The Innovation Ecosystem in Mature Firms

36

The Innovation Ecosystem in Mature Firms Abstract There is a common held belief among business scholars that the more mature and institutionalized an organization becomes, the less innovative it is. This paper takes a different approach to innovativeness in the mature firm by investigating whether its history, routines and other elements of institutionalization could in fact have a positive effect on its innovativeness. The whole picture of the company is studied and we concentrate on the senior management and their conceptions running a repetitively innovative mature company.

We investigate a number of long-established international firms from the consumer industry, and compare ability and disability of the firms to deliver path breaking new products and new offerings, i.e. innovations. Our findings suggest that those firms which were successful and innovative possessed a network of particular activists with long experience, knowledge, ability to act, and who collaborated with each other by filling complementary roles in the network of activists, also on senior management level. Their area of attention can be described as an innovation ecosystem, a mutual base of knowledge and values which are established over time.

Innovation, ecosystem, mature firms, senior management

1

Background Delivering genuine innovations is commonly associated with the high risk of failure. The failure rate varies greatly from industry to industry and from study to study. In those studies a failure rate of 80% of innovation cases is a common finding (Crawford, 1977). The small entrepreneurial firms are commonly regarded as the icon of innovations, however, evidence has been found that large mature firms are to be recognized as comparably favorable organizations for innovation (Chandy and Tellis, 2000). Bower and Christensen (1995) argue that larger, older and mature firms are less innovative than smaller companies. Their theory of disruptive technologies argue that large firms commonly do not search for and apply new technologies since they rely on their existing technologies and prefer to keep their strengths instead of replacing them with competing technologies. Larger and more mature firms – like small firms – certainly have their own set of limitations, but they also have their unique strengths and resources that support innovation. Large and mature firm, in this study, means that firm is several decades old, the firm employs in general some hundred people or more, ant that the revenues of the autonomous business unit are hundred million or more. It appears that the vital question is how the large mature company deals with inherent impediments and leverages the undisputed benefits.

As firms grow in seize they become more sophisticated, more specialized and biased towards formal systems maintaining the reached position on the market (Cyert and March, 1963). The larger the firm grows the more the organization is kept together and run according to formal arrangements. An evidence of this is thinking where innovation is seen as a kind of a formal process (Cunha and Gomez, 2003). This paper presents critique to the innovation process view. There is a counter view suggesting that chaos bring along innovations (Youngblood, 1997). A balanced view, between order and chaos, is obviously needed to settle this, what seems like a contradiction. In this paper we suggest the quality of that balance needed.

A general judgment is that innovation research commonly observes innovations as more short term projects or innovations as a long-term phenomenon part of a macroeconomic view (GemĂźnden, 2009).

This paper is positioned as a mid range view, between these two

extremes, recognizing the course of events during the entire cycle of innovation. The cycle of innovation lasts for many years, commonly even ten years or more (Agarwal and Bayus, 2002).

This course of events studied is a phenomenon described as highly uncertain,

unpredictable, sporadic, starting, stopping, dies, revives, it is non linear requiring recycling back trough activities in response to discontinuances and setbacks, it is stochastic as players 2

come and go and priorities change, and it is context dependent associated to history, experience, corporate culture, personalities, and informal relationships matter (Leifer et al, 2000). Taking this view on innovations elevates the consideration of long term leadership side by side with shorter term managerial considerations. Consequently, from this argument, more specifically this paper observes the acts and the conceptions of senior management who are crucial influencing the firm in a way that the firm sustains the state of innovativeness.

Beyond the above mentioned gap in the mid range innovation research, this paper revisits the knowledge concerning the promotors or champions of innovation. In this study the role profiles of innovation promotors has been experimented with and applied, not as Witte originated the theory of promotors on single episodes or innovation projects, but on the long term dynamic course of events leading the firm. Drawing on the promotoren theory and their world of thought, we introduce the concept of the firm innovation ecosystem, revealing the environment where they act.

Research questions In this study we examine what is the influence of the senior management and their areas of attention running a innovative mature company? 

Which are the critical areas of knowledge maintaining and sustaining the state of innovation in a successful firm?



What are the characteristics of leadership stimulating innovation and creating a sustainable innovation track record?

The criteria for an innovation in this study was that the what was invented was new to the firm, new to the market, and that the innovation generated substantially positive cash flow for the firm. As an invention was seen for instance a path breaking offering, product concept, and product related service, engineering. If one path braking innovation follows another during the years, we label the firm repetitively innovative.

As this research studies innovation as a long-term phenomenon, the management aspect is less vital than the leadership consideration. The term management in this paper is seen as doings and tasks; leadership in this research is primarily understood to be influencing others to do the management. In this respect, leadership deals broadly with shaping the unknown, like to designing a reasonable vision for collective and manageable action. A pure example of management is doing the day–to–day planning work, whereas leadership is encouraging

3

people to engage themselves in the planning. The terms leadership and management are without doubt overlapping one another.

Literature review The failure rates of packaged consumer products, including food and drug products, range between 37% and 80% (Crawford, 1977). Thus in spite of the time, effort, and resources expended, people in the organization see mostly failure, which illustrates the risk of involvement, and highlights the courage that an individual needs in order to engage in innovation activity. Consequently, as Klein and Sorra (1996) have noted, that commonly innovations did not appear to result from an organization–wide commitment, and that sustainable organized innovations are fragile. Entrepreneurs in large and mature organizational environments face a lack of power in connecting innovations to resources, operational processes, and company strategies (Dougherty and Hardy, 1996). They concluded that innovators enjoyed very little, temporary, or no support at all from senior management.

Schon (1971) argues that one challenge in the management of innovations is the long-term nature of sustainable innovation. Several other scholars support the view that the cycle of innovation commonly last for ten years or more (Agarwal et.al, 2000, Leifer et.al, 2000).

With the life-cycle conception of innovation Schon (ibid.) emphasizes that the different types of leadership capabilities are needed in the different stages of the cycle. Schon (ibid.) argues that the actors, mainly inside the company, are one important issue to considering when studying innovation. Schon (ibid.) argues that one of the key success factors is the champion of innovations. He/she is defined as persons who put him/herself on the line for an idea of doubtful success. He is willing to fail, but he is capable of using any and every means of informal sales and pressure in order to succeed. Another activist of innovation is labeled the promotor of innovation who has similar characteristics as a champion. The theory of innovation promotors is built on the assumption that a coalition of promotors takes extraordinary measures for innovations. Promotors are involved in the cycle of the innovation by starting it and terminating the decision process, but also actively participating in other stages.

Hauschildt and Kirchmann (2001) have defined three types of promotors who

undertake different actions for the success of innovation. The power promotor influences through the position in the hierarchy, technical promotor has extra knowledge to find critical details and solve problems and process promotor concentrates on the delivering process of innovation. GemĂźnden and Walter (1995) have defined a fourth promotor, relationship

4

promotor, who has social and network competence. Promotors have been found to play a role of great importance in innovation project management.

This study addresses in particular the environment where the promoters, champions, activists of innovation and alike do their work. The context of innovation has been studied from several angles. To mention a one proposal close to this study, is where Dougherty (1992) draws the attention to the thought world of leaders. This means in other words that leaders reflect different types of thoughts which can be observed by examining the behavior of leaders. According to Dougherty (ibid.) each thought world has a fund of knowledge (what they know) and system of meaning (how they know). Thought world of leaders comprises of external and internal rulers. Dougherty (ibid.) pinpoints the role of departmental thought world.

To mention another project that is close to this study Salomo, Gemünden, Leifer (2007) investigated dynamic capabilities of corporate innovation systems. They suggest that a corporate mindset oriented toward innovation, in combination with consistent innovation activities supported by a governance structure favorable for innovation allows an organization to make full use of its potential for innovation. Their study was based on a literature review, contrary to this study, which looks for similar knowledge through case studies addressing the chief activists of innovation.

