Boundary Theory and the Systems Boundary

Topic: Boundary Theory and the Systems Boundary

In Week 8, we will examine the system’s boundaries and boundaries as we consider the philosophical debate on what boundaries are: are they real or are they a social construct? What boundaries exist in an organizational setting? How do boundaries constrain learning and innovation? What are the implications and importance of studying boundaries for leaders and researchers?

Richardson and Lissack (2001) provide an eloquent answer:

The fact is that all of our human knowledge and understanding is built on a foundation of assumptions that implicitly regard natural boundaries as such, that is, these underlying assumptions carve up the whole into (sometimes arbitrary) parts that are assumed to have ontological status. If the boundaries implicit in particular knowledge are real, then a very strong case for the ongoing validity of that knowledge can be made. So an exploration into the status of natural boundaries is an exploration into the status of our knowledge.

In a practice article, Soken and Barnes (2014) argue that to create and sustain innovation and change, leaders must “bust through boundaries” (p. 13). They provide examples of leaders who did so successfully to become disruptive innovators.

Instructions:

Which principle of boundary theory causes the greatest challenge to the traditional way managers lead organizations, and why is it so disruptive?

How do leaders of complex adaptive organizations bust boundaries to create innovation? Please provide a case example other than Nayar.

Provide a rationale for your responses.

Support your discussion with references to and citations from your readings. Be sure you adhere to APA guidelines for citations and references.

Your post should be 250–500 words.

Please search any library for the following references below:

References

Richardson, K., & Lissack, M. (2001). On the status of boundaries, both natural and organizational: A complex systems perspective. Emergence, 3(4), 32–49.

Soken, N. H., & Barnes, B. K. (2014). What kills innovation? Your role as a leader in supporting an innovative culture. Industrial and Commercial Training, 46(1), 7–15.

