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INNOVATIVE MANAGERIAL ASPECTS OF THE POTENTIAL OF MATERIAL-TECHNICAL BASE AND THE FORMATION OF CONTROLLING MECHANISM IN THE MANAGEMENT OF THE ENTERPRISE POTENTIAL DEVELOPMENT

Olga V Voronkova*

Department of Economics of Environmental Management and Accounting Systems, Russian State Hydrometeorological University, Malookhtinsky Prospect, Saint-Petersburg, Russia

Anna A Kurochkina

Department of Economics of Environmental Management and Accounting Systems, Russian State Hydrometeorological University, Malookhtinsky Prospect, Saint-Petersburg, Russia

Irina P Firova

Department of Innovative Technologies, Public Sector Management and Business, Russian State Hydrometeorological University, Malookhtinsky Prospect, Saint-Petersburg, Russia

Elena V Yaluner

Department of Business Economics, St. Petersburg State University of Economics (UNECON), Saint-Petersburg, Russia

*Corresponding Author:
Olga V Voronkova
Department of Economics of Environmental Management and Accounting Systems
Russian State Hydrometeorological University
Malookhtinsky Prospect, Saint-Petersburg, Russia
Tel: +8 (812) 372-50-92
E-mail: o.voronkova.asu@bk.ru

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Abstract

In the current context, an important basis for the reproduction of life-sustaining activity and rise in the operation efficiency of domestic commodity producers is the mobilization of all available reserves. One of the major reserves is the use of available opportunities for resource economy, i.e. careful and economical use of resources. The primary focus of the domestic economy on a lower innovation-technological modes leads to the need of attracting enterprises to the technological development processes. The article examines the innovative aspects of the material-technical base management and the formation of controlling mechanism in the management of the industrial enterprise potential development. The innovative development of industrial enterprise potential is targeted as a research object. The aim of the article is justification of approach to strategic management of enterprise material-technical base (MTBE) development on the basis of restructuring as well as justification of specific features of formation and use of the controlling mechanism of the enterprise development processes. Achieving this goal involves determining the ability of the enterprise to develop its potential in innovative way as well as strategy features of such development, and the formation of the set of control parameters to manage this development, the justification of peculiarities of formation and use of the controlling mechanism of innovative development of an enterprise potential, and the development of methodological recommendations on organizational structuring of controlling mechanism and its connection with the enterprise staff activities.

Keywords

Material-Technical Base, Enterprise Potential, Innovative Development, Management Mechanism of the Enterprise Material-Technical Base Development, Controlling, Strategic Positioning

Introduction

The transformation conditions of functioning of the national economic system require from industrial enterprises to improve their adaptive ability, transition of management towards the strategic framework and the increasing validity of development programs, whose important component is the strategy of existing potential maximization. Only the continued support of development processes, including that from the state [1], and ensuring their manageability is able to provide domestic producers the success in the competitive struggle and improve the stability of their market position. In general, the technological development of the country depends on the ability of actors to generate innovations [2], widely implement them in production, and increase at a faster pace the potential of the material-technical base of enterprise (MTBE).

However, there are a number of objective obstacles. First, laying down the development programs should focus on innovative ground, although the ability of enterprises to innovate is quite low. Second, the control over the implementation of development programs is too complex, though it is the quality of their implementation that determines the future success of the enterprise in terms of its potential fulfillment.

Thus, become actual the issues concerning the ability of actors to generate innovation, widely implement them into production and increase at a faster pace the MTBE potential, as well as to form a controlling mechanism that would ensure fulfillment of the innovative development program of the enterprise potential and contribute to the optimization of its parameters.

Research Methodology

Morphological analysis of the essence of the "enterprise potential" concept revealed the existence of different conceptual approaches to its identification, associated with available resources (integrated specifications of all kinds of resources available at the enterprise that can be used for maintenance of the enterprise [3]), goals (potential as a limited number of alternative, complementing and even antagonistic objectives of enterprise operation and development, which can be achieved by the enterprise on the existing resource, production and organizational base [4]), reserves (represent hidden abilities of the enterprise in terms of solving of certain tasks [5]), and opportunities (a dialectical unity of both opportunities and their implementation processes [6], which can be a source of sustainable competitive advantages [7]) of the enterprises, as well as success factors [8] and entrepreneurial talent [9]. In addition to the above, it is possible to establish a number of classification features, generalized most completely in [10], which allow distinguishing different types of potential.

