CHAPTER A. AUDITING BEST PRACTICE FOR EFFECTIVE PRODUCT INNOVATION MANAGEMENT

Introduction’

Effective product innovation management is critical to the success of most manufacturing enterprises. With such a close link between product innovation performance and the organization’s overall success, managers and decision makers must ensure that this process is well managed and executed. However, product innovation is risky and expensive, which results in low success rates and many projects being terminated midway in the development cycle. With very many issues to address and very many variables to consider, practitioners and researchers seem to need a clear but complete framework for understanding and improving the product innovation management process. Such a framework is provided in this article.

Product innovation management (PIM)

Product innovation = The process of transforming business opportunities into tangible products and services.

Figure 1 illustrates a basic model for product innovation management. The goal of the model is to identify and integrate the most valuable and successful ways to plan and develop an effective product development process, namely it is proven that it is most ideal to have a portfolio of products whose product life cycles overlap. The model presented includes tools and procedures as well as individuals and teams. The model basically provides a structure, through which organizations can manage and coordinate their innovation process.

Five key activities:

1. Analyze the environment and identify opportunities

2. Generate innovations and investigate them

3. Plan projects and select sponsors

4. Prioritize projects and assign teams

5. Implement the product innovation plan

Each activity in the model is described in terms of inputs required, outputs, controls and mechanisms.

Controls = The enabling inputs to an activity, in the sense that they are the reason for the activity to take place.

Inputs = Consumed by the activity
>> Controls and inputs together create outputs, mediated by mechanisms

Controls are the enabling inputs to an activity. They are the reason for the activity to take place. Inputs are consumed by the activity and they together with controls are used to create outputs. Mechanisms are used by the activity to transform inputs and controls into outputs.

Key reasons for failure of product innovation management

• Lack of customer focus ; Manufacturing organizations often focus on internal procedures instead of focusing on the customer and his requirements and expectations

• Lack of shared understanding ; Product innovation teams are made up of experts from a wide variety of functions and disciplines and this diversity can create serious barriers for shared understanding

• Poor portfolio management ; Often an organization’s portfolio of product innovation projects is badly balanced in terms of optimal investment mix between risk versus return, maintenance versus growth, and short term versus long term projects.

• Poor communication and knowledge transfer ; Product innovation involves synthesizing and reusing existing knowledge and information, which organizations very often fail to do properly

Best practice model for PIM

The results of the research’s investigation revealed that there are many factors that affect the successful management of a portfolio of product innovation projects. Five key facilitators of PIM:

1. Strategy and Leadership
   Product strategy = The aims and objectives of the product innovation effort in relation to the organization’s overall strategy. It should specify market niches as targets to focus on and formalize the necessary structures for implementation. A product strategy should also focus and integrate team effort and permit delegation. Leaders are proven to have a significant impact on product innovation initiatives, namely leader’s role is to create a vision and effectively communicate this by setting clear objectives to all members of the organization. This is crucial to successful product innovation projects.

2. Culture and Climate
   Positive cultural characteristics can provide an organization with the necessary ingredients to innovate
   Culture = Values, norms and beliefs
   Climate = Policies, practices and procedures
   A lot of researchers claim that culture and climate are interconnected. In their view, employees’ values and beliefs (which are part of culture) influence their interpretations of organizational policies, practices and procedures (climate).

3. Planning and Selection
   It is necessary to effectively plan and select projects, which are customer focused and link to the new product strategy and goals

4. Structure and Performance
   A centralized, mechanistic structure = Reinforces past behaviors
   Organic, decentralized structure = Promotes learning and knowledge generation Centralization creates a more fragmented structure, which does not support people to challenge underlying assumptions and think for themselves. Decentralization, on the other hand, enables faster and more effective decision making in dynamic information rich environments. Organizations are beginning to reorganize organizational structures around communities of practice.

5. Communication and Collaboration
   Product innovation can be described as an information transformation process where information is gathered, processed and transferred in a creative way. Therefore, communication is a vital and basic necessity for product innovation
   Gatekeeper = Someone who scans the organization’s boundaries and brings information to the organization and disperses it to those inside
   >> Essential for product innovation.
   Other research found that significant benefits can be achieved if suppliers are involved in the early stages of the product innovation process. Customer involvement has also been proven to improve the effectiveness of the project, the same goes for internal communication and cooperation.

PIM scorecard

Innovation scorecards = Provides an overall assessment of the practices adopted with respect to best practices and enables decision makers to identify whether or not the required managerial processes and practices are in place

See Table 2 for the PIM scorecard with statements about each of the topics in the best practice model. Organizations that score high possess a good fit between their current management practices and systems and traits that are lauded to represent best practice. Inversely, an organization that scores low does not follow appropriate practices and will experience more difficulty developing successful products.

Conclusions

In today’s dynamic environment, it is becoming increasingly apparent that the survivors in this new era will be those companies who are rigorous in their pursuit of innovation, in order to develop and deploy new products more efficiently, effectively and profitability. It is also increasingly clear that the only way to achieve this goal is to actively manage the innovation process. In order to do this, managers must develop and provide the appropriate infrastructures and support systems.

CHAPTER B. THE BIG IDEA- BIG BANG DISRUPTION

Introduction

Disruptive technologies = Upstarts that offer cheap substitutes to existing products, capture new, low-end customers, and then gradually move upmarket to pick off higher-end customers, too. When these disrupters appear, it's time to act quickly—either acquiring them or incubating a competing business that embraces their new technology.

In this context, Big-bang disrupters = Entire product lines, and even whole markets are being created or destroyed overnight. Disrupters can come out of nowhere and instantly be everywhere. Big bang disrupters trigger disasters.

§B.2 ‘The differences’

The first key to survival is understanding that big bang disruptions differ from more-traditional innovations not just in degree but in kind. Big bang disruptions are not only cheaper than already existing offerings, they are also way more invented and better integrated with other already existing products and services. Many of them exploit consumers' growing access to product information and ability to contribute to and share it. The biggest challenge to incumbents maybe is that big-bang innovations come out of left field, combining existing technologies that don't even seem related to existing offerings to achieve a dramatically better value proposition. Big-bang disrupters may not even see already existing offerings as competition. They don't share that approach to solving customer needs. And they're not sizing up existing product lines and figuring out ways to offer slightly better price or performance with hopes of gaining a short-term advantage. Usually, they're just tossing something shiny in the direction of customers, hoping to attract them to a business that's completely different from already existing ones.

§B.3 ‘The three devastating features of big-bang disrupters’

• Unencumbered development ; Big bang disruptive innovations are often born of rapid-fire, low-cost experiments on fast-maturing, ubiquitous technology platforms. They don't need budget approval and aren't vetted before development begins. When cost is low and expectations are modest, entrepreneurs can just launch their ideas and see what happens.

• Unconstrained growth ; See Figure 1, graph of Traditional Technology Adoption vs. Big-Bang Disruption. Big-bang disruptions can be marketed to every segment simultaneously, right from the start.

• Undisciplined strategy ; According to many previous work of several researchers, businesses should align strategic goals along one of three value disciplines: low cost (operational excellence), constant innovation (product leadership), or customized offerings (customer intimacy). Failing to choose, said the authors, meant "ending up in a muddle." Big-bang disrupters, are thoroughly undisciplined. They start life with better performance at a lower price and greater customization. They compete with mainstream products on all three value disciplines right from the start.

§B.4 ‘How to survive big-bang disruptions?’

Big-bang disrupters are rewriting the rules of industry after industry, and the new rules hold only until the next wave of disruption comes along. There's almost no time to adapt, meaning bold strategies are the only way to cope:

• See it coming ; Learning to recognize the warning signs of disruptive innovation is key to survival. You need new tools to recognize sooner than your competitors do that radical change is on its way, and that means interpreting the real meaning behind seemingly random experiments
  Truth teller = Has talents that are based on equal parts genius and complete immersion in the industry's inner workings >> See article for examples (Steve Jobs, Bill Gates)

• Slow the disruptive innovation long enough to better it ; The best survival strategy may simply be to ensure that disrupters can't make money from their inventions until you're ready to acquire them or you can win with a product of your own. You can't stop a big-bang disruption once its unconstrained growth has taken off, but you can make it harder for its developers to cash in

• Get closer to the exits, and be ready for a fast escape ; It's up to senior management to confront the reality that even long-successful strategies may be suddenly upended, requiring a radical recreation of the business. To compete with undisciplined competitors, you have to prepare for immediate evacuation of current markets and be ready to get rid of once-valuable assets

• Try a new kind of diversification ; Diversification has always been a hedge against risk in cyclical industries. As industry change becomes less cyclical and more volatile, having a diverse set of businesses is vital. >> See article for examples (Fujifilm)

§B.5 ‘Conclusions’

You can't see big-bang disruption coming, big-bang disruption is the innovator's disaster. The impact of big-bang disrupters is certainly amplified for technology- and information-intensive businesses, but most industries are at risk. See article for examples.

CHAPTER C. COMMUNICATION FLOWS IN INTERNATIONAL PRODUCT INNOVATION TEAMS

§C.1 ‘Introduction’

Research question: “Viewing international innovation as an interfunctional activity, what are the communication requirements an international innovation team is facing, and what are the communication capabilities (interface mechanisms) that may be adopted to initiate, develop, and launch the new product effectively and efficiently?”

The analysis of the case study data suggests five requirements that determine the effectiveness and efficiency of communication in international product development teams:

• Network transparency

• Knowledge codification

• Knowledge credibility

• Communication cost

• Secrecy.

To cope with these communication requirements, organizations may create firm level capabilities (parallel structures, cross-functional and inter-unit climate, communication infrastructure, goal congruence) and team level capabilities (core team, team leadership, formalization, procedural justice).

>> The authors focus on the organization process of international innovation, and particularly on the communication flows during such projects

The following definitions will be used throughout the article:

Technological product innovation = A product whose development requires that an organization invests human, financial, or technical resources, to acquire new or unknown technologies, or to combine known technologies in a novel way

Technology = The practical application of scientific or technical knowledge

International product innovation project = An innovation project for which the functional responsibilities on R&D, production and marketing are not concentrated in one single country

§C.2 ‘Communication requirements in international innovation’

Communication = A process in which a source transmits information to a receiver through one or more channels.

Two conditions for effective communication:

1. There must be an intent to share information

2. The information transmitted has an effect on the receiver

For communication to be efficient, the intended communication effects must be obtained at the lowest cost possible.

The authors identify three effectiveness requirements (transparency of the communication network, knowledge codification, knowledge credibility) and two efficiency requirements (cost of communication, secrecy) for communication:

• Transparency = The degree to which the communication network is sufficiently clear and accessible, in order to let everyone understand the inputs and progress made.
  >> Limited transparency implies that members of a network have problems identifying the relevant persons to transfer information to or to obtain information from.

• Knowledge codification = The individual and collective processes through which knowledge and experience may be structured and made explicit

  • Different units and functions of an organization develop an idiosyncratic language, subculture, and a way of exploring and analyzing the environment. This is an important problem for companies growing via mergers and acquisitions.

  • The results of R&D activities are inherently difficult to codify

  • International differences in language, culture and context, provide another impediment to codification

• Knowledge credibility ; Previous research on innovation projects has shown that cross-functional interfaces are often embedded in a negative climate. Such a climate has a strong negative effect on the quality of cross-functional communication. It reduces the credibility of received information, and consequently the receptivity towards this information

• Communication costs; The costs, expressed in money as well as time, associated with personal communication in international new product development teams, may become prohibitive. Time and cost constraints may create a high degree of resource uncertainty in complex innovation structures involving multiple geographically separated units.

• Secrecy ; The innovation activities a company deploys are often of great strategic importance, meaning that secrecy is best assured when these activities are geographically concentrated. The internationalization of a firm’s activities increases the likelihood of information leaks.

§C.3 ‘Communication capabilities in international innovation’

To organize cross-functional communication flows in an effective and efficient way, companies have developed several communication capabilities. Two types of capabilities may be distinguished: firm capabilities and team capabilities.

• Firm capabilities

  • Parallel structures Assume an important part in the planning of innovation activities, and they also serve as an important platform for information transfer within the company

  • Cross-functional and Interunit Climate. Next to formal integration mechanisms (such as parallel structures), MNCs often rely on the firm’s organizational climate as a means for achieving normative integration, that is, consistency in purpose among disparate actors. Thus, it is not uncommon for cross-functional innovation teams to take time out to build organizational cohesion via personnel assignments, task-forces, reward systems, etc.

  • Communication Infrastructure. The new communication media have a great impact on both the effectiveness and efficiency of cross-functional communication flows.

  • Goal Congruence. A critical element determining team integration concerns the level of goal congruence between separate units. An important (and often institutionalized) impediment to team integration is the choice of performance parameters which are used to assess local operating units. In the absence of long-term congruent unit goals, emphasis is often put on local and operational activities and short term projects, reflecting the standards on which local units are evaluated

• Team capabilities

  • Core Team. Short and direct communication channels are preferred over long and indirect channels. Because of the complexity of the communication network, a central and commonly accepted connection point is required.

  • Team Leadership. Earlier research has shown that the choice of the team leader is an important determinant of innovation success

  • Team Formalization. Unlike past innovation studies, more recent studies have repeatedly shown that formalization contributes to interfunctional communication. This implies that team responsibilities have to be defined explicitly. Thus, a certain level of project protocol is needed to avoid conflicts and inefficiencies.

  • Procedural justice. The acceptance and successful implementation of a decision is strongly determined by the proactive involvement of all parties that are affected by this decision. The authors refer to this as ‘procedural justice’.