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From the boundaries of
management to the management
of boundaries
Business processes, capabilities
and negotiations
Andrea Caputo
From the
boundaries of
management
391
Received 30 November 2017
Revised 16 July 2018
Accepted 6 August 2018
Lincoln Business School, Lincoln, UK, and
Raffaele Fiorentino and Stefano Garzella
Department of Business and Economics,
Universita degli Studi di Napoli Parthenope, Naples, Italy
Abstract
Purpose – The purpose of this paper is to examine some of the new capabilities that are required for the
facilitation of business processes management (BPM) in the current political and technological landscape.
Specifically, the goal is to investigate the role of firm boundaries, from a business processes perspective,
in new contexts in which the affirmation of digitalization requires more integration across a complex
network of partners.
Design/methodology/approach – The paper is based on a review of relevant literature on BPM, firm
boundaries and negotiation. By critically integrating this literature, a framework is developed with the
objective of supporting the management of boundaries.
Findings – BPM, new competitive contexts, and the technological landscape require the development and
management of boundary capabilities. Among these capabilities, “boundary management” – how managers
coordinate resources, activities and business processes on the boundaries of the firm – should play a key role.
Moreover, as managers must continuously interact with multiple partners in digital supply chains, the
organizational model of negotiation serves as a means of effectively managing firm boundaries.
Practical implications – The framework offers insights and guidelines that can help practitioners manage
the boundaries of business processes. The authors encourage a focus on business processes occurring at firm
boundaries. Furthermore, the authors encourage the development of new capabilities in response to the needs
of practitioners to ensure best practices of negotiation.
Originality/value – This study shifts the emphasis of BPM from the boundaries of management to the
management of boundaries. By shedding light on new capabilities required, this paper enriches the BPM
literature and can assist, on the one hand, in reconfiguring business processes in the new political and
technological landscape and, on the other hand, in facilitating effective negotiation.
Keywords BPM, Digitalization, Boundary management, Boundary capabilities, Partnership, Negotiation
Paper type Conceptual paper
1. Introduction
New competitive contexts, digital innovations and big data analytics present a continuous
stimulus to renew sources of competitive advantage (Fosso Wamba and Mishra, 2017).
Markets are currently witnessing a rapid increase in digital infrastructures and network
dynamics (Karmarkar et al., 2015). Similarly, the Internet of Things is having a pivotal
impact on manufacturing systems (Caputo et al., 2016). Digitalization affects several aspects
of business, including business supply chains and operations, pushing firms toward the use
of new “sharing economy” business models (BCG, 2015; Cohen and Kietzmann, 2014;
Holweg and Helo, 2014; Roden et al., 2017; Sundararajan, 2013; WEF, 2016). We witness a
constant physicalization of what used to be the digital world, with tech companies often
This study was supported by the Research Funding Program of the University of Naples Parthenope.
Business Process Management
Journal
Vol. 25 No. 3, 2019
pp. 391-413
© Emerald Publishing Limited
1463-7154
DOI 10.1108/BPMJ-11-2017-0334
BPMJ
25,3
392
looking to give a physical dimension to their services, and a digitalization of what used
to be the physical world, with traditional companies digitalizing products and services that
used to need a physical space. Such trends have been so powerful that nowadays a clear
distinction between the two worlds makes every day less sense (Capurro et al., 2018;
Davenport and Ronanki, 2018).
These trends can enhance supply chain flexibility to increase the quality of production
while shortening delivery times to more quickly address variations in product demand
and to reduce crossing times while ensuring necessary stocks by partnering with flexible
suppliers. At the same time, digitalization should increase levels of production efficiency
to reduce production costs while optimizing immobilized capital such that plants can be
used properly while minimizing inventories by employing systems that can streamline
information flows. Indeed, firms can limit risks by sharing processes and activities to
reduce risks of flow interruption along the supply chain, minimizing operational risks
contingent on operating costs (Fiorentino, 2016). The affirmation of digitalization spurs
new interactions between companies and between companies and customers (Rosenzweig,
2009). In digital supply chains, the development of information technologies and digital
infrastructures render it possible to share large volumes of data and information that, on
the one hand, offer considerable opportunities but, on the other hand, present problems
related to their organization and correct use (Capgemini, 2011; Kumar et al., 2016;
Papadopoulos et al., 2017).
While it is clear that digital technologies will transform business processes, there are a
number of challenges that firms must address. These challenges must be addressed by
managers and executives.
For example, Michelin – a leader in the tire industry – has advanced a comprehensive
ecosystem that involves the use of sophisticated telematics and an optimized tire
management system that orients logics of business processes toward “service models.”
However, while this approach was developed internally, Michelin identified a need to
partner, especially in the field of big data analytics.
In such contexts, business processes management (BPM) will increasingly involve more
integration across a complex network of partners (D’Aveni, 2015; Mindruta et al., 2016;
PWC, 2016). The relevance of network models and of the development of digital society
stresses BPM at firm boundaries (Schotter et al., 2017). Boundaries are defined transitional
areas between inside and outside (Håkansson and Snehota, 1989). Business models currently
include a “border area” in which it is not easy to distinguish firms from the external
environment (Spring and Araujo, 2014). These boundaries circumscribe resources and
capabilities over which firms extend their governance and control (Pfeffer and Salancik,
1978). Basic criteria used for the identification of firm boundaries (Sarkis, 2012) can be
determined from a firm’s system of governance, whereas “instrumental roles” useful for
understanding the strength and extent of said actions can be attributed to other factors such
as legal (Coase, 1937; Williamson, 1975), physical (Scott, 2003), communication and
organizational elements (Weber, 2002).
Therefore, the ability of the firm to consistently negotiate within and beyond its
boundaries serves as an important strategic driver in achieving and sustaining a
competitive advantage (Brown and Duguid, 1998; Drori et al., 2013). Negotiation is
commonly defined in the relevant literature as a process through which two or more parties
reach a required joint decision while having different preferences (e.g. Rubin and Brown,
1975; Zartman, 1977; Fisher et al., 1981; Pruitt, 1981; Lax and Sebenius, 1986; Raiffa et al.,
2002; Caputo, 2016). Due to the interdependence that reigns over and within multi-actor
decision processes (Thompson, 1967), negotiation outcomes are affected by all decisions
made by parties involved. According to this perspective, the case of Lego – the toy
company – is an illustrative one. The company, from the launch of its “Lego Mindstorms,”
has had to manage new interactions with customers since the product also became
successful among adult enthusiasts of mechanics and robotics. Fans gather on the Adult
Fans of Lego online community and propose reprogramming sensors and control systems
as custom versions of the Mindstorm software and as improvements to Lego’s products.
Initially, the company considered acting legally against its customers, but after some initial
disruption, it decided not to limit the creativity of its fans, which had the potential to
stimulate firm creativity and innovation. Since 2004, the company has decided to negotiate
with its customers and to develop a new line of Mindstorm robots in collaboration with fans
in the design of a new product through a platform (Lego Digital Designer), a software
program that allows fans to virtually create their own Lego projects and to share their
creations on the internet. From this experience, Lego has entered a new digital business
arena (e.g. film and video games) (Lakhani et al., 2013). Effectively improving upon
negotiation capacities is crucial in managerial, political, and business contexts.
However, the current literature in terms of strategies, operations management and
negotiation seems to overlook the role of boundary management and negotiation in the
organizational capabilities of the firm (Borbély and Caputo, 2017a). Prior studies merely
highlight the role of firm boundaries in BPM (Fiorentino, 2016) and define boundary
management as the negotiation of knowledge (Roberts and Beamish, 2017). As supply chain
management is predominantly represented through relationship management,
critical issues involve managing relationships between processes, activities and people
