The Amoeba Management System - pdfs.semanticscholar.org · The Amoeba Management System 3 1. Introduction The Sustainability Report 2004 of the Kyocera Corporation describes under

The Amoeba Management System 1

Seminar Essay Course Management for the Future (PM 912)

of the Doctoral Study Programme at the University of Economics

in Prague

The Amoeba Management System

Lecturer: Prof. Ing. Jan Trunecek, CSc Department of Management

Faculty of Business Administration

04.06.2007

Author: Hans-Jürgen Jeebe Simmelsgartenstr. 15 D-53501 Grafschaft Germany


The Amoeba Management System

Contents

1. Introduction

2. Science fiction or reality: biological systems and management theory

3. Aims and Structure of the Amoeba Management System of Kyocera

4. Different applications of the Amoeba Management Systems

5. Summary

Bibliography


1. Introduction

The Sustainability Report 2004 of the Kyocera Corporation describes under

the Headline of Corporate Governance the Amoeba Management as a

special way of management with small groups assumed as the unit of

management based on Kyocera Philosophy. Kyocera considers that the

height of awareness of management participation, employee motivation

brought about by the Amoeba management the source of Kyocera`s

strenght.

Since the beginning of the nineties description of Kyocera`s special way of

management system is element of the yearly Sustainability Report or any

other annual meeting like the Kyocera Investor Meeting (February 2, 2007)

for example with the following aims: “Reinforce Amoeba Management

System and Create New Value to promote Growth”.

Kyocera Corporation is a Japanese multinational company based in Kyoto,

Japan. Founded in 1959 as a company specializing in the production of fine

ceramic components, Kyocera has expanded its business by effectively

developing and applying its ceramics technologies. Kyocera Corporation

has grown into one of the world's preeminent manufacturers of electronics,

optical equipment, and other products that use sophisticated ceramics and

electronics technology. Kyocera produces and sells information equipment

(page printers, video conferencing systems, and peripherals);

telecommunications equipment (cellular phones and "personal

handyphones"); optical equipment (single-lens reflex, compact, and video

cameras under the Contax, Kyocera, and Yashica brands); applied fine

ceramic products (cutting tools, medical devices, photovoltaic systems, and

recrystallized gemstones); fine ceramic products (components for the

electronics, automotive, chemical, metal processing, textile manufacturing,

and other industries); semiconductor parts (packages, circuit boards, and

other components used in advanced semiconductor devices); and

electronic components . These products, many of which are manufactured

outside of Japan, are sold around the world by the company's own sales

force, as well as through a comprehensive network of distributors and

dealers.

Although over the years Kyocera has been known more for its

individualistic spirit than for a typical Japanese communal character, the


company's corporate culture reflects a standard Japanese dedication to the

manufacture of superior products. This philosophy was established and

carefully cultivated by the company's entrepreneurial founder and

chairman, Kazuo Inamori, who retired in mid-1997 to become a Zen

Buddhist monk.

Today (2006) Kyocera Companies and principal subsidiaries are working in

Asia, Oceania, Europe, Middle East, Africa, North and South America with

69.700 employees in 184 group companies.

In 2006 Kyocera achieved 1.2 billion yen (8,1 Mrd. Euro) consolidated net

sales and improved the consolidated net income by 52.8 per cent.

Kyocera is one of the most profitable companies in Japan.


2. Science fiction or reality: biological systems and management theory The amoeba management system is a managerial technique developed by

Dr. Kazuo Inamori, the founder of the Kyocera Corporation. Indeed, Inamori

has received prizes as Japan's most effective manager on two occasions

largely as a result of his application of the amoeba management system.

The name and idea of this unusual management system is based on

biological phenomenon of the amoeba. The term “amoeba” comes from the

Greek word amoibe, which means change. Amoeba also spelled Ameba,

plural Amoebas, or Amoebae, any of the microscopic unicellular protozoans

of the rhizopodan order Amoebida.. The well-known type species, Amoeba

proteus, is found on decaying bottom vegetation of freshwater streams and

ponds. 1

Amoebas are very successful organisms and are legendary as the ultimate

shaper shifters.

