Group 1

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Group 1: Innovation & The Adaptive Cycle

Group 1 consists of Ernest, Roger, Brigit, and Jan. We will be presenting the first student lecture on April 2nd.

the slides for the lecture are here:File:Lectures slides group 1.pdf
The slides from the discussion can be fount hereFile:Discussion slides group 1.pdf


Assignment: How may innovation be related to the Adaptive Cycle?

To answer this central question we will discuss a number of topics. Firstly, we will discuss several aspects of innovation in general, and then place innovation in an organizational and managerial context. Secondly, we will discuss the relevant features of the adaptive cycle. Finally, we aim to place innovation in the context of the adaptive cycle, and will conclude with a discussion of the relationship between innovation and the adaptive cycle.

Innovation

The Discipline of Innovation

According to Drucker (2002) innovation can be viewed as a discipline, that is the systematic practice of innovation. Irrespective of the particular context, innovation is the specific function of entrepreneurship, "the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth". [1]

Sources of Innovation

Several sources of innovation may exist, these can be external (outside a company in its social and intellectual environment) or internal (within a company or industry). Drucker (2002) asserts that most innovations, in particular successful innovation, is the result of "a conscious purposeful search for innovation opportunities, which are found in only a few situations".[1] The following table[2] summarizes the sources of innovation as identified by Drucker, the first 7 and the last one by Spinoza et. al (1997):


Innovation sources.jpg


If you look at the eight sources for opportunities it appears they are in breakdowns, problems, changes, and challenges. The first four sources normally appear internally as challenges to the operation of the business; they can be pursued without the pressure of external competition. The next three sources appear externally, as part of the context in which the firm does business; they are complicated by competition with other firms. The eighth source, marginal practices, is adopted from Spinoza et al. A marginal practice is an existing practice in another field that may appear irrelevant in yours, but offers an opportunity to solve your problem.


Managing Innovation

Innovation is one of the most valuable asset that an organisation is striving for, organisations needs to develop innovative products continuously to stay ahead their competitors. How can an organisation adapt to a nature of innovation? ‘Innovation is the successful implementation of creative ideas by an organization’ (Amabile, 2000, p. 332). ‘This definition distinguishes between the generation of new ideas and their implementation’ (West, 2002). ‘While creativity is the dominant factor, one also has to demonstrate a high level of initiative to bring ideas to the implementation stage’ (Amabile, 2000; Kanter, 1988; Mumford & Gustafson, 1988; Van de Ven, 1986). Managing innovation needs different people that complement each other. If you look to innovation as a process then there are different phases involved from getting an idea to the implementation or production of a product. In the literature you can find a lot of frameworks and theories of the process of innovation. I find the framework of Basadur (1979, 1982, 1992) very powerful for its simplicity. Basadur portrayed individual, team and organizational creativity as a dynamic, circular four stage process of continuously finding good problems, defining them, solving them and putting good solutions into practice. Research also shows that skills in such a process can be deliberately developed (Basadur, 1979, 1994). To make the process work, skills in sequential diverging and converging thinking are necessary within and between the stages. In practice, the process is represented as eight diverging-converging steps within the four stages as follows:

  • Generating: problem and fact finding
  • Conceptualizing: problem definition and idea finding
  • Optimizing: idea evaluation and action planning
  • Implementing: gaining acceptance and implementation


Simple.jpg



Types of Innovation

There are two fundamental modes of innovation the first one is "exploitation" or incremental innovation. In this mode, innovation builds up or adds to existing models by refining existing procedures, doing the same only better or reaping value from what we already know. The second one is "exploration" or radical innovation. Here you find innovation that is radical and brings totally new concepts by searching for new options, experimenting with new ideas or generates value from realizing new possibilities. Within these two fundamentals there are four concepts that can be distinquished has shown in the table below:

Concept3.jpg

Henderson and Clark 1990

Most Innovation Models include Radical and Incremental innovation. In addition, other types of innovation are also recognized. Such as, Behavioral and System innovation (Dush et al., 2010). The term System Innovation refers to "far-reaching changes in technology, which may influence several branches of the economy or even give rise to entire new sectors" (Freeman & Perez, 1988) "Behavioral Innovation" does not refer to changes in technology, but rather changes in market-actor relations. This type of innovation is rooted in changes in consumption behavior and redefines production-consumption relations (Dush et al., 2010).

