"Management must manage!" Harold S. Geneen quotes (American Businessman, He was CEO of ITT (International Telephone and Telegraph) (1959-77)

Based on our today’s seminar, the Leadership within Innovation and Business Creation, I would like to write over some of my thoughts did surface after the lecture. We had a really interesting and helpful discussion, contemporary and future challenges and possible implications towards these directions for the managers were discussed, and many interesting points were raised. Eventually some of the issues which we as candidates of future’s managers should expect to deal with emerged as globalization, environmental issues, cultural clash, rapid technological changes, and scarcity of natural resources, financial breakdown and possible recession and such. Needless to say these alterations will be strong reflections over the managers therefore apart from the regular management duties as planning, organizing, monitoring and such, the management level will also need to revise some old habits and further gain some new skills, abilities, attitudes and behaviors to overcome these ongoing and some newly born issues. You will find some of the crucially important abilities and attitudes from my perspective in the following paragraphs:

Success comes along with trust
Building up relationship on mutual trust is located in the heart of the organizations, the other way around will block the development and the progress. Being trustworthy and open minded will definitely ease the work on managers’ shoulders.

The coming age will be the age of collaboration
Managers have to have the ability and capability to create a strong business network and cooperate with various external parties in order to gain and conceptualize knowledge and innovative ideas.

Doing the right things to do
Generally speaking environmental consciousness around the world has been increasing over the past decade. Consumers are more aware of the issues emerging around them. In this sense future managers shouldn’t be driven merely by profit and success, in fact always act socially responsible manners.

Steve Jobs' 2005 Stanford Commencement Address

True eye opener!

An Organic Organization and Cross-functionality to Spark Creativity

Here in this my new entry I will bring up some of my thought and points which struck me in the lecture we had with Mr. Ulf Spendrup and combine these thoughts with the learning’s I gained at Organizing and Leading Change seminars. Having said that, I must admit that I have always enjoyed hearing the pioneers and successful leaders form industries like Mr. Spendrup earlier this week, also I have always thought that these are great chances in order to put theory we have been taught into practice. So this week was a great opportunity in this sense.

During the lecture with Mr. Spendrup, he many times emphasized and praised being small and organic organization, he further put his view as a “Small is beautiful!”. As we know from the theory some of the main characteristics of being small can be counted as the following; flat structure, less hierarchy/more organic, flexibility, cross-functionality, cross-reference and less categorization. In small organizations ideas tend to be exchanged quickly between the employees, everyone can and should contribute from their own perspectives because it is being needed to survive. There is also a distinct lack of categorization of people within the company. Of course, employees are fulfilling their roles as engineers, electricians, and so on, but everyone is encouraged to give input on ideas. In addition the employees usually are not focused on one area, but diversified and skilled in many different areas with the ability to cross-reference in their work. At this point I believe the points has been mentioned above are completely in line with the Spendrups experience and besides these are the points Mr. Ulf and his brothers counted upon while they had been struggling their ways through today’s success. The cross-functionality and valuation of past learning’s was further highlighted in Spendrups’s ability to start new projects and jump between projects, and in the process make use of what had been learnt. The total flexibility to jump between projects was crucial for the company to be able to jump more quickly onwards. I believe these are highly important learning’s at the same time that much harder to control and follow in the course of growth. As in line with the theory, being small also brings chaos into the company and it might be destructive for those not familiar dealing with it!

One last point should be made for trust. Trust is the headstone of a healthy organization, without trust none of the points been made above will work properly. Trust among employees and more impotant trustworthy management is a must to set up a well functioning organization.

Open Innovation - External Sources in Innovation

According to Chesbrough (2003, 36) a fundamental shift has emerged in how companies generate new ideas and bring them to market. In the old model of closed innovation, firms adhered to the following philosophy: Successful innovation requires control, in other words, companies must generate their own ideas that they would then develop, manufacture, market, distribute and service themselves (see Figure below).

Toward the end of the 20th century, Chesbrough (2003, 36) points out two fundamental changes which have occurred radical changes in the notion of closed innovation:

…the dramatic rise in the number and mobility of knowledge workers, making it increasingly difficult for companies to control their proprietary ideas and expertise. Another important factor was the growing availability of private venture capital, which has helped to finance new firms and their efforts to commercialize ideas that have spilled outside the silos of
corporate research labs.

Sawhney (2002, 26) analyzes the alteration propounded by Chesbrough; ‘the innovation challenge has become how to best identify and use the knowledge that’s available both within and outside the company’.

