Managerial Dilemma
The key managerial issue facing a small technology start-up is usually that of ensuring access to resources, especially financial, as the project progresses from idea generation through to successful market launch (Chaston 2014). In large organizations, resource acquisition is a relatively unimportant matter. Instead the primary focus is on achieving an equitable balance between sustaining ongoing operations while concurrently providing adequate support for entrepreneurial activities. Sharma (1999) posited that this balancing act resulted in large firms facing the following dilemmas:
Managing all of the available ideas
Ensuring younger managerial staff has the capability to make commercially viable decisions
Justifying the allocation of staff during the development phase when no revenue is being generated
Ensuring an equitable balance of resources across the organization
Defining a launch strategy that is financially sustainable
Playbook Guideline 58: Careful management is required in order to achieve an appropriate balance between existing activities and involvement in radical innovation
Regaining Creativity
Case Aims: To demonstrate that excessively structured management systems can have an adverse impact on leading-edge innovations
Founded in 1902, the American 3M Corporation established a reputation for outstanding innovation. However, in the late 1990s, 3M experienced declining performance, probably reflecting that it had become too big and risk-adverse (Radjou, Prabhu, and Ahuja 2012). 3M hired Jim McNerney as the new CEO. Having previously worked at GE, he brought with him a disciplined attitude aimed creating a more efficient organization to be achieved through the use of the Six Sigma management philosophy. This highly structured system emphasizes predictability and certainty and is considered to have contributed to significantly improving profitability.
When Six Sigma techniques were utilized in 3M’s R&D laboratories, the aim was to systematize and standardize the cause innovation processes to be faster and more cost-effective. Innovators responded to the new philosophy by focusing on improving existing products and avoided involvement in high-risk leading-edge research. By 2005, 3M’s revenue from new products had fallen from the traditional 30 percent to only 21 percent of the total sales. McNerney’s replacement George Buckley perceiving the negative aspects of the Six Sigma process began to de-emphasize the concept within the organization. One important move was to reinstate the 15 percent rule self-directed projects concept, which gave 3M innovators the flexibility and freedom to pursue radical ideas without the fear of censure by senior management.
Leadership
R&D groups tend to differ from other teams within organizations because of the time-lagged, sporadic nature their outputs (Narayanan 2001). Innovation tasks usually involve a high risk of failure and frequently experience disruptions, delays, and setbacks (Kim, Min, and Cha 1999). All of these properties pose unique challenges for team leaders. Certain leadership practices have been identified as facilitative of individual creativity and team innovativeness. These include consultative leadership, commitment, charisma, work-related rather than administrative communications, high levels of information sharing, support for new ideas, focus on interpersonal skills of members, and a commitment to learning (Stoker et al. 2001).
Zhenga, Khoury, and Grobmeiera (2010) undertook a study of four technology teams to gain further understanding of the leadership role in R&D environments. The four teams demonstrated similar leadership characteristics as well as differences. The researchers concluded that the team leaders all exhibited the following common traits:
Simultaneously focused on the internal and external domains of the team
Steering rather than channeling efforts
A hands-off style and exerting minimum oversight
Buffering by serving as the team gatekeeper
Acting as the primary communications channel
Rainmaking by promoting their team inside and outside the organization
Playbook Guideline 59: The effectiveness of team leaders is critically important in ensuring the success of technological entrepreneurship endeavors
Managing Teams
Managerial leadership style and work environment significantly influence innovative performance, especially in the case of self-directed work teams (DiBella 1995). Thamhain’s (2003) study of R&D teams revealed certain metrics commonly used by team leaders and managers as indicators of innovative performance included (i) the number of new products or services introduced to market, (ii) time-to-market, (iii) cost and performance improvements, and (iv) number of generated patents. For teams and individuals, meaningful performance measures were more difficult to define.
Thamhain opined that one of the major challenges in innovation management is to achieve the involvement of the entire workforce. This is because high-tech innovation is a multidisciplinary effort, involving teams of people and support organizations interacting in a highly complex, intricate, and sometimes, even chaotic way. Factors of influence for achieving convergence between individual and overall organizational goals include effective communication, information sharing, and integration of activities with a common focus on desired outcomes.
Dynamic Capability
Firms can reduce variability and create greater efficiency by developing and improving internal processes. These routines are less effective when efforts require higher levels of innovation, such as creating new product categories, developing new technologies, or entering new markets (Cooper, Edgett, and Kleinschmidt 2004). When uncertainty is high, deterministic systems and procedures designed to bring order to a situation may vitiate the chaos necessary for successful innovation. Schreyogg and Kliesch-Eberl (2007) posited that the key capability for innovation to occur is the dynamic ability to learn and improvise. This will permit the firm to respond to the need for change, regardless of the environment.
