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Proven Methods for Innovation Management: An Executive Wish List Andrew M. McCosh, Alison U. Smart, Peter Barrar and Ashley D. Lloyd Innovation specialists from the largest British companies discussed what they wanted to know about innovation, and asked the academic community to suggest some answers. Some, but by no means all, of their questions had already been answered in the published literature. The behaviours that support a culture of innovation include a market orientation, an innovation-friendly ruling coalition, and organisational structures that propel novelty. These behaviours also encourage creativity if the risk-taking employees are rewarded for success and if they are asked to explain their personal mission at intervals. Several methods which researchers have found effective for the identification of ideas which may become market winners are discussed, as are methods building organisational competencies for innovation. Some of their remaining questions are being addressed by research projects currently in progress.

Introduction

T

he present paper fulfils two roles. In the first place it is a response to a ``Wish List'' published by a group of business executives who came together and drew up a list of the things they really wanted to know about innovation. Some of the questions they asked can be answered now, some can be discussed in a helpful manner now, and some were impossible. Secondly, this paper will serve to discuss the context which surrounds a project on innovation, on which our team, based at Edinburgh and Manchester, are engaged at present. The second goal will therefore be to show where our work fits into the vast panoply of efforts that have been devoted to the topic. The Economic and Social Research Council is a research funding body paid for by the taxpayers of the United Kingdom. It has responsibility for choosing projects to be supported financially within the social sciences. Many of its projects are proposed by research workers. In addition to these, the Council periodically announces initiatives, allocating significant amounts for research in specific fields. One of these initiatives was on innovation, starting in 1994 and continuing at # Blackwell Publishers Ltd 1998. 108 Cowley Road, Oxford OX4 1JF and 350 Main St, Malden, MA 02148, USA.

the time of writing. A background document to the Council's current research on Innovation at the level of the business firm provides a useful summary of the current issues and a number of ``stylised facts'' being ``robust conclusions from a large number of studies'' (ESRC, 1998). The ESRC initiative on innovation therefore, has benefited from inputs from more than a hundred academic contributors and a slightly smaller but still considerable number of interested business people. Most of the latter have some kind of special responsibility for innovation within their company. At a series of three dinner meetings, the business contributors were invited to state what they would really like to know about the entire process of innovation, whether it was to do with the management of innovation, with innovative management, with the task of implementing an innovation, or with some other aspect of innovation in the business world. After the meetings, the business contributors were allowed to write in with more questions, or with amendments. Eighteen questions were included in the final list produced by the secretariat of the Innovation Programme. One of the roles of this present note is to draw attention to the

Contributions from business

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answers, some partial, some very partial, but some fairly complete, which are already available to some of those questions in the published literature. The paper is therefore structured by reference to the questions in the executives' wish list. The headings of the sections are either questions they asked, or are collations of two or more of the questions which can conveniently be handled together. The method employed in writing this note was to examine a number of contributions to the literature, as shown in the bibliography, and to consider the extent to which each piece helped to address each of the questions or recommended procedures. The paper's mode of addressing the subject was analysed by what we have called the SHRAPNEL method, which involves deciding whether an article bears on a subject by way of Survey, ``How to'', Report, Advisory, Problem description, Notification, Education, or Literature review. In its second role, the present paper will discuss where the project we are engaged in has something to say about any of the questions. There are many questions which our project does not address at all. At the same time, it is quite important to draw the boundaries rather widely. Innovation means different things to different people, and it would be a brave author who declared any of them wrong. We are not dealing with a subject with sharp edges. The literature about innovation blends imperceptibly into other managerial subjects in almost as mysterious a manner as innovations themselves diffuse through the industries they pervade. We shall adopt the definition that an innovation is ``the successful implementation in business of new ideas'', as was decided by the project team on ``Innovation, the Best Practice'', staffed jointly by the Confederation of British Industry and the Department of Trade and Industry in 1992. The Edinburgh/Manchester project, which is entitled ``Business Process Contexts for Technological Investments and Competitive Advantage'', is concerned especially with the problems that managers face in trying to make an innovation succeed. We seek to contribute to the search for ways to make a corporate culture benign towards novelty, and to make an organisation supportive of new ideas. These new ideas may be surprising, but may also be vital to the task of meeting the future needs of the company's future markets. The project examines the business processes within a company, or a part of a company, shortly before a technological investment (a new machine, perhaps) is

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installed there. We then re-examine the business processes after the project has had a little time to settle in. Very detailed business process descriptions or maps are prepared to represent the before and after stages of the investment, and these are compared. The reasons for every business process alteration are explored by interview and by analysis. The success or otherwise of the investment is examined by survey and by observation. We have been finding that the more thought and planning that is devoted to customer service issues and ``new opportunities'' issues while the technological investment is being prepared for, and therefore the less time, proportionately, that is spent on the technical task of putting it into position, the better the investment will turn out to be. Perhaps unfortunately, we have also been finding that the amount of time spent on customer service issues and new opportunities issues is rather limited, considerably less than we had expected. The existing literature on innovation has the potential to be of great help to companies as they prepare for the future; there is very considerable agreement amongst the writers as to what should be done, and (perhaps more important) what should not. We hope the present paper will assist managers in finding good ideas from that literature. As mentioned above, our own study concentrates on those innovations which are of project form, with particularly those innovations which are realised through technological investment. It is our further hope and expectation that companies should be even better able to get new investments to succeed by following the well established principles and novel guidelines in our project reports, while drawing up plans for their investments and while bringing each investment into operation. As a preview of the conclusions we have reached from our reading of the recent literature on innovation and from our own investigations, we offer the following five guidelines for innovation; 1. The company, and the dominant coalition who manage it, must be firmly supportive of innovation as a way of life, by their example, their words, and their actions. 2. The company must keep close to its customers, partly to respond to their expressed needs, but mainly so that it can work out what they are going to want next, preferably before the customers know themselves. 3. There must be an internal procedure for keeping all innovation projects under

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continuous reconsideration, so that the work is done simultaneously on all fronts, but remains cohesive and compatible. 4. An innovative culture usually involves considerable freedom of action, substantial resources for educating all ranks in the firm about new technologies, and the use of small teams of employees who possess many skills between them. 5. To sustain an innovative culture, it is important that employees who innovate successfully should be seen to have been rewarded for it by the other employees. The section headings in the rest of the paper are chosen from the executives' wish list. The questions which they asked (including those which we have been unable to answer) are listed in Appendix A at the end of the paper.

1. What behaviours are likely to support a culture of innovation? Whether we are discussing innovation by scientists, by product group managers, by production managers, or by advertising copywriters, it seems to be the collective opinion of the academic writers on this topic that there are certain things that top management should arrange and certain other things they should avoid. One of the executives who helped draw up the wish list wanted a typology of innovation-supporting behaviour sets, so that each company could look up its own ``best behaviour list'' in a catalogue. It seems, from the literature, that this is not necessary; the advice is highly uniform. They all say that companies can build a culture of innovation by doing the same things. In the first place, it is essential to report the comment by Schewe (1994), that being good at innovation was a corporate skill. Schewe investigated whether managers should be concerned mainly with firm-related variables or project-related variables when they are trying to draw up policies that facilitate the success of an innovation. He was able, by studying 88 projects in some detail, to establish the importance of four factors. All of them were firm-related, none were projectrelated. The four factors which Schewe found to be important were innovation experience, large scale production capability, a strong orientation towards technology, and an efficient procedure for transferring projects within the business. He concluded that the general approach of the company was very much more important to innovation success than

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factors which were specific to the project itself. Quinn (1996) came to the same conclusion, and generated a list of the specific features of a company which he thought would assist companies in becoming fertile at innovation. Managers, he said, have to be willing to accept the ``tumultuous reality of innovation'' and that it probably will not be a tidy hierarchical procedure. The firm has to have a vision of its future and a clearly defined orientation towards the market. It should be divided into a number of small organisations, without too many command levels, and these should be set to compete against one another to produce solutions. He advocates a multiplicity of approaches to the same basic problem. He admits that this will make any corporate level plan for the overall innovation portfolio very complex and conditional. Quinn is also an advocate of the ``skunkworks'' approach to innovation management. This involves protecting a new and innovative project from being crushed by the corporate bureaucrats by hiding it in a separate building, usually quite a long way from the main factories. The approach is most effective when there is a senior manager actively involved, plus a project champion to lead the operation, plus a team of miscellaneous appropriate specialists. Quinn feels that this format creates an entrepreneurial attitude amongst the team, which other formats like ``venture groups'' do not usually attain. Another study which gave similar but not identical answers was carried out by Hurley (1995). This was a massive social science survey of a traditional design. An empirical investigation was undertaken at a government R&D agency, involving nearly 9000 people. The questions asked did not cover the list of factors which Quinn and Schewe had proposed, partly because the projects were done at about the same time. Instead, Hurley was interested in whether units which encouraged career development, participative decision making, and which emphasised ``people'' issues were more productive of innovations than those which emphasised the harder, more bureaucratic, factors. He used a statistical study of various measures of corporate culture and of innovation, and established that the more ``people-orientated'' R&D units obtained better results. These factors do not, of course, come into being all by themselves. The role of the top management group of the firm and the biases and viewpoints they adopt, will be likely to affect the entire ambience of the company,