Gallagher and West (2006, 319) define ‘open innovation as a powerful framework encompassing the generation, capture, and employment of intellectual property at the firm level.’ They identify three fundamental challenges for firms in applying the concept of open innovation: finding creative ways to exploit internal innovation, incorporating external innovation into internal development, and motivating outsiders to supply an ongoing stream of external innovations. Motivating outsiders to supply external innovations might be difficult, and Gassman and Gaos (2004) instead highlight the need for firms to identify such external ideas by using technological listening posts as a mean of technological knowledge sourcing. Later on Chesbrough (2003, 36-37) introduces the model of open innovation; ‘commercialization of external (as well as internal) ideas by deploying outside (as well as in-house) pathways to the market.’ (See Figure below)

Chesbrough (2004, 23) states that: Firms can and should use external as well as internal ideas and internal and external paths to market, as they look to advance their technology. Open Innovation assumes that internal ideas can also be taken to market through external channels, outside a firm's current businesses, to generate additional value.

Chesbrough and Schwartz (2007, 55) further explain the open innovation concept:

Traditional business models center around the idea of developing a product from internal technology (R&D) and then producing, marketing and selling that product one selves. Whereas the use of partners in the research and/or development of a new product or service creates business model options that can significantly reduce R&D expense, expand innovation output, and open up new markets that may otherwise have been inaccessible.

Van der Meer (2007) argues that an open innovation system requires a different way of thinking - different set of norms, beliefs and values. This claim is backed up by King et al. (2003, 600) in that: Given the “not-invented-here” emphasis that prevails in many firms, managers may not be naturally inclined to augment their firms’ internal resources with complementary, externally acquired resources. Such a bias may predictably decrease a firm’s ability to regularly appropriate rents from technological innovations. King et al. (2003, 600) argue that managers should be ‘receptive to obtaining from external sources the resources needed to create or exploit technological innovations’. Kirschbaum (2005, 24) claims that ‘innovation is a culture not a process’ and ‘successful, profitable innovation depends upon teamwork and an entrepreneurial culture’ by ‘combining internal and external competencies and knowledge, both in R&D and marketing’. Kirschbaum (2005,25) describes the successful approach of the Dutch company DSM - its ‘open innovation model for creating and nurturing new businesses involves the continuous appraisal and testing of ideas, projects and businesses until they are fully developed, spun off or rejected’. Gassmann (2006, 224) also suggests that:

Open innovation includes various perspectives: globalization of innovation, outsourcing of R&D, early supplier integration, user innovation and external commercialization and application of technology. Chesbrough and Crowther (2006, 229) further define inbound open innovation as ‘leveraging the discoveries of others’, and outbound open innovation as ‘looking for external organizations with business models that are better suited to commercialize a given technology’ Chesbrough and Crowther (2006, 235) further clarify that ‘the concept of open innovation ought not to be interpreted to imply the outsourcing of the entire R&D function’. Huston and Sakkab (2006, 62) adds substance to this, explaining that Proctor and Gamble’s open innovation model “Connect and Develop”; ‘ it is about finding good ideas and bringing them in to enhance and capitalize on internal capabilities’, and they stress that it was ‘crucial to know exactly what we were looking for’. As far as technology is concerned, Dodgson et al. (2006, 344) discuss in their study of Procter and Gamble’s approach towards open innovation that ‘as well as improving the company’s receptivity to external inputs into its innovation activities, technology also assists internal “openness”, by helping build effective communications between disparate groups in the company’. Actually, this is in accordance with Gassmann’s idea (2006, 225) which ‘by cooperation with external partners, many of a company’s orthodoxies – basic values and beliefs – are questioned, thus enabling breakthrough thinking’. In addition open innovation increases the extent of business and technological interdependencies between firms. Chesbrough (2007a, 25) states further on that open business models enable an organization to be more effective in creating as well as capturing value. These models also allow greater value capture by utilizing a firm’s key asset, resource or position not only in that organization’s own operations but also in other companies’ businesses. Sawhney et al (2007) argue that if all firms in an industry are seeking opportunities in the same places, they tend to come up with the same innovations. Thus, viewing innovation too narrowly blinds companies to same opportunities and leaves them vulnerable to competitors with broader perspectives. They define business innovation as the creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business system. When Christensen et al (2005, 1536) talk about the industrial dynamics of open innovation in the case of consumer electronics, they suggest that there will always be a level of “closedness” in innovating firms depending on how large a portion of the overall value they strive to appropriate and there need not be a consistent linear movement from closed towards open styles of innovation: A highly extrovert innovation strategy that is considered necessary for managing and controlling a technological discontinuity in the early stages of a new technology, is succeeded by a much more closed strategy in the subsequent rounds of follow-up innovations as the technology becomes more matur (Christensen et al. 2005, 1558). Similarly Kirschbaum (2005, 24) describes the successful approach of the Dutch company DSM emphasizing that ‘different management styles are required, ranging from a scientific approach in the early stages, to an entrepreneurial attitude in the early phase of commercialization, to a more risk-adverse mindset once the business has matured.’ These studies seems to confirm Chesbrough and Crowther’s (2006, 229) view that many companies on the market today are recognizing that ‘not all good ideas come from internal sources’. However, Chesbrough and Crowther’s (2006, 229) also stress upon that ‘not all good ideas can be successfully marketed internally.’ In this point Chesbrough (2007a, 22) states ‘one company develops a novel idea but does not bring it to market. Instead, the company decides to partner with or sell the idea to another party, which then commercializes it’. Companies yield by ‘allowing unused internal technologies to flow to the outside, where other firms can unlock their latent economic potential’:

