The document discusses the critical role of innovation as a driver for organizational success and competitive advantage, highlighting various companies and their approaches to innovation, including Apple, Facebook, Google, and Nike. It outlines the definition of innovation, its scopes and types, and emphasizes the importance of aligning innovation with business models to ensure long-term sustainability and effectiveness. Furthermore, it addresses the need for organizations to manage their innovation capabilities and structural processes to enhance their operational performance and market responsiveness.

1. Value-Creation
Organizational
Innovation
D R . C . C . TA N
SCHOOL OF MANAGEMENT
M A E FA H L U A N G U N I V E R S I T Y
2013

2. Historical graph showing the adoption of new technologies in the United States
(designed by Nicholas Felton via the New York Times).
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3. 12/18/2013

4. Innovation:
 Innovation is a means of enterprise.
 Innovation is a new capacity to create wealth from resources, and makes resources to
become “real resources” of significant competitive advantage.
 Thus, innovation is a driving force for a firm’s progress (Peter Drucker, 1985).
 When the environment changes and traditional thinking is challenged, the enterprise
needs to pursue innovation in response to challenges for survival in a rapidly changing
market (Burpitt & Bigoness, 1997). The firm must have new products and services to
satisfy old customers and attract new customers (AI-Beraidi and Rickards, 2003).
Context
changes
New strategies adapted:
 Innovation
Reference:
AI-Beraidi, A. and Rickards, T. (2003), “Creative Team Climate in an International
Accounting Office: An Exploratory Study in Saudi Arabia,” Managerial Auditing Journal,
18(1), pp. 7-18.
Burpitt, W.J. and Bigoness, W.J. (1997), “Leadership and Innovation among Teams,”
Small Group Research, 28(3), pp. 414-423.
Drucker, P.F. (1985), Innovation and Entrepreneurship: Practice and Principles,
HarperCollins.
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5.  Innovation:
 The attitude of innovation is directly and
indirectly the most important lever that
pushes the company ahead, with a
passionate missioned theme.
 Steve Jobs in the 1980s was quoted in the
Apply company mission statement: “Man is
the creator of change in this world.
 In its official Mission Statement, artifacts of
innovative works are reinforced:
 “Apple designs Macs, the best personal
computers in the world, along with OS
X, iLife, iWork and professional
software. Apple leads the digital music
revolution with its iPods and iTunes
online store. Apple has reinvented the
mobile phone with its revolutionary
iPhone and App Store, and has recently
introduced iPad 2 which is defining the
future of mobile media and computing
devices.”
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6.  Innovation:
 The attitude of innovation is directly and
indirectly the most important lever that
pushes the company ahead, with a
passionate missioned theme.
 Facebook: Mark Zuckerberg is credited as
founding facebook in 2004, when he
launched a website called “thefacebook,”
which was designed for the exclusive use of
Harvard students. The instant popularity of
the website drove it to expand and become
accessible to other universities, then high
schools, and selected companies such as
Microsoft and Apple. In 2006 Facebook
became accessible to the entire world’s
population and by the end of year it had 12
million users.
 “Facebook’s mission is to give people the
power to share and make the world more
open and connected.”
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7.  Innovation:
 The attitude of innovation is directly and
indirectly the most important lever that
pushes the company ahead, with a
passionate missioned theme.
 Google: The history of the Internet
information services company only goes
back to 1996, when founders Larry Page
and Sergey Brin were graduate students at
Stanford, and began working on a search
engine together which they called
“BackRub.” The name of the search engine
was changed to “Google” in 1997, a name
that was inspired by the mathematical term
“googol,” which means the number one
followed by 100 zeros, which represented
the infinite amount of Information Page.
 Google’s mission is to organize the world’s
information and make it universally
accessible and useful.
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8.  Innovation:
 The attitude of innovation is directly and indirectly
the most important lever that pushes the company
ahead, with a passionate missioned theme.
 Nike: Nike began on January 25, 1964 as Blue
Ribbon Sports with a $500 investment from each
founding partner, Phil Knight and Bill Bowerman.
Phil Knight was a track and field competitor in
college and Bill Bowerman was his coach. The two
men started Blue Sports as distributors of shoes
manufactured by the Onitsuka company in Japan.
In the early 1970’s Blue Ribbon Sports expanded
beyond the shoe distribution business to become
shoe manufacturers. On May 30, 1978, the company
officially became Nike, Inc., a name that is credited
to the imagination of the company’s first employee,
Jeff Johnson.
 The mission statement of Nike is: To bring
inspiration and innovation to every athlete* in the
world. If you have a body, you are an athlete.
Reportedly the asterisked clarification came from cofounder Bill Bowerman.
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9. 12/18/2013

10.  Innovation:
 The attitude of innovation is directly and indirectly the most important lever that pushes the
company ahead, with a passionate missioned theme.
 Naked Pizza Restaurants: The concept for Naked Pizza was originally created by founders Jeff
Leach and Pharon Wilson as “The World’s Healthiest Pizza” in New Orleans, Louisana. The
496 square foot restaurant was flooded when Hurrican Katrina hit and the founders were
among the community of business owners who went back to New Orleans to resurrect their
businesses and rebuild the city. After Hurricane Katrina hit, co-founder Robbie Vitrano was
working in both advertising and with an organization called Idea Village, both of which were
focused on rebuilding post hurricane businesses in New Orleans. The first restaurant branded
as Naked Pizza opened in 2006 with a mission much larger than just making pizza and
making a profit. In 2009 Naked Pizza got financial backing from billionaires Mark Cuban and
Robert Kraft and with that backing started aggressively implementing a franchise model for
expansion.
 Naked Pizza makes no secret that it is a pizza chain on a mission. “We intend to launch the
world’s largest grassroots health movement. We’ll do that by making a delicious, affordable,
all-natural pizza and delivering it to your home hot in about 25 minutes. Our mission is
delivering great tasting pizza that’s actually good for you.
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11. 12/18/2013