§C.4 ‘Model presentation’

The analysis of the case study data has suggested five requirements that determine the effectiveness and efficiency of communication in international product development teams: network transparency, knowledge codification, knowledge credibility, communication cost, secrecy. To cope with these communication requirements, organizations may create firm level capabilities (parallel structures, cross-functional and interunit climate, communication infrastructure, goal congruence) and team level capabilities (core team, team leadership, formalization, procedural justice). See Figure 1.

The article provides a parsimonious propositional model on the communication requirements that must be addressed in the management of communication flows in international product innovation teams.

CHAPTER D. ENHANCING SYNERGISTIC INNOVATIVE CAPABILITY IN MULTINATIONAL CORPORATIONS- AN EMPIRICAL INVESTIGATION

§D.1 ‘Introduction’

A substantial amount of research has focused on determining and classifying the structures of the global research and development (R&D) organization of multinational corporations (MNCs). However, little research has been undertaken to show how the various R&D structures adopted by MNCs affect their abilities to generate and deploy innovations globally. The study of this article initiates analysis and discussion of this latter dimension, providing empirical evidence of the relationship between the coordination structures and innovative capabilities. Specifically, this study investigates how intrafirm collaborative relationships among globally dispersed R&D units of MNCs enhance the synergistic innovative capabilities of the MNC group.

The underlying premise of the study in this article is that the global dispersion of R&D activities does not necessarily lead to improvements in innovative capabilities unless accompanied by effective cross-border coordination and integration. Effective cross-border coordination can be evaluated with four established constructs: autonomy, formalization, socialization, and communication. These constructs individually and collectively define the relationship between the headquarters (HQ) and overseas subsidiaries and inter subsidiary relationships.

§D.2 ‘Conceptual development’

Figure 1 depicts the conceptual framework developed for this study. It shows that synergistic innovative capability, the dependent construct, is directly determined by the extent to which autonomy, formalization, socialization, and communication are used to coordinate and control the activities of globally dispersed R&D units. In addition, the level of autonomy of R&D units is influenced by the level of resources available to them and the complexity of the environment in which they operate. Furthermore, the extent of socialization among globally dispersed R&D units is determined by the level of cultural diversity of the global R&D organization and the level of trust among the units. The theoretical justification for these relationships and the operationalization and measurement of each construct are discussed in greater detail in the remainder of this section.

Synergistic innovative capabilities- Dependent variable

Enhanced innovative capabilities depend on the frequency, density, and quality of interactions both within and outside the MNC group. In the study of the article, the focus is on how interactions within the MNC group amplify innovative capabilities through synergy. Synergy = The effect or outcome of cooperative interactions that individual parts cannot achieve alone.

>> Thus, Synergistic innovative capabilities = Higher-order ability to accumulate and deploy new knowledge or to recombine existing knowledge to create new innovations more effectively and efficiently due to collaboration among globally dispersed R&D units.

Direct effects- Independent variables

Autonomy.
The obverse of centralization, autonomy is the degree to which an R&D unit is able to make

or influence strategic and operational decisions affecting it in various value-adding activities, including production, marketing, human resources, budgets, and R&D. R&D units with greater autonomy have more authority when making decisions on their own behalf compared to those with less autonomy. Autonomy requires resources of several types, including managerial, technological, financial, and informational
Hypothesis 1 >> ‘Greater autonomy of R&D units will positively impact synergistic innovative capability.’

Formalization.

Formalization refers to decision making based on formal systems, established rules, and prescribed procedures. It involves monitoring by HQ representatives, frequent reporting by foreign R&D units, or incentives for units to comply with the expectations of HQ.

Hypothesis 2 >> ‘High levels of formalization will negatively impact synergistic innovative capability.’

Socialization

Socialization refers to the process by which R&D units learn and embrace the values, norms, and required behaviors of the corporation

Hypothesis 3 >> ‘High levels of socialization will positively impact synergistic innovative capability.’

Communication
Hypothesis 4 >> ‘HQ-subsidiary electronic communications will positively impact synergistic innovative capability.’

Hypothesis 5 >> ‘HQ-subsidiary personal communications will positively impact synergistic innovative capability.’

Hypothesis 6 >> ‘Intersubsidiary electronic communications will positively impact synergistic innovative capability.’

Hypothesis 7 >> ‘Intersubsidiary personal communications will positively impact synergistic innovative capability.’

Antecedent constructs
According to international management and global R&D research, resource levels and environmental complexity are two primary variables that determine the level of autonomy of globally dispersed R&D units. Similarly, trust and cultural diversity are identified as two key variables influencing the extent of socialization among these R&D. These variables were selected because of their potential to influence the innovative behavior of organizational units

Resource levels and environmental complexity

Researchers argue that the level of resources available to R&D units for creative activities is critical for innovations and collaboration because R&D units facing tight resources may be unable or unwilling to collaborate out of concerns that existing projects may suffer. Similarly, some researchers contend that organizational units operating in complex environments face greater uncertainty and, thus, require greater autonomy in order to be more responsive

Hypothesis 8 >> ‘R&D units with more resources will have greater autonomy.’

Hypothesis 9 >> ‘R&D units operating in more complex environments will have greater autonomy.’

Cultural diversity and trust

The more R&D staff trust each other, the greater the likelihood that they will share knowledge, information, and other assets of strategic value with their colleagues in other locations. Researchers also observed that R&D staff from different cultures tend to interpret, process, and share information differently

Hypothesis 10 >> ‘Greater levels of trust will lead to increased socialization.’

Hypothesis 11 >> ‘Greater cultural diversity will lead to increased socialization.’

See Table 8 for the Results of Hypothesized Relationships.

The key finding of the study in this article is that synergistic innovative capability is a multidimensional construct uniquely related to the coordination structures employed to manage the global R&D organization of the MNC (See Figure 2).

CHAPTER E. FORMS OF KNOWLEDGE AND MODES OF INNOVATION

§E.1 ‘Introduction’

According to the authors, there is a tension between two modes of innovation:

• Science, Technology and Innovation (STI) mode = Production and use of codified scientific and technical knowledge

• Doing, Using and Interacting (DUI) mode = Informal processes of learning and experience-based know-how.

Doing analyses, the authors found that firms practice the two modes with different intensities. The firms combining the two mods are found to be more likely to innovate new products or services than those relying primarily on one mode or the other.

Firm level >> Tension may be seen in the need to reconcile knowledge management strategies prescribing the use of ICT a tools for codifying and sharing knowledge with strategies emphasizing the role played by informal communication and communities of practice in mobilizing tacit knowledge or problem-solving and learning

Macro-economic level >> Tension corresponds to a need to reconcile and combine approaches to national innovation systems focusing on the role of formal processes of R&D in order to produce explicit and codified knowledge with those focusing on the learning form individual interaction within and between organizations resulting in competence-building often with tacit elements.

§E.2 ‘Knowledge defined’

Knowledge will be defined on the basis of dichotomies: explicit versus implicit and local versus global.

Explicit versus implicit knowledge
Explicit knowledge = Knowledge that can be written down may be passed on to others and can be absorbed by those who can read and understand the specific language.

>> In order to understand messages about the world you need to have some prior knowledge, skills and competences: Implicit knowledge

Codification is to make explicit what is implicit

Local versus global knowledge
The local versus global knowledge scale is about the generalizability and the degree of standardization of knowledge.

From know-what to know-who

There are four distinctions that are useful for understanding the different channels and mechanisms through which learning different types of knowledge takes place:

• Know-what

• Know-why >> Generic understanding

• Know-how >> Learnt in apprenticeship-relations

• Know-who >> Learnt in social practice and specialized education environments

Know-what and know-why may be obtained through reading books and attending lectures. Know-how and know-who are more rooted in practical experience.

The STI mode gives priority to know-why and the DUI-mode hives priority know-how and know-who. At the same time, specialized know-what is often required for operating in a science-based learning mode.

§E.3 ‘Forms of knowledge and modes of learning’

The different types of knowledge are related to differences in the two modes of learning and innovation. Technologies should be understood as involving both a body of practice, manifest in the artefacts and techniques that are produced and used, and a body of understanding, which supports, surrounds and rationalizes the former

STI-mode

The STI-mode refers to the way firms use and further develop science-like understanding (know-why) on the context of their innovative activities. The STI-mode develops explicit and global know-why, but there is a significant role for locally embedded implicit knowledge as well. When innovating, the STI-mode attempts to restate the problem in an explicit and codified form, going through earlier work and looking for pieces of already codified knowledge as well as looking for insights that can be drawn from outside sources.

>> Through the whole process all documenting results in a codified base of knowledge, not as tacit knowledge in the minds of individuals.

Knowledge management >> Knowledge sharing through wide access to codified knowledge within the firm

DUI-mode

In the DUI-mode, learning may result in both specific and general competencies for the operator. The DUI-mode refers to know-how and know-who which is tacit and often highly localized. The DUI-mode can be fostered by building structures and relationships that enhance and utilize learning by doing, using and interacting. Closer interaction with users of products and services outside the organization typically is a prerequisite for the experience-based learning that supports product innovation.

§E.4 ‘Conclusions’

The analysis conducted shows that the Danish economy of firms is characterized primarily by DUI or by STI learning strategies. The results also show that many firms that are involved in STI-learning have established organizational elements related to the DUI-mode. The research also shows that what really improves innovation performance is using mixed strategies that combine strong versions of the two learning modes.

>> Knowledge management: Make strong versions of the two modes work together in promoting knowledge creation and innovation.

CHAPTER F. FORTUNE AT THE BOTTOM OF THE INNOVATION PYRAMID- THE STRATEGIC LOGIC OF INCREMENTAL INNOVATIONS

§F.1 ‘Radical versus incremental innovations’

Radical innovations = Innovations that are new to the firm, market and industry; which incorporate a substantially different and new technology; and which provide substantially higher customer benefits relative to current products in the industry.

Incremental innovations = Improvements in a firm’s existing product offerings that better satisfy the needs of its current and potential customers. Incremental innovations manifest as adaptations, refinements, enhancements, or line extensions, incorporating new features that offer additional benefits.

This article focuses on incremental innovation in businesses’ competitive strategy by exploring how they can be leveraged to compete more effectively in the marketplace.

§F.2 ‘Incremental innovations and competitive strategy’

Refer to Table 1 for an overview of the role of incremental innovations in various competitive strategy contexts. See the article for examples for each context.

• Extending the time horizon of the revenue stream from radical innovations

• Entering new markets in product categories in which the firm currently has a presence

  • New types of markets

  • New market segments

  • New geographic markets

• Entering new product-markets in product categories in which the firm currently does not have a presence

  • New product-markets that currently are fragmented industries

  • New product-markets that emerge or become attractive as a consequence of changes in the legal and regulatory environment

  • Related new product-markets with entrenched competitors

• Achieving and defending product category leadership

  • Preempting shelf space by preempting potential entry points of competitors

  • Responding to price sensitivity and variety-seeking behavior driven brand switching

  • Protecting flagship brands with flanker brands

• Commanding a higher price relative to the product being supplanted by the incremental innovation, or a price premium relative to competitors’ offerings, to achieve higher margins

• Adapting to the structural constraints of the industry ecosystem

Research on incremental innovation shows that incremental innovations that manifest as line extensions can have three primary effects: 1. It increases overall demand; 2. It affects supply by increasing costs; 3. It has strategic consequences such as deterring entry of competitors and thereby allow an incumbent firm to increase prices

Research on incremental innovations that manifest as added new features suggest that added features provde positive differentiation by giving a product perceived advantages over the products of competitors.

§F.3 ‘Implications’

In today’s competitive environment, pursuit and effective exploitation of both radical and incremental innovation opportunities are imperatives. Managed effectively, each radical innovation can serve as a springboard for a steady stream of incremental innovations that generate new revenue streams

Firms set innovation-related performance objectives. It is important to ensure that the scope of such objectives encompass performance objectives and metrics specific to incremental innovations

Firms should strive to nurture organizational conditions, which are climate, processes, policies, structures and systems conductive to superior performance in the realm of incremental innovations

The importance of incremental innovations to a firm’s long-term growth, profitability, and survival should be guard against internal organizational conditions such as managerial biases and excessive focus on incremental innovation to the detriment of pursuit of radical innovations

CHAPTER G. INNOVATION AND KNOWLEDGE CREATION- HOW ARE THESE CONCEPTS RELATED?

§G.1 ‘Introduction’

Firms feel the need to develop strategies that offer them a sustainable competitive advantage >> Such strategies require the firm to continuously differentiate products and services, thus to constantly innovate. This continuous innovation process requires well developed knowledge management systems that facilitates in knowledge creation.

There is a strong relationship between innovation and knowledge creation.

§G.2 ‘Innovation’

Innovation = New knowledge incorporated in products, processes and services.

Technological innovation = knowledge of components, linkages between components, methods, processes and techniques that go into a product or service

Process innovation = Concerned with introducing new elements into an organization’s operations such as input materials, task specifications, work and information flow mechanisms, and equipment used to produce a product or render a service

Market innovation = New knowledge embodied in distribution channels, product, applications, as well as customer expectations, preferences, needs, and wants

Administrative innovation = Innovations that pertain to the organizational structure and administrative processes

Technology and market perspectives

• Abernathy and Clark classify innovation according to their impact on the market knowledge and technological capabilities of the firm who can be either preserved or destroyed. See Figure 1 for their model [regular innovation, revolutionary innovation, niche innovation, and architectural innovation]

• Henderson and Clark say to build products two kinds of knowledge are required: knowledge of a product’s components and knowledge of the linkages between components (architectural knowledge). Four kinds of innovations can be produced along these dimensions. See Figure 1 for their model [incremental innovation, architectural innovation, modular innovation, and radical innovation]

• Tushman et al. say that market knowledge can be either new or existing and technology can be either incremental or radical. Here, four kinds of innovation are identified. See Figure 1 for their model [architectural innovation, major product/service innovation, incremental product/service process, major process innovation].

