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I nvestigación, Desarrollo
e Innovación Empresarial
Texto-guía
CC Ecuador 3.0 By NC ND
Diagramación, diseño e impresión:
EDILOJA Cía. Ltda.
Telefax: 593-7-2611418
San Cayetano Alto s/n
www.ediloja.com.ec
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Loja-Ecuador
Segunda edición
ISBN-978-9942-08-494-1
Esta versión impresa ha sido acreditada bajo la licencia Creative Commons Ecuador 3.0 de
reconocimiento -no comercial- sin obras derivadas; la cual permite copiar, distribuir y comunicar
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ni se realicen obras derivadas. http://www.creativecommons.org/licences/by-nc-nd/3.0/ec/
Mayo, 2013
ÍNDICE
1. INTRODUCCIÓN.................................................................... 5
2. OBJETIVOS............................................................................... 7
3. CONTENIDOS......................................................................... 8
4. BIBLIOGRAFÍA........................................................................ 10
7. SOLUCIONARIO..................................................................... 80
8. GLOSARIO TÉCNICO............................................................ 84
9. ANEXOS...................................................................................... 88
INVESTIGACIÓN, DESARROLLO E INNOVACIÓN EMPRESARIAL
1. INTRODUCCIÓN
2. OBJETIVOS
General:
Específicos:
3. CONTENIDOS
Unidad 1
Unidad 2
Unidad 3
Unidad 4
4. BIBLIOGRAFÍA
4.1 Básica
Este texto guía, está didácticamente elaborada para que estudie las
unidades respectivas, de manera que, con facilidad pueda adquirir el dominio
teórico necesario para el logro de la investigación, desarrollo e innovación
empresarial. El documento sintetiza el criterio de varios investigadores en
el ámbito, permitiendo con ello ofrecer un material importante consultado
adecuadamente, de manera especial que conjugue la teoría con la práctica.
Papers:
1 Joe Tidd and Frank M. Hull (2006) Managing service innovation: the
need for selectivity rather tan ‘best practice’. New Technology, Work
and Employment. 21:2 ISSN 0268-1072.
2 Mike Hales and Joe Tidd (2009) The practice of routines and
representations in design and development. Industrial and Corporate
Change, Volume 18, Number 4, pp. 551–574
Casos:
A los candidatos a Master, les doy una cordial bienvenida a este módulo.
1 A nombre del Dept. de Ciencias Administrativas, agradezco la participación de Alex Dodd y Laura
Pacheco por sus traducciones de inglés y portuguez al español.
6 Abordaje
Estratégico
de la
Innovación
7 desempeño
en la
gestión de
innovación
8 desempeño
en la
gestión de
innovación
Contenidos
En tal sentido, la innovación solo existe después del éxito del producto o
servicio creado, no antes. Si no tiene éxito, solo es un invento o acciones que se
puede clasificar como una gestión más de la organización, pero no innovación.
Por ello, podemos decir que la gestión de innovación es interdisciplinaria y
multifuncional por naturaleza. Ya que, persigue un objetivo, que es el buscar
la lucratividad.
Dentro de las 4Ps. Las innovaciones más comunes son las de productos
y procesos, en el primer caso por lo general se materializa con el invento de
un nuevo producto (un nuevo medicamento, un nuevo tipo de lácteo, etc.)
que luego es éxito en el mercado. En caso de la innovación por proceso vemos
ejemplos en la nueva manera de hacer las cosas en una línea de producción
(cambiando los procesos de introducir los insumos productivos) como ejemplo
podemos citar los cambios en el sistema de almacenamiento de partes y piezas
en el método de ingresos de insumos automotrices.
son rápidos para ver las ventajas de las nuevas condiciones o simplemente
fracasar en el intente.
La teoría apunta a que la ruptura se da, por que las empresas Xs están
preocupadas de innovar por sobre lo que demanda el mercado emergente. O
sea, Se quedan compitiendo en un nicho que rápidamente es copiado y genera
muchos competidores. Que, “las empresas” aunque inviertan en I+D queda
sometida al mercado en el que actúa. Por tanto, cuando el mercado cae, la
empresa quiebra. La ruptura es porque la empresa no alcanza a ver el potencial
a largo plazo de los nuevos mercados emergentes y tampoco son capaces de
generar nuevos mercados (generar nuevas necesidades en el mercado) con
productos más útiles, pequeños y de bajo costo.
Sin duda, después del gran avance tecnológico y logístico que trajo la
invención de la locomotora a vapor, hoy el invento y alto desarrollo tecnológico
de las tecnologías de la información y comunicación TIC, es sin duda una
revolución en todo el sistema de vida de la humanidad. La penetración de
los teléfonos celulares en el mundo ha revolucionado la manera y forma de
comunicarnos, hoy existen más de 5 mil millones de celulares en el mundo
Innovación y sustentabilidad.
Resumen unidad I.
AUTOEVALUACIÓN 1
Objetivo
Contenidos
AUTOEVALUACIÓN 2
V/F
Objetivo
Contenidos
Existen tres áreas de distintos colores. Las áreas de negocio o UEA con
mayor fortaleza y situadas en sectores más atractivos invest/grow, requieren
enfocar la mayor inversión posible para alcanzar un rápido crecimiento. Las
áreas de negocio o UEA con menor fortaleza y en sectores menos rentables
harvest/divest, aconsejan su venta o desinversiones progresivas. En un
término medio selectivity/earnings se hallan las UEA en las que merece la
pena invertir, aunque de manera selectiva.
3. Nuevos competidores.
4. Productos sustitutos.
Una de las dos estrategias será que debe implementar la empresa para
alcanzar alguna ventaja competitiva.
Calidad Diseño
Soporte
Imagen
In_diferenciación
Precio
ESTRATEGIAS
Nota: Enfoque,
COSTES DIFERENCIACIÓN ENFOQUE no es una
estrategia en si,
Segmentación ya que
Porter
Especialización representa el
segmento donde
se implanta la
estrategia. Navas
& Guerras.2002.
ESTRATEGIAS
AUTOEVALUACIÓN 3
V/F
Objetivo
Contenidos
• Una lista para la verificación si usted está haciendo las cosas correctamente.
• Benchmarking, para verificar si usted está haciendo cosas tan bien como
la competencia.
La idea, es que usted llene estos cuestionarios y los envié al profesor, estos
cuestionarios generarán una nota en su rendimiento final como alumno. Por
tanto, sea claro y objetivo.
también la empresa amiga, puede ser una empresa productora del Estado,
toda vez que tenga administración autónoma (TAME, PETROAMAZONAS,
Etc.)
Por ello, antes de contestar el cuestionario n°1 y n°2. Deberá ingresar los
siguientes datos en hoja aparte:
Cuestionario n°1
Cuando haya terminado, sume los totales, como sigue:
Número de
pregunta Puntos
1 2 3 5 4
6 7 8 10 9
11 12 13 14 15
16 17 18 19 20
21 22 23 24 25
26 27 28 29 30
31 32 33 34 35
36 37 38 39 40
Total Dividida
por 8
Su puntuación
para Estrategia Procesos Organización Relaciones Aprendizaje
Cuestionario n°2
Cuando haya terminado, sume los totales, como sigue:
Número de
pregunta Puntos
1 2 3 5 4
6 7 8 10 9
11 12 13 14 15
16 17 18 19 20
21 22 23 24 25
26 27 28 29 30
31 32 33 34 35
36 37 38 39 40
Total Dividida
por 8
Su puntuación
para Estrategia Procesos Organización Relaciones Aprendizaje
Casos:
Los casos originales son en inglés pero para este texto-guía han sido
traducidos al español en un formato “ejecutivo” (se anexan), aún así, usted
debe hacer el esfuerzo en leer los casos originales, porque existen 3 preguntas
por casos y papers que están directamente relación con los textos originales.
Caso n°1
Caso n°2
Caso n°3
Papers:
1 Joe Tidd and Frank M. Hull (2006) Managing service innovation: the
need for selectivity rather tan ‘best practice’. New Technology, Work
and Employment. 21:2 ISSN 0268-1072.
2 Mike Hales and Joe Tidd (2009) The practice of routines and
representations in design and development. Industrial and Corporate
Change, Volume 18, Number 4, pp. 551–574
AUTOEVALUACIÓN 4
V/F
10. ______ De lo anterior, podemos decir que una empresa puede auto-
auditarse y ponerse sus propias metas.
7. SOLUCIONARIO
Autoevaluación 1
No. Respuesta
1 V
2 V
3 F
4 V
5 V
6 F
7 V
8 V
9 V
10 V
Autoevaluación 2
No. Respuesta
1 V
2 V
3 F
4 F
5 V
6 V
7 V
8 V
9 V
10 V
Autoevaluación 3
No. Respuesta
1 V
2 V
3 V
4 V
5 V
6 V
7 V
8 V
9 V
10 V
Autoevaluación 4
No. Respuesta
1 V
2 V
3 V
4 F
5 V
6 V
7 V
8 F
9 V
10 V
8. GLOSARIO TÉCNICO
Bibliografía
Caro, F. et.al. (2010) Zara Uses Operations Research to Reengineer Its Global
Distribution Process, Interfaces, Vol. 40, No. 1, January–February 2010,
pp. 71–84
Esty, D., Winston, A. (2006). “Green to Gold, How smart companies use
environmental strategy to innovate, create value, and build competitive
advantage”, John Wiley and Sons, Hokoben, New Jersey.
Ettlie (1999) Managing Innovation. John Wiley & Sons, Inc., New York.
Hitchens, D., Thankappan, S., Trainor, M., Clausen, J., De Marchi, B. (2005)
“Environmental performance, competitiveness and management of
small businesses in Europe”. Royal Dutch Geographical Society, KNAG.
Vol. 96,No. 5, pp. 541–557.
Kay. J. (1993) Foundations of corporate success: How business strategies add value.
Oxford University Press. Oxford.
Meadows, D. (1972). Los límites del crecimiento: informe al Club de Roma sobre
el predicamento de la humanidad. México: colección popular, fondo de
cultura económica.
Segarra, M., Peiró, A., Mire, L., Albors, J. (2011) ¿Eco-innovación, una
evolución de la innovación? Análisis empírico en la industria cerámica
española. Boletin de la sociedad española de cerámica y vidrio.
Stalk, G., Hout, T. (1990) Competing against time: How time-based competition
is reshaping global markets. Free press, New York.
9. ANEXOS
Corning Glass
Resumen Ejecutivo
(Recomendamos leer el original para despejar dudas)
Historial:
Esta firma está dentro de las ‘100 empresas del club’ habiendo sido
fundada a mediados del siglo XIX. Fue una pionera en la innovación de
procesos que permitió grandes volúmenes de fabricación de vidrio, pero en
el siglo XX se trasladó al desarrollo de “vidrios especiales” que la llevaron a
través de una variedad de enlaces de innovación de producto / proceso. Ha
gestionado con éxito las innovaciones, para evitar la mercantilización (copia)
de sus productos principales, repetidamente ha subido la escalera tecnológica
para entrar en nuevos campos, más difíciles y en los que puede conservar una
ventaja competitiva.
Esto incluye:
• Aprender con los demás - en lugar de tratar de poseer todos los recursos,
ha habido una tendencia creciente al “networking” y el desarrollo de
productos basada en alianzas. Su habilidad existente de poder configurar
equipos inter-funcionales les ha ayudado a dar una respuesta rápida en
este proceso.
Alianzas y “Networks”
Zara
Hoy, esta es una industria global que abarca las actividades de diseño,
corte y operaciones de procesamiento, ensamblaje, distribución y ventas - todo
impulsado por una enorme demanda de diferenciación y personalización.
Este, es un sector en el que el precio es sólo uno de los elementos – factores
distintos al precio, tales como variedad, velocidad, marca y calidad. También,
es una industria dominada por la necesidad en innovación de productos de alta
frecuencia - las colecciones de moda, ya no siguen la rutina antigua estacional
con colecciones de invierno y verano. En algunos casos, las colecciones
cambian cada mes, junto con la innovación en tecnología de la información y
comunicación; significa que el ciclo es cada vez más corto.
Todo ello, ha dado forma a una industria que se conecta altamente entre
redes a través de “cadenas de valor globales” que están coordinadas por los
jugadores más grandes dentro de este negocio. Una gran parte del “frente” de
la industria está bajo las grandes marcas y cadenas de distribución, mientras
que las operaciones de la ‘trastienda’ son a menudo realizadas por los pequeños
subcontratistas, con frecuencia en países de bajos costos salariales.
se confeccionaba pijamas y ropa interior. Con el clásico estilo que vendía sus
productos en toda la región; construyó su empresa durante los próximos 10
años y luego decidió incursionar en la venta al por menor; de esta forma logró
abrir su primer tienda en la noroeste ciudad de La Coruña en 1975.
Las cosas han cambiado un poco desde esa época. La industria de Diseño
Textil - Inditex - compañía que él estableció – en la actualidad pose un valor
estimado entre los $ 8 mil millones y acaba de abrir su tienda número dos mil
en Hong Kong. Este negocio textil se encuentra activo en casi 70 países y la
confección de ropa cuenta con 8 grupos de marcas claves, cada uno dirigido
a segmentos particulares o tipos de producto - por ejemplo: ‘Pull and Bear’
para los niños, ‘Massimo Dutti’ para hombres y mujeres mayores - ‘Oysho’ en
ropa interior. El más conocido de ellos es ‘Zara’ - una marca global con un
diseño fuerte y la identidad de la moda que atraviesa tanto la ropa y las tiendas
en las que se venden. Su ropa combina diseños elegantes con un fuerte vínculo
con las últimas tendencias de la moda y sobre todo con precios moderados.
Lotte Freddie, editora de moda del diario danés periódico Berlingske Tidende,
comentó: “Si quieres un look clásico, estilo italiano a tono con los estilos
actuales y a un precio razonable tienes que ir a Zara.” El crecimiento exitoso
de Zara no es simplemente una cuestión de bajo costo o de estandarización,
sino más bien de mucha innovación.
Mejoramiento Continuo – MC
Técnicas Específicas
(Herramientas)
Resumen Ejecutivo
(Recomendamos leer el original para despejar dudas)
Específicamente examinaremos:
• Hojas de verificación;
• Diagramas de flujo;
probable que sea un problema abierto, para los que pueden haber un número
de soluciones posibles. El desafío en esta etapa es explorar el problema a fondo
- quizás a través del uso de herramientas de “brainstorming” de grupo o de otro
método - para generar la mayor cantidad de posibles soluciones.