A third view, furthering the system view above, is the ecosystem conception of the innovation context. Originally Clapham (1930) coined the ecosystem expression as the meaning of the combined physiological and biological components of an environment. The term was later refined by Tansley, to mean ―the whole system…including not only the organism complex, but also the whole complex of physical facts what we call the environment‖ (Wikipedia, 2009). Like in the ecosystem, where the living organisms interacts with every other element in their environment, so also the innovation is in this study argued to take place in a analogous environment. Some earlier studies recognize the ecosystem both in terms of internal components of the company and external aspects of the community and marketplace.

Those components of the network consist of internal departments, like sales, R&D, operations, controllers, and external contingencies like, universities, customers, suppliers, government, and universities (Pistrui, 2007). Commonly the concept of the ecosystem reflects a national society aspect, including the network of ―all important economic, social, political,

5

organizational, institutional and other factors that influence the development, diffusion and use of innovations (Edquist, 2005, Ståhle et al., 2004, Miettinen, 2002).

In the social science innovation is treated as a bundle of dependencies in a multitude of different situations. Actors in an organizational system and a system of innovation are, connected through widespread bundles of associations. The ecosystem theories do not, in particular, describe the connections, but the parts of the system. The Actor-network theory (ANT) is concentrated particularly on the associations - also called the sociology of associations (Latour, 2005). It does not in particular address the parts of the social system, but the connections among those parts. The term actor refers not merely to the socially oriented person, for actors can also be objects, notions or ideas, beliefs, opinions, conceptions—as the intellectual equivalent for the actors and objects anything non– or anything non-human that is followed by some effect, something making a difference in the state of affairs. ANT is being used as a method in this study to locate those discussions at the center of the thoughts of the key players. The ANT world is populated by intermediate actors, by mediating actors, and by spokespeople of the group spreading meanings in a network community. The intermediate actors plainly transfer the meaning or effect forward, like the switchboard connecting phone calls. Mediator actors reshape the effect or meaning of the interaction in some way, like a radical innovation changing the meaning of the firm´s reason for being. Latour (2005) states, ‘situations where innovations proliferate, is where group boundaries are uncertain; where the range of things to be taken into account fluctuate‘. ANT thinkers criticize the use of terms like ‘social explanation‘, ‘context‘, ‘macro‘, and ‘global‘ for leaving out the vital description of the associations. In this study ANT is useful for the dismantling the notion ‗leading innovations‘.

When we particularly address mature and large innovative firms, instead of the usual innovative small start-up firms, the past of the mature firm plays a vital role. This raises the significance of the institutional theory in connection to innovations in mature firms. The conception of the institutionalization is built on the idea the organization has patterns of doing things that both evolve over time and become legitimate within an organization and its environment (Pfeffer, 1992). The occurrence of institutions is partly explained by taken-for granted ways of doing things, making it possible to focus on new problems instead of standard ways of doing things (Cyert and March, 1963). When the organizational structures and processes are a implicit reflection of ways of doing things, follows the difficulty of changing the only parts of the structure without changing the whole (Clarke, 1972). In the 6

new institutional theory institutions are defined as social structures, made up of ideas and beliefs of actors. In this view actors are defined as both humans and organizations. Over time institutional change takes places as new culture, such as norms, values, beliefs, rituals are introduced and adopted by the actors, at the same time as the old ones are either unlearned or forgotten. Institutional change commonly takes place gradually. Hence, institutional change takes place during a long period of time, commonly decades (Tainio and Lilja, 2003, DiMaggio, 1991, Holm, 1995). The institutional change resembles innovations, as both are movements taking several years, even tens of years (Agarwal et al., 2002) to materialize.

Commonly institutional elements are understood as an adverse force, hindering change and innovation. In this paper, where innovation is studied as a long-term and persistently led phenomenon, we expect that the institutional elements partly explain the firm‘s sustainable innovation track record.

Data collection and analysis The empirical observations were collected trough personal interviews with 3 to 5 innovation activists in 6 firms: a total of 24 interviews. The persons who were interviewed were selected according to the role profiles of innovator promoters (GemĂźnden and HĂśltzle, 2005). The firms had the track record of being serial innovators, as the time span of stories recorded were up to 10 years. The firms screened for this study were brand oriented firms. The logic going after a firm with brands, built on the expectation that the brand would reflect a history of path breaking business proposals and concepts. The profile of the firms is illustrated in the Table 1 below.

Table 1 Profile of Case Firms The data collection generated a data base of 29 hours of recorded material, or 508 pages of transcribed text, or 229.034 words. The database was analyzed sentence by sentence, and key 7

words of each sentence were coded, using the NVivo coding software. The coded key words were first combined with similar key words, which resulted in a database of 6.000 key words.

Similar key words were assembled as a group, labeled the 121 properties of the 24 categories of thoughts (illustrated in Table 4 on page 9). For each appearance of a key word, the whole paragraph containing this key word was coded. Thus, the volume of text associated with the key word, indicated whether a little or a great deal was spoken about a particular topic.

During the coding work a diary of the key words was kept, both to secure the traceability of evidence and to secure the consistency of the categories. The quality check of the consistency of each category was done through a cross check of the six cases, illustrated in Table 2.

Table 2 Empirical Evidence of the Category Use The attention to the topics discussed was graded, ranging from significant attention, modest attention, and low attention to no attention at all. A fundamental assumption in this research method is that the leaders spend most time on topics that concern them most, in the light of the innovation activity. Furthermore, it is assumed that the time they would spend on the interview reflects how they aspire to spend most of their time when they master the activity of innovation in the firm. This assumption leaves out tacit, unspoken expressions, which is a limitation in this study.

All data of the individual interviews were combined into one for each firm, thus becoming the combined voice of the innovation activists in each firm. The attention to the various categories, and the corresponding properties, were quantified and measured by the number of text units (lines) describing the extent to which each issue occurred in the leaders‘ interviews.

Some matters appeared in the discussion more significantly, whereas others appeared to be of less concern. In order to judge how important a category and its respective properties were in the discussion, it was necessary to introduce a scale (Table X). A category or its properties fell into the significant (S) class if the number of text units of the category exceeded the average plus the standard deviation of all the text units coded for each category. The observation was rated modest significance (M) if the number of text units fell within the standard deviation. If the category text units were below the average number of text units minus the standard deviation, it was classified as low significance (L). If there was no text 8

recorded for an observation, it is classified ‘no attention‘ in the leaders‘ interviews. The purpose of this grading of categories and properties was to enable us to disclose particular patterns of the innovation activist‘s attention. The grading standard of the observations is illustrated in Table 3 below.

Table 3 Grading Standard of the Observations The classes of thoughts are self evidently connected as a web to one another. To map the associations cross the categories of thoughts, the Design Matrix Structure method (DSM, by Pimler and Eppinger, 1994) was applied. It provides the possibility of tracing the associations and the dependencies of topics discussed. Originally the DSM was as a method associated with managing the design and engineering of complex system (Pimler and Eppinger, 1994): ‘The technique is useful for developing an understanding of the system engineering needs that arise because of complex interactions between components of a design‘. The thought worlds of the leaders in this study are seen as analogous to and substitutes for the product system when applying the model. To discover the intersecting categories a matrix was established with the same 24 categories on the x–axis and on the y–axis. The diagonal of the matrix was excluded, as studying the intersection with the self is tautological—comparable to analyzing the dependency in a sentence like ‘he sat alone with himself‘. As a result of this analysis comes out the matrix on aggregated general level (Table 4 below, full scale matrix in the appendix).

Table 4 General Level Matrix of the Categories 9

Also in this instance the strength of the association between the categories was quantified and measured with the same grading standard as above (Table 3). As the matrix illustrates, there emerges an distinct cluster of discussions both given the greatest attention and highly interrelated. The second level cluster is visible in the matrix, when the categories significantly associated, but not significantly discussed, are highlighted. The third level cluster consists of discussions which are both modestly recognized and modestly associated. The fourth level cluster is represented by the rest of the categories.

