TMI Vorlesung 5 Teil 1

• Analysis of subtasks of task executers and the relation between them

• The focus is on the rational aggregation and coordination of tasks

• Graphical representation via organization chart

-> Integration of innovation activities in corporate organization (e.g. centralized vs. decentralized R&D, innovation units)

-> Internal structure of R&D / innovation unit (e.g., definition of roles and responsibilities)

• Specifies the chronological order of tasks

• Smart time coordination/ synchronization of subtasks

• Graphical representation via process plan

• Coordination of tasks

-> Definition of rules and decision/information processes(milestones, phases & gates)

-> Organizing innovation projects

• Close to the market

• Flexibility

• Allows cross-functional coordination

• Immediate response to market changes

• Redundancy, no synergies acrossbusinesses

• "Application Closeness” -> neglecting the risk of long-term goals

• Knowledge concentration

• Cost advantages

• Coordination

• Support of long-term goals

• “Ivory tower effect”

• Transfer problems in project implementation

• “Happy engineering“ -> Inefficient / Ineffective

• Clear responsibilities for innovation

• Development of specific skills

• Insufficient resources

• No basis for long-term R&D platforms

• Rigid and highly specialized

• Well-defined goals

• Exact job descriptions

• Flexible; less specialized

• Unclear, short-term goals

• No final task assignments

• Clearly defined bureaucracy

• Hierarchy

• Centralization of decisions on top management level

• Controlling, authority and communication is done in a complex interaction network (not based on superiority)

• Personal dependent organization

Mainly vertical

Horizontal and vertical

To immediate superior

• To the organization and its goals and values

• Problem-oriented thinking

Stable with low technological uncertainty

Dynamic, ambiguous, technological uncertainty

Being only an exploiter or an explorer is dangerous:

• Overemphasis on improving existing products reduces learning of new skills leading to obsolescence (Exploitation)

• Overemphasis on exploring new competences risks spending scarce resources with very little payback (Exploration)

Companies that only explore may not survive today, companies that only exploit may not survive tomorrow.

• “such things as refinement, choice, production, efficiency, selection, implementation, execution” (March, 1991)

• The focus is on reducing variety, increasing efficiency, and improving alignment to current environments (short-term performance).

• “things captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery, innovation” (March, 1991)

• The focus is on seeking variety and increasing adaptability (long-term performance)

Firm Performance depends on Balance:

Balance between exploration and exploitation provides optimal performance (esp. in dynamic environment).

• Follow the rules and drive out the variance and slack

• Focus on serving existing customers and their needs

• Manage and refine existing competences

• Make money now

• Will more likely lead to incremental innovation

• Profits from a more mechanistic organization

• Break the rules and promote variance and slack

• Serve new customers with new needs

• Develop and lead new competences

• Make money later

• Will more likely lead to radical innovation

• Profits from a more organic organization

refinement, control, production, efficiency, selection, implementation, execution, disciplined Management, elimination of variance, short-term focus

search, variation, experimentation, play, flexibility, discovery, innovation, risk taking, tolerant of failure, long-term perspective

Ambidextrous Organizations are aligned and efficient in their management of today’s business demands, while also adaptive enough to changes in the environment that they will still be around tomorrow.

• Long periods of exploiting punctuated by short bursts of exploration

• Response to dramatic external or internal change

• More useful in stable, slower moving environments

• Often the case in the evolution of start-ups because of the lack of resources to simultaneously pursue exploration and exploitation

• Establish project teams that are structurally independent units, each having its own processes, structures, and cultures, but are integrated into the existing management hierarchy

• Requires that the two types of business are held together through senior management team

• Requires integration, common vision and values, and common senior-team rewards

• take initiative and are alert to opportunities beyond the confines of their own jobs.

• are cooperative and seek out opportunities to combine their efforts with others.

• are brokers, always looking to build internal linkages.

• are multi-taskers who are comfortable wearing more than one hat.

Exploration and exploitation activities are done in separate units

Individual employees divide their time between explorative and exploitative activities

At the top of the organization

On the front line – by salespeople, plant supervisors, office workers

Define structure, make trade-offs between exploration and exploitation

Develop organizational context in which individuals act

Relatively clearly defined

Relatively flexible

More specialists

More generalists

By good portfolio management

Successfully innovating firms protect their projects against cannibalization

Ideas are not identified or forgotten

No or delayed decisions

Too many projects in parallel

Synergies are not discovered

Ad-hoc initiated projects

Projects on fast track

Projects do not contribute to strategy

Projects do not follow the official decision path

“Bootlegging” Projects

Project delay and budget overrun

Unexpected termination / resource conflict

“Matrix-Conflicts”

Project benefits are not realized

Too many incremental innovations

• Lack of goal & decision making clarity

• Lack of transparency overproject portfolio

• Lack of responsiveness & pro-activeness

Maximize Value of Portfolio

Balance of Projects

Strategic Alignment of Projects

There may be conflicts and trade-offs between these three objectives!

Portfolio success must therefore be multi-dimensional.

Allocate resources so as to maximize the portfolio in terms of some business objective, e.g., expected net present return on net assets.

Restrict Portfolio Risk: Achieve desired balance of projects in terms of, e.g., long vs. short term or high vs. low risk, across markets, technologies, and project types.

Ensure that breakdown of spending truly reflects business strategy – that all projects are “on-strategy”.