Amoebas are identified by their ability to form temporary cytoplasmic

extensions called pseudopodia, or false feet, by means of which they move

about. This type of movement, called amoeboid movement, is considered

to be the most primitive form of animal locomotion.

During adverse environmental periods many amoebas survive by

encystment: the amoeba becomes circular, loses most of its water, and

secretes a cyst membrane that serves as a protective covering. When the

environment is again suitable, the envelope ruptures, and the amoeba

emerges.

When capturing prey, amoebas use a type of chemical detection to notice

the prey without to touch it. Their pseudopods form a kind of “dome” that

makes escape impossible. Amoebas seem to use different engulfing tactics

to suit the various types of prey. They can detect if a prey needs a fast

approach or can be feasted on as a slow meal. The amazing thing is that

the amoebas don`t touch the prey until it can`t escape.

1 ENCYCLOPAEDIA BRITANNICA (1987), Vol 1, p.347


What means the amoeba analogy in the theory of management?

In the mainstream literature Management is defined as an application of

economic principles to decision-making in business firms or of other

management units. The basic concepts are derived mainly from

microeconomic theory, which studies the behaviour of individual

consumers, firms, and industries, but new tools of analysis have been

added. Statistical methods, for example, are becoming increasingly

important in estimating current and future demand for products. The

methods of operations research and programming provide scientific criteria

for maximizing profit, minimizing cost, and selecting the most profitable

combination of products. Decision-making theory and game theory, which

recognize the conditions of uncertainty and imperfect knowledge under

which business managers operate, have contributed to systematic methods

of assessing investment opportunities.

In a competitive economy the quality and performance of the manager

determine the success of business. In the traditional U.S.-American

management literature management in common sense stands for the

people at the top - the term “management” is a little more than the

euphemism for “the boss”. Furthermore a manager means someone who

directs the work of others and who “does his work by getting other people

to do theirs”. 2

From a historical view, the theory is still very young, not even a hundred

years old, and the most important development is occurred since the

Second World War.

In textbooks3 management includes five processes: Planning, organization,

leadership, controlling and change management.

2 DRUCKER (1986), p. 6

3 STEINLE (1999), p. 155


Organization and management of multinational companies have to fulfil

special requirements. Manager who works in multinational context for

example must be able to consider cross cultural interdependencies.

Influence of culture, trust and communication on management processes 4

The organizational structure of an international company depends on its

strategy. Structure, Organization and management must follow the

strategy .5

The Kyocera Corporation is a very special role model in applying the

system of a living organism in its daily and strategic operational ventures.

Many other organizations are following the same system of imitating the

organic matter, Kyocera is applying the amoebic management system in

this respect, which has proved to be very successful over the many years

of experience and development.

Thinking in biological systems is a change of paradigm in the world of

management theory. It involves the idea to look upon the organization of a

company like a living organism.6 It does not make a sense to think that all

employees should function like amoeba in such systems but it is useful to

learn more about autopoiesis and self-sustainability, characteristics, which

can be derived from organic system and transferred in the economic world.

4 STEINLE (1999), p. 155

5 HILL (2002), p.407

6 MALIK (2002), p.6

Planning Controlling Organization Planning

Culture Trust

Communication


Thinking in organic systems

Autopoiesis literally means "self-production" (from the Greek: auto for self-

and poiesis for creation or production) and expresses a fundamental

complementarity between structure and function. The term was originally

introduced by Chilean biologists Francisco Varela and Humberto Maturana

conceived as an attempt to characterize the nature of living systems in the

early 1970s: The canonical example of an autopoietic system, and one of

the entities that motivated Varela and Maturana to define autopoiesis, is the

biological cell.7

Autopoiesis means the process whereby an organization produces itself.

An autopoietic organization is autonomous and has the ability to maintain

itself and contains component-producing processes. This components are

able through their interaction to generate recursively the same network of

processes which produced them.

From a very general point of view, the notion of autopoiesis is often

associated with that of self-organization.