Following these early findings we will in the next section move on to the analysis. We will pinpoint our results by highlighting our findings also pointing at the contrast between the four cases which we found were innovative and two firms which were not. Those firms which were not classified as innovative did not meet the criteria for innovation set out on page 3.

Results: The Dynamic Innovation System The processing of the empirical material results in a landscape of a variety of 24 topics (Figure 1), which are in the mind, or the thought world, of the leaders of innovative firms.

Viewing this broad field of knowledge leads to a conception, that one person in a large and mature firm probably cannot be found, who has the adequate information and personal experience in all the topics listed. Therefore, a coalition of several knowledgeable and experienced persons increases the probability for successful innovation.

Figure 1 The Thought World of Innovation Activists.

10

The view of the landscape exposes another finding; the mind of the leaders may be classified into three general areas of attention, beyond the universal consideration in terms of the time aspect and the barriers/problems. One area of attention, is the knowledge related to users of the innovation, the use, the location of use, etc. (ball, in the figure). The second area of attention, is the knowledge relate to activists, invention, the decision making, the skills, the leadership preconditions, etc. (the square). The third area of attention, comprehends the organization structure sales/marketing, project management, processes and the economics.

This leads us to suggest that composition of leaders‘ mind in the innovative firms may be described in the general terms driven and

3)

1)

external rulers/impulses, and internal

2)

subjective will

system driven areas of attention.

Particularly the subjective will driven and the system driven field of attention connects to the theory addressing informal and formal organizations (Bernard, 1938, Cyert and March, 1963), and the theory of mechanistic and organic systems of management. The mechanistic system is argued (Burns and Stalker, 1963) to be the dominant mode system of management in mature industrial firms. As an example, to quote one chief designer in an innovative mature industrial firm, ―company leadership likes order in general and to be in control; they like to know where their players are and to be in a position to trust that nobody will create undesirable surprises. A given proportion of disobedience is uncomfortable for them.

Although leaders may firmly advocate that they want creativity and new things, deep down, order is what they seek. Thus creativity commonly becomes subordinated to order‖.

The formal organization is system of consciously coordinated activities or forces of two or many persons, where targets and managerial control are essential. Specialization, line of command and span of control are three principles of organizational efficiency which is the basis of efficient administration (Bernard, 1938). Line of command is another term for arranging the company in a hierarchy. This applies for the empirical categories of knowledge that we found; formal organization structure, process and project management, economic tracking and sales and marketing system promoting the offering of the firm. In this field of knowledge and attention the mechanical system of management is efficient; the immediate superior manager is the reference, when it comes to instructions and decisions, and evaluating the personal performance. The individual is provided with distinct rights, obligations, and technical methods for the task of the individual. The hierarchy is not only a division of jobs and specialization, but also a structure for authority, communication and control at the same time (Bernard, 1938).

11

As a contrast to the formal organization, the informal organization environment is aggregate of the personal contacts, local immediate contacts between associated groupings. Here chains of interaction between individuals change the experience, knowledge, attitudes and emotions of individuals affected (Bernard, 1938). The informal organization builds on extensive commitment, also outside the formal role. Commitment to the task of the firm, the progress and the expansion are more valued than loyalty and obedience. We see that the subjective will driven areas of attention are, by and large, attributes of the informal world we discovered; the activists, the invention, the skills, the practices, the decision making and the preconditions in the innovative firm. All of these motivation-driven factors are dependent upon the individual desire and tendency of the activists to take actions. We argue that these found areas of attention and knowledge refer to the theory of organic systems of management. As a contrast to the formal organization hierarchy, this environment has a network structure of activity, communication, authority and control. The task of the individual is loosely defined and is subject for continuous redefinition and adjustment, though the dialogue in the network. Knowledge of technical and commercial may be located, not on the top of the hierarchy, but anywhere in the network, becoming the ad hoc centre of control authority and communication. The individual is sanctioned by the community, less by the superior. Communication between people is direct, disregarding rank, resembling more consultation, information and advices, than command, instructions and decisions. The prestige is related to the external industrial, technical and commercial milieu, rather as in the mechanistic system of management where prestige is attached to the internal recognition of general knowledge (Burns and Stalker, 1963).

The organization adapts to reflect the stable and changing conditions of the company (Burns and Stalker, 1963). The informal organization creates conditions under which formal organizations may arise (Bernard, 1938). The informal organization cannot survive without the support of the formal organization. The balance and the interaction between the formal and informal behavior is essential and inevitable for the organization to adapt to new situations. Also the theory of organic versus mechanistic management systems calls for a dynamic capability, enabling a mature firm to be innovative. A key question is, when to draw the line? The behavioral theory of the firm highlights an inflexion point as a behavior of ‗sequential attention to problems‘ (discussed later more in detail), as a vital claim for the firm to sustain despite conflicting goals. Or as one CEO stated it: ‗Then an organizational structure is needed when you go in for implementing, like this should be completed 1st of 12

September, as the exhibition starts the 2nd; then we better forget the artistic, and we just get going, and that is when project schedules are in firmly in the picture‘. The successful innovative firm appears master this sequential switching between these twin organization structures and management system modes.

When we examined the landscape, we discovered that this landscape is not flat, or a system of equally weighing parts. The leaders clearly spoke more about certain topics than of others.

This particular distinction is vital in this analysis, as the significant areas of attention are distinguished on this criterion (discussed on page 8-9). This result leads us to suggest that, there is a tip of the ice berg, when we examine the attention of the leaders in innovative firms, as illustrated in Figure 2.

Figure 2 Levels of Attention in the Thought World.

We suggest that the core of attention is the knowledge areas of the activists, the products, the invention, the decision making and the leadership preconditions. We call this the critical area of attention and knowledge. When we look closer on the quality of this area, we find that the filed mainly consists of subjective will driven areas of attention (four squares, one ball).

When we look at the following 2nd level, the central level of attention and knowledge, the quality of attention turns primarily to system driven areas of attention (four triangles, one square). In third place, the peripheral area of attention, emerge the external impulses. Our interpretation of what the activist are telling us is; there is both need for a mechanical system 13

of management and the formal organization, and the need for the informal organization and organic system of management. The mechanistic system is argued (Burns, Stalker, 1963) to be the dominant mode system of management in mature industrial firms. Therefore, managing successfully an innovative firm is a particular balance between these dualities, where the situation influences over the dynamics. When leaders of the firm master the two different systems it enables the company to deal with the structures and behaviors in a dynamic way. The low emphasis on talking about innovation in terms of a process and in terms of users, which surprised us, speaks against those studies claiming that these areas would have particularly prominent role in managing the innovative firm.

The topographic view should not be interpreted, that topics in the periphery would be less relevant. Central fields of knowledge, like sales/marketing, project management, and peripheral fields of knowledge, like customers, the appearance of the innovation clearly have a vital role in the play, when time for that comes. Furthermore, our view only highlights, specifically, the activist leader‘s view on innovation in the firm.

When we applied the theory of associations (Actor Network Theory, Latour 2005) to study the dependencies in this landscape, we discovered that this landscape is better described as an innovation ecosystem1; it is a multidimensional system of dependencies between the 24 topics, as illustrated in Figure 3.

Figure 3 The Firm Innovation Ecosystem.

1

An ecosystem is a system of independent organisms which share the same habitat, in an area functioning together with all other physical factors in the environment (Wikipedia, 2009). In this situation is conceptions, or knowledge areas, substitute the organism and the physical factors.

