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lOMoARcPSD|7864644 Lectures samenvattingen Strategic Entrepreneurship and Organizational Renewal (Vrije Universiteit Amsterdam) Scannen om te openen op Studeersnel...
lOMoARcPSD|7864644 Lectures samenvattingen Strategic Entrepreneurship and Organizational Renewal (Vrije Universiteit Amsterdam) Scannen om te openen op Studeersnel Studeersnel wordt niet gesponsord of ondersteund door een hogeschool of universiteit Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Week 1: Why innovate and why so difficult? Lecture 1.2 Firm survival rates: → less than 0,1% of US firms live to the age of 40 Darwinian view It is not about: - Being big (size) - Being strong (capital) - Being smart “the one most responsive to change” Product life cycle / S-curve Fluid phase - High uncertainty - High investment costs Organizational implications - frequent redefinition of tasks - Limited hierarchy - High lateral communication Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 → Organic structure: adaptability (due to high environmental uncertainty) Specific phase - Low uncertainty Organizational implications - Stable tasks - More hierarchy: coordination and control - Top-down communication → Mechanistic structure: predictability (low environmental uncertainty) From fluid to specific phase Structure: from informal to formal Organizational behavior: from flexible and responsive to rigid and predictable Power: from entrepreneurs to managers Orientation: from external to internal Innovation Discontinuities Competence enhancing - Large improvements in price/performance - Builds on existing knowledge - New products or new processes → Established players benefit Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Competence destroying - Large improvement in price/performance - Existing knowledge becomes obsolete - Entirely different knowledge and competencies → New entrants benefit Digital disruption → National advantages are disappearing → Increase inventions and a acceleration of innovations → BIG no longer beautiful → Market leaders lose their leadings positions increasingly quicker How van firms respond? Improvement / Incremental Renewal / Radical Evolutionary; incremental Revolutionairy: “jumps” Leitmotiv: We can always improve Leitmotiv: we have to change (crisis) Preventive: correctable Destructive: no way back Focus: management of operations (efficiency) Focus: management of opportunities Dominant role of planning and control Focus on creativity and entrepreneurship Which one is more important? → Short term, no guarantee for long term → costs money short term, but essential for long-term Example improvement: Digital transformation (john deer, Ravo) Example renewal: AI, Robots, VR, Nano-tech Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Little successes, many failures Very low succes, despite many R&D and government spending Manager houden innovatie tegen, uit angst dat de creativiteit van de ondergeschikte hun gezag ondermijnt Deeper organizational barriers - Economic: sunk costs (= no motivation) - Cognitive: no understanding (= no ability) - core capabilities → core rigidities - Competency traps: use of increasingly inferior resources - Overvaluing of internal knowledge - Dismissive attitude towards external resources / capabilities (makes firms inward looking) - Social/psychological (= no courage) - Complacency - Fear Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 The large company syndrome: established businesses have difficulty in nurturing break-away innovations Lecture 2.1 Innovation in times of recession - Attention to innovation is especially also important during a recession - Lack of innovation carries a substantial impact on performance - A regression offers relatively large opportunities Innovation killers Toolsmed Economic: - Lack of strategic priority - No willingness to deal with uncertainty and ambiguity - Strong focus on existing markets Cognitive: - No capabilities for collecting data on new markets and on new trends - No ability to interpret ‘weak signals’, foreshadowing major new trends Social/Psychological - The cultural problem of that sees innovation as too messy and difficult Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 - Behavior strongly geared toward avoiding mistakes and reducing risks Barriers to innovation DSM The more disruptive, the more separation Organizing for radical innovation Organizational separation → (radical) innovation Teams Teams are generally fare more effective and outperform individuals - Both in creating new ideas and bringing them to live Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 - One person’s idea leads to several more ideas by others - One person’s complaint may be another’s solution - A big thing for one person may be a small thing for a team Four types of teams Functional teams: Technical, simple problems. Functional disciplines, sequential approach, coordination via FM’s. + Taskdivision + Specialisation - Time consuming Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Light weight team Incremental innovation, coordination through project leader + Fast coordination + Project owner - Lightweight project leader - conflicting loyalty Heavy weight team Adjacent innovation, one task for coreteam member, project leader has power + Commitment + Consistency + Autonomy - Not in-depth - Status differences - Invisible C’s Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Autonomous team Tiger team, radical innovation, teammembers decoupled from functional disciplines, team has carte blanche, project leader is the boss + Focus + Decision power - Outside boundaries - Difficult to manager Radical innovations (Stephen Raes) - Time horizon: 5 - 10 years - Fund: 5 million (15 - 20 later) - Strategy: new technologies, new markets - Financially: cash flow - Decision points: milestones 3.1 Toolsmed & Co - founded in 1925 - Focus on medical tools through craftmanship - Limited focus on innovation - In 2010: major restructuring Description After the restructuring - Strong focus on operational excellence - Innovation more important Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 → Innovation & New Business Opportunities (INBO) Goal: Develop a systematic process for new growth business How: Combine the best of external venturing & corporate venturing, and take advantage of underleveraged ToolsMed assets (people, ideas, technologies) Ansoff strategy matrix Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 - Little C: distant from the core - Big C: close to the core Diagnosis INBO’s approach - INBO’s management involvement: (very) high - What do they do? - Close monitoring - Standardized approach - What does this bring? - Fast-decision making - Experience But at what cost? Balancing Act among 3 dimensions: - Temporal: Short-term vs. Long term - Behavioral: Freedom vs Control - Learning: Forgetting vs Borrowing ToolsMed’s systems Formalized, structured approach: - AOP: financial forecasting - POR: Plan of Resources Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 - Factory Map: manufacturing planning - Roadmap: 3-5 year outlook Implicit underlying assumptions - Close-to-perfect information - Well-defined PLC’s and bases of competition → Stable, predictable environment systems for integrating venture - System for cost allocation - Manufacturing: integral cost allocation (drives out ventures) - Division: expense managed (excludes ventures) But: - no systems in place to support the transition - Basically off-budget financing for business units (however, no credits for INBO) - Relocation: from corporate strategy to manufacturing (indicative of low strategic priority) Conclusion No mandate for using ToolsMed’s support systems - IT systems / sales & marketing channels / branding No funds for upscaling from INBO → Business units No rewards for business units managers for integrating - Only punishment No ‘stand-alone’ strategy for INBO division Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Chris Argyris - Espoused-theory: what managers say they do - Theory-in-use: what managers do ToolsMed & Co Execution Changes in SE-execution process - Longer incubation - More financial resources - More handsoff approach by INBO - More input from outside in front-end phase - External collaboration throughout pipeline process All to often new business is managed in a ‘polar fashion’ - Either exactly the same as a mature business - Leads to barriers that impede new business creation - Or, in splendid isolation - Leads to alienation and US vs. THEM mentality H1 business - Mature, well established - Focus: cost control, profitability H2 businesses - Rapidly growing, contributors of new revenue - Focus: revenue growth and market share gains H3 businesses - Future options, few survive - Focus: market development, identifying potential customers,S confirming technical & economic feasibility - Share of mind Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Implications 1. Different businesses should be managed differently 2. Different management styles - Exploitation versus exploration 3. Different performance metrics - H3: process-based milestones - H1: (financial) outcomes Implementing Temporal: short-term vs long term Short term Essential for getting the business up and running. Tactical milestones on building the business (forming the executive team, crafting an organization) Long term Essential for staying power and profitability, tactical milestones on growing the business (strategic clarity, revenue growth or profitability) Behavioral: freedom vs control Freedom Essential for ensuring the development of new practices that truly differ (free form the bureaucratic and budgetary control) Control Keeping strategy coherent and implementation manageable: ultimately acceptable for organization (lengthy review meetings with innovation team leaders, realistic, attainable plans) Learning: forgetting vs borrowing Forgetting Forget some of what made the Mother successful (“institutional memory”, hire outsiders, forget current customers) Borrowing Borrow some of her assets, which may provide the most significant advantage over independent start-ups (create only links to assets crucial for new customer acquisition, reward cooperative Business Units managers for borrowing) Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 3.2 Cognitive biases and innovation Cognitive bias A systematic error in thinking that occurs when on is interpreting information in the world around them. Why do biases occur in innovation decisions Because we deal with - Uncertainty (need for an unambiguous reality) - Risk (approaching pleasure and avoiding pain) Need for an unambiguous reality - Dual process model - Simplification through heuristics - Cognitive ability: the capacity to see and understand - Cognitive motivation: willingness to see and understand - Important heuristic strategy - Substitution Approaching pleasure and avoiding pain - Involves the choice between risky and unknown options, or the certain and familiar option - S1 generates feelings of pleasure or pain (affect), which then informs S2 Likely biases in innovation - Pro-innovation bias / status quo bias - Overoptimism - Short-termism - Availability bias - Affect bias - Anchoring bias - Loss aversion / sunk cost - Ambiguity aversion - Confirmation bias In the remainder, I focus on preventing oversimplification through scenario planning, to balance Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 And combine this with Pyramidal thinking to create transparency in our thinking and to align How to make better innovation decisions Scenario planning Objective: to develop a deeper understanding of the system in which your organization operates, by exploring core uncertainties in relation to one another Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Step 1: generate uncertainties Which developments (which you cannot control) impact your company on the short, middle, and long term? Step 2 / 3: categorize and select Step 4: scenario-matrix Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Step 5: fathoming scenario’s Wind tunneling Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Business idea = competitive advantage = unique way in which your company can satisfy market demand Impact and fit Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 The pyramid-method Objective: create order in a complex of closely related ideas such that they can be communicated in a coherent manner. This requires an all-encompassing structure that - Separates main from sub-issues / conclusions - And that specifies how they relate to one another Key line = mutually exclusive, collectively exhaustive 3.3 Innovation killers in strategy, structure & systems Innovation killers for structure Above the surface: easy-to-observe warning signals Structure Innovation execution is not separated from core business activities Execution Innovation execution heavily emphasizes borrowing from the past over forgetting of the past Leadership Presidential projects: innovation teams formally separated but micro managed by senior management Underneath the surface: difficult-to-observe barriers Economic barriers - Short term focus Cognitive barriers Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 - Cling to standing beliefs about beliefs (stability bias) Social-emotional barriers - Appetite for control by senior mgt - Risk aversion - Complacency (we are such a great company, we dont feel the urge to innovate) - Overconfidence in own judgement by leaders Innovation killers for strategy On present: how to strengthen our core business On future: how to disrupt our core business Embrace strategic paradox → balance strategic contradictions Above the surface: easy-to-observe warning signals Top management team - Not seeing it - Not getting it - Not doing it Underneath the surface: difficult-to-observe barriers Economic causes - Not seeing it - Loss aversion bias - Bias towards threats to core business Cognitive causes - Not getting it - Confirmation bias - Bias against opportunities for new (radical) innovations - Lack of experience with disruptions before Social-emotional causes - Not doing it - Strategic paradox mental overload - Fear of identity conflict - Fear of losing control Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Innovation killers for systems Above the surface: easy-to-observe warning signals Systems: one size fits all - Standardization in reporting across core business and innovations, based on future financial projections and financial ratios Systems: Carved in stone resource allocations & resistance by core business - No flexibility in resource allocation to new core business vis-a-vis innovation Leadership: one size fits all, carved in stone resource allocations & resistance by core business - New business is managed similarly, based on how well it conforms Strategy - discussions on withdrawal from newly emerging markets by the time lean startups bootstrap themselves successfully into the new field Underneath the surface: difficult-to-observe barriers Economic barriers - one size fits all - Economizing on management attention - Carved in stone resource allocations - Anchoring bias Social-emotional barriers - Resistance by core business - Uneven power distribution between core business and innovations teams Innovation killers for leadership Above the surface: easy-to-observe warning signals Leadership: not saying it - TMT emphasizing ‘must’ in communication - TMT alluding to threats rather than to opportunities - TMT pushing the urgency button Structure: not doing it - Too little love: innovations have and maintain an ‘orphan’ status - Too much love: innovations & new businesses are (very) early adopted by the standing organization Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Underneath the surface: difficult-to-observe barriers Economic causes: not doing it - unclarity about attractiveness of innovation & new business for core business, or vice versa - Need to give up on some existing routines, resources or revenues by the core business Cognitive causes: not doing it - large cognitive distance between innovation & new business, and the core business Social-emotional causes: not saying it - Threat to personal identity of TMT members (ego-threatening) - Fear of lacking credibility - Resistance against profound change in leadership style Social-emotional causes: not saying it - Strong local identity by people in innovation & new business - Us vs Them thinking on both sides Innovation killers for culture Above the surface: easy-to-observe warning signals Execution: avoiding failures - Moving too quickly - no time too lose Execution: denying failures - moving too slowly - giving me more time - ignoring feedback to try something new Leadership: protecting sales, protecting