Entovation International
The Chaos of Innovation Management: Dangers and Opportunities
Prepared by Debra M. Amidon,
Former Global Innovation Strategist, Digital Equipment Corporation
(Lehigh University, June 12, 1992)

We live in turbulent times. The dynamics of enterprise management and the global arena of business opportunity present challenges for enterprise managers regardless of profit status, geography, function or discipline orientation. It is no longer sufficient to be an expert specialist in one’s field. We have learned that 21st Century Management demands a more coherent picture of the universe within which our efforts have impact. Only flexible, adaptive, agile forms of networked infrastructures can deal with the speed of social-economic-technological change. These new forms of networked organizations must occur at micro-, meso- and macro-economic levels if an enterprise is to survive the intensity of global competitive forces.

Background:

It has been years since the inception of the Center for Innovative Management Studies at Lehigh University. The founders realized that the issues of international industrial competitiveness were not of a technology nature. In addition, the problems were certainly not a matter of “invention” as the U.S. continued to maintain supremacy in its research base. The real challenges were of a managerial nature with the need to analyze the full process of innovation from idea generation to market receptivity.

Over the past decade, the focus on innovation management has spawned numerous efforts of cross-disciplinary research, government-university-industry consortia, and analyses of the strategic positioning of our country in an ever-evolving global marketplace.

The National Research Council published the “Management of Technology: The Hidden Competitive Advantage” in 1987. (1) The Technology Transfer Society released its Roundtable Proceedings entitled Managing the Knowledge Asset into the 21st Century in 1987.(2) Another AAES Conference focused upon “Management of Technology: The Key to America’s Competitive Future” in 1987. (3) MIT launched a major project called Management in the Nineties, which resulted in a publication by Michael Scott-Morton entitled The Corporation of the 1990’s.(4) The National Academy of Engineering sponsored a three-year study resulting in a book entitled Profiting from Innovation(5) by William G. Howard, Jr. and Bruce Guile.

The National Technological University (NTU) broadened its curriculum to include Management courses. The Microelectronic and Computer Technology Corporation (MCC) recognized the critical needs for Technology Management on an international scope. The National Center for Manufacturing Sciences (NCMS) has a new Special Interest Group dedicated to Enterprise Management. The Council on Competitiveness has released numerous reports and recommendations geared toward bootstrapping the management capability of the nation.

There is hardly a professional organization, university or government agency (federal or state), which has not recognized the importance of managing valuable resources-technical, financial and human. The most recent research illuminates the fact that knowledge (i.e., intellectual assets) may, in fact, be the most critical of all.

Indeed, there has been an explosion of research effort and transcontinental insight prompted by the historic changes catalyzed by 1992, the elimination of the Berlin Wall and the dissolution of the USSR. This does not begin to address the massive changes occurring within Third World countries, the Seven Tigers and free trade initiatives. The globe has become our playground and the imperative to monitor progress on enterprise management systems worldwide has become the calling card for entrée into this kaleidoscopic economic game.

The Digital Approach:

Since the origins of the firm, much of the internal and external research focused on technology intended to position the technical competence of the Company for the future. Many research findings and collaborative efforts with university scientists provide the foundation of our product and marketing strategies-to-date. In 1981, we began some sophisticated work on strategic human resource planning and high performance work systems. In 1983, we recognized through our technology transfer efforts that there was a need to define a whole new management philosophy beyond the scientific principles of Taylorism. At that time we had instituted a Planning and Technology Transfer Program.

In 1986, an internal R&D group dedicated to the development of modern enterprise management technology was established. It was called Management Systems Research (MSR). The mission was to focus on executive decision-making with the vision of influencing worldwide managerial standards in the same way that technical standards evolve and create universal modes of communication.

The strategy was to use an Enterprise Management Systems-Architecture (EMS-A) to establish a platform of cross-disciplinary domains to address the full spectrum of enterprise dynamics. As portrayed on the figure below, an organization must take into consideration five critical aspects of managing the business: Economics, Sociology, Psychology, Management, and Technology.

No longer is it sufficient to only monitor the finances in the firm, as was the mainstay of university management programs for decades. The structure of the organization, the motivation of people, the cross-boundary processes and the utilization of technology all impact directly the business performance of the firm. In fact, a change in one domain will have an automatic effect on the others. Only when viewed as a coherent system of dynamics can one begin to optimize the business results.

