International Journal of Management and Humanity Sciences. Vol., 4 (1), 4456-4467, 2015 Available online at http://www.ijmhsjournal.com ISSN 2322-424X©2015 Investigating the Influence of Organizational Intelligence on Organizational Creativity: Case Study of Four Iranian Manufacturing Firms Sayed Mahdi Golestan Hashemi, Akbar Nilipour Tabatabaei, Abbas Rafiei, and Mojtaba Norozi Chegani Abstract The purpose of the present study is the investigation of the role of organizational intelligence on organizational creativity of four manufacturing firms in Fars and Isfahan provinces in Iran. The study is descriptive and correlational which was carried out during the first eight months of year 2014. The statistical population is all personnel of four manufacturing firms whose number exceeded 1407. Through random sampling, a sample of 250 persons was selected for the purpose of data collection. To collect the data related to organizational intelligence, Albrecht’s (2003) questionnaire was used and for organizational creativity data collection, a questionnaire developed by the researchers was used. Cronbach's alphas of the questionnaires were .87 and .76 respectively which are suitable. Few studies have been carried out on organizational intelligence and organizational creativity and nearly no study has been done on manufacturing firms. To investigate the relations between the variables of the study and to test the hypotheses, Structural Equation Modeling was used and the analysis was done through SPSS22 and Lisrel 8.5 the indices of total model fitness were suitable and the fitted model is dependable. The results of the study indicated that organizational intelligence has a positive and significant effect on organizational creativity and organizational intelligence can explain 65% changes in organizational creativity which is a significant value. Key Words: Creative Problem Solving, Factor Loading, Organizational Creativity, Organizational Intelligence, Structural Equation Modeling Introduction Increasing global competition, coupled with rapidly changing technology leading to the reduction in life cycle of products has made corporations more vulnerable to failure than any time in past (Khorshidi et al, 2013). In today’s business environment, one of the essential elements to an organizational success is adaptability which states that people must be able to accept changes as the basis to have creativity and innovation (Khorshidi et al, 2013). Therefore, creativity and innovation are considered to be key factors for survival, success and excellence of organizations (Cook, 1998). Creativity is generally of three types, namely, individual creativity, group/team creativity and organizational creativity. The focus of the present study is on organizational creativity. Organizational creativity is the creation of valuable and useful new products, services, ideas, procedures, or processes by individuals working together in a complex social system (Woodman et al, 1993). The organizational literature holds numerous statements on the necessity of organizational creativity. Gaining a competitive edge (Oldham and Cummings, 1996; Mumford et al, 2002; Tierney et al, 1999 ; Hu et al 2012; Lin and Liu, 2012; Beheshtifar and Kamanifard, 2013) and ultimately surviving in today’s market (West et al ,2004; Hu et al 2012; Lin and Liu, 2012; Beheshtifar and Kamanifard, 2013) are the main rationale behind these statements. Moreover, organizational intelligence is a basic and essential issue considering innovation and creativity in an organization (Pour Kiani et al, 2013). This type of intelligence has been attended to as a new concept in the field of management and organization; furthermore, it has an increasing prominence as a theoretical concept in organization theory. Organizational intelligence denotes the capacity of an organization to mobilize all of its brain power, and focus that brain power on achieving its mission (Albrecht, 2003). Individual intelligence is intrinsic while organizational intelligence can be acquired (Lefter et al, 2008). In conclusion, organizations that can successfully utilize organizational intelligence are the ones that use Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 human resources the best, create rational plans to reach aims explore the hidden potentials, have an integrated and systemic organizational thinking and help the development of organization (Erçetin, 2000). Furthermore, Improvements in organizational intelligence should support building more cost-effective coordination, improved decision-making and innovation, and improved business performance to enhance long-term prospects of organization (Veryard, 2012). Despite the importance of organizational creativity and the influence of organizational intelligence, few quantitative studies have been carried out to investigate the effect of organizational intelligence on organizational creativity. Referring to the abovementioned points, the present study is an attempt to find the effect of organizational intelligence on organizational creativity of four medium-sized and large Iranian manufacturing firms. Literature Review Organizational Intelligence The first person to venture into the subject of organizational intelligence