previous investments - Ridiculing early stage innovations - Resisting later stage innovations - Procrastination on upscaling & market introduction Underneath the surface: difficult-to-observe barriers Economic barriers - Protecting sales - Loss aversion bias - Protecting investments - Sunk costs bias Cognitive barriers - Avoiding failures - Failure myopia (being blind to failure) - Action bias (no time too lose) - Denying failures Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 - Escalation of commitment (even tho the feedback tells you otherwise) Social-emotional barriers - Denying failures - Fear of scapegoating - Avoiding & denying failures - Failure is seen as ‘fault’ Innovation killers for people Above the surface: easy-to-observe warning signals Leadership: not liking them - Core business people allocated to innovation People - Talents leaving the organization, or facing a burnout Leadership: not trusting them - Micro-managing by senior managers (substitution of ideas at the innovation work-floor for their own judgments) - Missing out on weak signals in the environment Execution - Lack of inspiration or fear at the innovation workfloor Underneath the surface: difficult-to-observe barriers Cognitive barriers - not trusting them - Lack of innovation experience with senior management - Stability bias Social-emotional barriers - Not liking them - Affinity bias when allocating the best people to innovation activities (allocate people that are similar to you) - Not trusting them - Narcissism - Fear of losing control - Difficulty in changing leadership style Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Lecture 4.1 Culture & People Corporate culture & NBD Willingness to cannibalize existing product/services - we sacrifice sales existing products to improve sales new products - we do not oppose new products that take away sales existing ones - We actively pursue new markets at expense of existing investments Future orientation - We emphasized to customers of the future relative to current ones - Orientation is at future needs customers, less on current needs - We rapidly detect fundamental industry shifts Tolerance for risk - Our managers embrace risky decisions - Relative to others, we favor high-risk / high return investments - We are willing to engage in untested new business ventures The three phases of strategic entrepreneurship / venturing Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Incubation = Experimentation - 1 cycle, 4 steps Crossing the Chasm (Geoffrey Moore, 1991) Different types of data Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 → Strong innovators use external data throughout the innovation process H2 people - business builders Key character traits - Appetite for risk-taking - Internal locus of control - Self-confidence - High energy level Hybrid personalities - Highly adaptive (agile) & focused (disciplined) - Big dreams & hands-on actions - Crave for recognition & handle rejection Key skills - Comfortable managing ambiguity - Internal networks & external networks - Socially intelligent - Balance between ‘cajoler’’ - ‘pick a fight’ - ‘ambassador’ Lecture 5.1 Volvo digital innovation & integration 2 dimensions of Organizational Identity in Incumbents Facing Disruptive innovations Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Situational influences on organization design (lawrence & Lorsch) Differentiation - The extent to which the organization is broken down into subunits Integration - The degree to which the various subunits must work together in a coordinated fashion Conditions for integration of innovations Ability to integrate - coordination and exchange of knowledge flows = cognitive integration Willingness to integrate - Reduction of agency conflicts between innovation teams and organization = economic & social-emotional integration Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Volvo’s connectivity hub Volvo’s app development group = Tiger team - radical innovation Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Volvo’s innovation structure Rotation of people → Some HR changes From just a job to a career in innovation → serial intrapreneur (H2) Job rotation - Creators & H2 in BGs - BGs people in innovation & venturing → diminishes ‘us vs them’ attitude For senior management positions → blue bruises from innovations & venturing Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Lecture 5.2 Guest lecture innovation Innovation is the exploration of new ideas which create successful and profitable products, services, processes and business models Wave 6: sustainability Sustainable development is a development that meets the needs of the present without compromising the need for future generations Taking into account the environment, economic, human and social aspects. Why SME matters - 99% of all business is a SME in the Netherlands - Over 70% of labor in the private sector comes from SME - SME contribute to 65% of the added value in the market Lecture 6.2 digitalization projects Digitalization projects Phase 2 Catching up What you should do: Manager different digital businesses differently Why you don’t: Preference for ‘one size fits all’ Approach: Simplistic strategy: we should Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Either top-down (alienation, no ownership) or bottom-up (isolated, piecemeal approach) What is the underlying problem? No clear link to business value, or no building of digital capabilities How come? - ignore strategic paradox - Leadercentric vis-a-vis Teamcentric top management teams Phase 3 best-in-class What TMTs should do: embrace the paradox not ignore it: Embrace paradox core business & new innovations → balance strategic contradictions (forgetting vs borrowing) Why TMTs dont: Fear of loss & fear of conflict (innovation killers), and fear of conflict within TMT How to address: - Leadercentric vis-a-vis teamcentric TMT - and/or change in leadership and TMT Key questions per digital opportunity 1. How can digital technology address pain points for the customer? 