The German sociologist N. Luhmann (*1927,+1998), transferred the term

autopoiesis for describing social structures.8

The Austrian economist F. Hayek (*1899,+1992), an advocate of liberal

democracy and free-market capitalism said that a market economy

functions as a self-organizing system of voluntary co-operation. Advocates

of laissez-faire hold that a centrally-planned economy makes the system

less organized and less efficient. As contrast, some socialist economists

discuss that market failures are so significant that self-organization could

produce bad results and that the government should direct production and

pricing. Many economists adopt an intermediate position that and prefer a

mixture of market economy and command economy characteristics (for

example John Maynard Keynes (1983-1946) influenced economics

especially labour economics with his General Theory of Employment,

Interest and Money).

7 MATURANA/VARELA (1980)

8 LUHMANN (1990)


For the Czech economist M. Zeleny autopoietic systems content a great

modeling, methodological and explanatory potential for treating as social

systems.9

Zeleny describes that sustainability and self-sustainability is direct related

to system organiziation and its self-production (autopoiesis). How systems

are organized is more important than how its individual members thinks and

how high is their “level of consciousness”.10

One of the best examples of self-management and self-coordination is

found in the amoeba System of Kyocera Corporation.

The concept of ultimate flexibilty is best summed up by Kyocera`s former

president Inamori: “Development is the continued repitition of construction

and destruction”, as if coming directly from the systems theory of

autopoietic self-organization.11

9 ZELENY (1995), p. 7

10 ZELENY (1997), p. 253

11 ZELENY (1997), p. 255


3. Aims and Structure of the Amoeba Management System of Kyocera The Kyocera organization is divided with its 184 companies by products

and geography:

- fine ceramic components

- semiconductor components for information technology

- applied ceramic products (especially solar power elements, industrial

precision knifes, orthopedic joint and bone replacement systems etc)

- electronic devices and optical components

- telecommunication equipment

- document imaging equipment

- information technology services

- hotels and hospitality

with subsiduaries in Asia, Oceania, Europe, Midddle East, Africa, North and

South America.

Generally looks the Kyocera organiazation like an application of a global

matrix structure

Global Matrix Structure

Europe USA/Canada Asia

Product Division A

Product Division B

Product Division C

Headquarters

Pacific


Global matrix structure tries to integrate global product, functional and area

responsibilities.12 Such multidimensional structures suite for companies with

wide global activities and heterogeneous product range. Responsibilities

are divided in such for areas or regions and such for different product

divisions. Decision making process can be slow and complicated because

normally two manager have to agree. Responsibilities can be overlapped

resources can be demand by different divisions. Advantages are to find in

using synergy effects and flexible and quick information and

communication which flows in vertical and horizontal directions.

The matrix structure suits best for companies with transational strategy like

Boeing aircraft industries with different business groups (product programs)

and functions (support services).

Kyocera adopted a divisional structure much earlier than it was normal

(while it was relatively small). As the firm got larger Kyocera wanted to

develop an organization structure that allowed the sense of partnership

integrated with the concept of profits which were generated during the

production process. The divisional structure supported this aims but as the

firm more and more expanded they developed the amoeba management

system for avoiding bureaucracy

Kyocera`s special development of profit center organization called amoeba

is extraordinary different to other multinational companies. Ranging in size

from 3 to 100 members, the typical amoeba had an average of 30 members

in manufacturing areas and less than 30 in sales.13 Compared with the

actual number of workers Kyocera should have more than 1500 amoebas.

The amoeba system had been developed by the founder of Kyocera, Dr.

Kazou Inamori.

His life story is both extraordinary and successfully. He proved his

pioneering entrepreneurial spirit and sense of high performance and

success-orientation by going into business in 1959 with only little capital

back-up. His creative talents as a chemical engineer, his customary close

contact to the base and his innovative sense for new markets have led

Kyocera to great success. To pass on his experience as an entrepreneur –

12

STONEHOUSE (2001), p. 321 13

KOTTER/ROTHBARD (1994), p. 3


one who doesn’t come from the traditional Japanese establishment - and

his ideas about management, Dr. Inamori chose an unusual and novel way.

Dr. Inamori’s motto "do what no one has done before" is important to

Kyocera because it constitutes an ongoing challenge, a necessary

motivation to lead Kyocera into the next millennium as an innovative

company. Dr. Inamori published a lot of books, for example, “A Passion for

Success” describing the philosophy on which both his life and his work are

based. As an entrepreneurial visionary, his commitments include

technological and social innovation, solving urgent world problems, and

"contributing to the material and spiritual happiness of humanity and

society".