Inn Types 2.JPG


Companies can have an open or closed business model in managing innovation, Chesbrough (2003) has created a framework where the differences between these models are shown:


Chesbrough.jpg


Management


When trying to manage an organization confronted with large scale change, management has got to react. What would happen if management is anticipating upfront that changes are inevitable and prepare their organization upfront. Weick wrote a lot about sense making, he advocates that management prepare by being proactive, He suggest some actions to be undertaken.

For a oversight of all the stakeholers: http://www.udemy.com/blog/wp-content/uploads/2012/01/startup-ecosystem-infographic.png

Weick: Sensemaking

Sencemaking as an analogy:
Mastermind is a game in which a colour code is to be found by refining hypothesis just up to the point that it equal to the code to be fount. This is the opposite of sense making. Imagine there is no certainty there is a code to be found, even if one finds a code you never know this is the code to be found or for that matter if the code war always this or will never change again. Much more that this there is no knowledge on the building blocks of the code, how many there are and if you can use them to crack the code.

This analogy clarifies what ‘knowledge’ organizations are facing and Weick tries to elaborate on this analogy with three hypotheses of Gertgen (Gertgen 1982)

  1. Identification of every ‘change’ event is subject to numerous revisions. There is no final revision, partly because circumstances change and therefor the context, partly because it is always evaluated in retrospective. Interpretations change over time.
  2. An Ancker point of every identification is measured by every, interconnected, ever changing interpretation
  3. Every event or action is multiple interpretable, there is no clear order, it is always about consensus.


What is playing a large role in interpreting information? According to Weick that is what he calls committed interpretation’ it is a crucial aspect in sense making. He describes it as follows:
Do what is expected of you, Play your part( we did this because we are colleagues….., we did this because our role predicts it….) he literary says(Weick 2011 Ch1)  :
'Once a person makes a commitment, then subsequent events often are interpreted in ways that confirm the soundness of that commitment.
Thus, commitments constrain the meanings that people impose on streams of experience'

Organizations are the perfect feeding grounds for committed interpretation. This is because organizations prefer to take action, take responsibility, make choices, organizations reward well-reasoned statements and research everything. But organizations also exaggerate in their efforts , this is why they do not recognize that choices and interpretations are the result of committed interpretation of the persons that made them.

Design as an inprovisation Theater:
A new way of organizing is according to Weick a possible solution to capture committed interpretation. He calls this way ‘ Design seen as a improvisation theater’ he has the following thoughts on it:

  1. In a improvisation theater coordination is not accomplished because everybody thinks along the same lines and look at a design from the same angle but because people have a similar state of mind when looking at a design on what is happening and what it can mean. Such a similar state of mind can result in coordination and leave room for individual input. The result is that people collectively can tackle a problem while there remains room to adjust for unexpected problems using individual competences.
  2. Design is not a blueprint it is a recipe. Blueprints give an worldview of what we think to be true. Recipes give a worldview from which we can truly operate.
  3. Design is giving a view on the past extrapolated to the future. Blueprints are focus points on which we try to understand the actions of the past.
  4. Designing is to remark a number of developments which bring improvement, focusing attention, classifying, dispersing them an recording them is a system



In the book ‘Managing the unexpected’ (weick 2007) this concept is more pragmatically explained and exemplified.
He defines five ‘rules’ to where organizations have to commit themselves

  1. Evaluate small mistakes
  2. Do not simplefy mistakes or processes
  3. Stay involved with the primary proces (operations)
  4. Be resilient, remain or regain a dynamically stable state
  5. Use the different expertise’s of the people you work with, do not make decisions exclusively based on hieratical structures