12.  Innovation:
 The attitude of innovation is directly and indirectly the most important lever that
pushes the company ahead, with a passionate missioned theme.
 Baskin-Robbins Ice Cream: Baskin-Robbins Ice Cream Stores was founded by brothersin-law Burt Baskin and Irv Robbins, who each started their own ice cream shops, and
then merged together to create the Baskin-Robbins concept. Irv’s ice cream store was
Snowbird Ice Cream, which he opened in Glendale, California in 1945, featuring 21
different ice cream flavors. Burt’s ice cream shop was called Burton’s Ice Cream Shop,
and the first one opened in Pasadena, California in 1946. In 1953 more than 50
Burton’s and Snowbird Ice Cream shops were rebranded as Baskin-Robbins 31 Ice
Cream, with 31 representing a different flavor for every day of the month. BaskinRobbins was acquired by London-based J. Lyons & Col, and is now part of the Dunkin’s
Brands group along with the Dunkin’s Donuts chain.
 Since 100.% of the more than 6,000 Baskin-Robbins Ice Cream stores in 50 countries
are franchise-owned, each Baskin-Robbins franchise owner could have their own
mission statement. But as the parent company of Baskin-Robbins, Dunkin’s Brands
has 12 Values and Principles that the company believes should guide the decisions of
everyone associated with Baskin-Robbins retail outlets, leading Baskin-Robbins
franchisees toward success.
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13. The Dunkin’s Brans Values and Guiding Principles are:
Our Values:
 Honesty – Embrace the truth about oneself and the world.
 Transparency – Demonstrate openness and vulnerability.
 Integrity – Say what you think and do what you say.
 Respectfulness – Honor the dignity, inclusion, and diversity of others.
 Fairness – Do what is right based on common principles.
 Responsibility – Make yourself accountable to the community.
Our Guiding Principles:
 Leadership – Responsibility with passion at every level.
 Innovation – Excellence in everything we do.
 Execution – Ownership and accountability for results, success and failures.
 Social Stewardship – Demonstration of good corporate citizenship and responsibility to all
constituents.
 Fun – Approach every challenge with enthusiasm, energy and excitement. Celebrate every step
of the way.
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14.  When an organization chooses to pursue innovation as a
pathway to ongoing success, the starting point is to develop
and publish its definition of innovation.
 Everyone in the organization needs to understand what
innovation means to them at individual, team and
organizational levels.
 A successful organization achieves the goals and objectives
that it sets itself. Innovation is simply a “lever” that
delivers success rather than an end in itself. There are
many levers that can be used to deliver success, including
M&As, 6 , and improved HRM practices. Innovation is one
of these levers and it should be placed in the context with
the objects and aims of an organization.
Innovation
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15. Define Innovation for the Organization:
 Innovation is the process that transforms ideas into commercial value:
Innovation = Invention + Exploitation
 The starting point for innovation is the
generation of creative ideas. Innovation is
the process of taking those ideas to
market or to usefulness.
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16. Scope of Innovation?
 “Innovation” is predominantly linked to R&D associated with
creating new products.
 But, Schumpeter put innovation in the following scopes:
 New products
 New production methods
 New markets
 New sources of supply
 New forms of organization
New forms of
organization
New
sources of
supply
New
production
methods
New
products
New
markets
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17. Scopes / Types of Innovation:
Process innovation
Organizational Innovation
New forms of
organization
New
sources of
supply
New
production
methods
New
products
Non-technical
New markets
Service innovation
Technical
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18. Customers
Competitors




Cost leadership
Differentiation
Focus
Blue Ocean





Complementors
Cost
Quality
Availability
Innovativeness
Env. Performance
Positioning
Capability
Process and
Coordination, and
Structure i.e.
bricks and mortar,
machinery
Consistencies:
 Corporate level
 Business unit level
 Functional level
 The Supply Chain
 The Distribution Chain
Systems
Organization and People
Networked
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19. Capability
Positioning
Value Curves
Innovation
 Value increases
 Non-Value Adding : Decreases and eliminated
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MBV of Competition
RBV of Competition
“Strategic Vision / Parity, Competitive Advantage”

20. Capability
Positioning
Value Curves
Innovation
 Value increases
 Non-Value Adding : Decreases and eliminated
MBV of Competition
RBV of Competition
“Strategic Vision / Parity, Competitive Advantage”
RBV:
 To develop and leverage “resources” in order to create new market qualifiers and order winners.
 The innovative content for operations strategy should be supported directly by key operational
capabilities deeply anchored within business processes and organizational routines.
 Organizational innovation capability, i.e. Learning and Growth capability, must be managed
integrally, in order to be both supportive and generative of operating excellence.
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21.  Consistency at decisions level
C.C. Tan et. Al. (2013)
Organizational
Innovations
Value-Creation
Business Model
 From this Scheme, OI is resource to BM (Business Models), and thus RBV theories can be
examined, and OI strategies become a means of leveraging the firm’s strategic resources (OI) so
they are constantly regenerated. Thus, OI has become a highly intelligent activity geared to
ensuring that a firm knows well what tangible and intangible resources it has, where they are
headed, and how to protect them in avoiding their decay or stagnation.
 And, BM becomes the “integrator” of all change initiatives of OI within the organization and
eventually helps build “strategic options” to compete in uncertainties.
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22. Customers
Competitors
Matching Organizational
Innovations and Business Models:
Complementors
Positioning
Systems
Organization and People
Networked
Create Value
Give the “Value”
Positioning
KPIs
Get (the Reward)
SSC
Supply-side Capability
Value Curve
Capability
Process and
Coordination, and
Structure i.e.
bricks and mortar,
machinery
DSC
Demand-side Capability
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23. 



Responsiveness
Flexibility
Speed
Flow management
Quality Availability
 CSR
 Marketing 3.0
 Waste elimination
Innovativeness Environmental Performance
KPIs =
Cost
 Overburden
 Efficiency
 Supply chain cost / Total business model cost
Env.P
Innovativeness
Availability
Quality
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24. Excess stocks
Order
Waiting
 It is generally difficult to see all
the waste that surrounds the
production, and thus it offers
huge opportunity for performance
improvement today.
 The waste could be at the valuechain level.
Excess movement
Excess processing
Excess transport
Rectification of mistakes
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Production of goods not yet ordered
Waste Elimination:
 Taiichi Ohno defined seven common forms of waste,
activities that add cost but no value:
 Production of goods not yet ordered
 Waiting
 Rectification of mistakes
 Excess Processing
 Excess movement
 Excess transport
 Excess Stock

25.  It is generally difficult to see all the waste that surrounds the production, and thus it offers
huge opportunity for performance improvement today.
 The waste could be at the value-chain level.
 For instance:
 The provision of most goods and services stretches across several departments and functions
inside the firm and across many different firms.
 Making an aluminum drinks can, for instance, involves several manufacturing firms from the
mine to the supermarket. Each of these elements in the chain – the reduction mill, the smelter,
the hot roller, the cold roller, the can maker, and the bottler – is busy trying to optimize its own
performance, typically through bigger machines with faster throughput times and bigger
batches. This in turn leads to a series of intermediate stores getting bigger all the time. The
net result is that the order is delayed, huge stocks are needed, larger discount to clear the
stocks are needed, lost opportunities for new markets and new orders are common, etc.
Org. Innov.
Supply Chain
Distribution Chain
 Thus, optimizing each piece of the supply chain in isolation does not lead to the best result for
all and the industry.
Value-Creation
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26. Renewing the traditional SWOT Analysis (an Org. Innovation aspect):
Strategic Management
Product-Market Side:
Positioning Position
Supply Side:
Resource Position
Value
Curves
S, W
 Making sense through Value-Curve
 To create real Value, not to waste and
O, T
Non-Value-Added
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27. Renewing the traditional SWOT Analysis (an Org. Innovation aspect):
Strategic Management
Product-Market Side:
Positioning Position
Supply Side:
Resource Position
As long as possible
Resources:
 Acquire
 Exploit
 Develop
 Absorptive Capacity
S, W
O, T
 Making sense through Value-Curve
 To create real Value, not to waste and
 Strategies.
Non-Value-Added
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Rent-Generation
Value
Curves