They also propose a fifth kind of innovation: generational innovation = Intermediate phase where both market and technology are going through continuous changes.

• Chandy and Tellis suggest again two common dimensions: technology and markets. Technology refers to the extent to which the technology is new/different and markets refer to the extent to which the new product fulfills key customer needs better than existing ones. See Figure 1 for their model [incremental innovation, market breakthrough, technological breakthrough, radical innovation]

Radical and incremental innovations

Radical innovation = Fundamental changes that represent revolutionary changes in technology. They represent clear departures from existing practice.

Incremental innovation = Other changes which are insignificant, minor, or do not involve a sufficient degree of novelty

Refer to Table 2 for the differences between incremental and radical innovation

§G.3 ‘Knowledge creation in organizations: concepts and models’

Organizational knowledge

Knowledge = A fluid mix of framed experiences, values, context information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. See Figure 2 for an illustration of knowledge

• Tacit knowledge = Experience, thinking, and feelings in a specific context, comprised of cognitive and technical components.

  • Cognitive components = Individual’s mental models, maps, beliefs, paradigms and viewpoints

  • Technical component = Concrete know-how and skills that apply to a specific context

• Explicit knowledge = Articulated, codified and communicated using symbols

  • Object based = Codified in words, numbers, formulas, or made tangible as equipment, documents, or models

  • Rule based = Encoded as rules, routines or standard operating procedures: task performance rules, record-keeping rules, information-handling rules and planning rules

• Cultural knowledge = Assumptions and beliefs that are used to describe, and explain reality, as well as the conventions and expectations that are used to assign value and significance to new information. Cultural knowledge is not codified.

• Individual knowledge = Created by and existing in the individual according to her beliefs, attitudes, opinions and the factors that influence her personality formation

• Social knowledge = Created by and residing in the collective actions of a group. Involves norms that guide intra-group communication and coordination

• Know-how = Procedural knowledge

• Know-why = Causal knowledge

• Know-when = Conditional knowledge

• Know-with = Relational knowledge

Knowledge creation

Knowledge creation can be done through the conversion and interaction between tacit and explicit knowledge.

Knowledge conversion occurs in four modes (See Tables 3 and 4):

• Socialization: tacit to tacit

• Externalization: tacit to explicit

• Combination: explicit to explicit

• Internalization :explicit to tacit

§G.4 ‘Innovation and knowledge creation’

Refer to Table 5 for a summary regarding innovation and knowledge creation.

Role of knowledge and knowledge creation into the classification of types of innovation (mostly based on capabilities and market knowledge). As already discussed, knowledge creation involves tacit and explicit knowledge, where tacit knowledge is closely related to knowledge exploration (discovery and experimentation >> Socialization and Externalization tacit knowledge) and explicit knowledge is closely related to knowledge exploitation (accumulating experience >> Combination and Internalization explicit knowledge).

Refer to Table 6 for a generic classification of innovation in a knowledge creation perspective

CHAPTER H. INNOVATION IN MULTINATIONAL CORPORATIONS: CONTROL AND COMMUNICATION PATTERNS IN INTERNATIONAL R&D OPERATIONS

§H.1 ‘Introduction’

A challenge facing many large multinational corporations (MNCs) today is how to effectively make use of their research and development operations. The R&D department is becoming increasingly important, and efforts therefore have to be made regarding how best to manage the relations between R&D operations around the world.

The authors identify three types of R&D unit role (local adaptor, international adaptor, international creator). They show that: (1) each type of R&D unit is managed primarily through a different mode of control; (2) local and international adaptors both focus their communication on their internal corporate network; and (3) international creators have strong internally and externally oriented networks of relationships.

§H.2 ‘Literature review’

Two assumptions:

• MNCs, particularly those in Europe and the United States, are increasingly performing their R&D outside the home country

• The motivations for internationalizing R&D are many and varied, but typically include access to scientific talent, access to ideas in multiple markets, responsiveness to local needs, responsiveness to host governments, and international division of labor

The aim of the article is twofold: (1) to examine the roles of international R&D units; and (2) to examine the communication and control systems used in international R&D. It is, perhaps, self-evident that these two themes are interrelated, in that the role of a given R&D unit is determined in part by the contextual mechanisms used to coordinate and control its activities.

Typologies of R&D units

Four studies have developed comprehensive typologies of foreign R&D units, and several others have added useful or related insights (See Table 1). The preference has been to type R&D units primarily according to the nature of their activity, i.e., whether they are responsible for adapting technology, developing new products, or undertaking pure research.

Local adaptor

Local adaptor = Helps the local producing unit to assimilate and effectively utilize the existing mainstream technology of the MNC.

Local adaptors are always local in scope, and with a rather limited development mandate. The essence of their role, as implied by Ronstadt, is to ease the transfer of technology from the parent company to the subsidiary manufacturing location. Local adaptors still exist, but they are becoming rare, namely subsidiary manufacturing operations have mostly shifted from domestic to international focus, and their associated R&D units have likewise migrated from pure support to greater value-added activities such as adaptation and product development

International adaptor
International adaptor = Provides backup for a local producing unit, but aspires to a more fundamentally creative role than a support laboratory, seeking to endow its subsidiary with some kind of product autonomy.

This unit’s role is substantially broader in scope than that of the support laboratory, and it is somewhat more creative as well.

International creator

International creator = This unit’s role is substantially broader in scope than that of the support laboratory, and it is somewhat more creative as well.

§H.3 ‘Control modes and communication systems’

Control = The regulation of activities within an organization so that they are in accord with the expectations established in policies and targets

Communication = The exchange of information through various media, including face-to-face contact, telephone, letter, and electronic mail.

A new field of research is the level of autonomy given to an international R&D lab. This is probably the most important aspect of control, in that it indicates the extent to which head office managers actively influence decisions made in the R&D unit. It is also widely argued that communication is central to effective R&D, and that it is made harder by geographical and cultural dispersion. A variety of mechanisms, he argued, must therefore be used to circumvent the problems, including socialization of managers, formalization of systems, use of boundary-spanning individuals, a network organization, central office processing, and electronic systems.

Likewise, some researchers concluded that ‘systems and procedures must be developed to facilitate world-wide coordination and information exchange’, including informal networks, lateral communication between subsidiaries, product councils, and long-range corporate research funding. They proposed the term ‘integrated network’ to refer to the complex array of relationships they observed in their case studies.

Modes of control

Three different modes of control will be considered here: Centralization, in which decision-making power is retained at the headquarters; Formalization, in which decision-making is routinized through rules and procedures; and Socialization, whereby organization members develop common expectations and shared values that promote likeminded decision-making. Any given parent–subsidiary relationship is liable to exhibit elements of centralization, formalization, and socialization at the same time.

• Local adaptors undertake activities that are relatively less critical to the MNC than those undertaken by other R&D units. Their mandate is essentially to adapt the existing products and processes to local demands. Expected is that the preferred mode of control in this situation is formalization; ‘The simplest method of coordinating subtasks is to specify the necessary behaviors in the form of rules or programs.’
  >> Proposition 1: Local adaptors will exhibit moderate levels of centralization, high levels of formalization, and low levels of socialization.

• International adaptors have considerably greater strategic importance and significantly more resources than local adaptors, and they demand increased degrees of freedom to be effective. A greater use of centralization and socialization are expected, but centralization is the preferred and most important one
  >> Proposition 2: International adaptors will exhibit high levels of centralization, low levels of formalization, and moderate levels of socialization.

• International creators are both heavily endowed with resources and strongly interlinked with one another, therefore it is expected that the high levels of reciprocal interdependence between units creates the need for sophisticated control mechanisms such as socialization

>> Proposition 3: International creators will exhibit moderate levels of centralization, low levels of formalization and high levels of socialization.

Communication systems

1. First, there are vertical lines of communication with entities in the head office. These are overlain on, and often part of, the MNC’s control mechanisms, but they are conceptually separate in that it is possible to have vertical communication without control and, indeed, control without communication (e.g., through formalization).

2. Second, there are lateral lines of communication with other international R&D units. These are particularly important when there are task interdependencies, for example in international innovation projects, but they are also useful for promoting the flow of new ideas between units.

3. Third, there are lateral lines of communication to other functions, notably manufacturing and marketing, within the same subsidiary. Again, these are most necessary where there are interdependencies, but there is potential for synergistic interaction as well.

4. Fourth, and somewhat differently, there are lines of communication to external entities such as customers, suppliers, and local universities, that comprise the environment in which the MNC is embedded.

>> These lines of communication facilitate the adoption of new ideas by the MNC and responsiveness to local contingencies.

§H.4 ‘Results’

Local adaptors were managed, as predicted, with significantly higher levels of formalization than the other two types. Interestingly, they also exhibited the lowest level of centralization. International adaptors were managed predominantly through centralization, with moderate levels of formalization. Perhaps surprisingly they also exhibited lower levels of socialization than the local adaptors—in terms of number of personnel rotated, for example. This difference was not significant though. Finally, international creators were controlled, as predicted, through relatively high levels of socialization, low formalization, and moderate levels of centralization. While the difference in emphasis in control modes across the three types was fairly modest, it is in keeping with the expectations and provides confirmation of the arguments presented in the theory section of the paper.

Local adaptors are, as would be predicted, firmly embedded in their local context. Their five most frequent relationships, in order, are with local manufacturing, local marketing, other local R&D, local customers and local suppliers.

Communication with the parent company is very limited, confirming the preference for formalization over centralization as a control mode, and communication with marketing and manufacturing units outside the local country is extremely low.

International adaptors have a significantly more international profile of communication than local adaptors, but their relationships are predominantly with other corporate entities and not with external parties. In particular, international adaptors have significantly more communication with ‘other local manufacturing’ units and manufacturing in other countries than local adaptors. By contrast, communication with other R&D units and with marketing units in other countries is very limited. These data suggest that international adaptors have a rather specific role, namely to act as the adaptation/improvement center for a network of integrated manufacturing sites.

International creators were distinct primarily in terms of the level of communication with external entities. They had significantly more communication with local universities, foreign universities, Swedish customers, foreign customers, and foreign suppliers, than the other two types, and significantly less communication with local customers than the local adaptors. International creators also had more communication with virtually all other entities as well, in comparison to the other types. Contrary to expectation, international creators even had strong communication with local manufacturing and marketing units. The suggestion is not that international creators communicate with external entities at the expense of internal relations, but rather that their external network is built on top of an internal network of relationships

CHAPTER I. INTER-ORGANIZATIONAL COLLABORATION AND INNOVATION: TOWARD A PORTFOLIO APPROACH

§I.1 ‘Introduction’

This article examines whether evidence can be found for the idea that inter-organizational collaboration supports the effectiveness of innovation strategies. Tobit analyses reveal a positive relationship between inter-organizational collaboration and innovative performance. At the same time, the impact on innovative performance differs depending on the nature of the partner(s) involved. These findings strongly suggest the relevance of adopting a portfolio approach to inter-organizational collaboration within the context of innovation strategies.

Broadly speaking, innovation strategies not only address the improvement and further development of existing technologies and products but also the development of new technologies and competencies. Firms need to engage in both exploitation and exploration. Whereas exploitation refers to activities such as improvement, refinement, efficiency, selection, and implementation, exploration is best captured by notions like search, variation, experimentation, and discovery. In order to meet the multiple requirements that innovation strategies entail, firms tend to adopt a portfolio approach toward organizing their new product development (NPD) activities. The article examines whether inter-organizational collaboration relates to the effectiveness of innovation strategies. In other words, are firms that engage in inter-organizational collaborations within the framework of their innovation strategy performing better in terms of innovative performance? In addition, this study explores whether this relationship—if observed—differs according to the nature of the innovation outcomes: is inter-organizational collaboration as relevant for improving existing competencies and products as for creating new ones? In this respect, it is feasible to examine whether the notion of portfolio (i.e., pursuing a multitude of different projects simultaneously) bears relevancy to inter-organizational collaboration as well.

§I.2 ‘The role of inter-organizational collaboration when innovating’

Inter-organizational collaboration has been recognized as important in supplementing the internal innovative activities of organizations. From the present literature, it is clear that organizations can improve their innovative capabilities by developing inter-organizational collaborations with a variety of partners. These partners can be:

• Existing suppliers and customers

• Potential lead users

• Universities and research centers

• Potential/existing industry competitors

The reasons why inter-organizational collaboration can contribute to the effectiveness and efficiency of an innovation strategy are numerous.

1. Inter-organizational collaboration might imply access to complementary assets needed to turn innovation projects into a commercial success

2. Working together with other organizations might encourage the transfer of codified and tacit knowledge. This might result in the creation and development of resources that would otherwise be difficult to mobilize and to develop.

3. Inter-organizational collaboration might help to spread the costs of research and development (R&D) among different parties, resulting, at the same time, in a considerable reduction of the risks associated with R&D-intensive innovation projects.

The observation that inter-organizational collaboration has considerable potential to contribute to the innovation strategies of organizations does not mean that all collaborations are successful >> As many as 60% of alliances fail.

Previous findings suggest that organizations that possess a diverse network of inter-organizational collaboration are better equipped to create and to commercialize new or improved products. Hence, this article presents the following hypothesis:

Hypothesis 1: Firms that engage in a variety of inter-organizational collaborative agreements—within the framework of their innovation strategy—will be more effective in terms of innovative performance.

Several scholars distinguished between explorative and exploitative collaborations. While the intent behind entering an exploration alliance involves a desire to discover new opportunities, an exploitation alliance involves the joint maximization of complementary assets. The results of such studies indicated that explorative and exploitative collaborations have different effects on a firm’s innovation strategies.

