COMPANY INNOVATION SYSTEM: A CONCEPTUALIZATION

InternationalAssociationforManagementofTechnologyIAMOT2018ConferenceProceedings

Page1of19

COMPANYINNOVATIONSYSTEM:ACONCEPTUALIZATION

ERIKDENHARTIGH

ÖzyeğinUniversity,FacultyofBusiness,Istanbul,[email protected]

ABSTRACT

Weconceptualizethecompanyasaninnovationsystemthatconsistsofcomponents,relationshipsand attributes,with the purpose to produce innovation. The systems approach to innovation hasreceived limited attention at the company level.While it is widely accepted for nations, sectors,regionsandtechnologies,andwhilesomecompany-levelfoundationsandbuildingblockshavebeenproposed,thedominantapproachatcompanylevelistoregardinnovationasaprocess.

Components of a company innovation system are actors or resources. Relationships refer to theconfiguration of these components: an innovation process now becomes one of the possibleconfigurations of components in a system. Attributes of a company innovation system arecapabilitiesandothersystemproperties,suchasinnovativecultureorinfrastructure.

Weexploretheconceptofcompanyinnovationsystembyanalyzingandcomparingcaseexamplesof ABB Group, Adobe Systems, Amazon.com, eBay, Hitachi, HTC, Lockheed Martin, Philips,Qualcomm,Salesforce.comandSouthwestAirlines.

Wefindthatusingthecompanyinnovationsystemapproach,wecanmapinnovationsystemsatthecompany level. We can identify the components, such as R&D departments, labs, ventureorganizations,teams,employees,C-levelofficesandfacilitatingtools.Wecanidentifyrelationshipssuch as single or multiple configurations, simple or complex configurations, technology-driven,market-driven or interactive configurations, and open or closed configurations. We can identifyattributes such as creativity versus efficiency emphasis, systematic versus non-systematicapproaches,adaptivenessofthesystem,andlargeproject-focusversusexperimentationfocus.

The findings indicate that companiesdesign, configureandcoordinate their innovation systems indifferent ways. Our current findings are tentative and preliminary and only provide descriptiveinsights of the case examples. A well-conceptualized and validated company innovation systemapproachmaygivemanagersrelevantinsightstoaddresstheproblemsofdesigning,configuringandcoordinating their company innovation systems. Academically, the company innovation systemapproachprovidescomplementaryinsightstotheexistingcompany-levelinnovationapproaches.

Key words: Company Innovation System; Corporate Innovation System; Innovation; Systemsapproach


Page2of19

INTRODUCTION

Weconceptualizethecompanyasaninnovationsystemthatconsistsofcomponents,relationshipsand attributes, with the purpose to produce innovation. The systems approach to innovationmanagementhas received limitedattentionat the company level. Innovation systemsapproacheshave been successfully applied to countries as National Innovation Systems (Lundvall, 1992), toregions as Regional Innovation Systems (Cooke et al., 1997), to sectors as Sectoral InnovationSystems (Malerba, 2002), and to technologies as Technological Innovation Systems (Carlssson &Stankiewicz,1991).Ineachofthosefields,theinnovationsystemsapproachiswidelyaccepted.

We propose the company innovation system approach as a relevant addition to the existinginnovation system approaches and to the innovation process approach. We base the companyinnovation system approach on foundations provided by Van de Ven (1986), who addressed thequestion of part-whole relationships in innovation management, by Granstrand (2000), who firstcoinedthetermcorporateinnovationsystem,byCarlssonetal.(2002),wholaidoutamethodologytoconceptualize innovationsystems,andbyO’Connor(2008),whousedthesystemsapproachformakingpropositionsaboutmajorinnovationinfirms.Weusemanyofthebuildingblocksthathavebeen proposed in the literature (Teece, 1996; Granstrand, 1998; 2000; Sigurdson& Cheng, 2001;Coriat&Weinstein,2002;O’Connor,2008;Steiber&Alänge,2013;Taylor&Wagner,2014;Chenetal.,2015).

At the company level, thedominant textbook approach is to regard innovation as a process (see,e.g.,Trott,2011;Tidd&Bessant,2013).TheintroductionoftheStage-GatesystembyCooper(1985)greatly contributed to the acceptance of the process view. Initially, many companies regardedinnovation processes as linear, with sequential steps, but soon they recognized that using cross-functionalmechanismsandparallelandnon-linearprocessesenhancedeffectivess(see,e.g.,Cooper1990). Cooper (2008) himself debunkedmanyof themyths that the Stage-Gate systemwould berigidandsequential,whilestillrecognizingthatmanycompaniesimplementitassuch.

With the advent of open innovation, companies and researchers have increasingly adopted aninnovationnetworkapproachinadditiontotheprocessapproach(Chesbrough,2003).Researcherswhouseanetworkapproachemphasizethestructureofasystem,countingthenumbersofnodesand linksandtheconnectednessbetweenthenodes.Researcherswhodevelopedtheconceptsofbusinessecosystemsandplatforms(e.g.,Moore,1993; Iansiti&Levien,2004;Gawer&Cusumano2014)haveextendedthisnetworkapproachintoasystemsapproach,inwhichthecompanyisoneof the actors within a technological (eco)system or platform. Researchers who use a systemsapproach look beyond systems structure, emphasizing the exchange relationships between theactors and the emergent properties at the system level. A systems approach to innovationemphasizes interaction, learning, and knowledge creation (Edquist, 1997). It allows inclusion of awide array of institutional attributes that may be important in explaining innovation, such asinnovativeculture,top-downversusself-organizedcoordination,oranopenversusclosedmindset.

The scope of this paper is limited: we only look inside the company, we use strictly a systemsapproach andwe only aim to describe. First, we only look at the company level, andwe do notventure into the links that clearly exist between the company and wider innovation systems or


Page3of19

networks (cf., Sigurdson & Cheng, 2001). Second, we do not make international comparisons ofcompany innovation systems in different national innovation or policy contexts (cf. Granstrand,2000; Sigurdson&Cheng, 2001). Third,wedonot aim to explainwhy a company is successful ininnovationorwhy somecompaniesaremore successful thanothers (cf., Steiber&Alänge,2013).Webelievethatthecomponents,relationshipsandattributesofthecompanyinnovationsystemareamong the factors that influence innovation success, but any attempt to include the companyinnovationsystemconcepttoexplaininnovationsuccesswillhavetowaitforthedevelopmentofabodyorempiricalresearch.