28. In short:
 Every step of the value-chain is Org. Innovations driven, on SK (Infrastructure, Structure) A.
Promotion
Policy
Principle
Perspective
Place
Process
Procedure / Practices
People
Pattern of People
Plan i.e. Forecast
Products
Profits
People
Plant
Position
Ploy
Org. Innov.
Develop “dynamic capability”
 Operational flexibility, and
thus gradually upgraded to
 Total “organizational agility”
and towards the hard-to-copy,
hard-to-diffuse (absorb)
capabilities.
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29.  There have been few conceptual and methodological contributions to the monitoring of
organizational innovations so far (Armbruster et al. 2008):
 Organizational innovations comprise changes in the structure and processes of an
organization due to implementing new managerial and working concepts and practices,
such as the implementation of teamwork in production, supply chain management, or
quality management systems.
Organizational
innovations
Business performance:
 Competitiveness (Caroli and Van Reenen, 2001)
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30. Organizational
innovations
Technical product and process innovations
Organizational
Innovations
New
sources of
supply
New
production
methods
New
products
New
markets
 Organizational innovations act as the prerequisites and facilitators of an
efficient use of technical product and process innovations as their success
depends on the degree to which the organizational structures and processes
respond to the use of these new technologies.
 Second, organizational innovations present an immediate source of
competitive advantage since they themselves have a significant impact on
business performance with regard to productivity, lead times, quality and
flexibility (Womack et al. 1990; Goldman et al. 1995).
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31. Organizational innovations:
 “Lean production,” an integrated variety of
new organizational concepts (Womack et al.
1990) such as:
 Teamwork
 Job enrichment and enlargement
 Decentralization of planning, operating
and controlling functions
 Manufacturing cells
 Quality circles
 CI processes
 Zero buffer principle (Kanban)
 Simultaneous engineering and JIT
delivery
Driving factor for:
Companies’ competitiveness
(Womack et al. 1990)
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32. Organizational innovations:
Other innovative concepts include:
 Business reengineering (Hammer and
Champy, 1993)
 TQM (Ishikawa, 1985)
 Fractal Factory (Warnecke, 1992)
Driving factor for:
 Modular Factory (Wildemann, 1992)
 Intelligent organization (Pinchot and Pinchot,
1993)
Companies’ competitiveness
 Agile enterprise (Goldman et al. 1995)
(Womack et al. 1990)
 Cellular forms (Miles and Snow, 1997)
 N-form corporation (Hedlund, 1994)
 All of these promised to guide the
reorganization of companies in order to achieve
significantly better performance indicators
with regard to productivity, quality, and
flexibility.
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33.  Although these studies have shown the importance of organizational innovations for business
performance, defining and measuring organizational innovation still lags behind.
 There are different interpretations of the term “organizational innovation” and the lack of a
widely accepted definition causes difficulties in designing and implementing measures and
indicators that sustain validity over a wide coverage (Lam, 2005).
 Definition?
 Measurement?
So far:
Understanding the big
picture of OI
Hopefully can
provide us with a
clearer, more valid
definition on “OI”
Then, we can
“Measure OI” and
conduct Research
in depth and
breadth.
Value-Creation
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34.  The existing literature on OI is diverse and scattered. There is no consensus on a definition of the
term “OI”, which remains ambiguous (Lam, 2005).
 Different areas of research are developing their own approaches to try and understand the
complex phenomenon of OI:
 How OI emerges, develops, and grows at the micro-level within the organization?
Reality?
Structural:
Recently
The “OI” Literature
?
OL and Creativity:
Change Process:
This strand focuses on theories of
organizational cognition and
learning (Argyris
and
Schon, 1978) as well as on
theories of organizational
creativity (e.g., Amabile, 1988).
Reality – Accepted (Refreeze) for
Efficiency and Further Productivity
Gain
Structure and Process (Move)
OL and Creativity (Unfreeze)
12/18/2013

35.  The existing literature on OI is diverse and scattered. There is no consensus on a definition of the
term “OI”, which remains ambiguous (Lam, 2005).
 Different areas of research are developing their own approaches to try and understand the
complex phenomenon of OI:
Structural:
Recently
The “OI” Literature
 Structural aspect? To
achieve a structure
Reality?
increasingly capable of
?
continuous problem
solving and innovation.
OL and Creativity:
 Theories of
organizational change
Reality – Accepted (Refreeze) for
and development? Types
Efficiency and Further Productivity
Change Process:
of change (evolutionary
Gain
versus revolutionary)?
Resistance to change?
How to overcome the
Structure and Process (Move)
inertia of organizations
so as to enable them to
better adapt to changing
OL and Creativity (Unfreeze)
environments and
technologies?
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36.  The existing literature on OI is diverse and scattered. There is no consensus on a definition of the
term “OI”, which remains ambiguous (Lam, 2005).
 Different areas of research are developing their own approaches to try and understand the
complex phenomenon of OI:
 OI leads to competitiveness of firms (Caroli and van Reenen, 2001)
 But, the measurement of OI (the reality) is not minimally addressed (Armbruster et al. 2008)
 With knowing the reality well, “OI” research will hardly realize its Full Potential, and the
practitioners will miss the opportunities to use “OI” to transform their organizations.
Reality?
Structural:
Recently
The “OI” Literature
?
OL and Creativity:
Change:
Reality – Accepted (Refreeze) for
Efficiency and Further Productivity
Gain
Structure and Process (Move)
OL and Creativity (Unfreeze)
12/18/2013

37.  The existing literature on OI is diverse and scattered. There is no consensus on a definition of the
term “OI”, which remains ambiguous (Lam, 2005).
 Different areas of research are developing their own approaches to try and understand the
complex phenomenon of OI:
 Certainly, the “Behavioral” aspect of OI are vastly neglected.
Measured BigPicture
Realities
Measured “OI”s
People-Centric (Behavior)
OI Process
12/18/2013

38. Example:
 Coordination aspect of organizational innovation:
Promotion
Policy
Principle
Perspective
Place
Process
Procedure / Practices
People
Pattern of People
Plan i.e. Forecast
Products
Ploy
12/18/2013
Profits
People
Plant
Position

39. Example:
 Coordination aspect of organizational innovation:
 Understanding how economic activities are coordinated inside organizations has
always been one of the most fascinating questions in economics.
 Since Adam Smith, economists have recognized that the benefit of organizing largescale production comes from “coordinated specialization.” When there is no
specialization, all agents perform the same operations, there is then no need for
coordination and no gain from having agents work together in one organization.
Specialization
Coordination
Benefits of
organizing largescale production
Specialization
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40. Example:
 Coordination aspect of organizational innovation:
 Coordination becomes crucial whenever there is specialization.
 On the other hand, coordination is also costly, which limits the extent of
specialization within organizations.
 Task coordination is like assembling complementary parts, such as the
assembling of subroutines for a software package, synchronizing travel plans
and accommodating logistics for a conference, reforming an economy by
restructuring enterprises.
 A product or a service is completed successfully only if the characteristics of
each attribute of the various parts are matched. Failure in the matching of
attributes often implies a breakdown. The attribute matching problem is
especially pervasive in implementing changes such as innovation and reform
within an organization, because by its nature such a problem cannot be solved
by automation.
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41. 12/18/2013
41

42. Innovation-Value-Driven Supply-Side Competency-andCustomer-side Opportunity Bridging Business Model
introduced (C.C. Tan)
3 Levels of
Characteristics
on Activities:
 Consistency
 Reinforcing
 Optimization
5-Forces
CompetitiveAdvantage
Characteristics
on Resources:
Resource Velocity
 Not easily
purchased
 Durability Resources
Activities
 Difficult to  Resources
 Partners
imitate
 Not readily
substituted
Consumes
 Competitive
superiority
Cost Structure
 VRIN…
3 Levels of
Characteristics on CVP:
 Parity
 Points of Differences
 Resonating
Innovation
Value Curves
(Customer
Value
Propositions)