was the American sociologist Harold Wilensky who published a book on this subject in 1967(Veryard, 2012). However, the subject of Organizational intelligence has been clearly and distinctly introduced by Matsuda (1992) in an article entitled, “organizational intelligence and its importance as a process and a product” (Pour Kiani et al, 2013). There has recently been no census among scholars on the definition of organizational intelligence since the proposed definitions have looked at the issue from different perspectives. Table 1 presents the key points of some of the proposed definitions for organizational intelligence. Table 1. Organizational Intelligence Definitions Organizational Definition Key Points Complex, interactive, cumulative and coordinating collections of human and machine 1 Matsuda, 1992 intelligence of an organization as a whole Operations related to information processing leading to compatibility with 2 Glain, 1996 environmental demands, initiating and implementing innovations Capacity of a corporation as a whole to gather information, to innovate, to generate 3 McMaster, 1996 knowledge, and to act effectively based on the generated knowledge Capacity of an organization to create knowledge and to use it strategically to adapt to 4 Halal, 1997 environment and business facility all intelligences used to make a common viewpoint or a renovation process 5 Lie bowitz, 1999 (examination) which leads the whole system Capacity of an organization to mobilize all of its brain power and focus that brain 6 Albrecht, 2003 power on achieving the mission 7 Simic, 2005 Intellectual capability of an organization in solving organizational problems Capability of an organization in creating knowledge and its application to make 8 Piri, 2006 strategic decisions A multidimensional and multifaceted concept involving the recursive interplay of 9 Akgun et al, 2007 cognitive, behavioral and emotional capabilities of organizations Intellectual capability of an entire organization which can be improved in many ways, 10 Jung , 2009 for example, through adopting new technology, policy enhancement and investment Using the potential to make quick and right decisions against sudden and Erçetin, 2000, unexpected situations that happen if system changes or improves, adapting to these 11 2001, 2009 changes, trying to learn permanently, using creativity and showing different skills Jonbeshi et al, Capability to collect, manage and use information to make effective and efficient 12 2012 decisions No Researcher In the present study, organizational intelligence is defined as the capability of an organization in processing information, producing and applying new knowledge, permanent learning to bring innovations and making applicable, practical and effective decisions to adapt to environmental conditions.The related literature reviewed confirms that different models have been proposed by different researchers to clarify and explain the concept of organizational intelligence the most important of which are (Veryard, 2012; Kazemi et al, 2012; Potas et al, 2010; Albrecht, 2003; Perkin, 2003; Matsuda, 1992) compared in Table 2. As it can be seen, Albrecht’s (2003) model is the most comprehensive; furthermore, besides having the features of other models, it is statistically measurable. It is worth mentioning that models proposed by Pour Kiani et al, (2013) and Veryard (2012) have paid special attention to knowledge, information and communication and Potas et al, (2010) model has more focus on appetite for change. Kazemi et al, (2012) model has specifically attended to organizational structure, alignment and congruence. Considering the results of models' comparison, the present study adopt Albrecht’s (2003) model as the basis for measuring, interpreting and 4457 Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 elaborating the concept of organizational intelligence. Many other researchers (e.g. Ranjbarian and Esgandari, 2014; Ahmadinejad et al, 2014; Sohrabi et al,2013; ,Eshkaftaki et al, 2013; Moghadam et al, 2013; Khanghahi and Jafari, 2013; Azma et al, 2012; Shahabi et al, 2012; Jonbeshi et al, 2012) adopted Albrecht’s (2003) model to measure and elaborate organizational intelligence. Albrecht in his book named "The power of mind at work" presented an organizational intelligence model composed of seven elements as follows: Strategic Vision: strategic vision refers to the capacity to create, evolve, and express the purpose of the enterprise (Nasabi and Safarpour, 2009). This means a feasible plan for leading an organization towards its main goals (Kordestani et al, 2013). Shared Fate: When all or most of the people involved in the enterprise, including associated stakeholders like key suppliers and business partners, and in some cases even the families of its members, know what the mission is, have a sense of common purpose, and understand their individual parts in the algebra of its success, they can act synergistically to achieve the vision, this sense that "We are all in the same boat" creates a powerful sense of community. Without a sense of shared fate, the psychological tone of the culture degenerates into a "Look out for number one" spirit (Nasabi and Safarpour, 2009). Appetite for Change: In