On the subject 1 and 2 he elaborates:
“There Is no question that when you organize, you simplify.
But you don’t need to simplify casually or habitually or instantly.
People can be more deliberate in their choices of what to simplify.
To be more deliberate means to be more thorough in articulating mistakes you don’t want to make”

When, in organizing, one only focuses on the effect you run the risk that you concentrate too much on preconceptions a person has. When also focusing on events you ‘’’don’t’’’ want to happen you also aim to the unexpected. Expectations create blind spots and blind spots have the tendency to grow if we approach them with biased views. The art is to diversify the point of view, these different points of view can be created when subject 3, 4 and 5 are accomplished in the information system



Ambidextrous organizations

When resilience is needed in an organization because new competitors or new technologies surfaces Tushman , Anderson and O’Reilly (1997) use the term ‘Ambidextrous organizations’. With this they mean that organizations have to develop differed means off supporting innovations. One side that is focused on continuous incremental changes on existing products so ‘new’ functionality/versions of an existing product can be created and put to marked. This other side needs to be focused on new development of new products, so called discontinuous innovations. The reason for this is that new versions of an existing product or variation on the same theme of an product have a limited lifespan. If this lifespan is coming to an end something new has to replace it.

Money is made by existing products and new versions of it. If the product is not saleable anymore a organization needs a new product that can be sold. The writers argue that ending of a lifespan can be done by a competing firm, a new competing technology or by (deliberately)cannibalizing on the old product by a new product of the same organization. In the eyes of the writers Ambidextrous organizations have some characteristic. These characteristic include some of the same elements mentioned by Weick

Ambidextrous organizations

  • They have multiple organization architectures that support diverse innovation requirements.
  1. Creating internal diversity to create insight and opportunity to make strategic choices.
  2. Providing balance to ‘fight’ the instability
  • Strategic decisions must be coupled with strategic organizational change
  1. Proactive strategic innovation always create a disturbance of the status quo
  • Creation of hardware and software tools
  1. Hardware --> organizational structures, processes
  2. Software --> Human resources, culture, social networks
  • Difference between architectures designed for continues incremental innovations and discontinues innovations.
    • continues incremental innovation High volume throughput--> short horizon:
      1. structured roles and responsibilities
      2. centralized procedures
      3. efficient oriented cultures
      4. Highly engineered work processes
      5. Homogeneous, older and experienced human resource
    • discontinues innovations Low volume throughput--> long horizon:
      1. entrepreneurial
      2. small teams
      3. lose structures and processes
      4. young and heterogeneous human resource



During a period of discontinues innovations management can ‘select’ a dominant design. After this management can chose to further develop the product line. Or management can chose to cannibalize a existing line for a new one

Management cannot know the right decision on de selection or the substitution but having a ambidexter organization management can maximize the probability that it will have both the ‘luck’ and the expertise to be proactive instead off reactive in the industries

There is a difference between proactive strategic reorganizations like in the case of ambidexterous organizations and reactive reorientations (turnarounds). The latter are more risky because of the existing crisis situation and time pressure as a result from that.

Ambidextrous managers


According to Mom, Bosh and Volbera (Mom 2009) ambidextrous managers can be described as the managers behavioral orientation toward combining exploration and exploitation related activities within a certain period of time. Ambidexterity of a manager shows itself in the way managers engage in routine and non routine activities, in collective and creative activities.

The writers conceptualize tree characteristics of ambidextrous managers

  1. They host contradictions
  2. They are multitaskers
  3. They refine and renew their knowledge


And two types of coordination mechanisms:

  1. formal structural
  2. personal


The study shows that the tree characteristics are present in ambidextrous managers
findings are that personal coordination structure is favored, although formal structural mechanisms are in place for effecting change.



