Major Innovation as a Dynamic Capability: A Systems Approach – O`Connor (2008)
Abstract
Major innovation (MI, including radical & really new innovation) is important for enabling
growth and renewal of an organization
This paper offers a framework for building an MI dynamic capability
There are 7 elements in the framework which together form a management system rather
than a process-based approach towards dynamic capabilities:
1. An identifiable org. structure
2. Interface mechanisms with the mainstream organization (some are coupled, some
lose)
3. Exploratory processes
4. Requisite skills and talent development to establish entrepreneurial talent
5. Governance & decision-making mechanisms
6. Appropriate performance metrics
7. Appropriate culture and leadership context
Introduction
Characteristics of radical innovation (RI)
Very promising opportunity
Reliance on invention and innovation
High risk and uncertainty
Their success is often impeded by forces within established companies
Champion-centered vs. systems-centered literature
Some scholars assign a critical role to the single-minded, visionary champion in RI
Others argue that such champions can be critical to RI but that organizations need to move
to a dynamic capability that includes the champion as only one element of the system
Definition of RI
Encompasses innovations that offer either new performance features or significant
improvement (5-10 times) in known features or sigifnicant reduction (e.g. 50%) in cost such
that new application domains would open up
Often enabled by new technology
RI transforms existing markets or industries and creates new ones
Major Innovation (MI)
Includes RI (extremely rare) and the second category “really new innovation”
RI and “really new innovation” only differ in terms of degree – RI might face even more
uncertain environments etc.
, Main difference between major innovation (MI) and incremental innovations: in MI there is
high level of uncertainty
Often, firms struggle to simultaneously manage incremental AND Major Innovation (lack of
ambidexterity)
Systems theory might help to establish the parameters necessary for a parallel management
system
Systems Theory
Definition of System:
“a complex of elements in mutual interaction. Each individual part depends not only on
conditions within itself but also on the conditions within the whole, or within superordinate
units of which it is a part”
Pioneered by biologists
Idea: the whole is greater than the sum of its parts
The behaviour of the whole cannot be understood from the properties of its parts
Systems are integrated
A system’s properties arise from the interfaces of its parts
A change in one element affects the others
Systems can be open or closed
Closed system Open systems
Clear boundaries Semi-permeable boundaries that
escape entropy by feeding a continual
Subject to entropy – it moves towards flux of energy and matter to stay alive
disorganization or chaos until it fails
Necessary to have interfaces with the
Exhibits autopoiesis (“self-making”) – it larger system it is embedded in
reproduces itself constantly by shifting
its elements Requires self-governance and learning
through networks, interfaces and
Homeostasis – self-regulatory feedback loops
mechanisms that allows organizations
to remain in dynamic balance Does not exhibit entropy but rather a
movement towards orderliness
Also:
Systems are nested (verschachtelt) one within another
Systems are linked as networks
Thus, systems are contextual – the relationships among parts can be only understood in
context of one system relative to other with which it is networked
Dynamic Capabilities Theory
Arises from RBV (competitive advantage from smart configuration of firm-based assets)
Capabilities = business processes needed to configure assets in advantageous ways
Concept of Dynamic capabilities: puts emphasis is on the role of strategic management in
adapting, integrating and reconfiguring those assets to match the requirements of the
changing environment
Abstract
Major innovation (MI, including radical & really new innovation) is important for enabling
growth and renewal of an organization
This paper offers a framework for building an MI dynamic capability
There are 7 elements in the framework which together form a management system rather
than a process-based approach towards dynamic capabilities:
1. An identifiable org. structure
2. Interface mechanisms with the mainstream organization (some are coupled, some
lose)
3. Exploratory processes
4. Requisite skills and talent development to establish entrepreneurial talent
5. Governance & decision-making mechanisms
6. Appropriate performance metrics
7. Appropriate culture and leadership context
Introduction
Characteristics of radical innovation (RI)
Very promising opportunity
Reliance on invention and innovation
High risk and uncertainty
Their success is often impeded by forces within established companies
Champion-centered vs. systems-centered literature
Some scholars assign a critical role to the single-minded, visionary champion in RI
Others argue that such champions can be critical to RI but that organizations need to move
to a dynamic capability that includes the champion as only one element of the system
Definition of RI
Encompasses innovations that offer either new performance features or significant
improvement (5-10 times) in known features or sigifnicant reduction (e.g. 50%) in cost such
that new application domains would open up
Often enabled by new technology
RI transforms existing markets or industries and creates new ones
Major Innovation (MI)
Includes RI (extremely rare) and the second category “really new innovation”
RI and “really new innovation” only differ in terms of degree – RI might face even more
uncertain environments etc.
, Main difference between major innovation (MI) and incremental innovations: in MI there is
high level of uncertainty
Often, firms struggle to simultaneously manage incremental AND Major Innovation (lack of
ambidexterity)
Systems theory might help to establish the parameters necessary for a parallel management
system
Systems Theory
Definition of System:
“a complex of elements in mutual interaction. Each individual part depends not only on
conditions within itself but also on the conditions within the whole, or within superordinate
units of which it is a part”
Pioneered by biologists
Idea: the whole is greater than the sum of its parts
The behaviour of the whole cannot be understood from the properties of its parts
Systems are integrated
A system’s properties arise from the interfaces of its parts
A change in one element affects the others
Systems can be open or closed
Closed system Open systems
Clear boundaries Semi-permeable boundaries that
escape entropy by feeding a continual
Subject to entropy – it moves towards flux of energy and matter to stay alive
disorganization or chaos until it fails
Necessary to have interfaces with the
Exhibits autopoiesis (“self-making”) – it larger system it is embedded in
reproduces itself constantly by shifting
its elements Requires self-governance and learning
through networks, interfaces and
Homeostasis – self-regulatory feedback loops
mechanisms that allows organizations
to remain in dynamic balance Does not exhibit entropy but rather a
movement towards orderliness
Also:
Systems are nested (verschachtelt) one within another
Systems are linked as networks
Thus, systems are contextual – the relationships among parts can be only understood in
context of one system relative to other with which it is networked
Dynamic Capabilities Theory
Arises from RBV (competitive advantage from smart configuration of firm-based assets)
Capabilities = business processes needed to configure assets in advantageous ways
Concept of Dynamic capabilities: puts emphasis is on the role of strategic management in
adapting, integrating and reconfiguring those assets to match the requirements of the
changing environment
