Open innovation - research paper

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A comparison between cross-functional teams and open innovation teams regarding the communication between key decision-makers and these innovation teams (paper has not been peer reviewed, thus it might still contain minor mistakes)

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  • A comparison between cross-functional teams and open innovation teams regarding the communication between

    key decision-makers and these innovation teams

    Jasper Joithe 4040430

    Stijn Timmers 1318799

    Delft University of Technology SPD research 2010

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    A comparison between cross-functional teams and open innovation teams regarding the communication between

    key decision makers and these innovation teams Jasper Joithea

    4040430 Stijn Timmersb

    1318799 Delft University of Technology

    a Student of MSc Strategic Product Design at the Industrial Design Faculty, Delft University of Technology, Tel: +31 643154407, e-mail: jasper.joithe@gmail.com, (corresponding author).

    b Student of MSc Strategic Product Design at the Industrial Design Faculty, Delft University of Technology, Tel: + 31618767801, e-mail: s.timmers-2@student.tudelft.nl, (corresponding author).

    ABSTRACT The complexity and the dynamic environment of current innovation management forces organizations to cooperate. A new cyclic approach of the innovation process is characterized by having multiple organizations from different industry sectors working together. The result is that project team members come from different organizations. These networked innovation teams bring new complexities to the table. The purpose of this paper is to investigate the communication between key-decision makers of host companies and team members of networked innovation teams and how this influences the outcome of the open innovation projects. The communication aspects of traditional cross-functional teams will serve as a frame of reference since these are already explored by literature. Participants of networked innovation teams have been interviewed. An analysis of the transcripts based on grounded theory shows that networked innovation teams seek for project management guidance to define goals, form teams, provide resources, enhance efficiency and make decision to reduce uncertainty. Closer management involvement reduces this uncertainty in cross-functional teams. Furthermore, the low frequency of meetings and the distance between management and team members increase the communication barriers.

    Keywords Communication, open innovation, cross-functional teams, networked innovation teams, senior management, key decision-makers

    INTRODUCTION In the current competitive and international business environment developments are sought to differentiate and stay alive. By focusing on innovations, companies strive for better positions within their markets. New product development is one way to innovate. Essentials for faster development and implementation demands more flexible organizations in the product life cycle (Clark and Wheelwright, 1993). This combined with the

    increased competition obliges companies to have their own project teams, to seek for radical change to outperform the competition. So, cross-functional teams have been evolved to withstand this increased pressure. After several generations, where innovation has changed in regards to the structure, the process and the people involved, the most common teams are the so-called cross-functional teams (Holland et al., 2000). Companies experience several advantages in having operational cross-functional teams. Those teams enhance e.g. the speed of the process and due to the complementary team, complex problems can be tackled easier. Furthermore, creativity is stimulated and customer needs are better embedded. Besides further benefits, cross-functional teams also bring obstacles along. Because of the team members from different departments, competition between resources might occur. This can affect the definition of a proper and coherent goal, which again can lead to an unclear direction or priorities. Additionally, the management support and the corresponding communication between key decision-makers and the team are perceived significant influences on success. Those so-called success factors for cross-functional teams are well-described in current empirical studies.

    The downsides of cross-functional teams cause the exploration of further development on how innovation would be the most successful. This is also steered and pushed by the developments of the business environment. An example is that companies become more international oriented, due to new communication and logistical methods. Furthermore, to overcome the current complexity of innovations, companies are bundling their strengths. The sharing of knowledge between companies makes the innovation process more open and networked. This makes the team composition different from cross-functional teams. It is still ill-defined in literature whether cross-functional success factors are applicable for networked innovation teams as well.

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    In this research paper the search for success factors of those new open innovations team is initiated. The networked innovation teams discussed in this paper are considered as teams with open innovation processes.

    This paper will mainly focus on the communication between host companies key decision-makers and the networked innovation team, because many success factors can be traced back to this particular scope. The current studies about success factors in cross-functional projects are used as frame of reference and can be compared with findings from interviews with networked innovation team members of Design Initiatief projects. Design Initiatief facilitates open innovation projects. The results must give a clear comparison between the communication between key decision-makers and team members of both cross-functional innovation teams and networked innovation teams.

    The paper has been divided into several sections. The first section starts with a literature review of relevant concepts. In the second section the research method will be explained. The third section discusses the results, followed by the conclusion. The last section will state recommendations for further research and how Design Initiatief could improve open innovation team processes.

    LITERATURE REVIEW

    Development of innovation projects Since 1950s the innovation process within companies or governments has started to get more structured and recognized. Economic and technological progression to stay alive in the competitive environments was the main driver of the development and the maturity of innovation management, according to Ortt and van der Duin (2008). Scientific research increased to become a crucial part of innovation management. After four generations this is still the same, although many differences have occurred during those changing approaches.

