Popular process management activities such as total quality management (TQM) facilitate incremental innovation but impede exploratory innovation. If a firm’s capacity for innovation is rooted in its ability to explore new areas – perhaps making groundbreaking discoveries – as well as exploiting existing capabilities, then process management activities must be separated from efforts to generate completely new ideas.
In 2013 Benner and Tushman’s research was awarded the impressive accolade of ‘Paper of the Decade’ by the American Academy of Management Review. For this reason alone it merits revisiting, but the research also contains findings that are as relevant and useful to businesses today as they were 10 years ago.
Put simply, this research finds that by focusing on myriad minor process improvements in the quest for efficiency, firms risk ‘not seeing the wood for the trees’ and missing out on more fundamental innovation. They must find a way to do both.
The research explores how process management techniques affect technological innovation and adaptation. Concepts such as TQM, Six Sigma, ISO standardization and business process re-engineering are based on a process view of organizations. Such techniques help to map and improve organizational processes, contributing to continual, incremental innovation that result in improved efficiency, reduction in costs, higher customer satisfaction and increased profits.
But long-term success is not only based on efficient exploitation of existing resources. Whilst companies do get steadily better by enhancing and integrating their existing capabilities, their core capabilities can become ‘competency traps’, encouraging a conservative, repetitive approach and obstructing the path to more radical innovation. A firm's ability to compete in the long run also depends on simultaneously developing completely new capabilities. While incremental innovations develop existing technology and serve existing customers, exploration into new knowledge or departure from existing skills leads to radical innovation, serving emergent customers or markets.
New products for new customers, designed around new technology, are often organizationally disruptive and require significant changes to existing activities. This research shows that popular process management tools lead to no such change, but instead to stabilization and rationalization of organizational activities, and a focus on easily available efficiency and customer satisfaction measures. This triggers bias towards certainty and favours ‘exploitative innovation’ at the expense of ‘exploratory innovation’.
As an organization learns and increases its efficiency through repetition of a set of activities, its subsequent innovation is increasingly incremental. With its focus firmly fixed on understanding and satisfying existing customers, innovation is channeled into areas that benefit existing customers. Non-standard, exploratory activities outside the existing technological parameters are not felt to be required and are not sought.
Business leaders should avoid focusing exclusively on incremental innovation in process management. This sort of innovation is closely related to existing technological or market competencies. Instead, they must meet both current customer requirements and also new customer demands simultaneously, and face the inconsistent demands of process exploitation and process exploration.
The answer is an ‘ambidextrous organization’ which allows for both exploratory and exploitative activities. This can be achieved through a mix of loose and tight organizational arrangements: within processes, the tasks, culture, individuals, and organizational arrangements should be consistent; but across sub-units, tasks and cultures should be inconsistent and loosely coupled.
The ideal outcome is the creation of two environments. On the one hand, there will be tight exploitation units in technologically stable settings, which benefit by reducing variability and maximizing efficiency and control through process management techniques. On the other, there will be turbulent, exploratory units for new customer segments and for radical innovation, where process management activities give way to variety, loose control and experimentation.
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