =

12 Installation of third unit in the State of Goiás Innovations in product: <???>mala<???> with patent deposit Inauguration of unit in Barueri Innovation in product: First Open Plus-patent deposit Innovation in product: Closure Plus Participative reengineering Plant in Barueri decommissioned Launch of Closure Plus in the Brazilian market, in partnership with Tintas Coral (ICI) 10 Entry in aerosols market-acquisition of Crown Cork s operations Product innovation: Ploc Off Production licensing to Renda Nordeste Strategy for appropriation of technological assets-licensing income royalties In 1987, with the demands originating from these Japanese techniques, Project Simplification emerged and all channels of communication were opened. Project Simpli fication is a formal channel for presentation of ideas which contributed to thousands of internal changes, most of them related to process innovations, though some have resulted in new and successful products. The employees are encouraged to offer ideas, in groups or individually, which may enhance any product or process, administrative or operational, and receive awards when an idea is approved. Table 1 shows the 20 evolution in the number of ideas generated by employees in recent years. The project comprise two annual phases at each Brasilata s units and one annual event the so-called Supercopa, in a competition among the best winning ideas generated in the three units of the company. Not infrequently, the awards are won by teams of five or more people, a mong whom the original father or mother of the idea has its concept developed with help from mechanics, electricians, machine tool operators, etc. Even ideas which do not get the green light are compensated, even if symbolically, and considered as an investment by Brasilata s top management. The number of ideas generated in 1999 and 2000 seems to have pleased Brasilata s board. For according to P<.> Böhmerwald (1996:92), the number of ideas generated in Brazilian companies with programs encouraging suggestions barely reached 0.4 ideas by employee per year, at least in Obviously, the number achieved at Brasilata was considered low when compared with statistics from Japanese businesses, which according to the Japan HR Association reached an average of 36 suggestions per employee per year (JHRA, 1992:17), but Japan, since the 1960s, has always been light-years ahead of western businesses in terms of generation of ideas by their employees.

13 <<marcador de lugar para tabela <<<PÁG. 88>>> Projeto Simplificação: idéias geradas nos últimos anos>> Table 1 Project Simplification: ideas generated in recent years Year Number of ideas Number of ideas/employee , , , , ,77 By mid-2000, the research by the FGV s Forum of Innovation begins at Brasilata. At that moment, the top management of the company was provided with more information gleaned from world literature, suggesting that the average reached at Brasilata was not in fact so good. In April 2001, a news story published in the business section of the New York Times reported that the American Bic, with employees had received, in the previous year, 2,999 suggestions, or 4.38 per employee. The acknowledgment that the level of ideas was not low only when compared with Japanese standards was a shock for the board, which immediately began to act in order to narrow the gap. By using instruments provided by the ISO 9000 standard, the company put in place a preventive initiative which in just a few days identified the probable causes for the low level of ideas: delays in the evaluation process, delays in the implementation of approved ideas, and low commitment by some managers. This preventive action was completed and a corrective action was immedia tely implemented. The coordinating structure for Project Simplification was bolstered and the problem was attacked on several fronts. In less than 60 days, the number of ideas tripled, and by the end of 2001 the number of ideas had reached 2,453 ideas (2,68 per employee). 20 New ideas were fed back into system where they were originally generated, raising their number to 10,387 in 2002 and 28,940 in 2003, or ideas per employee, with a substantially relevant fact: the 60% rate of ideas getting the green light remained practically the same as before the dramatic rise in the number of ideas submitted. The gap with Japan had been abridged. Two lessons seem to be the outcome of this episode: the first is that cooperation with teaching and research institutes (FGV/Eaesp s Forum of Innovation, in this instance), usually brings substantial benefits to the