8. Anote todas las ideas - de forma clara y donde todos puedan verla.
10. Permita ideas para incubar (con tiempo) Brainstorm en las sesiones con tal
vez un par de días en el medio. Esto da tiempo para que el equipo deje
las ideas reposar en su mente, lo cual a menudo da lugar a nuevas ideas
en una sesión posterior.
• Uno-a-la-vez
• Anotarlo
Las ideas se deben anotar y no ser dichas en voz alta, pero cada uno debe
ser capaz de ver cada idea en la lista.
¿Qué es?
El análisis de causa y efecto es una técnica para identificar las posibles causas
de un problema o efecto. La técnica utiliza un diagrama de causa y efecto para
registrar las posibles causas, como sean sugeridas.
7. Decidir y actuar.
¿Qué es?
Las hojas de verificación le ayudarán a reunir y clasificar los datos. Las hojas
de verificación se aseguran de que todo el mundo recoja datos comparables en
la misma forma, y en un formato que permita un fácil análisis.
3. Diseñe una hoja de verificación preliminar. Ponga los artículos que serán
monitoreados por la izquierda y los períodos de tiempo en la parte arriba.
Deje espacio para los totales a la derecha de cada elemento que se observa
a lo largo de la parte inferior y en los períodos de observación. Etiquetar
las hojas de verificación con claridad.
5. Realice las revisiones que sean necesarias como consecuencia del paso 4.
¿Qué es?
Los diagramas de flujo son una herramienta útil para usar a la hora de
mejorar un proceso, especialmente cuando usted está planeando recoger datos
o implementar una solución. También se puede utilizar para documentar
un proceso nuevo o para comparar un proceso existente con un “ideal” del
proceso.
Proveedores
Política de despliegue
acuerdo con los objetivos determinados para el próximo año, incluyendo una
serie de objetivos para sus propias actividades de MC. Este proceso - que
es esencialmente la “gestión por objetivos” – es una de las vías que mejor
resultado obtienen y genera un compromiso por parte del empleado para su
realización, el reconocimiento de que esto es lo que se utiliza para evaluar el
rendimiento en el próximo año, y la comprensión de que el logro se relaciona
con recompensas.
Papers Traducidos
Por lo tanto, los autores realizan una tipología con los resultados
obtenidos:
Resumen:
Conclusiones:
En este papel, Hales y Tidd examinan el trabajo realizado por las rutinas
y representaciones en el diseño y desarrollo de un nuevo producto, con el fin
de observar los mecanismos implicados en la innovación. Ellos, se basan en el
análisis significativo de los aspectos de las rutinas “ ostensiva y de performance”.
Estas han surgido en los últimos años, con especial énfasis dentro de papel
principal de las distintas representaciones en juego de la creación de un
“producto”. Por lo tanto, los productos y las actuaciones reales de trabajo, son
los focos claves de la investigación. Su objetivo era aclarar las formas en que
las representaciones (en particular los productos de representación, tal como
documentos), las rutinas formales (en particular un proceso estándar para el
desarrollo de un producto global), y actuaciones de interacción en el trabajo,
contribuyan a la labor estratégica del diseño conceptual y el desarrollo de un
bien de capital complejo.
De tal forma, las dos variables independientes que se investigan son los efectos
de las rutinas formales y representaciones formales sobre la innovación (siendo
la variable dependiente).
Resumen:
CASOS ORIGINALES
Caso n°1
Case Studies
Manufacturing doesn’t get much older than the textile and clothing
industry. Since the earliest days when we lived in caves there’s been a steady
demand for something to wrap around us to keep warm and to protect the
more sensitive bits of our anatomy from the worst of the elements. What
began with animal hides and furs gradually moved into a more sophisticated
activity with fabrics woven from flax or wool – and with people increasingly
specializing in the business.
In its early days this was very much a cottage industry – quite literally
people would spin wool gathered from sheep and weave simple cloths on
home-made looms. But the skill base – and the technology – began to develop
and many of the family names we still have today – Weaver, Dyer, Tailor,
for example – remind us of the importance of this sector. And where there
were sufficient cottages and groups of people with such skill we began to see
concentrations of manufacturing – for example the Flemish weavers or the
lace-makers in the English Midlands. As their reputation – and the quality
of their goods – grew so the basis of trading internationally in textiles and
clothing was established.
were becoming much bigger while at the same time significant developments
in technology (and the science underpinning the technology) meant that
making textiles and clothing became an increasingly industrialized process.
Much of the early Industrial Revolution was around the cotton and wool
industries in England and many of the great innovations and machinery –
such as the spinning jenny – were essentially innovations to support a growing
international industry. And the growth of the industry fuelled scientific
research and led to developments like the invention of synthetic dyes (which
allowed a much broader range of colour) and the development of bleaching
agents.
By the twentieth century, the industries had become huge and well
established, with growing international trade in raw materials such as cotton
and in finished goods. The role of design became increasingly important as
basic demand was satisfied and certain regions – for example, France and Italy
– began to assume strong reputations for design. Branding became increasingly
important in a world where mass communications began to make the telling
of stories and the linking of images and other elements into advertising, which
fuelled demand for clothing as much more than a basic necessity purchase.
through much of Africa and Latin America to its present home in China.
Just because the dominant trends lead in one direction doesn’t mean
that there isn’t scope for someone to spot and deploy ways of bucking this
trend. One such player was a young clerk working in a small clothing retailing
business in northern Spain. Frustrated with his career prospects Amancio
Ortega Gaona decided to strike out on his own and in 1963 invested his
savings – the princely sum of US$25 – into a small manufacturing operation
making pyjamas and lingerie. In classic fashion he peddled (and pedalled –
his earliest transport was a bicycle!) his wares around the region and built the
business over the next 10 years and then decided to move into retailing as
well, opening his first shop in the north- western town of La Coruna in 1975.
Its clothes combine stylish designs with a strong link to current high
fashion themes with moderate prices. As Lotte Freddie, fashion editor of
the Danish daily newspaper Berlingske Tidende, commented, ‘If you want a
classic, Italianate look in tune with current styles and at a reasonable price
go to Zara.’ Zara’s successful growth is not simply a matter of low cost or of
standardization but rather of innovation.
The company have become leaders by exploiting some of the key non-
price trends in the industry – for example, variety and product innovation.
For example, over 10 000 different clothing models are created and sold every
year – this is most certainly not a case of ‘one size fits all’ or of long-lasting
product types! Ortega has taken the entire system for creating clothes and
built a business – and originally did so in an area which did not previously
have any textile tradition.
Once the new design has been approved the fabric is cut and then
distributed to this network of small workshops – and these represent an
outsource capability delivering a high degree of flexibility. Pre-cut pieces
and easy-to-follow instructions are given to workers in what is still largely an
informal economy – and their output then flows back into the massive Zara
distribution centre like tributaries to a fast-flowing river. (This is not a small
operation – the centre has around 200 kilometres of moving rails on which the
products flow. Highly automated and with extensive in-line quality checking,
the process transfers the incoming pieces into production lots which are then
allocated to a fleet of trucks for fast shipment, mostly by air from the nearby
airport at Santiago de Compostella.)
3. Zara Home has just opened using the same basic business model and
deploying the same innovative approach as the rest of the business but in the
home goods field. Do you think it might succeed and why?
Caso n°2
Corning Glass
Background
This firm is another of the ‘100 club’, having been founded back in
the mid-nineteenth century. It was a pioneer in process innovation enabling
high-volume manufacture of glass, but in the twentieth century moved
into developments of specialized glasses which led through to a variety of
product/process innovation links. It has successfully managed to avoid
the commoditization of its core products by repeatedly climbing up the
technological ladder to enter new and more difficult fields in which it can
preserve competitive advantage. Its consistent investment in R&D has meant
it has a ‘technology till’ into which it has been able to dip each time the
company has faced crisis. At first perhaps by accident but in more recent times
as a function of strategic design, they have built a capability for reinventing
themselves – moving from a glassmaker to a fibreglass pioneer to a key player
in photonics, fibre optics and moving into Internet services.
The company has always held innovation as a core strategic value, and
they ink this strongly to generating and managing intellectual property –
their knowledge bank.
• Consistent support for 150 years for the core values of innovation
through knowledge generation and application
The company has a fairly ‘standard’ process for steady state innovation
– using a version of a stage gate model to funnel development ideas through a
well-resourced system designed to generate customized solutions to particular
market needs. This has worked well for them in their traditional markets where
the pace of change is relatively slow and where the envelope within which
product development takes place is clearly defined. They have particularly
good links between product development and manufacturing with feedback
into the design process – a key theme emerging out of their early presence as
a strong player in process technology innovation.
Their move into new markets and less certain product/market definitions
has meant that they are now experimenting with different routes to managing
the ‘do different’ innovation process. These include:
• Learning with others – rather than trying to own all the resources,
there has been a growing trend to network- and alliance-based product
For more on Corning and the ways in which it manages innovation see
M. Graham and A. Shuldiner, Corning and the Craft of Innovation (Oxford:
Oxford University Press, 2001).
Caso n°3
Tools
• problem-solving cycle;
• brainstorming;
• checksheets;
• flow diagrams;
Problem-Solving Cycle
Identify
Review Define
Implement Explore
Select
Whatever the initial stimulus, finding a problem then triggers the next
stage which is to define it more clearly. Here the issue is often to separate out
the apparent problem (which may only be a symptom) from the underlying
problem to be solved. Defining it also puts some boundaries around the
problem; it may be necessary to break a big problem down into smaller sub-
problems which can be tackled — ‘eating the elephant a spoonful at a time’. It
can also clarify who ‘owns’ the problem — and thus who ought to be involved
in its solution, if the solution is to stick for the longer-term.
Having analysed the nature of the problem, the next stage is to explore
ways of solving it. There may be a single correct answer, as in crossword
puzzles or simple arithmetic — but it is much more likely to be an open-
ended problem for which there may be a number of possible solutions. The
challenge at this stage is to explore as widely as possible — perhaps through
the use of brainstorming or other group tools — to generate as many potential
solutions as possible.
Next comes the selection of the most promising solutions to try out —
essentially the reverse of the previous stage since this involves trying to close
down and focus from a wide range of options. The selected option is then
put into practice — and the results, successful or otherwise, reviewed. On the
basis of this evaluation, the problem may be solved, or it may need another
trip around the loop. It may even be the case that solving one problem brings
another to light.
Brainstorming
Brainstorming is the rapid pooling of all and any ideas that a group of
people can come up with before any discussion or judgement takes place.
Every idea is recorded no matter how bizarre or irrational.
How to Brainstorm
2. Get the right size of team. The technique seems to work best with groups
of 5 to 7 people.
8. Write down EVERY idea — clearly and where everyone can see them.
9. When all the ideas are listed, review them for clarification, making
sure everyone understands each item. At this point you can eliminate
duplications and remove ide the group feels are no longer appropriate.
This gives time for the team to let the ideas turn over in their mind,
which often
Approaches to Brainstorming
One-at-a-time
A member of the group offers one idea and the session continues this
way until everyone has had a chance to add to the list.
Write-it down
Ideas are written down rather than stated out loud, but everyone must
be able to see each idea listed.
What is it?
Use this tool when you want to establish the cause of an effect. The effect
may be either a problem or a desirable effect — when something desirable has
happened it is useful to find out what caused it so you can make it happen
again.
1. Establish what the problem, or effect, is. It must be stated in clear and
concise terms, agreed by everyone.
2. Write the effect (problem) in a box on the right and draw a long line
pointing to the box.
3. Decide the major categories of causes. This may be done in several ways:
• Brainstorming.
4. Write the major categories in boxes parallel to, and some distance from,
the main line. Connect them to the main line with slanting arrows.
• Add the causes to the diagram clustered around the major causes
they influence. Divide and sub-divide the causes to show how they
interact, and draw links between causes that are related. If the
diagram becomes too crowded, move one or more categories to a
new sheet of paper.
• This will probably involve using other tools. For example, in order to
verify some of the possible causes identified you may need to collect data
(using checksheets) and analyse it (Pareto Analysis, graphs, etc.).
Checksheets
What is it?
1. Recording Checksheet :
2. Checklist Checksheet:
3. Location Checksheet:
Constructing a Checksheet
2. Decide how often the events will be observed (the frequency) and
over what total period (the duration).
4. Test the draft Checksheet by getting someone who did not help
design it to use it.
Flow Charting
What is it?
A flowchart can tell you a lot about a process and the activities involved
eg Are all the activities really necessary? What controls are in place?
Constructing a flowchart
Policy deployment
Two key features are important here — the use of ‘stretch’ targets which
give impetus, and the use of monitoring and measurement against these targets
as a way of guiding the process and maintaining momentum. In addition
there is a strong component of ‘know why’ as well as know-how — in other
words, there is an attempt to explain the rationale behind the strategy and
how improvements in a particular area contribute to it. For example, in a
chemical plant working towards the target of ‘zero breakdowns’ each machine
has detailed operating and maintaining instructions attached. These have
been developed through CI activity and include not only the new operating
procedures but also a section on why these steps are important. There is thus
an element of organisational learning, of turning tacit into formal knowledge.
Similar functions are performed by the storyboards which characterise progress
along the road to meeting strategic targets.
Tools
Continuous Improvement: Specific Techniques
CI involves an extended journey, gradually building up skills and capabilities within the
organisation to find and solve problems. Not surprisingly there are many different
techniques which can help enable the process, and for a full account of them you should look
at the further information sources. What follows here are some brief explanations of basic
tools.
Problem-Solving Cycle
At its simplest, we can see continuous improvement as involving a cycle of problem-finding
and solving, like this:
In the first stage — identify — the organization recognizes that there is a problem to solve.
This may be an emergency or it may be a minor difficulty which has been nagging away for
some time; it may not even be a ‘problem’ but an experiment, an attempt to find out a new
way of doing something.
Whatever the initial stimulus, finding a problem then triggers the next stage which is to
define it more clearly. Here the issue is often to separate out the apparent problem (which
may only be a symptom) from the underlying problem to be solved. Defining it also puts
Tools
some boundaries around the problem; it may be necessary to break a big problem down into
smaller sub-problems which can be tackled — ‘eating the elephant a spoonful at a time’. It
can also clarify who ‘owns’ the problem — and thus who ought to be involved in its solution,
if the solution is to stick for the longer-term.