Gergen K.J. (1982) toward transformation in social knowledge. NY: springer-verlag
K.E. Weick. (2001), Sense making in organizations: Small Structures with large Consequences. Making Sence of the organization ,Ch 1
KE. Weick. ( 2001), Organisational redesign as Improvisation. Making Sense of the organization, Ch 3
KE. Weick K.M. Sutcliffe ( 2007). Managing the unexpected, reliant performance in an age of uncertainty. John Wiley & Sons
Tushman M.L., Anderson P.C., O’Reilly C. (1997). Technology cycles-innovation streams-and ambidextrous organizations,Managing Strategic Innovation and Change :New York: Oxford University press
T.J.M.Mom, F.A.J. van den Bosch, H.W. Volbera (2009). Understanding Variation in managers 'ambidexterity': Investigating direct and indirect effects of formal structural an personal coordination mechanisms.Organisation Science Vol.20 No.4 jul-aug

The Adaptive Cycle


A lot of elements from the adaptive cycle theory can be linked to the business cycle theory. This theory identifies cycles in economical systems. There is a typology of business cycles according to their periodicity.

Schumpeter describes these business cycles compese a waveform of cycles. In Schumpeters work The theory of economic development[4], he describes economy as a circulair flow which leads to a stationary state (Walrasian equilibrium) without innovation.

According to Schumpeterinnovation is the only source of economical growth. Innovation is done by entrepreneurs. A main work of Schumpeter is "Business Cycles". In this work Schumpeter gives a lot of examples - analizing different industries - for innovation as a driver for economic growth.If we compare the business cycle to the adaptive cycle, the role of innovation can be seen as "the key that starts the engine and keeps it running" as [5] stated by McCraw in his analysis of schumpeters Business Cycles.

-- Spiral dynamics -- Innovation in different quadrants of the adaptive cycle.

Quadrant 1: The Equilibrium

Theoretically there is no innovation in this quadrant. Organizations functions as a stationary (Schumpeter). In the example's of Schumpeter, governments forbid the use of new machines or import from India or other kinds of acceptance of innovation, until 1 entrepreneur gets it done to work out his innovation and then we go to Crisis quadrant


Quadrant 2: The Crisis

Crisis quadrant. The organization gets sense of the fact that the problems can't be solved on the traditional way the have always done. The organization needs help. Innovation gets space to come to new idea's of how to overwin the crisis.In this quadrant the first part of innovation (The idea's) get a great role. Idea's does not led to succes automatically.....

Quadrant 3: New combinations

In this quadrant, innovations are further worked out and tried out. Succesful ones are taken to the next stage, and optimezed there.

Quadrant 4: Entrepreneurship

Optimizing and upscaling succesful innovations. Finding the way to a new balance. By optimizing and embedding the new innovations into the daily business, the cycle starts again.

Left side

IN the left side the organization is not influenced bij innovations. At max small incremental innovations to work more efficient or effective. The organization can be influenced by external innovations, en can move to the right side (crisis)

Right side The right side is the unsure side in which creative destruction takes place. But it starts in the left side. The organization in quadrant 1 has become a “stationary” in schumpeters thoughts. In the view of Holling, it waiting to see an accident happen, and the organization goes to the second fase of the crisis.

Linking the adaptive cycle to innovation: In the view of Holling. (Holling (2001) - Understanding the Complexity of Economic%2C Ecological and Social Systems.pdf), there are three properties that shape that the adaptive cycle.

The inherent potential – Wealth Limits for what is possible

The internal controllability The capacity to change to the target goal

The adaptive capacity The vulnerability to unexpected disturbances

A

Innovation & The Adaptive Cycle

The four quadrants of the adaptive cycle


References

  1. 1.0 1.1 Drucker, P. F. (2002). The discipline of innovation. Harvard business review, 80, 95-104.
  2. Denning, P.J. (2004) The Social Life of Innovation. Communications of the ACM, Vol. 47. No. 4.
  3. Kondratieff, N. D.; Stolper, W. F. (1935). "The Long Waves in Economic Life". Review of Economics and Statistics (The MIT Press) 17 (6): 105–115. doi:10.2307/1928486. JSTOR 1928486.
  4. Schumpeter, J.A. The theory of economic development : an inquiry into profits, capital, credit, interest, and the business cycle translated from the German by Redvers Opie (1961) New York: OUP
  5. Schumpeter’s Business Cycles as Business History - Business History Review 80 (Summer 2006): 231–261. © 2006 by The President and Fellows of Harvard College.