14

Like in an ecosystem, the dependencies are not random. To challenge the randomness, we applied a criterion for assessing the interrelation between the various areas of knowledge, as described on page 9 and Table 3. When we measured a strong interrelation, we labeled it a significant dependency. We found a particularly strong interrelationship, again, between the knowledge and attention areas activist, products, invention, decision making and leadership preconditions. We conclude that these five knowledge and areas of attention are the entry point into the innovation activist‘s world of thinking; by addressing these topics on the agenda, brings most likely in, also the other central and more peripheral knowledge areas into the discussion of experienced innovation activists.

When we made a detailed causality analysis we made two vital findings; firstly, the few activists in the organization are masters of dealing with long cause–and–effect chains, with products, persons, invention, preconditions, and decision making as the critical center area of attention. Secondly, of these five areas of knowledge, we found evidence that the innovation activist are the single most vital area of knowledge and attention, as these individuals are the play makers of innovation. The findings of Hauschildt and Kirchmann (2001), where innovation can also happen without distinct promoters, bring in a limitation to our argument.

To conclude, we suggest that the activist leaders of innovative firms have a fixation interpreting the general business conditions of the firm, the idea

and new knowledge

creation, and dealing with the decision making process, which all combined shape the innovative output, i.e. the product.

Critical Areas of Attention and Knowledge Understanding how mature innovative firms are led, underlines the imperative to have a deeper understanding of the five critical areas of attention and knowledge. In the following are suggestions which are the building blocks of this area of attention and knowledge:

The Activists

We recognized a high number of persons involved in the discussion about innovations in the firm, but recognized only a small number of people with an extraordinary role contributing to enhance the innovative state and cycle of innovation. This supports earlier research, stating that innovations did not appear to result from an organization–wide commitment, and that sustainable organized innovations are fragile (Dougherty and Hardy, 1996). Bernard argues (p.84, 1938), ‘the preponderance of persons in a modern society always lies on the negative 15

side with reference to organizations‘. Thus people are drawn to do their job—to fill the position that has been assigned. What sustains the efficiency of cooperation in the organization is the satisfaction coming from working for something and the achievement derived from its accomplishment. This phenomenon of willingness to contribute is be labeled

by Bernad (1938) as ‘the capacity of equilibrium‘ of the organization, which expresses the balancing of burdens by satisfaction—the reason for continuation. In short, there is a reason to assume that the majority of persons in the organization are passive in their cooperation outside the role of their formal position. This may explain why so few in the organization are willing to work with the unknown and risky associated with innovations.

The few extraordinary roles we were able to find, fits to the typology of the three role descriptions of the promotoren theory (Witte 1977, Hauschildt and Kirchmann 2001, Gemünden and Walter 1995) : a person with high hierarchical influence, able to allocate both financial and human resources, legitimating the actors and actions of the activists (Power Promoter), a person who knows the critical details, optional solutions, and technical architecture of an innovative new offering (Expert Promotor); and finally, a person well position in the hierarchy, with direct contact to the top management who knows the processes, rules and values of the firm, a person searching and promoting people with initiatives and ideas, who moderates change inside of the firm (Process Promoter). These roles deal with not knowing, not wanting and not understanding. The roles are described in Table 5.

Table 5 Power Sources and Contributions of Promoters

16

These informal roles in the organization are built on their appreciation for their ideas and knowledge, i.e. what information and experience they have. Authority, generally connected to the formal organization, however, it is equally vital in the informal, where authority plays an essential part in the coordination and in the acceptance of decisions when the path chosen must cross the unknown, like in case of innovations. The right authority serves as a guarantee for the expert quality of decisions, the coordination and articulation of responsibilities that emanate from the decisions.

Innovations do not start from a blank sheet, but there is a story before the innovation story in a mature firm. We recognized in our study that short tenures with the firms have an adverse effect on the capability to master innovations in a mature firm. Therefore the discussion about inventing also ties closely into the theory of prior knowledge (Shane 2000); a person has a knowledge corridor and the ability to apply new knowledge and information is based on their prior knowledge. In other words, some people recognize better new opportunities with the help of their previous knowledge. Prior knowledge matters in a situation when there is a wide range of matters and there is a need to grasp the relationship between cause and effect in each discussion.

In the firms which were successful in innovation these role characters were easy to find, whereas in the failing firm persons in those roles were hard to find, of if they were found they were disconnected from each other. In those firms where no promoters were found, a common denominator was that there were knowledgeable people in the firm, but no-one seemed to have gained a position and the power as an authority of knowledge among the peers inside the organization. This demonstrates the importance of authority as an ingredient of the ability need for innovation. In those firms where clear authorities of knowledge were found, it corresponded with long tenure with the firm, commonly more than 10 years long time with the firm.

The Innovation

Innovation as a phenomenon is a course of events commonly lasting many years, even ten years, and the life during those years is very unpredictable, risky, people come and go, sporadic, and very unforeseeable (Leifer et al., 2000). The activists spoke about this field of knowledge in terms of requirements, wake of an idea, evolutionary stages and ways of working with innovations. It would be misleading to propose the one theory for this field of knowledge. To interpret this piece of empirical evidence we propose that a valuable theory in 17

this discussion is the organizational new knowledge creation theory. According to Nonaka and Takeuchi (1995) tacit and explicit knowledge is activated and comes into use when individuals socialize and do things together. The positive gains from common experience is accumulated as tacit knowledge and is rooted in the firm culture (more below), in the same way as explicit knowledge, like presentations, documents, handbooks, reports, figures.

Nonaka and Takeuchi (1995) argue that the nature of knowledge creation is an iterative course of events. Simply, the knowledge creation patters begins from listening and dialogue between individuals with different backgrounds. The tacit and explicit knowledge, experiences, opinions etc. are shared within the group which results in new combinations of ideas. When new ideas are applied in laboratory like conditions, this allows new conceptions to emerge. When this iteration endures long enough new knowledge grows. The knowledge creation occurs both inside and outside of the boundaries of organizations. An alternative view to the new knowledge creation theory we draw the attention Open Innovation concept (Chesbrough, 2004). This view is more target oriented, building on the idea of a funnel screening ideas which ends up as innovation. The new knowledge creation theory is more an open ended path compared to the innovation funnel construct. Thus, we argue that the innovation funnel corresponds more to R&D projects, whereas the new knowledge creation correspond closer to the nature of the innovation phenomenon.

An activist brought up an alternative metaphor of the working with innovations: ―Think of a bird with a long beak, flying with its mouth open at the edge of the water. When it catches a fish, it closes the beak and swallows. The bird knows well that if it does not fly back and forth over the lake it will not get anything. Innovation is a similar process; we are out fishing, but we don‘t know what we‘ll get. You can‘t decide when it happens. If you work unconditionally and eagerly, things usually come up. Chance favors a prepared mind‖.

In firms that failed delivering innovations had the handicap of short tenure, and from this following lack of firm specific prior knowledge. Furthermore, in firms failing to deliver innovations regarded innovation too strongly as a process. In that instance the output had more the character of product improvements rather than path breaking innovations. We argue that talking of innovation as a process fits only in the end phase of innovation, when action can be programmed to lead to a distinct result.

The Preconditions

18

The activist and the invention activity in a mature firm do not take place in a vacuum, but part of the firm activity as a whole, today and the past. Therefore, this brings to the attention those preconditions under which the firm operates, which make the invention and activists a part of the larger whole firm. The activists expressed the preconditions as general overriding conditions that made or broke the inventions in their companies. Or, in more specific terms; given conditions like the location of the firm; inherent conditions like the history and the culture of the firm; the current establishment, the owner, the chairman, the CEO and top directors ruling the firm; the self-perception of the firm, what it is all about; the perceived situation of the firm; and the strategic direction and steering of the firm. The given and the inherent conditions occur as historical facts, where the leading innovation activists have less influence. The interpretation of the situation, the ethos of the firm, the strategy of the firm appears as areas of greater direct influence.

This field of knowledge broadly connects to the institutional theory, where these specific empirical topics occur as a variety of qualities of the institution, as expressed by the leading innovation activist of the firm. Following the empirical evidence, this leads us to suggest some particular knowledge areas as vital for understanding the thought world of the innovation activists. As goes to show, all the institutional entities of the corporate world brought here up are not favorable for innovation.