2. How can we address these 3. How can we make this into a profitable, sustainable approach H2 business = online improvement of machinery H3 business = digital services = new business models → exiting horizontal software (forgetting of the past) → capitalize on vertical, domain-specific expertise (borrowing from the past) Managing paradoxes in Top management teams Two types of team roles: Advocate: supporting a particular agenda / view Integrator: connecting between disparate parts Leadercentric teams: Advocate: Team members allocated to different agendas, views and roles Integrator: Senior leader. ‘embracing the paradox’ → lead to less risk of conflict, while does not affect the quality of decision Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Teamcentric teams Advocate/Integrator = each team member High degree of member / member interaction → risk of conflict is higher, but quality of decision is also higher Key conditions: - High interpersonal skills - Psychological safety - Common fate reward systems Phase 4 worldclass What you should do: - Willingness to fail - Willingness to cannibalize Why you don’t: lack of talent and incentives (innovation killers) How to solve: - Hire right caliber: ‘digital hybrids’ - Reward cannibalization (20% rule) Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Articles Week 1: why innovate and why so difficult Gibson, Birkinshaw (2004). The antecedents, consequences, and mediating role of organizational ambidexterity Contextual organizational ambidexterity The capacity to simultaneously achieve alignment and adaptability at a business-unit level. Facilitated by a context characterized by a combination of: - Stretch: induces members to voluntarily strive for more rather than less ambitious objectives - Discipline: induces members to voluntarily strive to meet all expectations (clear standards, feedback systems) - Support: induces members to lend assistance and countenance to others (freedom of initiative at lower levels, support) - Trust: induces members to rely on the commitment of each other (involvement of individuals in decisions) → too much of stretch and discipline, results in a burnout → too much of support and trust, results in a country club Benefits: - More sustainable (as it facilitates an entire business unit instead of one function) - Avoids coordination problems between subunits - Manifests itself in the specific actions of individuals throughout the organization It allows individuals to use their own judgement as to how they divide their time between alignment-orientated and adaption oriented activities Hypothesis 1: The higher the level of ambidexterity in a business unit, the higher the level of performance. --> confirmed Hypothesis 2: The more that a business-unit context is characterized by an interaction of stretch, discipline, support and trust, the higher the level of ambidexterity. --> confirmed Hypothesis 3: Ambidexterity mediates the relationship between context - as captured by the interaction of discipline, stretch, support and trust - and business unit performance. --> confirmed Structural ambidexterity Certain business units or groups within the business units focus on alignment, while others focus on adaption. Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Other types: - task separation - Temporal separation O’Conner (2008). Major innovation as a dynamic capability: A systems approach Major innovation (MI) - Both radical and really new innovations Dynamic capability theory Firms can evolve processes that enable them to develop, change and rejuvenate themselves How to nurture MI dynamic capability, that form a management system rather then a process-based approach: 1. An identifiable organization structure responsible for the firms major innovation efforts (NIBO) 2. Interface mechanisms a. The role of the MI system’s need to be communicated throughout the organization b. MI systems objectives need to be tightly and reciprocally coupled to the firms strategic intent c. MI systems need to be loosely coupled with the mainstream organization in terms of resources d. MI system’s project management need to be decoupled from the mainstream system 3. Exploratory processes that are learning orientated need to be utilized for managing project progress 4. Requisite skills: identification and nurturing of appropriate skills and talent 5. Governance and decision-making mechanisms for considering and governing the portfolio of MI ventures. a. MI dynamic capability requires an option mentality to project evaluation b. Requires a mechanism for governing or overseeing each project in the portfolio composed of project-specific expertise c. Constant reflection and reconfiguration 6. Appropriate performance metrics 7. Appropriate culture and leadership context, where the leadership and culture recognize the importance of the MI system Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 System theory Each element's role in the major innovation system is justified in terms of four criteria required by systems theory: 1. The system is identifiable, and its elements are interdependent 2. The effect of the whole is greater than the sum of the