Given that the resource-based approach to the definition of potential is the most common, we suggest to consider "potential" as a resulting category of the level of material-technical base development (it is defined as a multitude {MTBE} containing the means and products of labor and technology). In this sense, the most acceptable becomes the definition of "potential" as the resource pool ensuring the enterprise’s ability to effectively implement the operations [11].

Further, we note that it is appropriate to subordinate management of available resources of the enterprise to the processes of the MTBE development management. It is exactly technological development (development in the context of the selected range of technologies, and research and manufacturing capacities) will form the basis for the enterprise development in general.

In the context of the article objectives we determine the development of MTBE as interrelated transformation of quantitative, qualitative and structural characteristics of the aggregate means of production and real assets of the enterprise consistent with its corporate culture and adapted to the needs of the institutional counterparties as well as the demands of the functioning environment. Since restructuring will ensure the development of MTBE (transition {MTBE (t)} → {MTBE (t + 1)}), essential is the formation of an appropriate development management mechanism of the material-technical base (DMMMTB). A set of levers and tools for implementation of managerial influence forms the basis of DMMMTB. Such a system of levers should be formed as a reflection of the enterprise goals through the parameters of MTBE.

To assess the appropriateness of MTBE development, it is necessary to introduce a presumptive criterion. We suggest taking the potential of MTBE as such criterion (EP). According to the criterion of MTBE development efficiency we suggest to select the MTBE potential growth condition after execution of the development act: EP (t + 1) > EP (t), that is, MTBE development management should be focused on the potential maximization condition: EP → max. We defined the potential of MTBE (EPMTB) as the generalizing characteristics of the availability of resources and capabilities at the enterprise. At that, in the context of compliance with the conditions EPMTB (t + 1) > EPMTB (t) and EPMTB → max, we need to elaborate typical MTBE development scenarios based on the analysis of the operational environment of industrial enterprises and assessment of their MTBE status.

To ensure controllability of the development processes (which is achieved by keeping the desired driving dynamics of a system from {MTBE (t)} to {MTBE (t + 1)} that is reflected in obtaining the desired value of levers and indicators in a future period after the application of selected methods of managerial influence, taken from the management tools) we should develop a proper system to support management mechanism. An important factor in the success of MTBE development is the management of changes and qualitative transformations, which should be scientifically substantiated and based on theoretical grounds that consider both general theoretical framework for the organizations management, and the existing concepts of the management of changes. Consequently, we propose to assess the opportunities for the development of the enterprise and its MTBE based on the definition of the susceptibility of the enterprise to implement changes and innovation. Indeed, the implementation of the MTBE development process, as an act of transition to {MTBE (t + 1)} is possible only provided readiness of the enterprise for certain transformations. Thus, according to the authors, since development should lead to improved performance of the enterprise (implementation of condition EPMTB (t + 1) > EPMTB (t)) and ensure the improvement and modernization of existing MTBE, the DMMMTB should be based on innovative underlying reasons. This provides for the introduction of sustainability and innovation criteria for the ongoing transition from {MTBE (t)} to {MTBE (t + 1)} for all MTBE components, that is, for all possible transformation options. At that, we consider it appropriate to introduce additional indicators at implementing each of the transformation options that will ensure the compliance with the requirements for sustainability, innovation, adaptability and reliability of MTBE development. The imposition of such requirements should agree with various approaches to understanding of the essence of the "potential" notion.

With regard to the controlling of innovative changes, the issues of its organization and implementation are presented in some detail in the economic literature. The existing developments deal with different approaches in understanding of the notion of “controlling” (generally there are two concepts: German [12] and more extended the American model of controlling [13,14]). The works define the peculiarities of controlling objectives and tasks (here in most cases the authors distinguish between operational and strategic controlling [15]), present a number of classification features of controlling (most often the controlling is differentiated depending on the subject of activity, the time of implementation, the areas of activities, and the way of conducting [16]). Further, we will focus on the interpretation of the controlling provided by Mann et al. [17] as "the process control system to achieve the ultimate goals and outcomes".