The cornerstone of any organization is how it defines its reason for being. The generic purpose of the firm is taken to its core, the rational profit seeking and the output—what the firm delivers—are the most fundamental purposes of the organization, but that is not enough (Cyert and March, 1963). The sense making definition for the purpose of the firm need to be a consequence of the business environment, otherwise it lacks a sensible meaning (Cyert and March, 1963). In general managerial terms, the purpose of the firm is usually stated as the mission—a higher strategic meaning of the firm (Mintzberg, 1994) or ‘what role the firm has in what larger system‘ (Normann, 2001).

The business model and strategy advocated by the top management follow as a consequence from the chosen purpose of the firm, as those outline the choices and purposes on an operating level. The business model tells in sense-making way how the purpose of the firm will be implemented and fulfilled (Magretta, 2002). If the strategy can be called a plan of how to survive in competition Mintzberg (1994), business model is more a story of doing and the effect of the doing. Again, also the strategic orientation that the top management chooses 19

has far-reaching impact on the customer proposition, critical processes, organizational structure, management systems and the company culture. Porter (1985) has defined generic strategies , which Treacy and Wiersema (1997) later have refined into three general strategies; one striving for product excellence (seeking for operationally superior products reformulating industry standards as customer value; having processes for creating new ideas, structures allowing entrepreneurship and avoiding bureaucracy, liberally managed and result oriented, with a culture encouraging imagination and questioning), another striving for operational excellence (beneficial and convenience as customer value, with smooth processes for sourcing and delivering to base customers; structures centralized controlled, low empowerment, processes standardized widely in the firm; strictly managed continuously tracking performance; a culture emphasizing efficiency and avoidance of extravagances) and the third customer excellence (customer tailored solutions trough long-term relations; processes for finding ides and implementing solutions; empowering the ones close to the customers; culture encourage individual customer service and long lasting relations).

Mintzberg (1978) argues that the strategy can be either deliberate or emergent. An alternative perspective is to limit strategic definitions merely the vision of the firm and leaving all the rest undefined. By definition (Normann, 2001) the vision is about the future, about the gap between the present state and the imagined future state of the firm. The vision also tells about the effects on the external world, and the future state of the organization.

When we consider innovation in a firm context, and here in particular mature firms, a legacy of the past is that a firm organization works according to a certain general logic. According to the behavioral theory of the firm, five generic goals eventually rule behavior in any industrial firm: production goals, inventory goals, sales goals, market share goals, and profit goals (Burns and Stalker, 2001). It is furthermore argued that ‘organizational choice is heavily conditioned with rules, organizational standard operating procedures, within which it occurs‘ (Cyert and March, 1963). Certain general procedures of choice are associated with a predictable behavior of the organization. That is to say, the firm relies on certain specific procedures when implementing the general procedure. Cyert and March (1963) argue that there are three general criteria of choice; avoid uncertainty, maintain rules and use simple rules. On the operating level, when questions are asked ‗how is this done in this company?‘, ‗how is this fabricated?‖ four specific standard operating rules apply; task performance rules, continuous recoding and reporting, information handling rules, plans and planning rules.

Standard operating procedures and rules are deeply rooted in the organization culture 20

memory of the firm and pillars of the stability of the firm. Like memory, procedures are based on experience and learning, by which the firm adapts to its environment and builds up the sustainability of the procedural behavior.

Company culture is commonly (Trice and Beyer, 1991, Aaltio–Marjosola, 1991) brought up as a vital explanation why innovation occurs or does not occur in a firm. Culture here refers (Aaltio–Marjosola, 1991) to the sum of past experiences, negotiations, decisions, and conventions, where the culture serves a function of safeguarding the good beliefs, customs, and people, as well as limiting them. The culture is vital, as it relates to the self–respect of the collective as well as the individual (Brown, 1976). An institutional element, closely related to the company culture is the concept of values. ‘A value is a conception, explicit or implicit of the desirable in the organization which influences the selection from available modes, means, and ends of action‘ (Kluckhohn, 1956). Company values can be seen as general beliefs guiding judgment and actions that are projected on situations, when explicit norms, rules, guidelines are absent. This is a common situation in the case of innovations.

In successful innovative firms, the culture supports further innovations, but the innovation activists were did not seem to be concerned about the company culture. Why? Probably because these individuals were those individuals introducing new norms and ideas which is the new culture in innovative firms. In innovative firms, the culture supports further innovations, whereas a firm unable to be successful in its innovation is stuck in the past structures if the culture does not change. Another cause for the failure, was found in one of the cases where there were

mixed messages concerning the strategy; we found evidence of two competing generic strategies, the true strategy of operational excellence reduced and the product excellence one not acted upon. From this followed conflicts disabling the decision making, disarming the firm from the ability to deliver new offerings and products. In another failing firm, there appeared disagreement on the top level (also) about the ethos of the firm; is it a furniture firm or is it an interior design firm. The difference may seem small, but the effect of the disagreement led to similar unproductive and arbitrary debates, as in the case with two strategies.

We have to remark that one element alone of the preconditions does not necessarily cause inability to deliver innovations. A well merited chief designer in one of (listed) firms said, ‖I am aware that you cannot talk about it today, about employment in the neighborhood, or your own employment, or somebody else‘s employment, or that the economy of the municipality 21

goes bankrupt, it is totally irrelevant factors in this ‘global economy‘ and in ‘shareholder value‘ thinking. For the most it is too abstract to grasp how to ‘increase value‘ for those who own this ‗firm‘. It is not ethically, morally, or anything, enough exciting goal. There has to be something else! Like pure curiosity to find out ‘does this solution and technique work‘ and ‘can this be built like this‘? Or something.‖ This firm was a successful innovator; however, the contradiction put the activists repeatedly in severe conflict situations and in the middle of several disputes.

The Decision Making The decision making, in this study, comprehends the constructive collaboration between persons, in search of a positive outcome. Listening to the activists, we discovered them talking about the decision making in terms of triggers for dialogue; the individual emotions and thoughts of those involved; and the dialogue, including the concerns of participation and resolving matters, all leading to reaching a mutual perspective, preceding the decision.

We further build on the above presented idea that, the innovation is an iterative, like a positive or negative spiral or course of events, and from that follows that also the decision making is step by step connected to the same spiral and the theory of new knowledge creation. It is argued (Nonaka and Takeuchi, 1995) that knowledge conversion occurs along the process of interaction between participants—from tacit to explicit knowledge and vice versa. The theory of knowledge creation proposes that innovative firms create knowledge and new information by relaxing what is understood as the problem and the solution. We can think of knowledge creation as a dynamic human process of justifying the personal belief toward the ‘truth‘—in short, justified belief. There is a relationship between information and knowledge, information being a flow of messages, whereas knowledge arises from that very flow when connected to the beliefs and the commitment of its holder.

A decision is always a conclusion reached on the grounds of both facts and personal values.

When individuals make a decision through a coordinated effort, with the merit of their own criteria, they simultaneously make themselves dependent on the behavior of their peers in the cooperative group. An individual decision also partly incorporates the decision of another person who guides the individual‘s choice. The individual comes to accept those premises that form the grounds for the ‘borrowed part‘ of the decision, without questioning those underlying premises. The borrowed part of the solution rests on, as earlier mentioned, the authority that has the power to guide the actions of others (Simon, 1945).