Empirically, too, our scope is limited to descriptive case analyses and a cross-case analysis of thecompany innovation systems of ABB Group, Adobe Systems, Amazon.com, eBay, Hitachi, HTC,LockheedMartin,Philips,Qualcomm,Salesforce.comandSouthwestAirlines.Theonlyaimoftheseanalysesistoshowthattheconceptcanbeusedtodescribecompanyinnovationsystemsandthattherearedifferencesbetweencompanies.Werecognizethatfurtherconceptualwork isnecessaryto fleshout theconceptand its sub-concepts, toenable testingand falsifying theconcept,and toclarify the connections with related concepts. Further empirical work is necessary to test theusefulnessoftheapproachforanalyzinginnovationincompanies.

COMPANYINNOVATIONSYSTEM

Foundationsandmethodologicalaspects

Granstrand(2000)coinedtheconceptofcorporateinnovationsystemanddefineditas“…thesetofactors,activities,resourcesandinstitutionsandthecausalinterrelationsthatareinsomesenseimportantfortheinnovativeperformanceofacorporation.”(p.14),adefinitionthatisinlinewiththeconceptsofnational,regional,sectoralandtechnologicalinnovationsystems.Hestudiedsuchsystemsindifferentcountycontexts,onanaggregatecountrylevel,identifyinganumberofimportantcharacteristicsanddevelopments,suchasthegrowingimportanceofexternaltechnologyacquisitionandtheincreasingdiversificationofcompanies’technologybase.Healsoinvestigatedimplicationsforgrowthandperformance.Grandstrand’s(2000)isthemostcomprehensivestudyonthistopictodate,butresultsarepresentedatanaggregatelevel,andcouldbemoreinformativefordevelopingtheconceptatthecompanylevel.

VandeVen(1986)providedafoundationforcompanyinnovationsystemsinhisdiscussionon‘problemsinthemanagementofinnovation’.Oneofthemainproblemsininnovation,heargues,isthemanagementofpart-wholerelationships.Atemptingandmuch-usedapproachforachievingmaximumproductivityistosegmentinnovationintoasequenceofstagesandtodividethelaboramongspecialistdepartments,likeR&D,productionormarketing.Suchapproacheshaveturnedouttobeinadequateforcomplex,interdependentactivitieslikeinnovationbecausetheefficiencyofthemicro-structurestoooftenleadstomacrononsense(VandeVen,1986).Analternative,heproposes,wouldbetousesimultaneouscouplingofbusinessfunctions,basedonthehologram/brainsmetaphorofMorgan(1986).Thisrequiresradicallydifferentdesignprinciplesfortheorganizationofinnovation,specifically:

i. allowingthecollectionofactorsresponsibleforinnovationtoself-organizeii. creatingredundantfunctions,ratherthannarrowspecialisms


Page4of19

iii. assuringrequisitevariety(Ashby,1962),meaningthatthecomplexityoftheinternalsystemshouldbelargeenoughtodealwiththecomplexityoftheenvironment

iv. usingtemporallinkage,meaningthatactorscanconfigureintogroups,changeconfigurations,eliminateconfigurationsandreconfigureintodifferentgroups,basedonthedemandsoftheirinnovationtask.

Fortheseprinciplestowork,VandeVen(1986)continues,thesystemneedsthegovernance,institutionalcharacteristicsandinfrastructurethatenableittolearn.Thisrequiresnetwork-buildinginsideandoutsidetheorganization.

O’Connor(2008)usedasimilarapproachtomakepropositionsabouthowfirmscouldorganizeandbuildcapabilitiesforgeneratingmajorinnovations.Sheproposesfourrequirementsforthevariousaspectsofacompanyinnovationsystemtobedefinedasa‘system’:

i. thesystemshouldbeidentifiableanditselementsshouldbeinterdependentii. thewholeshouldbegreaterthanthesumofthepartsiii. thereshouldbeinternalandexternalrelationshipsforthesystemtobeindynamicbalanceiv. itshouldhaveaclearpurposeinthelargersysteminwhichthesystemisembedded

Carlssonetal(2002),intheirpaperonanalyticalandmethodologicalissuesforinnovationsystems,indicatethatsystemsconsistofcomponents,therelationshipsamongthem,andtheircharacteristicsorattributes.Componentsareactors,artifacts(cf.,theresourcesmentionedbyGranstrand,1998),andinstitutions(suchaslaws,traditionsandnorms).Therelationshipsbetweenthecomponentsareessentialfortheformationofasystem:thepartsinfluenceeachother;thepartsinfluencethewhole;andthewholeinfluencestheparts.Suchrelationships,Carlssonetal.(2002)argue,canbemarket-basedonnon-marketbased.Thefeedbackloopsintherelationshipsprovidethedynamicsofthesystem.Attributesarepropertiesofcomponentsandrelationships,suchascapabilitiesforselectingmarkets,technologiesandorganizationmodes,organizationalcapabilitiesforcoordinatingandintegratingactivities,functionalcapabilitiesforexecutingtasksefficiently,andadaptivecapabilitiesthatallowthesystemtolearnfromsuccessandfailure.Nexttothis,thesystemhasdynamicproperties,suchasrobustness,flexibility,theabilitytogeneratechangeandtheabilitytorespondtochanges.Suchchanges,theyarguecanbeendogenouslyorexogenouslyinduced.Carlssonetal.(2002)definethreemajormethodologicalissuestoresolveforconceptualizingasystem:

i. whatisthelevelofanalysis?ii. whatisthedefinitionofthesystemboundary?iii. whatconstitutessystemperformance?