Top management actions

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The CEO's role

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including but not limited to the innovation units. Schoenecker, Daellenbach, and McCarthy (1995) received one of the Academy of Management's ``Best Paper'' awards for a careful study, in two industries, of the characteristics and demographics of top management teams and the R&D intensity of the companies' activities. The kind of people who make up the top management group are shown to affect the commitment of the company to innovation. Papadakis and Bourantas (1998) studied the role of the chief executive officer in promoting and championing technological innovation. They found that new product innovations, significant product changes, and innovations in the production process were all facilitated by direct intervention by the CEO. They attributed these successful interventions, among Greek companies, to the personal characteristics of the CEO, especially his need for achievement and his goal of reputation. The conventional wisdom of the dominant coalition within the firm is always important in determining what actions will be taken. There have, of course, been rather a lot of sad cases in which a company did not innovate and suffered severely in consequence. In a rather plaintive paper, Goldman (1985) ``suggests that, notwithstanding the propensity to invention of establishments with competent and sometimes superior R&D organisations, these do not necessarily produce innovations''. He points out that many large firms have functional fiefdoms that have to be satisfied before a new idea can be allowed to progress. In general they each add overhead to the project and they often, collectively, drown it. Goldman writes, perhaps with some bitterness, about the ALTO which was roughly the same as the LISA Apple machine that came out five years after it. The ALTO was technically as good as LISA, perhaps better, with a laser printer (in 1974!) but the bureaucracy drowned it. Goldman offers a distressing litany of similar tales, in which the absence of a culture of innovation is blamed for one lost opportunity after another. He is particularly concerned about the impact of so-called bean counters in the executive suite. He feels that their special talent is in stifling novelty, but in timing the inevitable loss of competitiveness so that the bean counter involved has just retired before the company collapses. A very careful and thorough investigation was offered by Dougherty and Corse (1997). They address the organisational capacities that are necessary to take advantage of product innovation, especially for large established organisations. Their goal was to;

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. describe the underlying skills, know-how,

and orientations that enable people to generate viable new products on a regular, not occasional, basis, and . to understand why the ability to innovate is so limited in big organisations. They studied forty cases of new product development by interview with 134 workers in 15 very large companies, which were dominant in their fields, but which were being attacked by new small ones. Of the forty products, five were successes by the time of writing up the report, 16 were in the market but it was not yet clear if they would succeed, 12 were still being worked on, and seven had failed or been cancelled. Dougherty and Corse found the following behaviours to be effective in getting a good innovation result; . Comprehensive product conceptualisation

should be employed, by which they seem to mean building in customer needs and requests at the design stage. . Iterative organising is also essential. This means communicating an innovation and what it needs across the firm, quickly, in very much the same manner as was advised by Eldred and McGrath (1997) under the title of `Program Synchronisation' and by Cusumano and Selby (1996) under the title of `Parallel Working'. . Situation evaluation should be employed. This is regular evaluation to see that the idea is on track or perhaps is creating a new track; this can be compared to the synchronisation meetings at Microsoft as reported by Cusumano and Selby. . There should be collective accountability. This list, although phrased slightly differently, is very much like the other recommendations previously discussed. The biggest problem reported to Dougherty and Corse by their innovating subjects was linking new product development to the rest of the enterprise. Capacity to innovate well depended on deep structures, the basic underlying assumptions about ``how we work in this company'', about what a product is, about what kinds of collaboration are appropriate, and about the nature of responsibility. These capacities had a limited reach horizontally within the firm. Getting a product accepted by your equal in another bit of the business was a big struggle. Perhaps we can close this part of the paper with a comment from Peter Drucker (1985) on one of his ``seven sources of innovative opportunity''. The third of these was a focus on a `process need'. Within this group, there

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is a sub-class which requires the firm to undertake programme research. This can happen where you have a felt need, you can identify what knowledge you require to meet the need, but that knowledge does not exist. In this situation you can invest in the creation of that specific new knowledge. Eastman invented the famous Kodak film that way, by research to enable the photo-sensitive layer to be deposited on a light flexible film instead of a heavy glass plate. Drucker imposes a list of requirements before a `process need' innovation can be workable. There must be; . a self contained process, which has . one weak or missing link. We must have

before us,

. a clear definition of what we want to

1.3 1.4 1.5 1.6 1.7 1.8

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produce what a large proportion of them are going to want next, even if they do not realise it yet. Not too many interfering bosses. Freedom of action is at least permitted, preferably encouraged. The firm must have a longish term view. The firm must have a method of transmitting new ideas across the company quickly and supportively. The dominant coalition must be openminded towards innovation. There must be some kind of organisational method of keeping the projects on track. Frequent inter-departmental project information meetings would be an example.

happen, and

. an ability to define the solution specifica-

tion, and

. a high level of receptivity amongst the

possible customers for the idea that an improvement is needed.

It seems clear that these conditions will be very hard to meet in a firm that does not have a substantial willingness to support innovation. Unless the firm has a top management group which will go through the process of checking that these conditions are met, then Drucker suggests that it is likely that nothing will happen. The great majority of the case study observations being written by the Edinburgh/ Manchester research project team at the moment are of the process need kind. However, in most of them the problem has been the importation of knowledge that is new to the company, but is necessarily totally new elsewhere. We have run into several examples, of varying degrees of severity, in which the conditions described by the authors in this part of the paper have not been met in full. When this has happened, the difficulties which the above-quoted authors predict, have indeed been observed. Fortunately, in most cases so far, the consequences have been inconvenient rather than cataclysmic, and the delays have been distressing rather than lethal.

Summary of the conclusions of the papers concerning the behaviours which support a culture of innovation. 1.1 The characteristics of the company, (not the specific project) are dominant in determining whether it will be good at innovating. 1.2 It is important to have a market orientation. Listen to your customers, and try to

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2. How can creativity be encouraged, while cutting the probability of failure and encouraging innovations that are directed towards the market? This part of the paper deals with three questions from the wish list, perhaps the hardest three. The questions are sufficiently closely related to make it sensible to handle them together. The questions are hard because there are quite a number of different answers, and each answer, as with much innovation research, can display considerable instability in outcomes, Downs and Mohr (1976), Nelson and Winter (1977) and Rogers (1962). Butler, Turner, Coates, Pike, and Price (1993) write from a perspective which is clearly in support of the viewpoint implied by these questions. Their results give them force. They studied a number of companies with rigour, and found that those which were performing well in the market place were the ones which set market gains as their objective and who spent time learning what their competitors were up to. Cost cutting companies, in their survey, did not have a good overall performance record. In our own research, Company A was a cost cutter. Several years ago a product component of moderate significance was brought in-house from a previous subcontractor. The technological investment we studied involved the installation of a new machine which would accelerate the production of the component and make the process more efficient. The managers of the firm regarded the project as a substantial success. We differ on this matter. There is no doubt that the new machine improved the

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Marketing and innovation

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performance of Company A relative to the situation before the arrival of the new machine. However, the new machine merely brought the costs of the component close to what had been available from the external source. The initial investment, to bring the component in-house, had been catastrophically unprofitable, and the new machine investment merely restored something close to the status quo ante. The importance of the three questions on encouraging creativity is clearly endorsed by recent papers on innovation. Drew (1994) points to the massively increased pace of change in the banking world and the pressure for novelty that has created. Jennings (1996) comes to very similar conclusions within the field of insurance. Quinn (1996) puts orientation to the market in second place (behind goal clarity and vision) in his list of the essential characteristics of the companies that innovate best. The whole of the book by Drucker (1985) is a clarion call for companies to understand that innovation is part of the marketing process and marketing is part of the innovation process, and that you cannot do a successful job of the one without the other. Our Company B provides an illustration of this kind of successful innovation. They were approached by a big drinks company who wanted to market a new (but perhaps faddish) kind of drink, and asked if they could produce some flavourings. Instead, Company B offered to produce the entire product, alcohol included, in a concentrated form. A substantial spending on tanks, flow meters and other plumbing was required. All the big drinks company had to do was to add water. This significantly enhanced the profitability of the project for Company B, but also enhanced their status with the major drinks company. The company chose to think through the needs of their market, and to get just slightly ahead of it. In the task of encouraging innovation, the easiest case is one where you are managing a group of highly creative people. In this instance, the innovating will be done by the people who are confronting the problem. The report by von Hippel (1988) shows how this has worked out in a number of highly technical companies. The ``user group'' in this situation are at least as well qualified as the ``technical group'' and they also have a more precise understanding of the problem they are trying to solve. These problems are usually solved very effectively, with new machines of gradually increasing capability being invented as the users develop their ideas and understanding of the problem. The

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technicians may not be brought into the situation at all, or may only have a role to play in taking the instrument the users have built and converting it into a saleable product. If this should happen in your company, enjoy it. It may never happen to you again. At the other extreme we have the work of Vonortas and Xue (1997). They studied a small sample of manufacturing and machining companies near Washington DC USA. These firms were run by experienced practical engineers, who had no university degrees, no R&D departments, no government grants, and no other obvious means of learning how to do the clever things they were doing with computer-based numerically controlled machine tools. They explained that the reason they were good at CNC work was simply that their customers were all big defence contractors. If you were not up to speed on CNC matters, they would not buy from you, and there were no other customers around. People can be pretty creative when the other option is going broke. This example of `market pull' on the technology strategies adopted by these small machine shops provides a credible explanation as to why the innovations happened in the first place and why they are maintained. In between these extremes however, we have to deal with the more normal situation, where the people from whom we want creative ideas are neither natural scientific geniuses nor threatened with bankruptcy. In these circumstances, the observations of Amabile et al. (1996), Griffiths (1996) and of Cusumano and Selby (1996) throw some light on the organisational contexts, within which creative ideas can flourish. In Amabile et al.'s work on the perceptions of the work environment for creativity, a number of conceptual categories are tested with respect to their perceived association with creative work environments as ``stimulant'' or ``obstacle''. Their model includes categories for; . encouragement of creativity (. . . of risk

taking and idea generation)

. autonomy or freedom (. . . relative auton-

omy to instill a sense of ownership and control) . resources (. . . adequacy needed to support the innovation) . pressures (. . . where there is excessive workload pressure) . organisational impediments to creativity (. . . where the organisational climate undermines creativity) ``The study allows for a reasonably confident assertion that perceptions of five work environment dimensions do consistently