smart organization, change represents challenge, opportunity for new and exciting experiences, and a chance to tackle something new. People in these environments see the need to reinvent the business model as a welcome and stimulating challenge, and a chance to learn new ways of succeeding (Nasabi and Safarpour, 2009). Heart: The element of heart involves the willingness to give more than the standard. Organizational psychologists refer to discretionary effort as the amount of energy the members of the organization contribute over and above the level they have "contracted" to provide (Nasabi and Safarpour, 2009). Alignment and Congruence: Any group of more than a dozen people will start bumping into one another without a set of rules to operate by. They must organize themselves for the mission, divide up jobs and responsibilities, and work out a set of rules for interacting with one another and for dealing with the environment. In the intelligent organization the system, broadly defined, all come together to enable the people to achieve the mission (Nasabi and Safarpour, 2009). Knowledge Deployment: More and more these days, enterprises succeed or fail based on the effective use of knowledge, information and data. Knowledge deployment deals with the capacity of culture to make use of its valuable intellectual and informational resources. Organizational intelligence must include free flow of knowledge throughout culture and careful balance between conservation of sensitive information and the availability of information at key points of need. It must also include support and encouragement for new ideas, new inventions and an open-minded questioning of the status quo (Nasabi and Safarpour, 2009). 4458 Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 Strategic Vision Shared Fate Matsuda, Organizati 1992 onal recognition Perkin, 2003 Albrecht ,2003 Strategic Vision Potas et al,2010 Being intuitive and farsighted Kazemi et structural al,2012 dimension strategic dimension Veryard, 2012 4459 Decition Action Table 2. Comparison of Different Models of Organizational Intelligence Appetite for Heart Alignment and Knowledge Deployment Change Congruence Organizational learning Organizational communications Conversations Written Communication Listening Symbolic Conduct Shared Fate Appetite for Change Adaptation to changes Renewal Actions and reactions Agility Communication with stakeholders Cultural dimension Cultural dimension Environmental dimension Communication and collaboration Sense-making Performance pressure Organizational learning Organizational memory Organizational Organizational learning communications Organizational Organizational communications intelligence as a product Heart Conversations Symbolic Conduct Written Communication Knowledge Processing Alignment and Congruence Knowledge Deployment Being flexible and convenient in operation Communication with the stakeholders The The structural dimension behavioral The functional dimension dimension The communicational dimension The informational dimension The Environmental dimension Decition Action power of Organizational imagination policy about and creativity problem Organizational policy about problem Performance pressure Renewal Actions and power of Being intuitive and far- reactions Agility imagination sighted Communication and creativity with stakeholders The communicational dimension The informational dimension Information gathering Knowledge and memory Learning and development behavioral dimension Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 Performance pressure: It's not enough for executives and managers to be preoccupied with the performance of the enterprise. In the intelligent organization, everyone owns the performance proposition, the sense of what has to be achieved and the belief in the validity of its aims. Leaders can promote and support a sense of performance pressure, but it has the most impact when it is accepted by all members of organization as a self-imposed set of mutual expectations and an operational imperative for shared success (Nasabi and Safarpour, 2009). Organizational Creativity Creativity is one of the essential and vital characteristics of humans which has an undeniable effect on human perfection and civilization; furthermore, this is the foundation for inventions and scientific and artistic achievements. Despite the long history of creativity in human life, tremendous pace of technological changes, global competition and economic uncertainty have made the organization realize that organizational creativity is one of the key and permanent resources of having a competitive and survival advantage. There are various definitions of organizational creativity. However, the outcomes of organizational creativity should be new and useful, i.e. be valuable to the organization (Isaksen and Ekvall, 2010). Styhre and Sundgren (2005,p.4) defined organizational creativity as the “a variety of activities in which new ideas and new ways of solving problems emerge through a collaborative effort by promoting dialogues that involve multiple domains of scientific knowledge to produce value for the organization’s mission and market”. Fisher and Amabile (2009) defined organizational creativity as the production