Having analysed the nature of the problem, the next stage is to explore ways of solving it.
There may be a single correct answer, as in crossword puzzles or simple arithmetic — but it is
much more likely to be an open-ended problem for which there may be a number of possible
solutions. The challenge at this stage is to explore as widely as possible — perhaps through
the use of brainstorming or other group tools — to generate as many potential solutions as
possible.
Next comes the selection of the most promising solutions to try out — essentially the reverse
of the previous stage since this involves trying to close down and focus from a wide range of
options. The selected option is then put into practice — and the results, successful or
otherwise, reviewed. On the basis of this evaluation, the problem may be solved, or it may
need another trip around the loop. It may even be the case that solving one problem brings
another to light.
In terms of learning, this is essentially a model for experimenting and evaluating. We gain
knowledge at various steps in the process — for example, about the boundaries of the
problem in defining it, or about potential solutions in exploring it or about what works and
what doesn’t work in implementing it. The point is that if we capture this learning it puts us
in a much better position to meet the next problem; if it is a repeat, we already know how to
solve it. If it is similar, we have a set of possible solutions which would be worth trying. And
if it is completely new, we still have the experience of a structured approach to problem
solving.
Brainstorming
Brainstorming is the rapid pooling of all and any ideas that a group of people can come up
with before any discussion or judgement takes place. Every idea is recorded no matter how
bizarre or irrational.
How to Brainstorm
1. Keep a relaxed atmosphere. Meetings should be disciplined but informal. If possible,
choose an informal venue.
2. Get the right size of team. The technique seems to work best with groups of 5 to 7
people.
3. Choose a leader. The leader checks that everyone understands what is going on and
why.
4. Define the problem clearly.
5. Generate as many ideas as possible.
6. Do not allow any evaluation and discussion.
7. Give everyone equal opportunity to contribute.
8. Write down EVERY idea — clearly and where everyone can see them.
9. When all the ideas are listed, review them for clarification, making sure everyone
understands each item. At this point you can eliminate duplications and remove ideas
the group feels are no longer appropriate.
Tools
10.Allow ideas to incubate. Brainstorm in sessions with perhaps a few days in between.
This gives time for the team to let the ideas turn over in their mind, which often
results in new ideas at a later session.
Approaches to Brainstorming
One-at-a-time
A member of the group offers one idea and the session continues this way until everyone
has had a chance to add to the list.
Write-it down
Ideas are written down rather than stated out loud, but everyone must be able to see
each idea listed.
Also called the ‘Fishbone Diagram’, this participatory exercise explores the links between
the effects and the possible causes of an issue. This tool encourages a group setting for
problem —solving and demonstrates that problems can have a number of causes.
What is it?
Cause and effect analysis is a technique for identifying the possible causes of a problem
or effect. The technique uses a Cause and Effect Diagram to record the possible causes as
they are suggested.
Tools
draw links between causes that are related. If the diagram becomes too
crowded, move one or more categories to a new sheet of paper.
6. Evaluate and analyse the possible causes.
7. Decide and act.
• This will probably involve using other tools. For example, in order to verify
some of the possible causes identified you may need to collect data (using
checksheets) and analyse it (Pareto Analysis, graphs, etc.).
Checksheets
What is it?
A Checksheet is a tool for recording and organising data.
Constructing a Checksheet
1. Decide what data you need to collect.
2. Decide how often the events will be observed (the frequency) and over what total
period (the duration).
3. Design a draft Checksheet. Put the items to be monitored on the left and the time
periods across the top. Allow space for totals on the right for each item being
observed and along the bottom for the observation periods. Label the Checksheets
clearly.
Tools
4. Test the draft Checksheet by getting someone who did not help design it to use it.
5. Make any revisions that are necessary as a result of step 4.
6. Distribute the Checksheets to the people collecting the data and explain how to use
them.
7. Act on the data collected.
Flow Charting
What is it?
A flowchart is a diagram illustrating the activities in a process.
Flowcharts are a useful tool to use when improving a process, especially when you are
planning to collect data or to implement a solution. They can also be used to document a new
process or to compare an existing process with an ‘ideal’ process.
Flowcharts are a good communication tool — by using standard symbols everyone will have
the same understanding of the process.
Constructing a flowchart
1. Decide what level of detail the flowchart is to represent.
This will depend on the purpose for constructing the flowchart. On a higher level
flowchart several tasks which make up an activity will be shown as one activity
whereas on a lower level flowchart each task will be shown separately.
2. List the activities in the process.
3. Draw the flowchart (sometimes this is done using standard symbols — for example:
Stretched circle Start or end of process
Rectangle Step or activity in the process
Diamond Decision point
Arrow Direction of flow
Tools
Policy deployment
As the name suggests the basic concept in policy deployment is the development of
mechanisms for breaking overall strategic objectives of the business down into small units,
each of which can provide the target for groups or individuals in their CI activities over a
sustained period. For example, in Nissan Cars the overall strategic target is cascaded down
through the organisation via the appraisal process, where everyone has the chance to discuss
and agree to certain objectives over the coming year, including a range of targets for their
own CI activities. This process — which is essentially ‘management by objectives’ — is a two-
way one but the outcome is agreed targets and a commitment on the part of the employee to
achieving them, a recognition that this is what will be used to assess performance over the
coming year, and an understanding that achievement will be related to rewards.
Its value in CI is to provide a focus and targeting process which moves on from simply
improving things on a project by project basis. In policy deployment targets are linked to
strategic objectives and local activities mesh together to contribute to meeting these. For
example, if the overall target includes an objective to become competitive by reducing
customer lead-time by 25%, then policy deployment would ask, for each area, how they
could cut 25% of time out of their overall operations. In turn this would cascade down to
the individual units within the area, and down to the individual teams, with the same
question. Each individual team will then use CI tools to explore the sources of wasted
time, and the kinds of thing which might cut it down — and on a project by project basis
they would chip away at the time taken within their area. In aggregate form this would
result in major savings.
Two key features are important here — the use of ‘stretch’ targets which give impetus,
and the use of monitoring and measurement against these targets as a way of guiding the
process and maintaining momentum. In addition there is a strong component of ‘know
why’ as well as know-how — in other words, there is an attempt to explain the rationale
behind the strategy and how improvements in a particular area contribute to it. For
example, in a chemical plant working towards the target of ‘zero breakdowns’ each
machine has detailed operating and maintaining instructions attached. These have been
developed through CI activity and include not only the new operating procedures but
also a section on why these steps are important. There is thus an element of
organisational learning, of turning tacit into formal knowledge. Similar functions are
performed by the storyboards which characterise progress along the road to meeting
strategic targets.
Policy deployment is concerned with strategic objectives so the timescales for typical
‘campaigns’ are long. For example, in Japan the ‘mid-term plan is the key driver in firms,
and this represents a clear statement of objectives and targets over the next 3 years.
Introduction
We know a great deal about the organisation and management of new product devel-
opment in the manufacturing sectors, but comparatively little about how applicable
this is to the service sector (Miles, 2000; Tidd et al., 2005). In this paper we identify
product development practices that explain variation in performance in a sample of
38 service firms in the UK. These practices, which were derived from good manage-
ment practice in manufacturing industries, were found to explain significant variance
in performance indicators in the UK sample, a matching one in the USA of 70 firms,
and a dataset combining the two (Tidd and Hull, 2003). However, scales measuring
sets of ‘best management practices’ constructed from the combined data better fit the
USA than UK sample. Therefore, this paper builds new scales from analysis of only
the UK data. The objective is to see whether some configurations of practice better
predict performance outcomes in the UK data than the model of ‘best practice’ based
principally on the US data.
A typology of organisation design is developed to classify the configurations
observed in the UK data. The typology provides a theoretical context for hypothesis-
❒ Joe Tidd (j.tidd@sussex.ac.uk) is Professor of Technology and Innovation Management and Deputy
Director of SPRU (Science and Technology Research), University of Sussex, UK. He has worked as
policy adviser to the Confederation of British Industry (CBI), and was the academic member of the
Steering Committee for the DTI Innovation Review. Frank Hull is Professor in the Department of
Management at the Arizona State University. He was previously Professor at the Graduate Business
School at Fordham University, New York.
ing which kinds of configurations are likely to have effects on which kind of perfor-
mance outcome. Using the typology to classify these service data is challenging
because contingency theory and the related notion of configurations were derived
largely from industrial studies conducted prior to the emergence of large service firms
and recent advances in information technology (IT) (Miozzo and Soete, 2001). Our
study provides an opportunity to update and extend the notions of contingency and
configuration to include service enterprises, and to identify the roles of IT in new
service development and delivery.
Theoretical framework
The dominant management research and literature on new product and service devel-
opment seeks to identify and to promote the notion of ‘best practice’ management and
organisation (e.g. Clark and Wheelwright, 1993; Cooper and Edgett, 1999). Much of
the best practice new product development today has been derived from the ‘lean’
approach to product development (Clark and Fujimoto, 1991; Womack and Jones,
1996), based entirely on practices in the manufacturing sector, principally the car
industry. However, the notion that different types of organisational structures and
management processes are appropriate for different kinds of tasks dates back to the
pioneering work of Burns and Stalker (1961) and Woodward (1965), and the develop-
ment of contingency theory. Central to contingency theory is the concept that no single
organisational structure is effective in all circumstances. Instead there is an optimal
organisational structure that best fits a given contingency, such as size, strategy, task
uncertainty or technology (Donaldson, 1996). Therefore, the better the fit between
organisation and contingency, the higher the organisational performance (Donaldson,
1999). This relationship between contingency, structure and performance has been
supported by a substantial body of research conducted in the 1960s and 1970s, includ-
ing qualitative comparative case studies (Burns and Stalker, 1961; Chandler, 1966;
Lawrence and Lorsch, 1967) and quantitative analysis of large samples (Child, 1972).
Contingency theory is strongly positivist, and has been much criticised, as it appears
to leave little scope for other influences, such as managerial choice or institutional pres-
sures (Powell and DiMaggio, 1991; Tidd, 2001). However, Child (1972) offers some
accommodation of the competing theories by allowing some ‘strategic choice’ within
boundaries determined by contingencies, an approach developed by Chandler (1990).
A significant body of research on the environment-strategy and strategy-structure
linkages supports this view (Dess et al., 1993; Miller, 1996). Specifically, the notion of
a ‘configuration’ is an internally consistent combination of strategy, organisation and
technology that provides superior performance in a given environment. For example,
the success of the multidivisional structure, or M-form, is associated with a strategy
of diversification into related product areas because the volume and complexity of
information strained the traditional functional structure (Chandler, 1966; 1990). Most
recently, a number of studies have begun to challenge the notion of a single ‘best prac-
tice’ and have re-examined the relationships between strategy, organisational struc-
ture and management processes (Thomas and Ramaswamy, 1996; Atuahene-Gima and
Ko, 2001; Kald et al., 2001). We adopt a similar position here, and argue that contin-
gencies influence the strategic configuration of management, organisation and tech-
nology, and that they constrain rather than fully determine ‘best practice’ (Tidd, 2001;
Tidd et al., 2005), what we have referred to as ‘strategic degrees of freedom’ (Tidd,
1993).
According to a large number of seminal studies, three contingencies appear to be
associated consistently with organisational structure: size, technological complexity
and task uncertainty. Much of the early research examined the relationship between
formalisation, specialisation and firm size, the Aston Group (Pugh et al., 1969; Pugh
and Hickson, 1976) being the most influential work on this subject. Woodward (1965)
identified technology as a contingency, and Perrow (1970) developed a finer grain
typology of technology, based on task analysability and variability. Similarly,
Lawrence and Lorsch (1967) proposed that the rate of environmental change affected
the need for differentiation and integration within an organisation, and found
support for this in their comparative study of organisational structures in three
different sectors. Galbraith (1977) argued that as task uncertainty increases, more
information must be processed, which in turn influences the control and communica-
tion structures.
The basis of these early theoretical typologies and empirical taxonomies are
anchored on the dichotomy of the ‘mechanistic’ bureaucracy and the ‘organic’ type of
organisation design (Burns and Stalker, 1961). Organic designs are claimed to be best
for innovation, and mechanistic ones for cost efficiency (Hage, 1980; Hull and Hage,
1982). The organic type is claimed to be optimal for competition in complex, dynamic
environments; the mechanistic is optimal for stable, predictable environments
(Lawrence and Lorsch, 1967). One reason the dichotomy is so fundamental is because
the strengths of each design correspond with the generic types of competitive advan-
tage, cost versus innovative differentiation respectively (Porter, 1990). Finer typologies
have been proposed, and more recently management researchers have developed
these ideas into more prescriptive management frameworks, which attempt to match
organisational structural templates to specific task environments (Mintzberg, 1979;
1983; 1994; Galbraith and Lawler, 1993; Galbraith, 1994). A common theme of such
work is that activities that are unpredictable or uncertain require relatively more inter-
personal methods of coordination and control than mechanistic-bureaucratic methods.
A review of 21 innovation research projects concludes ‘environmental uncertainty
influences both the magnitude and the nature of innovation . . . (which) suggests that
future research should adopt environmentally sensitive theories of organisational
innovation by explicitly controlling for the degree and the nature of environmental
uncertainty’ (Damanpour, 1991). In particular, perceptions of environmental uncer-
tainty appear to affect the organisation and management of new product development
(Souder et al., 1998; Hauptman and Hirji, 1999; Tidd and Bodley, 2002).
We can use these critical contingencies to develop a four-cell typology as shown in
Figure 1. On one axis we have complexity and uncertainty, and on the other size or
Performance Performance
Innovation Cost reduction and
innovation
Performance Performance
Low
scale. This creates four broad organisation types: (A) simple craft-batch, (B) mecha-
nistic bureaucracy, (C) hybrid mechanistic-organic and (D) organic technical-batch.
The simple craft-batch type offers highly adaptive, customised services as its perfor-
mance advantage. Its relative simplicity enables it to be flexible and direct in devel-
opment and delivery, but it is relatively inefficient and has little incentive to innovate.