parts 3. Homeostasis is achieved through interaction and networking with the larger organization 4. There is a clear purpose in the larger system in which the MI management system is embedded Dynamic capabilities theory (DCT) Arises from the a resource based view (RBV) that sees the firm as owning stocks of valuable technology or other firm-specific resources → emphasizes the role of strategic management in adapting, integrating and reconfiguring those assets to match the requirements of the changing environment The following unique skillsets are needed: - Courage - Intellect - Divergent thinking - Convergent thinking Tripsas, Gavetti (2000). Capabilities, cognition, and inertia: evidence from digital imaging This paper examines how managerial cognition influences the evolution of capabilities and thus contributes to organizational inertia. Established firms are less likely to adapt when the new technology is: 1. Competence destroying (it requires mastering an entirely new scientific discipline) 2. Destroys the ‘architectural knowledge’ (knowledge about interfaces among product components) 3. Destroys the value of a firm’s existing complementary assets Bounded rationality with managers forms the basis that drive managerial decisions Commonly held beliefs - Belief in the primacy of technology: commercial success could only come through major research projects The razor blade business model Core (durable) product sold at cost or very little margin. Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Disposable product associated with durable product is sold at a wide premium → The adoption of this model led to the inertia of Polaroid to adapt to the changing imaging landscape In rapidly changing environments, it is impractical to have ongoing turnover of top management teams The development of the ability to question current strategic beliefs in an ongoing way is important A crucial challenge for organizations facing radical technological discontinuities, is the ability to distinguish changes that require only the development of new technological capabilities from changes that also require the adoption of different strategic beliefs. Week 2: Structure & Systems Burgers, Covin (2016). The contingent effects of differentiation and integration on corporate entrepreneurship Theoretical background Structural differentiation - The degree of “seperation of exploitative and explorative activities into distinct organizational units”. - this allows each unit to most effectively execute its tasks. It prevents intrusion of corporate entrepreneurship into mainstream activities and provides managers of exploratory units with the autonomy to set up organizational structures and modes of management conducive (bevoordelijk) to corporate entrepreneurship Three ways in which senior teams can manage this contradiction of differentiation and integration (O’Reilly and Trushman, 2008) 1. Developing a common identity through a shared vision 2. The ability to synchronize actions and unity of purpose through senior team integration 3. Targeted structural linking mechanisms such as periodic cross-unit meetings (cross functional interfaces) → however, the combination of differentiation and integration may interfere with the benefits of structural differentiation as a driver of corporate entrepreneurship - The cost of organizing integration - Costs resulting from integration Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 This research It addresses the role of organizational size and environmental dynamism as contingencies (onvoorziene omstandigheden) affecting how particular differentiation-integration combinations relate to corporate entrepreneurship levels. Hypotheses Organizational Size: H1A: The moderating effect of shared vision of the structural differentiation → corporate entrepreneurship relationship is more positive for larger organizations. --> Confirmed H1B: The moderating effect of senior team social integration on the structural differentiation → corporate entrepreneurship relationship is more positive for larger organizations. --> Some support H1C: The moderating effect of cross-functional interfaces on the structural differentiation - corporate entrepreneurship relationship is more positive for larger organizations. --> Confirmed Environmental dynamism: H2A: The moderating effect of shared vision on the structural differentiation → corporate entrepreneurship relationship is less positive for organizations facing higher levels of environmental dynamism. --> marginal support H2B: The moderating effect of senior team social integration on the structural differentiation → corporate entrepreneurship relationship is less positive for organizations facing higher levels of environmental dynamism. → confirmed H2C: The moderating effect of cross-functional interfaces on the structural differentiation → corporate entrepreneurship relationship is less positive for organizations facing higher levels of environmental dynamism. → some support Methods Sample of 4000 Dutch firms. Questionnaire. Dependent variable: level of corporate entrepreneurship Independent variables: structural differentiation, shared vision, senior team social integration, cross functional interfaces, organizational dynamism, size Discussions Higher levels of integration in combination with differentiation is more important for enhancing corporate entrepreneurship in larger than in smaller organizations Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 In smaller companies the costs of integrating outweigh the benefits, when trying to overcome them via cross functional interfaces