(Luvison and de Man, 2015; Niesten and Jolink, 2015). Thus, scholars and practitioners must
identify ways to face such issues. From calls for what new capabilities are required in terms
of BPM, this study investigates the role of boundaries in the new political and technological
landscape from a business process perspective. Specifically, to achieve systematic
conceptualization, we advance a framework of BPM based on a critical review of boundary
capabilities, that allows to further our understanding of the overlap among digitalization,
boundary management and negotiation.
This conceptual paper contributes to the fields of BPM, strategy and negotiation by
bridging a pool of concepts and frameworks that thus far have been limited to the
specificities of their original field. Moreover, the paper makes a theoretical contribution by
advancing knowledge through the systematization and rationalization of studies focused on
boundary management and through the development of a conceptual framework for
boundary capabilities. Finally, the managerial and theoretical implications of this
framework shift the focus from the boundaries of management to the management of
boundaries, in which negotiation capabilities play a key role.
This paper is structured as follows. Section 2 presents a theoretical background on firm
boundaries. Section 3 analyses the role of boundary management as a key to supporting
BPM in new competitive contexts. Section 4 advances an organizational model of
negotiation (OMoN) for effectively managing firm boundaries. Finally, Section 5
summarizes the main contributions of the paper and presents the study’s implications
and avenues for future research.
2. Theoretical underpinnings of firm boundaries
Boundaries have been analyzed by scholars of economics, management and organizational
behavior (Villalonga and McGahan, 2005). Traditional theories such as those of “transaction
cost economics” and “resource-based views” generally investigate boundaries through a
“make or buy” lens (Barney, 1991; Coase, 1937; Williamson, 1975). Transaction cost
economics focuses on the benefits and costs of managing activities within or outside of
boundaries. The resource-based view (RBV ) suggests that the analysis of boundaries
should encompass the traditional dichotomy between benefits and costs to integrate the
analysis of resources with capabilities development. These theories have been recently
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developed based on the evolution of competitive and technological landscapes that
necessitate collaborative decision making in resource, knowledge and BPM (Foss, 1996;
Milgrom and Roberts, 1990; Parmigiani and Mitchell, 2009; Santos and Eisenhardt, 2005;
Tortoriello and Krackhardt, 2010).
The RBV of the firm serves an explanation for the management of boundaries and for the
role of negotiations in this process. The RBV seeks to understand how competitive
advantage is created and sustained over time by focusing on the internal organization of
firms (Wernerfelt, 1984; Prahalad and Hamel, 1990; Barney, 1991; Nelson, 1991; Peteraf,
1993) rather than stressing industry structures and firms’ positioning within a given
industry (Porter, 1979; Hatten et al., 1978). The conceptualization of firms as clusters of
resources heterogeneously distributed across firms is the underlying assumption of the
RBV (Newbert, 2007; Wernerfelt, 1984).
The literature of this area argues that when through development or acquisition a firm
possesses resources that are valuable, inimitable, rare, and non-substitutable, a competitive
advantage can be achieved and sustained. This allows the firm to implement value-creating
and difficult-to-duplicate strategies (Allred et al., 2011; Barney, 1991; Nelson, 1991; Peteraf,
1993; Wernerfelt, 1984). Dynamism has been included by Teece et al. (1997) into the RBV,
highlighting that most environments in which firms compete are dynamic. This suggests
that the structure of an industry evolves at different rates and that the ways in which
companies achieve a competitive advantage in dynamic environments cannot be explained
by a static approach to the RBV. Instead, firms with dynamic capabilities outperform their
competition, as they can “integrate, build, and reconfigure internal and external
competencies to address rapidly changing environments” (Teece et al., 1997, p. 516).
The literature on dynamic capabilities has developed and expanded, often in different
directions (Mintzberg et al., 1998; Williamson, 1996) with no agreement on the definition of the
term “capabilities” and, as a consequence, with a certain degree of heterogeneity in terminology
used (Hine et al., 2014). In their seminal article Eisenhardt and Martin (2000) claimed that
dynamic capabilities actually consist of identifiable and specific routines. Some integrate
resources, such as product development routines (e.g. Toyota). Strategic decision making is
considered a dynamic capability whereby “managers pool their various business, functional,
and personal expertise to make the choices that shape the major strategic moves of the firm”
(Eisenhardt and Martin, 2000, p. 1107). Other routines involve retaining and releasing resources
(e.g. knowledge creation or alliance and acquisition capabilities) (Eisenhardt and Martin, 2000).
Finally, others relate to the reconfiguration of resources within a firm via transfer, resource
allocation, and synergistic processes. Dynamic capabilities developed from the path-dependent
histories of individual firms are characterized as unique and idiosyncratic (Teece et al., 1997)
while they also present common features associated with effective processes facilitated across
firms (Eisenhardt and Martin, 2000). In this vein, we can configure an organizational capability
in negotiating within the dynamic capabilities of boundary management. Wang and
Rajagopalan (2015) argue that negotiation can be considered a firm-level ability among a firm’s
individual alliance capabilities. Individual alliance capabilities, according to the RBV, can be
defined as a firm’s ability to search for, negotiate, manage, and terminate an individual alliance
(Kale and Singh, 2007; Simonin, 1999; Wang and Rajagopalan, 2015). For this reason,
negotiation is considered a stage of the life cycle of an alliance (Wang and Rajagopalan, 2015)
and it is defined as a firm’s ability to negotiate “the terms and structures of the collaborative
agreement” (Simonin 1999, p. 1155). Nevertheless, this definition is slightly limited and could
benefit from further development, and it is thus developed in this paper.
3. Toward a new perspective on firm boundaries
Environmental dynamics currently call for new perspectives on BPM. In this way, the
management of boundary processes has become a key variable of new competitive contexts
(Adamides, 2015; Foss et al., 2013; Gonzalez-Benito and Lannelongue, 2014; Schmenner et al.,
2009; Swink et al., 2007).
Studies are increasingly focusing on firm boundaries as a third alternative
over integration and markets, and the joint use of skills and knowledge has highlighted
the role of boundary management (Alexander, 1997). Boundary processes embrace the
activities through which companies select joint relationships. The boundary concept
emerged as a means to analyze activities and processes that can be jointly controlled and
influenced by several organizations (Yang and Lin, 2010). “Control” becomes the criterion
used to define where firm boundaries should be placed: “the organization ends where its
discretion ends and another begins” (Pfeffer and Salancik, 1978, p. 32). Specifically,
boundaries should be viewed as a continuum that represents an intermediate form of
hybrid governance in network dynamics, digital innovations and sharing economy
perspectives (Normann and Ramirez, 1993; Håkansson and Snehota, 2006).
This continuum constitutes a “border area” in which it is not easy to distinguish firms
from the external environment. Consequently, it is increasingly becoming necessary to use
the concept of boundaries and of the “boundary zone” as a central element of BPM.
The management of resources, knowledge and activities along firm boundaries should be
used as a new paradigm for obtaining and sustaining a competitive advantage (Dyer and
Singh, 1998; Garzella, 2000; Wagner, 2003).
Boundary management should be used to integrate the benefits of internal and external
growth strategies (Hargadon, 2002; McEvily and Zaheer, 1999; Steensma and Corley, 2001;
Takeishi, 2001). Scholars have identified advantages of managing business processes in
hedging against demand uncertainty and in acquiring and developing new capabilities
from partners (Cao and Zhang, 2011; Cassiman and Veugelers, 2006; Parmigiani and
Mitchell, 2009). Other studies show that boundary management favors the integration of
coordination and flexibility benefits by jointly developing both (Park et al., 2004;
Lavie, 2006). Another literature stream focuses on the chance of facing relevant risks in
current contexts (e.g. the full outsourcing of key activities by partial outsourcing to
enhance resource and knowledge portfolios from relationships with external actors).
These findings have caused business process scholars to shift from the analysis of the
management of boundaries to the study of boundary management (Blocker et al., 2012;
Fiorentino, 2016; Troilo et al., 2009) and have helped managers overcome traditional
trade-offs between internal and external processes.
The management of boundaries involves making decisions on “how” to define activities