In exploitative collaborations, the main purpose relates to the enhancement of existing organizational competencies. More specifically, exploitative collaboration centers on leveraging existing skills. Exploitative collaborations focus on complementarities between technologies and products already present. Exploitation-oriented collaboration processes benefit from clear performance objectives that are translated into measurable output controls and are monitored by formalized coordinating and control mechanisms.

Hypothesis 2: The more a firm engages in exploitative inter-organizational collaborations, the more effective it will be in terms of improving and further developing existing technologies and their implied products.

Explorative collaboration, on the other hand, is seen as instrumental in creating new competencies; learning processes and joint experimentation figure prominently in this type of collaboration. Hence, a differential emphasis in the direction of intangible or tacit knowledge exchange can be observed. To achieve such learning objectives, alliance partners rely more on personal and informal modes of coordination and control

Hypothesis 3: The more a firm engages in explorative inter-organizational collaborations, the more effective it will be in terms of developing new technologies and/or products.

§I.3 ‘Results’

This study has tried to find empirical evidence for the idea that the variety of inter-organizational collaboration relates to the effectiveness of innovation strategies. The analyses conducted in this study confirm the hypotheses outlined. Firms that possess a heterogeneous network of collaborative partners within the framework of their innovation strategies perform better in terms of the proportion of turnover realized by means of new or improved products. In addition, the difference between exploitative and explorative collaborations has been introduced to examine whether different kinds of collaboration relate to different types of innovation outcomes. These hypotheses have, to a large extent, been confirmed.

CHAPTER J. INVESTIGATION OF FACTORS CONTRIBUTING TO THE SUCCESS OF CROSS-FUNCTIONAL TEAMS

§J.1 ‘Introduction’

The rapid change and diffusion of technology as well as burgeoning global competition have intensified the need for complex and highly novel product innovations, with the result that the use of cross-functional product development teams has become increasingly important. Although cross-functional teams have been ballyhooed as a key organizational tool for developing new products, it is not clear why and under what circumstances they should be used. Research questions illustrating the aim of this article:

1. What is the impetus for companies to begin to use cross-functional teams?

2. What factors are perceived as being associated with cross-functional team success?

§J.2 ‘Literature review’

One group of studies has focused on variables that play an antecedent role in the product development process, including setting project goals, empowering project team members, establishing a project climate, and the human (as opposed to physical or financial) resources of the team. These antecedent elements reflect management actions that initially direct the development effort and set the stage for the product development that follows. They are put in place at the outset of a project and create the foundation on which the work of the project takes place. Main streams of literature:

Stage-Setting elements

Goals

Establishing goals for a project provides several benefits. On the one hand, they provide project members with a common frame of reference, which, in turn, promotes a higher level of cross-functional cooperation. Providing teams with clear, consistent goals is also a way to create boundaries for the project team so that it is not continually redefining its direction.

Empowerment

Goals also are important to set boundaries within which teams can be empowered to make project related decisions. Studies that looked at the relationship between empowerment in cross-functional teams and performance yielded surprisingly consistent results .

Giving individuals greater decision-making responsibility leads to their being more committed to the project and to meeting its goals. At the same time, it can lead to greater satisfaction on the part of team members. When subordinates are empowered, they perceive their work groups, their managers, and themselves as more influential and, as a result, a more innovative climate is created

Climate

The climate that surrounds a product development effort can play an important role in setting the stage for the NPD effort. At the outset of a project or even before it officially begins, management consciously or unconsciously creates a climate. As noted earlier, one means of creating a more innovative climate is by empowering team members. Another means is to create a sense of urgency about the project. Creating a sense of urgency about the project and conveying to team members its importance stimulates a feeling of excitement about working on the project and generates a feeling of commitment to it.

Human resources

The capabilities that are embodied in the members of the team represent a significant project resource. The extent to which there is a good fit among these resources and the project can impact on its effectiveness. Management can set the stage for product development by putting together a team of individuals who possess the “right” skills and by ensuring that the needed technical expertise and interpersonal skills are present on the team

These four variables—goals, empowerment, climate, and human resources—are elements that, in some sense, precede the development effort itself. They set the stage for subsequent development by creating clarity of direction for the project, providing team members with the decision-making authority they will be able to exercise during the project, creating a climate enveloping the team’s efforts, and selecting individuals who will enhance the likelihood of project success. Stage-setting elements also work in conjunction to create a basis for undertaking the development work of the team.

Enablers

Enablers = Individuals—team leaders, managers, and champions—who have the potential to enable cross-functional team success. These individuals can facilitate the development team’s efforts and impact on the stage-setting elements that have been put into place initially.

Enablers play different roles;

• Team leadership; some researchers found that effective project leaders delineated task boundaries for the team and then allowed team members to perform within those boundaries without specifying how the work itself was to take place. In this way, they enabled the development process, i.e., the work of the team, rather than engaging directly in carrying out development tasks themselves.

  • Participatory style of leadership, where team members are given the freedom to explore, discuss, and challenge ideas and make their own decisions about what technologies to pursue, problems to solve, and tasks to undertake. When this style is employed, the team leader gives considerable control to the team to conduct product development as they see fit >> Associated with higher project performance

  • Using an open and apolitical style of leadership also may facilitate successful NPD. Apolitical leaders share information and knowledge broadly with the team and other groups within the organization so that realistic decisions can be made based on facts and so that realistic expectations for the projects are known by and accepted at all levels of the organization.

  • Leaders also enable NPD by performing a variety of roles, including keeping team members challenged and instilling a positive attitude toward the project and being a communicator. In this role, the leader acts to maintain the climate of the project and so facilitate project performance

  • Finally, it has been suggested that the project leader may be a linking pin or bridge between the project team and senior management. Powerful project leaders are particularly effective politicians in lobbying for resources, protecting the group from outside interference, and managing the impressions of outsiders. Powerful leaders may command greater respect and, thus, may be able to attract better project team members to the group (i.e., human resources, a stage-setting element) and to keep groups focused and motivated.

• Senior management support; Senior management support of a project team can have a direct effect on performance. Their support can take a variety of forms, including demonstrating commitment, helping the team to surmount obstacles, making things happen, and providing encouragement to the team

• Champions; Champions = Someone who “takes an inordinate interest in seeing that a particular process or product is fully developed and marketed”, can play an enabling function.

Their role can vary significantly, from doing little more than stimulating awareness of an opportunity to playing a major role in overcoming strongly entrenched resistance by management

Team behaviors

A third area of research has investigated the relationship between stage setters and enablers and team behaviors, including cooperation, commitment, ownership, and mutual respect.

• Cooperation; Cooperation, i.e., working together to accomplish the work of the team, has been variously defined as collaboration, teamwork, interaction, communication, and integration.

• Commitment; Commitment refers to a sense of duty that the team feels to achieve the project’s goals and to the willingness to do what’s needed to make the project successful

• Ownership; Ownership refers to the feeling of wanting to make a difference. It goes beyond duty, i.e., commitment, in that members of the team begin to tie their identity to a project’s outcome, thus putting forth extra effort to ensure its success

• Mutual respect; The respect that team members have for each other can lead to open communication among the team and to feelings of trust. When team members trust each other’s judgments and interact honestly with each other, they are, in effect, exhibiting a form of respect for others

Refer to Figure 4 for a proposed model of interactions among stage setters, enablers, team behaviors, and cross-functional team success.

CHAPTER K. MANAGEMENT OF INNOVATION NETWORKS: A CASE STUDY OF DIFFERENT APPROACHES

§K.1 ‘Introduction’

Innovation and business networks essentially belong together. Innovation and technology are often the driving forces behind the formation of business partnerships and networks. In networks, an innovation should not be seen as the product of one actor, but as the result of interplay between several actors.

Network = A set of nodes and relationships that connect them

Management of innovation is called controlled chaos, it includes surprises and unexpected changes, but it can still be controlled to a certain extent. Companies’ network competence is important for achieving innovation success in business networks.

Network competence = Relationship-specific tasks, initiation, exchange, coordination, cross-relational tasks, planning, organizing, staffing, controlling, specialist qualifications, and social qualifications

The amount of R&D partnerships has increased particularly in high-tech sectors and other sectors where learning and flexibility are important features of the competitive landscape. IT has also facilitated the increase of innovation networks. IT makes possible new products, services, business concepts, organizations, and forms of cooperation. A virtual organization is a network and an example of a new kind of organization facilitated by IT

This article aims at increasing the knowledge of management of innovation networks by mapping characteristics of management approaches of two case companies. These companies operate in the software business and develop their products in inter-organizational networks. Special attention is paid to differences in the management approaches between the case companies.

>> The term “innovation network” refers to a set of actors mobilized by a focal company for R&D activity.

§K.2 ‘Innovation and network management’

Innovation management

Some authors have reserved the term “innovation” just for the result of the innovation process, and “innovation management” for the managerial activities that attempt to control the innovation process.

Three types of innovations: product innovation, process innovation, and market innovation. Product innovation provides the most obvious means for generating revenues. Process innovation provides the means for safeguarding and improving quality and for saving costs. Market innovation is concerned with improving the mix of target markets and how chosen markets are best served. Its purpose is to identify new or better potential markets; and new or better ways to serve target markets. The role of effective use of market information is emphasized particularly in the case of product and market innovation, including the generation, internal dissemination, and the firm’s responsiveness to market information.

Innovation may be highly radical, radical, intermediate, significant incremental, or minor incremental. Highly radical innovation is an unique original product or system which will obsolete existing ones. It is based on proprietary technology beyond the state-of-art and major R&D. Radical innovation is a new product or system with original state-of-art proprietary technology that will significantly expand the capabilities of existing ones. It requires significant R&D. Intermediate innovation is a new product with proprietary technology, however it may be duplicated by others. It is a mix of standard and special features, and requires average R&D. Significant incremental innovation refers to significant extension of product characteristics with original adaptation of available technology. It is characterized with limited patent protection and minor R&D. Minor incremental innovation refers to incremental improvement over existing products. It is a standardized product and an application of current technology. It has no patent protection and requires no R&D.

The term innovation management encapsulates the management of the whole process of innovation from the idea generation stage through product or process development/adaptation to launch in the market or start. This includes both strategic and operational issues. A new product development process can be divided into three phases: generating ideas, technical development, and commercializing.

According to research, the following guidelines are relevant to managers leadinginnovation.First,thecompany,andthedominantcoalitionwhomanagesit,must be firmly supportive of innovation as a way of life, by their example, their words, and their actions. Second, the company must keep close to its customers, partly to respond to their expressed needs, but mainly so that it can work out what they want in the future, preferably before customers know themselves. Third, there must be an internal procedure for keeping all innovation projects under continuous reconsideration, so that the work is done simultaneously on all fronts, but remains cohesive and compatible. Fourth, an innovative culture usually involves considerable freedom of action, substantial resources for educating all ranks in the firm about new technologies, and the use of small teams of employees who possess many skills between them. Fifth, to sustain an innovative culture, it is important that employees who innovate successfully should be seen to have been rewarded by the other employees.

Management of business networks

Business network = Consists of “nodes” or positions (occupied by firms, households, strategic business units inside a diversified concern, trade associations, and other types of organizations) and “links” manifested by interaction between positions

A network can be approached in terms of its activities, resources, and actors. The activities and resources in two different relationships can complement each other, or they may be in competition. Similarly, actors can use the existence of complementarity or competitiveness in their relationships in different ways when interacting with each other. Networks are evolving organism and their dynamics is caused by the fact that actors, relationships, needs, problems, capabilities, and resources change over time.

Network management involves marketing, technology transfer, information exchange, accounting and finance, as well as public and interpersonal relations. Developing a network strategy includes determining:

• What is the strategic situation to be analyzed

• Upon which actors to focus

• Who determines the nature of the relationships

• What part in the network does each actor play

• What leverage and what steering potential does each actor have.

Other researchers bring forward that network management includes four basic levels, which are: (1) industries as networks level – involving network visioning; (2) firms in networks level – involving net management; (3) relationship portfolios level – involving portfolio management; and (4) exchange relationship level – involving relationship management.

Innovation networks

One research suggested five critical success factors for innovations management in networks. These are cooperation between parties, coordination of activities, communication between people, creativity, and level of chaos. The advantage of cooperation is that each party can do what it does best. The benefits of cooperation will be materialized when the parties involved establish effective and efficient coordination of activities to be undertaken. An important prerequisite for successful coordination includes creating and maintaining good and timely intra- and inter-organizational communications. Research suggests that cooperation, coordination, and communication reduce the level of chaos in an innovations process, and, thus, increases the probability of developing successful innovations.

Two knowledge management processes;

Cognitive model = Assumes that transfer of knowledge through networks is unproblematic; knowledge is assumed to “flow” fluidly between people through networks.

Community network model = Assumes that knowledge (unlike information) cannot simply be processed; rather it must be continuously re-created and re-constituted through dynamic, interactive and social networking activity. This is especially important for innovation processes that are interactive.

§K.3 ‘Findings’

Several aspects of management of innovation networks are identified:

Duration of the network

The data of this study show that an innovation network may be project specific, in other words temporary, or continuous. When it concerns a situation in which the innovation network is project specific, the data show that the company, which developed the initial product idea in the first place, has the natural position to decide whether they want to carry out the product development project in-house or in networked cooperation with other companies. When it concerns a situation in which the innovation network is continuous, the data suggest that formation of such a continuous network is enhanced by a common professional history and friendship between the actors.

The fact that a key network is continuous enhances the innovations management because the actors of the network learn to know each other.