The Modern “Knowledge” Focus:

The nature of high technology firms demands very sophisticated infrastructures that promote “real-time” innovation and global resource optimization. One might even argue that today all industries are becoming technology sensitive given economic conditions. This includes manufacturing and the service sectors.

For many years companies in the information technology business have viewed a hierarchy for computing as a template for product development. First adopted by practices in the field of artificial intelligence, general managers have now recognized that this hierarchy may actually be a platform for industrial eras in which we now find ourselves rapidly approaching the “Knowledge Economy”.

In Stage I, data transmission or automation is an assumed organization characteristic just as quality or sound financial management. Stage II organizations have now been “informated” in such a way that the overload - instead of providing managerial insight as intended-has frustrated executives at every level. We recognize that it is not the information per se, but what one does with the information (i.e., converts it into knowledge) that influences the quality of executive decision-making in Stage III. And when the collective intellect of an enterprise is harnessed, and we can leverage off the shared learnings of one another, we approach Stage IV.

Bruce Kogut, in 1984, recognized that to obtain sustainable global advantage, companies may have to expand beyond economies of scale or scope to focus on “experience as a result of gained knowledge” (6). Ray Stata, President of Analog Devices, says it a different way: “The rate at which organizations learn may be their only sustainable competitive advantage.”(7)

Chris Bartlett, Harvard, and Sumantra Ghoshal, INSEAD, have catapulted the concepts of cross-boundary processes, which penetrate the practice of managers in every type of enterprise in the organization spectrum-from cross-functional integration to economic superpower collaboration. They argue that there are three important flows at the center of emerging organizational relationships…flow of parts, components and finished goods…flow of funds, skills and other scarce resources…flow of intelligence, ideas and knowledge.”

In 1991, Ikujiro Nonaka published an article in the December issue of the Harvard Business Review entitled “Knowledge Creating Companies”(9), in which he eloquently states that despite all the talk about “brainpower” and “intellectual capital”, few managers grasp the true nature of managing such an enterprise. Nonaka has called the question for management researchers worldwide and provides a foundation for the next generation of research.

Our own internal research efforts operate as a virtual worldwide network of expertise through the Management System Research Network (MSR-net). We have focused on “Knowledge Innovation” ® (i.e., creation, exchange and application of new ideas) as the new source of wealth in the decade to come. We are intent on defining the core principles, benchmark standards and diagnostic tools essential to manage the enterprise-as-a-whole.

An interesting analysis performed by our internal human resource experts defines the modern paradigm shift in terms of “knowledge networking”. Charles Savage in his internationally acclaimed book on Fifth Generation Management (10) illuminates the value of cross-boundary teaming as the methodology to create that new knowledge wealth. Ray Grenier and George Metes, in a book entitled Enterprise Networking: Working Together-Apart (11), provide continuums for an enterprise to gauge their own effectiveness, not only technologically, but in terms of the human networking required in the modern enterprise. We are, indeed, in the midst of a radical transformation of the information technology business into the knowledge processing industry.

This new knowledge focus goes far beyond the traditional view of expert systems although they can play a major role in expediting and capturing the “knowledge flow”, or accumulated learnings of an enterprise. “Knowledge economy” is being articulated in many high quality writings such as The Wealth of Information (12) by Tom Stonier, Future Wealth (13) by James Robertson, and Managing in the Information Society (14) by Yoneji Masuda. Joseph Badaracco makes the concepts more operational in a book entitled The Knowledge Link: How Firms Complete Through Strategic Alliances.(15)

Defining the “D-form”* Enterprise:

Most enterprises are evolving into a more modern form of management philosophy which we have labeled Dynamic-form (i.e., D-form) in contrast to the Multi-divisional (i.e., M-form) entities created by Alfred B. Sloan in the 1920’s at General Motors. When an enterprise became large-scale, the sensible way to organize was to separate it into smaller more manageable units. And, in the era of competitiveness, internal competition for resources operated similar to the dynamics of market economics.

As the world changes, however, the marketplace broadens across the globe, the spread of technological breakthroughs approaches astronomic proportions, the nature of alliances takes on inter-galactic qualities and customer expectations are increasingly driving the pace of industrial transformation. The traditional hierarchical, independent business unit structures are not dynamic enough to take advantage of the vast business opportunities.