that integrate and interface a firm with the external environment. This approach implies the
involvement of several subjects with strategic autonomy and generally affects business
processes that can neither be considered fully internal nor fully external. Such management
should design and manage business processes based on a broader perspective to identify
new integration and coordination opportunities among firms’ value chains and those of
external “partners” (Boddy et al., 2000; Pil and Holweg, 2006; Porter, 1987) by “linking” and
“bearing” strategies for managing relationships with suppliers and customers (Scott, 2003).
Boundary strategies encourage an organization to adopt a win-win approach to the supply
chain where each actor collaborates to compete with other chains. Such “linking strategies”
seek to internalize the resources and skills of partners. Firms, in pursuing information
sharing and the alignment of internal and external business processes, should allow for the
innovative redesign of the entire supply chain to satisfy customers more effectively and to
improve overall operating efficiency levels. At the same time, however, firms must supervise
business processes by developing “bearing” strategies that prevent external actors of the
supply chain from acquiring key information through their relationships with the firm.
Competitive expectations should lead other parties of boundary operations to promote their
own interests at the expense of firm interests.
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The management of boundaries is designed to create value by focusing on business
processes and activities that occur at firm boundaries. The following section furthers our
analysis on the role of boundary management with the aim of identifying capabilities that
can support it.
4. The role of “boundary management”
The adoption of boundary strategies implies that essential decisions have been made to shift
the attention of corporate leaders and of strategic management in the business process
periphery. Making the decision to strategically manage boundaries involves first
understanding opportunities inherent of this perspective and then considering its
effective, efficient and correct implementation.
Boundary strategies contribute specific potential to the strengths that characterize
other traditional development models. In contexts in which new communication tools and
new ways of governing relationships are established, the choice of bringing to the
boundaries the center of the strategy promotes the bearing or linking of strategies and can
promote creativity and innovation (Adamides, 2015; Foss et al., 2013; Garzella, 2000;
Gonzalez-Benito and Lannelongue, 2014; Lorenzoni and Lipparini, 1999; Möller and
Halinen, 1999; Parolini, 1999; Ritter et al., 2004; Schmenner et al., 2009; Swink et al., 2007;
Villalonga and McGahan, 2005).
We also understand that a successful boundary strategy requires the involvement and
participation of a plurality of autonomous subjects. The greater autonomy that
characterizes boundary elements and resources improves boundary strategies. The choice
to focus on resources that are not internal (and that are not even external) favours strategic
intent. Strategic creativity derives from individual contributions of subjects and from
strategic freedoms for “joint fertilization” and to prefigure a stronger ability to organize
innovative actions, the primary source of competitive advantage (Biemans, 1996; Björk and
Magnusson, 2009; Fronterre, 1991; Leenders et al., 2003). The company can thus realize an
organization capable of ensuring creativity, flexibility and responsiveness (Capaldo, 2007).
However, the decision to share processes with other subjects involves focusing special
attention on the management of boundaries. Boundary management thus becomes a
cornerstone of boundary strategies. Boundary managers are the guarantors of the
consistency of operations. Their goal is to forge balance and harmony between various
elements and activities facilitated in the boundary area by combining them effectively and
efficiently with internal and external forces to achieve excellence relative to competitors.
The importance of management is well recognized; Chandler (1990) has already stated that
while a company leads its own life beyond its individual executives and while technological
and market requirements limit its development, a company’s health and efficiency in
meeting its economic functions are almost always dependent on the talent of its managers.
In covering and remaining with this essential function, management personnel attitudes
have evolved and boundaries strategies emphasize the importance of governing relational,
organizational and technological factors. The skills and professionalism required from
management personnel become more complex and articulated. Alongside typically technical
knowledge, leadership, communication and relational abilities are emphasized and
entrepreneurial attitudes become fundamental (Pearce, 2004).
The ability to capture weak signs, to anticipate the future, to spur innovation and to
govern change is a key element of entrepreneurship with increasing enthusiasm for
magnanimity (Dyer and Hatch, 2006). Management personnel must be able to manage a
system of increasing complexity and of varied factors, giving rise to a harmonious
combination capable of interpreting environmental and competitive dynamics. These
include intangible factors and IT technologies that have had a considerable impact on
management strategies in recent years. The strategic importance of intangible resources
depends largely on their limited reproducibility and incremental nature. Here, we refer to the
abilities of most immaterial elements to simultaneously produce inputs and outputs of
the production process. Most resources are consumed during production while intangible
resources, rather than diminishing as a result of their use, when used well enhance or at
least retain their potential (Hussi, 2004; Hussi and Ahonen, 2002; Teece, 2000).
Likewise, the establishment of “boundaries” in strategic processes draws attention to the
deepening of the role played by information and specifically information technology as a
factor that allows for the integration of elements that carry out critical tasks of resource
linking and development while facilitating continuous isomorphisms of a given company
and environment by means of strategic boundary management in the search for optimal
competitive positioning.
The need for a set of technical, mechanical and informatics tools that can support a
company’s information and knowledge needs has revealed a link between information
technologies and information systems (Kern and Willcocks, 2000). Moreover, the study of
the development of information technologies and specifically of their applications to the
field of business shows how, in addition to offering information support for decisions, they
are decisive in the traditional task of automating production processes and more recently in
artificial intelligence and the development of modern and innovative interactions that
characterize the relationship between a company and its environment (Powell and
Dent-Micallef, 1997; Sher and Lee, 2004).
In any case, it is overwhelming that the management of intangible and relational capital
and the strategic use of resources related to information technology are elements that are
difficult to spontaneously realize. Their harmonic integration and progressive development
within corporate settings must be achieved through wise, careful and forward-looking
governance that views management as a privileged actor.
In line with the growing importance of boundary strategies, boundary management
teams must express the increasingly urgent need to organize innovative relational systems
(Brusoni et al., 2001). This effort must extend beyond classical business boundaries and
must interpret new ways of managing processes that move resources from within to
boundaries (e.g. issues related to the development of telework or the “internet of things”)
and those that approach resources from the outside (e.g. the creation of inter-company
networks or “big data analytics”).
The boundary manager is a communications expert who governs, organizes and controls
the flow of information. The boundary manager must ensure that corporate
communications internally, externally, commercially and operationally support the
company’s mission and represent its values and culture. The belief that organizations
are also supported by and take part in their systematics by sharing a culture and values
that are somewhat homogeneous shows how the task of management ends up assuming a
significant symbolic-communicational component and how important its leadership talents
truly are.
Leadership and communicational skills in turn become indispensable and irreplaceable
tools for overcoming conflicting antagonisms and interests and for achieving a convergence
of goals that enable more people to interact in the pursuit of common economic goals
(Denis et al., 2001; Dhanaraj and Parkhe, 2006; Dyer et al., 2001; Paulraj et al., 2008).
All of these considerations and the delicate role played by management teams are even
more relevant to strategy development and to the governance of boundary relations, which
is often characterized by weak links.
The boundary manager must be able to design and organize values, information flows, and
operational processes to maximize organizational efficiency while ensuring a high degree of