Reward from the network

According to the data of this study, companies carrying out product development in the network context may have very different orientations for using the network for profit making and personal self-fulfillment. In some cases, companies see new innovations as a means and in some cases as an end.

Fundamental meaning of the network

The data of this study suggest that an innovation network may be both a means and an end. In other words, the network may primarily be for business purposes or for self-fulfillment and social purposes. When the network is a means, the real benefits relate to the fact that the company is able to mobilize various important resources for innovations processes unavailable in-house.

The nature of organization

The present data show that the nature and practices of product development may vary significantly, and, consequently, the operation of an innovation network may resemble a traditional or virtual organization. In an innovation network resembling a “traditional” organization, the innovation process is more restricted by location and time. In other words, the innovation process mostly takes place within the framework of physical offices and working hours. In virtual organizations, individuals’ work is not restricted by time and place, and communication is strongly facilitated by IT. Such a product development environment allows a greater degree of freedom to individuals involved with the development project.

Planning, control, and trust

According to the data of this study, planning, control, and trust are important elements in innovations management in the network context. They are important, not only for coordinating activities in the development process, but also for the protection of intellectual properties of innovations, which is crucial in the software business. In some cases, planning and control of an innovation process seem to be very formal and structured. In other cases, planning and control seem to be less controlled, and the operation is rather based on trust between actors in the network.

Hierarchies, authority, and coordination

The present data show that the companies examined carrying out product development in the network context do not want to create hierarchies in their network. The various advantages gained from networked product development would be lost if the operation becomes too hierarchic and rigid.

§K.4 ‘Discussion’

Some structured frameworks have been introduced for network management aiming at facilitating the focal company to control the business network around it to achieve its own goals, at least to certain extent.

Researchers developed a framework for strategic decision making in business networks including the following phases and measures:

1. Context description (Which is the strategic situation to be analyzed?).
2. Set of actors (Which are the actors to be focused?).
3. Interdependence matrix (Who determines the nature of the relationships?).
4. Portfolio of interdependencies (Which part in the network does each actor play?).
5. Strategy matrix (What leverage and what steering potential does each actor have?).

Other researchers introduced a systematic approach for managing business networks, called key network management. This approach included three basic elements:

1. identifying a key network;
2. strategies for managing actors of the key network; and
3. developing and applying operational level methods for managing actors within the key network.

Finally, some researchers suggested it is important to seek knowledge of the following issues:

1. “What are the best practices for participation in and virtual integration of supply chain/value networks?”
2. “How should a firm manage a network of relationships across channel partners, customers, partners, and competitors?”
3. “What are the best ways to measure superior performance in network management (versus performance of stand-alone products and services)?”

The following guidelines and characteristics of managing virtual teams have been brought forward:

• Team issues. Virtual teaming requires initial face-to-face meetings to develop a sense of “team”. Managers must visit remote participants during the course of project. Trust between team members is difficult to establish when operating in a virtual environment. Virtual team leaders should be selected with an acknowledgement of the unique demands placed on distributed teams.

• Process issues. The project objectives must be restated and reinforced frequently to ensure that all members remain focused on a common outcome. Conflicts must be addressed quickly to prevent unresolved issues from interfering with communications. Discussions on decisions will be more difficult to contain as participants continue discussions via electronic media. Expectations of each team member must be stated clearly to assist then members as they work independently. Team member workloads should be monitored to ensure that significant increases do not occur due to increased electronic communication, regular training must occur equally for all members of the virtual team.

• Appropriate technologies. Selection of collaboration tools must be made to establish an integrated virtual environment. Project management tools must support the virtual environment and the project process.

• Security. Documents must be secured before, during, and after transmission to ensure the integrity of the information. Participants must be authenticated to ensure that information is distributed between project participants. Secure transmission tunnels must be established if secure information is being transmitted within the virtual team environment.

• Interoperability and standards. Interoperability of software must be established prior to inclusion within the virtual team environment. The virtual team and environment must address the spectrum of interoperability definitions that are appropriate in the given project

CHAPTER L. MULTINATIONAL AND MULTICULTURAL DISTRIBUTED TEAMS- A REVIEW AND FUTURE AGENDA

§L.1 ‘Introduction’

Distributed teamwork has become commonplace within and among organizations. Indeed, nearly two-thirds of U.S. employees have engaged in virtual work. These individuals often work as part of a distributed team that consists of members from various cultural and national backgrounds.

§L.2 ‘Prevalence of MNMC distributed teams’

Research showed that diverse and distributed teams are becoming the norm for businesses and governments around the world because of the increased opportunities they provide. Although team members may work across major time zone differences, across internal business units, and across cultures, they can perform effectively.

Although the ability to use a wider resource base may be an advantage of MNMC distributed teams, these teams can present some challenges. Some researchers warn that 50 per cent of virtual teams would fail to meet either strategic or operational objectives due to the inability to manage the distributed workforce implementation risks. Also, the demands of working in a MNMC distributed team can be taxing to team members. As one professional explains in an article depicting her MNMC distributed team experiences, “There are delays in response and communication, and in such cases I might lose a day instead of a few hours… Communication and collaboration can take up a significant chunk of project time”. Understanding how to maintain effective MNMC distributed teams that meet the needs of both the team members and organization presents a challenge to both practitioners and researchers.

§L.3 ‘What constitutes culture in MNMC Distributed teams research’

The current work on MNMC distributed teams, however, often has focused on a geographical facet, conceiving of culture in terms of broad national differences. Hofstede’s work is very often used to assess cultural differences in teams;

• Individuals from the individualistic culture were perceived as transferring more knowledge than those from the collectivist culture
• The conclusion is that globally distributed teams will be effective vehicles for knowledge sharing in an organization as long as individuals learn the cultural logic of others’ divergent beliefs. If not, culture is constructed as something which divides individuals
• In virtual teams, the individualism–collectivism dimension is an important dimension of culture as it reflects the extent to which members are inclined toward teamwork and open to accommodating others ’views’

This paragraph is about research that is done on MNMC distributed teams and culture. There appears to be a strong focus on nationality when investigating culture in this body of research, and several researchers rely on Hofstede’s dimensions. Scholars also examine team composition, often referred to as cultural heterogeneity. Some findings suggest that cultural differences matter, whereas other research suggests that they may not in teams that experience high trust or regular communication. Further research exploring these issues is needed.

§L.4 ‘The role of distance in MNMC distributed teams’

Distance is viewed as both a challenge and as a nonissue to MNMC distributed teams. Although some work continues to frame distribution as a constraint, some empirical findings suggest that distribution does not impair MNMC distributed team collaboration or performance. This variation points to the need for future research to clarify the role of distribution and its effects (or lack thereof) on team processes and outcomes. Moreover, it should be noted that generally, previous empirical research on MNMC distributed teams tends to treat distance as a discrete difference (i.e., the team is distributed or it is not distributed). Although few empirical studies explicitly frame distance as a step function, an implicit argument in several articles reviewed here is that greater distance places more constraints on teams.

§L.5 ‘Recurring themes in existing MNMC Distributed Teams research’

Scholars interested in MNMC distributed teams have examined several topics, See Table 1. Some of these topics are highlighted in the article;

• Communication; This research has been concerned with pointing to communicative behaviors that are deemed effective in MNMC teams. Two behaviors emerge somewhat consistently in this research: frequent communication and face-to-face communication

  • Frequent communication. Several of these works suggest that communication frequency is a necessary ingredient in MNMC distributed team effectiveness. For instance, frequent informal and unplanned communication has been shown to be related to shared identity and shared context

  • Face-to-Face communication. Some articles privilege face-to-face communication as necessary for MNMC distributed team effectiveness. Face to face is found to be beneficial to reducing task conflict, fostering trust, and enhancing team dynamics

• Conflict. Several researchers found that: (a) the way virtual team members manage conflict is crucial in their success performance, and (b) temporal coordination has some significant moderating effects on team performance. They examine conflict in terms of specific conflict management behaviors, including avoidance, accommodation, competition, collaboration, and compromise.

• Temporality. These articles note relationships between temporality and MNMC distributed teams

MNMC distributed teams have several features

1. They involve various types of dispersion beyond temporal and spatial dispersion. Distributed teams are geographically distributed in that they are separated by (great) physical distance (different cities, different countries)

2. MNMC distributed teams may be permanent or temporary. In much of the current research, scholars conceive of these teams as temporary

3. Although members of MNMC distributed teams often communicate via technological means, they may not communicate exclusively in this manner. Indeed, as many of the articles reviewed indicate, some teams may choose to meet face to face, deeming it necessary for team effectiveness

4. They are made up of members who self-define as being (or are considered to be) from two or more national (nation-states), ethnic, and/or cultural backgrounds

§L.6 ‘Suggestions for further research’

• Adopt Multi-Faceted, Multi-Level Views of Culture

Future researchers should expand their conceptualization of culture to include not only multiple nationalities and demographics but also multiple team and organizational cultures.

• Acknowledge the Complexities of Distribution
  Future research must take into account the variation in distribution

  • Degree of virtuality. Virtuality (space, time, modality) is a matter of degree, and teams may be considered highly virtual or less virtual.

A team’s degree of virtuality relates to the richness of the communication media typically used by members to accomplish tasks and the extent to which team members are separated by time and space.

• • Degree of distribution. Another type of variation among distributed teams concerns whether the team is partially or fully distributed. Partially distributed teams occur when some team members are distributed across various locations, whereas other team members are collocated.

  • History of the team. As in any team, prior knowledge about team members or experience working with a particular group of individuals can affect team dynamics.

  • Degree of (im)permanence. The relative permanence of the team has also been argued to be a feature of distributed teams. Other scholars note that virtual teams can be temporary work forms, where “members have never worked together before, and who may not expect to work together again as a group”

  • Degree of task complexity. Essentially,more complex tasks require higher levels of interdependence within a team, which can have an effect of many of these team processes, depending on where the team lies on other continua.

• When Are Culture and Distribution Consequential to Teams?
  Third, future research must look at how a multifaceted view of culture and these complexities of distribution relate to each other in influencing team processes and outcomes. For example, in combining the complexities of distribution (partially vs. fully distributed) with the complexities of culture, one may wonder if a team that is partially distributed may be challenged (or enhanced) by the subcultures that may arise as a result of different locations.

CHAPTER M. STRATEGIC ENTREPRENEURSHIP- CREATING COMPETITIVE ADVANTAGE THROUGH STREAMS OF INNOVATION

§M.1 ‘Introduction’

Most of today’s companies are faced with the challenge of changing frequently in order to meet the needs of those they serve, which is becoming increasingly difficult.

Tension >> The need for a firm to constantly and rapidly change. A firm should exploit what it already is successful in, and explore what it is not successful in yet. Effectively managing this tension is becoming a key differentiator between maintaining organizational success and facing dwindling performance over time. It is namely shown that firms have difficulties sustaining their performance over a considerable period of time.

§M.2 ‘Introducing strategic entrepreneurship’

Strategic entrepreneurship (SE) = Term used to capture firms’ efforts to simultaneously exploit today’s competitive advantages while exploring for the innovations that will be the foundation for tomorrow’s competitive advantages. >> A firm should opt for a balance between opportunity seeking (exploration) and advantage seeking (exploitation).

Effective SE helps the firm to develop relatively sustainable competitive advantages, which are difficult to understand for competitors and difficult to imitate.

The actions taken to transition from exploration to exploitation, and from exploitation to exploration poses challenges.

Refer to Figure 1 for some individual attributes of strategy, entrepreneurship and SE.

§M.2 ‘Exploration; benefiting from diverse investments’

Identifying ways to position a firm in one or more market spaces to deal with environmental change is a key outcome of exploration activities. Exploration’s success depends on the firm’s ability to acquire new and diverse knowledge, and integrate that with existing knowledge. Increases in the rate and complexity of environmental changes makes firms looking for more efficient means of explorations >> Strategic alliances and corporate venture capital programs are the outcome here, namely firms are able to share the risks and uncertainty of exploration activities.

There are structural and cultural mechanisms required to support exploration : the degree of centralization of authority, the standardization of procedures, and the formalization of processes. Organizational structures characterized by decentralized authority, semi-standardized procedures, and semi-formalized processes support exploration activities.

Refer to Table 1 for the fundamental, organizational characteristics of successful exploration.

§M.3 ‘Exploitation; benefiting from focus’

Exploitation rests on knowledge of a proven innovation, making it possible for firms to be aware of present needs and demands. Firms that are able to meet these needs and demands enjoy a competitive advantage.

Firms may also seek external partnerships when engaged in exploitation. Firms want to acquire and bundle complementary knowledge and resources to extend their ability to leverage existing capabilities and competitive advantages.

Exploitation is characterized by structural and cultural mechanisms that allow the firm to focus on a core set of knowledge and capabilities. Continuouslt acquiring diverse knowledge is not critical here, the need for speed requires that the firm focuses on already established knowledge. Because of this, extensive cross-divisional communication is not needed. A centralized structure is needed, and highly specialized, standardized and formalized routines also benefit a firm’s exploitation efforts. Experimental behaviors of employees are not needed here >> Slows down the process and introduce inefficiencies. Focus on what is known instead of what could be should be supported.

Refer to Table 2 for the fundamental, organizational characteristics of successful exploitation.