The firm no longer restricts itself to the markets it serves directly. Now it participates in other segments through licensing fees, joint ventures and spinoffs, among other means. These different streams of income create more overall revenue from the innovation. (Chesbrough 2007a, 24) The concept of outbound open innovation that Chesbrough and Crowther (2006) use and later developed by Chesbrough (2007a) further conceptualized by Lichtenthaler (2007a, 67), who states that ‘product marketing and licensing are a complement to the firm rather than a substitute in technology exploitation’. Lichtenthaler (2007b) finds differences between external technology exploitation and internal innovation by arguing that ‘efficiency is essential in internal innovation, but it is less important in external technology exploitation’. He suggests that ‘the data point to managerial deficits in planning and intelligence, which are considered the greatest challenges of successful external technology exploitation’ and therefore calls for ‘competence-based approaches to organizational boundaries’. Further, Lichtenthaler (2008) states that to leverage ‘technology assets in the presence of markets for knowledge’, it’s often a case that ‘technologies are simultaneously applied inside the firm and transferred across firm boundaries’. As a result ‘companies have to develop integrated strategies that facilitate ‘keep and-sell’ approaches to technology exploitation’ and that such ‘dynamic capabilities may constitute an important source of competitive advantage’. Chesbrough (2003) presents a useful comparison to summarize the debate between the closed and open innovation (See Table below).

References:

Chesbrough, H. (2003)’ The Era of Open Innovation’, MIT Sloan Management Review, Vol. 44, No. 3, pp. 35-42.

Chesbrough, H. (2004) ‘Managing Open Innovation’, Research Technology Management, Vol. 47, No. 1, pp. 23-26.

Chesbrough, H. and Crowther A.K. (2006) ‘Beyond high tech: early adopters of open innovation in their industries’, R & D Management, Vol. 36, No. 3, pp. 229-236.

Chesbrough, H. and Schwartz, K. (2007) ‘Innovating business models with co-development partnerships’, Research Technology Management, Vol. 50, No. 1, pp. 55-60.

Chesbrough, H. (2007a) ‘Why Companies Should Have Open Business Models’, MIT Sloan Management Review, Vol. 48, No. 2, pp. 22-28.

Christensen, J., Olesen, M. and Kjaer, J. (2005) ‘The industrial dynamics of Open innovation – Evidence from the transformation of consumer electronics’, Research Policy, Vol. 34, No. 10, pp. 1533-1549.

Dodgson M., Gann D. and Salter A. (2006) ‘The role of technology in the shift towards open innovation: the case of Procter & Gamble’, R&D Management, Vol. 36, No. 3, pp. 333-346.

Gassmann, O. and Gaos, B. (2004) ‘Insourcing Creativity with Listening Posts in Decentralized Firms’, Creativity and Innovation Management, Vol.13, No. 1, pp. 3-14.

Gassmann, O. (2006) ‘Opening up the innovation process: towards an agenda’, R&D Management, Vol. 36, No. 3, pp. 223-228.

Huston, L. and Sakkab, N. (2006) ‘Connect and Develop: Inside Proctor & Gamble’s New Model for Innovation’, Harvard Business Review, Vol. 84, No. 3, pp. 58-66.

King, D.R., Covin, J.G. and Hegarty W.H. (2003) ‘Complementary Resources and the Exploitation of Technological Innovations’, Journal of Management, Vol. 29, No. 4, pp. 589-606.

Kirschbaum, R. (2005) ‘Open innovation in practice’, Research Technology Management, Vol. 48, No. 4, pp. 24-28.

Lichtenthaler, U. (2007a) ‘The Drives of Technology Licensing: An Industry Comparison’, California Management Review, Vol. 49, No. 4, pp. 67-89.