Innovation requires a search for new information outside the existing knowledge base, often in areas unrelated to current operations. The process can be uncertain as well as only being of relevant to a particular context. As a consequence, there will be a requirement to engage in experimentation to cope with high variation and diversity (March 1991). There may be little clarity about how particular decisions lead to particular outcomes. This situation will, therefore, demand ad hoc problem-solving and iterative adaptation to unpredictable outcomes (Winter 2003).
The creation of dynamic capability requires the presence of specialist personnel. Certain characteristics may not distinguish entrepreneurs from more conservative employees in areas such as in-depth expertise, problem-solving ability, and communication skills. But, other skills tend to be unique to entrepreneurs. These include a tolerance for high risk and ambiguity and the ability to persist and sell innovative ideas (Day 1994). The organizational environment is also highly important in enabling innovation. Project teams need to be able to interact and exchange information with others to engage in the high level of problem solving and creative action necessary for innovation. Communications about new ideas is best fostered in strong personal relationships because innovation often requires close collaboration between those who do not typically work together. Hence, in their relational support role, managers can facilitate communication by promoting collective understanding and interpersonal trust among employees (Dess et al. 2003).
Playbook Guideline 60: The complexity of many technological entrepreneurship projects demands the development of dynamic capabilities within the organization
Managing Technological Diversity
Case Aims: To illustrate how a complex high-tech organization may seek to achieve structure and order within the innovation process
Boeing Corporation is a highly diversified company engaged in areas that include (i) commercial aircraft products and services (ii) defense products such as military aircraft and missiles, (iii) space products such as satellites and launch vehicles, and (iv) a growing array of advanced networked system products for both commercial and defense applications. This diversity of products and services relies upon the sustained exploitation of innovation across a widening array of technologies. An enterprise such as Boeing usually requires the existence of a framework for managing innovation across many areas in a manner that is focused and connected, but without hindering creativity. Hence, the company has sought to avoid a personality-driven approach to research management because this may result in a R&D portfolio based on preferences and hunches, rather than providing the basis for a systematic view of the whole company and its opportunities (Lind 2006).
Boeing Corporation has identified certain key objectives that underpin decisions concerning the current and future innovation portfolio. These include projects being required to be:
Highly collaborative, drawing many types of participants together in the innovation process
Systematic, applying systems engineering principles and process concepts
Lean enabling enterprise-level R&D to respond effectively and efficiently to Boeing business needs
Continuous, enabling management of the portfolio in response to changes in company needs and opportunities as they arise
Traceable, ensuring clear linkage of R&D efforts to business needs
Promote a high level of innovation, experimentation, and discovery
Enable longer-term R&D to be properly related to near-term R&D
Draw appropriately from external and global sources of R&D such as labs, universities, and other companies
Manage complexity in a fashion that enables participants to know what they need to know and when they need to know it, without being overwhelmed with details they do not need
Be simple and clear, allowing people to quickly see how they can contribute and collaborate with others
Strategic Planning
The conventional view is that strategic planning promotes a careful review of the different options in various business environments, which increases the number of new product development (NPD) projects and enhances firm performance (Moorman and Miner 1998). Strategic planning is formal process that utilizes explicit procedures to determine specific, long-range objectives, generate alternative strategies, requires adherence to the selected strategy upon plan implementation, and utilizes a structured system to monitor results. By clarifying competitive threats and opportunities, the process provides the basis for implementing actions designed to enhance firm performance. Planning can help speed up the NPD process by resolving organizational conflicts and providing a clear vision for future activities. Christensen (1997) argued that planning based on sound market research, followed by execution provides that provides justification for strategic management being an effective and efficient process.
Eisenhardt and Tabrizi (1995) articulated the idea that improvisation or an experiential approach that lacks formal planning may increase the number of NPD projects. This is because such activities motivate the impromptu acquisition and application of knowledge and intelligence, which may be tangential to norms, rules, and conventions. The implication associated with this latter perspective is strategic planning could represents an inertial force that decreases the number of NPD projects.
Song et al. (2011) opined three reasons to support the view that strategic planning decreases the number of NPD projects. First, formal strategic planning may provide irrelevant and incomplete NPD knowledge because it cannot accommodate unexpected outcomes or problems that occur during the NPD process. Second, a formal strategic planning process designed to govern and control NPD activities may prevent employees from being innovative. Third, by their very nature, innovative and entrepreneurial initiatives cannot be planned precisely in advance. Fourth, strategic planning may promote a culture of inertia and rigidity within which creative ideas for projects that are not part of organizational memory are often rejected.
An experiential approach that eschews formal planning and focuses on improvisation can accelerate the ideation process. In addition, improvisation motivates the impromptu acquisition and application of knowledge, which helps teams generate more NPD projects by increasing the speed of the NPD activities. Additionally, a firm that emphasizes improvisation in NPD can continuously evaluate activities and outcomes. This will create more NPD projects than an organization that draws on resources from prior learning and strategies to respond to the changing market potential (Chelariu, Johnston, and Young 2002).