22

The role of logic in decision making, in particular in connection to innovations, is controversial. It is commonly assumed (Bernard, 1938) that decision making in organizations is usually justified with logic. If the decision is broken into parts, the means and the ends, the logic can be given a clearer role. The ends, like the installation of an assembly line, can be a means for a further ends, like the delivery of SUV cars, which in turn may be subordinated to the more remote and ultimate ends: a car fit for family leisure traveling. When we recognize the difference between and immediate ends to a more distanced, extremely remote ends, the role of logic is highlighted. The closer the ends, the less the uncertainty; the further away and more general the end, the more it is distorted by organizational and environmental risk. It follows that most remote or general ends are probably arrived at as the result of an illogical influence process in which consensus plays a vital role. The means appear to be primarily a logical process of acts, like fact based reasoning, discrimination and choice of alternatives, in which the ends have been decided. This reasoning can also be stated in terms of one practitioner saying. ‗Creation of new things comes up when you work completely unconditionally; in a certain direction, of course, but with some type of loose framework.

Often the work is not what you have been assigned to do. A lot of good work has been done without deliberate permission‘.

The ends, or the common goals, of the firm in general were discussed earlier section. Just as the organization is a hierarchy of actors, there is a similar hierarchy of goals. From a formal and legal standpoint, the motives of the owners and top managers are major forces in the determination of goals. There is rarely one goal, but many. There is rarely a clear goal, but a search for it. In strong hierarchy, the organizational goals are usually the goals of the top manager, and conformity is purchased with inducements like wages, premiums, interest, and managerial attention. The goals are supported by a system of internal control that keeps the staff aware of the entrepreneurial demands (Burns and Stalker 1963). As innovation by nature challenges the norms of thinking, rules, standard operating procedures in a mature firm, before it becomes the new common logic and wisdom in the firm, it raise the question how do leaders deal with the problem when the dominating formal agenda, like strategy, organization, policy collide with the informal? Consider an example (Cyert and March, 1963) of a condition of conflict in an industrial manufacturing firm: The sales department wants 1) specific tailoring of product specifications and individual delivery times to individual customer needs, and the production and finance department want 2) product standardization and delivery times consistent with production smoothing. Logically these demands are 23

inconsistent. The common situation seems to be a question of either/or. We think that individuals have lists of organizational preferences that then infiltrate into the objectives of the firm. Assume, however, that members of the organization have a relatively disorganized pool of demands. Assume that at any time a member is aware of only a limited set of demands. It is reasonable to think that the demands require more attention than the member‘s involvement in the organization would allow, and of course there are demands of others on the member‘s attention. In situations in which the demands of conflicting interest occur simultaneously, the clash is avoided when the organization responds to the demands sequentially. Cyert and March (1963) suggest that the shift in focus of attention explains why organizations operate successfully, despite many conflicting goals and demands within the firm. Sometimes managerial attention may be focused on cutting costs, sometimes on making investments, and so on. In organizations in which sequential attention to problems occurs, what looks to an outsider like a contradiction is not contradictory to an insider, in cases in which the organization is temporarily able to avoid conditions which seem to be in fundamental conflict.

The ends of the decision is often made in the top level of the organization but the choice and shaping of the means regard also the lower level of the organization. Eventually, purpose or goals conflicts are never fully settled in the firm. Individuals tend to have different demands, drifting attention, and a limited possibility to be represented in all matters of the firm. The goals of the firm change gradually, except in dramatic situations. From this follows, therefore, that the purpose or objectives are never fully rationalized. The extent of the bargaining process, when it ends, and when policy begins to be reconsidered (resulting from a demand from some part of the organization), hinges on the skills of the leaders to work out the decision process adequately. The decentralization of decision making and attention to goals, sequential attention to goals, and slack keeps the organization in a state of decision making, despite multiple, changing situations and inconsistent demands and goals.

In the successful firms there is an evident ability to take problems as they occur, i.e. an sequential attention to problem. In the failing firms we found evidence of problems with lack of initiatives; problems coming to the same table, as people were geographically distant, did not understand each, miss understood each other; and ambiguity whose word counts in the end in a conflict situation between two high rank individuals.

24

Product In this study the innovative product was defined as something path breaking new in the offering, both for the firm and the market, and something which contributed significantly to the revenues of the firm. According to the leading activists of innovation, the product is shaped as a consequence of the combined effect of the activists, new knowledge creation, inventions, decision making and preconditions provided by the leadership. The effect of positive leadership influence reflects on the physical product, the engineering and the features of the product; and the tangible and intangible dimensions as the product concept (including services), which we have found in the empirical material.

When we observed innovation in a business firm context and a long-term view, we saw that innovation was actually series of connected projects that accumulated at some point of time became recognized as an innovation. The full impact of a true innovation, not merely a product improvement, challenges and modifies the purpose and the organization of the firm.

In one of the firms, the original invention was close to one hundred years old, but later profoundly reinvented, which shows that the ongoing firm does no need radical innovations on a yearly basis.

Schumpeterian versus Kirznerian is one of, if not the most referenced, general explanation of the existence and emerging of new opportunities. Kirzner‘s (1973) fundamental claim is that opportunity lies in the differing levels of access to existing information—some have access and some do not. Schumpeter‘s (1942) claim is that new information is central to an explanation for the existence of entrepreneurial opportunities. In other words, a Kirznerian approach explores an idea within an established paradigm or business, whereas the Schumpeterian approach assumes the creation of true novelty, which, according to Normann (2001) requires ‘frame breaking‘ thinking. These two views are not mutually exclusive; rather, they distinguish different types of opportunities that can be prevalent in the market at the same time (Shane and Venkataraman 2000), as it is stated by a technical director; ‘In case of a known product and technology, the impulse, in principle, comes from the customers. In case of a totally new product, the idea and intuition begins primarily inside the company‘.

Schumpeter (1942) argues that that the locus of opportunity for innovation is found in technological discontinuances and social, demographical, political, and regulatory changes.

The framing of what is an innovation can also be stated from an generic typology (lecture by Gemünden, 2006), stating what is new: the new may be the product, the inputs like materials 25

for making the product;

the process of making the product, social and organizational

innovations, and new markets. Or, alternatively as Schumpeter (1942) stated; the market economy is fueled by new consumer goods, new methods of production or transportation, new markets, and new forms of industrial organizations.

A technical innovation begins a new path and a competition between various technologies. At the end there is a technology that the majority of market adopts and it is called dominant design. Therefore Utterback (1941) suggests with his theory of dominant design that being first in the market with a technical innovation does not necessary bring the success. Utterback has also introduced the theory of waves of innovation which means process innovation waves follow the product innovation waves. The innovation process is divided into several phases and a set of phases form a wave. Product innovation generally is followed by process innovation in a mature market (Utterback 1941). If the term process is extended to comprehend also how the product is made available for use, the attention to service innovations appears as a sense making extension of process innovations (Grönroos, 1998).

In the successful firms the innovation followed an innovation, with a good business track record. To quote one CEO; ‘We have delivered something every year. In fact, we also have had the merit of two worldviews. Over the past 15 years, we have improved our results every quarter‘. The firms falling short, they had no innovations to show. In one of the cases there was no track record of innovations at all, whereas in the other case there was evidence of creativity but lack of sales from that creativity. Or, as a cynical person called the innovation initiatives ‘brand–building projects without business significance‘.

To conclude the analysis of the five critical areas, we give the word to one highly merited promoter by knowhow; ‗we have learned to combine technology and materials. We try always to keep three aspects present in a new product: preferably improved functionality; possibly new technology and new material, the costs of which make sense; and, in the end, the design that supports all this‘ Discussion The description of the innovation ecosystem and the dynamic nature of attention leave out a particular description of the characteristics of successful and unsuccessful leadership in a mature firm striving to be innovative. In this research one crucial characteristic of the firms studied is that the organization is led by professional managers.

26

One feature in innovative firms is that there are several leading persons, here called activists, with different knowledge profiles active in the making of innovations. Those activists, who have desire and knowledge to bring the potential invention forward, can also be called the authorities of knowledge in the informal world of firm. If these activists are not positioned in the upper hierarchy of the formal organization, they do not necessarily adapt to the norms and the rules of the formal organization. When these actors are in the upper hierarchy of the formal world of a mature firm the likelihood increases that innovation follow innovation over time.