The figure below outlines the modern form of management philosophy as it has been defined inside DIGITAL and corresponds to the five elements of the Enterprise Management System-Architecture (EMS-A) referenced earlier:

Our own research shows that this new form of management philosophy may even have been established with the founding of DIGITAL by Ken Olsen in 1957. At that time, he felt that the research environment in which a network of experts working collaboratively to push technological frontiers could be a profitable business venture. Technology aside, this organization form has continued to be an enigma to external observers. The focus, however, has been the knowledge base, not the hierarchical authority modes of decision-making.

The dawn of the knowledge economy has brought the imperative for an Art of Collaborative (not Competitive) Strategy. It is in the understanding of interdependence across all borders (i.e., functions, industry, sector and geography) and a shared mission (i.e., “Knowledge creation”) that we can begin to view the global enterprise as an innovation system of expertise as an innovation system of expertise which promotes the collective wisdom unachievable by any entity individually. Symbiotic partnering across all nodes of the Strategic Business Network (SBN) ensures advancement of modern management practice.

State-of-the-Art of Innovation Research

In preparing this analysis, I was reminded of two previous experiences that are relevant to this task. In 1987, Chris Hill, then at the Congressional Research Services, coordinated a conference on technology transfer. As an industrial participant on a panel, I was asked to comment on my perspective. I outlined the myriad of research OPPORTUNITIES from which DIGITAL had determined an investment strategy. These ranged from individual sponsored research grants, consulting contracts with university professors, support of Presidential Young Investigators, affiliation with hundreds of research consortia, etc. In short, to quote Pogo, “The opportunities were insurmountable.”

Now, there is a far more elaborate and candid analysis from the industrial perspective, which was published by the Government-University-Industry Research Roundtable in 1991. The document entitled “Industrial Perspectives in Innovation and Interacting with Universities” (16) is mandatory reading for those interested in academic collaborative management. Not only does it reference the multitude of opportunities, it defines some of the more fundamental issues related to creating true synergy among industrial and academic counterparts.

Another illuminating analysis (17) of the relative strengths and weaknesses of the technical enterprise of the nation was released by the National Academy of Engineering months ago. What is worthy of note is the recognition of managerial problems within the U.S. infrastructure (e.g., failures in the educational system, university-industry mismatch, the eroding economic infrastructure, the NIH syndrome, underdeveloped intra-and inter-firm relationships, lack of global sourcing).

At the inception of CIMS, there were very few lights of excellence in the field. Now there are many. Companies have invested heavily in supporting the research centers, consortia and principal investigators. The knowledge is flowing to increase the state-of-the-art, but the state-of-the-practice is wanting. Companies, even the size of DIGITAL, are hard pressed to monitor and absorb the results of the research it is directly or indirectly funding!

The second experience comes to mind around the topic of VISION. A very elaborate vision analysis was performed inside the company only to discover what appeared to a lack of leadership. After closer scrutiny it was revealed that the fragmentation in the system was the problem, not lack of vision per se. This is symptomatic of the networked organization form. The challenge was how to create fusion and coherence with a simple elegant strategy that could transform the company and, in fact, the entire industry.

It would seem that the state of innovation research might be at another critical crossroads. In 1983, CIMS was the answer-a catalyst to focus attention on the managerial agenda, which here-to-fore the government funded research base was almost entirely technology-driven. CIMS, modeled after the Semiconductor Research Corporation (SRC), taps into the management expertise in every sector across the nation. It should begin to operate as a Strategic Business Network (SBN) to promote the distributed flow of critical knowledge throughout the scientific research enterprise.

The most progressive insight is provided in a March 1992 Discussion Paper released by the Government-University-Industry Research Roundtable. This working document, prepared under the direction of Erich Block, is entitled “Fateful Choices: The Future of the U.S. Academic Research Enterprise”.(18) in describing the dynamic infrastructure, it outlines vision of a global research system with a diverse workforce and modern communication networks. This new challenge is summarized:

“If the U.S. academic research enterprise is to enter the 21st Century in a position of strength, the increasingly diverse groups and institutions must set aside their special interests and join together in common purpose.”

The paper also outlines some options for achieving the future with a framework for national-level strategic thinking. Now is the time to apply our knowledge in innovation research to the nation and around the globe.