flexibility. Management teams must be able to exploit potentialities of the human system and
to allow individuals to develop their creativity and to encourage their participation.
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Table I.
Strategic relevant
factors for the
management
of boundaries
The boundary manager, to render the information system and the circulation of
information effective, must organize the flow of information itself in a bidirectional manner
to identify weak signals received from inside and outside. The need to deliver creativity and
flexibility to the corporate system while maintaining stability implies the need to redefine
interpersonal relationships, the role system, and control methods (Chenhall et al., 2011).
Increasing levels of complexity require the careful management of organizational dynamics
that in the absence of proper government action would end up creating dangerous
centrifugal and conflicting situations.
Boundary management must, on the one hand, manage the delicate balance between
inter-organizational relations, cooperation and collaboration with organizational
repercussions of technological change and cultural evolution lead to and, on the other
hand, integrate the various activities to ensure the coherence and harmony of production.
In other words, it must be able to overcome the trade-off resulting from the need to
ensure the diversity and variance of the organizational system in promoting its creativity
and flexibility, to enhance strategic-organizational development, and to limit the occurrence
of centrifugal and conflicting situations with repercussions on the company’s economic
viability (Dalton and Lawrence, 1970; D’Aveni, 2015; Dhanaraj and Parkhe, 2006; Kale et al.,
2000; Lawrence and Lorsch, 1967).
Typical management and organizational issues of boundary strategies are above all
represented by the difficulty of “controlling” organizations and individuals gravitating to
the boundary area overtime and representing the strategies of strategically relevant
resources (Berglund and Sandström, 2013; Katz and Kahn, 1966; Pfeffer and Salancik, 1978).
To limit risks associated with dangerous centrifugal forces, with boundary variables and
resources becoming external and competing with the company, there is a need to constantly
seek arrangements that give relative cohesion to resources and boundary organizations
often based on the ability to reach a strategic convergence of interests although starting
from dissimilar and sometimes even apparently conflicting positions.
In any case, however, it is necessary to ensure and develop a sense of belonging in an
organization to discourage dangerous opportunistic behaviors (Lado et al., 2008; Parkhe, 1991;
Thompson, 1988; Williamson, 1996). Such physiological autonomy and flexibility in boundary
relations emphasize the need for forms of cultural, strategic and operational coordination that
are more advanced than traditional ones (Fronterre, 1991). Otherwise, bankruptcy risks
become pronounced and the severity of effects on the company is proportionally correlated
with the importance of tangible and intangible assets concerned.
Thus, how can organizations and subjects that are essentially autonomous combine
specific interests and achieve “strategic consistency”? What are the main factors that ensure
stability in the boundary relations? What factors control and govern coalitions?
Our analysis suggests that there are some strategic relevant factors for the management
of boundaries. These factors are related to three highly related dimensions such as
technological, cultural and relational (Table I). The boundaries management needs to
Technological
Cultural
Relational
Information systems
Information technology
Technological know-how
Information and data flows
Automation and AI
Web and Internet of Things
Weak signs capture and big data analytics
Entrepreneurship
Creativity and innovation spur
Leadership
Change management
Values designing and organization
Motivation capacity
Sense of belonging
Communication
Inter-company networks
Intra-company networks
Conflict management
Fostering trust
Bearing actions
Linking actions
adequately consider these factors when confronting with multiple actors inside, outside and
on firm boundaries. Specifically, it is easy to recognize the need for delicate relational
activity involving compromise and negotiation that organizes, structures and formalizes in
ways considered appropriate while supporting relationships of trust, opportunism, power
and dependence. Hence, the next section introduces concepts and theories of the negotiation
literature and relates these to the strategic literature to reflect on and discuss the need for
negotiation capabilities within the realm of capabilities required for boundary management.
5. Negotiation for “boundary management”
The deepening of decision-making processes commonly known as “negotiations” has been
always been considered dear to scholars of management, who have focused on strategic
cooperation forged between companies and their stakeholders at large (e.g. Fisher et al.,
1981; Komorita, 1985; Kramer, 1991; Lax and Sebenius, 1986; Lewicki et al., 1992;
Raiffa, 1982; Walton and McKersie, 1965; Zartman, 1977). Mostly influenced by the fields
of political science, organizational psychology and management, over the years, these
studies have contributed to the construction of so-called negotiation theory, which has
assumed the development of techniques and models designed to solve political problems
as a primary target of investigation.
Management studies relating to negotiations have mainly focused on negotiation
processes occurring between companies, customers, suppliers, and industrial relations.
However, the vast majority of studies consider negotiation an individual activity rather than
organizational activity, and even the few that recognize that organizations indeed negotiate
largely fail to apply a systematic approach to the entire spectrum of negotiation activities
while focusing on few functions and mostly on sales and purchasing (e.g. Borbély and
Caputo, 2017a). Instead, the large collection of literature of political science has long
acknowledged the role of institutional negotiation in describing how modern states
negotiate (e.g. Zartman, 1977). Famous statements such as G.W. Bush’s note on not
negotiating with terrorists have formed a negotiation culture or imprint that has fostered the
ways in which the U.S. has negotiated thus far. Similarly, the CEO of budget airline Ryanair
has consistently exhibited a negotiation-based attitude toward the take or leave it approach
that has permeated the entire company (e.g. Borbély and Caputo, 2017b). However, most
management studies assume that organizations do not negotiate and that only people do.
However, it is clear that any organization wishing to negotiate effectively and efficiently
must make a coordinated effort to develop negotiation capacities at the organizational level.
For example, Borbély and Caputo (2017a) theoretically developed a framework for the
development of organizational capabilities of negotiation in unveiling how organizations
can develop a negotiation capability. As such, a negotiation capability development should
be pivotal to the management of firm boundaries and particularly in contexts of
rapid technological change given the need for continuous innovation through cooperation
and coopetition and given the quest for new markets.
In a global environment where the digital revolution has substantially enhanced the rate
of competition, the literature agrees that cooperation strategies applied within company
departments and between companies can often have a number of benefits, including
improved levels of communication, stronger relationships between suppliers and customers,
and process sharing (e.g. co-design and co-production). This scenario is significant when
businesses, due to a lack of know-how or funds, can hardly self-generate the innovation
needed to effectively respond to market needs.
Competitive positions are selected by companies acting as rational systems through
choices made based on more strategic options. Scholars argue that several benefits can
result from cooperation strategies such as a stronger communication, sharing processes
such as those of co-design and co-production and closer interactions between suppliers
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and customers. This has important meaning in a context in which a lack of know-how or
funds renders innovation needed to efficiently address market needs can hardly be
automatically generated by businesses.
An essential characteristic of cooperation activities is the negotiation process. Negotiation
skills are improved and the ability to negotiate effectively is enhanced through negotiation
processes that are crucial to political, managerial, and business contexts.
Negotiation theory, in its prescriptive form, arises as a synthesis between
economic-mathematic and socio-psychological approaches. Two main studies can be
considered landmark works: Fisher et al. (1981) study influenced by psychological and
behavioral doctrines and Raiffa’s (1982) analysis based on game theory and the
mathematical and statistical disciplines. The relationship between these works and
Lax and Sebenius’ (1986) work has contributed to the adoption of negotiation theory
in management.
Over the years scholars have debated ways to locate, expand, or even create a Zone of
Possible Agreement, which can be represented by an Euler-Venn diagram and which is