The activists influence through visible enthusiasm, which means that their informal position, and their job, in the firm can be at stake for their beliefs for the new invention. They have a long-range commitment and continuity and a mission higher than the ordinary business mission which is the origin of their internal force. Like one activists said, ―A journalist asked me what is driving me to work on innovations. I answered that my motive is to keep the hometown, the nation, and myself employed. If the hundreds of our workers do not have work, nor do I have anything to do here in this firm‖. Five of the six cases studied are located in non–metropolitan or relatively small cities, which seems to reduce the mobility of the key activists once they have been rooted in the firm.

The activists have broad insights and long experience from working with the firm. In all of the mature innovative companies the key activists have more than ten years experience.

Only few activists are experts of managing the long chains of cause-and-effect relationships which all connect to the critical areas of attention (products, activists, leadership preconditions, decision-making process and invention) in the thought world of the interviewed leaders. Our proposal is that the art of innovation management is about future dependencies, which, in part, have not yet been recognized, not associated, nor yet organized.

The activists‘ combined depth and width of knowledge, give them the ability to oversee a broad span of dependencies over the organization, which makes them specialist overcoming problems related to innovations. The reason may be that the newly hired people do not have experience, insights and boldness to confront the uncertainty often associated with innovations. If the reputation for successful innovation cases is the bases for the informal authority, the quality of the resource cannot be hired but it should be cultivated in the organization. Applicable prior knowledge (defined by Shane, 2003) of customer problems,

27

markets, ways to serve the market can be hired, but the core of the innovation system solution must also exist.

The management in innovative mature companies has a dynamic orientation and capability to master both the mechanistic and organic system of management needed in different situations. It leads to the capability to master the conflicting strategies and organizational problems by the organizational attention which is crucial when stimulating innovations.

The activists in the mature innovative firms take part in building new organizational agreements while at the same time they are breaking the older structures. Either they have ideas of their own, or they interact with actors who have ideas and initiatives which sustain the cycle of innovations. They act as catalysts for the innovation life cycle. They do not rule the discussion by force; they also listen and debate issues. However, the key activists often make the conclusive decisions which determine the future organizational structure and innovation policy. Activists lead the firm through enough legitimate decisions so that the innovation cycle is proceeding by interaction and debates. They also influence the preconditions for success such as analyses of the ruling situation and discussions of ideas‘ relationship to the organizational atmosphere and to the whole organization.

A vital company culture is favorable to innovation. Leaders who are able to create an innovative company culture are appreciated in the firms. The organization is sensitive to the continuity of new knowledge creation and commercial and financial success. New knowledge is created through mingling, reflecting, combining, experimenting, doing and contra-factual thinking (imaging alternative outcomes of past events) and new information and experiences are resulted from the creation. New information and experiences are the building blocks of the authority of knowledge. The commercial and financial success of the innovation arising from the new knowledge and the growth of authority are the building blocks of innovative company culture. Or as one activist explained the terms for their autonomy, ‗Our only true protector has been our good and steady profitability level through the years, and we have delivered something new every year‘.

Conclusion It appears that the vital question is how the large mature company deals with inherent impediments and leverages the undisputed benefits when they deal with innovations. From this point of view, follows that the main attention of this study concentrated on long term

28

leadership issues, providing the related parts of the organization to work together as a whole—as some kind of system—for running an innovative mature company.

Our findings contribute to the theory of promotoren and innovation champions, by disclosing news about the thought world of the promotors of innovation in leading positions of the firm.

We found that there is not one hero in the organization, but several persons with different knowledge profiles and quality of contributions to innovations. Still our findings support the view that innovations do not appear to result from an organization–wide commitment and that a limited number of people contribute to enhance the innovative state and cycle of innovation (Dougherty and Hardy, 1996). We have chosen to call these exceptional persons activists; they play, also, the informal roles of rare knowledgeable persons engaged in a team effort, who are not necessarily complying with the official doctrine or norms of the firm.

When these authorities of knowledge in the informal world, also act in high positions of hierarchical power in the formal world, the result is the solid track record of successful innovations and business management. Our research show that the activist leaders of innovative firms have a fixation interpreting the general business conditions of the firm, the idea and new knowledge creation, and dealing with the decision making process, which all combined shape the innovative output, i.e. the product or the offering.

These activists

influence through visible enthusiasm, demonstrating their devotion by risking even their ‘organizational life‘ for their beliefs. They appear to have a mission higher than the ordinary business mission, which is the origin of their internal force. The ‘shareholder value‘ thinking is respected as one rule of the game, but at the same time regarded as narrow–minded thinking for these activists, where firm long–range continuity is the most vital consideration.

In this light, we consider the term ‗management support‘ to innovation too mild, and suggest it could be substituted by the term ‗management devotion‘ when discussing leadership in innovative mature firms.

Research of Hauschildt and Kirchmann (2001), have found evidence of the positive relationship between innovation success and the presence of a number of different promotors in the organization structure. Our research suggest that this is due to the broad field of knowledge and experience needed to master innovations, that one person in a large and mature firm probably cannot be found, who has the adequate information and personal experience in all the knowledge areas and dependencies recognized. That is why a coalition of several knowledgeable and experienced persons increases the probability for successful innovation. We find that there is an evident and direct connection between the maturity of the 29

management team, the lack of authorities of innovation in the firm and the ability to deliver innovations. New employees bring in fresh blood and new ideas, but their knowledge is not aligned with the situation and formal/informal structures in the new firm. To become experienced takes trial and error, plus several years to match the newcomer´s past experience with the new firm.

We also find that our results further the knowledge of the thought world. We did find, like Dougherty (1992) the external and the internal parts of the thought world. Beyond this we found evidence that the internal part of the thought world can be divided into subjective willdriven and system driven areas of attention, and we have defined the particular knowledge areas of these two parts. We have accordingly also defined the particular knowledge areas of the external part of the thought world. These definitions are our specific suggestion to what Dougherty (ibid.) refers to as funds of knowledge (what they know). We saw from our observations that the leading innovation activists‘ prime area of knowledge is the internal will-driven area of attention, whereas the internal system driven area of attention is a secondary concern, followed by the attention to external impulses.

The result of our study brings forward a new meaning for the innovation ecosystem. The term innovation ecosystem is commonly referred to when discussing national networks of innovation. We introduce the firm innovation ecosystem of the leading innovation activists.

We have, as above stated, defined the 24 knowledge areas of that ecosystem and the associations between those areas. At the heart of the ecosystem we find the knowledge areas discussing activists, invention, leadership preconditions, decision making and the product.

We did find, in line with the promotor theory, that the activists are vital for the life in the firm innovation ecosystem.

In the successful innovative firms we draw the conclusion that the leaders are masters of combining the mechanical and the organic system of management, and they are sensitive and skillful dealing with the dynamics between the formal and the informal organization. The leaders of innovative firms managed the inherent conflicts associated with the innovation activity and the business as usual, by allowing separatism, or accepting several agendas, and dealing with conflicting decisions according to the idea of sequential attention to problems (Cyert and March, 1963). We saw as reasons for firms failing to fulfill their innovation ambitions; short time of employment, entailing in lack of authorities of knowledge and disconnection between activists, managerial blindness for the informal organization structures 30

and the organic system of management entailing in an overly belief in control and system thinking, which in turn strangled the needed improvisation for innovations.

Innovation was studied as a long–term and persistently led phenomenon, extending beyond the life span of one project. We have seen that innovations grow as result of a number of connected projects over the years. The low emphasis on talking about innovation in terms of a process and in terms of users, which surprised us, speaks against those studies claiming that these areas would have particularly prominent role in managing the innovative firm. We think it is appropriate to discuss innovation in terms of a process only in the later stages of the innovation cycle when activities and tasks can be programmed to produce a specific product or service. Instead, we encourage looking at the innovation cycle as a positive, negative, or neutral spiral of new knowledge creation. Luck can shorten the lead time to success, but luck is probably not the main reason

for success. Or as Louis Pasteur said, chance favors a prepared mind.