The mechanistic bureaucracy is the most efficient organisation, and is most appropri-
ate for high scale production, in stable environments. The hybrid type combines some
of the advantages of mechanistic efficiencies and organic organisation of professional
knowledge to achieve both cost and innovation advantages simultaneously (Duncan,
1976; Daft, 1978; Hage, 1980), what we refer to elsewhere as the ‘Janusian’ organisa-
tion (Isaksen and Tidd, 2006). For example, professional bureaucracies employ highly
skilled people to perform complex work that is partially regulated by mechanistic
standards required for control in large-scale settings (Mintzberg, 1979; Mintzberg and
Quinn, 1996). Finally, the organic technical-batch organisation is fully organic and
highly innovative, but at a lower scale of activity.
adopt Enterprise Resource Planning (ERP) or similar integrated systems (Trott and
Hoecht, 2004). The adoption of BPR has often focused on processes and their auto-
mation without including the (re)organisation of groups or (re)design of products
(Darnton and Darnton, 1997). Therefore, the main benefits associated with these formal
approaches to process improvement are savings in cost and time, rather than quality
or innovation (CSC Index, 1994; Braganza and Myers, 1997).
Significant improvements in Information and Communications Technologies (ITC)
have increased capabilities for Managing processes (Rayport and Sviokla, 1995). There
has been a great deal of interest in the application of IT to services (McCabe, 2000;
Miles, 2000), but the influence of ITC on the organisation of new product development
in service firms has received relatively little attention in the literature (notable excep-
tions include: Drew, 1995; Sundbo, 1997; Lievens and Moenaert, 2000). ITC are hypoth-
esised as having a positive impact on system integration because of the speed and
scope of data distribution, improving performance in terms of costs and time.
However, ITC are presumed to be more effective to the extent that it supports mature
processes and cross-functional organisation (Tidd and Bodley, 2002), and therefore
may have a negative effect on innovation. Similarly, ITC could represent a bottleneck
in new product development in services. Many of ‘legacy’ ITC systems date from the
1980s and 1990s, and are not easily adapted, or integrated with other systems. Fur-
thermore, the complexity of the systems may not allow people outside IT departments
to judge whether adjustments to the system are possible or not (Nightingale, 2003). In
addition, many firms have outsourced parts of their IT, resulting in increased com-
munication problems. As a result, potential new services may be constrained by IT
systems and tools.
Research methods
Samples and methodology
Based on a review of the literatures on new product and new service development,
and discussions with a small group of executives from prominent service companies,
we developed a detailed checklist of practices. This checklist was used in formal inter-
views and workshops to help us to develop and refine our postal questionnaire into
one that was appropriate for services. Many of the items had to be reconstructed at a
more abstract, general level because of the intangibility and diversity of service pro-
ducts. We discussed the initial case studies and questionnaire at two workshops for
those involved in new service development, one in London and the other in New York.
The 130 participants from 75 organisations provided further feedback on our proposed
framework and questionnaire. A user group of 18 service organisations was formed
from these events, and a total of 27 case studies were created from these 18 organisa-
tions. This user group and the more detailed case studies helped us to ground the for-
mulation of hypotheses and to better interpret the statistical results from the postal
surveys.
US sample
Participants in the survey were companies in the New York metropolitan area. Large
companies were targeted because they were more likely to have a broad experience
of process and product innovation, and structural differentiation increases the need
for integration provided by cross-functional organisation and process tools. From a
list of the 100 largest employers in Crain’s New York Directory, 58 service companies
were identified. Accounting, consulting, legal and non-profit organisations were not
pursued. A total of 120 questionnaires were mailed, and the preferred respondent was
someone in the service product development function, or alternatively persons in busi-
ness development, quality management or productivity improvement. Respondents
from 70 businesses in 51 corporations returned questionnaires. These included 11 of
the 12 largest publicly held corporations, and all but four employed more than 500
people. The distribution of categories of the US service sector sample is shown in the
Appendix A.
UK sample
Respondents were drawn from the alumni network of contacts of a business school.
The sample was one of convenience, and no claim is made for it being representative.
As shown in Appendix A, the UK sample reflects the composition of service in London
and the south-east of the UK, with a bias for financial services and consulting, similar
to the sample in New York. In total, 100 questionnaires were mailed, and after a
reminder 38 usable questionnaires were returned.
Analysis procedures
The scales were constructed using factor analyses only of the UK data (Varimax
method). The sets of practice items included in each scale are shown in Appendix B
along with Alpha coefficients. Factor loadings and Alphas for the USA and combined
samples are available (Tidd and Hull, 2003). Multiple regression analysis is used to
predict variation in performance measures. The step-wise method was used to maxi-
mise variance explained.
Measures
The measures were adapted from a 200-page inventory of best practices based on 16
case studies and analysis of 100 companies. Many of the items had to be reconstructed
at a more abstract, general level because of the intangibility and diversity of service
products. The questionnaire consisted of 150 questions using seven point Likert scales.
Pilot surveys were conducted in the USA and UK, and subsequent workshops in New
York and London were used to help to refine the questions for the service context.
Performance measures
Twelve items loaded in four factors in the UK data. The four scales are labelled: (1)
product innovation and quality; (2) improvements in service delivery process; (3) time
compression in development and delivery; and (4) cost reduction in development and
delivery.
Factor analysis of the questionnaire items within each of the OPTS (Organisation,
Processes, Tools and Technologies and Systems) categories resulted in five organisa-
tion loadings, three for process, three for tools and three for system. Factor analysis of
these 14 sets of practice resulted five loadings. Four of these included three practice
sets and are described below as configurations. A fifth factor contained only two. Each
of the 14 practice sets is tagged in Appendix B with the number of its factor within
each of the OPTS categories.
Best practice summary index, the sum of all 39 items in the 14 sets of practice, is
calculated to assess the overall relationship between practices and performance
outcomes.
As respondents were asked to self-report their own company’s performance (depen-
dent variables) there is a potential for ‘over-reporting’ performance. In postal surveys
such as these that rely on respondents to report both the independent and dependent
variables, there is a possibility that respondents’ implicit theories and beliefs might
shape their ratings of performance, to create an ‘halo effect’. Ideally, we would have
preferred to use other more objective sources to determine the dependent variables,
but this proved to be impractical, as many of the businesses examined were divisions
or subsidiaries of larger organisations, and did not publish separate performance data.
However, we are confident that these effects are not significant in this study because
we asked a wide range of questions relating to different aspects of service performance
(cost, time, quality, innovation and delivery), and these resulted in a wide variation is
responses, with no obvious consistent bias. In addition, our experiences with the user
group, and our interviews for the case studies provided further verification of the
survey findings.
Results
Descriptive statistics
Means and standard deviations are shown for the UK and US samples in Table 1.
Performance indicators do not differ significantly between the two samples. However,
three of the four configurations are lower in the UK as is an index summing best
practices. This contrast suggests a kind of dilemma. How can roughly similar levels
of performance be achieved with differing levels of practice? A resolution of this
seeming contradiction occurs if system configurations in the UK are more parsi-
monious in practices because their strategy narrowly focused on selected performance
outcomes instead of multiple kinds of advantage simultaneously as in the USA. A
system configuration approach might be more efficient for targeting specific kinds of
performance outcomes; the best practice paradigm approach more effective for
multiple outcomes.
Performance inter-relationships
Performance indicators are less strongly correlated with one another in the UK than
US data. The index of innovation and quality is significantly correlated with service
delivery, but not time compression and cost reduction. The correlation between time
compression and cost reduction falls short of significance. By contrast, all four of these
performance indicators are significantly inter-correlated in the US data. This suggests
companies in the UK sample may pursue niche strategies that do not require achiev-
ing multiple kinds of performance advantages simultaneously.
Practice inter-relationships
Sets of practice are less strongly correlated with one another in the UK than US data.
In the UK sample, 42 of 91 possible correlations among the 14 sets of practice are
insignificant and three are negative as shown in Table 2. Variation in the strength of
these relationships suggests the possibility of polymorphism. By contrast, only nine
of 91 possible correlations are insignificant in the US data and only one is negative
(not shown). This contrast suggests that the UK data may conform less closely to a
best practice paradigm.
System configurations
The notion of system configurations is explored as an alternative to an all-
encompassing best practice approach to performance improvement in the UK data.
Analysis of the 14 sets of practice loaded in five factors. Four of these had loadings
with three components and are deemed configurations for the purpose of exploratory
research. The fifth, with only two components, is designated as a subsystem. Inter-
estingly, each of the five organisation factors loaded in a configuration/subsystem.
This result supports the prospect that varied configuration may be represented in the
UK data.
Total I and Q Time Cost Service Configuration Configuration Configuration Configuration Subsystem OPTS
A B C D E
157
158
148
Table 2: Correlation matrix of factors of performance and practices for the UK data
Total 1.00
performance
Innovation 0.54 1.00
and quality
Time 0.46 −0.12 1.00
Cost 0.47 −0.16 0.31 1.00
Service 0.87 0.36 0.25 0.25 1.00
Delivery
Organisation 0.52 0.46 0.25 0.31 0.35 1.00
Factor O1 0.20 0.13 −0.08 0.25 0.20 0.61 1.00
Factor O2 0.34 0.23 0.40 0.11 0.15 0.67 0.31 1.00
Factor O3 0.47 0.23 0.46 0.37 0.26 0.60 0.13 0.43 1.00
Factor O4 0.29 0.46 0.06 −0.06 0.15 0.68 0.12 0.16 0.12 1.00
Factor T3 0.16 0.06 0.18 0.30 0.04 0.32 0.32 0.03 0.02 0.14 0.45 0.42 0.15 0.45 0.37 0.50 0.16 0.12 1.00
System 0.55 0.54 0.16 -0.09 0.44 0.56 0.08 0.47 0.22 0.48 0.41 0.51 0.44 0.45 0.30 0.63 0.36 0.61 0.21 1.00
Factor S1 0.37 0.23 0.29 −0.02 0.28 0.20 0.04 0.37 0.16 −0.08 0.32 0.46 0.22 0.55 0.25 0.26 0.13 0.07 0.37 0.70 1.00
Factor S2 0.42 0.51 0.18 −0.19 0.29 0.56 0.05 0.43 0.35 0.54 0.31 0.33 0.40 0.25 0.13 0.58 0.48 0.51 0.02 0.83 0.32 1.00
Factor S3 0.39 0.50 −0.12 −0.16 0.38 0.37 0.10 0.26 −0.01 0.49 0.25 0.33 0.37 0.21 0.24 0.47 0.09 0.70 0.12 0.80 0.35 0.52 1.00
OPTS 0.66 0.55 0.26 0.19 0.50 0.82 0.45 0.52 0.35 0.59 0.60 0.78 0.62 0.71 0.49 0.75 0.47 0.57 0.45 0.84 0.56 0.72 0.62 1.00
Mean 2.56 2.86 2.31 2.26 2.56 2.48 2.43 2.45 2.36 2.63 2.54 2.60 2.76 2.47 2.64 2.49 2.42 2.73 2.28 2.64 2.60 2.65 2.68 2.55
SD 0.51 0.83 0.78 0.97 0.68 0.62 0.87 0.77 0.83 0.90 0.90 0.64 0.73 0.74 0.96 0.58 0.83 0.96 0.89 0.61 0.71 0.83 0.75 0.49
**p = 0.01 for coefficients greater than 0.41/*p = 0.05 for coefficients greater than 0.32 (two-tailed significance).
OPTS, Organisation, Processes, Tools and Technologies and Systems.
Total performance Innovation and quality Time compression Cost reduction Service delivery
Configuration Best Configuration Best Configuration Best Configuration Best Configuration Best
practice practice practice practice practice
B. Mechanistic customisation
Factor B is organised by the involvement of external customers in product develop-
ment and delivery process decisions (O-5). Standardisation is a key factor in control-
ling the relationship (P-3). Electronic links are used to exchange data with customers
and suppliers (T-3). To the extent it corresponds to a mechanistic bureaucracy in the
typology, it is hypothesised as achieving high levels cost leadership, which is sup-
ported by its significant regression on cost reduction.
In terms of the OPTS framework, product development and delivery is organised
around customers in Factor B. Setting standards for projects and products is a key
method of process control. Presumably customers help set these standards in confor-
mance with their requirements. The electronic interchange between Factor B and its
customers provides the capability for routinely adapting them to market demand.
In addition, this type also has a significant effect on product innovation and quality
that was unanticipated in the typology. One may speculate that mass customisation
with ITC has improved the capability of mechanistic firms to innovate. To the extent
the locus of innovation is external, the operations of Factor B differs appreciably from
a stereotypical mechanistic bureaucracy functioning as a closed system.
D. Integrated innovative
Factor D organises co-located, cross-functional teams in a flattened hierarchy (O-4).
Communications are open regardless of rank, both face-to-face and via email (T-2). Its
technical base utilises expert systems and management information systems. Respon-
sibility for work is shared and partnering is practiced throughout the value chain
(S-2).
The organic design has many advantages for creativity and innovation (Damanpour,
1991; Isaksen and Tidd, 2006). They have dense communications facilitated by cross-
functional teams and physical collocation (Hull et al., 1996; Collins and Hull, 2002).
Cross-functional teaming, whereby different specialists are assigned to work on the
same project simultaneously, has been advocated and widely adopted in many com-
panies as a strategy to improve their product development process. Collaboration
among diverse functions typically provides better solutions to complex design prob-
lems (Gatenby, 1994). Physical co-location involves aggregating project team members
in common space to enhance rich communications among group members (Daft and
Lengel, 1986). Accordingly, Type D ranks significantly higher than other configuration
in innovation, but lowest in all other performance measures (Table 1, overall perfor-
mance index r = 0.39).
Type D: case example
For example, in BBC Worldwide (BBCW) speed/timeliness is essential to the processes
given its strategic nature. Processes are strongly time-driven—indeed, diagrammati-
cally they are captured in a timeline. A series of defined steps is defined, beginning
with the initial receipt of programme treatment, to the final sign-off by a senior
management committee. The process documentation at BBCW has inbuilt financial
measures as well as benchmarks against the success of previous programmes. The
quality of a bid is dependent on individuals and departments providing the required
information on a timely basis, together with robust ROI analyses and sales projections.
However, processes are able to evolve reactively to emergent business needs. For
example, if a new means of exploiting programmes arises (Video on demand, broad-
band video) these additional media can be included in the necessary documentation.
In the case of an emergency item that requires urgent approval, informal contacts are
exploited to minimise timescales, which is indicative of flexibility and the use of
networking.