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differ between high and low creativity projects, and thus these dimensions may play animportant role in influencing creative behaviour in organisations; challenge, organisational encouragement, work group supports, supervisory encouragement, and organisational impediment.'' They conclude that their model has broad applicability to management practice as well as contributing to the development of innovation theory. Griffith's ideas will also be considered again later in this paper from a theory angle, but at this stage they are presented as preconditions for establishing or maintaining a `creative climate'. Instead of taking her comments as analytical therefore, we use them as above in Amabile's work, in the search for organisational environments which support the creative parts of the enterprise. Griffith's ideas were based upon the original ideas of Vroom (1964), whose project was a matter of getting people to do something when they had the choice of not doing it. What then are the conditions that have to be in place for them to ``take the plunge''? Griffith has translated Vroom's ideas into the terminology of technology implementation. This translation enables us to consider the special case where the technology being implemented is creativity itself. The first essential is expectancy. The potentially creative person must have an expectation that the work they put in, if it is successful, will be allowed to see the light of day and will not just be brushed aside by a superior who was expecting something else. If they expect the organisation to ignore what they are capable of creating, they simply will not bother to create anything. The second essential is instrumentality. If I create something, I want a reward. If the organisation has a culture of recognizing successful creative work, it will get creative work, and some of it at least will be successful. The reward does not have to be in cash. It can be a special article in the works newspaper. It might be a promotion that happens a couple of years before it could otherwise have been expected. The important bit is that there is recognition, and that it is publicly tied to the creative success. The last factor is called valence by Vroom. This is a complex concept, roughly comparable to the statistical concept of the `expected value' of the project. If the creative person considers all the possible outcomes of the work he or she is about to start on, and then multiplies each outcome by the probability of that outcome being the real result, and adds these together, we have the valence. If this is a big number, so that the overall chance of a successful outcome to the project is fairly high, then the

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creative juices will flow. Griffith is writing about the problem of getting people to use a new technology, but the ideas she puts forward seem to fit the corporate task of motivating or sustaining creativity very well. Cusumano and Selby (1996) have written about the Microsoft approach to innovation. The company seeks to control creativity by requiring the creative people to explain what it is about the new software features they are considering that large numbers of customers will pay for, and why. There is also a system for rationing resources to projects. The objective here is to make sure that the creative people deliver products to customers. It would be very easy for the creative folk to continue experimentation indefinitely if there was no constraint of this kind. It is also worth noting the results of Balachandra and Friar's compendium (1997) of innovation research. This showed that firms which were contemplating a radical innovation in a high technology market had to concentrate their resources and efforts on getting the technology right (which is not surprising) but also had to spend an equal amount of time and effort on organisational questions if they were to be successful.

Market

Vonortas & Xue (1997) Drew (1994) Jennings (1996)

Orientation

Cost

COMPANY A

COMPANY B Von Hippel (1998) Balanchandra & Friar (1997)

Goldman (1985)

Controlling creativity

Good

Results

Poor

A common feature in several papers about the encouragement of creativity and the task of keeping creativity directed toward the needs of the market is the concept of continuous reconsideration. The concept is mentioned by Pollalis and Frieze (1993) in the context of information technology deployment, Eldred and McGrath (1997) in the context of technology transfer, Cusumano and Selby (1996) in the context of co-ordination of software development, and Dougherty and Corse (1997) in the context of new product generation. Each product development project must be routinely and regularly revisited as work progresses, to make sure that the work is in fact progressing, and to make sure that the different elements of the the proposed new product or service remain coherently linked to one another. These reconsideration meetings also serve to transmit

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ideas about the project and related matters to other teams within the firm, and to other departments which may need to become involved as the product gets nearer to the market. Dvorak, Dean and Singer (1994) demonstrated the power of the concept of continuous reconsideration with their story of a new information system for a chain of clothing stores. This system was created in a frantic rush, and disobeyed nearly all the laws of systems development, but came to a successful and prize-winning conclusion because of the continuous reconsideration policy, coupled with a very clearly stated goal. The concepts of prototyping, pilot trials, user involvement, multiple testing, parallel running, and the rest were simply jettisoned, and the whole project was held together by the continuous reconsideration system. At this concluding stage of the discussion of this question group, the first author of this paper would like to offer his own observations on the subject of encouraging innovation. The opinion has been developed during two spells as head of a university department, two spells as a Dean, and several spells as a director of assorted companies, some of them quoted. Encouraging creativity is not the same thing as letting creative people run amok. If you do that, you will get all sorts of creativity, but you will probably not be able to use any of it for any business purpose. Instead, I suggest that you spend as much time as it takes to make sure your creative people have a clear understanding of what the business is about, and what the competitors are doing and have done. Then let them run amok, and round them up once a month or so and make them tell you where they have been. If it sounds crazy, but they show signs of still understanding the basic problem, give them encouragement, and relate any bright ideas they may have sparked in you. If it just sounds crazy, spend more time on explaining the business and the competition. This is a time-consuming exercise. Sometimes, however, it works. This view is supported by Tom Davenport (1995), who suggests that the main task in achieving creativity in a team is to make it a community. The job, as he defines it, is to get the group to regard themselves as a team with a common problem to solve, and then to give them the tools they say they need and let them get on with it. Do not try to run it like an engineering project, which requires design, modeling, and advanced planning. That will put the team back into the mode of doing what they have been told to do, and reduce the company to the ingenuity level of the ``chief engineer''.

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Summary on Encouraging Creativity 2.1 The company must have an external world view. It must be focused on its markets, not its own cost structure, in normal times. 2.2 It is easy to promote innovation if the company is full of natural innovators or if the alternative is bankruptcy; otherwise you must spend about equal effort on getting the technology right and on organisational issues. 2.3 Persuading people to promote new ideas requires an atmosphere of receptive freedom, a willingness to reward a good innovation, and some kind of downside risk cushion. 2.4 Creativity is most likely to be ``businessfriendly'' if there is a process of continuous reconsideration across the company to make sure everyone is still following the same trail, or perhaps that they all make the turn to a new trail roughly at the same time. 2.5 There must be some kind of control, so that, for example, the creative people have to explain why anyone would ever pay for the features they are working on, and so that, for a second example, they have a total budget limit for each subproject. But keep the central system as loose as you can.

3. How can companies avoid the trap of perpetuating the things they are good at, instead of learning the things they will have to become good at? The problem of keeping too close to a winning formula is one which can cause a great deal of serious financial injury to those managers and entrepreneurs who fail to realise their mistakes until too late. Very few of the coachbuilders of the 1890s managed to make the transition to being carmakers. Some of them made the transition to building the coachwork for cars before being consumed by the carmakers. Drucker (1985) pointed out that ``systematic business innovation consists in purposeful and organised search for changes, and in the systematic analysis of the opportunities such changes might offer for economic or social innovation''. He also points out that the quality of a product that matters is not a function of the care and enthusiasm and expense which its maker put into it, but the utility it provides to its buyer. It is very hard indeed for people who have spent their working lives on trying to do a

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better and better job to believe that nobody really cares. There is no doubt, however, that the business world must operate on that assumption. Pride in workmanship is permissible between consenting adults in private, but is not acceptable as a basis for deciding what to offer the general marketplace. In particular, it is very dangerous to offend against Drucker's fifth law (1985, p. 210). This states that you should not respond to the requests of all your customers to make the product do what they want, because when you do that the gadget will be so costly that few of them will be able to afford it. If you violate this law, you make yourself vulnerable to ``entrepreneurial judo'', the situation under which the small competitor can use your own strength to destroy you. It is, of course, possible to overdo Drucker's fifth law; Peters and Waterman, amongst others, have made it obvious that you have to stay close to your customers so that you can keep track of their needs. Drucker would not, I imagine, object to that idea. He would only object to the idea of responding to all of them, all of the time. More recently, Markides (1997) has suggested that the way to avoid the perpetuation trap is to change the game. ``By breaking the rules of the game and thinking of new ways to compete, a company can redefine its business and catch its bigger competitors off guard. Significant shifts in market share and fortunes occur not because companies try to play the game better than the competition, but because they change the rules''. Neff and Shanklin (1997) have similar views, albeit reached from a different direction. The paper takes Schumpeter's idea of creative destruction, and applies it to high technology product strategy. The basic idea is to cannibalise your own good products before someone else does. They provide a useful discussion of examples from Hewlett Packard, Gillette, Intel, Microsoft, and other high tech., or at least middle tech., firms. They also offer an array of examples of firms who did not cannibalise, and thus let the opposition get in. The largest scale discussion of this topic is to be found in Christensen (1997). He has written a book about disruptive technologies, and the book is full of examples of the problems that can arise when the question from the wish list is not answered or is answered wrongly. Christensen writes about sustaining technologies, which the existing leader firms will usually be able to implement better than any in-comer. These are logical progressions from the previous product lines, using the demands of existing customers to

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determine the criteria upon which they will be judged. He also writes about disruptive technologies, which are cheaper to the customer, provide fewer benefits, may perform less well, and may in general be dismissed as ``shoddy work'' by any of the existing producers. The difficulty, for these existing producers, is that there may well be a substantial group of new customers who are quite happy with this ``shoddy'' product, and (worse still) their own offerings may have been improved beyond the requirements of substantial numbers of their existing clientele, creating a new avenue for gain for the disruptive technologist to improve into. The difficulties which Sears Roebuck, Digital Equipment Co., Rodime, Kittihawk, and several other companies which were leaders in their industries can be traced to their inability to deal with this problem. We may be in the middle of a similar process in the airline industry, where the traditional giants are offering more and more enhancements at rising prices, which creates space for small lines like Easyjet and Valuejet to come in underneath them. To complete the circle, British Airways is introducing its own lowcost frill-free airline called GO. If this is the problem, what is the solution? Neff and Shanklin's view has already been reported. We should do our own cannibalisation. They refer to another paper which states that the next product generation should be out of the laboratory before the present generation is made available to the public. Organisationally speaking, this is difficult to implement. It can really only be done if there is a physical separation of the plants where the various generations are made, for reasons of morale. At the same time, their solution is certainly going to deal with the question in the wish list. As we report elsewhere in this paper, it is an approach which Microsoft also employ, to good effect. The story of Intel, the chip company, is also relevant. They have cannibalised the 286 chip, the 386 chip, the 486 chip, and are now cannibalising the Pentium chips. The rest of the chip shops are having considerable trouble keeping up with these innovations. Venkatraman (1994) has addressed a related problem, in which he offers advice on how to get the most benefit from business transformations which deploy information technology. Through vigilance, we should identify which of five levels is the one where the costs and benefits of an IT revolution will be in balance. These levels are localised use, internal integration, business process reengineering, business network redesign, and business scope redefinition. We start, he