From this study grew ideas for further research. This study did only regard the innovation ecosystem as-it-is. This leads the thoughts to further research how such an innovation ecosystem has been built over the years. Related to this growth, also the growth of knowledge authorities – promoters- in connection to innovation seems like a sensible direction for new knowledge creation.

31

References Aaltio–Marjosola, I.; Cultural Change in a Business Enterprise, Acta Acadmiae Oeconomicae Helsingiensis, 1991.

Agarwal R., Bayus B.; The Market Evolution and Take–Off of Product Innovations, Review of Marketing Science WP No. 214, 2002.

Bernard C.; The Functions of the Executive, Harvard University Press, England, 1938 (1968).

Bower J, Christensen C; Disruptive Technologies, Harvard Business Review, Jan–Feb. (1995).

Brown M.; Values – A Necessary but Neglected Ingredient of Motivation on the Job, The Academy of Management Review, Vol. 1, No. 4, pp.15–12, 1976.

Burns T., Stalker G.; The Management of Innovations, Oxford University Press, New York, USA, 1963 (2001).

Chandy R., Tellis G.; The Incumbent´s Curse? Incumbency, Size, and Radical Product Innovation, Journal of Marketing, Vol. 64, pp.76–80, 2000.

Chesbrough H.; Managing Open Innovation. Research-Technology Management, Volume 47, Number 1, pp. 23-26, 2004.

Clarke R., Cornish D. Controlled trial in institutional research – paradigm or pitfall for penal evaluators, HMSO, London, United Kingdom, 1972 Crawford M.; Marketing Research and the New Product Failure Rate, Journal of Marketing, Vol. 41, No. 2, pp.51–61, 1977.

Cunha M., Gomez J.; Order and Disorder in Product Innovation Models, Creativity and Innovation Management, Vol. 12 No. 3, pp.174–185, 2003.

Cyert R., March J.; A Behavioral Theory of the Firm, Prentice–Hall, USA, 1963 (2001).

DiMaggio P., Powell W., The new institutionalism in organizational analysis, Chicago University Press, Chicago, USA, 1991.

Dougherty D.; Interpretive Barriers to Successful Product Innovation in Large Firms, Organization Science, Vol. 3., No. 2, pp.179–202, 1992.

Dougherty D, Hardy C.; Sustained Product Innovation in Large, Mature Organizations – Overcoming Innovation–to–organization Problems, Academy of Management Journal, No. 5, pp.1120–1153, 1996.

Edquist C., Systems of Innovations, Chapter 7 in The Oxford Handbook of Innovation by ( Fagerberg J. et al.), Oxford University Press, New York, USA, 2005.

Gemünden H.G. and Walter, A.; Der Beziehungspromotor – Schlüsselperson für interorganisationale Innovationsprozesse. Zeitschrift für Betriebswirtschaft, No. 65, pp.971–986, 1995.

32

Gemünden H.G., Hölzle K.; Schlüsselpersonen der Innovation; Champions und Promotoren, document, 2005.

Gemünden H.G.: Defition of Innovation and Influence of Innovativeness.Doctoral Seminar Helsinki of University of Technology.

Gemünden H.G.: Doctoral dissertation review (2009). Presented on the doctoral dissertation at Åbo Akademi Universtiy, March, Turku.

Grönroos C.; Marketing services: the case of a missing product, Journal of Business & Industrial Marketing, Vol. 13, pp.322–328, 1998.

Hauschildt, J., Kirchmann, E.; Teamwork for innovation – the „troika― of promotors, R&D Management, Vol. 31, pp.41–49, 2001.

Holm, P.; The Dynamics of Institutionalization: Transformation Processes in Norwegian Fisheries, Administrative Science Quarterly, Vol. 40, 1995 Kirzner I.; Competition and Entrepreneurship, University of Chicago Press, Chicago, USA, 1973.

Klein K., Sorra J.; Challenge of Innovation Implementation, Academy of Management Review, Vol. 21, No. 4, pp.1005–1080, 1996.

Kluckhohn C.; Toward a Comparison of Value–Empases in Different Cultures, The State of Social Sciences, Chicago Univeristy Press, Chicago, USA, 1956.

Latour B.; Reassembling the Social – An Introduction to Actor Network Theory, Oxford University Press, New York, USA, 2005.

Leifer R., McDermott C., O´Connor C., Peters S., Rice M., Veryzer W.; Radical Innovation, Harvard Business School Press, Boston, Massachusetts, USA 2000.

Magretta J.; Why Business Models Matter, Harvard Business Review, May 1, 2002.

Miettinen, R. National Innovation System: Scientific Concept or Political Rhetoric, Edita, Helsinki, 2002.

Mintzberg H.; The Rise and Fall of Strategic Planning, Prentice Hall Europe, 1994.

Mintzberg H.; Patterns in Strategy Formulation, Management Science, Vol. 24, No. 9, pp.934– 948, May 1978.

Nonaka I., Takeuchi H.; The knowledge–creating company – how Japanese companies create the dynamics of innovation, Oxford University Press, New York, USA, 1995.

Normann R.; Reframing Business – When the Map Changes the Landscape, Wiley & Sons, United Kingdom, 2001.

Pfeffer J.; Managing with Power, Harvard Business School Press, Boston, USA, 1992 33

Pimler, T.U., Eppinger S.D., ASME Design Theory and Methodology Conference, Minneapolis, USA, 1994.

Pistrui, D.; Innovate Now: Report on Innovation Research Report, Illinois Institute of Technology, 2007 Porter M.; Competitive Advantage – Creating and Sustaining Superior Performance. Free Press, New York, 1985.

Salomo S., Gemünden H.G., Leifer R.; Research on corporate radical innovation systems – A dynamic capabilities perspective: An introduction, Journal of Engineering and Technology Management, 24 (1), pp.1–10, Mar. 2007.

Schon D.; Beyond the Stable State, Norton, New York, USA, 1971.

Schumpeter J.; Capitalism, Socialism and Democracy, Harper and Row, New York, USA, 1942.

Shane S., Venkataraman S.; The Promise of Entrepreneurship as a Field of Research, Academy of Management Review, 26, p.13–17, 2000.

Shane S.; A General Theory of Entrepreneurship – The Individual Opportunity Nexus, Edward Elgar Publications Limited, UK, 2003.

Simon H.; Administrative Behavior – A Study of Decision Making Process in Administrative Organizations, Free Press, New York, USA 1945 (1997).

Ståhle P., Sotarauta M, Pöyhönen A,; Leadership of innovative environments and organization, the Future Committee, Parliament of Finland, 2004 Tainio, R., Lilja, K.; "The Finnish business system in transition: outcomes, actors, and their influence", in Czarniawska, B., Sevón, G. (Eds),The Northern Light – Organization Theory in Scandinavia, Copenhagen Business School Press, Trelleborg, pp.69-87, 2003.

Treacy M., Wiersema F.; The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market, Basic Books, New York, USA, 1997.

Trice H, Beyer J.; Cultural Leadership in Organizations, Organization Science, Vol. 2, No. 2, pp.149–169, 1991.

Utterback J.; Mastering the Dynamics of Innovation, HBS Press, Boston, Massachusetts, USA, 1941 Witte. E.: Power and Innovation: A Two-Center Theory, in: International Studies of Management Organization, Spring (1977).

Wikipedia. (2009). Ecosystem. Retrieved December 7, 2009, from Wikipedia: http://en.wikipedia.org/wiki/Ecosystem Youngblood M.D.; Leadership at the Edge of CHAOS: From Control to Creativity, Strategy & Leadership, Vol. 25, No. 5, pp. 8-14, 1997.

34

Appendix

35