The primary purpose of the amoeba management system is to create an

environment in which individuals both enjoyed their work and were able to

influence the way it was performed, amoeba members are been promoted

to develop into the role of managers. Amoebas work as small separate

companies have all responsibility which an independent enterprise has.

Most amoebas are sales or manufacturing units. Amoebas could sell and

buy from both inside and outside the company. The prices for intracompany

trade based upon market prices.

Amoebas are expected to expand, divide and disband as necessary. The

number of amoebas changes daily. When the company has developed a

new product, a new amoeba will be formed to produce it and another to

support it for launching in the market. Leaders of amoebas lend and borrow

members and in this way they eliminate losses of surplus labour. Personnel

transfers between amoebas could be on permanent or temporary.

Amoebas are disbanded when the business opportunity no longer exist.

This flexibility is one of the most important reasons for Kyocera`s success.

Some of this rules are very close to the fundamental rules for project

organization and for management of project groups.

Project groups are established to fulfil a special task, and they have to do it

in a fixed time etc.14 Actually a lot of amoebas contain task forces and

project groups.

The manager of an amoeba is responsible for its operation, organization

and success. In every division are headquarter administrative departments

which support the amoebas as background service.

14

KRAUS/WESTERMANN (1998), p. 12


An amoeba is lead by an manager who has to report about amoeba

performance to a section or division manager. The financial performance of

amoebas is measured on a monthly basis. The monthly plan evaluation

consists of looking at orders received, shipments made and value-added

per hour for a sales amoeba. For manufacturing amoebas the report looks

to value-added labour hour of production.

In relationship to the philosophy of Dr. Inamori, the company recognize

superior-performing amoebas by psychological, not monetary, satisfaction.

It is against Kyocera`s philosophy to motivate employees through financial

benefits, Kyocera expect that each employee to work for himself or herself,

for his or her colleagues, and for society.15

For understanding this philosophy the company provided seven level of a

special philosophical training and offers a lot of different courses depending

on different levels of responsibility in the firm. New employees who have

just started to work at the company have to absolve a two-week orientation

course to study the company philosophy.

Beyond that, a variety of formal meetings play an important role in the

management process. Meetings are an indispensably instrument of

communication in every level, the corporate level, division level and at the

sales and production levels.

The company stated of itself to follow the established principles of any

learning organization that includes the five elements of: Planning, Doing,

Controlling, Acting, and Checking. All of such processes are being well

made use of in daily standard operating procedures with various well-

established and well-organized processes, and a perfect systematic

structure that is based on the amoeba management system with a highly

philosophical learning culture based on positive moral and inspirations

which encourages the breaking of from closed traditional boundaries into

exploring new advantages of life and the future.

15

COOPER (1994), p. 8


Importance of central functions

Especially multinational firms need central functions like coordination,

information and controlling. How much coordination a company needs for

coordinating its subunits depends on the strategy they pursue. Depending

on the level of independence they need more or less coordination.

Multinational companies with activities all over the world needs the highest

support of coordination and a company with focus on domestic business

and small number of international subsidiaries less.

Controlling standards and controlling operations make sure that all units

regards companies strategy and aims. There are a lot of different

instruments and mechanism like personal and process control, report

systems etc.

In this relationship the “Corporate Governance” –System for multinational

firms is a very interesting solution. Corporate governance refers to the

framework of rules and regulations that enable the stakeholders to exercise

appropriate oversight of a company to maximize its value and to obtain a

return on their holdings. The principles of Corporate Governance are

endorsed 1999 by 29 OECD member nations (published: www.oecd.org). 16

Kyocera Coporation considered the rules of corporate governance, too and

central functions in its headquarters developed the firm strategy, reporting

system and other instruments.. Very remarkable are internal and external

information politics about the Kyocera philosophy (Kyocera Philosophy

Handbook, Kyoocera Management Handbook, Kyoercera Accounting

Handbook).

16

OECD (2000)


4. Different Applications of The Amoeba Management Some other companies use an application of organic structures like

amoeba as a managerial technique. The W.L.Gore & Associates, Newark,

Delaware, USA shows how a multinational company without formal

organizational structures works very successfully.17 This company is

considered as prime example for an innovative organization. Scientists

evaluate success on two different aspects: Renouncement of formal

organization as trend for the future and on the other hand the confirmation

of dynamic structures and flexibility as success factors, which differ from

traditional types of organization. The Gore organization is compared with

the Amoeba Management System too.