Sketch of an Innovation Audit

The Enterprise Management system-Architecture (EMS-A) might provide a useful framework to guide (1) the development of the next generation of management research, and (2) the assessment of the effectiveness of the innovation effort-to-date.

On a separate page, I have sketched my own observations and biases together with suggestions for how to capitalize upon the opportunities. The CIMS research agenda appears to address several of these points in one form or another. There would be some value, however, in viewing it as a whole with a systematic framework such as the EMS-A provides. As referenced before, it is in the interrelatedness of all of these factors that influences the transformation we are all seeking.

Attempts to understand the innovation management policies and practices stretch across the globe. The core work of the EC has been to harness the resources of a region for global economic advantage. The OECD has embarked upon a study of innovation strategy country-to-country. Richard Nelson, Columbia University, is about ready to release his new book on the topic. CIMS could provide a service to member companies by monitoring and disseminating the analyses of such global management efforts.

There is a need for national leadership with a focus from the White House Office of Science and Technology Policy, the National Research Council, and the National Institute of Science and Technology. The high quality research being performed in the plethora of universities, industrial and federal research labs, and consortia must be leveraged if we are to reposition the wealth of this country in a global marketplace.

My recommendations include:

Focus on Knowledge Innovation

Rely upon an Enterprise Management System-Architecture

Think Transnationally in mission, Expertise, and Action

Legitimize the Strategic Business Research Network

Practice the art of Collaborative Strategy

We have all incrementally increased the State-of-the-Art of innovation research. The time has come for a quantum breakthrough in the State-of-the-Practice. Such an effort requires a shared vision, some common language and interdependent progress. Such leverage can only occur when there is an appreciation of the learning dynamics embedded in our network of strength.

References:

__________, “Management of Technology: The Hidden Competitive Advantage”, The National Academy Press, 1987.

Rogers, Debra M. and Dimancescu, Dan, Managing the Knowledge Asset into the 21st Century: Focus on Research Consortia, Technology and Strategy Group, 1987.

__________, “Management of Technology: The Key to America’s Competitive Future”, American Association of Engineering Societies (AAES), 1987.

Morton, Michael Scott Morton, The Corporations of the 1990’s: Information Technology and Organizational Transformation, Oxford University Press, 1991.

Howard, William G., Jr. and Guile, Bruce R., Profiting from Innovation, The Free Press, 1992.

Kogut, Bruce, “Designing Global Strategies: Comparative and Competitive Value-Added Chains”, The Wharton School, 1985.

Stata, Ray, “Organization Learning- The key to Management innovation”, Sloan Management Review, Vol. 30, Issue 3, Spring 1989.

Bartlett, Chris and Ghoshal, Sumantra, “Managing Across Borders: New Organizational Responses”, Sloan Management Review, Fall 1987.

Nonaka, Ikujiro, “Knowledge Creating Companies”, Harvard Business Review, December 1991.

Savage, Charles, Fifth Generation Management, The Digital Press, 1990.

Grenier, Ray and Metes, George, Enterprise Networking: Working Together-Apart, The Digital Press, 1992.

Stonier, Tom, The Wealth of Information, Thames-Mathuen, 1987.

Robertson, James, Future Wealth, Casell, 1989.

Masuda, Yoneji, Managing the Information Society, Basil Blackwell, 1990.

Badaracco, Joseph, The Knowledge Link: How Firms Compete, Harvard Business School Press, 1991.

__________, “Industrial Perspectives in Innovation and Interacting with Universities”, Government-University-Research Roundtable, 1991.

__________, “The U.S. Technical Enterprise”, National Academy of Engineering, 1992.

__________, “Fateful Choices: The Future of the U.S. Academic Research Enterprise”, A discussion paper published by the Government-University-Industry Research Roundtable, 1992.

© Copyright 1992 by Debra M. Amidon. All rights reserved.

® Knowledge Innovation is a registered trademark of ENTOVATION International Ltd. All rights reserved.

* Note that the’ D-Form’ became the ‘I-Form’ when published in Innovation Strategy for the Knowledge Economy: The Ken Awakening. (Amidon 1997).

[Please note that this paper was delivered at the Center for Innovative Management Systems (CIMS) at Lehigh University, Pennsylvania on June 12, 1992.]

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