    Currently, innovation management has reached the fourth generation, where innovation projects do not only occur in single departments of a company, but also between other departments internally as well as externally, with an emphasized focus on the market, following Rothwell (1994). Different disciplines of science, business, technology and markets are brought together to cover all aspects of the innovation process. This makes this generation significantly different from other generations concerning the innovation process. The process becomes more open with the increased influence of other parties and the alliances that are realized. This makes the new generation of innovation processes more open and therefore the name open innovation have appeared (Chesbrough, 2003). Also, many differences exist between other generations; researchers like Niosi (1999) and Rothwell (1994) have

    identified differences amongst the innovation generations, regarding the conditions in which the processes occurred like the innovation process, the structure, the strategy and the innovation outcomes. Nevertheless, still parts of innovation processes of earlier generations are currently used to seek for economic and technological improvements. Cyclic innovation The structure of the innovation process has changed over time. In the first two generations the process was linear, what means a sequential process from department to department within a company. This sequential process is also called the pipeline model. In the third generation companies tried to approach partners with particular market or technological knowledge. This interaction led to feedback loops within this remaining linear process. Lately, during the developments in the fourth generation, innovation processes have become more cyclic. Relatively, there is not yet much research done about this new way of innovation management in relation to research on earlier innovation generations. Nonetheless, e.g. Berkhout (2000) has tried to capture this entire new innovation process in a single model, called the Cyclic Innovation Model (CIM) (figure 1). This concept is not only a representation of the new innovation structure, but it is also applicable for other innovation aspects. The interaction between disciplines is visible with the four cycles between the four nodes, which represent the organizations in that particular field of knowledge.

    Fig. 1 Cyclic Innovation Model (Berkhout, 2000)

    Thus, this cyclic innovation process can be seen as a networked innovation process between companies, institutes or governments. Due to this networked cooperation, companies can focus on their core businesses again and bundle all the knowledge in singular processes, which are executed by project teams.

    Innovation teams When looking in-depth at what happens within cyclic innovation process and the traditional pipe-line process several differences appear, regarding the drivers that force companies to innovate, companies organizational structure, leadership, et cetera. People who work within

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    the process are exposed to all the mentioned influences. The team composition has also been changed over time.

    In the traditional pipeline process the innovation development was sequential from department to department, which is a mono-functional approach. After each development stage the process is hand over to other departments. This is a rather static approach.

    The fourth innovation generation has tremendously changed the innovation approach. Companies work more closely together and teams are formed with members from different companies to complement each other in the innovation process. These open innovation teams often operate project-based, through which every member gets involved in the process. Team members have to overcome the complexity of this networked innovation process, to start performing.

    Another common way companies innovate is when members of several internal departments join forces to merge e.g. marketing, technological and R&D knowledge. These are internal cross-functional innovation teams. Ancona and Caldwells (1992) definition of a cross-functional team is; members of different departments and disciplines are brought together under one manager and given the charge to make development decisions and enlist support for them throughout the organization. The higher management of a company assigns a team consisting of employees from different departments and delegates assignments to this team to end up with differentiated and superior products eventually (Cooper, 1979). Still, many companies make use of cross-functional teams in new product development. Success factors in cross functional innovation teams Since there is a lot of evidence regarding the team performance and the outcomes of cross functional teams, many success factors are identified which have an influence on the success rate of the innovation outcomes. Previous research has shown that a complex set of reasons affect the success of innovations. Success is interpreted differently amongst researchers. McDonough III (2000) defines it as success in comparison to the companies competitors performances, where Cooper and Kleinsmidt (2007) have developed a complete performance map to identify the success rate, with metrics like profit impact, sales impact, etc. Cooper (1999) identifies two types of success factors. Firstly, there are environmental factors, with a poor controllability. These appear in the market, technology or within the competitive set. Secondly, the factors exist which are more controllable, because these appear within the companys innovation process. This controllable set of factors will be explained in detail, because Cooper (1979) mentions that the environmental variables do not play a critical role in relation to the success of innovations.

    Controllable set of success factors It is hard to collect all the bits and pieces that might influence the outcome of an innovation process, because there is a lot of research done about the performance of cross-functional teams. Furthermore, the point of view can differ as well, e.g. Cooper (1999) (2000), Cooper and Kleinsmidt (1993) (2007) and Holland et al. (2000) discuss success factors from the innovation teams perspective, while Thamhain (1990) explains it from a managerial point of view. Despite these differences, many success factors appear to be important in general.

    True cross-functional teams are perceived as a significant part of innovation success and can cause the decrease in time to the market (Cooper and Kleinsmidt, 1993). Many departments have to be involved where each team member should possess an equal stake in the project. Thereby, the role of each team member must be clearly defined. The complete team must be accountable for the whole project process. Perceiving the importance of the project stimulates this accountability. Performance rewarding stimulates the level of motivation amongst team members (Steiner 1972). During the process many procedures have to be taken into account, this helps to increase the level of success. The team needs to be e.g. sufficiently prepared and understanding the customer needs. Time is needed in the initial phase to understand the goal and (corporate) objectives, to define the product and product strategy and plan the implementation before entering the development stage. Many teams rush through this front end. Project planning is also brought forward, by e.g. (Blindenbach-Driessen, 2006) and (Thamhain, 1990), as influence of success, although others state that planning functions as a barrier in innovation project teams (Barczak and Wilemon, 1991). Within the team strong leadership is needed, to recognize drivers and barriers in the innovation process to steer the team into the right direction. The project leader has to expose commitment as well. Commitment is important in both the team and between the team and the external parties, because it refers to a sense of duty that the team fells to achieve the projects goals and the willingness to do what is needed to make the project successful (Brown et al., 1994). Also senior management must act proactively towards the project team. Showing their involvement and commitment has a tremendous effect on the success of an innovation team, a...