Margin
Break-Even
Cash Flow
Equity Growth
3 Levels of
Characteristics on
Customer Equity:
 Value equity
 Brand equity
 Relationship equity
CRM
Channels of
Distribution
Customer
Segments
Generates
Revenue Stream
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43.  Always measure your Organizational Innovations and Business Models
Value-Creation
Resource
Perspective:
 Learning and
Growth
 Partner
scorecard
Process
Perspective:
Customer
Perspective
(CVP, Value
Curve)
KPIs
KPIs
Financial
Perspective
 Revenue Stream
 Cost Structure
 Cash
Flow/Return Rate
12/18/2013

44. Continued:
 But the quality of the coordination, i.e. the adjustment of attributes depends itself on the
quality of communication inside an organization. The communication problem arises
because only managers directly and frequently engaging in particular task have firsthand information and knowledge about the task.
 Communication is necessary for others to use such information and knowledge, but
communication is likely to be imperfect because message transmission, due to technical
bugs as well as human misunderstanding, can go wrong.
 Poor or ineffective communication arises whenever the absence of direct involvement in a
task implies poorer knowledge about it.
Poorer
knowledge on
certain issues
Poorer
communication
regarding them
Poorer coordination
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45. Continued:
 Drilling further, coordination problem is endogenous, depending on how tasks and
decision-making power are assigned within an organization. That is, the organizational
form matters.
 All these are OI issues.
Form of
organization
Poorer
knowledge on
certain issues
Poorer
communication
regarding them
Poorer
coordination
 M-Form (Multi-divisional form) organization as one
that consists of “self-contained units” where
complementary tasks are grouped together; versus:
 U-Form (Unitary Form) organization is decomposed
into “specialized units” where similar tasks are grouped
together.
 Because the M-form and the U-form organizations
assign tasks differently, the communication problems
they face are also different.
12/18/2013

46. Continued:
 A simple trade-off emerges between “better coordination and less economies of scale” in
the M-form compared to the U-form.
 In the self-contained units of the M-form, local managers can more easily solve the
coordination problem by making good use of local information.
 In the U-form organization, coordination of specialized units is centralized by top
managers so that economies of scale are obtained, but the coordination problem is harder
to solve, as the top managers have to rely on imperfect information about attributes
transmitted by local managers.
 Obviously, the M-form is better than U-form in promoting innovation or reform if the
quality of communication is low and the value of scale economies is not high.
 A less obvious, but more important, result is that the M-form organizations is able to
promote innovation or reform through “experimentation,” that is, it can experiment an
innovation or reform program in some part of the organization first before implementing
it in the entire organization.
 The fundamental reason why the M-form is capable of carrying out experimentation
is its organizational form: each unit is self-contained, and coordination is carried out
by local managers.
 In contrast, in the U-form, the benefits of experimentation cannot be reaped because
coordination is centralized.
12/18/2013

47. Research Opportunities:
?
Forms of Organization
Depth and breadth of innovation
 M-form is a more flexible organizational form, which can promote more innovation
or reform. The flexibility of the M-form can lead to a higher propensity to innovation
or reform, an important dynamic advantage compared to U-form.
 In contrast, the U-form is more rigid. This rigidity tends to be deleterious for
innovation or reform.
12/18/2013

48. Example of M-Form and U-Form at National Levels: The Implication to Government’s Policies
The agricultural reforms:
 There is a striking difference between the organization of the Soviet planning
administration on one hand, and that of the Chinese planning administration, on the
other hand (Qian and Xu, 1993).
12/18/2013

49. The agricultural reforms:
 The Soviet economy was organized into many specialized or functional ministries (e.g.,
Ministry of Cereal and Grain Production, Ministry of Tractors and Farm Machinery,
Ministry of Fertilizer Production, etc.). This corresponds to a U-form organization (also
known as “branch organization.”).
 In contrast, the Chinese economy has been organized mainly on a geographic basis. This
corresponds to an M-form organization (also known as “regional organization”).
 Thus, the hypothesis: The Chinese economy with its M-form structure is prone to reform
via regional experimentation.
 On the other hand, when reform comes into the Soviet U-form economy, it is
comprehensive and coordinated from the center, and thus more difficult to do.
 But always exception which we need to study in depth (the % of variation not explained),
i.e. see the Sara Lee’s Sanex soap: the other factors i.e. the leadership factor could be the
missing link.
12/18/2013

50. Different in the setup of
government governance
structure in ASEAN
countries
?
Different levels of competitiveness
and innovation (breadth and depth,
speed, frontiers, competitive edge),
types and scopes of innovation.
 How did they resolve the specific challenges or inherent weaknesses of the
structure?
12/18/2013

51. At organizational levels:
 According to Chandler (1962, 1977) documented important cases of some large
American corporations that replaced the U-form corporate form by the M-form in the
first half of the 20th century.
 According to Chandler, serious problems arose under the U-form between functional
departments, such as production and sales, when the firm introduced new products
or adopted innovations. In the case of Du Pont, before 1921 whenever a new chemical
was developed such as explosives and paints, coordination difficulties resulted in too
many mistakes, which convinced Du Pont to reorganize the firm into an M-form with
multi-divisions by products.
12/18/2013

52. At organizational levels:
 Similarly, before 1925, Sears, the largest mail-order firm in the U.S., was organized
as a U-form corporation with the headquarters in Chicago and departments
responsible for specialized functions nationwide, such as procurement, sales, and
distribution. When Sears expanded into many new territories and became involved in
new businesses, its coordination problems became severe. In 1939 Sears was
reorganized into the M-form with multi-functional and autonomous territorial
divisions.
 Later, Williamson (1975, 1985) theorized that the overload problem of the
headquarters was the main problem with the U-form corporation.
12/18/2013

53. At organizational levels:
 Williamson (1975, 1985) argued that, with daily operations being decentralized to
self-contained divisions, the M-form corporations reduce the work overload at the
headquarters and create time for top managers to engage in strategic planning.
 What about product-focused corporations versus process-focused corporations?
Process/ProductFocused
Organizations
Value
Curve
 Future-focused Organization
 Know the value shifts – Staying
abreast of current worldwide
trends and being aware of those
just around the corner
 Take actions on the values
 Values/Strategy-focused
organization
MarketFocused
Organiza
tions
Marketing 3.0
12/18/2013

54. References:
Chandler, A. Jr. (1962), Strategy and Structure, New York: Doubleday & Company, Inc.
Chandler, A. Jr. (1977), The Visible Hand: The Managerial Revolution in American
Business, Cambridge: Belknap Press of Harvard University.
Qian, Y. and Xu, C. (1993), “Why China’s Economic Reform Differ: The M-form
Hierarchy and Entry/Expansion of the Non-state Sector,” Economics of Transition, 1(2),
pp. 135-170.
Williamson, O. (1975), Markets and Hierarchies, New York: Free Press.
Williamson, O. (1985), The Economic Institutions of Capitalism, New York: Free Press.
12/18/2013

55. Look into PSF (Professional Service Firms):
 PSF is the ultimate embodiment of that familiar phrase “Our assets are our people.”
Frequently, a PSF tends to sell to its clients the services of particular individuals or a
team of such individuals, more than the services of the firm.
 PSFs usually involve a high degree of interaction with the client, together with a high
degree of customization (innovation is needed).
 Both of these characteristics demand that the firm attract (and retain) highly skilled
individuals.
 The PSFs, therefore, competes in two markets simultaneously:
 The “output” market for its services
 The “input” market for its productive resources – the professional workforce.
 Thus, there is a need to balance the demands of the two markets, which can be
accomplished through the firm’s economic and organizational structures –
organizational innovations.
12/18/2013