Gore was founded in 1958 and is a private held company with worldwide

sales in 2006 about $1.84 Billion.

In 2006 Gore worked with 7.500 associates (a special synonymous for

employees) in more than 45 plants and sales locations worldwide.

Manufacturing operations are clustered in the U.S.A., Germany, Scotland,

Japan and China and sales and customer services are located in all

continents.

Gore has developed proprietary technologies with the versatile polymer

polytetrafluoroethylene (PTFE) for products for electronic signal

transmission, fabric laminates, medical implants, as well as membrane,

filtration and fibers technologies for diverse industries. Most well-known

products are outdoor-clothes with the Gore-Tex textile.

In 2006 Gore earned a position on Fortunue`s annual list of the U.S. “100

Best Companies to Work For”. Gore-U.K. ranked as No. 1 among the “100

Best Places to Work in the U.K.” of Sunday Times (2006). Gore-Germany

ranked as No.1 of the “Best Places to Work in Germany” in category of mid-

sized companies.

17

ZWIRNER (2004)


The companies earned a lot of prices and awards for innovative product

development as well as entrepreneurship.

Which criteria makes this company so successful and attractive for their

employees?

Gore has avoided to introduce traditional hierarchy, opting instead for a

team-based environment that supports personal initiative, encourages

innovation, and fosters person-to-person communication among all of their

associates. This kind of unique corporate structure leads to be a significant

factor to associate satisfaction and retention. Gore themself in their internet

web-site (www.gore.com):

“We work hard at maximizing individual potential, maintaining an emphasis

on product integrity, and cultivating an environment where creativity can

flourish. A fundamental belief in our people and their abilities continues to

be the key to our success.”

Gore prefers to work with self-regulating groups instead with fixed

structures, like amoebas which change their size and shape depending on

influences from outside. If a plant or a unit exceed a size of more than 150

workers, they will be divided because the company has learned a lot of the

relationship between size and losses of direct person-to-person

communication.

Often the management style oft Gores was called as Non-Management but

the internal organization of Gore bases on clear rules:

- freedom (for innovation and improving the own creativity)

- self-obligation (for acting by internal conviction not on instruction)

- fairness (as basis of team-work and interacting with clients and

supplier)

- waterline (means an analogy with using a ship while it has been

finishing, working under the waterline could be dangerous for the ship in

the case of damaging, and therefore it is important to consult other

associates for discussing problems which are important for the

company. Working above the waterline is intensive desired.)

Workers at Gore are called associates not employees and their salary

depends on success of the company regulated in a system of participation.

Teams select their leader themselves and a leader couldn`t make a claim

for leadership. Most of the associates feel themselves as leaders.


Another example of an application of the amoeba system is the Australian

TCG (Technical Computer Grahics) with a self-producing network in a

business-firm environment. They have no coordination divisions, “leading

firms”, or management superstructures guiding TCG`s 24 companies. The

Coherence growth an maintenance oft the network is guaranteed by a set

of network-producing rules. 18

18

ZELENY (1995), p.14


5. Summary

A lot of companies in industrial countries has spent the last few years in

restructuring mode, drastically reorganizing processes in order to maximize

profits. Just a reliance on restructuring has had unintended negative side

effects, as hierarchies that once controlled the direction of many companies

become less relevant, and loyal employees become increasingly

disheartened by often short-sighted strategies.19

At present a lot of companies shift away from solutions like restructuring

organization toward a transformation of established corporate structures, a

wider distribution of knowledge, and the use of modern performance-

measurement systems and technologies. Like companies as W.L.Gore and

Kyocera they will develope their advantage upon the agility and flexibility of

their processes, people and technologies and can build lasting value for

their company, customer and employees.

A number of experts agree this trend. They believe that a transition is

necessary between the traditional corporate structures of the 20th century

and the ones to thrive and be productive in the 21st century. They think that

organizations, which contain growing proportions of skilled workers, should

not be structured in the same way as yesteryear`s factories and plants.