Table 3 Shows steps of getting started with balancing exploration and exploitation activities in order to meet the requirements today’s rapidly changing environment

CHAPTER N. THE INNOVATION VALUE CHAIN

§N.1 ‘Introduction’

Innovation challenges differ from firm to firm, and otherwise commonly followed advice can be wasteful, even harmful, if applied to the wrong situations. Companies can’t just import the latest fads in innovation to cure what’s ailing them. Instead, they need to consider their existing processes for creating innovations, pinpoint their unique challenges, and develop ways to address them. In this article, a comprehensive framework is offered: “the innovation value chain”. The innovation value chain view presents innovation as a sequential, three-phase process that involves idea generation, idea development, and the diffusion of developed concepts. Across all the phases, managers must perform six critical tasks – internal sourcing, cross-unit sourcing, external sourcing, selection, development, and companywide spread of the idea. Each is a link in the chain. Along the innovation value chain, there may be one or more activities that a company excels in – the firm’s strongest links. Conversely, there may be one or more activities that a company struggles with – the firm’s weakest links.

§N.2 ‘Think innovation value chain’

To improve innovation, executives need to view the process of transforming ideas into commercial outputs as an integrated flow. The first of the three phases in the chain is to generate ideas; this can happen inside a unit, across units in a company, or outside the firm. The second phase is to convert ideas, or, more specifically, select ideas for funding and developing them into products or practices. The third is to diffuse those products and practices. See Figure 1

• Idea generation; Executives understand that innovation starts with good ideas – but where do these concepts come from?

• Idea conversion; Generating lots of good ideas is one thing; how you handle (or mishandle) them once you have them is another matter entirely. New concepts won’t prosper without strong screening and funding mechanisms.

• Idea diffusion; Concepts that have been sourced, vetted, funded, and developed still need to receive buy in – and not just from customers. Companies must get the relevant constituencies within the organization to support and spread the new products, businesses, and practices across desirable geographic locations, channels, and customer groups. In large companies with many subsidiaries and organizations, such diffusion is far from automatic.

A company’s strongest innovation links are simply no good if they prompt the organization to spend money with little hope of solid returns or if the attention paid to them further weakens other parts of the innovation value chain. Managers need to stop putting all their effort into improving their core innovation capabilities and focus instead on strengthening their weak links. There typically are three kinds of ‘weakest link’ scenarios

Idea-poor company = Spends a lot of time and money developing and diffusing mediocre ideas that result in mediocre products and financial returns. The problem is in idea generation, not execution.

Conversion-poor company = Has lots of good ideas, but managers don’t screen and develop them properly.

Diffusion-poor company = Has trouble monetizing its good ideas. Decisions about what to bring to market are made locally, and not-invented-here thinking dominates. As a result, new products and services aren’t properly rolled out across geographic locations, distribution channels, or customer groups.

Best practices for the idea-poor company

• Build external networks

  • Solution network, geared toward finding answers to specific problems

  • Discovery network geared toward unearthing new ideas within broad technology or product domains

>> Whether managers are developing solution networks or discovery networks, the key metric for them to keep in mind is diversity, not number, of contacts. The goal here should be to tap as many unique sources of information and ideas as possible as opposed to interacting with many similar contacts.

• Build internal cross-unit networks; A complementary approach to generating new ideas from outside companies is to build cross-unit networks inside organizations. After all, employees who don’t know one another can’t collaborate on new ideas. And the occasional cross-functional brainstorming session won’t do the trick: It unfairly assumes that people who are unfamiliar with one another will be able to work together to generate ideas on demand. What’s needed is an ongoing dialogue and knowledge exchange between people from different units

Best practices for the conversion-poor company

Most companies have no shortage of formal systems for managing ideas. The number and diversity of people involved, however, can create a risk-averse and bureaucratic process that grinds execution to a halt.

• Multichannel funding; A multichannel funding model opens up different options outside the boss’s immediate purview – from small discretionary pots of seed money all the way to full-scale venture funds

• Safe havens; Some companies are better than others at building safe havens for their emerging concepts. Such havens can be critical to the successful conversion of good ideas into profitable products or businesses

Best practices for the diffusion-poor company

In decentralized organizations, managers are granted considerable autonomy, including the freedom to say “No thanks” to new ideas. Even when managers have less formal control over which new ideas will be implemented, they can still delay or sabotage projects they don’t believe in.

Idea evangelist = Someone who preaches the good word about an emerging product or business. The best evangelists relentlessly use their deep, high-touch personal networks to increase awareness among employees and persuade them to adopt a new product or business concept. They reach out through phone calls, e-mails, and sales calls and in meetings. Their relationships must span many different parts of the organization for companywide and cross-company diffusion to ensue.

CHAPTER O. THE INVISIBLE SUCCESS FACTORS IN PRODUCT INNOVATION

§O.1 ‘The critical success factors in product innovation’

Research has uncovered two types or classes of success factors. The first deals with doing the right projects; the second with doing projects right

Type 1

Doing the right projects is captured by a number of external or environmental success factors over which the project team has little control. These include characteristics of the new product’s market, technologies, and competitive situation, along with the ability to leverage internal competencies. Although not within the control of the project team, these are nonetheless useful factors to consider when selecting and prioritizing projects.

Type 2

These success factors emphasize doing projects right and focus on process factors or action items—things the project team does (or too often does not do). And they are the invisible ones. But these actions are controllable and discretionary, so they are seen from time to time. For examples see page 2

§O.2 ‘What the winners have thought us’

1. Solid up-front homework—to define the product and justify the project. Successful project teams undertake superior up-front homework (more time, money, and effort; and better quality work) than do failure teams
2. Voice of the customer—a slave-like dedication to the market and customer inputs throughout the project.
3. Product advantage—differentiated, unique benefits, superior value for the customer. One of the top success factors is delivering a differentiated product with unique customer benefits and superior value for the user. Such superior products have five times the success rate, more than four times the market share, and four times the profitability as products lacking this ingredient, according to one study
4. Sharp, stable, and early product definition—before development begins. A failure to define the product—its target market; the concept, benefits and positioning; and its requirements, features and specs—before development begins is a major cause of new product failure and serious delays in time to market
5. A well-planned, adequately resourced, and proficiently executed launch. The need for a quality launch—well planned, properly resourced, and well executed—should be obvious.
6. Tough go/kill decision points or gates—funnels, not tunnels. In too many companies, projects move far into development without serious scrutiny: once a project begins, there is very little chance that it will ever be killed. The result is many marginal projects are approved, and scarce resources are misallocated.
7. Accountable, dedicated, supported cross-functional teams with strong leaders. Good organizational design means projects that are organized as a cross-functional team, led by a strong project leader, accountable for the entire project from beginning to end, dedicated, and focused (as opposed to spread over many projects), and where top management is committed to the project
8. An international orientation—international teams, multi-country market research, and global or “glocal” products. An international orientation also means adopting a transnational new product process, utilizing cross-functional teams with members from different countries, and gathering market information from multiple international markets as an input to the new product’s design.

§O.3 ‘Why winners are rare’

Seven possible reasons, or “blockers” are offered by managers for why the success factors are invisible and why projects seem to go wrong, or take too long, or aren’t well carried out. And each requires an antidote or specific action to overcome it:

1. Ignorance: our people simply don’t know what should be done in a well-executed project.

Some companies’ leadership teams and project teams simply don’t understand what’s required to make new products successful. That is, they lack a complete and balanced perspective on what a well-run project looks like—what the important tasks and events are.

>> Solution: Processes; roadmaps, blueprints, or game plans for driving new products to market. They lay out the key steps and activities, stage by stage; they define decision points or gates, complete with go/kill and prioritization criteria; and they build in best practices.

2. Lack of skills: we don’t know how to do the key tasks—for example, the market research know-how and business analysis acumen are missing; and we often underestimate what’s involved in these tasks.

The needed skills and knowledge are missing. Today’s complex projects require a multitude of technical and people skills to be an effective, well-rounded team leader or player.

>> Solutions;

• Team training; Too many companies assume that their employees will simply rise to the occasion when it comes to new products. Management assigns people to project teams from a variety of functions in the company, but few have received formal training in the area of product innovation.

• True cross-functional teams; Lacking a renaissance man or woman as a team member or leader, the next best thing is a cross-functional team comprised of members from various functions and with complementary skills

• Groom project team leaders; Project leadership is an acquired skill and typically does not materialize on one’s first project. One reason for the paucity of exceptional project leaders is that management does not give them the chance to mature—management typically promotes them to more lucrative jobs after a successful project.

• Define standards of performance expected. This is perhaps the most difficult of the four solutions. It begins with an understanding of what constitutes best practices.

3. Faulty or misapplied new product process: we havea process, but it doesn’t work: it’s missing key elements; it’s laden with bureaucracy; and it’s over applied.

• Missing success factors

• Bureaucracy; The process encourages much non-value added activity.

  • Bullet-proofing for gates. The process has become an end in itself in some businesses, as teams go to great lengths to prepare for gate meetings.

  • Too many gates, too many stages. More is not necessarily better. The typical proficient new productprocess contains about four or five stages and gates (not counting the ideation stage and post-launch review). Much more than that, and bureaucracy sets in.

  • Inflexibility. The new product process is a risk management tool. If the project’s risk is high, then one should adhere fairly closely to the prescriptions of the roadmap. But if risk is low, then detours designed to speed projects through certainly are recommended.

  • Management control system. A final and serious process deficiency is that the business’s development process has become a command and control system rather than a superhighway to the marketplace. In short, senior management views the process as a way to keep them engaged in projects—to keep them informed of what’s going on and to enable them to interject their demands and decisions, and, worse, to micromanage projects

>> Solution: If a new product process is more than 2 years old, it probably needs updating and fixing. Conduct a post-launch audit of your past projects and find out what made them successes or failures. Next, undertake a critical review of your new product process. Finally, get rid of the time wasters and speed bumps in your process. Take some completed projects and work with the team on a retrospective analysis of their project.

4. Too confident: we already know the answers, so why do all this extra work?

5. A lack of discipline: no leadership.

One of the problems in product innovation is that many of the prescribed actions in a well-run project are discretionary or optional. Often the lack of discipline comes from the top. The leadership team of the business “talks the talk,” but doesn’t walk the talk. Indeed, the leadership team is often the first to break rank—to break discipline

>> Solutions:

• The leaders must understand the vital role of new products in their business. Too often, senior management treats new products as an afterthought. Senior management is so tied up with day-to-day business issues and the pressures of achieving quarterly financial results that they seem relatively distant from new products.

• The leaders must demonstrate leadership. And they must lead by example, practicing discipline and adherence to the principles that underlie best practices in product innovation

• Install a process manager. There has never been a successful implementation of a new product process without a process manager or facilitator in place! No process, no matter how well designed and needed it is, will ever implement itself. It needs someone to make it happen. This person is the process manager; and for larger businesses, this is a full-time position. Indeed, the best performing businesses have incorporated process facilitation into their new product efforts

6. Big hurry: we’re in a rush, so we cut corners!

>> Solution: Recognize the need for cycle time reduction. But also recognize that some things done in the interest of saving time have exactly the opposite effect.

7. Too many projects and not enough resources: there’s a lack of money and people to get the job done.

Most businesses have too many projects and not enough resources to do them properly. This is the result of two management failures: (1) management doesn’t provide the necessary resources to achieve the business’s new product goals; or (2) they approve too many projects for the limited resources available. Indeed, the performance of project teams often is jeopardized by senior management.

>> Solution: Strive for funnels, not tunnels! That is, move to a funneling process, where many concepts enter the process, but at each successive stage and after new information is delivered, a certain percentage of projects are cut. To do this, build tough go/kill decision points into your new product projects in the form of gates

§O.4 ‘Eleven action items’

The ABCs that underlie new product success have been identified and should be clear to everyone. But blockers get in the way and consistently make these success factors invisible. The solutions highlighted in this article are now integrated into eleven action items, beginning with the leadership team of the business:

1. Your leaders must lead

2. Design and implement a new product process

3. Overhaul process

4. Define standards of performance expected

5. Install a process manager to oversee the process

6. Build in tough go/kill decision points

7. Use true cross-functional teams

8. Provide training

9. Seek cycle time reduction

10. Move to portfolio management

11. Cut back the number of projects underway

CHAPTER P. THE NEW CORPORATE GARAGE- WHERE TODAY’S MOST INNOVATIVE- AND WORLD-CHANGING- THINKING IS TAKING PLACE

§P.1 ‘Introduction’

Apple’s inventiveness indicates a dramatic shift in the world of innovation. Three trends are behind this shift. First, the increasing ease and decreasing cost of innovation mean that start-ups now face the same short-term pressures that have constrained innovation at large companies; as soon as a young company gets a whiff of success, it has to race against dozens of copycats. Second, large companies, taking a page from startup strategy, are embracing open innovation and less hierarchical management and are integrating entrepreneurial behaviors with their existing capabilities. And third, although innovation has historically been product- and service-oriented, it increasingly involves creating business models that tap big companies’ unique strengths.

It’s early days still, but the evidence is compelling that we are entering a new era of innovation, in which entrepreneurial individuals, or “catalysts,” within big companies are using those companies’ resources, scale, and growing agility to develop solutions to global challenges in ways that few others can.

§P.2 ‘A brief history of innovation’

• The first era of innovation—that of the lone inventor—encompassed much of human history. Innovators occasionally formed or latched on to companies to exploit the full potential of their ideas, but most seminal innovations developed before about 1915 are closely associated with the individuals behind them

• A combination of longer-term perspectives and less stifling corporate bureaucracies meant that many organizations would happily tolerate experimental efforts.

• The seeds of the third era were planted in the late 1950s and the 1960s, as companies started to become too big and bureaucratic to handle at-the fringes exploration. Given the scale required to innovate, however, these rebels needed new forms of funding. Hence the emergence of the VC-backed start-up.

• Whereas the inventions that characterized the first three eras were typically (but not always) technological breakthroughs, fourth-era innovations are likely to involve business models.