Discussion
All four configurations had one or more significant effects on specific performance
indicators. Each configuration appears to have parsimoniously evolved or acquired
sufficient good practices to be viable at least in niche markets. Factor A compresses
time and improves service delivery by focusing on customer requirements and project
management; Factor B reduces costs by setting standards and through the involve-
ment of suppliers and customers; Factor C provides a combination of innovation and
efficiency by promoting team work and knowledge sharing; and Factor D raises inno-
vation and quality by means of cross functional groups supported by groupware and
other ITC, but this increased coordination raises the time and cost of service devel-
opment. Our findings suggest that each organisation type and the relationships with
performance indicators are multi-dimensional. Innovation and quality are improved
by cross-functional teams and sharing information (Factor D), raised by involvement
with customers and suppliers (Factor B), and by encouraging collaboration in teams
(Factor C). Service delivery is improved by customer focus and project management
(Factor A), and by knowledge sharing and collaboration in teams (Factor C). Time is
compressed by knowledge sharing and collaboration (Factor C), and customer focus
and project organisation (A), but cross-functional teams can prolong the process
(Factor D). Costs are reduced by setting standards for projects and products, and by
involvement of customers and suppliers (B), and increased by cross-functional teams
(D).
The viability of these configurations in the UK data argues for updating the stan-
dard contingency typologies to encompass advances in technology and making such
typologies more generic to better accommodate service as well as manufacturing
sectors. Examination of the actual measures suggests that each of the four system con-
figurations provide several common elements, including:
• organisational mode of bringing people together;
• control mechanisms, either impersonal (standards, documentation, common soft-
ware) or interpersonal (collocated teams);
• shared knowledge and/or technical information base;
• external linkages, for example, customers and/or partners/suppliers.
The traditional notion of simple craft-batch organisation needs rethinking in light
of the project-based organisation. Although lacking in tools, the project-based config-
uration was rather sophisticated in organisation and process. For example, its organ-
isation involved downstream functions early on. The processes deployed by Factor A
to incorporate the voice of the customer in their products were advanced, for example,
QFD, which is consistent with the fact that Factor A made more use of TQM and BPR
than any other (r = 0.39 and 0.53, respectively, not shown in Tables). Clearly then
service companies increasingly deploy project-based organisations to integrate
resources more quickly to serve their customers (Gann and Salter, 1998), which may
help to overcome some of the problems associated with the co-production of service
innovations between providers and their customers (Dolfsma, 2004). In sum, com-
panies in this niche may compensate for a lack of advanced technology with prowess
in organisational and process.
The mechanistic customised configuration differs from a traditional machine
bureaucracy in two important ways. First, the limitations of dedicated assembly-line
equipment during the period when Woodward’s mass production type was first
described have been largely surmounted by flexible, programmable automation (Tidd,
1991; Collins and Hull, 2002). Second, the openness of Factor B to customers contrasts
with the closed systems of the past that produced large quantities of standard units
to stock (Mintzberg, 1979). Its programmable capabilities enable a degree of mass cus-
tomisation that was impractical in earlier era of dedicated equipment for specialised
production. Trott and Hoecht (2004) have argued that ERP systems may increase
control and efficiency through increased standardisation of process and products, but
are likely to limit innovation, but our findings suggest that there is still some scope
for new service development within such environments. Developments in ITC have
enabled mass producers to customise products more easily through platform products
(Meyer and DeTore, 2001), and to respond to the voice of customers in new ways.
Professional bureaucracies have often been burdened by conflicting masters, the
knowledge-based codes of professional conduct and large-scale administrative
requirements. However, the growing volume and specialisation of knowledge chal-
lenges the boundaries of traditional professions and has weakened external control
over internal activities within corporations. A growing number of loosely regulated
communities of practice have emerged both within and across different subject-based
disciplines. The hybrid knowledge-sharing configuration enables a relatively self-
contained group of people to become experts in developing and delivering products
as quasi professionals. This type of organisation thereby provides some of the advan-
tages of codified knowledge with far less hierarchical control by bureaucratic forms,
consistent with the view that most service innovations demand greater knowledge
sharing than in conventional product development (den Hertog, 2000).
An organic organisational design originally meant little more than the absence of
bureaucratic constraints. Today the integrated innovative type of configuration has a
more active agenda. Relatively more influence and resources are given to project teams
instead of functional departments. Open communications are not left to chance
encounters, but structured by collocated, cross-functional teams deployed in flat hier-
archies so that communications are more horizontal than vertical. Therefore, in a
service environment, even the most organic structures may require more structured
elements to help overcome the intangible nature of new service development (de
Brentani, 2001; Dolfsma, 2004).
Notes
1. The index of environmental dynamism sums six factors (Technological complexity of service
products, Rate of service product introduction, Compatibility of service products with other
products, Customisation, Globalisation, and Quality) in terms of increased challenge in
market requirements and turbulence.
2. The organizational factor of Configuration C, Cellular grouping, is significantly correlated
with cost reduction (r = 0.38, not shown in Tables).
3. Partnership process subsystem:
O—Partner involvement (1).
P—Documentation (1).
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Category UK US
Financial services 13 18
Retail banking 1 5
Credit card — 3
Lending 2 2
Private banking — 1
Investment services 10 7
Insurance 2 8
Consulting services 5 4
Construction — 1
Distribution/logistics (*) 2 6
Education/training 0 1
Healthcare 4 8
Diagnostic services 2 4
Hospital 1 1
Pharmaceutical services 1 2
Manufacturing related services (**) — 4
Non-profit 1 3
Publishing 1 2
Retail 2 3
Travel/hotel 3 2
Telecommunications 2 5
Transportation 3 5
Total 38 70
Appendix B: Measures
# Factor a UK a USA
Appendix B: Continued
# Factor a UK a USA
Appendix B: Continued
# Factor a UK a USA
1. Introduction
In this article, we examine the work done by routines and representations in the
design and development of a new product, building upon the significant discussion
of “ostensive and performative” aspects of routines which has emerged in recent
years (Feldman and Pentland, 2003), with a particular focus on the role of various
representations and “artefacts” play (Pentland and Feldman, 2005). Thus, artifacts
and actual performances of work are the key foci of our study, and our goal is to
clarify the ways in which representations (notably representational artifacts, such
as documents), formal routines (notably a standard process for global product devel-
opment), and performances of workplace interaction contribute to the strategic work
of conceptual design and development of a complex capital good.
In the field of routines research in innovation, theorization of representations
is under-developed, although scholars in a number of fields are now beginning
to draw attention to the importance of such practices (e.g., Whyte and Ewenstein,
2007; Whyte et al., 2008). It is common to mistake the representation for the routine,
The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved.
2. Theoretical orientation
Our main theoretical context is the debate that has developed around Nelson and
Winter’s (1982) central concept of routines, as regular and predictable behavioral
focus for the negotiation and interaction between different professional groups
(Bechky, 2003b), or for mediating boundaries between dispersed communities of
practice (Carlile, 2002; Sapsed and Salter, 2004).
1. Formal routines: Formal routines have formal representations (their form and/or
artifactual repertoire is pre-specified; are formally required (their deployment
is specified for certain approved, required outcomes). When performed, they
often produce formal representations as a specified kind of outcome. We do
not discuss routines that are non-formal (not formally specified, not formally
represented).
3. Methodology
Our study was designed to engage with issues of practice in knowledge work.
Be aware that knowledge is handled in collective settings, but while handling
artifacts, we chose to study practices in the field of design and development,
where representations and working with artifacts are known to be significant
(Henderson, 1998, 1999). We exploit traditions of ethnographic “work practice”
research: Barley (1986, 1988); Kunda (1993); Randall et al. (2007); and Suchman
and Trigg (1996), from the fields of computer-mediated communication and
computer-supported cooperative work (Strauss, 1988; Anderson and Sharrock,
1992; Schmidt and Bannon, 1992), and more broadly in the analysis of the organiz-
ing power of inscriptions in actor-network sociology (Law 1986, 1991; Latour 1990,
1991; Akrich et al., 2002). One widely diffused construct in these areas is that
Week 1 Observation commences. Senior engineers discuss the potential for a product release
based on recent lab results exploring new configurations in the transport module
of the ABC-family machines. This includes discussion of how to package the
release to get it into leading customers’ sites, retrofitting on already-installed ABC-
family machines. Thus, the design of the release (a commercial event) is under con-
continued
Table 1 Continued
representatives of stakeholder interests; and the checklists of the wizard were used in
the meeting—literally, completed on a laptop and displayed on a projection screen—
to register the nominees of those stakeholder interests, for the formal purposes
of PDP. Thus, right at the start of its existence, the ABC-10 wizard displayed its
basic role, as a collection of representations of outcomes of activities conducted by
stakeholders in ABC-10. And the first representation to be created in the wizard
was a representation of representatives; a map of formal authorities in the context of
ABC-10’s development.
From this point, three significant things were available to the development
screen and entered field-by-field scrolling down the form, as part of the live business
of the meeting. Second, participation in the meeting was very wide; it constituted
the fullest showing of ABC-10 stakeholders that we saw at any point during the
24-week period, in any work setting including generic PDP reviews and ABC-10
cross-function team meetings. Third, the kick-off event itself was formative in
a formal way: by virtue of completing this formally specified element of the PDP
procedure, the program manager was able, subsequently, to legitimately call on and
deploy both financial resources and the intangible resources taken up by the partic-
ipation in cross-function meetings, in forms of activity some of which were not
5.2 PDP review meetings and the sign-off process for beta release
All development programs currently active under PDP were required to present
and discuss progress at PDP review meetings held in a regular timeslot every
2 weeks. The central aim of PDP reviews (a strong ostensive aspect) was to achieve
planned and formally scheduled phase-exit events for PDP programs. Meetings were
convened and led in a formal chairing style by the PDP process manager (a formal
quality management role, occupied by a person who has no specific involvement
with any actual PDP program).
The flow of each meeting was organized in segments, each of which centered on
the presentation and discussion of a “dashboard” representation that was specific
to this venue. It was a composite of three distinct representations: (i) a graphical
timeline (showing critical specified events in the lifetime of a PDP program, on a
week-by-week timeline, with the current week highlighted); (ii) a scorechart matrix
showing status (good to bad, represented by standard “smileys”) against six specified
dimensions of responsibility; and (iii) text bullet points to highlight critical issues.
The dashboard itself did not seem to be specified in any formal description of the
PDP, but the use of the dashboard—a highly formalized representational artifact—
was fundamental to the organization of activity in this particular work setting, which
was convened formally to achieve critical, specified PDP outcomes. These meetings
were formally minuted, had a formal, pre-circulated agenda, and pre-published the
dashboards for each program to be discussed. Thus, in this work setting, formal
procedure and standardized representational forms were closely coupled, with the
latter providing a strong means of ordering the flow of the meeting.
The series of review meetings leads eventually to sign-off for a PDP program.
We left HighTech in week 24, and thus did not see sign-off for ABC-10, which was
scheduled around week 48. However, it was mandatory that sign-off for this release,
as for any other MinShip (beta) or CR release, should be achieved through
1. Making it work, making it fit. The machine under design—a novel, complex, engineered,
physical artifact.
2. Making it in time, achieving The supply chain for beta tools and the alpha tool—
“cut-in” with ongoing activities hundreds of thousands of dollars of working capital,
in HighTech. dozens of locations.
development was achieved with a wizard that was 98% empty. In 12 weeks of cross-
function team meetings, only one performance of a routine from the wizard was
observed, when a formal project-risk algorithm was run, its final value and input
values strenuously negotiated the value of the risk index recorded in the wizard.
However, the kick-off meeting, organized around certain elements of the wizard,
was critical in establishing the working regime for subsequent cross-function team
activity); and in the final stages it was mandatory that the wizard’s sign-off routines
would be employed, generating formal representations of actions and outcomes for
the file. These episodes and phases—formally establishing the PDP cross-function
7. Conclusions
In focusing on formal routines, we have narrowed our focus because we do not feel
that it is useful for the usual, broad “routine” construct to be made to carry the
whole burden of theorizing. We find ourselves concerned with issues of performance,
local instances of work practice, the specifics of representational work, and the
ubiquitous management and production of knowledges in mundane interactions.
We believe that these concepts are more relevant and realistic, than the broader
interpretations of routines that make no distinction between formal and non-
formal modes of representation.
We have demonstrated that formal routines make particular contributions to
the processes we have observed. They contribute resources to the work being done
which impact at certain points, on certain aspects of the work. Different routines do
different things. Interestingly, the work done by routines is not necessarily achieved
in the settings where the routines are enacted. Although the work done by repre-
sentations of routines was of limited scope (e.g., the PDP wizard), the work done by
representations from routines (e.g., PowerPoints, drawings), elsewhere, within an
architecture of multiple, concurrent, ongoing practices, was highly significant.
Specifically, we saw work “here” (in conceptual design settings) being done more
by formal representations than by formal routines, but with the work of making
those representations available being done by formal routines elsewhere.
At a higher level, formal representations of PDP (the handbook and the wizard
as formal ostensives of the PDP) played important roles: as prior and
8. Future research
We have been impressed by the diversity of routines, in reach, in scale, in what they
actually contribute, or even where their contributions are mobilized (not necessarily
where they are enacted). Therefore, we would encourage research which examines:
the kinds of organizations. We feel that such domains of activity provide fruitful
ground for empirical research on routines; and
4. The contributions that formal routines and formal representations make
in securing participation of appropriate representatives in a course of action.
While formal authority, and related constructs such as governance, do make
an appearance in the routines literature (e.g., Dosi, 1995; Coriat and Dosi,
1998), this often seems to be tied to rationalist or cognitivist constructs, such
as rules as genotypes of actions rather than being open to a more performative
analysis, episodes of interaction and negotiation, manifest collaboration between
Acknowledgments
We gratefully acknowledge financial support by the UK ESRC under the “Evolution
of Business Knowledge” research program and the positive and detailed feedback
that we received from the three reviewers of earlier drafts. We are also grateful for
the intellectual contributions of our co-researchers at Imperial College, in particular
Jennifer Whyte and Boris Ewenstein, now based at Reading University and
McKinsey, respectively.