defined as the intersection set of sets representing several stakeholder interest
configurations (Figure 1). This is done by determining the strategic manipulation of
elements of a negotiating structure as the main method, which is defined as components and
relationships between components forming the basis of negotiation as a joint
decision-making process.
Three basic elements compose the negotiating structure: the parties involved, the
subjects or issues under negotiation and preferences, and thus the interests and positions
of the parties involved. Negotiations can be categorized according to these elements as
follows. Regarding the number of parties involved: two negotiating sides can be
distinguished (bilateral or dyadic) from negotiating with more parties or with multilateral
ones (Raiffa, 1982). Parties can also be configured depending on whether they negotiate as
an individual or as a group/organization or as an individual or collective. Regarding the
number of issues involved, there are two different types: one-question negotiations and
those covering more issues (Raiffa, 1982; Sebenius, 1983). Finally, on the configuration of
interests, a distinction is made on the distributive from integrative negotiations. The first
distributives are also known as win-lose (a fixed pie) and are configured for conflicting
interests between parties. The latter distributives are defined as win-win (an expandable
pie) due to the possibility of reaching an agreement that is satisfactory for all parties
(Pruitt, 1981; Walton and McKersie, 1965).
In the management of firm boundaries, these three aspects play an important role in
increasing the complexity of such negotiations; this is mainly attributed to the
interdependence between the many parties involved. Certainly, scholars stress that
multilateral negotiations often present very different dynamics of development from
those of bilateral negotiations according to three dimensions: their larger size and higher
levels of complexity and stronger diversity (Kramer, 1991).
Interests of “A”
Figure 1.
Representation of a
generic ZOPA with
the Euler-Venn
diagram
Interests of “B”
ZOPA
Source: Caputo (2012)
Of the several parties involved in boundary negotiations, there are the heterogeneous ones
with their own conformation of interests and issues. This complicates the process by
broadening the scope of negotiations. For example, the blurred and interdependent systems
of governance that interplay within the boundaries of a firm (Normann and Ramirez, 1993;
Håkansson and Snehota, 2006) constitute at the same time a complexity factor as well as an
opportunity factor for the negotiation taking place. The possibility for parties to form
coalitions to influence the outcomes of negotiations represents a further source of
complexity in multilateral negotiations recognized in the literature (e.g. Raiffa, 1992;
Komorita and Kravitz, 1983; Murninghan and Brass, 1991; Polzer et al., 1998).
We propose that coalitions, for example, should be particularly critical for the
management of boundaries where a firm must govern relationships in an efficient and
effective fashion.
Integrative potential, which can be defined as an increase in the joint gain available to
negotiators over and above the joint gain afforded by a fixed-sum solution, is included in
many negotiation situations, and it is a primary topic of negotiation research as it concerns
the achievement of integrative agreements. Integrative agreements can be made through the
use of different specific negotiation strategies where several issues are considered or where
several parties are involved (Sebenius, 1992). Thus, we argue that integrative negotiations
are fundamental for successful boundary management, where several interests need to be
jointly satisfied to exploit opportunities for competitive advantage.
Managers, as behavioral studies on negotiation and conflict resolution show, are often
inefficient, and integrative agreements are not typically reached by them, although
such agreements are frequently available, mutually beneficial, and therefore desirable
(Moran and Ritov, 2007). The possibility of changing the game as a distinctive element of the
negotiation process was first identified by Sebenius (1983, 1992), who argues how elements
of negotiation structures, issues, parties, interests and positions change during negotiations.
This issue can be considered an implicit and natural evolution of the process itself and can
be tactically guided by parties involved. This manipulation, which is known as Negotiation
Arithmetic, allows the elements of a structure to be changed by parties in a strategic manner
and together with the adoption of conduct aimed at creating or claiming value allows,
depending on the goal to be achieved by parties involved, the shifting of negotiations from
distribution to integration and vice versa.
To create value by extending the range of potential agreements, the addition of issues
that exploit differences in interests among parties involved can be considered a useful
strategy. Likewise, this can complicate the negotiation process or destroy the possibility of
solving other issues. The separation or setting aside of issues can simplify the negotiation
process, but this can lead to complications in the achievement of agreements on other issues;
in turn, there are trade-offs that must be evaluated.
Such interests and positions can be strategically manipulated by parties involved
through appropriate actions (e.g. by linking issues) during or outside of negotiations
(Lax and Sebenius, 1986).
The manipulation of the number of parties through the same negotiation or by external
facilitators can be considered another potential strategic approach to the shift toward an
integrated approach.
To reach an agreement and to spur a significant influence on the conduct of negotiations,
the absence or presence of an interested party may be required. Clearly, complications in of
negotiation process result from changes made to the number of parties and issues involved
and especially in the case of an increase in abundance (Sebenius, 1983). Therefore, adding
parties to a negotiation can be a successful choice only when this may materially influence
the negotiation or realize tangible interests. Such parties are typically allowed to participate
to reinforce existing coalitions or to help form one by leveraging links to new interests and
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issues (Murninghan and Brass, 1991; Polzer et al., 1998; Raiffa et al., 2002). On the other
hand, the release of parties from a negotiation can occur to reduce information costs, to
reduce the complexity of the negotiation process, or to forge agreements shared by most of
the original participants (Lax and Sebenius, 1986, 2002; Sebenius, 1983).
Scholars have examined specific strategic negotiations rather than considering
negotiation as a whole from a strategic point of view. Jemison and Sitkin (1986), in their
study on the acquisition process as a determinant of acquisition activities and outcomes,
argue that the importance of negotiating practices lies in the acquisition process with
reference to the success of operations (and particularly with regard to the acceptance of
operations by personnel). Indeed, dissatisfaction and low levels of productivity can result
from a lack of transitional support ( Jemison and Sitkin, 1986). Furthermore, controversial
research has been conducted on acquisitions in relation to the reasons why well-designed
acquisition processes fail; in this regard, strategic fit cannot be considered as the only
variable. Other drivers of success include the process of negotiating acquisition and the
integration of a target into the parent company (e.g. Dierickx and Koza, 1991; Jemison and
Sitkin, 1986). Likewise, studies show that joint venture negotiations differ from those of
cross-cultural businesses because levels of firm motivation, project longevity, and resource
commitment are different in the case of this form of negotiation (Luo, 1999; Luo and
Shenkar, 2002), revealing a pattern in organizational behavior and especially with reference
to contract negotiations (Lee et al., 1998; Luo, 1999; Luo and Shenkar, 2002).
Dierickx and Koza (1991) argue that individuals with prior negotiation experience should
have an easier time managing information asymmetries and thereby achieving their
strategic objectives such that information asymmetries can be considered endemic to
merger and acquisition negotiations; similarly, they always exist during negotiations.
Recently, institutional studies have drawn a similar link between negotiation and
strategies with the importance of negotiations in institutional settings being found to be
useful in understanding dimensions of organization behaviors in negotiations (Helfen and
Sydow, 2013; Helms et al., 2012). Scholars highlight that new practices sometimes arise
“from the efforts of numerous and different organizations that work together to negotiate a
settlement on a new institutional arrangement (trade associations, e.g. working to develop
novel industry standards)” (Helms et al., 2012, p. 1120). The imprint of organizational culture
appears through negotiations even when it is believed that “organizations do not negotiate,
individuals do” (Sydow et al., 2009). Negotiation strategies of unions or institutional
organizations are typically quite consistent regardless of changes made by the negotiating
team, showing some form of institutional movement behind individual practices.