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Spotting the creative idea

suggests, at the level where the cost and benefits balance, and work up from there. His conceptions of business scope redefinition are really quite similar to the ideas of Christensen on disruptive technology. The words are different, but the underlying concepts are in tune. Perhaps we should allow Christensen the last word on this topic. If we are to avoid falling into the trap of just continuing to do what we have always been good at, we have to devise a clear policy for avoiding the problem. The Christensen policy for this is as follows; . We create a small company, or find one

which already exists, which is small enough to get excited about the small victories which our mammoth firm can hardly detect, and which has clients who can really use the new and disruptive technology, and which can gain access to the new markets which will be our hope for the future. . We make sure they do not spend all the resources available on their first idea of where the market is, because it is much more likely to be the third or fourth guess that will be the right one. z There is a tendency to talk about this kind of idea by using the term ``skunkworks''. We offer two comments on this idea. First of all, it is only going to work if the skunkworks is far enough away from the head office so that the bureaucrats cannot smell them. Otherwise, they will interfere, stifle, and probably destroy it. Secondly, if you (as a senior manager in the enterprise) call it a skunkworks, do you really think this is going to motivate the personnel in the direction you want? The use of the word seems to be rather widespread, but we should work at producing an alternative. How about a ``fast growth enterprise''?

Summary on Avoiding the Perpetuation Trap. 3.1 Try to change the ``rules of the game'':the way your industry operates. 3.2 Cannibalise your own products before anyone else can. 3.3 Study the options for introducing an information-technology-based disruption of the way your industry operates. Choose a good level at which to introduce it, and work upwards and outwards from there. 3.4 Use a skunkworks, but do not call it that.

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4. Are there ways of spotting the creative idea that can be made a winner? The executive who included this question in the wish list was careful to avoid the temptation of asking if we could help him spot a winner. After all, if the academic could do that, why should he tell? The problem was set in the marginally easier form of identifying a creative idea that would develop a following within the company, generate its own momentum under the right guidance, and perhaps, just perhaps, become a lead product for the company in a dozen years or less. The literature can cast a certain amount of light on this topic. In the first place, we must make sure we are keeping our eye on the right ball. The question as posed tends to force us to think about each project as the focus for our principal attentions, but that is the wrong ball. Schewe (1994) has shown that the success of an innovation is crucially dependent on factors which are related to the company which has to put the innovation to work. They are not related, directly, to the project itself. It is the nurturing environment of the business that makes the project prosper. The four variables that caused projects to succeed in Schewe's study of 88 projects were innovation experience, large scale production capability, a technological orientation, and an efficient procedure for transferring projects. These skills belong to the company, so it is to the design, or the characteristics, of our company that we must look for innovation success. To begin with, we could take the extreme instance:- a company that does nothing at all except innovations, on contract for other firms. Surely a business like this will know how to set itself up to innovate well? Perry (1995) studied IDEO, which is precisely this kind of firm. This small business has 180 folk, from almost as many disciplines, forming and reforming teams as the need arises. There are no titles, there is no hierarchy. The emphasis is on cross-fertilisation of ideas among team members. Their method consists of five steps:- understand, observe, visualise, implement, and evaluate. We have here the ultimate example of a small team, flat organisation chart business, composed of very highly skilled people. Surely this cannot work in a large firm? Wrong. Cusumano and Selby (1996) write about how Microsoft competes. By market capitalisation, this is the second largest company in the world. It has the same approach as IDEO, only writ large. Cusumano

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and Selby have identified seven principles which govern the workings of that firm; 1. First, hire smart people who know the technology and the business. 2. Second, organise them into small teams of functional specialists, and make sure the teams overlap in responsibility. It is much safer to have an overlap than to find you have left a space. 3. Third, pioneer and orchestrate the mass markets as they evolve. Take markets that were exclusive and make them inclusive. 4. Fourth, focus creativity by attaching resources to milestones instead of to dates. 5. Fifth, do every element of a project in parallel, with regular meetings to make sure they are still synchronised and still cohere. It is a serious waste of time to do each step sequentially, the whole project will take forever. 6. Sixth, there must be continual learning through self-criticism and sharing. 7. Seventh and last:- Attack the future!!! This last item is the most central to the success of the company. They, perhaps more than any other company before, are taking Schumpeter seriously. Do not wait for the future to happen; work hard to try to make the future happen our way! A responsive organisational design is obviously helpful, but it is not the whole solution. We still have to work out which projects to undertake, however lean and mean our organisational design may be. In this part of the mission, we may learn from Faulkner (1996), who is responsible for making the project choice decisions for Eastman Kodak. He has found the discounted cash flow approach to be seriously misleading for a new idea, and tried to use the Black-Scholes option pricing formula instead (see Black, 1975). The idea is that an innovative activity is a way of buying an option, either to proceed to the next stage towards commercialisation or to give up. He reports that this method worked, sort of, but he found it hard to explain to other managers. He now uses a decision tree method, which allows them to deal with the fact that R&D is normally a staged process, and you have the option to quit at several points on the way through. His paper gives a worked example of a simplified case, the technique of which will be familiar to anyone who has read about the decision science concepts. Faulkner makes one additional and very important point. Because of the way they are structured, the discounted cash flow methods, the expected value methods, and most of the rest almost always value a project down, to a seriously

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invalid extent. This is because they do not properly account for the options to abandon the project. Hamilton (1997) has arrived at a similar position to that of Faulkner in terms of finding which projects to back. He says that there are three kinds of business innovation investment, and they need to be handled differently. First, there is basic research, for the building of knowledge. Hamilton claims that the typical firm spends so little on this that the method of analysis does not matter much. In the third place, there is general business project investment, for which purposes the discounted cash flow approach works reasonably well. The problem lies in between these, in the second group, which he calls Strategic Positioning research. He, like Faulkner, likens this to an option, where we do the work to enable our company to move into a new technology quite quickly if it looks as though it will pay off. The DCF of these is likely to be negative, so the only way the work could be approved would be if the ``option value'' element is enough to swing the total sum to a positive total. In addition to this method of appraisal, Hamilton advocates building a technology review into the routine planning process of the firm. Do our plans use technology as a strategic asset? Do our plans allow for development of key technologies (vital for the present) and pacing technologies (likely to be vital for the future)? Do our plans take advantage of emerging technology-driven opportunities? These questions, in Hamilton's view, will help the firm to keep on top of developments, and avoid the nasty surprises which creative destruction can entail. The executive who put this question on the wish list specified that spotting a good idea was not enough. It was necessary also that the idea should have the potential to develop a following within the firm, so that it could gain the momentum it would need to be able to grow into a full scale product. The work of Griffith (1996) is very helpful in this regard. She brings a behavioural perspective, linked to some ideas of Vroom's, on why technologies sometimes do not get into use. We have already mentioned three of her ideas in an earlier section, each of which is vital to the promotion of an idea to the front line of corporate thinking. Expectancy is required, because unless the creative person expects to be recognised for his or her inventiveness, he or she just will not bother to search. Instrumentality is required, because the creative person wants a reward for being creative. Valence is required, because unless the project is perceived by the creative people

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as having a strongly positive net present value, they simply will not exert themselves upon it. Griffith says potential users of technology will be motivated to use that technology if (and only if) expectancy, instrumentality, and valence are all high. She goes on to consider equity theory, under which the enthusiasm of an employee for the technology is said to be proportional to the justice and recognition that the company will assign to his or her efforts relative to other people. If, in the opinion of the employee, the technology embedded in the idea under consideration is not very much better than the best alternative technology (which may be the one in use at present), then the equity theory judgement which that employee might make would be to refrain from trying the new technology out. This judgement means that the idea will never surface. It is self-evident, of course, that the employee may be absolutely right. If the managers of the business do not think so, they are going to have to come up with some rather powerful arguments.

Summary on spotting potential winning ideas 4.1 Idea spotting is likely to take place in a company environment where novelty is valued and speaking out is encouraged. 4.2 Small teams, in a flat organisation, consisting of high calibre people who are (collectively) multi-skilled, will be more likely to generate ideas that have promise. 4.3 Think ahead towards taking a market which used to be exclusive and making it inclusive, for the broad mass market. 4.4 Employ a procedure for continuous reconsideration, to make sure each idea is developed across the whole business in a synchronized and coherent manner. 4.5 Evaluate projects soundly. In particular, remember to give due weight to any possible early exit options. 4.6 Make your people feel that it is gainful for them to be innovators. Let them observe other innovators being rewarded.