14 business. The second is that Brasilata s style of management, given its flexibility and full involvement of employees, encourages change. A commitment by which the company promised to abstain from job cuts materialized in a deal signed in 1988, and in 1990 the process of participative planning was started. Managers, supervisors, and the board began their effective participation in the process for the definition of vision, mission, values, targets, and actions. A system consisting in monetary incentives for employees was implemented in 1991, preceding in four years the Brazilian legislation on the subject.<<1>> The company also implemented the participation of employees in its results long before it became mandatory by government regulations. In March 2004, the employees were awarded a monetary participation which 10 on average represented almost a one month salary, or the equivalent to 15% of the net profit after income tax. The domestic economic crisis in the first half of the 1990s forced the company to take decisions regarding its structure, which was excessively "heavy" (too many job positions, hampering internal communications). Standing by commitments previously u ndertaken, Brasilata was administratively and operationally restructured by means of a participative re -engineering process, through which the employees took part in the structure s slimming down, participating in decisions on firing staff and scrapping positions, a rather unusual process, since both in its theoretical formulation as well as in practice, re-engineering is the top-down process, requiring a good measure of authoritarianism. All this helped to create a climate of trust among employees, because the company has met its every 20 commitments, even in circumstances of serious crisis, when survival imperatives typically means that obligations are left in the backburner. It is worth noting that at that time Brasilata closed its facility in Barueri, due to the fall in market steel cans share, due to the popularization of the tetrapak option as packaging for tomato sauce and, particularly, of the PET packaging for edible oils. On the whole, the company suffered losses in the range of US$1 million. The innovative environment The term innovative environment was borrowed from Castells and Hall. These authors employ the term in relation to a site or region, and not to a specific business firm. According to them, the innovative environment can be defined as the place where synergies operate effectively to generate constant innovation, on the basis of a specific social organization, for the production complex at the 30 said site (Castells e Hall, 1994: ). These authors arrived at this definition after analyzing many different specific sites, including the Silicon Valley in California, Route 128 in Massachusetts, Sophia-Antipolis in the French Riviera, and other technopolis, or sites where a successful buildup of synergies emerged from a combination of innovations. The concept of innovative environment

15 considers a given set of organizations (businesses, teaching and research institutions, government agencies, etc.) in a specific site. Considering just one business, the concept of innovative environment highlights the internal synergies which operate effectively to generate continuously innovations which the business requires to support its competitive strategy. At the end of this restructuring process the company acquired a new vision of its business, according to which the appropriation of technological assets is treated as one of its key strategic dimensions. Every innovation in management fostered the creation of an innovative environment within Brasilata, i.e., an environment encouraging the emergence of individ ual and group initiatives targeted at searching for new solutions in any field of business enterprises. The innovative ideas crop up 10 naturally and are fostered by the Project Simplification. The company believes in team spirit and encourages all its employees to work together and to offer the highest number of ideas they can possibly generate. Each and every employee is considered an inventor and the credit for his or her contribution is made public within the phases of Project Simplification and at the Sup ercopa, as already mentioned. An employee hired after having retired while working with another company said, the difference is the investment in new ideas". According to this employee, his previous employer would not even care to know what was in the mind of its staff, and he felt this big difference, because being almost 65 years old and having worked for 40 years with the competitor, he had never seen such a stimulating working climate. The guiding values for the relationship with people at Brasilata are based on unlimited sustainability. 20 Employees can only be dismissed for cause. When a dismissal is considered, a discussion and analysis group is formed in order to evaluate the motives for such a discharge. The prevailing commitment with job stability creates a safety net whereby employees are guaranteed a future without fear being dismissed. A feature arising from the Brasilata s management model is that the company rules are much more flexible than in most companies. The fact that anyone, at any momen t, is able to speak without intermediation to a director is cited as something innovative, not found in other companies in the industry. A milestone was established in 1987, because in that year the director -superintendent was challenged for his authoritarian behavior. In face of the standoff involving directors and managers, there ensued a change in behavior, and channels of communication opened for a faster flow of information. 30 When present at company parties, its owner (majority stockholder), Waldemar He leno, is adamant to shake hands with each and every employee, thanking them for their efforts as members of the Brasilata family. Now over 70 years old, Heleno performs the ritual with reasonable frequency. This kind of personal contact is highlighted as quite different from the climate in other business firms, where employees do not even know who is the director or owner of the company, as revealed in the

16 testimony of an employee working for two years now at Brasilata Estrela, after holding a job for 20 years at another company: Every six months the president, or some top executive, would come. And he was accessible only to members of the board or sometimes to the managers. The coordinating staff could not even get close. At Brasilata, the difference was apparent in the fact that the owner himself was present at a company party, and was adamant to come round to each table to say hello and shake hands with everybody. In 20 years with my former employees I only had lunch once with my manager, and even then, I guess, it was because he did not have company for the special meal. This was on his birthday, and I think he was feeling a bit lonely. I felt quite embarrassed. Here, everybody invites us, and the managers and 10 directors, even those from São Paulo, are a close knit group. It was not like this, there. Internal transactions are performed in line with an approach to prevent the buildup of problems. With the opening of channels of communication in 1987, and culminating with the participative reengineering in 1997, the number of levels shrank and decision-making is now closer to where problems crop up. When it is necessary to discuss or negotiate with directors or managers, the person with the necessary data and information for decision -making is usually the one who deals with those in higher hierarchical levels. As a result of the new approach, besides the consolidated participative management, Brasilata embarked on an intense search for innovations in production and processes built upon the participation of all its employees. Project Simplification generates substantial demand for the 20 implementation of new ideas. The generation of ideas occur as an anarchic process, as it should. The development of selected ideas occurs at the factory floor in each of the company s units, although Brasilata now has a prototype dedicated team with a direct link to the director -superintendent, which was created in This team is made up by 5 experienced technicians, but it does not resemble in anyway a R&D team. Although the team has its specific instruments and devices, their real laboratory is the whole company itself, therefore one could say that all the 900 Brasilata staff, besides being potential inventors, are laboratory auxiliaries, for in many instances they perform experi mental activities to develop new products and their related production methods. Formative variables for an innovative environment The innovative environment created at Brasilata along the time is built upon a number of features 30 observed and detected by means of interviews and questionnaires answered by the company s employees. Thirty associates were interviewed, including Brasilata s majority stockholder, all directors and managers, every chief in the organization, and those responsible for the area of prod uct development. Those interviewed also answered questionnaires focused on the innovation under study.