First,thelevelofanalysisforacompanyinnovationsystemisfairlyclear:itwillbeeitherthecorporateorthebusinessunitlevel.Weneedtobecarefulnottomixthelevels,althoughtheycanbeanalyzedtogetheraslongasitisclearonwhichlevelweare.Second,wedefinethesystemboundaryforthemomentverystraightforwardasthelegalboundaryofthecompany.Apossiblealternativewouldbetouseastakeholder-baseddefinitionthatwouldinclude,forexample,subcontractorsworkingwithinthecompanyortemporarylaborers.Furthermore,asarguedbyCoriat&Weinstein(2002)andasshownintheconceptsofSigurdson&Cheng(2001)andChenetal.(2015)thecompanyinnovationsystemmaybestronglyintertwinedwithwiderecosystemsor


Page5of19

regional,sectoralornationalsystemsofinnovation,anditmayinpracticenotbesoeasytodefinewhatis‘inside’andwhatis‘outside’.Thedynamicsofthesystemmeanthatthecompanyboundarymayevolveovertime.Nexttoorganicevolutionofthecompany,thismaybetheresultofmergersoracquisitions,orofallkindsofspin-outandsource-inmodesthatresultfromopeninnovation.Third,wedefinesystemperformanceorpurposeofacompanyinnovationsysteminabroadsense:itsoutputsincludedifferenttypesofinnovation(product,technological,businessmodel,organizational)withdifferentratesofinnovativeness(e.g.,incremental,radical),differentratesofsuccessorfailureanddifferentratesofimpactonthecompany,themarketortheworld.

Components

Followingthe‘template’forinnovationsystemsasputforwardbyCarlssonetal.(2002),wedefineacompanyinnovationsystemas‘thesystemofcomponents,relationshipsandattributeswithintheboundaryofacompany,thathasthepurposeofproducinginnovation.’

Startingwiththecomponents:thesecanbeactors,suchasindividuals,teams,departmentsorbusinessunits,businessorcorporatedecisionmakers(executivessuchasChiefTechnologyOfficersorChiefInnovationOfficers)incubators,centralordecentralR&Ddepartments,laboratoriesorfacilitatinggroups.Granstrand(1998,p.475),inhisconceptualizationofthetechnology-basedfirm,viewsafirmas“…alegallydefined,dynamichumansystem,consistingofasetofheterogeneousresourcesinaninstitutionalsetting…”.Heidentifiesresourcesasthemostimportantcomponentsofthesystemandheprovidesadetaileddiscussionoftheseresources,namelyphysicalcapital,financialcapital,intellectualcapital,relationalcapitalandhumanembodiedcapital.Thelatter,is,ofcourse,embeddedintheactorsandtheirrelationships.

Relationships

Thecomponentsoftheinnovationsystemcanbeconfigured,bytop-downcoordinationorbyself-organization,intoconfigurationsthataddressspecifictasks.Forexample,oneconfigurationfocusesoncomingupwithnewideas,anotherconfigurationfocusesondevelopingandlaunchingnewproducts(seefigure1).Wearguethattheseconfigurationswillnormallymatchthecomplexityofthecompany’senvironment(‘requisitevariety’).Wefurtherarguethattheseconfigurationscanrangefromtemporarytopermanent(‘temporallinkage’).Successfulconfigurationsaroundrecurringtasksareexpectedtobemorepermanent,reflectingthecompany’sexploitationofexistingresources,activitiesandcapabilities.Configurationsmeanttodiscovernewcombinationsorunsuccessfulconfigurationswillbemoretemporaryandreflectacompany’sexplorationactivitiesandthebuildingofnewresourcesandcapabilities(seealsoO’Connor,2008).Atthesystemlevel,wewillthereforeseeidentifiablestructuresandinterfaceswiththemainorganizationandtheenvironment(O’Connor,2008).

Notallthesystem’sactorsandresourcesneedtobeinvolvedineveryconfiguration.Indeed,differentconfigurationscanexistsimultaneously,partlyoverlappingandusingthesameactorsandresources,whileperhapsleavingotheractorsandresourcesunused(‘reducndancy’).Theuseofactorsandresourcesfordifferenttasks,orthe(temporal)lackofuseofsomeactorsandresourcesalignwithVandeVen’s(1986)designprincipleof‘redundancyoffunctions’:thecapacityofthesystemislargerthanwhatitactuallyneedsforanyspecificconfiguration,butpreparesitforwiderneeds.


Page6of19

Figure1:CompanyInnovationSystem

Weknowfrominnovationprocessliteraturethatprocessstructurescanrangefromlinearandsimple(inalimitedinterpretationofStage-Gate),tononlinearandinvolvingcomplexcoordinationmechanisms.Lookedatinthisway,aninnovationprocessbecomesaspecificconfigurationmodeofcomponentsoftheinnovationsystem.Thecompanyinnovationsystemapproachdoesthereforenotreplaceorcompetewiththeprocessapproach,butcomplementsandgeneralizesit.AccordingtoOrtt&VanderDuin(2008),acompanymaychooseadifferentconfigurationofitsinnovationprocess,contingentuponthetypeofinnovation,thetypeofbusiness,theresourcesavailable,ortheexternalenvironment.Differentconfigurationsmayexistsidebyside.Someconfigurationsaresuccessfulandwillbemorepermanentlylinked,meaningthatthecompanywillusethemoverandover.Otherconfigurationsmaybemoretemporarylinked.Thisalsopointstothecoordinationfunctioninacompanyinnovationsystem.Amorepermanentconfiguration,onceinplace,mayrequirerelativelylesscentralcoordination.Temporalconfigurationsandreconfigurationswillrequirecontinuouscoordination,eitherself-organizedandcentrallyfacilitatedorcentrallymanagedandcontrolled.

Whatdosuchconfigurationslooklike?Differentconceptshavebeenproposed.Teece(1996)identifieddifferentarchetypesofsystemrelationshipgovernancebasedontheinstitutionalcharacteristicsofexternallinkages,hierarchicaldecisionmaking,changeculture(whichheequateswithinformalstructure),scope(multi-orsingleproduct),andverticalintegration.AsarchetypesTeece(1996)identifiedthemultiproductintegratedhierarchy,thehighflexSiliconValleytype,thevirtualcorporationandtheconglomerate.Eacharchetypefacilitatesspecifictypesofinnovationandthecreationoforaccesstospecifictypesofcapabilities.

