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1

Innovation as “creative destruction” 

  • Schumpeter (1931) analyzed the implementation of new combinations of factors of production (hypothesis: such innovation triggers business cycles)
  • Creative entrepreneurs implement innovations because they expect monopoly profits from doing so. “Side-effect”: creative destruction
  • Phases: strong growth, imitation and deceleration of growth, depression
  • Obstacles an entrepreneur is faced with:
    • Lack of experience and information about the innovation
    • Habitual, routine ways of thinking
    • Counter pressure from the social environment
  • Dilemma of innovation:
    • –Innovation is a precondition for economic growth
    • Innovation destroys existing structures and positions (→ losers from innovation) 

2

An example from TUM research: open source software 

  • Open source heralded as “new way of developing software”
    • You tap into the knowledge and labor of others
    • Others may do work for you (development of new features as well as maintenance, support)
    • --> May render software development process more effective and more efficient
  • General perception/assumption: open source is cool and fun
    • So everyone should want to do it if the firm suggests it, right?
  • We find vast individual-level differences in support for open source
    • Employees with job roles facing the most change show less support
    • Employees without personal experience or training show less support
  • Explanations
    • Increasing uncertainty, decreasing self-efficacy
    • Change in job role, lack of newly required skills 

3

Forms of resistance against innovation 

  • Rational-technological arguments
    • Doubts about operability: “Does it work?”
    • Objections against the timing of the innovation: “Now is not a good time!”
    • Objections because of missing/limited fit: 
      ​“It does not fit to our processes / products!”
  • Rational-economic arguments
    • Objections against destruction of valuable assets/competences:
      “Existing capital goods will become obsolete!”
    • Objections against risk:
      “The risk is too high!”
    • Doubt about the necessity of the innovation (reversed burden of proof):
      “Who on earth needs this? Necessity must be proved!”
  • Ecological arguments 

4

Causes of resistance: Why does it happen? 

  • Barriers of “not-knowing” / due to lack of knowledge
    • Innovation may require intensive learning and intellectual deliberation / adaptation
    • This leads to resistance when individuals are (or feel) incapable of coping with the innovation
    • Individual effects can be amplified in groups (e.g. departments)
  • Barriers of “not-wanting“ / due to lack of willingness
    • Constitutional or learned mechanisms of regulation/governance
    • Reasons related to power (re-)distribution, high risk aversion 
    • “Group Think“, ideological world-views, conservative attitude
    • Objective reasons, innovation creates winners and losers 

5

Resistance from administration 

Does administration hinder or foster innovation?

  • Administration for routine tasks can filter out innovation:
    • Responsibility: nobody is or feels responsible / competent
    • “Rejection” by way of passing the innovation up in the hierarchy
    • Problems of coordination from ineffective assumption or allocation of competencies
    • Filtering effect when innovation criticizes the existing organization
  • Resistance from accounting?
    • Accounting does not treat innovations as intangible investments/assets, but as expenses
    • However, recent changes in IAS: Of “R&D”, “D” can (and must) be amortized (“aktiviert”), “R” must not
    • Profit & loss accounting oriented towards the short term reduces incentives for innovation (e.g. discounting of future revenues) 

6

Roles in the innovation process: Questions 

Who can help to overcome the obstacles?

  • Innovation processes are often driven by individuals
  • Such people have been termed “promotors” or “champions”

--> Questions: Which roles / functions exist in the innovation process that are critical to its success? 

7

The “Promotor Model” 

  •   Developed out of the research project “Columbus” (Witte 1973) which analyzed the decision processes during the first-time introduction of computers
  • in private companies and public authorities
  •   Main result: strong forces existed against the introduction of computers (obstacles and resistance to innovation) but also in favor of it (impersonated by so-called promotors)
  • Prof. Eberhard Witte
  • [page13image5136]
  •   The research team of Witte initially identified two types of promotors: the technical promotor and the power promotor
  •   Hauschildt subsequently introduced the process promotor and Gemünden and Walter in 1995 the relationship promotor
  •   Several empirical studies have confirmed the central hypotheses of the promotor model (see Hauschildt/Kirchmann 2001) 

8

Promotor Model: Central theorems 

  • Correspondence theorem: Specific types of resistance to innovation require specific sources of power to overcome them
    • Barriers due to lack of knowledge must be overcome by technical knowledge (technical promotor)
    • Barriers due to lack of willingness must be overcome by hierarchical power (power promotor)
  • Division of labor theorem
    • It is more effective when different individuals take on the different promotor roles than when one individual takes on all roles
  • Interaction theorem
    • promotors need to cooperate in order to make the innovation process successful 