Lichtenthaler, U. (2007b) ‘Externally commercializing technology assets: An examination of different process stages’, Journal of Business Venturing, forthcoming 2008.

Lichtenthaler, U. (2008) ‘Leveraging technology assets in the presence of markets for knowledge’, European Management Journal, forthcoming 2008.

Sawhney, M. (2002) ‘Managing Business Innovation: An Advanced Business Analysis’, Journal of Interactive Marketing, Vol. 16, No. 2, pp. 24-26.

Sawhney, M., Wolcott, R.C. and Arroniz, I. (2007) ‘The 12 Different Ways for Companies to Innovate’, MIT Sloan Management Review, Vol. 47, No. 3, pp. 75-81.

Van Der Meer, H. (2007) ‘The Dutch Treat: Challenges in thinking in business models’, Creativity and Innovation Management, Vol. 16, No. 2, pp. 192-202.

West, J. and Gallagher, S. (2006), ‘Challenges of open innovation: the paradox of firm investment in open-source software’, R & D Management, Vol. 36, No. 3, pp. 319-331.

Absorptive Capacity

The concept of absorptive capacity was first introduced by Cohen and Levitnhal (1990, 128) in their study called “A New Perspective on Learning and Innovation” and defined as ‘the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends’ and this process ‘is critical to the firms innovative capabilities’.

Cohen and Levitnhal (1990, 128) further argue that ‘the ability to evaluate and utilize outside knowledge is largely a function of the level of prior related knowledge’. Besides, according to them; absorptive capacity certainly begins with individuals. They also emphasize the exploitation dimension of the absorptive capacity by stating ’absorptive capacity refers not only to the acquisition or assimilation of information by an organization but also to the organization's ability to exploit it’ (Cohen and Levitnhal 1990, 131).

Zahra and George (2002, 186) redefine absorptive capacity (ACAP) and offer a third definition as ‘a set of organizational routines and processes by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational capability’, while Jones (2006, 357) further defines it as ‘a dynamic capability based on the creation and utilization of knowledge that contributes to improved competitive advantage’. Zahra and George (2002, 186) subsequently reconceptualize the notion of ACAP through dividing into two subsets namely “potential and realized absorptive capacity.

Potential capacity comprises knowledge acquisition and assimilation capabilities, and realized capacity centers on knowledge transformation and exploitation (Zahra and George 2002, 185).

Zahra and George (2002) stress upon the four dimensions of ACAP comprehended by their definition – acquiring, assimilating, transforming, and exploiting the knowledge, they state that these four dimensions ‘play different but complementary roles in explaining how ACAP can influence the organizational outcomes’. In their study, they relate each of the four dimensions that compose ACAP to its respective components, roles, and importance (See Table Below).

Absorptive capacity begins with individuals, it is the organizational ability to acquire and apply new knowledge that is of primary interest (Cohen and Levinthal, 1990). Zahra and George (2002) reconceptualise absorptive capacity (ACAP) as a dynamic capability based on the creation and utilization of knowledge that contributes to improved competitive advantage. Dynamic capabilities place more emphasis on the ability of firms to respond to an unstable business environment.

References:

Cohen, M. W. and Levinthal, D.A. (1990) ‘Absorptive Capacity: A New Perspective on Learning and Innovation’, Administrative Science Quarterly, Vol. 35, No. 1, pp. 128-153.

Jones, O (2006) ‘Developing Absorptive Capacity in Mature Organizations: The Change Agent’s Role’, Management Learning, Vol. 37, No. 3, pp. 355-376.

Zahra, S.A. and George, G. (2002) ‘Absorptive Capacity: A Review, Reconceptualization, and Extension’, Academy of Management Review, Vol. 27, No. 2, pp. 185-204.

Big Threat; Solution is Underway!

Over the past few decades, our world has been continuously struggling with environmental issues. Recently global and regional climate change has emerged as the biggest and most urgent issue the global society has to face, no doubt various industries will be affected by this upheaval. Fortunately, awareness across the world over environmental issues has been growing to some extent simultaneously though hasn’t came to the desired level. In this entry I will try to address some of these issues which are highly related in being Green Innovation.

As a matter of fact fossil fuel consumption is being accused for having the biggest impact over global warming. New ways and innovative solutions such as wind mills, bioenergy and especially second generation biofuels which employ advanced technical processes can potentially displace a substantial amount of fossil fuel and eventually make the world better off.

