It's a fairly common belief that the larger and older an organisation becomes, the more resistant it will be to change.

Siam Cement Group, Thailand's oldest cement-manufacturer, is proving this to be a misconception. Either that or the 96-year-old organisation is exceptional.

Even though the group has more than 100 subsidiaries in petrochemicals, paper and packaging, cement, building products and distribution, the fundamental changes that are sweeping through the conglomerate belie its age.

Employees are encouraged to speak out and initiate new ideas, while executives are expected to listen. Mistakes and failures are of no great consequence, as long as lessons are learned with which to improve the organisation.

Innovation is the key concept behind the group's change, says president and chief executive Kan Trakulhoon, who stepped up to take SCG's highest post one year ago. Without innovation, he says, business organisations in the future will be unable to move forwards or remain market leaders. Businesses can no longer rely on price competitiveness but must develop new types of high-value products in response to customers' needs.

"Four years ago we saw that our glory in the past was not enough to make us grow in the future and to be a market leader, so we tried to adopt the idea of innovation and push the group towards becoming a new innovative organisation," Kan says.

The metamorphosis began in 2003, and Kan, then the group's vice president, was the key man behind the change. Coming from an engineering, rather than a business, background, he recalls the extraordinary efforts required to transform the group into a new-look company full of innovation and with more competitiveness.

Two vital areas of transformation were changes to the group's internal working style and processes and a determined push towards research and development in the hope of creating the group's own technologies.

"We had to change the mentality of all executives and employees, to serve the new innovative organisation," Kan says. "Instead of employees being assigned to jobs and keeping their ideas to themselves, the new-style organisation encourages them to initiate new ideas and speak out, directly to the executives."

Kan believes it's very important for executives to listen to their staff and hear what they say. When executives are more open for employees to express their opinions, they get more new ideas that are useful for further development.

At SCG any employee can propose an idea directly to top executives. And Kan says he has built up an internal working atmosphere in which all employees feel free to show what they think, even though their ideas may not be accepted.

"No matter if the idea is good or bad, we will listen to it. We have to make the discussion environment comfortable enough so that employees don't feel embarrassed if their idea is rejected."

The transformation process is still not finished, and Kan is determined to make his executives and employees think as a new, innovative group. He has put a lot of effort into pushing his staff to be more open-minded; to think outside the box, be assertive, dare to take risks and be eager to learn. And from these seeds, he believes new innovative ideas will grow.

"In an innovative organisation, we need to accept changes for the better. In the meantime, we should accept mistakes and failures and learn from them. Being 'too professional' will limit the emergence of innovation."

However, changes in working and thinking processes, on their own, are not enough. To make SCG a truly innovative organisation, the group needs to develop its own technology, and this is also part of Kan's vision. He has sharpened the group's focus on research and development in the belief that having its own technology will make it more self-reliant, improve its products and strengthen its competitive advantages.

SCG's research and development structure has changed. From having just one central research and development unit serving all businesses in the group, Kan has established a research-and-development section in each individual business unit. Each has its own technology manager working closely with the business manager to set up a technology road map for the next 10 years, to be used as a guideline for technology development matching the aspirations of each business.

To make research more fruitful, Kan says the group is also creating alliances with outside research organisations to co-develop new technologies. Over recent years, SCG has collaborated with MIT Media Lab to develop a supply-chain management system as well as paper with special characteristics. It has also been working with local universities on technology development to serve the group's businesses.

"R&D is a must, as it will drive technology innovation to emerge within the organisation," Kan says. "I do believe that business, R&D and innovation cannot stand apart."

And that's why SCG's R&D budget will rise every year. From only Bt100 million in 2004, it was raised to Bt170 million in 2005, Bt350 million in 2006 and Bt700 million this year. Because he regards R&D as the group's strategic weapon, he expects the group's annual R&D spending to reach Bt1.4 billion by 2011.

"Conducting research helps us to develop new products that have higher value to serve customer's requirements, and this helps us stay one step ahead of others in the market," he says.

To force the issue, Kan has set an aggressive plan to increase the proportion of SCG's revenue generated by high-value products from the current level of 10 per cent to 50 per cent by 2015, and he says that with a sharper focus on R&D, he's confident the group will make it.

He has come up with a plan to help the careers of R&D staff.

"I knew that this group of employees rarely had a career path along which to grow, so I tried to develop a new career track for technology people to allow them to grow in their own path," Kan says.

SCG has 24,000 employees, of whom 60 per cent are engineers and scientists working in different fields including mechanical, chemical and industrial engineering, computing and electronics, materials, polymers and even botany.

In the past, this group of people has been left behind in the organisation. Those capable of becoming top executives had to switch to a management career path and were lost to the organisation's technology team.

From now on at SCG, engineers and scientists will be allowed more room to grow in their technology careers so they can continue to serve the group's innovation vision while stepping into top executive jobs.

Much more work lies ahead for the 52-year-old SCG boss, who is constantly looking forward to the future technologies that will play an important role in the group's business.

"I can see that nanotechnology and biotechnology will have an important role in our business in the future, and these are areas that the group has to catch up with," he says.

After four years of constantly pushing for change, Kan sees no end to the long road down which innovation and technology are leading SCG.

"Innovation and technology will be a key tool in helping us to make Thailand's oldest cement company a business leader in the Asean region by 2015," he says.

Pongpen Sutharoj

The Nation