• Today young companies have what feels like milliseconds to enjoy an early success before they need to start outspending imitators and fighting for talent. The increasing ease and decreasing cost of innovation mean that as soon as a young company gets a whiff of success, it has to race against dozens of copycats.

§P.3 ‘Medtronic’s healthy heart’

An example of innovation that had major success

Insurance is still rare in India, so Medtronic had to make its pacemaker more affordable. It worked with a local partner to create India’s first financing plan for medical devices. No new technology was involved here—and that’s the point. Medtronic used business model innovation to enter markets formerly out of its reach. On the basis of this early success, the company plans to scale up the program across India and then in other emerging markets. The effort also positions Medtronic to dramatically expand in those markets as it develops new technologies that lower costs. (CEO Omar Ishrak has announced a goal of radically reducing the cost of a simple pacemaker.) A startup that seeks to compete with Medtronic would have to either build a new pacemaker and seek regulatory approval (which would take years, if not decades) or partner with an established pacemaker manufacturer. It would struggle to get meetings with local doctors with whom Medtronic already has deep relationships. And, of course, it would have to learn how to operate in India, a notoriously complex market. Medtronic simply has capabilities, experience, relationships, expertise, and resources that entrepreneurs don’t.

>> This is a fourth-era-innovation story. Medtronic mixed the entrepreneurial approach of a third-era VC-backed start-up with the unique capabilities once housed in second-era corporate labs. Giants like Medtronic have hard-to-replicate advantages over start-ups.

§P.4 ‘The Role of the Corporate Catalyst’

As companies have decentralized strategic and innovation activities, promoting agility, they have become increasingly hospitable to catalysts = Those mission-driven leaders who corral corporate resources that are outside their traditional span of control to address sprawling challenges. They form networks or coalitions within and outside the company and are motivated by the desire to solve big problems. Healthy Heart, for example, could not exist without the Medtronic catalyst Keyne Monson. In 2008 the head of the company’s international arm asked Monson to devise a business model that would increase its presence in India. Monson launched the effort without a single direct report.

Other examples;

Unilever’s water purification

One effort that supports this plan is the Pureit water filtration business, overseen by Yuri Jain, a vice president who leads the company’s global water initiatives. People in most parts of the world— especially developing countries—lack reliable access to safe drinking water. Studies show that low-cost interventions to purify water can have a big impact, reducing the risk of potentially lethal diarrheal diseases by 50%. However, many consumers in, for instance, Bangladesh and India have no choice but to boil water to purify it, which is expensive, takes time, leaves the water vulnerable to recontamination, and consumes precious fossil fuels. Like Monson at Medtronic, Jain enlisted a number of external parties to help bring the company’s innovation to market—in this case by partnering with NGOs to make Pureit available to schools and consumers who would have difficulty affording the technology.

Syngenta’s Productive Farming

Musyoka and his team devised a program dubbed Uwezo (“capability” in Swahili), which uses the sachet distribution model to provide smallholders with affordable, premeasured packages of cropprotection chemicals—the same products sold to large farms. Farmers could simply pour one packet into 20 liters of water in the backpacks they used to spray their fields, eliminating dosing problems and waste. Musyoka quickly recognized that lowering prices was only part of the solution; education was needed, too. He and his team launched a multipronged information campaign that leveraged existing retailer relationships. Retailers serve as important advisers to farmers, so the team created a program to train retailers about productive farming practices. In addition, it commissioned 45 field agents to travel on motorcycles to farms, plant demonstration plots, and advocate responsible farming. Mass-market media—including programs that farmers could listen to on their mobile phones—broadened the program’s reach. Like Monson, Musyoka drew inspiration from outside his company’s industry. He created a business model that combined the capabilities of a large company (agronomic knowledge, retailer relationships, brand recognition) with external enablers and a stand-alone field force, and it is working.

IBM’s Smarter Cities

IBM committed $100 million to 10 small-scale experiments that emerged from the jam in areas including water, energy, transportation systems, and health care. Harrison was selected to help simulate a venture environment on a new corporate strategy team located at company headquarters in Armonk, New York. The team presented its ideas directly to CEO Sam Palmisano.

Harrison led one of the 10 prototype-development experiments, originally called Instrumented Planet. His team sought to answer this question: How could IBM combine its services acumen; the connectivity of the web; and physical sensors, actuators, and RFID chips to improve efficiency by monitoring the movement of people and vehicles and the activity of energy systems? Many of the building blocks were in place, but the company needed a unifying vision and a specific service offering. In classic catalyst style, Harrison looked outside the organization for inspiration. Instrumented Planet became Smarter Cities (part of IBM’s Smarter Planet initiative), through which the company would offer a bundle of technological infrastructure and related services to help cities save money and improve lives by better managing energy, water, traffic, parking, public transit, and other resources.

CHAPTER Q. THE STAGE-GATES IDEA-TO-LAUNCH PROCESS- UPDATE, WHAT’S NEW AND NEXGEN SYSTEM

§Q.1 ‘What is Stage-Gate?’

Stage-Gate process = A conceptual and operational map for moving new product projects from idea to launch and beyond—a blueprint for managing the new product development (NPD) process to improve effectiveness and efficiency. Stage-Gate is a system or process not unlike a playbook for a North American football team: It maps out what needs to be done, play by play, huddle by huddle—as well as how to do it— in order to win the game.

Stage-Gate, in its simplest format, consists of (1) a series of stages, where the project team undertakes the work, obtains the needed information, and does the subsequent data integration and analysis, followed by (2) gates, where go/kill decisions are made to continue to invest in the project. See Figure 1. A standard Stage-Gate system designed for major product developments is shown in Figure 2.

The Stages

The innovation process can be visualized as a series of stages, with each stage composed of a set of required or recommended best-practice activities needed to progress the project to the next gate or decision point. Think of the stages as plays in a football game—well defined and mapped out, clear goals and purpose, and proficiently executed:

• Each stage is designed to gather information to reduce key project uncertainties and risks; the information requirements thus define the purpose of each of the stages in the process.

• Each stage costs more than the preceding one: The process is an incremental commitment one—a series of increasing bets, much like a game of Texas Hold’em. But with each stage and step increase in project cost, the unknowns and uncertainties are driven down so that risk is effectively managed.

• The activities within stages are undertaken in parallel and by a team of people from different functional areas within the firm; that is, tasks within a stage are done concurrently, much like a team of football players executing a play.

• Each stage is cross-functional: There is no research and development (R&D) stage or marketing stage; rather, every stage is marketing, R&D, production, or engineering. No department owns any one stage.

The Gates

Following each stage is a gate or a go/kill decision point. Gates consist of the following:

• Deliverables: What the project leader and team bring to the decision point (e.g., the results of a set of completed activities). These deliverables are visible, are based on a standard menu for each gate, and are decided at the output of the previous gate.

• Criteria against which the project is judged: These include must-meet criteria or knock-out questions (a checklist) designed to weed out misfit projects quickly; and should-meet criteria that are scored and added (a point count system), which are used to prioritize projects.

• Outputs: A decision (Go/Kill/Hold/Recycle), along with an approved action plan for the next stage (an agreed-to timeline and resources committed), and a list of deliverables and date for the next gate

§Q.2 ‘Frequently made misunderstandings’

• Not a Functional, Phased-Review Process; Today’s Stage-Gate system is built for speed. The stages are cross-functional and not dominated by a single functional area: This is a business process, not an R&D or marketing process. The play is rapid, with activities occurring in parallel rather than in series. The governance process is clear, with defined gates and criteria for efficient, timely decision making. And the project is executed by a dedicated and empowered team of players and led by an entrepreneurial team leader or team captain

• Not a Rigid, Lock-Step Process; Stage-Gate is a map to get from point A (idea) to point B (sucessful new product). As in any map, when the situation merits, detours can be taken. For example, many companies tailor the model to their own circumstances and build lots of flexibility into their process

• Not a Linear System; Due to the visual graphics associated with Stage-Gate, some people see it as a linear model—the stages as linear and the activities within each stage as linear. They miss the point that although the stages are laid out in a sequential stepwise fashion, within each stage activities and tasks are anything but linear.

• Not a Project Control Mechanism; Stage-Gate is a playbook designed to enable project teams and team leaders get resources for their projects and then to speed them to market using the best possible methods to ensure success.

• Not a Dated, Stagnant System; Although Stage-Gate has endured for many years, today’s version is almost unrecognizable from the original model; it has evolved a lot over time.

• Not a Bureaucratic System

• Not a Data Entry Scheme; Although software, with its required data entry, can be a valuable tool and facilitator to the process, do not let the tail wag the dog here. Stage-Gate is composed of a set of information-gathering activities; the data that these activities yield can be conveniently handled by IT to facilitate document management and communication among project team members. But the software and data entry are tools, not the process.

• Not Just a Back-End or Product-Delivery Process

• Not the Same as Project Management; Stage-Gate is a macroprocess—an overarching process. By contrast, project management is a microprocess. Stage-Gate is not a substitute for sound project management methods. Rather, Stage-Gate and project management are used together. Specifically, project management methods are applied within the stages of the Stage-Gate process.

§Q.3 ‘Problems with the Stage-Gate model’

• Gates with no teeth. The most common complaint is that even though the company has installed a stage-and-gate system, the gates, which are the vital component of the governance or decision-making process, are either nonexistent or lack teeth. The result is that projects are rarely killed at gates

• Hollow decisions at gates. In still other companies, the gate review meeting is held and a go decision is made, but resources are not committed. Somehow management has missed the point that approval decisions are rather meaningless unless a check is cut: The project leader and team must leave the gate meeting with the resources they need to progress their project.

• Who are the gatekeepers? Many companies also have trouble defining who the gatekeepers are. The gatekeepers are the senior people in the business who own the resources required by the project leader and team to move forward. Businesses should try to keep the number of gatekeepers as small as possible

• Gatekeepers behaving badly. A very common complaint concerns the behavior of senior management when in the role of gatekeepers

Other problems companies are facing, and other misunderstandings;

• Misapplying Cost-Cutting Models to Innovation Projects like Six-Sigma or Lean Manufacturing.

• Trying to Do Portfolio Management without a Stage-and-Gate Process. Some managers mistakenly believe that they can get by with only portfolio management and no stage-and-gate process in place.

The argument is that their gates lack the real teeth necessary to make go/kill decisions and to prioritize projects, so portfolio management is the answer.

• Too Much Bureaucracy in the Idea-to-Launch Process. Having a well-defined and efficient system that speeds new products to market is the goal. Instead, what some companies have done is to design a cumbersome, bureaucratic process with a lot of make-work and non-value-added activities

  • Deliverables overkill. Most companies’ new product processes suffer from far too much paperwork delivered to the gatekeepers at each gate

  • Demanding much non-value-added work in the stages. Some companies’ processes build every possible activity into each stage, and long lists of required tasks and activities per stage are the result. Moreover, most Stage-Gate processes over time become far too bulky as more and more make-work gets added to the system

• Too Much Reliance on Software as a Solution. Some product developers see IT tools solving everything. Not so: The mistaken belief is that the purchase of a software tool will be a substitute for a robust idea-to-launch process or is the fix for an ineffective innovative system. Software is a great facilitator of a stage-and-gate process, yielding many benefits. For example, software tools available for Stage-Gate enable project teams members to communicate more effectively and to work on shared documents; they provide an electronic Stage-Gate manual complete with all deliverables templates, lists of task within stages and accompanying worksheets; and they track projects and provide tailored views of all the projects in the pipeline. Thus, IT can greatly ease the implementation and use of Stage-Gate. But an IT tool per se is not a substitute for the idea-to-launch process: You need a solid innovation process first, that you then incorporate into your software.

• Expecting the Impossible from a Process. The implementation of a process is often assumed to be the magic bullet, the hope being that all these other problems will disappear

• No Pain, No Gain. The implementation of any system requires some effort, and indeed Stage-Gate makes certain new demands on project teams, leaders, and gatekeepers

§G.4 ‘Next-Generation Stage-Gate: How companies have evolved and accelerated the process’

Here now are some of the ways that progressive companies have modified, adjusted, and adapted Stage-Gate and have implemented the next-generation stage-and-gate process.

Scaled to Suit Different Risk-Level Projects

Perhaps the greatest change in Stage-Gate over the last few years is that it has become a scalable process, scaled to suit very different types and risk levels of projects—from very risky and complex platform developments through to lower-risk extensions and modifications and even to rather simple sales force requests. Management recognized that each of these projects—big and small—has risk, consumes resources, and thus must be managed, but not all need to go through the full five-stage process. The process has thus morphed into multiple versions to fit business needs and to accelerate projects. Figure 4 shows some examples: Stage-Gate XPress for projects of moderate risk, such as improvements, modifications, and extensions; and Stage-Gate Lite for very small projects, such as simple customer requests.

A Flexible Process

Stage-Gate is flexible as opposed to a rigid book of rules and procedures to be religiously followed. No activity or deliverable is mandatory: Stage-Gate is a guide that suggests best practices, recommended activities, and likely deliverables. Another facet of flexibility is simultaneous execution. Here, key activities and even entire stages overlap, not waiting for perfect information before moving forward.

An Adaptable Process

Stage-Gate has also become a much more adaptable innovation process, one that adjusts to changing conditions and fluid, unstable information. The concept of spiral or agile development is built in, allowing project teams to move rapidly to a finalize product design through a series of ‘‘build-test-feedback-and-revise’’ iterations. Spiral development bridges the gap between the need for sharp, early, and fact-based product definition before development begins versus the need to be flexible and to adjust the product’s design to new information and fluid market conditions as development proceeds. Spiral development allows developers to continue to incorporate valuable customer feedback into the design even after the product definition is locked in before going into Stage 3.