9

Promotor Model: Types of promotors (I) 

What do they do? Contributions of different promotor types: 

  • Technical promotor
    • has idea for new product, process, or technology
    • contributes creative effort that allows to initiate the innovation project 
  • Process promotor
    • recognizes the value the idea has for the company

    • can identify the relevant resources

    • involves power promotor and other key individuals 

  • Power promotor

    • allocates resources to innovation project

    • overcomes resistance, possibly using hierarchical potential 

10

What are they like? Characteristics of different promotor types: 

  • Technical promotor
    • specific knowledge
    • high technical credibility
    • renowned expert in technical matters
    • knows possibilities and limits of technology 
  • Process promoter
    • knows the organization

    • speaks the language of R&D people and mgmt.

    • diplomatic; good negotiator; knows how to build coalitions

    • good communicator

    • charismatic, can inspire and motivate others

    • willing to take risks 

  • Power promotor 

    • hierarchical potential at his/her disposal

    • can allocate staff and financial resources

    • able to advance decision processes

    • takes the company’s strategic direction into account

    • long-term perspective 

11

Guideline for implementation 

  • Technical promotor is the center of specialization – s/he is providing the impetus for innovation
  • The deficiencies of the technical promotor need to be identified systematically and need to be compensated by a power promotor
  • In case of large “distances” (e.g., due to language or subject), a process promotor should be introduced into the process
  • Predominance of self-organization: team members need to combine autonomously into a team; support of this procedure can be in the form of assistance/enabling for initial contacts 

12

Definition: what is a network? 

 Any set of relationships is a network 

 A network is a collection of nodes linked by a type of relationship - trust, problem solving, decision making, information flow... 

13

Networks – at many different levels 

 Business-oriented – Individuals

– Project teams – Business units – Firms

 Location
– With a city

– Within a region – Within a nation

 Across different units

 Different media

 Face-to-face

 Electronic
– Discussion boards – Social networking – Email lists
– Email traffic

 Behavioral patterns
– Movement through buildings 

14

• What does the concept of homophily imply for innovative activity and its organization? 

Soziale Homophilie ist die Tendenz von Individuen, andere Menschen zu mögen und mit ihnen in Interaktion zu treten, wenn diese ihnen ähnlich sind. Die Ähnlichkeitsattraktion kann sich dabei auf diverse Kriterien wie Geschlecht, ethnische Herkunft, sozioökonomischen Status oder den Bildungsgrad beziehen. Alltagssprachlich kann das Phänomen mit dem Sinnspruch "Gleich und gleich gesellt sich gern." zusammengefasst werden.

15

Key network positions: the broker 

  • Connects clusters of disconnected others
  • Benefits from this network position:
    • Control advantages regarding the flow of information
    • Information advantages
  • Note: Brokers can both be good guys and bad guys! 

16

Key network positions: technological gatekeeper 

  • Connects clusters of disconnected others
  • Individual strongly connected internally and externally
  • Two-step process
    • 1. Gatherandunderstandexternalinformation
    • 2. Translate this information into something meaningful and useful to others in the organization
  • Keen to distribute information to others in the organization 

17

The gatekeeper 

  •  Features:
    • – central person
    • – good knowledge of information from external sources
  •  Functions:
    • – information collector / producer
    • – information catalyst
    • – unlike promotors, not linked to specific project
  •  Characteristics:
    • – high technical / professional competence
    • – many publications and presentations
    • – high formal level of education
    • – employed already for a long time
    • – lower leadership level in hierarchy 

18

The importance of self-selection into roles 

“The frequent observation [is] that champions or promotors occur ‘spontaneously’ and that their emergence is not amenable to organizational intervention.” *

Empirical studies on the effectiveness of gatekeepers find that an effective gatekeeper role cannot be filled by simply identifying and assigning a member of staff to this “position” ** 

 

  •  Instead of appointing someone to champion, gatekeeper, etc. suitable individuals – who already act informally in such a role – must be identified and supported in their role
  •  Such “natural” champions, gatekeepers, etc. do exist – for example, it was easy to identify them in the open source study mentioned at the beginning of the lecture
  •  Question to you: what do you think motivates these individuals? 

19

Summary 

  • Innovation is “creative destruction”, it creates winners and losers
  • Resistance to innovation:
    • – from those who stand to lose from it
    • – Barriers of “not-knowing” and “not-wanting”
    • – Resistance from administration and accounting
  • Important roles in the innovation process: – technical promotor
    • – process promotor (champion)
    • – power promotor
    • – gatekeeper
  • Link back to innovation strategy: more reasons as to why to look outside
    • – Many of the tools we will be looking at allows a firm to do just that