The adoption of this interpretation requires a certain extension, first, towards concretizing the tracking capabilities of innovative transformations of the enterprise. Second, forming the set of indicators under control, we should provide the ability to track the innovative transformations, which necessarily accompany the development process. Third, the set of indicators should reveal the ability of enterprise to fulfill its own potential.

Theoretical grounds of the controlling system orientation towards the development of the enterprise potential represent a certain number of efforts, which foresee the impact of controlling towards the development of potential of the enterprise through the following measures:

• Providing the implementation of the enterprise competencies through the controlling system to achieve strategic or operational objectives [18];

• Controlling of the adequacy of the volumes and typology of the elements for pursuing the enterprise goals (the availability to use relevant resources) [19];

• Controlling as the overcoming the strategic gaps in the ability to meet the needs of the enterprise or conformity to external conditions [20].

• Since not all economic entities are able to develop in an innovative way, it is necessary to differentiate the composition of controlled parameters and determine the features of organization and implementation of controlling depending on the level of susceptibility of enterprise to innovations.

We assume that the implementation of controlling should be based on the hypothesis that the formation of controlling mechanism of innovative development of EP should be based on the susceptibility of enterprise to conduct transformational change and implement innovation. Such innovations can include both existing resources (corresponds to the resource-based concept of interpretation of the potential) and technology of their conversion (corresponds to competence-based approach to the definition of the potential). Thus, for the introduction of the ability to quantify potential we will consider it within the frameworks of the development of material-technical base of the enterprise (MTBE).

Research Findings

The ability to correlate potential of the MTBE with business processes running by the enterprise becomes very valuable in the context of the restructuring concept. The existing system of business processes of the enterprise provides eventually the fulfillment of the enterprise’s core competencies. At that, the development of potential of the MTBE should be subordinated to the development of business processes organization and areas of competence of the enterprise. Given the requirement for the introduction of innovativeness, we form a matrix determining development directions and ways of MTBE, which will be determined in terms of ability to transform existing elements of the MTBE and the level of use of innovative potential of the enterprise (IPU) (is fulfilled through the ability to achieve results by means of the implementation of innovative projects). The author's version of such a matrix is shown in Figure 1.

internet-banking-matrix-based-approach

Figure 1: Matrix-based approach to study potential development program.

The MTBE development organization should be based on appropriate development strategy of MTBE (DSMTB), which is a list of accepted approaches and principles for transition of MTBE to the desired future condition (into condition {MTBE (t + 1)}). At that, these strategic decisions are subject to the overall development strategy of the enterprise, determining the peculiarities of conversion of strategic competence zones of the enterprise. The activities of the enterprise should be based on pre-defined strategy. According to the 5P approach to the conception of strategy (strategy as a plan, pattern, position, prospect and the principle of behavior) we can develop a list of typical strategic decisions in the field of potential development of MTBE, formalized using the methods of portfolio analysis. In this case, we suggest presenting the entire list of typical strategic decisions in a form of matrices shown in Figure 1.

Therefore, DSMTB refers to varieties strategies because it is subject to the requirement of the transformation of the enterprise competence zones (this requirement is specified and formalized in the framework of several characteristics of regulatory level strategies, whose development is mandatory for any economic entity). Moreover, DSMTB is not a specific time sequence of actions, but a generalized representation of the approaches and principles, which lay basis to achieve the correspondence of the MTBE elements to the competence zones of the enterprise. At that, DSMTB is included indirectly in the recourses management mechanism (DMMMTB) through the enterprise goals (EG).

The specified correlation of normative and variative strategies differently represents the understanding of concepts of "enterprise development" and the "development of material-technical base of the enterprise." The development of MTBE and restructuring of MTBE potential can be considered in two aspects: as the MTBE adaptation to transition into a new area of competence (extensive or reactive component of the development; in relation to business processes it may be understood as a "pulling" system, where business processes and their provision are adapted to the new requirements of the competitive market); and as the creation of conditions for transition into a new area of competence (intensive or advanced strategy; in relation to processes it is understood as a "pushing" system in which the transformation of the MTBE brings to market new competitive advantages of the enterprise).