and senior team integration → Same for firms operating in dynamic environments → Stable environments managers are encouraged to integrate structurally differentiated innovation units tightly Jansen et al. (2009). Structural differentiation and ambidexterity: the mediating role of integration mechanisms The study examines how integration mechanisms mediate the relationship between structural differentiation and achieving ambidexterity They examined the mediating role of two senior team integration mechanisms that are seen as beneficial for combining strategic contradictions - Formal senior team contingency rewards (denied) - Informal senior team social integration Their findings suggest that the direct effect of structural differentiation on ambidexterity operates through informal senior team and formal organizational integration mechanisms - Informal senior team social integration - Formal organizational integration mechanisms: e.g. cross-functional interfaces The Mediating Role of Senior Team Integration Mechanisms Senior team integration mechanisms enable balanced resources allocation and strategic coherence in ambidextrous organizations Hypothesis 1: Senior team contingency rewards mediate the relationship between structural differentiation and ambidexterity. --> DENIED → Outcome interdependency through the senior team contingency rewards does not encourage senior team members to reconcile conflicting interests across differentiated exploratory and exploitative units Hypothesis 2: Senior team social integration mediates the relationship between structural differentiation and ambidexterity. --> SUPPORTED → Encourages team members to openly discuss and debate conflicting demands, goals, and aspirations of their associated exploratory and exploitative units. Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 The Mediating Role of Organizational Integration Mechanisms Organizational integration mechanisms facilitate knowledge exchange and combination between differentiated exploratory and exploitative units Hypothesis 3: Cross-functional interfaces mediate the relationship between structural differentiation and ambidexterity. --> SUPPORTED → Boundary-spanning mechanisms contribute to the development of a common language and ensure the capture of interpretation and integration of knowledge sources across differentiated exploratory and exploitative units (without interrupting their internal processes) Hypothesis 4: Connectedness mediates the relationship between structural differentiation and ambidexterity. --> DENIED → connectedness does not mediate the relationship between structural differentiation and ambidexterity but contributes to achieving ambidexterity directly. Having informal social relations within the organizations directly affects pursuing exploratory and exploitative ambidexterity. → maybe because it becomes more difficult to develop and maintain informal social relations between organizational members across differentiated exploratory and exploitative units Method 4000 random firms with at least 25 employees. Survey. Discussion Ambidextrous organizations should carefully design and implement specific types of integration mechanisms at different hierarchical levels: - At the corporate level, encourage social integration among senior team members - At lower hierarchical levels, ambidextrous organizations should establish more formal cross-functional interfaces that deepen knowledge flows across differentiated units yet retain the contradictory processes and time orientation within exploratory and exploitative units. Maula (2013). Top Management’s Attention to Discontinuous Technological Change: Corporate Venture Capital as an Alert Mechanism A firm should have high status heterphilous venture capatalist partners, to stir managerial attention earlier to emerging discontinuous technological changes. Three principles that underlie the attention based view: 1. Managers their actions are based on what their attention is focused on Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 2. the context in which a situation is happening, affects the attention and decisions of managers 3. attention is structurally distributed (so by the organization that distribute the issues, answers and decision makers) Smith & Tushman (2005). Managing Strategic Contradictions: A Top Management Model for Managing Innovation Streams Managing Strategic Contradictions: Differentiating and integrating How might paradoxical frames increase organizational performance? - First, the frame creates a context that demands to formulate distinct goals for the existing products and innovation. - It creates a foundation for cognitive processes that can handle inconsistencies. Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Raffaelli, Glynn, Tushman (2018). Flexing the frame: The role of cognitive and emotional framing in innovation adoption by incumbent firms Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 Schilling (2017). Serial Breakthrough Innovation: The Roles of Separateness, Self-Efficacy, and Idealism Separateness both reduces an individual’s indoctrination to established norms and decreases their sense that existing rules and norms apply to them. Self efficacy Self-efficacy is one’s confidence in one’s own ability to accomplish things and achieve one’s goals Bandura argues that an individual’s self-efficacy is influenced by - enactive attainment (i.e., experience in succeeding or failing at a task), - vicarious learning (i.e., seeing or hearing about others succeeding or failing at a task), - verbal persuasion (i.e., being told one will