56.  Input Market
 Smartness
Market of
Professional
Workforce
Firm’s
Economic
Structure
Firm’s
Organizational
Structure
Market for
Firm’s
Services
 Output Market
 Customization
12/18/2013

57. Organizational Innovation:
 Need to balance between Input and Output Markets
Input Market
Organizational
Structure
Output Market
Business Model
Economic Structure
Organization’s structure:
 Senior (client relations), Manager (project management), and junior
(professional tasks)
 PSFs are the job shops of the service sectors. The project nature of the
work means that there are basically three major activities in the delivery
of professional services: client relations, project management, and the
performance of the detailed professional tasks.
12/18/2013

58. Organization’s structure:
 If the PSF is a job shop, then its professional staff members are its “machines”
(productive resources).
 As with any job shop, a balance must be established between the types of work
performed and the number of different types of “machines” (people) that are required.
The PSF is a “factory,” and the firm must plan its “capacity.”
Data, Information
Raw Materials
People
Machine
Information, Knowledge
Finished Goods
 Capacity Plan
 MRP/II
12/18/2013

59.  Compensation system
 Target utilization
Market of
Professional
Workforce
 Career and promotion opportunities
 Target turnover and Growth rates
Quality of personnel
Firm’s
Economic
Structure
Target utilization
Staffing at each level
Firm’s
Organizational
Structure
Mix of project types
 Billing rates
 Project team structure
Market for
Firm’s
Services
Organizational innovation is needed for PSFs.
 Target Growth Rate
 Project team structure:
 Job shop for “Brains”, more closely
resembles a disconnected assembly lines
for the “Grey Hair” project type (i.e. may
require highly customized output, but
they usually involve a lesser degree of
innovation and creativity than a Brains’
project), “Procedure” project type.
12/18/2013

60. To prevent innovation deadlock in PSF:
 While it is in the best interest of the firm to undertake similar or repetitive
engagements, often this does not coincide with the desires of the individuals
involved.
 Apart from any reasons of status, financial rewards, or fulfillment derived from
serving the client’s needs, most individuals join PSFs to experience the professional
challenge and variety and to avoid routine repetition.
 While individuals may be content to undertake a similar project for the second or
third time, they will not be for the fourth, sixth, or eighth.
 Yet it is in the interest of the firm (particularly if the market has not yet caught
up) to take advantage of the experience and expertise that it has acquired.
 One solution, of course, is to convert the past experience and expertise of the
individual into the experience of the firm by accepting a similar project, but
utilizing a greater proportion of juniors on it. Besides requiring a lesser
commitment of time from the experienced seniors, this device serves to train the
juniors.
12/18/2013

61. Thus:
 The adoption of concrete organizational concepts has a paramount impact on the
ability of a company to improve its performance.
Organizational
innovation
Ability to improve
performance
Value-Creation
12/18/2013

62. From the above examples and illustrations:
 We can define “organizational innovation” as the use of “new managerial and
working concepts and practices” (Damanpour, 1987).
 By applying this definition, it is possible to “measure” not only “whether
companies have changed their organization (structure and processes) within “a
defined time period”, but also “to provide an analysis of the adoption ratios of
concrete organizational concepts in different companies and company types”
(sector, firm size, etc.) and “the extent of use within one company.”
 Organizational innovation defined as the implementation of new organizational
concepts serve as the implementation of “new organizational concepts” serve as
“an indicator for the intra-firm diffusion of different organizational practices”.
Definition “New”
 Facilitate “Measures” – Innovate?
Time? Scopes? Comparative Purpose?
12/18/2013

63. Categorizing organization innovation?
 As structural organizational innovations and procedural organizational
innovations (e.g., Coriat, 2001; Wengel et al. 2000; Whittington et al. 1999):
 Structural organizational innovations:
 Influence, change and improve responsibilities, accountability, command
lines, and information flows as well as the number of hierarchical levels, the
divisional structure of functions (R&D, production, HR, Financing, etc.), or
the separation between line and support functions. Such structural OI
include, for instance, the change from an organizational structure of
functions (product development, production, HR, etc.) into product- or
customer-oriented lines, segments, divisions, or business units. Look at our
illustrations on U-Form and M-Form organizations.
 Procedural organizational innovations affect the routines, processes, and
operations of a company. Thus, these innovations change or implement new
procedures and processes within the company, such as simultaneous engineering
or zero buffer rules. They may influence the “speed” and “flexibility” of
production (e.g., teamwork, JIT concepts) or the quality of production (e.g., CI
process, quality circles).
12/18/2013

64. Categorizing organization innovation?
 OI can be further differentiated along an “intra-organizational” and “interorganizational” dimensions.
 While intra-organizational innovations occur within an organization or company,
i.e., implementation of teamwork, QCs, CI processes, the ISO 9001 certification,
inter-organizational innovations extend beyond the boundaries, i.e. R&D
cooperation with customers, JIT processes with suppliers or customers or SCM
practices with suppliers.
12/18/2013

65. A typological Model (Armbruster et al. 2008)
Focus of Organizational Innovation:
Structural Innov.
Procedural Innov..
Type of Organizational Innovation
Intra-Organizational:
 Cross-functional teams
 Decentralization of planning, operating,
and controlling functions
 Manufacturing cells or segments
 Reduction of hierarchical levels










Teamwork in production
Job enrichment, Job enlargement
Simultaneous engineering
CI process, Kaizen
QCs
Quality, Audits, Certification (ISO)
Environmental Audits (ISO 14000)
Zero-buffer-Principles (Kanban)
Preventive Maintenance
…
Inter-Organizational:
 Cooperation, Networks, or Alliances
(R&D, Production, Service, Sales,
etc.)
 Make or buy, Outsource
 Offshoring / Relocation





JIT to customers, with Suppliers
Single, dual sourcing
SCM
Customer Quality Audits
…
12/18/2013

66. Procedural Dimension of OI:
The Innovation Value Chain: the innovation best practices to boost your innovation capacity.
 Idea generation
 Idea conversion
 Idea diffusion
Multi-Stakeholder Involvement; industry concentration & clusters:
 Knowledge intensity, Local knowledge, “Innovation Excellence” Clusters
Idea Generation
Idea Conversion
Value
Curve
OL
Idea Diffusion
 Knowledge spillover
 Stimulate spin-offs
 Worthiness / Values Appreciated
ROI (Return on Idea)
12/18/2013

67. Pinpoint your weakest links:
For each phase in the innovation value chain, identify your company’s weakest skills.
Phase:
This link….
Is weak if….
Idea
generation
Collaboration within units
People within units can’t generate good
ideas on their own.
People collaborating across units don’t
produce good ideas.
Your company doesn’t source enough good
ideas from customers, competitors,
inventors, and other external parties.
Collaboration across units.
Collaboration with outside
partners.
12/18/2013

68. Phase:
This link….
Is weak if….
Idea
conversion
Screening and funding of new
ideas
Your screening and funding criteria are so
strict that they shut down most ideas, or so
loose that your company overflows with
projects that don’t fit your strategy.
Developing ideas into viable
products, services, of
businesses.
Ideas selected for further development
languish in parts of your organization that
are too busy doing other things or that don’t
see their potential.
Spreading developed ideas
within and outside the
company.
Developed ideas don’t get buy-in from
customers, internal constituents,
distribution channels, or desirable
geographic locations.
Idea
diffusion
12/18/2013