Playbook Guideline 61: Excessive reliance on formalized strategic planning can reduce the capabilities of the organization to identify and develop highly innovative new ideas
Radical Innovation
Rae (2007) noted that senior management behavior can adversely influence the functioning of an R&D project. Burgelman, Christensen, and Wheelwright (2008) found that the senior management within 3M’s optical systems division did not differentiate between R&D projects. They used the same reporting structures and metrics to evaluate all their R&D projects, regardless of whether the project was incremental or radical. This resulted in project teams preferring more predictable projects with short-term rewards, which ultimately affected the long-term innovation performance at 3M.
Frameworks used to categorize R&D projects are usually based on the extent of change. Wheelwright and Clark (1992) used the product and process dimensions to evaluate the extent of change in project scope. They classified projects that have low levels of product and process change as “derivative projects,” projects that have high levels of product and process change as “breakthrough projects,” and projects with medium levels of product and process change as “platform projects.”
R&D projects in high-tech organizations fall into three distinct categories based on their learning goals, namely radical innovation projects, incremental innovation projects, and hybrid projects. These three types of projects benefitted from different types of incentives, leadership, and team autonomy. Incremental innovation projects benefitted from outcome incentives, transactional leadership, and lower levels of team autonomy. In contrast, radical innovation projects benefitted from process incentives, transformational leadership, and higher levels of team autonomy. Transformational leaders are more able to promote risk taking and experimentation, which in turn encourages team members to search for novel solutions. Furthermore, these teams benefitted from higher levels of team autonomy because this permitted team members to adjust their assignments and goals. Hybrid projects will benefit from an ambidextrous leadership style and a reasonable level of team autonomy. Because these projects face pressures to find novel solutions under time or budget constraints, ambidextrous leadership promoted risk taking and experimentation, but also drove teams to meet explicit targets.
Playbook Guideline 62: Radical innovation can benefit from transformational leadership and high levels of team autonomy
Bootlegging
Case Aims: To illustrate how unofficial activities can enhance innovation within organizations
Bootlegging is an entrepreneurial process whereby employees seek to bypass corporate systems to engage in underground projects. For example, within BMW, the 12-cylinder engine was developed over a period of five years by a group of motor aficionados, without management approval. The engine was a success and contributed significantly to BMW’s brand image of innovative automobile excellence (Anon 2006).
Augsdorfer (2008) posited bootleg entrepreneurs usually do not care whether bootlegging is permitted or not, or if the firm expects open communication about the activity. At Becton Dickinson, total transparency is perceived by senior management as an unrealistic demand and driven by wishful thinking. When managers know about bootleg projects, this will tend to cause questions to be asked, thereby reducing the researcher’s sense of freedom. On the basis of available data, Augsdorfer proposed that the dilemmas faced by bootleggers include:
Creative people need an outlet for their creative energy and curiosity. Most formal organizations fail to provide sufficient space for people with ideas outside the mainstream.
Decisions that concern innovations are important, but often have to be taken under conditions of high technical and market uncertainty. They must be based on careful analysis, with uncertainties reduced to a minimum. Hence, the bootlegger may face a chicken- and-egg situation. Research is required to get the idea accepted. However, how does research commence without a go-ahead? The bootlegger must be willing to engage in unapproved informal research because it is unlikely that a formal approval will be given.
R&D budgets need to be planned. Usually, this happens annually when objectives are linked to budgets. But, great ideas often occur between planning periods.
These dilemmas can be overcome by resorting to underground activity. Serendipity, spin-offs from current research, or other unforeseen events are important in unleashing creative ideas. Dissatisfaction with a manager’s decision or rising personal interest in a current topic is a further trigger. It is common to spend some hours bootlegging on a regular basis. Most bootleg projects were accepted by the firm after disclosure because they met the firm’s business needs. Radical innovation depends on good ideas emerging from individual minds. Augsdorfer opined that bootleggers can be considered as creative because they think in a divergent way, opening up opportunities for the firm.
Augsdorfer also proposed that only occasionally do underground ideas create radical breakthroughs. Most companies interviewed characterized the usual bootleg idea as leading to a technological improvement. The technology of existing products is improved either by adding functionality or replacing technological imperfections with specific refinements.
Although bootleg entrepreneurs work outside any formal procedures, they are, in fact, controlled by friends, colleagues, and on occasion, by customers. Criticism by others is useful for distilling and refining the quality of the idea. Despite concerns senior management may have over their lack of control, bootlegging can provide an important catalyst for organizational creativity. This is because most outstanding new ideas typically emerge from a few creative individuals within an organization, who often question mainstream approaches. Hence, to ban or block bootlegging is likely to significantly reduce the innovative capabilities within an organization.
Playbook Guideline 63: Bootlegging can play an important role in stimulating creativity among the more entrepreneurial employees