succeed or fail at a task) and - physiological state (i.e., inferences an individual makes based on their physical sense of strength, fatigue, agitation, etc.). Idealism and Superordinate Goals Idealism is the prioritization of ideals, values, and goals over the current reality – idealists focus on the world as they believe it should be, rather than how it actually is. Idealism serves as a very powerful intrinsic motivator that both fuels the individual’s persistence, and provides an ego buffer against the criticism that might induce others to conform. Tellis (2009). Radical Innovation Across Nations: The Pre-Eminence of Corporate Culture First, several factors do not seem to be as important drivers of radical innovation in firms across nations as many researchers believe. Among these are some frequently emphasized metrics of national labor, capital, government regulation, and culture. In contrast, internal corporate culture is an important driver of radical innovation. Three firm attitudes that may drive innovation - Willingness to cannibalize assets - Future orientation - Tolerance for risk Three practices that sustain these attitudes - The empowerment of product champions - Establish incentives for enterprise Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 - Creation and maintenance of internal markets - Internal autonomy (decision making authority) - Internal competition Second, we find that radical innovations translate into financial value to the firm. Keil (2009). Gems from the Ashes: Capability Creation and Transformation in Internal Corporate Venturing Capability Creation - Products - Patents - Personal capabilities - Organizational capabilities Capability Development and Transformation - Transforming the team - Transforming ideas - Transforming products - Transforming technological capability, personal capabilities, and organizational capability Venture Management Processes and Capability Transformation - Venture reviews - Connection to the broader learning system - Venture redirection - Management attention Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 the concept of capability transformation via branching, in which internal and external selection processes act on capabilities to cause them to move in six potential ways: - retirement, in which case the resources linked to the capability are removed; - retrenchment, in which the utilization of a capability declines; - renewal, in which a firm places a capability in a new development stage; - replication, in which a firm seeks to copy a capability developed in one setting and use it in another; - redeployment, in which a capability developed to serve one product/market is moved to another; - recombination, in which the original capability is combined with another Khana, Guler, Nerkar. (2016). Fail Often, Fail Big, and Fail Fast? Learning from small failures and R&D performance in the pharmaceutical industry -→ found that, as the number of failures increases, R&D output, measured as the number of patents filed by the firm, decreases, whereas the quality of the patents, measured as citation to those patents, increases. (follow up interviews to explore why) → So: an increase in small failures lead to an increase in the quality of R&D (citations) but a decline in R&D output (number of patents). Project-selection mechanisms at the firm level adapt to feedback from failed patents faster than generation mechanisms at the individual scientist level, causing an increase in R&D output quality and a decline in R&D output. The lag in transferring knowledge to scientists, combined with the path-dependent nature of search and scientists’ motives, cause a dip in the R&D output as individual scientists slowly adapt to incoming feedback. Lange, Boivie, Henderson (2009). The Parenting Paradox: How multibusiness diversifiers endorse disruptive technologies while their corporate children struggle H1a: There is a negative relationship between the density of corporate parents with PC businesses and the likelihood that a focal PC business will fail H1b: There is a negative relationship between the mass of corporate parents in their non-PC businesses and the likelihood that a focal PC business will fail H2a: Corporate children with older corporate parents have higher failure rates than those with younger corporate parents Gedownload door Roos Snels ([email protected]) lOMoARcPSD|7864644 H2b: The interaction of the size of a corporate child and the age of a corporate parent is negatively related to failure rates; that is, the hazards imposed by older corporate parents are less detrimental to larger children. H3a: The density of stand-alones is positively related to the likelihood that a focal business will fail H3b: The mass of stand-alones is positively related to the likelihood that a focal business will fail In summary, when a young industry requires substantial investments in new infrastructure to become viable, and the industry is based on a technology that undermines the customer relationships of established firms, then diversified entrants endorse the new industry while saddling their own children with cumbersome routines. This situation creates a paradox in which diversified firms hurt their own corporate children, yet also legitimize a young industry and enhance the survival of its stand-alone start-ups. we see that when business size is about two standard deviations above its mean, having an older parent is no longer a disadvantage. Instead, as size increases, larger children eventually achieve parity with larger stand-alones. Gedownload door Roos Snels ([email protected])