69. The supply side:
Not buy-in?
The demand-side:
Value Curves:
Idea generation
or converted
Not buy-in?
 Why?
 Worthy of being
buy-in?
 Involvement
 Weaknesses not
mended
 Issues with other
sides of the valuechain.
12/18/2013

70. Strengthen your weakest links in the innovation value chain:
 Your capacity to innovate is only as good as the weakest link in your innovation value chain.
 The table shows how to select practices that strengthen your weakest links.
If your company
has difficulty ….
Consider these
practices:
Examples:
Generating ideas
Build external
networks
At Procter & Gamble, in-house product developers translate
customer needs into technology briefs describing problems
needing resolution. Briefs go to technology scouts, suppliers,
research labs, and retail worldwide to elicit solutions.
Another example: The pharmaceutical company Eli Lilly has
spearheaded InnoCentive (www.innocentive.com), a solutionseeking Web site to find answers to specific technical or
scientific problems. The company post questions – for
instance, “How can we protect fatty acids from oxidation?” –
that any of the more than 10,000 engineers, chemists, and
other scientists registered at the site can tackle. The
individual or group offering the best acceptable solution gets
a financial reward; the winner of fatty acids challenge
receive $20,000.
12/18/2013

71. Strengthen your weakest links in the innovation value chain:
 Your capacity to innovate is only as good as the weakest link in your innovation value chain.
 The table shows how to select practices that strengthen your weakest links.
If your
company has
difficulty ….
Generating
ideas
Consider Examples:
these
practices:
Build
external
networks
Build discovery network geared toward unearthing new ideas within broad
technology or product domains. This is what Siemens, the Germany-based
electronics and engineering company, has done in Silicon Valley.
Since 1999, it has sited a 15-person scouting unit in Berkeley, California.
Members of the Technology-to-Business (TTB) Center cultivate personal
relationships with scientists, doctoral students, venture capitalists, and
entrepreneurs as well as government labs and corporate research centers.
Through these relationships, they learn about emerging technologies and
business ideas. Their real value as scouts, though, lies in their ability to
match emerging technologies to specific Siemens businesses. For instance,
TTB scouts learned about technology for optimizing the quality of service
on computer networks from a Columbia University doctorate student.
12/18/2013

72. Strengthen your weakest links in the innovation value chain:
 Your capacity to innovate is only as good as the weakest link in your innovation value chain.
 The table shows how to select practices that strengthen your weakest links.
If your company
has difficulty ….
Consider these
practices:
Examples:
Generating ideas
Build cross-unit
networks
P&G has communities of practice, each comprising
volunteers from different parts of the organization
and built around an area of expertise. The teams
solve specific problems and participate in monthly
technology summits with representatives from
P&G’s business units.
12/18/2013

73.  Employees who don’t know one another can’t collaborate on “new ideas.” And the
occasional cross-functional brainstorming session won’t do the trick: It unfairly assumes
that people who are unfamiliar with one another will be able to work together to generate
ideas on demand. What’s needed is an ongoing dialogue and knowledge exchange between
people from different units.
12/18/2013

74. If your company
has difficulty ….
Consider these
practices:
Examples:
Converting ideas
Provide crossunit funding
Organization to drive cross-unit business with funds,
in full commitment; systematically drive through.
Create safe
havens
Establish a separate, autonomous business unit to
develop new ideas supporting the company’s strategy.
Successful venture managers earned hefty bonuses.
12/18/2013

75. If your
company
has
difficulty ….
Diffusing
ideas
Consider
these
practices:
Example:
Let’s look at the European launch of Sara Lee’s Sanex soap and shower
products in the early 1990s. Sanex was first created in Spain and
quickly achieved leadership in the bath and shower segment as a
“healthy skin” concept.
Designate
“idea
evangelists” Excited by Sanex’s regional success, Sara Lee’s European executive
team asked Martin Munoz, the present of the Southern European
division of Sara Lee and a creator of Sanex, to take personal
responsibility for coordinating its launch across Europe. The only
problem was that Sara Lee’s “highly decentralized structure” made such
a launch difficult, and several country managers had already expressed
their lack of support for Sanex. So Munoz made it his personal crusade
to win them over.
12/18/2013

76. If your
company
has
difficulty ….
Diffusing
ideas
Consider
these
practices:
Example:
He had the excellent results from Spain to help make his case, but, as
he said, “Success is never enough.”
Designate
Despite resistance from the marketing managers in the UK and
“idea
Denmark, Munoz persevered: He visited them many times, and he
evangelists” brought them out to Barcelona to sell them on the concept.
Munoz was also aware of internal changes and moved quickly to visit
and bring on board a new marketing manager who had just replaced a
skeptical one in the UK. His tenacity prevailed. After 2 years, Sanex
had successful launches in four countries.
It was eventually introduced in 29 countries and for several years was
Sara Lee’s best-selling brand in its household and body care division.
12/18/2013

77.  Innovation challenges differ from firm to firm.
 Use of clear objectives:
 When Steve Bennett joined Intuit, the maker of the financial software
programs Quicken and QuickBooks, in January 2000, it was a company with
lots of ideas – most collected from outside the organization – but little
discipline for bringing those ideas to market.
 “We had a lot of energy focused on learning from customers,” the CEO recalls,
“but we are struggling to decide which ideas would have the highest impact.”
To fix this, Bennett demanded that “clear business objectives” be set for “ideas
in development,” and he held people “accountable” for delivering on them.
 Intuit is now just as good at executing on ideas as it is at generating them.
The company’s revenues and profits are up 47% and 65%, respectively, in
2004, in part because of this effort.
Clear company’s objectives
Ideas generation
 Organizational learning
strengths / communities of
practices
Ideas execution
12/18/2013

78. Ethnographic Observation
Interview
Qualitative Research
 Consider how Intuit developed its Simple Start edition of QuickBooks in 2003.
 Developers wanted to observe the owners of one- or
two-person businesses: Exactly how did they manage
their accounts?
 How did they handle their payable and receivables?
 Intuit created a fact-finding process: A ten-member
development team visited with small business owners
in 40 “follow me homes,” where the developers
experienced firsthand the business problems facing
users.
 Many customers didn’t need or want certain higherend accounting functions in their software, the
developers learned, so the team set out to simplify
QuickBooks. They tested six successive stripped-down
versions of the software in the follow-me-homes before
arriving at the Simple Start edition – which proved to
be a best seller for Intuit.
12/18/2013

79. Multi-Stakeholder Involvement; industry concentration & clusters:
 Knowledge intensity, Local knowledge, “Innovation Excellence” Clusters
Idea Generation
Idea Conversion
Value
Curve
OL
A Research Process
Idea Diffusion
 Knowledge spillover
 Stimulate spin-offs
 Worthiness / values appreciated
ROI (Return on Idea)
12/18/2013

80.  Innovation challenges differ from firm to firm.
 Use open sourcing:
 About the same time that Bennett took the helm at Intuit, A.G. Lafley became
CEO of Procter & Gamble, a company that had traditionally been good mainly
at developing new products internally and bringing them to market.
 But a persistent weakness was its “insular culture.”
 Lafley wanted the company to become better at “cultivating ideas from the
outside.”
 After five years of investments, P&G now has a state-of-the-art process for
sourcing ideas externally, which includes a global network of resources and
online knowledge-exchange sites. This process complements P&G’s core
competency in executing on ideas and has helped fuel an increase in sales and
profits of 42% and 85%, respectively, over the past five years.
External
Ideas generation
12/18/2013