The organization acts as an individual entity that brings issues and interests to the table,
causing such strategies to represent behaviors of the organization itself (Helms et al., 2012;
Weiss, 1990).
As noted above, negotiation plays an important role in the effectiveness of boundary
management. Negotiation capabilities developed by boundary managers can favor
information sharing (Aldrich and Herker, 1977), knowledge flows (Patriotta et al., 2013;
Tushman and Scanlan, 1981), and conflict resolution (Schotter and Beamish, 2011).
However, in the new competitive contexts created by a strong digitalization and expansions
of the firm boundaries, how can organizations develop a negotiation capability in support of
effective boundary management?
The recently developed OMoN (Borbély and Caputo, 2017a) can support the answer to
such question by drawing attention on where a negotiation capability can be created.
The OMoN model consists of four levels (individuals, linkages, infrastructure and
organizational capabilities) and prescribes stages for developing a negotiation
infrastructure (Figure 2). The OMoN theoretically assumes that when it is applied to a
company strategy, in our case a boundary strategy, it can ensure consistency in
Assessment and direction of strategic actions in
support of negotiation capability in the
management of the boundaries
IV. Organizational Capability
The strategic contribution of negotiation to an
organization
Development of a supporting system wherein
knowledge is shared among actors operating
within boundaries to support value creation
III. Infrastructure
Organizational infrastructure in support of
negotiations
Interventions designed to raise awareness among
managers and employees who operate within
boundaries in support of value creation
opportunities and strategies
II. Linkages
How negotiations impact one another
Training and development of employees’
negotiation skills to help employees effectively
operate within boundaries
From the
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403
I. Individual
Individual negotiations and negotiator behaviors
Source: Adapted from Borbély and Caputo (2017a)
negotiations, hence improving the competitive advantages of a firm. Its application to the
management of boundaries can be highly beneficial in supporting coordinated actions
among actors who come into contact along boundaries.
The first level of the model is the individual level, which relates to the training and
development of firm employee negotiation skills (Borbély and Caputo, 2017a). Stemming
from the vast body of organizational psychology research investigating how people
negotiate, this level concerns how boundary actors interact at the negotiation table.
Variables to take into consideration at this level include characteristics of negotiations and
their performance, processes and outcomes; satisfaction levels and the ethical views of
negotiators. Successful boundary managers should, therefore, be conscious and
knowledgeable about the behavioral aspect of negotiation. For example, they could put in
place appropriate training and development actions for employees involved in boundary
management that allows for integrative negotiations to take place.
The second level of the model considers linkages, which relate to the development of a
system of negotiations within an organization (Borbély and Caputo, 2017a). In particular, this
level prescribes how an organization should understand how different individual negotiations
that take place impact one another. As such, previous negotiations are considered to serve as a
context for subsequent negotiations, spurring the path-dependent evolution of how an
organization negotiates. The boundary manager should be, therefore, aware of the
interdependence among different negotiations taking place within the boundary and support
effective knowledge exchange, through business processes, that allow to leverage on
collaboration, trust and reciprocity. Variables to consider at this stage include the histories of
previous negotiations, the contexts of negotiations, levels of situational awareness and how
knowledge and experience are shared among employees and managers. It is fundamental for
the management of boundaries to promote an environment of trust within boundaries to allow
for information sharing. For example, interventions should take place to raise awareness of
the benefits of relationships occurring along boundaries.
Figure 2.
The OMoN model
applied to the
management
of boundaries
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404
The third level of the model is the infrastructure level, which relates to the development of
an organizational infrastructure in support of negotiations (Borbély and Caputo, 2017a).
This level is concerned with the organization of a negotiation function that improves the
efficiency and consistency of negotiations. In boundary management, this could be
assimilated to a formal knowledge management system for negotiations, designed with a
variable geometry that allows it to be dynamically opened to different actors in
the boundary, even if external to the organization. Variables covered at this level include
infrastructure characteristics, management practices, incentive systems, KPIs, and the
transferring of knowledge.
The fourth level of the model is the capability level, which relates to the development of
negotiation as a strategic resource (Borbély and Caputo, 2017a). It is concerned with the
strategic understanding of negotiation as a major source of competitive advantage
in the boundary management, making the negotiation capability a pillar of the boundary
management capability. Variables to be considered at this level may include
organizational performance, upper management commitment and idiosyncrasies found
between organizations.
6. Conclusions
From a business processes perspective, the paper examined the role of boundaries in the
new political and technological landscape. Our analysis suggested that in digital supply
chains, boundary management and negotiation should be developed as key capabilities in
aligning and integrating complex networks of partners interacting along firm boundaries.
We exhibit how the digital transformations of our time are creating new competitive
contexts, such contexts are having a major impact on firms and business processes, making
the boundary of the firms dynamic, expanding and more blurred than in the past. It is
therefore necessary for managers to understand these dynamics and move the perspective
from the boundary of management to the management of the boundaries, which should be
done by developing a boundary management capability. This capability relies upon the
opportunities provided by the digital transformation and includes as its pivotal part a
negotiation organizational capability, which allows for a more effective and proactive
management of the boundaries (Figure 3).
Digitalization
Outside
the firm
Boundaries resources
The management
of boundaries
New Competitive
Contexts
Negotiation
capabilities
Expanded and blurred
Firm’s boundaries
Inside
the firm
Figure 3.
An explicative
framework for
boundary
management
Firm boundaries
Our findings show that the choice to consider boundaries as the basis of a strategy promotes
the design and management of business processes from a broader perspective. In using this
perspective, firms should develop new capabilities (e.g. boundary management)
to effectively connect firm value chains to those of “partners” (Schotter et al., 2017).
Specifically, negotiations should deeply impact flexibility/performance outcomes
(Caputo et al., 2018).
In the context of digitization, we provide theoretical and managerial contributions to
three main areas of the literature and a first attempt of integration of these three bodies of
work together. First, from a theoretical point of view, we contribute to studies on BPM.
We develop a matching framework for studying BPM by applying a perspective on firm
boundaries that explicitly considers key features of negotiation (Fiorentino, 2016).
In competitive contexts where digitalisation and intelligence are emerging, boundary
management has become relevant as a means to affect the future development of business
processes. Based on our findings, firms should increasingly determine whether business
processes flexibly support partnerships by forging their own boundary capabilities or by
“plugging in” to partners’ capabilities (Luvison and de Man, 2015; Niesten and Jolink, 2015).
Second, we contribute to studies on supply chain management. Digitalization has
spurred value creation managed in the firm “periphery” and in interfirm relationships
(Kumar et al., 2016). We suggest that to overcome limits of traditional supply chain models,
which generally involve rigid organizational structures, unapproachable data, and
disjointed relationships with partners, firms should develop boundary capabilities such as
those of boundary management. A critical question facing supply chain managers who seek
to benefit from boundary capabilities concerns ways to face the complex relationships of
firm boundaries. Negotiations can drive a transition from the “current view” of supply
chains to a “future vision” of digital supply chains to enable automation, flexibility and
partner management (Papadopoulos et al., 2017).
Third, we contribute to strategic negotiation studies. We find support for extending the
OMoN model to the management of boundaries (Borbély and Caputo, 2017a). This extension