17 This is not about conjectures involving their perception, but hard facts as seen through the eyes of those who participate in a culture focused on innova tion. These features are the following: People are aware of their value in the company employees are aware of the results arising from innovations in the organization and they believe in them. High motivation is distinctly perceived among all employees. It could be said that the employees do not contemplate the possibility that the innovations may not materialize or may fail to bring about positive results. This optimism pushes them forward, generating confidence in the results of innovations, as well as always associating these results and the innovations themselves to the objectives of the organization; People are aware that the recognition for their efforts is collective all employees feel the 10 recognition for their participation in the organization. G ood performance results in recognition and underperforming is not seen as critical, i.e., there are no penalties for below average performance. This combination of incentives, recognition, and tolerance to error is related to the performance and cooperation among the members of the groups. This suggests high motivation and satisfaction when performing their activities. It was never detected any recognition or reprimand targeted specifically at an individual. Every form of expression is positive and directed at the group as a whole. People recognize the leaders in innovation a striking feature at Brasilata is the perception, by its members, of the leaders who drive innovations. Employees know they are free to offer their opinion as feedback to these leaders, which denotes substantial concern with maintaining good intra -team relationships. Leaders are seen as cheerleaders of the teams initiatives, receiving as feedback the 20 recognition, by the employees, of their valued responsibilities. Information necessa ry to implement a given innovation is communicated in all directions, although there is a clear delimitation and recognition of the leaders in innovation. People know that learning is valued during the survey it was never detected any trace of an instance when an error might undermine the career advancement of any employee. And all employees interviewed agree that learning is a priority for the company, which minimizes the weight of errors that, when they do occur, are attributed to the group (seldom to a n individual employee); People are aware of the commitment among participants in the organization people involved with innovation are convinced that each of them fulfills his or her responsibility and commitments, and the relationship is balanced and satisfactory, and for these reasons to work for the company is a gratifying 30 experience. There is a great satisfaction with relationships within the company and commitments undertaken are fulfilled and respected. This behavior denotes a high -level of commitment and balance in internal relationships;

18 People face problems openly conflicts are not avoided in the company, and when they do emerge, they are discussed transparently in order for a solution to be found. Conflict control is usually undertaken by the group itself; hierarchy does not act as an authority for conflict resolution, but as a facilitator. The method employed is to face conflicts openly with all parties involved, and not to mask them. As a result of this approach, the groups always engage in dis cussions trusting their counterparts and displaying maximum empathy towards the other group. The basis for this relationship is mutual trust among the teams, which has contributed to a decline in the frequency of conflicts. The success achieved by Brasilata in the development of a strategy based on the endogenous generation of production and process innovations getting rid of the usual passivity found among 10 businesses in an industry which is dependent on suppliers was mainly a consequence of competences generated by a work environment with the features outlined here, which are in turn result of the consolidation of a model of participative management. The following example is but one of countless results arising from the innovative environment created by the participative management model. Product innovations Fechamento Plus represents a radically different concept of lid for paint steel cans, as opposed to the design introduced in the beginning of the 20th century. The traditional method for closing thes e cans is based on friction by multiple pressure and originated in an invention by John Hodgson, who in 1905 was awarded by the US Patent Office the rights to the patent No Since then, many 20 different alternatives for this closure method were tried in several countries, but none was successful, and the friction design has become a world standard for more than 90 years. One of the most recent efforts aiming at the replacement of the closure design by friction took place in 1990, when Davies Can, an American firm, unveiled the so-called Trim Rim Can system, introduced to the trade media as the big innovation in cans for paints.<<1>> Davies Can has reportedly invested US$15 million in new plants and production lines, but the innovation did not work sati sfactorily, since after a can was originally opened it became very difficult to put its lid back. In the American market, paints are mixed at points of sale in order to obtain the color desired by consumer. Thus, the first opening was at paint stores, wher e staff soon started to reject the newly designed cans. In a meeting in October 1999 in Dallas, in the US, Warren Hayford, then B. Way 30 Corporation`s CEO, which acquired the remains of Davies Can, told one of the authors of this book that this company was totally destroyed by the design. <<2>> this is an example of an invention which did not manage become an innovation, a subject discussed in chapter 1.