81. The Innovation Value Chain:
 The innovation value chain view presents innovation as a sequential, three-phase process that
involves idea generation, idea development, and the diffusion of developed concepts.
 Across all the phases, managers must perform six critical tasks – internal sourcing, cross-unit
sourcing, external sourcing, selection, development, and companywide spread of the idea.
 Along the innovation value chain, there may be one or more activities that a company excels in –
the firm’s strongest links.
 Conversely, there may be one or more activities that a company struggles with – the firm’s
weakest links.
 Thus needs to take an end-to-end view of the organization’s innovation efforts. It centers their
attention on the weakest links and prompts executives to be more selective about which
practices to apply in their quest for improved innovation performance.
Idea
Generation
Idea
Conversion
Idea Diffusion
Strategy 1, 2, ….
12/18/2013

82. The Innovation Value Chain:
 The innovation value chain can also help managers realize that a perceived innovation strength
may actually turn out to be a weakness if they’re not complemented by equivalent strengths in
other areas.
 For instance, a hardware manufacturer were at one point had 50 very good ideas for new
products and businesses floating around the company, but, because managers did not screen the
ideas properly – funding the best ones and killing the others – few ideas took hold, and new ones
just kept coming. Then, the engineers there became increasingly frustrated, seeing their creative
talents go to waste. By failing to recognize the weak link (idea selection) and focusing more time
and resources on an already strong link (idea generation), the management team undermined
the company’s overall efforts.
Idea
Generation
Idea
Conversion
Idea Diffusion
12/18/2013

83. Idea
Generation
Idea
Conversion
Idea Diffusion
Absorptive
Capacity ?
In the Global Innovation Index 2013 Report:
 By Cornell University, INSEAD The Business School for the World, WIPO
(World Intellectual Property Organization).
 Until the 1990s, the linear model of innovation policy was dominant. This model
led to a focus on providing R&D infrastructure, financial support for innovation
in companies, and technology transfer.
 Resulting analyses and policies emphasized the supply of innovation inputs and
support instruments, often neglecting the absorption capacity of firms and the
specific demand for innovation support in less-favored regions.
 Moreover, issues such as management and organization deficits (in particular
within small and medium-sized enterprises) were often overlooked.
12/18/2013

84.  Continued on the weakness:
 Similarly, it doesn’t matter how great a company’s idea-selection process is if only a few good concepts
are on the table or if the subsequent development process is weak.
 It’s also a waste of time and money to develop state-of-the-art capabilities for rolling out products or
services when there’s nothing worthwhile to diffuse.
 In short, a company’s strongest innovation links are simply no good if they prompt the organization to
spend money with little hope of solid returns or if the attention paid to them further weakens other
parts of the innovation value chain.
 Managers need to stop putting all their effort into improving their core innovation capabilities and
focus instead on strengthening their weak links.
(Marketable Innovations)
Idea Generation
Idea Conversion
Value
Curve
OL
ROI (Return on Idea)
Idea Diffusion
 Knowledge spillover
 Stimulate spin-offs
 Worthiness / values appreciated
12/18/2013

85. In fact, a company’s capacity to innovate is only as good as the weakest link in its
innovation value chain.
We always look into the
“strengths” of innovation
process but neglected the
weaknesses:
 Idea-poor?
 Conversion-poor?
 Diffusion-poor?
Comparative study?
 The interventions to
rectify? To transform?
(all about organizational
innovation)
12/18/2013

86. In Summary: The Innovation Value Chain:
 To improve innovation, executives need to view the process of transforming ideas into
commercial outputs as an integrated flow – rather like Michael Porter’s value chain for
transforming raw materials into finished goods.
Phase 1: Generate ideas
 Can happen inside a unit:
Do people in our unit
create good ideas on their
own?
 Can happen across units in
a company: Crosspollination. Do we create
ideas by working across
the company?
 Can happen outside the
firm. Do we source enough
good ideas from outside the
firm?
Phase 2: Convert
ideas
 Select ideas for
funding. Are we
good at screening
and funding new
ideas?
 Develop them into
products or
practices. Are we
good at turning
ideas into viable
products,
businesses, and
best practices.
Phase 3: Diffuse
 To diffuse those
products and
practices. Are we
good at diffusing
developed ideas
across the
company.
12/18/2013

87. KPIs of the Innovation Value Chain:
Ideas Generation:
 In-house: Number
of high-quality
ideas generated
within a unit.
 Cross-pollination:
Number of highquality ideas
generated across
units.
 External: Number
of high-quality
ideas generated
from outside the
firm.
(Marketable Innovations)
Ideas Conversion:
 Percentage of
funded ideas that
lead to revenues.
 Number of
months to first
sales.
Diffusion:
 Percentage of
penetration in
desired markets,
channels,
customer groups.
 Number of
months to full
diffusion.
12/18/2013

88.  In Short: Although the use of “innovative organizational concepts” is evidenced to
have a positive impact on a company’s competitiveness, research in “defining and
measuring organizational innovation” lags behind.
Innovation Value Chain:
(Marketable Innovations)
Idea generation
Idea conversion
Diffusion
OL
 If executives tailor their solutions to the right problems, over time, a weak link in the
innovation value chain will become a strong one – and some other part of the chain will
need tending instead.
 Managers need to monitor each link in the chain constantly in order to continually
improve the whole. That means, they will need to implement new KPIs that focus on
the specific deliverables from each link in the chain.
 Managers adopting the value chain view of innovation will also need to cultivate “new
roles for employees” (HRM Strategies)
12/18/2013

89. (Knowledge, Realities):
Business Objectives and Strategies, KPIs
(Methods):
Idea generation
Idea conversion
(Marketable Innovations)
Diffusion
(Behaviors):
HRM Strategies
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90. Peter F. Drucker:
Sources of innovation:
 Unexpected occurrences:
opportunity, unexpected
successes and failures.
 Incongruities:
Incongruity with the
end-user or customers’
wants, incongruity
within the logic or
rhythm of a process,
incongruity between
expectation.
 Process needs
 Industry and market
changes, i.e. industry
structure.
 Demographic change.
Business Objectives and Strategies, KPIs
Idea generation
Idea conversion
HRM Strategies
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Diffusion

91. What is “innovation”?
 Peter Drucker (2002):
 Innovation is the specific function of entrepreneurship. Today, much confusion exists about the
proper definition of entrepreneurship. Some observers use the term to refer to “all small
businesses;” others, to “all new businesses.”
 In practice, however, a great many well-established businesses engage in highly successful
entrepreneurship. The term, then, refers not to “an enterprise’s size or age,” but to “a certain
kind of activity”: innovation – the effort to create purposeful, focused change in an enterprise’s
economic or social potential. The very foundation of entrepreneurship is the practice of
systematic innovation.
 Above all, innovation is:
 Work rather than genius.
 It requires knowledge.
 It often requires ingenuity.
 And it requires focus.
 Innovators rarely work in more than one area. For all his systematic innovative
accomplishments, Thomas Edison worked only in the electric field. An innovator in
financial areas, Citibank for example, is not likely to embark on innovations in health care.
 But when all is said and done, what innovation requires is “hard, focused, purposeful
work.” If diligence, persistence, and commitment are lacking, talent, ingenuity, and
knowledge are of no avail.
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92. Build the organization’s capabilities:
 Knowledge, Skills, Attitude that the company
must apply in order to be successful
Organizational
Innovations
New
sources of
supply
New
production
methods