Without going into a detailed analysis of the "development" category, note that this transition is revealed within a certain development spiral. Since under the support of areas of competence, the enterprise can form the institutionalized space of interaction, common with counterparties, which will serve the framework to attract new qualitatively changed elements of the MTBE, and this will entail the transformation of potential of the MTBE. Here we can talk about the integration framework of MTBE development and integration development of the enterprise [21,22].

Thus, developing a program of organizational change of MTBE, we should take into account the existence of two opposing approaches, which suggest the possibility or impossibility of DMMMTB to influence the change process.

In the context of approaching to the initiation of a competitive struggle with regard to advance emergence of competencies, the control circuit of transformations within DMMMTB should also be based on the active response to changing operational conditions or on the manifestation of the contradictions in the parameters of the MTBE. The need to ensure the active management of change led to the development of a large number of models for change and restructuring. At that, the increase in efficiency of change management foresees the setting of parameters that allow modeling and controlling the process of change (the transformation process parameters).

Let turn to the definition of directions and areas of controlling of the innovative development processes of enterprise potential.

The enterprise position in the matrix presented in Figure 1 allows determining the peculiarities of the controlling mechanism (MC) in the management of innovative development of potential. Orientation to the resource paradigm when defining the potential allows correlating the operation of the MC with the management mechanism of material-technical base development (DMMMTB). Both mechanisms are considered as a set of levers and tools for implementation of control actions, supported by appropriate provision. Thus, becomes actual the issue related to identification of the levers and indicators that ensure the operation of the MC and DMMMTB. Here it is necessary to consider the transformational nature of development processes.

We believe it appropriate to take into account the level of innovative receptivity of the enterprise when considering the controlling mechanism (MC) (IRE in Figure 1). Unfortunately, in the economic literature there are many interpretations of innovation receptivity of an enterprise, which refer to "the willingness to adaptation of technology" [23], "the ability to implement innovative projects" [24], and "the ability to increase the innovative properties of products" [25]. These interpretations are mainly focused on the enterprise as a whole, while we need to consider the receptivity of the potential and the MTBE to innovative transformations. Accordingly, we will consider the IRE with regard to DMMMTB as the willingness and ability of the enterprise to transform parameters of the MTBE and conditions of its use through innovative way.

In order that MC could take into account the level of innovative receptivity, it is necessary to provide the possibility of its evaluation that could become the basis for further research. On the other hand, it is necessary to take into account the assertion declared in Figure 1. That the IPU is defining characteristic of the ability to produce innovation. At that, MC and DMMMTB, in the course of their operation should use the level of implementation of innovative potential (IPU) and determine its specific proportion that is attributable to elements of the MTBE.

There is a relationship between the innovation receptivity indicators (IRE) and the use of innovative potential (IPU), according to which the increase in IPU increases the receptivity to innovations, and vice versa. Consequently, the action of the MC will determine the level of usage of IPU. In addition, for a number of enterprises, DMMMTB should consider just the ability of the enterprise to transform rather than its innovative receptivity.

Thus, depending to the proposed observations, we suggest to use the "development potential of the MTBE" as a benchmark for MC. Focusing on the considered approaches to the identification of the potential we propose to determine the development potential through a combination of the following attributes:

• Availability (presence) of the MTBE elements and lack of contradictions between them;

• Possibility of using the available combination of the MTBE elements to support requests from the areas of competence of the enterprise;

• Efficient use of the MTBE elements from the viewpoint of implementation of the enterprise goals;

• Correspondence of the MTBE elements to promising areas of activity and the enterprise development program;

• Readiness for transformational transitions of the MTBE configuration depending on the level of innovative receptivity of the enterprise.

The combination of these attributes determines the potential of the enterprise and its MTBE development.

Discussion of Results

For the implementation of the indicators of controlling, it is needed to relate them with the selected principles of maintaining the enterprise in the market, and the interaction strategy with the enterprise contractors. Indeed, it is the strategic behavior determinants of the enterprise that define the approach to accumulation of knowledge about the involvement of the MTBE elements (from the market or from cooperation ties). Here, in the organization of information support of the DMMMTB operation, we propose to differentiate the set of quality indicators of the MTBE elements formation with regard to the possibility of obtaining such elements from contractors. In this case, the operation of the DMMMTB requires certain changes in the organization of its information support.