5. Competence for innovations?

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One of the most demanding problems in the field of innovation is that of competence. Trying to define the competencies needed to help with innovations is very difficult. It is even more difficult to hire the people who have it. It is difficult to retain these people in a large organisation. Nearly everybody gets frustrated at some stage in a large organisation, even the people at the top of it, but the

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innovative and creative people are the ones with the lowest level of tolerance for organisational tidiness, accounting proceduralism, bureaucratic turf protection, and the various other devices managers in large enterprises use to make sure the dividends do not get too high. In an earlier section, we have dealt with the particular problem of avoiding the perpetuation trap. The tendency to keep on doing the things we are good at, instead of trying to become good at the things we need to know next, is a danger indeed. It is, of course, a competence issue, and might have been considered in this section. It has been separated out because of its rather dramatic consequences. A substantial number of papers have been written on the problems, difficulties, and hardships associated with competencies (lack of), organisational constraints (excess of), and organisational structures (inappropriateness of) in the context of innovation. We will consider a few of these before moving on to consider the writings which offer solutions. Bessant (1985) wrote about the problems of introducing advanced manufacturing technology as the problem looked to him in 1985. ``The technology is not usually the bother. It is people. There is a shortage of skilled help. People need to have multiple skills to use Advanced Manufacturing Technology, and most of the available people only have one. Some do not have a proper grasp of one skill. They have to be able to switch tasks, which union demarcation lines make difficult in Britain''. Senker (1983) has noted the difficulties of staffing computer integrated manufacturing, in similar terms. Gupta and Cawthon (1996) wrote as follows about small and medium sized firms. ``The requirements (of flexible manufacturing methods), intellectually speaking, of both managers and workers seem to be worryingly high. Other authors have alleged that nobody is using FMS to manage flexibly, and this may be the reason''. Bruun and Mefford (1996) agree, with particular reference to the utility of a component factory in a developing country. ``If you want to be able to use these components in your main factory, you have a major training task ahead of you''. The literature is in agreement that there is a difficulty, and that the difficulty is more likely to be a people problem than a machine problem. The next question, of course, is what to do about this ``people problem'', in a normal business situation. von Hippel (1988) has shown that sometimes it will go away by itself. In the context of a highly technical community, involved in the highest calibre of

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scientific work, the users of the new technology will normally create the prototype by themselves, without any intervention by a commercial department or by an instrument supply company. In this setting, von Hippel found that the user community would typically carry the prototype through three or four revisions before any instrumentation company became involved. We will rarely be this lucky in other settings. Sometimes the people problem can be solved by education. Butler, Malstrom and Parker (1996) offer a screen by screen tutorial to help people work out the financial implications of an automated manufacturing system. Junankar (1994) contributes a survey-based discussion of the right rate of discount to use when carrying out a capital investment appraisal of a new technology investment. He reports, rather worryingly, that the companies using real returns are using the same discount number as the ones using the nominal returns, which suggests we have more education to do. Udo and Ehie (1996) sent out a questionnaire which listed 26 benefits of advanced manufacturing technologies, and ran a regression of the results. One of their conclusions was particularly pertinent to the topic of education for competencies. They found that it was wrong for companies to assume that the employees would realise that they would get benefit from the AMT system as well as the company. The company, they suggest, must first establish that there is such an employee benefit, and then educate the staff about it and the nature of it and the possible amounts involved. Getting the employees into a supportive mode by this method of education has a strong positive impact on the success of the AMT installation project. The educational needs of the highest levels of the business are addressed by Fitzpatrick (1995), who provides a short checklist for very senior executives who are engaged, as his title has it, in ``Assessing the worth of new technology''. He proposes ``value'' criteria, which are Return On Investment, Strategic Match, Competitive Advantage, Competitive Response, Information Systems Architecture (would the new gadget fit), and Management Information. The ``risk'' criteria, which get negative points, are Organisation Risk, Definitional Uncertainty (where the new products to be supported are not clear yet), Technical Uncertainty (are there alternative sources of supply? would we be hurt by software bugs?), and Information Systems Infrastructure Risk (is our network so loaded that this new bit might blow the fuses?).

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Besides education, there are many articles which offer advice on how the competencies should be selected and how they should be enhanced. The skills required for a head of R&D have evolved, according to Larson (1996). He has moved from being a scientist, to being an efficient scientist (who does more with less), to being a business scientist (who gets the product to the market first). His skills have broadened, according to this McKinsey survey, and the ``best'' of them have a wide range of skills, of which networking-related skills were the largest single group. There is a significant body of literature which tries to explain how to build the competence set that will facilitate innovation. As far as we can see from the views of those contributing to this literature, the exact bundle of skills or innovativeness possessed by a single person is not very important. As Davenport (1995) puts it, ``what you actually need is to make a community out of a bunch of people who have to work on the same problem or have to share the same information set. That usually means they should be helped to design their own work, but that is rarely allowed. Designing their own information system would also make a great deal of sense, but that is permitted even less often''. The general idea of team-building appears again and again in the innovation literature as a crucial element in competence creation. Small teams of highly skilled people in a flat organisational structure seems to be the recipe of choice of nearly all the writers on this subject, whether they have obtained their empirical knowledge by survey, by case study, by formal report, or by consultancy experience. In addition to the remarks of Davenport above, the papers by Bessant (1985), von Hippel (1988), Gupta and Cawthon (1996), Dougherty and Corse (1997), Quinn(1996), Udo and Ehie (1996), and Sohal (1996) are unanimous on the significance of team building. In the Edinburgh/Manchester project, perhaps not surprisingly, we take the view that there is a need for the organisation to possess a competence at innovation. In particular, we seek to define the essential elements of the task of making a new technological investment a success. We also define the ways in which managers should handle this task in order to obtain the best results from the newly implemented investment. There are steps to be taken before the new technology arrives, more steps to be taken as it is installed, and more again as the new technology is bedded into the organisation. The competencies to do this effectively and without mishap would be

The importance of teams

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useful for most organisations. Competence therefore might well explain the potential capability of an organisation to innovate and at another level, the extant innovativeness of managers themselves. Our project is also concerned with a second specific measure, that of the increase in competitive advantage that an innovation has achieved. We are studying technological investments in firms, and we start from the position that the investing firm/SBU has assumed that these investments will result in a competitive advantage gain. The gain can, in turn, be attributed in part to the decision to make the technological investment, in part to the way in which the managers adjusted the business processes which surround the new technological investment, and in part to the inherent technical efficacy of the new machine (or process) which is going into operation. In our project, the measure of competitive advantage is obtained by what we have called SCRaP analysis; Speed, Cost, Reliability and Preparedness. This measures the extent to which the customers or clients of the company benefit because of the new investment in terms of the speed with which they obtain the service or product they are seeking, the cost they have to pay out to obtain a `unit' of that service, and the reliability of the service to the customer. When these items are measured, it is usually possible to obtain an estimate of the overall competitive advantage gained, by comparing the new performance figures for the company with the best performer in the market and with the market average. The P in SCRaP analysis refers to preparedness investments. These are designed specifically to create a first mover advantage, by preparing the business for a business change or volume surge that has not yet occurred. These investments are inherently riskier than the ones which seek the other three benefits, but the payoff from a successful preparedness investment may be enormous. The measures of extant managerial innovativeness which are employed by the Edinburgh/Manchester project are complex and very detailed, and therefore beyond the scope of the present paper. The general idea is to draw a detailed map of the business processes as they were before the technological investment went into operation, to draw another map after it is ``bedded down'', and to examine the changes to see which of them were managerial initiatives, which were forced upon the company by the physical demands of the new investment and which of them were demanded by the market place.

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Summary on Competence 5.1 The education of people at all levels in business seems to be agreed as an important area of need. Directors need training about AMT just as much as the workforce. 5.2 It is important to make sure the workers understand that they will gain from the introduction of new technology. First, establish that there is an overall gain, then decide how to divide it up, then tell the workers. 5.3 Getting high tech. gadgetry to work reliably and continuously is a big chore. It is most easily handled by teams of people who have mastered the skills between them. Networking exercises and team building activities can help people understand the abilities of their colleagues.

6. How to get at useful academic work? One of the executives who contributed to the wish list touched on a point which has frustrated executives since management first became a respectable topic for study in universities, about eighty years ago. He was sure there was a lot of useful material about in the academic literature, but there was a lot of useless material as well, and there was a lot of material written in extremely obscure language. ``How'', he asked, ``can we get at the useful material which is buried in the dross?'' It depends, of course, what you mean by useful. One man's dross may be another's revelation. At the same time, at least one suggestion can be offered within the field of innovation studies. Readers may already be familiar with the Foresight programme which is managed by the Foresight Directorate in the Office of Science and Technology, DTI, UK, and other such E.C. initiatives. For example, ``The Foresight programme which aims to improve the competitiveness of the U.K. economy, and enhance the quality of life, by bringing together business, the science base and Government to identify and respond to emerging opportunities in markets and technologies.'' (See http://www.foresight.gov.uk /about.html). On the purely academic side, executives may be relieved to learn that the academics, too, get a bit overwhelmed by the diversity of their own efforts. From time to time, small groups of academics will get together and produce a literature survey, covering the most recent couple of hundred articles and books

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that have been written on a topic. These compendia may be rather hard work to read, but they represent a substantial economy of effort compared to reading the two hundred academic articles they are drawn from. The objective in this instance, of course, is to identify from the compendium those specific items which are of relevance to the manager's current concerns. We shall take a brief look at three compendia. A team from Bradford University (Butler, Turner, Coates, Pyke, and Price 1993) have produced a significant compendium of papers on innovation as an incidental byproduct of an investigation at twenty plastics companies. The main goal was to study how and why the firms handled the processes of technology and investment. The team measured the companies' awareness of the actions of other companies with whom they compete and with whom they are compared. The team also tested for performance, to see if a company was in ``the lowest decile'' or ``the top decile''. Reasons for making investments were appraised, and were found to be (in descending order of importance), market gains, efficiency gains, image, keeping up with the technology, regulation, standardisation (especially after a merger), and availability of a grant. The team found that the firms with high competitive awareness and good performance tended to emphasise the market gain objective. Efficiency investments were commonest among the firms exhibiting high competitive awareness but low performance. The extensive bibliography may be worth consulting by those whose concerns are along these general lines. Another compendium found, rather worryingly, that the conclusions reached by the 76

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articles they studied were ``non-uniform and in some cases contradictory'' (Balachandra and Friar, 1997). They chose papers which were trying to work out, usually by case study or survey followed by correlation analysis or similar, why some innovations seemed to work and others did not. This compendium is very thorough, and includes one table which may be helpful in its own right. This analysis showed that there was little chance of finding a universally applicable set of factors, but that it was possible to obtain sensible guidance on how to spend your research and planning effort, when an innovation was at the planning stage. Table 1 shows the conclusions they draw from their reviews of the research evidence. There is, say Balachandra and Friar, no chance of finding a valid set of factors that will fit and explain all innovation, a well reported problem in innovation studies (Downs and Mohr [1976], Nelson and Winter [1977] and Rogers [1962]). They believe the above table can help managers decide where to spend their research effort and planning effort, but that is as far as you can get. To take the last line, there is no point in spending money on market research in a new market if you are making a radical high tech. innovation. On the other hand, for the same innovation, it is very important to spend carefully but perhaps heavily on getting the technology and the organisational issues right. A totally different kind of compendium has been drawn up by Gopalakrishnan and Damanpour (1997). They have gathered papers on innovation written by economists, by contextual technologists, organisational technologists, variance sociologists, and process sociologists.