Chenetal.(2015)useRothwell’s(1994)fiveinnovationgenerationsasastartingpointtoidentifyanumberofarchetypesofinnovationsystems.TheuseofRothwell’s(1994)generationsalsoimpliesa


Page7of19

genericevolutioninhowcompaniesstructureandleadtheirinnovationsystemsovertime.Specifically,Chenetal.(2015)identify:

i. theinternalR&D-orientedinnovationsystem,withadominanttechnology-pushroleofinternalR&D

ii. theinternalandexternalcollaborativeinnovationsystem,withinterconnectedR&D,marketingandmanufacturingfunctions

iii. thehighlystrategy-orientedinnovationsystem,ledfromthebusinessstrategybytheCEOorChiefInnovationOfficer

iv. theecologicalinnovationsystem,whichdepartsfromthecompanylevelandseesthecompanyasanactorinabusinessecosystem

Coriat&Weinstein(2002)identifytwomainquestionsregardingsuchconfigurations.Thefirstis“Howcanoneunderstandboththediversityoforganizationalpatternsandtheexistenceofdominantmodesoforganization?”(p.276).ThisquestionisrelatedtoVandeVen’s(1986)designprincipleofrequisitevariety-differentenvironmentsrequiredifferentlevelsofsystemcomplexity-andtotheprincipleoftemporallinkage-someorganizationmodesaresuccessfulacrossenvironmentsandovertime,andwilltendtomorepermanentlinking,exploitingexistingresourcesandcapabilities.Coriat&Weinstein’s(2002)secondquestionis“Howcanorganizationalpatternsevolvetogivebirthtonewprinciplesandorganizationalsystems?”(p.277).ThisquestionisrelatedtoVandeVen’s(1986)designprincipleofself-organization(givenanewandunknowntask,thesystemwillreconfiguretotryandsolvethetask)andalsototheprincipleoftemporallinkage(unsuccessfulmodesormodesthatarenotcontinuallyrequiredwilldissolveandbereplacedbyothermodes,exploringnewroutinesandbuildingcapabilities).Coriat&Weinstein(2002)warnagainsttreatingthecompanyasaclosedsystem,explainingthatthecompany-and,consequently,itsdynamics-isapartofthewiderinstitutionalenvironment.Theyinterpretthisinstitutionalenvironmentmainlyasthenationalorsectoralsystemsofinnovationthatthecompanybelongsto.

Likeanysystem,acompanyinnovationsystemhasanenvironment,i.e.,thatwhichisoutsidethecompany,anditinteractswiththisenvironment,exchanginginputsandoutputswithit.Likethesystem’sownresources,suchinputsandoutputscanbephysical,financial,intellectual,relationalandhuman.Externalinnovationsystemssuchasplatforms,businessecosystems,technologysystems,regional,sectoralandnationalinnovationsystemsandthepublicsectorareimportantpartsofthatenvironment(cf.,Sigurdson&Cheng,2001).Companyinnovationsystemscanbemoreorlessopentothatenvironment(Chesbrough,2003).

Attributes

Finally,wecanidentifysystemattributes.Thelistofpossibleattributesislongandinvolveseverycharacteristicthatpotentiallyinfluencessystembehaviorandperformance.Sigurdson&Cheng(2001)providetenelementsofcorporateinnovationsystems,ofwhichsevencanbecharacterizedasattributes:organizationalabilityandstrategy,arrangementsforadvancedlearning,humanresourcemanagement,competitivestrategy,managementofintellectualpropertyrights,networkingabilityandstrategy,andfinancingstrategy.O’Connor(2008)proposesrequisiteskillsandtalentdevelopment,governanceanddecision-makingmechanisms,performancemetrics,andcultureandleadershipcontext.Steiber&Alänge(2013),inanin-depthcaseanalysisofGoogle’s


Page8of19

innovationsystem,identifysevensystemcharacteristicsthatarecoretocontinuousinnovation:innovation-orientedculture,selectionofindividuals,leadersandfacilitators,organizationalinfrastructure,performanceandincentives,organizationallearning,andexternalinteraction.Apartfromtheexternalinteraction,whichisanaspectofsystemrelationships,allaresystemattributes.

Manyoftheseattributeshaveincommonthattheyaredifficulttomeasure,somethingthatSteiber&Alänge(2013)forexampledobyinterviewswithcompanyemployees.Basedontheattributesproposedandtakingmeasurabilityintoaccount,weidentifyfiveattributesofcompanyinnovationsystems:

i. innovationasanexceptionversusinnovationasday-to-daybusiness;thisisrelatedtoinnovationculture

ii. non-systematicversussystematicinnovation;thisisrelatedtoorganizationalinfrastructureforinnovation

iii. dramaticturnaroundsversusadaptableorganization;thisisrelatedtoinnovationcultureiv. largebreakthroughprojectsversus(massive)experimentation;thisisrelatedtomechanisms

oflearning(see,e.g.,Thomke,2001;Taylor&Wagner,2014)v. theabilitytocombinecreativityandefficiency;thisisrelatedexploration-exploitation,to

mechanismsoflearningandtoorganizationalinfrastructure(see,e.g.,Reevesetal.,2013)

METHOD

Weexploretheconceptofcompany innovationsystembyanalyzingcaseexamplesofABBGroup,Adobe Systems, Amazon.com, eBay, Hitachi, HTC, Lockheed Martin, Philips, Qualcomm,Salesforce.com and Southwest Airlines. To construct the case examples,we used a case protocolthatcontainsrelevantaspectsofthecompanyinnovationsystem(seetable1).Fortheanalyses,onlypubliclyavailabledatawasused,suchasthecompanywebsiteanditsannualreports,pressreleases,mediacoverage,academicarticlesandotheravailablecasestudies.Thisdataputslimitsonwhatwecanmeasure;itisnearimpossible,forexample,tomeasureinnovativeculture,leadershiporhumanresourcemanagementpractices.