of ideas for novel and appropriate (useful or valuable) products, services, processes or strategies in an organization. Hu et al (2012) defined organizational innovation as the whole process through which an organization integrates external and internal resources, conceives, proposes, screens, adopts, and finally implements ideas, products, services, procedures, and processes that are novel and useful to the organization. Bratnicka et al (2013) defined organizational creativity as firm's ability to generate new and useful ideas, to address rapidly changing opportunities and threats by making timely and market – oriented decisions and to frame breakthrough changes in its resource basis. Organizational creativity, in the present study, is defined as generating new, valuable and useful ideas applied by the personnel in an organization to resolve problems through joint efforts and making timely and market-based decisions in line with the available resources. Components of organizational creativity, supporting researches and index of measuring components, are presented in Table 3. It is worth mentioning that this table is the basis for the development of organizational creativity questionnaire. Table 3. Measurement Index and Supporting Research Related to Organizational Creativity Components Organizational Index of Component’s Supporting Research Creativity Components Measurement Woodman et al,1993; Amabile,1997; Drazin et al,1999; Number of new ideas Styhre and Sundgren,2005; Sadi and Al-Dubaisi,2007; of personnel Number of ideas Hunter et al, 2007; Fisher and Amabile, 2009; Maimone and Sinclair,2010; Hu et al, 2012 Woodman et al, 1993; Amabile, 1997; Drazin et al, Usefulness of ideas 1999; Styhre and Sundgren, 2005; Sadi and Al-Dubaisi, 2007; Fisher and Amabile, 2009; Hu et al, 2012 Rate of usefulness of ideas Alignment of idea with aim Woodman et al, 1993; Amabile, 1997; Drazin et al, 1999; Styhre and Sundgren, 2005; Hunter et al, 2007; Fisher and Amabile, 2009; Maimone and Sinclair, 2010; Hu et al ,2012; Khorshidi et al, 2013 Woodman et al,1993; Amabile, 1997; Drazin et al,1999; Number of creative problem Mathisen and Einarsen, 2004; Styhre and Sundgren, solving 2005; Hunter et al, 2007; Mostafa and El-Masry, 2008; Fisher and Amabile, 2009; Maimone and Sinclair, 2010; Beheshtifar and kamani fard, 2013 Novelty of ideas Number of creative problem solving 4460 Woodman et al,1993; Amabile,1997; Drazin et al,1999; Hunter et al,2007; Maimone and Sinclair, 2010; khorshidi et al, 2013 Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 Organizational Intelligence and Organizational Creativity Few studies have been carried out to investigate the relation between organizational intelligence and organizational creativity. This part is to investigate studies dealing with the relation between organizational intelligence and organizational creativity. Pour Kiani et al, (2013) state that organizational intelligence has four results for an organization, namely, improving organizational performance, competitive advantage, efficiency and innovation. To explain innovation, Pour Kiani et al (2013) mention that one of the key results of organizational intelligence is being inventive (creative) and making creative solutions and claim that it can be said that the chance of the occurrence of new ideas in the organization will be increased if it acts intelligently and uses its personnel’s intellectual and mental capacities in its best way.Mehara et al, (2012) in an article on the relation between organizational intelligence and creativity of managers in public junior high schools of East of Gilan province concluded that there is a positive and meaningful relation between creativity and organization intelligence. Nasabee (2009) investigated the relation between organizational intelligence and personnel creativity in Shiraz University of Medical Science. The statistical universe was 280 of personnel in 3 levels (managerial, expertise, personnel) selected through stratified random sampling. Findings showed a statistically significant relation between organizational intelligence and creativity; in other words, any increase or decrease in organizational intelligence indexes equally changes those of creativity. Dayan (2006) studied the moderating effect of market turbulence on organizational intelligence. The population of study was product managers of electrical/electronic, computer, pharmaceutical, chemical, and machinery/metal manufacturing companies. The result of the study indicated that team intelligent has a significantly positive effect on product creativity. The rest of this part will be devoted to investigation of indirect relation between organizational intelligence and organizational creativity. Through the inductive analysis of these studies, it can be argued that organizational intelligence has a significant meaningful effect on organizational creativity. Mooghali and Azizi (2008) investigated the relation between organizational intelligence and organizational knowledge management development. The results indicated a statistically significant relation between organizational intelligence and organizational knowledge management. Marjani and Arabi (2011) investigated the role of organizational