Guidance on research and planning

Table 1. Innovation

Technology

Market

Importance of Market

Incremental Incremental Incremental Incremental Radical Radical Radical Radical

Low Low High High Low Low High High

Existing New Existing New Existing New Existing New

3 3 3 2 2 1 2 1

Technology 3 3 2 2 2 2 2 3

Organisation 1 1 3 3 2 2 3 3

Note: 1=less important, 2=important, and 3=very important

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Economists do not really regard innovation as a managerial process, merely as a surrogate for spending on R&D or as a measure of new products generated. Innovation, for them, is a very gross and aggregated measure, and they do not really study it as itself. Contextual technology researchers study innovation in much closer detail, but still at the level of the industry context. Their goal is to help firms manage technological transitions. Organisational technologists consider the same problems, but from the inside of a single firm. Variance sociologists study why innovations are adopted quickly or slowly in a firm, and also explore whether a company has features which make acceptance easier or harder. Process sociologists regard innovation as a continuous process and study it as such. Gopalakrishnan and Damanpour provide a large bibliography, giving examples of all five varieties. According to Gopalakrishnan and Damanpour the problems that companies have in finding multiple-skill personnel are duplicated in the academic world. Each of these five domains can present a valid view of an innovative practice. It is very rare that one of them has been able to deal with the problem in all its diversity.

Summary on Academic Access

Small project companies

6.1 Look for ``survey papers'' and ``review articles'' within the general territory you are interested in. Plough through them, highlighting the occasional sentence that seems to bear on the current issue of concern. Send away for the paper(s) that have given rise to the promising sentence(s). If necessary, have them translated.

Conclusion The recent literature on innovation has been largely devoted to the external view and to the marketing aspects of innovation. The Edinburgh/Manchester project is devoted to the business process view, and this includes both the external view and the cost or internal view. The literature has given us a substantial number of insights concerning how to foster, to promote, and to preserve an innovative corporate environment. The company culture must be positive towards innovation. The dominant coalition of senior managers must be supportive of the concept of novelty. The company must be willing to take a longish term view of the market and what it will be needing, and must

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be ready to educate its own people to understand new technologies as they come along. It is desirable to have a strong market outlook. This means remaining in close touch with your important customer groups. It also means keeping aware of what these important customers are going to want next, preferably before they realise it themselves. We must be prepared to cannibalise our own products; if we do not, someone else may do it for us. It also means keeping a watch for over-improvement. If we add too many ``bells and whistles'' to the product, we are holding an umbrella over our small hungry competitors who are offering a basic edition. Within the firm, we must have ``innovationfriendly'' procedures in use. There must be efficient procedures for advising all the departments of the business of a new idea, so that the work can progress on all the important fronts at the same time. This entails having some kind of continuous reconsideration procedure, to make sure that these parallel developments remain compatible and coherent with one another. Some firms have the view that small teams, representing a diversity of different skills, are the most effective machines for innovation. These small teams, with few bosses and a considerable freedom of action, will generate ideas and innovations in good volume. To motivate these small teams to direct themselves in ``business-friendly'' directions, it is recommended that those teams which manage to produce good innovations should be rewarded, and that the rewards and the reasons for them should be clearly articulated within the organisation. The creation and fostering of small forefront companies which can adopt new product or market innovations enthusiastically, and for whom the innovation is a significant enterprise benefit is also advocated. The present authors would prefer that they were not called ``skunkworks''. ``Fast growth enterprise'' is a term which sounds less disparaging, does much the same job, and is offered as an alternative. On the cost side of innovation, the opportunities are just as great. The invention of new technologies may enable technological investments to be made which will transform the cost function, or the speed of service, or the reliability of the product or service. These opportunities to innovate on the cost side have recently been most dramatic in information technology, but exist also in other fields. Once again, however, the most powerful instances of innovation have been those in which the cost alteration is motivated by the chance to create a new market opportunity.

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An innovation is a solution to a problem in an industry which provides benefit to the firm which introduces that solution. For example, slow service and high branch office costs were a problem for the customers of the insurance industry. The innovation of `direct line' telephone services has massively enriched the firms which first introduced it and readers will be able to think of dozens of other examples. Albeit that there are apparent conflicts in the literature, this paper has attempted to provide some answers or partial answers to the ``wish list'' and gives us a reasonably clear idea on how organisational innovation may be achieved, provided we have a company with a dominant coalition that is receptive to novelty and change.

Appendix A:- A Summary of the Executives ``Wish-List''. 1. How to encourage innovation in directions which have real market value. 2. How to develop and manage a closer symbiotic relationship between customer and supplier in the innovation process. 3. How to turn a market that sees regulation and standardisation as a threat to one that sees these as an opportunity. 4. How to do business in different cultures. 5. How to improve the creative innovative processes of the brain. 6. How to encourage creativity and risktaking while reducing the odds of failure. 7. How to encourage a set of behaviours which will provide a natural disposition towards innovation and how these differ from behaviours needed to implement innovation. 8. How to develop behaviours that nurture and sustain, through all levels of management, innovation arising at the coal face. 9. How to spot the good idea which will generate a following, recognising that the idea generator may not be the right person to carry it through. Therefore, how to identify the champion to drive it through to realisation. 10. How to define a typology of innovation so that organisations can determine the right approaches and solutions for their particular situations. 11. How not to homogenise out the passion. 12. How to define core competencies and the skills needed to pursue these within a defined company ``architecture'' and how to preserve the capability. 13. How to raise competence capability against that of the competition.

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14. How to avoid the competence trap of perpetuating what you are good at rather than what is needed to adapt to the changing business requirements. 15. How to decide what competencies should be sourced internally and which externally. 16. How to handle people issues when introducing new concepts and ways of working. 17. How to manage the virtual company, under which teams assemble for a project and disband again. 18. How can we use better the information that is already available from academic research, and identify what really matters.

Bibliography Amabile, T.M., Conti, R., Coon, H., Lazenby, J. and Herron, M. (1996) Assessing the Work Environment for Creativity, Academy of Management Journal, 39, 1154±1184. Balachandra, R. and Friar, J.H. (1997) Factors for Success in R&D projects and new Product innovation:- A contextual framework, IEEE Transactions on Engineering Management, 44, 276±287. Bessant, J. (1985) The integration barrier; problems in the implementation of advanced manufacturing technology, Robotica, 3, 97±103. Black, F. (1975) Fact and Fantasy in the Use of Options, Financial Analysts Journal, 31, 61±72, July-August. Bruun, P. and Mefford, R.N. (1996) A framework for selecting and introducing appropriate production technology in developing countries, International Journal of Production Economics, 46+47, 197±209. Butler, D.P., Malstrom, E.M. and Parker, S.C. (1996) A Model for the Economic Evaluation of Automated Manufacturing Systems, Cost Engineering, 38, 25±32. Butler, R., Turner, R., Coates, P., Pike, R. and Price, D. (1993) Investing in New Technology for Competitive Advantage, European Management Journal, 11, 367±376. Christensen, C.M. (1997) The Innovator's Dilemma:When New Technologies cause Great Firms to Fail, Boston Mass USA: Harvard Business School Press. Cusumano, M.A. and Selby, R.W. (1996) How Microsoft Competes, Research Technology Management, 26±30. Davenport, T.H. (1995) Will Participative Makeovers of Business Processes succeed where reengineering failed? Planning Review, 23, 24±29. Dougherty, D. and Corse, S.M. (1997) What Does it take to take Advantage of Product Innovation? Research on Technological Innovation, Management and Policy, 6, 155±190. Downs, G.W.R., Jnr., and Mohr, L.B. (1976) Conceptual Issues in the Study of Innovation, Administrative Science Quarterly, 21.