19 The Closure Plus design, invented by Brasilata, is not an enhancement, but a breakthrough which introduces a solution entirely different from the traditional approach and is based on a design by interference fit, which will probably establish itself as the new de facto standard, given its following benefits: it is about three times as much resistant to intern al pressures, shock, and drop than the closure design by friction, as tested by the renowned Packaging Technology Center (CETEA/ITAL); it is at once more easily opened and closed, and more difficult to try and tamper with cans contents; it results in materials savings of between 19% and 25% in the assembly ring-lid, depending on the diameter of cans, when compared with the conventional system. 10 So many are the benefits that in the American market alone the introduction of the new system would result in annual savings in excess of US$10 million, according to a conservative estimate. Due to its competitive benefits vis-à-vis the conventional friction-based design, one would not be mistaken in declaring the design a real Columbus egg, from the perspective of the insight that led to the idea. This peculiar egg, though, given its extreme complexity, required substantially different processes and involved practically the entire company, its suppliers, clients, and research and financing institutions, as will be shown below. History of the invention In the beginning of the 1990s, Suvinil e Coral producers of top selling paints in the Brazilian market and Brasilata s two largest clients began showing their interest in an alternative packaging 20 which might counteract an increasingly common practice the falsification of their brands of paints. Some individuals, and even unscrupulous firms, were buying empty 18 -liter paint cans, then carefully cleaned them and bought legitimate new cans of paint which were opened, hav ing water added to their contents, thus obtaining two or more cans that would end up being sold as the original product in the market. To fight such practices, Brasilata s quality manager at the time came up with the idea of modifying the ring profile in the 18-liter paint can, introducing a relief which would leave a telltale sign when its lid were first removed. The alteration in the original relief did not preclude a violation of the contents, but made it apparent, in line with the "tamper evident" inter national method employed in cans for packaging foodstuffs. The sales manager thought his solution fully satisfied the needs of the paint producers, and it was his the idea of giving the new cans the name First Open, alluding to 30 the telltale sign of the first opening of the newly designed cans. These were a great success, and in 1994 the 18-liter First Open can was awarded the Embanews prize in the technology category.

20 Competitors affected by Brasilata s success also started manufacturing its Latalimpa tamp er evident cans, which also solved another problem, a resulting sharp ring edge. These cutting edges in the metallic sheet, besides the risk of bruising the users fingers, also exposed the uncoated steel, which eventually oxidized and sometimes resulted in paints becoming stained. The introduction of the new cans by the competition was a severe setback for Brasilata s technical team, which set about finding a solution which would also overcome the cutting edge problem with the First Open design. In ju st 24 hours, helped by a number of simulations in a computer -assisted design (CAD) system, an experienced technician arrived at a solution. The external part of the internal border would be rolled out, forming a circular rim, thus eliminating the undesirab le cutting edge, while at the same time 10 creating a channel on the lid s external border and enabling it to match the ring, as shown in figure 2. <<marcador de lugar para ilustração <<<PÁG. 96>>> Desenho esquemático do Fechamento Plus: perfil>> Figure 2 Ring Lid Clearly, the proposed solution solved the problem of ring s cutting edge, this being the primary reason for its design. It became clear, though, from the beginning, that the introduction of an interference fit between the ring and the lid was a substantial enhancement for closing the can, and as a consequence 20 made it even more evident any previous opening of the can. The directors immediately gave their approval to the innovation, every required resource was made available, and in a few days the fir st prototype had been completed by the tooling department team. The director -superintendent himself gave the can the First Open Plus name. In just 90 days the new can already hit the market. In 1995, Brasilata was awarded its second Embanews technology p rize for the introduction of the First Open Plus lid design. In 1995, in conversations with Alexandre Cenacchi, chairman of Sayer Lack, an important client, the director-superintendent was asked to consider the production of rounded cans for lower -priced paints. Traditional cans for paints, as we have seen, had been developed in the beginning of the last century, and its closure system was based in friction by multiple pressure. The client was now asking if it 30 would be possible to employ a lid kept in place simply by pressure, such as those used in powder milk cans. Brasilata s director knew and agreed that deficient pressure closure was unacceptable for the paint industry. Paints require cans with tighter sealing than those used for powder milk, due to its characteristics such as weight, internal pressures, etc. Despite being impossible, at the time, to fulfill

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