intelligence in organizational knowledge management. Their research population included all staff (644 people) in economic department of the Central Bank of Islamic Republic of Iran. The findings showed a positive and significant relationship between organizational intelligence (and all its components) and knowledge management (and all its components).Sung and Choi (2012) examined the effects of team knowledge management on the creativity and financial performance of organizational teams across 35 branches of a Korean insurance company. Data were collected from 65 sales teams. The findings denoted team knowledge utilization was positively related to team creativity; in contrast, stocking team knowledge was not a significant predictor of team creativity. Considering the points mentioned, the hypothesis of present study is that organizational intelligence has a significant and positive effect on organizational creativity. Figure 1 presents the proposed model for this study. Strategic Vision Shared Fate Number of new Appetite for ideas of personnel Change Heart Organizational Intelligence Organizational creativity Alignment and problem solving Knowledge Deployment pressure 4461 of ideas Number of creative Congruence Performance Rate of usefulness Figure 1. Conceptual Model of Research Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 Methodology The present study is descriptive, Matrix Analysis. The purpose in correlational research is to determine if there is any relationship among two or more variables and if it exists, to what extent it is. Correlation Matrix (Covariance) Analysis is a type of correlational study to investigate the set of bivariate correlations among variables. Statistical population, sample size and sampling method The statistical population of this research is all personnel in four manufacturing firms in Isfahan and Shiraz, Iran, in 2014. Of these four firms, one was involved in producing refinery tools and parts, the other was producing plastic materials and the last two were food production firms. The total number of personnel was more than 1407 at the time of sampling. From among this population, a sample of 250 personnel was selected through random sampling. Instruments Questionnaires were used to collect data. In order to measure organizational intelligence, a revised version of Albrecht’s (2003) questionnaire including 28 questions was used. In order to measure organizational creativity a five item questionnaire was developed by the researchers. Responses were scaled through a five-point Likert scale. Face validity of the instrument was approved by experts; furthermore, to determine the reliability of questionnaires, a preliminary study was conducted on 25 samples from the same statistical population. Reliability of both questionnaires was measured by Cronbach's alpha which was .86 for organizational intelligence questionnaire and .78 for organizational creativity questionnaire. Moreover, the final Cronbach's alpha for organizational intelligence questionnaire and organizational creativity questionnaire were .87 and .76 respectively. Then, a confirmatory factor analysis was run through Lisrel. Convergent and discriminant validities were used to assure validity. Questionnaires were manually distributed among participants. 184 persons (74%) filled in and returned questionnaires. Data Analysis Method Data were analyzed through Structural Equation Modeling which is a combination of Confirmatory Factor Analysis, Path Analysis and Multiple Regression. Structural Equation Modeling has two applications. The first one is Confirmatory Factor Analysis which investigates the relation among latent variables and their related questions. The second one is the relation among latent variables and testing hypotheses. Structural Equation Modeling is a system whose input is model and data. Fit Indices and parameters’ estimation are its output. Data Analysis The hypothesis for the present study is that organizational intelligence has a positive and significant effect on organizational creativity. To confirm or reject this hypothesis and find the relation among variables, SPSS22 and Lisrel8.5 were used. First, correlation coefficients or factorial loads among latent and manifest variables will be investigated. Figure 2 is the output of Lisrel in Standard Solution mode which represents the relation between the concept of organizational intelligence and its dimensions. As it can be seen in this figure, all factorial loads are above .5; moreover, the average of the extracted variance is .51 for organizational intelligence. The result of investigating convergent validity and discriminant validity indicated that the latent variable was valid and factors can explain the concept of organizational intelligence well. Figure 3 is the output in T-Values mode which deals with the significance of relations. Values which are larger than 1.96 and smaller than -1.96 indicate significant relations. As it can be seen in Figure 3, all relations among concepts and dimensions of organizational intelligence are significant. To explain the relation between organizational creativity and its dimensions, data were analyzed through the software in Standard Solution mode (Figure 4). As it can be seen in the figure, all factorial loads are above .5; furthermore, the average of extracted variance for organizational creativity was .54. Convergent and discriminant validities were confirmed which indicates that factors can explain the concept of organizational creativity well. Figure 5 is the software output in T-Values mode for latent variable of organizational creativity. As it can be clearly observed, all coefficients have significance over 1.96; therefore, relations among organizational creativity concept and its dimensions are significant. 