“Today`s big companies do very little to enhance the productivity of their

professionals” wrote Lowell Bryan and Claudia Joyce.20 Verticallly oriented

organizational structures, retrofitted with ad hoc and matrix overlays, nearly

always make professionals work more complex and inefficient – relics of

the industrial age.

More success is expected by models which are based on the organization

as a network, like the “lattice” design of the Gore Corporation or like the

biological amoeba metaphor hat has recently found its organizational

embodiment in the most successful Amoeba Mangement System at

Kyocera.21

Compared with this actual discussion the organizational structures of

companies like Kyocera or Gore and their Amoeba Management System

which are described are or were “Science Fiction” -solutions, really

successful since decades.

19

OXMAN/SMITH (2003), p 77-82 20

BRYAN/JOYCE (2005), p. 24-33 21

HAMADA/MONDEN (1989), p.197-210


Bibliography

BRYAN/JOYCE /2005) Bryan, L., Joyce, C.: The 21st-Century Organization”, McKinsey Quarterly, Issue 3, 2005

COOPER (1994) Cooper, R., Kyocera Corperation: The Amoeba Management System, Harvard Business School Cases 9-195-064, August 25, 1994, Publishing Division, Harvard Business School, Boston

DRUCKER (1986) Drucker, P.F., The Practice of Management, New York, 1986, Harper Business edition (1993)

ENCYCLOPAEDIA BRITANNICA (1987) The New Encyclopaedia Britannica, Volume 1, 15th Edition, 1987, Chicago

HAMADA/MONDEN (1989) Hamada, K./Y. Monden, Y. : Profit

Management at Kyocera Corporation: The Amoeba System in: Y. Monden and M. Sakurai (Eds.), Japanese Management Accounting, Productivity Press, Cambridge, MA.

HILL (2002) Hill, Charles W.L. , International Business – Competing in the Global Marketplace, Boston, 2002

KRAUS/WESTERMANN (1998) Kraus.R./Westermann,R.: Projektmanagement mit System, Wiesbaden 1998

KOTTER/ROTHBARD (1993) Kotter, J.P., Rothbard, N. :Kyocera Coporation, 1993, Harvard Business School Case, 9-491-078, Publishing Division of Harvard Business School, Boston


LUHMANN (1990) Luhmann, N., Essays on Self-Reference, 1990, Columbia University Press

MALIK (2002) Malik, Fredmund, Biologische Organismen als neues Modell? (Biological organism as new model?), www.managementkybernetik.com, 2002, Cwarel Isaf Institute

MATURANA/VARELA (1980) Maturana, Humberto & Varela,

Francisco, 1980, Autopoiesis and Cognition: the Realization of the Living. Robert S. Cohen and Marx W. Wartofsky (Eds.), Boston Studies in the Philosophy of Science

OECD(2000) The OECD (Organisation for Economic Co-operation and Development) Guidelines for Multinational Enterprises, Revision 2000, Paris

OXMAN/SMITH (2003) Oxman, J.A., Smith, B.D.: The Limits of Structural Change in MITSloan Management Review, Fall 2003, Vol 45, No. 1, Massachusetts Institute of Technology

STEINLE (1999) Steinle, C./Bruch, H.: Einführung in das Management-Studium, Controlling: Kompendium für Ausbildung und Praxis, Stuttgart, 1999

STONEHOUSE (2001) Stonehouse, et al.: Global and Transnational Business – Strategy and Management , Chichester, 2001

ZELENY (1995) Zeleny, M., Ecosocieties: Societal Aspects of Biological Self-Production in Soziale Systeme, 1995, V.2

ZELENY (1997) Zeleny, M.: Autpoiesis and self-sustainability in economic systems, in Human Systems Management 16 1997


ZWIRNER (2004) Zwirner, H. (publisher): Die Amöbe als Erfolgsgeheimnnis (Amoeba as secret of success) - W.L.Gore&Associates Inc, Author: Baueregger,N.; Krüger, W. in McKWissen, Heft 08(2004), p.56-81

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The Amoeba Management System - pdfs.semanticscholar.org · The Amoeba Management System 3 1. Introduction The Sustainability Report 2004 of the Kyocera Corporation describes under