Table1:Caseprotocol

Question AspectofCIS

Analyzethecompanyaccordingtothecharacteristicsof“moderninnovationmanagement”(useasemanticdifferentialscale):

i. InnovationasexceptionversusInnovationasday-to-daybusiness Attributes

ii. NonsystematicversusSystematic Attributes

iii. DramaticturnaroundsversusAdaptableorganization Attributes

iv. LargebreakthroughprojectsversusMassiveexperimentation Attributes

v. Closed,withincompanyversusopen,innetworks Relationships

vi. InnovationasthebusinessofR&DversusInnovationaseverybody’sbusiness

Components

Didthisinnovationappearfromatechnology-pushmodel,fromamarketpullmodel,fromaninteractivemodel,orfromopeninnovation?

Relationships


Page9of19

Describetheinternalinnovationsystemofthecompany:

i. Isinnovationrepresentedattheexecutivelevel?Doesthecompanyhavea‘chiefinnovationofficer’or‘chieftechnologyofficer’?

Components

ii. Whatarethemaincomponents(actors,departments,units,incubators,centralorde-centralR&Ddepartmentsorlaboratories,etc.)involvedininnovation?

Components

iii. Howdothesecomponentsworktogethertocreateinnovation? Relationships

iv. Drawapictureofthecomponentsoftheinnovationsystemandhowtheyworktogether

Components

Relationships

Analyzewhichmechanismsthecompanyusestocombinecreativitywithefficiency

Attributes

Based on this case protocol junior researchers, i.e., senior undergraduate students, analyzed 152casesof largecompanies.Wecheckedtheseinitialcasesforqualityandcompleteness,forinternalconsistencyandformutualconsistency.Weselectedthe11bestandmostcompletecasesanddidacross-caseanalysisofthose,makingadditionalinterpretationswherenecessary.

RESULTS

Wepresenttheresultsofthecaseanalysesinthetables2,3,and4below.

Table2:Cross-caseanalysisofcoordinationandsystemcomponents

Company Overallcharacter

Principleofcoordination

Components:actors

Components:C-level

Components:R&Dvseverybody

ABBGroup Complex, linear, technology-driven

Key individuals connecting R&D with business; collaborations facilitated through software systems

R&D global and division level, ventures department

Chief Technology Officer overseeing all aspects

R&D is core

AdobeSystems

Individual-based, decentralized, rule-based

Informal, complex, highly de-centralized, but strictly rule-based

All employees (individual)

Chief Technology Officer and a Chief innovation and creativity officer

Everybody's business

Amazon.com Many small teams, informal, complex, decentralized

Informal, complex, highly de-centralized

Many small, independent teams; Lab 126

Chief Technology Officer overseeing key projects

Everybody's business


Page10of19



Components:actors

Components:C-level


eBay Multi-incubation, decentralized, technology driven

Self-organizing under strong C-level leadership

Incubation programs worldwide; hackatons; Innovation demo expo; R&D department

Chief Technology Officer leading technology vision and strategy

Everybody’s business, but technology driven

Hitachi Complex and holistic; project-based

Project-based and rule-based

Sister companies; de-central business development; technology strategy office; centers for social and for technological innovation; center for exploratory research

Chief Technology Officer and many decentral business development executives

Moderate, leaning toward everybody’s business

HTC Technology-driven and open

Self-organizing under strong C-level leadership

Developers (internal and external); HTC Design studio; Incubators; Business partners

No, but innovation is integral part of C-level responsibilities

Internal R&D and external partners

LockheedMartin

Multi-modal Depends on the type of innovation

Specialized R&D departments; Skunk works; de-centralized business; ‘lighthouse’ for open innovation

No; C-level officers of the business are responsible

Specific departments for specific breakthroughs combined with everybody’s business for improvements


Page11of19



Components:actors

Components:C-level


Philips Interactive, systematic, complex

Collaboration between various departments

Decentral country-based and business-based; central group innovation department; Incubators; Design center

Chief Technology Officer

Decentral: not everybody, but also not a single department: multiple departments are leading

Qualcomm Linear, technology push

R&D driven, linear process

R&D facilities around the world: labs and incubators; decentralized units, each with own unique knowledge

Chief Innovation Officer

Mainly R&D

Salesforce.com Simple, customer data-driven

Initiation de-central; implementation centralized; more impactful innovation coordinated by executive level

Individual employees; tools and labs

No, but innovation is integral part of C-level responsibilities

Mostly business development, driven by the business

SouthwestAirlines

Lean and flexible; decentralized yet efficiently coordinated

Strategy and innovation department initiates and coordinates

Multiple functional business departments

Chief Technology Officer and Chief Strategy & Innovation Officer

No R&D department: multiple departments involved

We find that using a company innovation systemapproachwe canmap themain components ofcompanies’ innovation systems, such as executive level representation, central innovationdepartments, de-central departments in regions or attached to the business units and businessteams. Companies differ in their centralization of innovation efforts, in the emphasis they put oninnovationbydepartments (mostlytheolder, industrialones)versus innovationby individualsandsmall teams (mostly theyounger, IT-basedones),and inseeing innovationas thebusinessofR&Dversusthebusinessofeverybodyinthecompany.Executiverepresentation isremarkablyuniform,witheitherspecificC-levelinnovationortechnologyofficersorclearinnovationresponsibilitieswithgeneralC-levelofficers.

Large differences can be seen in coordination mode: from top-down via R&D driven to self-organizing. We added an overall characterization of the company innovation system, which also


Page12of19

showsconsiderabledifferencesandwhichdoesnotimmediatelyshowanyarchetypesasproposedbyTeece(1996)orChenetal.(2015).