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Drew, S. (1994) BPR in Financial Services:- Factors for Success. Long Range Planning, 27, 25±41. Drucker, P.F. (1985) Innovation and Entrepreneurship:- Practice and Principles, 2nd edn. Oxford: Butterworth Heinemann. Dvorak, R., Dean, D. and Singer, M. (1994) Accelerating IT Innovation, McKinsey Quarterly, 1994, 123±136. Eldred, E.W. and McGrath, M.E. (1997) Commercialising New Technology ± II, Research Technology Management, 40, 29±33. Economic & Social Research Council (ESRC) (1998) Knowledge Management, Innovation, New Products, Processes and Markets, IMI Learning Across Business Sectors, ESRC Background Document http://www.esrc.ac.uk/prog/imi-bgd.html pp. 1±15. Faulkner, T.W. (1996) Applying ``Options Thinking'' to R&D Valuation, Research Technology Management, 39, 50±56. Fitzpatrick, E.W. (1995) Assessing the Worth of New Technology, Journal of the American Society of CLU and CFC, 49, 37±38. Goldman, J.E. (1985) Innovation in Large Firms, Research on Technological Innovation, Management, and Policy, 2, 1±10. Gopalakrishnan, S. and Damanpour, F. (1997) A Review of Innovation Research in Economics, Sociology, and Technology Management, Omega, 25, 15±27. Griffith, T.L. (1996) Negotiating successful technology implementation. A motivation perspective, Journal of Engineering Technology Management, 13, 29±53. Gupta, M. and Cawthon, G. (1996) Managerial Implications of flexible manufacturing for small/medium sized enterprises, Technovation, 16, 77±83. Hamilton, W.F. (1997) Managing technology as a strategic asset, International Journal of Technology Management, 14, 163±176. Hippel, E. V. (1983) Increasing Innovators returns from innovation, Research on Technological Innovation, Management and Policy, 1, 35±54. Greenwich Conn: JAI Press. Hippel, E.V. (1988) Users as Innovators. In: Anonymous The Sources of Innovation, pp. 11±27. Oxford: Oxford Univ Press. Hurley, R.F. (1995) Group Culture and its effect on Innovative productivity, Journal of Engineering and Technology Management, 12, 57±75. Jennings, J. (1996) Innovation will Distinguish Insurance Winners, National Underwriter, 100, 4±53. Junankar, S. (1994) Realistic Returns: how do manufacturers assess new investment? pp. 1±11. London: CBI. Larson, C.F. (1996) Critical Success Factors for R&D Leaders, Research Technology Management, 39, 19±21. Markides, C. (1997) Strategic Innovation, Sloan Management Review, 38, 9±23. Myers, S.C. and Turnbull, S.M. (1977) Capital Budgeting and the Capital Asset Pricing Model: Good News and bad news, Journal of Finance, 321±333. Neff, M.C. and Shanklin, W.L. (1997) Creative Destruction as a Market Strategy, Research Technology Management, 40, 33±40.

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Nelson, R.R. and Winter, S.G. (1977) In Search of Useful Theory of Innovation, Research Policy, 6, No. 1. Papadakis, V. and Bourantas, D. (1998) The Chief Executive Officer as Corporate Champion of Technological Innovation:- An Empirical Investigation, Technology Analysis & Strategic Management, 10, 89±109. Perry, T.S. (1995) How small firms innovate:Designing a culture for creativity, Research Technology Management, 38, 14±17. Peters, T.J. and Waterman, R.H. (1982) In Search of Excellence, New York: Harper & Row. Pollalis, Y.A. and Frieze, I.H. (1993) A New Look at Critical Success Factors in IT, Information Strategy:- The Executive's Journal, 10, 24±34. Quinn, J.B. (1996) Team Innovation, Executive Excellence, 13, 13±14. Rogers, E.M. (1962) Diffusion of Innovation, The Free Press, New York. Schewe, G. (1994) Successful Innovation Management: An Integrative Perspective, Journal of Engineering and Technology Management, 11, 25±53. Schoenecker, T.S., Daellenbach, U.S. and McCarthy, A.M. (1995) Factors affecting a firm's commitment to Innovation, Academy of Management Journal, Best Papers 1995, 52±56. Senker, P. (1983) Some Problems in Implementing computer-aided engineering ± a general review, Computer-aided Engineering Journal, 25±31. Sohal, A.S. (1996) Assessing AMT implementations: an empirical field study, Technovation, 16, 377±384. Tyre, M.J. (1997) Gaining Competitive Advantage from New Technologies; Patterns of User Adaptation, Research on Technological Innovation, Management and Policy, 6, 191±214. Udo, G.J. and Ehie, I.C. (1996) Advanced Manufacturing Technologies:- Determinants of implementation success, International Journal of Operations and Production Management, 6±26. Venkatraman, N. (1994) IT-enabled business transformation; from automation to business scope redefinition, Sloan Management Review, 35, 73±87. Vonortas, N.S. and Xue, L. (1997) Process innovation in small firms:- case studies on CNC machine tools, Technovation, 1, 427±438. Voss, C.A. (1988) Implementation: A Key Issue in Manufacturing Technology: The need for a Field of Study, Research Policy, 17, 55±63. Vroom, V.H. (1964) Work and Motivation, New York: Wiley.

Andrew M. McCosh is University Fellow and Professor of Finance in the Department of Business Studies, University of Edinburgh. Alison Smart is a Research Fellow in the Department of Business Studies at the University of Edinburgh. Peter Barrar is Professor of Operations Management at Manchester Business School. Ashley D. Lloyd is a Lecturer in Information Management in the Department of Business Studies at the University of Edinburgh.

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COMMENTARIES Managing the Paradoxes of Innovation Harry NystroÈm

T

he article is very comprehensive and deals with a large number of important issues in Innovation Management in an insightful way. The ways in which business people are involved in defining the need to study innovation is very ambitious and should lead to a better dialogue and understanding between academics and practioners. While most of the conclusions, as noted by the authors, are similar to those reached by other researchers , the overall picture is richer and more multifaceted compared to most surveys of the area. I certainly agree with the main conclusions, the need for both process and market orientation, a creative culture and leadership and aflexible reassessment of what has been achieved. At the same time I feel that the paradoxical and dialectic aspects of innovation management, being both flexible and focused; committed and openminded; technologically and market oriented, are not emphasized enough. I think this is because the dynamic of the change process, going from one level of innovation to another, either to meet environmental need or internal requirements, is not given enough attention. Some companies, for instance big established firms, need to introduce more creative confusion to gain innovative potential, while others, for

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instance small venture companies, need to achieve more order and stability to consolidate their business. To me, achieving a balance between more open and more closed options and operating modes is the essense of creativity and innovation. This means that we really cannot make a clear distinction between incremental and radical innovation, they are both parts of the creative process and should be viewed as complementary rather than alternative choices. Another aspect which I feel is somewhat neglected in the survey, is timing. Often when something is done is more important from an innovation point of view than what is done. By and large, however, I think the article does a good job of summarizing many of the main issues in the eclectic field of innovation management, both from a practical and an academic point of view.

Harry NystroÈm is Professor at the Department of Marketing and Organization, Institute of Economics, SLU, Uppsala, Sweden and Visiting Professor at the School of Management, Oslo, Norway.

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Some Contingency Issues John Bessant Despite some fifty years of research in the field, backed up by innumerable accounts of lessons learned the hard way through bitter experience, there is still a problem in managing innovation of application. That is, we have the lessons but for whatever reasons, fail to learn from them. One reason for the gap is probably to do with the sheer volume of material available, which is more than enough to put off even the most enthusiastic practitioner. Perhaps the most valuable contribution which this piece makes is to help address this problem of seeing the wood for the trees, by providing a number of minireviews of relevant (and generally recent) literature on aspects of innovation management. A key feature of this article is that it represents a response to concerns and questions raised by industrialists and other practitioners in the field of innovation. Too often researchers and writers in the field fall into the trap (which is highlighted in their own studies) of not getting close enough to the users. Yet ever since Project SAPPHO in the 1970s we have been aware that close user interaction is critical to innovation success. This piece goes some way to addressing the needs of a particular group of users but it probably has relevance to a much broader community. The selection of themes is well-grounded, although it inevitably represents the views of a particular group, and other themes might have deserved mention. For example, I wanted some recognition of the contingent nature of innovations themselves. What goes on in a small firm is very different to a multinational giant, and innovation in services raises different challenges to manufacturing. New forms of innovation are becoming important: for example the field of complex product systems or the role of innovation networks and clusters. But pleasing all the people all the time is an impossible task, and the selection offered is a good start and relevant to the needs of at least one set of practitioners. Perhaps this piece could provide a starting point for a longer series extending the coverage to different themes?

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By the same token, some themes are treated more extensively than others. For example, the discussion in section 3 on the theme of perpetuating vs innovating is fascinating but the section on competence left me feeling a little muddled and wanting more clarification The style of the piece is of particular value, moving through a sequence which involves setting up the broad thematic area, providing a mini-review of the literature and then a supporting and brief summary for practitioners. In doing this it addresses a second problem in closing the gap between research and implementation of good practice in innovation management ± that of translating academic work into usable and accessible material. The section on getting at existing academic work is helpful, although the approaches suggested are somewhat limited. I suspect there is much more to be done to close the academic/industry divide. The Teaching Company programme, for example, is a well-reported mechanism for technology transfer and could potentially be a foundation for transferring innovation management skills on a more sustained basis. There is also a trick missed in terms of the Internet and the increasing use of this medium by both researchers on and practitioners in innovation management suggests that at least some of the more wellknown web-sites could be mentioned. (For example, the excellent newsletter run from the McMaster University in Canada, or the Technology and Innovation management homepage of the U.S. Academy of Management). Beyond that the potential for webcrawling services ought to make it possible to explore and examine a wide range of innovation management material (from a global research and experience base) and also to make contact with interesting looking groups working in the field. One paradox is that the work carried out by the authors themselves is not extensively reported. We must assume this gap is due to modesty (!), but it would have been interesting to know more about their own direct experiences of working with practitioners and

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of the emerging messages for innovation management. Overall this is a useful contribution to innovation management, even if the methods extracted are not always as well-proven as they might be. It provides a bridge between the knowledge we have accumulated about innovation management and the practitioner community. As an output from a state funded programme on innovation (the ESRC initiative) it is a good example of how such research can be made relevant and accessible,

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and the authors are to be commended for this. The paper offers a challenge to researchers to get their messages across better, and offers a helpful template for doing so.