We propose, first, to carry out differentiation of the indicators for monitoring depending on the parameters of the strategic behavior of the enterprise and the level of the MTBE potential. In this case we propose to divide the indicators, which are monitored by MC and DMMMTB into two groups: mandatory and optional indicators. Mandatory indicators must meet the quality indicators of development processes approved at the enterprise. Additional indicators will be determined by the parameters of the strategic behavior of the enterprise in accordance with the Table 1.

Table 1: The logic of selection of the additional controlled indicators for monitoring.

Directions Determinants of local strategic behavior of the enterprise
Controlling over development processes IRE – low
IPU – low
IRE – high
IPU – low
IRE – low
IPU – high
IRE – high
IPU – high
Controlling over efficiency of use of potential (the choice among {IPU}) The effectiveness of the interpretation of the social component of development of the MTBE Performance indicators of economic changes feasibility The effectiveness of the interpretation of the organizational component of the development of MTBE The use of innovative potential and technological changes
Controlling over the ability to respond to changes (the choice among {IRE}) The susceptibility of the staff to the program of changes Development of creative potential in activities of DMMMTB Structural receptivity of the enterprise The adequacy of support for innovation activities

As is obvious from Table 1, it brings under regulation the involvement of specific groups of indicators in the information support system of the DMMMTB operation. The advantage of this proposal consists in minimizing the operating costs of the DMMMTB. Another proposal is the organization of the enterprise activity monitoring with the disaggregation of the MTBE development component. This proposal provides that MC will not only control "plan/actual" of the variance or track changes in the environmental factors.

Selection of the indicators presented in Table 1 and their integration with the controlling mechanism allows creating circuits to provide controlling of innovation development of enterprise potential. However, MC and DMMMTB need in organizational design. Generalization of available studies allowed determining the forms of the DMMMTB construction. In aggregated form, they are characterized in Table 2. The difference in proposals appears in the introduction of conditions for the selection of DMMMTB organization form and associating these conditions with the parameters of the strategic behavior of the enterprise in the implementation of development potential of the MTBE.

Table 2: A generalization of approaches to the organizational and structural construction of the DMMMTB.

The DMMMTB organizational structure form Description of possible shortcomings and peculiarities in the implementation of the DMMMTB institutional construction The competitive behavior of the enterprise in realization of the existing potential
The target department for the coordination of horizontal links of joining of material and supplies The complexity of conducting integrating function and the impossibility of resolving the entire list of the problem on managing transformational changes in DMMMTB Providing or creative strategic behavior to fulfill the potential
The selection and empowerment of one of the departments that are already represented in the structure of the enterprise The complexity in coordination of control actions (the department can be competent, for example, in the development of means of labor, and wrongly interpret technological requirements) Ensuring or opportunistic strategic behavior in the fulfillment of potential
The establishment of a special department responsible for managing the MTBE development All the advantages and disadvantages of the centralized approach. Improving transition to a new coordination of elements of the potential Opportunistic competitive behavior
The "Boss" (in terms of ISO 9000) of one of the processes gets the powers to manage the MTBE development The decentralization of the MTBE development with regard to separate processes. Typically is used for targeted production of innovation. Limited coverage of development processes. Ensuring or creative strategic behavior to fulfill the potential
Project or matrix structure involved in the fulfillment of the functions The combination of competent workers in accordance with the priority of a particular aspect of the existing potential development Creative competitive behavior

Conclusion

The article substantiates the understanding of the development potential of the enterprise, considering the peculiarities of the organization in the framework of the management mechanism for development of the enterprise’s material-technical base, control circuits of restructuring processes, as well as presents the methodical recommendations on formation of the controlling mechanism in the course of innovative activity of the enterprise. In the framework of identification of such potential, groups of indicators are defined, whose involvement to the controlling mechanism is carried out depending on the parameters of the strategic behavior of the enterprise. However, the development of specific indicators requires further investigations.

Summing up, it should be noted that the innovative development of industrial enterprise should lead to improved performance of the enterprise and the improvement and modernization of existing MTBE. Thus, the development of the enterprise’s potential should be determined within the framework of its ability to transform existing elements of the material-technical base and the level of innovative potential use (which is revealed through the ability to achieve goals based on the implementation of innovative projects).

References

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