Table3:Cross-caseanalysisofsystemrelationships

Company Relations:innovationgeneration

Relations:closedversusopen

Relations:singleormultipleconfigurations

Relations:simple,linearversuscomplex

Relations:fixedversusreconfigurable

ABBGroup Interactive model, leaning toward technology-driven

Mostly closed; working with universities on R&D

Single: combining technology with customer input

Complex with interdisciplinary cooperation

Reconfigurable in idea and testing stage; fixed in development stage

AdobeSystems

Market pull Open or closed when and where necessary

Many parallel processes

Moderate complexity (small teams)

Extremely configurable

Amazon.com Interactive Mostly closed

Many teams ('pizza teams') working parallel on different projects

Moderate complexity (small teams)

Extremely configurable

eBay Open innovation, but technology is core driver

Leaning toward open

Multiple processes (internal and external paths)

Simple process (technology-driven), but with complex coordination

Reconfigurable within limits

Hitachi Between interactive and technology push

Moderate: not open but working with many alliances and partners

Multiple processes (project-based)

Complex, continuous collaboration for holistic solutions (project-based)

Project-based reconfigurable

HTC Open innovation, but technology is core driver

Open, with partners and external developers (open source)

Single Linear process, but complex coordination

Depending on the project different actors involved

LockheedMartin

Contextual: technology push, interactive and semi-open all exist

Multiple: closed and semi-open

Multiple processes: technology-driven and combining technology with customer input

Linear for breakthrough projects; complex for other projects

N/A


Page13of19

Company Relations:innovationgeneration

Relations:closedversusopen

Relations:singleormultipleconfigurations

Relations:simple,linearversuscomplex

Relations:fixedversusreconfigurable

Philips Interactive Moderate not open but working with many alliances and partners

Single, combining technology with customer input

Very complex, many departments and units involved

Reconfigurable within limits: depending on the project different actors involved

Qualcomm Technology-push

Mostly closed, but cooperation with universities in early stages

Single Simple linear Fixed

Salesforce.com Between demand-pull and interactive

N/A Multiple: data analytics-driven and customer insight-driven

Cross-functional teams

Fixed

SouthwestAirlines

Demand-pull

Moderate: open to input from networks, but innovation internal

Dual: initiation and implementation

Dual: initiation is more complex, implementation is more linear

Reconfigurable for implementation (‘relaxed structure’)

Wefindthatwecanindicatetherelationshipsbetweenthecomponentsofthecompanyinnovationsystems. This is no surprisewith the innovationgenerations concept (Rothwell, 1994;Chenet. al,2015), althoughherewe see companies that are inbetweengenerations and companies thatusemultiplegenerationsinparallel.

Internal and external innovation systems are intertwined (Sigurdson & Cheng, 2001; Coriat &Weinstein,2002;Chenetal.,2015),henceweshouldbecareful to include theeffectsofexternalinnovationsystemsonthecompanyinnovationsystem.Theopenversusclosedaspectcapturespartof these relationships, andhere, too,we seedifferences that transcenda simpleone-dimensionalscale:somecompaniesusemultiplemodes,beingopenforsomeinnovationproblemswhileclosedforothers.

We find that many companies use multiple configurations, either multiple processes or multiplenetworksorsubsystems,withintheircompanyinnovationsystems.Thisshowsthevalueofcompanyinnovationsystemconceptversustheinnovationprocessapproach.Processesexist,buttheyareaspecific typeofconfigurationof thesystem,even if somecompanies limit their systemtoasingleconfiguration.


Page14of19

Singleormultipleconfigurationsdoesnotequalsimple,linearversuscomplexconfigurations.Thereare companies with single, yet complex configurations and companies with multiple yet simpleconfigurations.

Anotherinsightfromthecaseexamplesisemphasisonreconfigurationsand‘newcombinations’(cf.,Edquist, 1997).We can detectwhere new configurations come from, e.g., from individuals, fromteams,fromcentraloffices,orfromprojects.Intheinnovationsystemsapproach,themechanismofhownewcombinationshappenisbuiltintotheanalysisratherthanexternallyassumed.Admittedly,alotofconceptualandempiricalworkneedstobedonetoclearlydemonstratethisprinciple.

Table4:Cross-caseanalysisofsystemattributes

Company Attributes:combiningcreativityandefficiency

Attributes:exceptionversusday-to-day

Attributes:systematicversusnon-systematic

Attributes:turnaroundsversusadaptable

Attributes:breakthroughsversusexperimentation

ABBGroup Multipleapproaches:separation;scientistinitiativewithbusinessselectioncriteria;localbusinesstouseglobalresources

Day-to-day Systematic N/A N/A

AdobeSystems

Self-organizationandself-selection

Day-to-day Moderatelysystematic

Adaptable Massiveexperimentation

Amazon.com Multipleapproaches:massiveexperimentationcombinedwithquicklearningfrommarketfeedback;separation(Lab126)

Day-to-day Moderatelysystematic

Adaptable Massiveexperimentation

eBay Internalandexternalecosystem(eBayinnovationdemoexpo;incubatorsandhackatons)

Day-to-day Systematic Adaptable Regularmajoradaptations(e.g.,Paypal,Skypeintegration)

Hitachi Self-organizationdeliversideasandexperiments;centralmanagementsetsboundaries

Day-to-day Systematic N/A Experimentation


Page15of19

Company Attributes:combiningcreativityandefficiency

Attributes:exceptionversusday-to-day

Attributes:systematicversusnon-systematic

Attributes:turnaroundsversusadaptable

Attributes:breakthroughsversusexperimentation

HTC Externalecosystem Day-to-day Systematic Adaptable Experimentation

LockheedMartin

Multipleapproaches:separation(Skunkworks);withinbusinessself-organizationandexternalecosystem

Day-to-day Systematic Bothadaptableandturnarounds

Breakthroughs

Philips Multipleapproaches:separation(PhilipsResearch);self-organizationthroughcomplexcooperation;ecosystemwithpartners

Day-to-day Systematic Adaptable N/A

Qualcomm R&Dgeneratesideaincooperationwithuniversities;thenlinearprocesstoselectandimplement