However second generation is an ongoing progress and doesn’t seem economically viable in some future time therefore evaluated as some long-term promise. Though, it is an attractive topic and being developed rapidly. Currently the biofuel industry is dominated by mainly two countries; USA and Brazil (OECD 2004, 2007). In his State of the Union speech on January 23, 2007, President Bush set the goal of producing 35 billion gallons of renewable and alternative fuels by 2017, citing the need for independence from foreign oil since oil prices has been showing high volatility and this pattern seems to persist.

Besides many car manufacturers have welcomed this new era by hosting different technologies and adapting new innovative solutions. One example is Swedish car manufacturer Saab which believes that one viable direction is to move towards ethanol. Saab has developed the 9-5 BioPower model which runs on biofuel ethanol for the Swedish market, where about 80 percent of Saab’s sales are now BioPower models, and Saab is promoting sales in other European markets and extending BioPower to other models (Saab’s official website).

It can be said that green innovation is growing rapidly. I strongly believe that by relying on green innovation the followings will actualize soon; recycling waste, diversifying the sources of energy and not but least reducing CO2 emissions and other pollution.

References:
OECD (Organization for Economic Co-operation and Development) (2004) ‘Biofuels for Transport; an International Perspective’, International Energy Agency
OECD (Organization for Economic Co-operation and Development) (2007) ‘Biofuels for Transport: Policies and Possibilities’

Reflection over the Creativity Module Articles

Jane Epstein has just become a manager at TechniCo. She's trying to get a fix on the various personalities and roles of her new coworkers, and by and large, she seems to have inherited a pretty good team. Something about Andy Zimmerman, though, has her worried. Andy is a kind of guy humiliates and insults other employees for minor mistakes; ruthlessly cuts down colleagues when they present ideas that aren’t fully developed, and makes everyone in the group feel small and stupid. But on the other hand he is a kind of guy notably good at his job; almost the best in the group. I believe Jane is very well aware of that leaving Andy out of the group would be no good for her group. However she also knows that tolerate Andy’s unacceptable behaviors will obviously have some undesirable consequences for the group too. Well, it seems that this kind of confrontations that Jane has to face come off often in many organizations. I believe that finding one-size-fits-all solutions for these kinds of confrontations is almost impossible. Also this is where one manager separates from one another. In the organization where I used to work, we had one Andy as well; he was the kind of guy prefers doing nothing but sitting in his office, you could have seen him rarely out of his office or talking to anybody. But alike our Andy was gifted too when we stuck in numbers. Though everything about him had to be complicated and problematic; every time when we needed his help, he criticized everything what we had been doing and demanded the work to be redone as the way he requested. Well as many might guess, that was driving us crazy. At first we tried to get along with him; invited him out to have some drink with us, he simply refused. Nevertheless we didn’t give up on him, called him at the breaks for a coffee, it didn’t work out. At times we had serious discussions; one could say we were at each other's throats! One might ask where the manager was standing on this picture. Well he was very well aware of what was going on however Andy was not the kind of guy easily bent his head over, he was literally stubborn. His rights were the universal ones according to his logic. Besides with his unique abilities he was not easily disposable. Eventually after some time things got seriously worsened. Nobody was talking to our Andy; neither was he. Finally the situation got unbearable, when the top management realized that the business started to get affected by the conflict through communication slowing downs, emerging a hostile atmosphere etc… our Andy was dismissed. Unfortunately even after his dismissal we couldn’t regain the peaceful environment back.

In the article The Weird Rules of Creativity. Sutton (2001) outlines several ideas for managing creativity that are clearly odd but somehow effective. Such ideas echoed by well-known scholars are being captured; like creative destruction by Schumpeter takes the form of ignoring what has worked before or pushing perfectly happy people into fights among themselves. The author discusses new approaches to hiring, managing creative people, and dealing with risk and randomness in innovation. I believe that these practices will broaden the companies’ views and guide them to look for alternative ways of getting innovative information and ideas then the traditionally way or past models.

And lastly I would like to reflect my opinions over the article called the MBA Admission Criteria and an Entrepreneurial Mind-Set: Evidence from “Western” Style MBAs in India and Thailand by Shepherd et al. (2008). The finding that Shepherd et al. (2008, 169) ‘an existing selection criterion for MBA admission —the GMAT— was negatively associated with the mind-set believed to be necessary for managerial success’ didn’t surprise me. In this week the study I made for the assignment to prepare the entrepreneurship literature debate made me come to conclusion that by not underestimating the importance of proper education, being entrepreneur has nothing to do with getting higher GMAT scores. What I believe is that the dynamics of the country living in and the culture carry much more importance. Being good at GMAT shows one that who he has capacity and capability to learn however apart from that doesn’t prove anything whether he has ability to be a good manager.