Joe Tidd, SPRU (Science and Technology Policy Research), University of Sussex, UK.
e-mail: j.tidd@sussex.ac.uk
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The related concepts of open innovation and user-centric innovation are currently popular in
the literature on technology and innovation management. In this paper, we attempt to address
two shortcomings to their practical application. First, the precise mechanisms supporting open
and user innovation in different industrial contexts are poorly specified. Second, it is not clear
under what circumstances they might become dysfunctional. We identify how the interaction of
meso- and micro-level mechanisms contribute to project-based user-centric innovation, based
on a detailed characterization of the business activities of eight technology and engineering
consultancies working across a range of sectors. We develop and illustrate the notion of
generative interaction, which describes a series of mechanisms that produce a self-re-enforcing
ecology, which favours innovation and profitability. At the same time, we observe the opposite
dynamics of self-reinforcing degenerative interaction likely to produce a cycle of declining
innovation and profitability. In the specific context of project-based firms, we show that user-
centric, open innovation can affect performance negatively, and we discuss the consequences
(positive and negative) of different patterns of interaction with clients.
44 R&D Management 41, 1, 2011. r 2010 The Authors. R&D Management r 2010 Blackwell Publishing Ltd. 2010,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
suggested in the literature (Mowery, 2009). Work point it has now become ‘all things to all people’,
that is based on Pavitt’s (1984) paper and the lacking explanatory or predictive power (Tidd and
taxonomy he proposes, shows that patterns of Bessant, 2009). The empirical evidence on the
innovation differ fundamentally – by sector, firm utility of open innovation is limited, and practical
and strategy. prescriptions are overly general (Trott and Hart-
There is a need to examine the mechanisms that mann, 2009). Individual case studies are frequently
help to generate successful open innovation (En- not generalizable, while studies based on the var-
kel et al., 2009). In this paper, we contribute to a ious Community Innovation Surveys (Laursen and
shift in the debate from potentially misleading Salter, 2006; Poot et al., 2009) provide only simple
general prescriptions, and provide some empirical counts of external sources and partnerships. Thus,
insights into the precise mechanisms and potential they may suffer from survivor bias and also reveal
limitations of open, user-centric innovation in one little about the mechanisms of and limitations to
particular industrial context – technology and open innovation.
engineering consultancies (TECs). Research in a The phenomenon of open innovation is not
tradition that goes back to Woodward (1958) new (Mowery, 2009) and innovation that exploits
shows that complex technologies developed in external networks through a process of recursive
projects, typically involve interactions with dis- learning and testing is a classic organizational
tributed external actors and users (Chandler, response to the complexity or uncertainty of
1990: p. 68; Hobday, 1998), which makes project technology and markets (Freeman, 1991). Thus,
success context dependent (Blindenbach-Driessen the well-established innovation networks litera-
and van den Ende, 2006). In this paper, we unpick ture potentially can contribute much to the debate
some of the mechanisms that generate or restrict on open innovation. Innovation networks are
innovation, with a particular focus on types of more than an aggregation of bilateral collabora-
client relationships and interactions. tive relationships or dyads (Belussi and Arcangeli,
In Section 2, we review the literatures on open 1998): as embedded social context and position
and user-centric innovation, and innovation by relative to other, actors have major impacts on
project-based organizations. In Section 3, we innovative activity. Variations in the degree and
discuss our method, which includes a large web- type of such interaction typically produces dy-
based survey to identify broad issues and patterns namic, inherently unstable and unpredictable set
of interaction, and in-depth project-level studies of relationships, that make network-based inno-
of TECs to reveal the micro- and meso-mechan- vation fundamentally different from the trial-and-
isms of open, user-centric innovation. Section 4 error process found within individual firms (Bi-
describes the business context of TECs, and dault and Fischer, 1994).
Section 5 identifies the mechanisms that support Networks shape the flow and the sharing of
generative interaction and generate mutual bene- information, and generate power and control
fits for the actors, and particularly benefits that imbalances among actors (Gulati, 1998). This
extend beyond the project to affect future cycles means that the position an organization occupies
of activity. We also identify a dark side of user- in a network is strategically important and reflects
centric innovation, which shows that interactions its power and influence. Sources of power include
with users can limit innovation (degenerative resources (technology, expertise, economic
interaction). Section 6 offers some suggestions strength), processes (decision making) and legiti-
about the implications of our findings for tech- macy (trust) (Hardy, 1996). Hakansson and Wa-
nology and innovation management and policy, luszewski (2003) identify types of interactions
and highlights some avenues for further research. influenced by network position:
knowledge of, and an ability to work with develop stealth aircraft, provide a powerful ‘pull’
each other. for radical innovation (Rich and Janos, 1994).
social interactions between organizations – Users have come to mean external developer
external business relationships, which can im- communities (von Hippel, 2005) and even wider
pede or provide opportunities for innovation. communities of interest such as open-source soft-
ware communities (von Hippel and von Krogh,
More recent research has examined the poten- 2006; Osterloh and Rota, 2007).
tial for firms explicitly to design or selectively to Lead users are particularly important for the
participate in innovation networks, within a stra- development of complex products; in so-called
tegic path-creating rather than passive path-de- ‘vanguard projects’ (Davies and Brady, 2000),
pendent process. Doz et al.’s (2000) study of 53 they may open up the need for new requirements
research networks identifies two distinct dynamics ahead of what is generally available in the market.
of formation and growth, emergent networks and Sophisticated users in business-to-business markets,
engineered networks. The emergent network de- such as scientific instruments, capital equipment
velops as a result of environmental interdepen- and information technology (IT) systems co-
dence and common interests. The formation and develop innovation and act as early adopters. The
development of the engineered network requires a results in the lead user literature are open to a
triggering entity (Doz et al., 2000), which is potential problem of survivor bias, and the practical
usually the activity of a nodal firm to recruit difficulties related to peripheral firms identifying
network members regardless of their environmen- lead users ex ante when success is defined ex post
tal interdependence or similar interests. These and contingent on network position. Helpfully, a
different types of network present different op- recent review identified a number of characteristics
portunities for learning, the development of pro- of lead users (Morrison et al., 2004): (1) they
prietary standards, locking customers and other recognize requirements early; (2) they expect high
related companies into position, ensuring techno- level of benefits due to their market position and
logical compatibility, etc. which gives core-posi- complementary assets; (3) they identify and develop
tioned firms an advantage over firms on the their own innovations and applications; and (4) they
periphery (Hooi-Soh and Roberts, 2003). see themselves and are perceived by their peers to be
User–producer interactions are particularly im- pioneering and innovative.
portant in these networks (Freeman, 1991). User- Firms developing innovative complex products
led innovation results in better specified open and services can benefit from using lead users to
innovation, is based on a longer research tradition both co-develop products and provide feedback
(Rothwell et al., 1974; von Hippel, 1976) and has that will help to predict the success of the parti-
greater potential for in terms of technology and cular innovation (Tidd and Bodley, 2002). A
innovation management (Flowers and Henwood, study by Callahan and Lasry (2004) of 55 tele-
2008) (NESTA, 2008). Users are characterized communications infrastructure projects found
variously as ‘consumers’ whose needs must be that the importance of customer input increased
understood, as ‘tough customers’ (Rothwell and with technological newness. It showed also that
Gardiner, 1983) with exacting demands and as there had been a shift from customer surveys and
‘lead users’ (von Hippel, 1986) that promote focus groups to co-development, because ‘con-
product modifications and are often able to pre- ventional marketing techniques [had] proved to
dict future demand. In user-centric innovation, be of limited utility, were often ignored, and in
the boundary between consumer and producer, hindsight were sometimes strikingly inaccurate’
and between ‘innovators’ and ‘adopters’ tends to (Callahan and Lasry, 2004). Whyte et al. (2008)
become blurred as innovation develops and and Hales and Tidd (2009) provide similar results
becomes more complex (Hobday et al., 2000). respectively for semiconductor capital goods and
The scope of user-led innovation has broa- architecture practices.
dened from its original narrow focus on identify- Such findings are particularly important for
ing and internalizing specialist knowledge from Project-Based Organizations (PBO) (Hobday et
users (von Hippel, 1976, 1977) that was difficult al., 2000), which inherently are more open and
to capture via market research (Rothwell et al., user-centric than conventional organizations.
1974; Maidique and Zirger, 1985). As Rothwell Such organizational forms are used to realize
describes it, tough customers mean good design specific, one-off projects (e.g. the construction
(Rothwell and Gardiner, 1983) and very demand- of a major facility such as an airport or a hospital)
ing customers, such as the military seeking to or to manage the design and fabrication of
complex product systems such as aero engines, flight or other clients, based on a reputation effect.
simulators or communications networks (Hobday, Swan and Scarborough (2005) refer to generative
1998; Whitley, 2006). Project organizations combine interactions rather than relationships, to describe
many different elements into an integrated whole, situations involving successful innovation in
often involving different types of firms, long time- which knowledge integration is facilitated by net-
scales and high levels of technological risk (Davies et work co-ordination. They also refer to degenera-
al., 2007). Their organizational efficiency comes tive interactions, which occur when this co-
from economies of system, rather than economies ordination fails and the knowledge is not inte-
of scale (Nightingale et al., 2003) because this grated.
organizational form enables the creation and re- While these comparative case studies (Lane and
creation of new organizational structures to fit the Maxfield, 1996; Swan and Scarborough, 2005)
demands of each new project and client, and is able focus on bilateral relationships, in this paper we
more easily than functional organizations to inte- extend the concept to the multiple meso-level
grate diverse types of knowledge (Hobday et al., interactions that occur in the wider business envir-
2000). However, PBOs have an inherent weakness onment. We refer to the sum of these relationships
in their ability to co-ordinate resources across in the ecology (i.e. a particular market in a parti-
projects and to capture innovation and learning cular geographic system) as either generative inter-
(Hobday et al., 2000). Nevertheless, PBOs are actions or degenerative interactions. We combine
associated with major innovations in project man- the insights from work on relationships and their
agement and organization, in areas such as project potential for providing feedback effects, with
financing, regulation and risk-sharing, and in sec- whether these feedback effects are beneficial or
tors as diverse as pharmaceuticals and civil engi- deleterious. From a methodological perspective, it
neering. Although this type of innovation may is important to emphasize that generative interac-
appear to be very different from the core innova- tions may be localized, to the extent that they are
tion process associated with conventional new identifiable only at the department or division level
product development, the underlying process is still in an organization (Lane and Maxfield, 1996). In
one of careful understanding of user needs and other words, they may not be apparent at firm
meeting those. It is important to have user involve- level, and are a feature of the environments of only
ment throughout development, and to integrate some employees with particular business activities
their different perspectives. and links. In this paper, we examine the experience
Based on the existing research, when and of firms engaged in open, user-centric innovation in
whether PBOs benefit from open, user-centric different industry environments, and identify how
innovation are unclear. Selection bias, especially different interaction dynamics influence innova-
in case studies of exceptionally successful firms or tion. We focus on TECs, which are precisely the
projects, can be misleading in finding the experi- sort of firms where relationships with users are
ence to be positive. Research suggests that the likely to influence both the opportunity for innova-
dynamics of networks is an important influence tion, and the potential to create and capture value.
on the success or failure of projects. In particular,
Lane and Maxfield (1996) suggest successful in-
novative collaborations result from situations 3. Method
where two organizations with different perspec-
tives and capabilities share commitment to a The research on which this paper is based was
common direction, interact in a recurring manner conducted as part of the MINE (Managing In-
and value, monitor and nurture their relationship. novation in the New Economy) research pro-
Such generative relationships can ‘induce changes gramme. A major part of the programme
in the way participants see their world and act in involved a large web-based survey designed to
it and . . . give rise to new entities, like agents, capture the broad range of innovation dynamics
artefacts, even institutions’ (Lane and Maxfield, in different industry sectors. Cluster analysis
1996: p. 216). Importantly, Lane and Maxfield enabled the identification of seven stable and
emphasize that the precise nature of the benefits statistically different groups of a minimum of
deriving from generative relationships cannot be 100 firms that use innovation to create and
anticipated, in part because ‘relationships gener- capture value in similar ways. The survey instru-
ate relationships’ (Lane and Maxfield, 1996: ment is available at http://www.minesurvey.
p. 221). The positive results of generative relation- polymtl.ca and detailed statistical results are
ships may extend to future projects with the same reported elsewhere (Miller and Floricel, 2007b;
Miller et al., 2008). Based on the innovation access to data (see Table 1). Note that the unit of
dynamics across clusters that were identified, we analysis is not the individual firm because we
conducted a series of case studies to investigate would expect to find interactions at the level of
innovation within each cluster. In this paper, we business units (Lane and Maxfield, 1996). It is the
focus on the dynamics of one cluster, ‘systems business unit level interactions that we asked
engineering and consultancy’, represented in this interviewees about, based on their personal experi-
paper by the TECs. We use the case studies to ence. Five of the business units in the sample are
build a theory of how innovation occurs within a focused on particular sectors, but are units within
group of firms that are part of a cluster; however, much larger firms (multi-disciplinary, multi-sector
we do not test the generalizability of this theory to consultancies). The other three (see Table 1) are
other sub-groupings (Eisenhardt and Graebner, focused on particular industries. TEC participa-
2007; Pratt, 2009). The other groups within the tion was based on our agreement that they would
cluster include IT consultancies and management remain anonymous. Here, we reveal only the most
consultancies and subsequent research could at- necessary detail and information about the firms.
tempt to generalize our theory to these groups. We conducted 23 semi-structured interviews in
We conducted an inductive study to capture the eight TEC business units across the seven firms.
meso- and micro-level mechanisms involved in in- The business units were engaged in the following
novation, based on broad ranging interviews with sectors: Automotive, Energy, Water, Healthcare,
firms. The interviews included questions on value Industrial Processes (x2), Public Amenities and
creation and capture, corporate and innovation Transport Infrastructure. Interviewees included
strategies and external influences on innovation. directors and project managers. We tried to
Theory building does not require random sam- identify individuals engaged in innovation and
pling (Pratt, 2009) and sampling for this study was company learning strategies. Interviewing more
undertaken specifically to support the identifica- than one person in an organization, at different
tion of key modes of innovation in TECs. Because levels and with different expert knowledge, on the
context is important, firms were selected on the same topic, and discussing historical and recent
basis of their international coverage and experi- events, helps to avoid bias and retrospective
ence in the market. The interviews thus provided sense-making in qualitative research (Eisenhardt
information of experience in a variety of contexts. and Graebner, 2007).