offers useful insights to scholars of negotiation, a very new field of management, in proposing
opportunities to adapt and deepen current frameworks of specific research domains.
Practical implications of our study include the need for managers to ask questions, such
as: How are we placed on the various levels of the OMoN? Which stages may prove useful in
developing the targeted negotiation infrastructure? How can partners be persuaded to
approve of boundary strategies used and of processes of digital transformation? More
generally, managers may benefit from our propositions by reflecting on how boundaries are
impacting their business and how they can manage both the current impacts and the future
ones. A first action for managers interested in developing a boundary management
capability would be to develop a role into the organization for a boundary manager, who
oversees the business processes on the boundaries, assesses skill needs and implements
appropriate trainings, develops an infrastructure that exploit the benefits of digitalization in
fostering collaboration and trust among the boundary actors.
Future studies may empirically develop our work from the existing literature. Our
findings suggest that digitization should transform boundary management systems, supply
chains and negotiation patterns. Future studies may pose “where” and “how” questions.
Scholars of BPM may extend our framework to explore the effects of subcomponents of
boundary capabilities and negotiations to better understand subtle effects on business
process performance and partner management. Empirical studies should test our
conceptualization and apply our framework to specific cases. In addition, future studies
should explore how digitalization is being used in boundary business processes, how
digitalization has transformed boundary resources and capabilities, and how these shifts
may continue to manifest in the future. Similarly, another promising avenue for future
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research is the further investigation of the knowledge gaps related to boundary
management (in terms of challenges, value, data, etc.) and negotiation (in terms of
organizational, skills, capabilities, and processes). Moreover, our study should promote the
investigation of new challenges of boundary management in relation to digital supply
chains. Studies should discuss ways to identify opportunities and risks related to the
management of big data along firm boundaries. Specifically, reflections drawn from this
paper may trigger scholars to investigate the role of data generated from increasingly broad
boundaries that characterize contemporary firms. As such, questions related to data
protection and cybersecurity and especially in the light of recent scandals that have affected
Facebook and Cambridge Analytica may serve as another line of investigation. Similarly,
ethical concerns related to the management of boundaries may offer interesting avenues for
future research. The management of information and data sharing across and within
boundaries must be ethical and carefully managed between partners. Companies developing
boundary management capabilities must consider ethical issues related to data protection
and storage, as data are increasingly becoming of strategic importance as a shared
environment with decisions to be made on the access and ownership of such information.
Finally, the findings of this study may be extended to inform negotiation research on
which factors affect partner selection and negotiation. In particular, studies may focus on
the implications of boundary management for human skills, as well as training and
development. Future studies with this focus could examine changes affecting skills needed
to engage in negotiations along boundaries and what this may mean for negotiators.
Such studies may examine whether negotiators must become data scientists or analytics
experts, whether the rate of skills obsolescence is expected to increase or ways to use digital
data to drive boundary management in negotiations as a profitable line of investigation.
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Corresponding author
Raffaele Fiorentino can be contacted at: fiorentino@uniparthenope.it
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BMGT Amplified Writing and Discussion
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strategy for maximizing learning.
What kills innovation? Your role as a leader
in supporting an innovative culture
Nelson H. Soken and B. Kim Barnes
Nelson H. Soken is based at
N.H. Soken Consulting,
Hugo, Minnesota, USA.
B. Kim Barnes is based at
Barnes & Conti Associates,
Inc., Berkeley, California,
USA.
Abstract
Purpose – The purpose of this paper is to suggest a set of leadership practices that can help to build
and sustain a culture of innovation.
Design/methodology/approach – The article is based on the authors’ many years of consulting and
facilitating learning experiences in innovation management in a broad range of organizations. The
authors have observed that specific leadership and management practices seem to be strongly related
to the success or failure of organizations in building self-renewing innovation environments.
Findings – Leadership and management behaviors that engender fear, a lack of focus and
communication about organizational innovation strategy, a paucity of resources (time, money,
encouragement) are among the factors that make innovation less likely or less successful. A clearly
communicated purpose, the ability to accept and use failure, and an accessible process for getting a
hearing on ideas are among the supportive factors.
Practical implications – Many leaders understand that innovation is key to their organization’s ability to
survive in a connected and competitive business environment. Fewer understand and/or are willing to
make the changes that will create and sustain a culture of innovation. Leaders who are willing to adopt
some of these practices are likely to achieve better results in encouraging talented people to contribute
their capabilities, ideas and efforts to strategic innovation initiatives.
Originality/value – Successful innovation is not created through magic and good fortune. It is the
product of strategic thinking, a supportive culture, great talent, managers who know when to be involved
and when to step back, and leaders who listen, support risk, and learn from failure.
Keywords Leadership, Innovation, Culture, Management, Organizations, Risk-taking
Paper type Viewpoint
xecutives see innovation as the way to long-term success. According to a McKinsey
worldwide survey, over 70 percent of the executives view innovation as one of their
top three growth drivers over the next three to five years. These organizations have
incorporated innovation into their vision, mission, and strategy. One of the first issues that
arises is that many of them do not have a common definition of innovation. People in these
organizations often conflate creativity and innovation. They may believe that it belongs in the
marketing department or R&D. If innovation is to be an important factor in organizational
strategy, the word must have a shared meaning to everyone in the organization. In the
managing innovation course developed by David Francis, PhD and B. Kim Barnes,
innovation is defined as ‘‘optimizing the potential benefits embedded in an idea that is new to
you’’. Two concepts contained in this definition are that innovation is about creating value
and that it requires individuals and organizations to embrace something new. It is not just
about generating good ideas, but also about taking these good ideas and bringing them to
fruition. Innovation requires people to change and move beyond the status quo. Vision,
motivation, focus, perseverance, and leadership guidance are required to achieve success.
E
In that same McKinsey survey, 65 percent of the executives surveyed are disappointed with
their ability to stimulate innovation in their organizations. It is not as if these leaders and
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‘‘ Innovation requires people to change and move beyond the
status quo. Vision, motivation, focus, perseverance, and
leadership guidance are required to achieve success. ’’
organizations are not investing in innovation. They invest in workshops on innovation,
experts come in to consult with leaders on innovation strategy or recommend building
‘‘creative spaces.’’ They recognize that creating a positive and cheerful workplace is
important to employee engagement and productivity. Unfortunately, they see few new
products or services emerge from their development teams. They find that clunky processes
continue to slow things down. The mood and climate of the organization’s physical and
social environment remain dull, subdued; even, at times, depressing. People celebrate
Fridays and hate Mondays. Talented individuals leave for greener pastures at other
companies that they perceive as more exciting. What’s wrong with this picture? Frustrated
leaders throw up their hands and ask themselves and others, ‘‘What am I supposed to do to
create a real culture of innovation?’’ Richard Danzig, former US Secretary of the Navy, states
in the February-March, 2000 issue of the magazine, Civilization: ‘‘Organizations are a kind of
fossil record of what bothered their predecessors. That record should be studied, he argues,
to anticipate better how organizations will change. The issue is not whether they will
encounter different types of crises; they will. The issue is w…