New
products
New
markets
Can be bought
Adapted
Synthesized in a fresh way
Built
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93.  Teresa Amabile, Ph.D. in psychology and
Head of the Entrepreneurial Management
Unit at the Harvard Business School, has
provided one of the most simple and yet
comprehensive framework on “the sources of
individual creativity.”
 Knowledge – All the relevant
understanding an individual brings to
bear on creative effort.
 Creative thinking – Relates to how
people approach problems, and depends
on personality and thinking / working
styles.
 Motivation: Motivation is generally
accepted as key to creative production,
and the most important motivators are
intrinsic passion and interest in the work
itself.
Amabile, T.M. (1992), Growing Up Creative, Creative Education Foundation.
Amabile, T.M. (1998), “How to Kill Creativity,” in Harvard Business Review.
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94. Expertise
(Knowledge)
Creativity
Creative
Thinking
Skills
Motivation
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95. Knowledge:
 On one hand, in-depth experience and long-term focus in one
specific area allows people to build the technical expertise that
can serve as a foundation, or playground for creativity within a
domain.
 At the same time, creativity rests on the ability to combine
previously disparate elements in new ways, which implies a
need for a broader focus and varied interests.
 Thus, perhaps the best profile for creativity is the T-shaped
mind, with a breadth of understanding across multiple
disciplines and one of two areas of in-depth expertise.
T-Shaped Mind:
Breadth of knowledge
 As Frans Johansson (2004, p. 104) explained, “We must strike a
balance between depth and breadth of knowledge in order to
maximize our creative potential”
Johansson, F. (2004), The Medici Effect: Breakthrough Insights at
the Intersection of Ideas, Concepts, and Cultures, Harvard
Business School Press.
Depth of Knowledge
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96. Creative thinking skills:
 Heavily attitudinal
 Amabile suggests that key aspects of creative thinking are:
 Comfort in disagreeing with others and trying solutions that depart from the status quo.
 Combining knowledge from previously disparaging fields – reaching out to other fields.
 Ability to persevere through difficult problems and dry spells.
 Ability to step away from an effort and return later with a fresh perspective (“incubation”).
Move away from the status quo
Knowledge from disparaging fields
Persevere
 Step Away & Return Later
 MIT’s Theory U
Successful innovation
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97. 12/18/2013

98. Creative thinking skills:
 Sternberg (1997; 2000) promotes a “triarchic theory”, the three main aspects of intelligence
that are key to creativity:
 Synthetic (creative) – the ability to generate ideas that are novel, high quality, and task
appropriate; ability to redefine problems effectively and to think insightfully. Sternberg also
notes that the basis for insightful thinking involves knowledge acquisition in 3 forms:
 Selective encoding: distinguishing relevant from irrelevant information.
 Selective combination: combining bits of relevant information in novel ways.
 Selective comparison: relating new information to old information in novel ways.
 Analytical: Critical / analytical thinking is involved in creativity as the ability to judge the
value of one’s own ideas, to evaluate the strengths and weaknesses and suggest ways to
improve them.
 Practical: Ability to apply intellectual skills in everyday contexts, and to sell creative ideas.
Analytical Intelligence
Insightful
Creativity
Practical
Intelligence
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99. Motivation:
 Amabile explains, “We have found so much evidence in favor of intrinsic motivation that we
articulated what we call the Intrinsic Motivation Principle of Creativity: People will be most
creative when they feel motivated primarily by the interest, satisfaction, and challenge of the work
itself – and not by external pressures (i.e. extrinsic motivation),” (Amabile, 1992, p. 78).
 The intrinsically motivated people will explore various pathways and alternatives, taking his or her
time and enjoying the process along the way. This exploration will lead to novel, alternative
solutions, some of which will turn out to be more appropriate, and successful than the original,
obvious path.
Similar to:
Sternberg (1997; 2000)’s Triarchic Theory of Intelligence
Explorative Competencies
CC Tan et al. (2013):
Exploitative Competencies
Evaluative Competencies
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100. Motivation:
 The types of extrinsic motivations that are most likely found in the workplace and classroom are
not easily avoided. Amabile’s research on motivation implies that, in the educational contexts, the
impact of grades or praises as reward for schoolwork should be reviewed in light of their impact on
creativity.
 Amabile suggests that if assessment is necessary, using it as informational – as a tool for
improvement, rather than as a judgment, may reduce the feeling of external control.
Explorative Competencies
Exploitative Competencies
Evaluative Competencies
(Information)
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101. Motivation:
 motivation is particularly important when emphasis is on “novelty.” If greater
emphasis is on persistence, synergistic extrinsic motivators may play a role.
Additional roles for extrinsic motivators are that they can help an individual
sustain energy through the difficult times necessary to gain skills in a domain.
Extrinsic motivators may also serve to bring people in contact with a topic to
engage their intrinsic interest.
Extrinsic Motivation
Innovation
Intrinsic Motivation
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102. Previous Research: 1-Month Ago (CC. Tan, 2013)
Sustainable Organizational Competitiveness, Sustainable Competitive Advantage
Skill
 Creative output is
linked to the amount
of time a person is
actively engaged in a
creative domain
(Simonton, 1999;
2000; 2003)
(Innovation)
I’ve
done
it
Knowledge
I can
“Active” engagement and “time”
I will
Attitude
Nature of realities, Expectations and Goals
The Mediating Forces:
 Organizational innovation
policies and deployment
 Proper adaptation of
intrinsic and extrinsic
motivation
 Climate creation
 Idea management
 Leadership-Followership
balance
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103. Previous Research: 1-Month Ago (CC. Tan, 2013)
New Model for Organizational Innovation: CC Tan et al. (2013)
Sustainable Organizational Competitiveness, Sustainable Competitive Advantage
“Active” engagement and “time”
Skill
 Creative output is
linked to the amount
of time a person is
actively engaged in a
creative domain
(Simonton, 1999;
2000; 2003)
(Innovation)
I’ve
done
it
Knowledge
I can
I will
Attitude
Nature of realities, Expectations and Goals
The Mediating Forces:
Must target also at SKA
domains:
 Knowledge – the
Ontological realities aspect,
i.e. Business Model.
 Attitude – the
Epistemological
relationship with the
realities, i.e. Climate
Creation, LeadershipFollowership Balance
 Skills – the Methodological
or Processual competence,
i.e. the innovation valuechain or SLL, DLL.
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104. Reference:
Simonton, D.J. (1999), “Scientific Creativity as Constrained Stochastic Behavior:
The Integration of Product, Person and Process Perspectives,” in Psychological
Inquiry, 10(4), Lawrence Erlbaum Association.
Simonton, D.K. (2000), “Creativity: Cognitive, Developmental, Personal and Social
Aspects,” in American Psychologist, January, pp. 151-8.
Simonton, D.K. (2003), “Scientific Creativity as Constrained Stochastic Behavior:
The Integration of Product, Person and Process Perspectives,” in Psychological
Bulletin, 129(4).
Sternberg, R.J. (1997), Successful Intelligence, Plume Books.
Sternberg, R.J. (2003), “Creative Thinking in the Classroom,” in Scandinavian
Journal of Educational Research, 47(3).
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