Efforts were also made to ensure that different Interviews lasted between 45 and 150 min, and
industrial sectors were discussed in each firm. In were transcribed verbatim. Most of the interviews
part, this was designed to provide reassurance to were conducted on site, which enabled access to key
interviewees that the information they were pro- corporate reports and other literature (e.g. publica-
viding was not being revealed to competitors. The tions for clients). Interviewees were encouraged to
firms participating in the study were selected from direct the researchers to secondary sources to
a directory of UK engineering firms (Fullalove, triangulate their claims (e.g. in policy reports, trade
2004), which ensured the inclusion of well-known journals and engineering journals). In addition to
and less familiar, and more and less successful questions about innovation, relationships and va-
firms in the sample. The final selection of seven lue creation, we asked participants to identify
firms was on the basis of early agreement to project examples, which led to identification of
participate in the project and agreement to provide additional interviewees and documentation.
Interview transcripts and secondary materials be increasing. For example, TECs can work with
were coded using an open coding system (Strauss clients on design, or work in consortia with other
and Corbin, 1998) and synthesized into detailed contractors to provide integrated ‘design and
cases based on a standard interview template. The build’ packages, which are handed over to the
first objective was to identify the micro and meso- client when the project has reached completion.
level mechanisms associated with value creation and Private finance initiatives (PFI) allow consortia to
value capture. This approach is based on that pro- design, build, own and run the asset, whereby
posed in Swan, et al. (2007), and involved recursive they deliver to the client not the power station, for
cycles between theory and data (Eisenhardt and example, but electricity at a pre-arranged price
Graebner, 2007) in order to re-code the data and per kilowatt hour. Therefore, TECs’ role can
identify the dynamics among micro and meso-level vary. They can provide services in the form of
mechanisms based on groupings of interviewee designing a facility, or may be involved in design-
quotes. Replication logic was used (Yin, 1994; ing the competition on the basis of which con-
Eisenhardt and Graebner, 2007) to underpin the tracts are awarded for the construction of the
core theory presented here and to ensure that our facility; they may provide technical advice to the
findings were not related to an idiosyncratic case. client or to the financiers of projects.
As we illustrate in the following section, TECs
capture value by building experience and accu-
4. Empirical context: an introduction to mulating knowledge through partnerships with
TECs operators, strategy consultants and vendors. This
builds reputation, technological and project man-
TECs provide services to support the design, agement capabilities network connections and
development, maintenance and renewal of most leads to further assignments. We suggest that
of the physical infrastructures in modern econo- the main drivers of innovation in this category
mies (e.g. buildings, transport, utilities), over their are selecting experienced consultants to jointly
entire life cycles. They provide a very wide range envision new solutions with clients; structuring
of technical services ranging from conceptual the governance of projects for distributed pro-
design, project development, environmental as- blem-solving between clients and specialized con-
sessment, site selection, investment and acquisi- sulting and engineering firms, and developing
tion appraisal and warranty management to project management competencies that enable
decommissioning and rehabilitation.1 firms to cope with critical changes.
Examples of large multidisciplinary consulting TECs tend to access external knowledge sys-
firms include employee-owned firms, such as tematically, and therefore operate in a classic
Mott MacDonald, and publicly listed companies open innovation system. The extract below from
such as Atkins Plc. However, there are numerous an interview with an engineer in the Transport
small firms that focus on fewer or even single TEC refers to the development of data-capture
markets. TECs operate in many distinct economic methods from work-sites that exploit university
sectors, nationally and internationally, providing research and lead to new safety standards and
facilities and systems (e.g. water/energy utilities; their wider application in the professional com-
industrial and commercial assets, transport infra- munity:
structure, hospitals, schools), in which many
activities are similar. The top 10 clients for UK I know certainly with this work on [Tube Train
civil engineers in 2005 tendered for contracts, Line] there is quite a good link with [University
individually worth between d286m and d1.9bn. X] . . . they are actually instrumenting some of
These include UK government departments the sites that we are working on with monitor-
(Transport, Health, Defence) and private sector ing instrumentation and their knowledge . . .
firms (Asda, National Grid Transco, Land Secu- they’ve gained, is then sent back to us so that
rities, News Corporation).2 we can actually see exactly what is going on
The ecosystem surrounding an infrastructure during a certain remedial process or whatever,
project is composed of a web of specialized and it is that type of stuff that then gets
consultants and contractors, typically connected published and is then slowly filtered through
to a central systems integrator. TECs play im- and becomes sort of more recognised and it’s
portant roles within this network in helping to when then, fine write an updated standard that
define problems and identify solutions. The num- that stuff then raises the level and really that’s
ber of contractual roles open to TECs appears to the cycle.(Transport TEC Engineer)
The Managing Director of Industrial Process A process, which under certain conditions, can
TEC described the development of a novel system produce a positive feedback cycle or generative
developed for an application in the highly regu- interaction, which has benefits for both TEC and
lated nuclear sector: their clients (see Figure 1, boxes 1–14).
In Section 4, we described how during genera-
you get all the expertise from [Client nuclear tive interaction TECs use both external knowl-
plant], from [a Blue Chip engineering firm], edge networks and more conventional internal
from [Name of Engineering Procurement Con- capability- and reputation building. Together,
tractor] from [name of another Nuclear Client] these (internal) micro- and (external) meso-level
all of these experts and the nuclear inspectorate mechanisms account for the generative develop-
. . . and we claimed the credit but the truth is ment of stocks of expertise, which flows through
it’s an industry developed design . . . So you the project network among TECs, their clients
can feel a lot more confident with it because and their partners. The most prominent mechan-
I’ve had all the bloody experts of the industry isms in the case studies3 are depicted in Figures 1
crawling all over it and changing it.(MD In- and 2. The case studies also identified other
dustrial Process A TEC) mechanisms that enhance competitiveness. These
include internal organizational processes, such as
These two extracts illustrate how knowledge ac- knowledge-management programmes (developed
cumulation occurs through networks, and links by each of the multi-disciplinary TECs studied),
with universities, other contractors, suppliers and and emergent capabilities based on the scale and
regulators. Much of the knowledge is formalized scope of operations. An example here is the
into decision methodologies that help retain past ability to offer clients a one-stop-shop covering
learning and experience, including professional all the project’s design needs (mentioned explicitly
guidelines and building regulations. by three TECs). This paper focuses on the me-
chanisms that feed into the generative interactions
associated with innovation, rather than the dis-
5. Micro- and meso-level mechanisms tinct dynamics associated with successful compe-
contributing to open, user-centric tition (despite its economic importance).
innovation Figure 1 presents a series of quotes from inter-
views about mechanisms that are inter-related
In this section, we show that TECs typically engage and occur across a range of client-TEC interac-
in bespoke projects that rely on working closely tions. These were selected on the basis of replica-
with clients to specify the design brief. These tion logic (i.e. they emerged repeatedly in the
projects are often critical to the client’s business cases studied). These interactions span project
and the cost of failure is high. The case studies cycles, clients and other stakeholders; Figure 1,
show that these units’ use of innovation to add thus, does not represent a single project cycle.
value for their clients is often limited (see quotes in These mechanisms form the core of generative
Figure 2). We find that although TEC often engage interaction as conceptualized in this paper.
in open, user-centric innovation, differences in their Figure 1 begins with Proposition (i) that in-
network relationships influence the rate and direc- novation delivers added value to the client’s
tion of innovation (e.g. from award-winning business. Value is generated for clients in a
bridges and tunnels to incremental advances such number of ways, for example, through enhanced
as new ways of applying pre-existing data-capture prestige (e.g. being associated with a conspicuous
techniques on site). Because outcomes influence the construction, such as London’s 30 St. Mary Axe,
accumulation of technological capabilities and re- popularly known as ‘the Gherkin’, or the Burj Al
putation, they in turn affect future performance. Arab Hotel known as ‘the Sail’, in Dubai);
Over time, these approaches can yield very different through improved functionality of assets (e.g. im-
outcomes as we illustrate below. proving the acoustics in a concert hall, reducing
hospital infection rates); cost savings (e.g. designs
that use prefabricated components to enable
faster build times (e.g. railway station platforms,
5.1. Dynamics of generative interaction
railway embankment renewals); or less disruption
Getting to a position where TECs, their clients (e.g. using tunnel jacking and ground freezing to
and other stakeholders, such as contractors and slide a pre-fabricated road tunnel under opera-
suppliers, can innovate together is a multi-stage tional railway lines in Boston’s ‘big dig’) or
improved safety (e.g. using movement monitoring Proposition (ii) in Figure 1 states that when
systems to reduce the risk of collapses during TECs generate client-added value this may have
excavations). This list is based on information ongoing benefits for the TEC. The mechanisms
gleaned from the interviews with TECs (e.g. see through which this is achieved include better
quotes 1 and 2 in Figure 1) and a review of some chances of repeat business and enhanced reputa-
leading UK engineering publications. However, it tion (boxes 3–6). This may improve the competi-
should be regarded as illustrative rather than tiveness of TECs in tenders. A Project Manager
exhaustive. described this as:
we were in a competitive situation on the Interviewees spoke about the benefits from
[Nuclear plant] project which made a big differ- reputation and client relations including the abil-
ence . . . I suppose [to] how much profit at the ity to influence the client and other stakeholders,
end of the day, how much profit we can make. such as contractors, in project decision making.
When you are in a competitive situation it’s you The ‘soft’ skills and status of the TEC project
know, you get beaten up a lot more commer- manager can also be important in influencing
cially at the start. But I am sure that one of the clients’ receptiveness to innovative solutions.
things that went in our favour was our track This, in turn, may allow the TEC to work in
record at the [name of prior client] project ways that create value for their clients. The
because all of the people within the nuclear following extract from an interview with a Trans-
industry they know each other and they are port Director and a leading engineer, illustrates
interconnected and I am sure they talk to each these points:
other. So I am sure the [previous] project helped
us actually win the [Nuclear plant] project. . . . so understanding of customers’ needs and
(Project Manager – Industrial Process A TEC) identifying solutions that will satisfy them is a
particular strength. It’s obviously grounded in
Generating repeat business or increasing reputa- technical expertise, but it’s also dependent on
tion and enhancing competitiveness are important advocacy, mentoring, learning from experience
in lowering the cost of sales by spreading the fixed and conveying that understanding to the cus-
costs involved in running a TEC and bidding for tomers through precedent and reputation . . . I
contracts (see quotes 5 and 6). However, as the mean our competitors obviously do that to a
next quote shows, although powerful, reputation certain extent as well. (Transport director 1)
in a particular technical field is not a panacea:
If the TEC staff can indeed convey the benefits of
an innovative approach and actually deliver
if people aren’t aware of us and they advertise added value, then the cycle is complete and
for designers . . . it can be difficult for us to should generate benefits for TEC and client (see
actually win you know because it’s an open Figure 1), opening the way to future cycles and
market and money comes into it but actually more generative interaction.
more than 50% of the work we do, we get from Two important caveats must be stressed. The
people phoning us up and asking us to do it first is that innovation is not a necessary pre-
and luckily they’ll do just about anything to get condition to drive the cycle illustrated in Proposi-
us to do it . . . . [but]we just lost a design tion (iii). TECs can grow organically through an
competition for one in [place name] and I accumulation of reputation/repeat business/ex-
haven’t had any feedback yet unfortunately pertise without being particularly innovative.
. . . what we would say is why, why is the However, in contributing to the creation of added
practice that’s got by far and away the more value for the client, innovation is an important
expertise. Why have we lost this competition? driver of generative interactions and the poten-
(Public amenities TEC- Innovation leader) tially beneficial outcome of these interactions.
Also, as our interviewees pointed out, it may be
This extract and quotes 7–10 lead on to Proposi- difficult to innovate within a client project. Figure
tion (iii) in Figure 1, namely that there is a 2 puts forward two propositions which in our
reinforcing dynamic between reputation, repeat view represent a key challenge to the promotion
business and accumulation of expertise, all of of generative interaction in engineering projects.
which feed into one another. Finally, quotes 11– Proposition (v) is that TECs often do not have the
14 under Proposition (iv) in Figure 1 suggests that resources required for independent innovation
this cycle generates greater profit margins for (although there are some modes of innovation
TECs. This could be due to reductions in the they do manage alone4). It is notable that while
costs of sales, but might be due also to innovation Water TEC and Automotive TEC both had R&D
and the scarcity of a particular resource (see facilities, unlike the other TECs, even these TECs
quotes 3 and 9), which allow premium pricing. were still reliant on external funding or other
This supports research that suggests that firms use resources to take forward innovation (quotes 15
‘magnet’ projects to enhance their reputation in and 19). Proposition (vi), supported by quotes
design or problem solving, in order to attract 21–24, is that both clients and contractors (in-
customers (Dodgson et al., 2005). cluding TECs) are strongly constrained by the
existing institutions, inter- and intra-organiza- . . . commercial risk, health and safety, techni-
tional structures, culture and power (Bijker, cal risk . . . there are lots of different types of
1995; Burnes, 2004; Nelson, 2008). Often, these risk but the way to manage this area is to
constraints are quite justifiable not least because actually get the parties together in a different
of the different perspectives of project stake- procurement way and have a workshop on risk
holders as we explore in more detail below. where everybody in a non-confrontational way
In projects, the TEC has to innovate with the . . . can raise it, it gets owned, examined and
client and other contractors in the project’s inno- proportioned and then you can show that the
vation network also have to be brought into risk of being conventional is actually higher in
agreement. This is important because generative all sorts of ways. All those factors where the
interaction can only occur when the gap between risk hits you can demonstrate and then you can
the project participants undertaking design and its move forward to introduce . . . which is effec-
implementation is bridged. This applies particularly tively innovation (Transport TEC Director 1)
to civil engineering projects because design consult-
ing and engineering procurement consulting are Health TEC had found an alternative way to
very distinct types of business.5 The TECs in our introduce innovation and facilitate generative
sample emphasized this requirement for harmoni- interactions. They choose to forgo joining the
zation. The Transport, Public Amenities, Health consortia bidding for larger but higher risk con-
and Industrial Process B TECs all referred to the tracts to design and build hospitals. Instead, they
importance of such methods as ‘open-book ac- favour taking and adapting the traditional role of
counting’, which allow contractors and clients to the client’s technical advisor (who help the client
work together within a mutually shared under- to develop the tender documentation and run the
standing of each other’s incentive structures. Such competition). The Health TEC project manager
approaches were one way in which innovation explained that ‘you sacrifice a much bigger fee for
could be introduced into a project: the right to be more innovative in the business . . .