An Efficient, Lean, and Rapid System

Smart companies have made their next-generation Stage-Gate process lean, removing waste and inefficiency at every opportunity. They have borrowed the concept of value stream analysis from lean manufacturing and have applied it to their new product process. All the stages, decision points, and key activities in a typical project are mapped out, with typical times for each activity and decision indicated.

In undertaking this mapping, it becomes clear that there is often a difference between the way the process is supposed to work and the way it works in reality. Exhibit 6: Example of a ‘‘Value Stream Map’’ of the Current New Product Process

More effective governance

• Use of scorecards to make better go/kill decisions. A number of firms use scorecards for early stage screening (for Gates 1, 2, and 3 in Figure 2), in which the project is scored by the gatekeepers right at the gate meeting on key criteria. Typical criteria for a new product projects are in Figure 7

• Employing success criteria at gates. A second selection method, and one employed with considerable success at firms

• Self-evaluation as an input to each gate. Some companies let the project teams submit their own filled-in scorecard prior to the gate meeting. The view is that the project team’s judgment of the project’s attractiveness is also important information for the gatekeepers.

• Displays of in-process metrics at gates. In-process metrics are also considered important by some management groups and hence are displayed at gates. Inprocess metrics capture how well the project is being executed and whether is it on course and on target.

• Integrated with portfolio management. Portfolio management and a gating process are both designed to make go/kill and resource allocation decisions and hence are being integrated into a unified system in the next-generation Stage-Gate.

• Accelerating the Gates

• The need for fast go/kill decisions combined with global and diverse development teams means that effective and timely gatekeeping has become a major challenge

  • Leaner and simpler gates

  • Distinguishing between work done in the stages and deliverables to the gates

  • Self-managed gates

  • Electronic and virtual gates

Accountability, the Post Launch Review, and Continuous Improvement

Next-generation Stage-Gate systems build in a tough post launch review to instill accountability for results and at the same time to foster a culture of continuous improvement. Continuous improvement is one of the main tenets of lean manufacturing and lends itself readily to application in the field of product innovation.

Continuous improvement in NPD has three major elements:

1. Having performance metrics in place: These metrics measure how well a specific new product project performed. For example, were the product’s profits on target? Was it launched on time?

2. Establishing team accountability for results: All members of the project team are fully responsible for performance results when measured against these metrics.

3. Building in learning and improvement: When the project team misses the target, or when deficiencies occur, focus on fixing the cause—stop this from happening again—rather than putting a band-aid on the symptom or, worse yet, punishing the team.

An Open System

Stage-Gate has also been modified to accommodate open innovation. Best performers have reinvented their NPD process to handle the flow of ideas, intellectual property (IP), technology, and even totally developed products into the company from external sources and also the flow outward

Exhibit 9: Stage-Gate Has Been Adapted to Become an Open Innovation Model

CHAPTER R. TOWARDS A MULTIDISCIPLINARY DEFINITION OF INNOVATION

§R.1 ‘Introduction’

Organizations need to innovate in response to changing customer demands and lifestyles and in order to capitalize on opportunities offered by technology and changing marketplaces, structures and dynamics. Organizational innovation can be performed in relation to products, services, operations, processes, and people. There is agreement that in order to both sustain their competitive position and to strengthen it, organizations and economies must innovate and promote innovation. Innovation is a key policy and strategic issue. Innovation is tightly coupled to change, as organizations use innovation as a tool in order to influence an environment or due to their changing environments (internal and external). Different forms of innovation draw to varying extents on different teams, departments, and professional disciplines. Therefore, innovation is of interest to practitioners and researchers across a range of business and management disciplines, and has been discussed variously in, for example, the literature on human resource management, operations management, entrepreneurship, research and development, information technology, engineering and product design, and marketing and strategy. Whilst there is some overlap between the various definitions of innovation, overall the number and diversity of definitions leads to a situation in which there is no clear and authoritative definition of innovation.

§R.2 ‘Literature review’

To demonstrate the diversity of the definitions of innovation and to press the case for the development of an integrative definition, the article offers a few examples of definitions of organizational innovation where some emphasize different aspects of innovation and others are dedicated to a discipline. Ultimately some 60 definitions of innovation were collected from the various disciplinary literatures, and analyzed in order to get to one multidisciplinary definition of innovation.

§R.3 ‘Results and discussion’

Tables II and III show the attributes of innovation definitions that have been identified through the content analysis. These six attributes form the basis for an integrative definition of innovation, since they have been surfaced from key definitions drawn from different disciplinary areas. These attributes are defined as follows:

• Nature of innovation refers to the form of innovation as in something new or improved

• Type of innovation refers to the kind of innovation as in the type of output or the result of innovation, e.g. product or service

• Stages of innovation refers to all the steps taken during an innovation process which usually start from idea generation and end with commercialization

• Social context refers to any social entity, system or group of people involved in the innovation process or environmental factors affecting it

• Means of innovation refers to the necessary resources (e.g. technical, creative, financial) that need to be in place for innovation

• Aim of innovation is the overall result that the organizations want to achieve through innovation.

On the basis of the key attributes of definitions of innovation and the descriptors used by those definitions to characterize the attributes, a diagrammatic definition of “innovation” is proposed in Figure 1. The diagram incorporates the six attributes identified as being common to the various disciplinary definitions of innovation.

Definition >> Innovation = The multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace

The definition begins with the term “multi stage process” as most of the definitions presented earlier have highlighted that innovation is not a discrete act and is a process. Secondly, the article focuses on business organizations in this paper, although it has not explicitly articulated in the textual definition that innovation can occur in various social entities and contexts. Third, as shown in the diagram, many definitions have focused on the means of innovation, that is the ways in which ideas have been transformed into new, improved and changed entities, whether products or services, for example, for new markets.

CHAPTER S. WORKING TOGETHER APART? BUILDING A KNOWLEDGE-SHARING CULTURE FOR GLOBAL VIRTUAL TEAMS

§S.1 ‘Introduction’

The rise of global virtual teams is a phenomenon of globalization. At the same time, new information and communication technologies play an ever-increasing role in all aspects of global business relations, but are particularly important in the emergence of new global organizational work structures and virtual work environments. Information and communication technologies have been viewed as an indispensable tool for multinational corporations that choose to move beyond the geographic constraints of face-to-face employee interactions and endeavor to build a virtual workplace and/or use virtual teams as a new component of a generally traditional work structure. Whereas information and communication technologies are essential in the communication and knowledge-sharing processes for geographically dispersed employees, computer-facilitated communication.

Technologies are only as effective as those using them. Even though information and communication technologies impact knowledge sharing, team coherence and performance, it is the human component in the virtual environment and the interactive relational bonds that facilitate or hinder the development of a shared knowledge culture and organizational learning. Creating a knowledge-based environment requires more than information and communication technology; it requires other crucial elements such as intra-team trust and intra-team relational bonds, leadership, intercultural communication competence, and cross-cultural training that foster a collaborative interactive permissive space.

This paper examines the following issues: (1) what are the cross-cultural challenges faced by global virtual teams?; (2) how do organizations develop a knowledge sharing culture to promote effective organizational learning among culturally-diverse team members? and; (3) what are some of the practices that can help maximize the performance of global virtual teams?

§S.2 ‘What and why global virtual teams?’

Researchers suggest three main attributes for virtual teams – (1) it is a functioning team that is interdependent in task management, having shared responsibility for outcomes, and collectively managing relationships across organizational boundaries, that (2) team members are geographically dispersed, and (3) they rely on technology-mediated communications rather than face-to-face interaction to accomplish tasks. In essence, team members are not collocated and definitely use technology-mediated communication such as information and communication technologies.

Global teams = A team that is comprised of individuals located in many different countries or geographic areas, and team members differ in their functionality, which adds complexity to group dynamics. The main idea behind this concept is that people are both geographically dispersed and functionally diverse.

Global virtual teams are not only separated by time and space, but differ in national, cultural and linguistic attributes, and use information and communication technologies as their primary means of communication and work structure

The potential advantages of global virtual teams are that they can create culturally synergistic solutions, enhance creativity and cohesiveness among team members, promote a greater acceptance of new ideas and, hence, provide a competitive advantage for multinational companies. The possible disadvantages are that they tend to have more time consuming decision-making processes and when miscommunication and misunderstandings occur, stress and conflicts among team members are heightened and less easily dispelled.

There are two key issues (illustrated in Figure 1) to implement global virtual teams:

§S.3 ‘Culture and knowledge sharing base’

Knowledge sharing is often facilitated by communication that involves the exchange of meaning. The process of communicating is dynamic, multifaceted and complex. Cultural conditioning affects the evaluation of experience as well as the means by which information and knowledge is conveyed and learned. When miscommunication occurs, particularly in a cross-cultural setting, the sender and receiver should be seen as both active participants engaged in knowledge transfer and culturally mediated discourse. The ability to communicate effectively in a cross-cultural setting resides in the abilities of all participants to successfully decode and encode messages so that they are understood within the others’ cultural contexts.

Moreover, in computer-mediated environments, the means by which information is transferred is flattened, less dynamic and thus may become less salient, possibly less easy to grasp, retain and learn.

National Cultural Effects on Global Virtual Teams Intra-team Dynamics

Individuals from different cultures vary in terms of their group behaviors and communications styles. Several research has found that;

• In order to understand the communication and behavioral priorities of those from a particular culture, one must understand the context in which they occur.
  High context culture = Relying heavily upon the external environment for behavioral cues where people value subtle and indirect communication styles

Low context culture = Where the communication put less emphasis on non-verbal or behavioral cues, hence communication tends to be more direct, with an avoidance of ambiguity

• Hofstede’s four cultural dimensions framework (power distance, uncertainty avoidance, individualism versus collectivism, and career success versus quality of life, originally labeled masculinity versus femininity) inform both global virtual team dynamics and can provide useful insight into how a shared knowledge culture can be constructed and how people interact in virtual teams

Organizational Culture Effects on Global Virtual Teams

Organizational culture is embedded in the national cultures in which an organization operates. Although both cultures play different roles, each influences the way things operate in multinational corporations.

Organizational or corporate culture = Includes the values and beliefs expressed in artefacts, symbols and practices as well as organizational language, traditions, myths, rituals, and stories. Another view: ‘It is the way we do things around here. In essence, corporate culture is the learned, shared, and tacit assumptions such as values, beliefs, and assumptions’

§S.4 ‘Information and communication technology as a facilitating tool for knowledge sharing’

In information and communication technology-mediated environments where geographically dispersed and culturally diverse members electronically converse in English, the language used by members may further obscure intended meaning and hamper knowledge management when members assume that terms and slang in one English-language culture have identical meanings in another English language environment.

Individual team members need to be cognizant of English language variation in intra-team electronic communication, particularly in regards to tone, style, formality, salutations and closings, and aware that substantial sociolinguistic and grammatical variations exist within the global English-speaking community and will impact intra-team communications. Team members’ cultural differences in work emphasis, deadline adherence, project management style all need to be made transparent to the team and a synergistic team approach to each concern be mediated and agreed upon early in the team formation process. The role of information and communication technologies is regarded as a functional tool that facilitates the cross-cultural collaboration and communication. Information and communication technologies can provide a common medium for work and shared meaning.

§S.5 ‘Human challenges of virtual team membership’

Understanding human challenges of virtual team membership in order to create a knowledge-sharing culture and capabilities provide numerous key implications for multinational corporations. What needs to be clearly emphasized and articulated here is the fact that teamwork is a culturally and linguistically bounded concept.

• Creating effective team leadership; Team leaders play a crucial role in effective global virtual team management and in creating a knowledge-sharing environment. The leader(s) co-ordinate activities/tasks, motivate team members, monitor and/or facilitate collaboration and address/resolve conflict. Team leadership must involve effective cross-cultural communication and understanding, ensure that there is a collective sense of belonging, and that team values, task assignment and plans are shared. Team leaders need to build intra-team participation, ensure that all ideas are heard, and monitor participation rates.

• Managing conflict and global virtual teams dynamics; In information and communication technologies-mediated environments, addressing conflict situations and even detecting the existence of conflict, is not always straightforward. For example, in one hand, avoidance behavior may indicate conflict in certain cultures. On the other hand, confrontational behavior can lead to conflict in other cultures. Global virtual teams need to anticipate potential areas of conflict in the formation stage and develop norms/rules around conflict resolution

• Developing trust and relationships; For global virtual teams, being both heterogeneous cultural entities and geographically dispersed virtual entities, the risk of potential misunderstandings and mistrust is heightened. Trust between group members as well as trust between the team and the organization is equally important. The ability to collaborate depends heavily upon trust as open reciprocity and sharing of information and knowledge will not freely occur without it.

According to some researchers, the formation of cross-cultural trust includes a reciprocal element in it and falls under two behavioral categories

• • Credibility where one party (focal) believes that the other party (referent) has capabilities, competence, expertise and resources to make a successful exchange that meets outcome expectations. Focal also believes that referent will act in a reliable and predictable manner to meet the expectations.

  • Benevolence includes beliefs about the emotional aspects of the referent’s behavior like positive intention to exchange. Such beliefs include a referent’s good will and that the referent will not jeopardize the exchange outcome, and will in fact support enhanced outcomes in the exchange.

• Understanding cross-cultural differences;

• Developing intercultural communication competences; Although using information and communication technologies can reduce certain cross-cultural barriers, team members need cross-cultural training to gain the desired cognitive, affective and behavioral competencies. These competencies respectively mean that people need to understand and recognize cultural differences; feel comfortable with various cultures; and thus act accordingly to suit cultural differences.

As a summary for practical suggestions, Table 1 highlights the need for numerous knowledge, skills and abilities in order for global virtual teams to work effectively in a virtual environment.