Day-to-day Systematic Continuousadaptation

N/A

Salesforce.com Culturesupportsideageneration;veryselectiveinimplementation

Day-to-day Systematic Moderate,leaningtowardadaptable

Regular well-functioningchanges; noradicalchanges

SouthwestAirlines

Separationandself-organization

Moderate,notday-to-day,butalsonotexceptional

Systematic Moderate:standardizedprocessesnotadaptable,butregularupdates

Towardexperimentationand fastlearning; noradicalchanges

Wefindthatwecan identifycompany innovationsystemattributes.Thecombinationofcreativityand efficiency (exploration-exploitation) shows different approaches taken by companies: fromhavingseparateunitsforcreativity/ideagenerationandefficiency/implementationmodes;viaself-organization,wheretheindividuals,teamsordepartmentsthemselvesdecidewhichmodetofocusonand/orwhentomaketheswitchbetweenthemodes;totheuseofexternalecosystems,whereexternal networks are configured for generating ideas or for efficient collaboration (Reeves et al,2013). The attributes of day-to-day innovation versus innovation as exception, systematic versusnonsystematicinnovation,andadaptableorganizationversuslargeturnaroundsdonotshowalotof


Page16of19

variance.Thismaybebecauseourselectionisbiasedtoinnovativeandlargercompanies,orbecausetheseattributesarenot sufficientlydifferentiating.Furtherconceptualdevelopmentandempiricaltestingseemsnecessaryhere.Thelastattribute,breakthroughsversusexperimentation–alearningmechanism(e.g.,Thomke,2001)–againshowsdifferencesfromoneendofthescaletotheother.

CONCLUSION

Objectiveandfindings

The objective of this paper was to conceptualize the company as an innovation system and toexplore this concept using descriptive case examples. The company innovation system approachbuildsonexistingtheoreticalfoundationsandsomerelevantbuildingblockshavebeenproposedintheliterature.Itprovidesadditionalandcomplementaryinsightstoexistingapproaches,specificallytotheinnovationprocessapproach.

Wefindthatusingthecompanyinnovationsystemapproach,wecanmapinnovationsystemsatthecompany levelandshowthedifferencesbetweenthem.Wecan identify thecomponents,suchasR&D departments, labs, venture organizations, teams, employees, C-level offices and facilitatingtools. We can identify relationships such as single or multiple configurations, simple or complexconfigurations, technology-driven,market-drivenor interactive configurations, andopenor closedconfigurations.Wecanidentifysystemcharacteristicssuchascreativityversusefficiencyemphasis,systematicversusnon-systematicapproaches,adaptivenessofthesystem,andlargeprojectversusexperimentationfocus.

Academicandpracticalimplications

This research has academic and practical implications. Academically, we propose that innovationmanagementcanbeanalyzedusingthecompanyinnovationsystemapproach.Wealsoproposethatcertainproblemsandcharacteristics,suchascross-functionalcooperation,learningandknowledge,theemergenceof newcombinations, and coordinationof the innovation functions, canbebetteranalyzedanddeeperunderstoodbyusingacompanyinnovationsystemapproachthanbyusinganinnovationprocessapproach.

Practically,companiesneedtoaddressproblemsofinnovationsystemdesign(whoorwhichpartofthecompany innovationsystem is responsible forwhat), innovationsystemstructure (howdothedifferent parts of the company innovation system work together) and innovation systemcoordination(howtoensurethatthecompanyinnovationsystemisproductive,fulfillsitsobjectives,and is stable). A well-conceptualized and validated company innovation system approach mayprovidemanagerswithinsightstoaddressthoseproblems.Whichbringsustofutureresearch.

Scopeforfutureresearch

The implications stated above are, at thismoment, tentative and preliminary. The current paperprovides merely an initial conceptualization and descriptive exploration of the company as aninnovationsystem.Furtherconceptualworkisneededtofleshouttheconceptanditssub-concepts,to integraterelevantadditionalconcepts(e.g.,variousattributes), toensuretheabilitytotestandfalsifytheseconcepts,andtoclarifytheconnectionswithanddistinctionfromrelatedconcepts.All


Page17of19

the analytical and methodological aspects of innovation systems as identified by Carlsson et al.(2002)shouldbefurtheraddressedandclarified.Specificissuesthatcometomindare:

i. the system definition/boundary, e.g., a strictly legal definition of the company versus astakeholder involvement definition, embedding in environment and larger systems (e.g.,Sigurdson&Cheng,2001;O’Connor,2008)

ii. the roleof the systemdesignprinciples (e.g.,VandeVen, 1986;Morgan1986;O’Connor,2008)

iii. the possible configurations of the system, archetypical, permanent, or temporary (e.g.,Teece,1996;Chenetal.,2015)

iv. the governance and institutional characteristics of the system (e.g., Van de Ven, 1986;Teece,1996;Sigurdson&Cheng,2001;Steiber&Alänge,2013)

v. adefinitionoftheelementaryunitsofthesystem(e.g.,Granstrand,1998)

vi. theroleofresources(Granstrand,1998)andcapabilities(Coriat&Weinstein,2002)

vii. thedynamicandevolutionaryaspectsoftheconcept(Carlssonetal.,2002)

Furtherempiricalworkisneededtodotheactualtestingandtodemonstratetheusefulnessoftheapproachforanalyzinginnovationincompanies.Suchempiricalworkcouldstartwithmappingtheinnovation systems of companies using the case method, making cross-sectional comparisonsbetweencompanies,or followingtheevolutionofspecificcompany innovationsystemsovertime.Specifically,duetothecontinuousfeedbackinthesystemproducedbyitsinteractions,weshouldbecarefulwith‘snapshots’(Carlssonetal.,2002).Longitudinalresearchisthereforestronglypreferred.

Upon availability of a sufficient basis of empirical observations, further questions could beempirically tackled, such as the contingency between system structure, governance and theenvironment, or the relationship between system structure, governance and innovativeperformance.

ACKNOWLEDGEMENTS

We thank our students Aarush Jaggi, Buğra Bilgili, Deniz Tunalı, Ecenaz Başaran, Emre Özdemir,GökçeTurna,KerimAlikemal,TahirGündüz,TracyMolho,UktuKuranandYuşaAtışfortheireffortsindoingtheinitialcaseanalysesandwethankDr.MarcZegveld(IBM)forhisinitialideasandworkontheconceptofcompanyinnovationsystemattheDelftUniversityofTechnology.