technical advisor role isn’t new but the way we loop of generative interaction will develop in
approach it . . . is quite new’ The benefit comes which open user-centric innovation leads to
from persuading the client to put out a more added value for clients, and repeat business,
detailed tender than is usual. The advantage of better client relationships and accumulation of
this (in addition to a higher fee for the Health technical expertise and enhanced reputation for
TEC) is that: ‘If the brief is very well defined and the TEC. These mechanisms enable TECs to work
the design is well defined then . . . not only is the with clients prepared to sign off on innovative
programme time shortened, but the cost of bid- solutions. This cycle produces benefits for the
ding is a lot less’. The Health TEC claimed that by TEC in the form of increased profit margins
showing clients how to create space in the bidding (beyond reduced cost of sales), based on the
process for innovative designs, they were attract- ability to put a premium price on work that
ing a new stream of stimulating work internation- requires particular skills or because prior experi-
ally and also introducing clients to the one-stop- ence, and innovative methods enable more effi-
shop for additional design features provided by cient and/or more cost-effective work than is
their multi-disciplinary consultancy. The Health being offered by the competition.6
Project Manager concluded ‘all this can be looked
at outside of if you like the red hot competitive
bidding stage . . . it’s [a] more rational integrated
holistic engaging approach with the client so that
5.2. Dynamics of degenerative interaction
you get buy in.’ We have shown the feedback loop of generative
These routes to more influence over the project, interaction and shown how it can be inhibited or
adopted by the Health and the Transport TEC interrupted (in Figure 2). We now describe how the
may be critical because innovative projects are interactions between TEC and client can deterio-
often perceived to be more risky, especially in the rate into degenerative interactions through a dif-
context of large capital intensive projects. ferent feedback loop (see Figure 3). These negative
In summary, when TECs, clients and other interactions are related to the client’s attempts to
stakeholders are able to overcome the constraints reduce costs through tender-based competition to
depicted in Figure 2, then a positive feedback push down prices, or through contracts that push
the risk onto the contractors. Proposition (vii) at of Sales in Industrial Process B TEC noted that
the centre of Figure 3 is that clients’ efforts to quality was adversely affected in fixed fee projects:
protect themselves may produce degenerative in-
teractions in a business environment. For example, [In the past] there was far more lump sum
in the UK government procurement of civil en- bidding [in the UK] . . . a client would come
gineering services is a business environment that out with . . . work and they’d say . . . ‘Give me
frequently produces degenerative interactions. your price to do the full engineering and con-
Quotes 26, and 29–31 in Figure 3 suggest that struction management on a fixed price’, okay,
they may arise as a result of competitive tendering and of course they, they picked the lowest price
among TECs. In Section 4, we described how and then what they get is . . . a contractor
TECs win work to design assets, or provide they’re working with who all the time is snap-
consulting services to the client directly or work ping at their legs trying to get change orders to
in a consortium to serve the client. While compe- get the prices so they can make some money,
tition is often important to maintain a healthy but on the top of that they’re giving as crumby
industry (Tidd and Bessant, 2009), our interviews a product as possible because they’re trying to
show that staff in several TEC consider that get their costs down, okay? And so what
competitions for tenders are often badly mana- happens is these jobs regularly went extremely
ged. Competitive tendering processes referred to pear-shaped, I mean running very late, way
explicitly by interviewees include ‘lump sum’ over budget, major punch-up ending up in
contracts (services for a fixed fee) and PFI (and claims and this consumes huge amount of
related public/private partnerships – PPP), which time in both the client and the contractor
they saw as contributing to a deterioration of resolving large claims, okay?
their business environment. One suggested that
However, the Transport, Health and Industrial
The Innovation Leader at Public amenities TEC Process A and B TECs emphasized that clients
suggested ‘‘the problem [is] it’s a very expensive tried to pass on the risks to their suppliers: ‘The
business to bid to do PPP projects. . .if you fail customers are no longer prepared to pick up
you know you’ve spent an awful lot of money reimbursable jobs of a million man-hours and
which could be on these big projects millions of have all the risks’ – said Industrial Process A TEC
pounds and then fail to win it.’’ Health TEC – Managing Director.
Director echoed this: ‘‘we work on a reduced fee A consequence of this client behaviour is that it
until we win the job. Now if you don’t win the job leads to an increasingly adversarial environment
then you make a loss.’’ in which litigation is more common, which has a
negative impact on innovation (quotes 27–29 in
The interviewees’ opinions were divided about the Figure 3).
merits and downsides of tender-based competition A director of one TEC (unspecified due to the
to drive innovation. However, interviewees from association with litigation) succinctly described
three of the largest TECs suggested that fixed fee how the client would not get an innovative solu-
and PFI competitions were generally avoided and tion by pushing the risk onto the TEC:
an advisory role was preferred (see Health TEC in
Section 5.1). Because two of these firms have a The procurement of services in our business is
good reputation for innovation, this would seem an changing . . . they [the client] are then looking
undesirable consequence of this form of competi- at it from the point of view of minimising their
tion. Indeed, one TEC noted that some regions had risk and transferring risk on to their suppliers.
taken steps to try to reduce the negative conse- They want us to take different sorts of risk
quences of price competition: ‘Federal acquisition than we would have done in the past. They are
in the [United] States prohibits the use of fee transferring risks that we are not best able to
competition. Fee competition if you want [some- deal with . . . they are trying to persuade us to
thing] that is divisive to innovation is very strong. It take risks that our insurers don’t want us to
pushes prices down, your risks right up . . . and the take . . . therefore what happens at the end of
[designer’s] fee right down’. [Transport – director 2] the day we have now come into a situation with
The outputs from PFI projects were seen as another key government customer . . . [where
being poor quality: ‘PFI has been a bit negative the TEC said] if we are going to be sued for this
really in terms of quality’ (Public Amenities – [if it goes wrong] then here is our solution [the
innovation leader). Similarly, the Vice President client said] ‘oh we didn’t mean that’ . . . . you
[the client] cannot transfer this risk too us [the the client benefits the TEC through reputation
TEC] and expect us to come up with an and repeat business; (iii) Reputation, repeat busi-
innovative or the best idea . . . Insurance costs ness and the accumulation of expertise feed into
[for TECs] in the market place are going sky each other; (iv) This cycle benefits TECs by
high. One way to ensure we get good insurance contributing to increased profitability in this
quotes is that we have a risk management business ecology (although equally they may
structure that demonstrates to the insurance suffer from degenerative interactions elsewhere);
community how we manage risks. You then However, (v) TECs are dependent on clients to be
find it starts to impact on some of the things able to innovate during projects, particularly as
you would do. they do not typically have access to the resources
they need for physical testing. Therefore, although
He went on to describe another situation where computer simulations allow a degree of ‘offline’
liability had had implications for future innova- learning, TECs generally lack the sort of protected
tive solutions: space for sufficient ‘offline’ R&D that Nelson
(2008) observes in other contexts (see for example
We were sued for some work overseas where at quote 20 in Figure 2). Furthermore (vi) clients, and
the time some concrete mixes we used were more indeed TECs and other project contractors are
risky but they were a good idea at the time and in often resistant or unable to support to the intro-
the past would not have been sued for advising duction of innovations to allow such testing for
on this particular approach because a govern- institutional or cultural reasons. Yet some staff in
ment would not have chased us . . . We got chased TECs, in certain situations, are able to overcome
in hindsight for something that was natural obstacles through multiple cycles of the type out-
practice in the world community and we ended lined in Figure 1, thus enjoying generative interac-
up shelling out money from our insurance poli- tion in that business ecology.
cies. What that then makes us do is we are now It is important to stress that the process of
not only saying how do we control risk today we generative interaction is dependent on context.7
are trying to guess which way the insurance In many situations, the scope for generative
market is going in the future so that makes us interaction is limited and innovation networks
even more conservative if we are not careful . . . are ineffective and lead only to technically ade-
quate designs and services, or even have a nega-
Of course, the greatest loss to the TEC in these tive influence. The negative effects may produce a
circumstances is the inability to interest the client downward spiral in the relationships among par-
in an innovative solution, which in turn limits the ticipants, which we term degenerative interaction.
ability to provide the best solutions in terms of Based on our findings, we would suggest that
added value. clients’ efforts to reduce costs or push the risk
onto contractors may extinguish innovation and
result in poor-quality outputs and interactions in
6. Discussion and conclusion that business ecology.
Generative and degenerative interactions are the
In the study reported here, we set out to char- products of firm-specific competencies and also the
acterize the dynamics of innovation in TECs, and experience and characteristics of the TEC, the
through an inductive process, to build on a line of client, and their environment. In line with Lane
theory conceived by Lane and Maxfield (1996) and Maxfield (1996), we find these interactions to
and extended by Swan and Scarborough (2005). be context specific and unlikely to be identified by
Our contribution adds to the literature on gen- firm level analysis of large TEC firms. The interac-
erative and degenerative interactions between tions we observed are those of individuals or teams
TEC and other organizations in the same business in particular markets and were only observed
ecology. Based on a series of empirically sup- through examination at that level (e.g. PFI in the
ported, testable propositions, we extended the United Kingdom). Generative interactions involve
scope of the term generative interaction, and both the meso and micro-levels, spanning teams of
argued that it occurs through a series of inter- specialized individuals in the firm and the commu-
related mechanisms that allow TEC to establish nities of clients, competitors, contractors, suppliers
and build on a trajectory of innovative projects and regulators with whom they interact.
through a process as follows: (i) Innovation adds Although the cases in this study relate only to
value to the client’s business; (ii) Adding value for TECs, we find little support for the notion that
open, user-centric innovation is sufficient for sus- Bidault, F. and Fischer, W.A. (1994) Technology
tainable competitive advantage. Instead, we find transactions: networks over markets. R&D Manage-
that traditional internal knowledge routines and ment, 24, 4, 373–386.
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Davies, A., Brady, T. and Hobday, M. (2007) Charting
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The authors gratefully acknowledge the support of theory from cases: opportunities and chal-
the Social Sciences and Humanities Research Coun- lenges. Academy of Management Journal, 14, 4,
cil of Canada for their support of the Managing 532–550.
Enkel, E., Gassmann, O. and Chesbrough, H. (2009)
Innovation in the New Economy (MINE) Pro-
Open innovation: exploring the phenomenon. R&D
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the engineers who generously gave their time for Flowers, S. and Henwood, F. (2008) Editorial: special
interview in support of this project as well as to Jeff issue on user innovation. International Journal of
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anonymous reviewers for providing helpful advice in Freeman, C. (1991) Networks of innovators: a
improving the paper. All the usual disclaimers apply. synthesis of research issues. Research Policy, 20,
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Michael Hopkins is a Research Fellow at SPRU
(Science & Technology Policy Research) at the
Notes University of Sussex. Originally trained as a
biologist, he moved into social science research
1. Other services typically undertaken by the case study at Sussex, gaining an MSc in Technology
firms include asset integrity management, marketing and Innovation Management, and a DPhil in
and strategic advice, commercial agreements, opera- Science and Technology Policy Studies. His re-
tional engineering, commissioning client assets, plan- search focuses on the evolution of socio-technical
ning permissions, project management, development
systems, particularly in biotechnology and engi-
of regulations, engineering specifications, feasibility
studies, inspection and analysis, site supervision, ten-
neering, spanning both technological and organi-
der adjudication, interface co-ordination, lifetime stu- zational change. He publishes in natural sciences
dies and testing and inspection. (Nature, Nature Biotechnology) and social
2. Anon ‘Top 10s’, Construction News, January 19, sciences (Research Policy, Science as Culture)
2006: p. 16. and continues to undertake interdisciplinary
3. We cannot exclude the possibility that in other TEC research.
firms, beyond our cases, these mechanisms and
probably many others, feed generative interaction. Joe Tidd is a Professor of technology and innova-
Figure 1 should be interpreted as a set of empirically tion management at SPRU (Science & Technol-
derived propositions, whose sufficiency and general- ogy Policy Research), University of Sussex, UK.
izability should be tested in future studies.
His research interests include managing process
4. The focus of this paper is generative and degenerative
interaction; discussion of innovation by TECs would
innovation, service innovation and the relation-
go beyond this. However, we should emphasize that ships between innovation and organizational per-
innovation in TECs does occur outside of externally formance and growth. He has written eight books
funded projects. For example, the larger TEC in our and 460 papers on the management of technol-
sample [Firms D, E and G] had developed software ogy and innovation, the most recent being Gain-
programmes and/or knowledge management systems ing Momentum: Managing the diffusion of
that helped them to work more efficiently. innovations (Imperial College Press, 2010) and
5. The Public Amenities TEC project manager and an Managing Innovation: Integrating technological,
engineer in the Transport TEC described the key market and organizational change (Wiley, 2009,
differences as being that designers invested in few with John Bessant).
physical assets and expected smaller fees on which
they earned higher margins, while engineering procure-
ment consultants (EPC) have to invest large amounts
Paul Nightingale is the Deputy Director of SPRU
in equipment, and take on a bigger financial risk (Science & Technology Policy Research), at the
during the building phase of projects, for which they University of Sussex and visiting Professor of
earned a smaller margin of the total project budget. Corporate Strategy at Cass Business School
Although this might be quite a large sum, the risks (City). He received his MSc and DPhil from
were also higher. TECs occasionally participate in risk/ SPRU, at Sussex. His work has appeared in
reward sharing with EPC, but profit margins can be Research Policy, Industrial and Corporate
quickly eroded if there are mistakes (e.g. penalties for Change, Trends in Biotechnology and Nature
the delays (the cases of the Wembley football stadium Biotechnology. His current research focuses on
in the United Kingdom, and the collapse of the UK biosecurity, financial innovation and the innova-
London tube maintenance company, Metronet, are
tive financing and management of high impact
examples of failures in risky projects producing very
adverse impacts on the firms involved).
firms.
6. Others have suggested that innovative projects may
benefit TEC by enhancing staff retention and re- Roger Miller (MSc, MBA, DSc) has pursued
cruitment as customers with interesting projects, and a dual career in academia and international
enthusiastic staff are keen to work in innovative and consulting. He holds the Jarislowsky Chair in
successful TEC (Salter and Gann, 2003). Innovation and Project Management at Ecole
GDV/gg/2013-04-17/212