4462 Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 Figure 2. Lisrel Output for Organizational Intelligence Variable in Standard Solution Mode Figure 3. Lisrel Output for Organizational Intelligence Variable in T-Value Mode Figure 4. Lisrel Output for Organizational Creativity Variable in Standard Solution Mode Figure 5. Lisrel Output for Organizational Creativity Variable in T-Value Mode The relations among variables of conceptual model of the present study were analyzed through Structural Equation Modeling by Lisrel. Lisrel output for conceptual model is presented in Figure 6. Value .87 indicates strong influence of organizational intelligence on organizational creativity. Moreover, software output in TValues mode is presented in Figure 7. Value 10.20 denotes significant relation between organizational 4463 Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 intelligence and organizational creativity; therefore, the hypothesis is confirmed and results show that organizational intelligence has a positive and significant effect on organizational creativity. In addition, the values of factorial loads of markers of each latent variable and their significance level (according to the reported T values) confirms that all markers are properly located in their own place. Therefore, it can be concluded that markers which were used has an acceptable accordance with the theoretical foundation of this study. Since the t statistics reported for all markers is above 1.96, all markers are significant at the level 5%. Properties of model fitness are presented in Table 4. The results of Absolute Fitness Indices, which includes GFI and RMR, show that variance and covariance of error were properly controlled. For Cooperative Fit Indices, which includes CFI, IFI, NNFI and NFI, it is concluded that their values Figure 6. Lisrel Output for Conceptual Model of the Study Figure 7. Lisrel Output for T-Values Mode of Conceptual Model of the Study are above .95 for this model which is an appropriate value. Furthermore, the reported value for Root Mean Squared Error of Approximation (RMSEA) index denotes that measurement error has been controlled. Generally, the results of Table 4 indicate that model has a good fitness with data. Therefore, the estimated parameters in this model are dependable. 4464 Intl. J. Manag. Human. Sci. Vol., 4 (1), 4456-4467, 2015 Table 4. Properties of Model Fitness Reported Value Desirable Limit Index 1.69 Between 1 to 3 Relative Chi - Square .03 ≥.08 RMR .94 ≤.90 GFI .90 ≤.90 AGFI .97 ≤.90 NFI .98 ≤.90 NNFI .99 ≤.90 IFI .99 ≤.90 CFI .96 ≤.90 RFI .062 ≥.08 RMSEA Results and Discussion Considering Figures 6 and 7, it is evident that markers of Alignment and Congruence and Heart, with the factorial load of .76, have the highest influence and performance pressure, with the factorial load of .62, has the lowest influence on the formation of latent variable of organizational intelligence. As to the formation of organizational creativity latent variable, usefulness of ideas, with the factorial load of .85, has the highest influence and the number of ideas, with the factorial load of .79 and number of creative problem solving, with the factorial load of .55 are ranked next. As it was stated, all markers have significant factorial load on their own latent variables. Considering the coefficient path of .87 and the significant value of t (10.20), it can be inferred that organizational intelligence has a positive and significant effect on creativity; moreover, the value of reported R, which is .65, indicates that organizational intelligence can explain 65% of changes in organizational creativity. The above result is in line with the results of studies done by Pour Kiani et al (2013), Mehrara et al (2012), Nasabee (2009), Kazemi et al (2012) and Potas et al (2010). Conclusion Organizational creativity has an influential role on survival and competitiveness of every organization and knowing the factors affecting this creativity is imperative to identifying the challenges ahead and enhancing organizational performance. The main objective of the present study was investigating the effect of organizational intelligence on organizational creativity. The findings indicate a positive and significant relation between organizational intelligence on organizational creativity and organizational intelligence explains 65% of changes in organizational creativity. Therefore, increase in organizational intelligence leads to increase in the number of ideas, their usefulness and number of creative problem solving at the level of organization and all of these factors significantly increase organizational creativity. 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