REFERENCES

Alikemal,K.(2017),QualcommWiPower.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Ashby,W.R.(1962),Principlesoftheself-organizingsystem.InPrinciplesofSelf-Organization:TransactionsoftheUniversityofIllinoisSymposium,H.VonFoerster&G.W.Zopf,Jr.(eds.),pp.255–278.London:PergamonPress.

Atış,Y.(2017),LockheedMartinF35LightningIIJetFighter.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.


Page18of19

Başaran,E.(2017),HitachiSmartCityAnalysis.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Bilgili,B.(2017),HTCViveVR.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Carlsson,B.,Jacobsson,S.,Holmén,M.,&Rickne,A.(2002),InnovationSystems:AnalyticalandMethodologicalIssues.ResearchPolicy,31(2),233–245.

Carlsson,B.&Stankiewicz,R.(1991),Onthenature,functionandcompositionoftechnologicalsystems.JournalofEvolutionaryEconomics,1(2),93–118.

Chen,J.,Huang,S-f.,&Xu,Q-r.(2015),FirmInnovationSystems:PerspectivesofResearchesonState-ownedKeyEnterprises.FrontiersofEngineeringManagement,2(1),64–70.

Chesbrough,H.(2003),Thelogicofopeninnovation:managingintellectualproperty.CaliforniaManagementReview,45(3),33–58.

Cooke,Ph.,Uranga,M.G.,&Etxebarria,G.(1997),Regionalinnovationsystems:Institutionalandorganisationaldimensions.ResearchPolicy,26(4–5),475–491.

Cooper,R.G.(1985),Selectingwinningnewproductprojects:UsingtheNewProdsystem.JournalofProductInnovationManagement,2(1),34–44.

Cooper,R.G.(1990),Stage-gatesystems:anewtoolformanagingnewproducts.BusinessHorizons,33(3),44–54.

Cooper,R.G.(2008),Perspective:TheStage-Gate®idea-to-launchprocess—Update,what’snew,andNexGensystems.JournalofProductInnovationManagement,25(3),213–232.

Coriat,B.&Weinstein,O.(2002),Organizations,firmsandinstitutionsinthegenerationofinnovation.ResearchPolicy,31(2),273–290.

Edquist,Ch.(1997),Systemsofinnovation:technologies,institutions,andorganizations.London:Routledge.

Gawer,A.&Cusumano,M.A.(2014),Industryplatformsandecosysteminnovation.JournalofProductInnovationManagement,31(3),417–433.

Granstrand,O.(1998),Towardsatheoryofthetechnology-basedfirm.Researchpolicy,27(5),465–489.

Granstrand,O.(2000),CorporateInnovationSystems:AComparativeStudyofMulti-TechnologyCorporationsinJapan,SwedenandtheUSA.PapersubmittedtotheDynacomproject.

Gündüz,T.(2017),AdobeSystems–AdobeCreativeCloud.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Iansiti,M.&Levien,R.(2004),Strategyasecology.HarvardBusinessReview,82(3),68–81.

Jaggi,A.(2017),AmazonEcho.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Kuran,U.(2017),ABBKNXI-BUS.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Lundvall,B-A.(1992),Nationalsystemsofinnovation:Ananalyticalframework.London:Pinter.

Malerba,F.(2002),Sectoralsystemsofinnovationandproduction.ResearchPolicy31(2),247–264.


Page19of19

Moore,J.F.(1993),Predatorsandprey:anewecologyofcompetition.HarvardBusinessReview,71(3),75–83.

Molho,T.(2017),eBay.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Morgan,G.(1986),Imagesoforganization.BeverlyHills:SagePublications.

O’Connor,G.C.(2008),Majorinnovationasadynamiccapability:Asystemsapproach.JournalofProductInnovationManagement,25(4),313–330.

Ortt,J.R.&VanderDuin,P.A.(2008),Theevolutionofinnovationmanagementtowardscontextualinnovation.EuropeanJournalofInnovationManagement,11(4),522–538.

Özdemir,E.(2017),Salesfoce.comandCloudComputing.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Reeves,M.,Haanaes,K.,Hollingsworth,J.&ScognamiglioPasini,F.L.(2013),Ambidexterity:theartofthrivingincomplexenvironments.BostonConsultingGroupPerspectives.

Rothwell,R.(1994),Towardsthefifth-generationinnovationprocess.InternationalMarketingReview,11(1),7–31.

Sigurdson,J.&Cheng,A.L-P.(2001),Newtechnologicallinksbetweennationalinnovationsystemsandcorporations.InternationalJournalofTechnologyManagement,22(5/6),417-434.

Steiber,A.&Alänge,S.(2013),Acorporatesystemforcontinuousinnovation:thecaseofGoogleInc.EuropeanJournalofInnovationManagement,16(2),243-264.

Taylor,A.&K.Wagner(2014),Rethinkingyourinnovationsystem.BostonConsultingGroupPerspectives.

Teece,D.J.(1996),Firmorganization,industrialstructure,andtechnologicalinnovation.JournalofEconomicBehavior&Organization,31(2),193–224.

Thomke,S.(2001),Enlightenedexperimentation:thenewimperativeforinnovation.HarvardBusinessReview,79(2),67-75.

Tidd,J.&Bessant,J.(2013),ManagingInnovation:IntegratingTechnological,MarketandOrganizationalChange-5thEdition.Hoboken:Wiley.

Trott,P.(2011),Innovationmanagementandnewproductdevelopment-5thEdition.Harlow:PearsonEducation.

Tunalı,D.(2017),Southwest.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

Turna,G.(2017),PhilipsLumea.AssignmentforENTR401/MGMT401TechnologyandInnovationManagement,ÖzyeğinUniversityBusinessSchool.

VandeVen,A.H.(1986),Centralproblemsinthemanagementofinnovation.ManagementScience,32(5),590–607.

Documents

COMPANY INNOVATION SYSTEM: A CONCEPTUALIZATION