John Bessant is Professor of Technology Management, and Head of CENTRIM (Centre for Research in Innovation Management), University of Brighton, UK.

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What About Networks? Louis A. Lefebvre The paper appeared to me to be a very novel and interesting approach to problem formulation and one that enhances the opportunities for open dialogues between academics and industrialists. It also reflects a lot of the short-term preoccupations that industrialists have with innovation management. Although I agree with the authors when they mention that they take the process view of innovation (this should be stated in the title of the paper), they also concentrate on the later part of the process, as opposed to the R&D which is often a significant early aspect of innovation. I noticed no references to the R&D Management journal in the bibliography, which is somewhat surprising, considering the contribution of the journal over the last decades to the field of innovation management. As a consequence, the short-term is privileged over the long-term view, which brings me to a further comment. An important dimension of innovation management is the

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issue of `structuring to compete'. This can be done at the firm level but also is noticed at the industry level in the form of firm networks. These networks increasingly rely on SMEs as suppliers of products, services and innovation. The management of such networks in a globalized economy may well become the next managerial challenge for large and small firms alike. It will require new skills, new ways to communicate, new means to do business, and more importantly new legal and commercial frameworks within which to operate.

Louis Lefebvre is Professor at the EÂcole Polytechnique de Montre al, Montre al, QueÂbec, Canada

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Notes on Unanswered Questions Pier A. Abetti This paper presents a comprehensive list of eighteen questions about innovation that concern business executives. Based on a review of recent literature on innovation, the authors have answered eleven of these questions in a useful manner. In this brief commentary, I will attempt to answer five unanswered questions, and discuss briefly the decisive role of general management in promoting and implementing radical innovations.

Question 4: ``How to do business in different cultures'' Based on my 45-year experience of doing business in the United States, Europe, Latin America, the former Soviet Union, Pacific Rim, first for a large multinational company (General Electric, USA) and then starting New Business Incubators in 20 countries, I would recommend a study of the fivedimensional cultural framework of Hofstede (1984). An analysis of the cultural differences between the two negotiating parties, for instance Americans and Russians, will suggest a strategy that will maximize the emotional and material rewards for both parties. A few published case histories illustrate the value of this approach (e.g. Kapij and Abetti, 1997).

Question 8: ``How to develop behaviors that nurture and sustain, through all levels of management, innovation arising at the coal face'' Question 16: ``How to handle people issues when introducing new concepts and ways of working'' These two questions are clearly discussed in the book ``The Change Masters'' by Kanter (1983), that includes a study of 120 innovations, one-third technological, the rest organizational, managerial, and sociological. Kanter presents the ``power tools'' required for implementing successful innovation at all levels of management, from the coal face miners to the Chief Executive Officer. From my experience, the two major challenges in the successful sustained implementation of a

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radical innovation are (1) the role of middle managers and (2) the reincorporation of the ``newstream'' innovation into the ``mainstream'' operations (Burgelman, 1983). Middle managers have the most to lose in organizational innovation and have to get the job done during a tumultuous transition period. For instance, the CEO of General Electric, Jack Welch, reduced the layers of management below him from eight to four, increased the span of control of some middle managers from three to thirty and then dismissed a great number of them. Thus a strong resistance may be expected that can only be broken by bringing the best, most adaptive middle managers on board at the earliest stage and finding non-managerial roles for others. In large bureaucratic companies, top management is often frustrated with the slowness of the innovation process; therefore, they experiment with unorthodox organizational forms, such as ``internal corporate ventures,'' ``skunkworks,'' and even ``underground'' innovation (Abetti, 1997). If these innovations are unexpectedly successful, such as the IBM PC, the Toshiba word processor and laptop, they arouse suspicion, envy, and hostility from the main organization. Here the challenge is to reincorporate these ``mavericks'' into the ongoing, traditional ``mainstream'' operations. IBM bureaucratized the PC operation and lost leadership while Toshiba was successful in transforming the ``underground'' laptop project into their enduring global leadership in subnotebook computers.

Question 15: ``How to decide what competencies should be sourced internally and which intramurally'' The general answer is that ``core competencies,'' that is the unique competencies that determine the performance/cost merit figures of the company's products, processes, and systems, should be developed and sourced internally, while supporting competencies can be acquired extramurally. For instance, if you are in the aircraft and gas turbine businesses, you need to be a leader in super-

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alloys, heat transfer, fluid flow, aerodynamics, mechanical design, and corrosion, since these competencies determine the performance of the engines. On the other hand, noise abatement, pollution reduction, and control systems may be acquired because they do not yield unique competitive advantages. The only exception to this rule is when the ``window of opportunity'' for a new product is too short to allow for in-house development. In such cases, competencies may be acquired externally, but should be transferred internally as expeditiously as possible to avoid continued dependence on the supplier.

Question 17: ``How to manage the virtual company, under which teams assemble for a project and disband again.'' We have here the classic problem of the labor unions, ``The faster you work, the sooner you are out of a job!'' One possible solution, adopted in the GE R&D laboratories, is a matrix organization. All scientists and engineers have a permanent home according to their specific disciplines, for instance microchip design and packaging. They report to the senior scientist in the field who is responsible for evaluating the quality of their technical contributions. At the same time, each specialist reports to the project manager, who evaluates his/her job performance (meeting specs, time and cost budgets, teamwork, etc.). In between projects, the specialists go back to their home discipline, update and sharpen their knowledge, write reports, and prepare themselves for the next projects.

Quite often some projects are ahead of schedule, while some are behind schedule, but it is difficult to move people like pawns from one project to another for a short time. Microsoft has solved this problem by having a ``core group'' of thirty to forty top software developers who report directly to the CEO, Bill Gates, for their assignments. Gates monitors the status of all major projects, determines the location and causes of the bottlenecks, selects the best people for the job, and moves them organizationally up, down, or sideways, according to needs. Thanks to this ``organizational slack,'' the project teams remain intact and the laggards recover their schedule with this extra help. Needless to say, membership in Gates' ``elite team'' provides strong motivation to outshine peers and do extraordinary work!

Role of General Management Finally, I would like to emphasize the key role of General Management in achieving success for radical innovations. This role is well explained in the book, ``Winning in HighTech Markets'' by Morone (1993). With reference to Figure 1, the General Manager and a small team of dedicated people creatively visualize a radical innovation, for instance, cellular telephones within Nokia, a Finnish company that produced tires and rubber boots! They translate their vision into strategic focus (Nokia's present business is 99% communications) and develop a winning business strategy while concentrating all their resources in the area of focus. The business

Figure 1. The role of general management for winning in high-tech markets through radical innovation.

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strategy is to achieve market leadership through advanced technology and design (for which Finland is famous). The concentration of resources develops unique in-house technical and worldwide marketing competencies. Thus leadership is achieved through innovation and sustained through the market feedback loop that, in turn, refines the strategies and reinforces the unique core competencies in the company. Thanks to innovation and strategic focus, Nokia, practically unknown six years ago, is now the world leader in cellular phones, ahead of two larger veteran competitors: LM Erickson and Motorola.

References Abetti, P.A. (1997) Underground Innovation in Japan: The Development of Toshiba's Word Processor and Laptop Computer. Creativity and Innovation Management, 6, 127±139.

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Burgelman, R.A. (1983) Corporate Entrepreneurship and Strategic Management. Management Science, 29, 1349±1364. Hofstede, G. (1984) Culture's Consequences: International Differences in Work-Related Values. Beverly Hills, CA (USA): Sage Publications. Kanter, R.M. (1983) The Change Masters. New York, NY (USA): Simons and Shuster. Kapij, M.I. and Abetti, P.A. (1997) An Entrepreneurial Venture Teaming Multi-Cultural Groups: A Case Study of Software International, Ltd. Management of Technology, VI, 1162±1171. Morone, J. (1993) Winning in High-Tech Markets. Boston, MA (USA): Harvard Business School Press.

Pier A. Abetti is Professor, Management of Technology & Entrepreneurship, Lally School of Management and Technology, Rensselaer Polytechnic Institute, Troy, New York, USA.

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Wishes and Knowledge in Innovation Management Jon Sundbo This article is unusual because it is oriented towards practical use, which is rare in academic work. Practitioners have presented their wishes about innovation management and the researchers in the project that the article refers to have ± as an answer ± presented the knowledge that management science provides. One of the remarkable things in the article is the appendix lists `wishes that science has no answer to'. If this list is correct, it demonstrates that science lacks knowledge of core issues such as how to encourage creativity and how to develop innovation-sustaining management behaviour ± behavioural factors that are the preconditions for innovation. If we lack knowledge about these factors, as yet we have no knowledge of how innovations are really produced and no possibilities of telling how the innovative behaviour of the firms could be improved. We can only count the innovations and correlate them with more rigid economic variables such as R&D investments, the number of employed academics etc., which economists use. Management science is far behind economics in researching and explaining innovation. However, the situation is not that bad. The article presents a series of conclusions from management science that tell us something about the behaviour of managers and employees in innovation processes. Besides, the article has not included all existing research investigations ± thus a lot of the excluded results could answer many of these questions. There are no explicit criteria for why the referred literature has been selected. Nevertheless, I also have the general impression that we know less about the behaviour of the people involved in the innovation process than about the more briefly measured and abstractly defined economic variables. A general theme of the article is that the most important determinant to improve creativity and innovative behaviour among managers and employees seems to be general cultural factors. Those related to the firm in general are more important than those re-

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lated to specific organisational activities such as project teams. That means that firms should aim at creating an innovationoriented corporate culture more than dealing with detailed formal organisational constructions. This is a result in accordance with an old conclusion from Burns and Stalkers (1961). Another theme is the importance of customer relations suggesting that firms should be occupied by developing services in relation to new products more than by technicalities. Also here the ``wish-but-don't know'' list reveals that we know little about how to develop the customer relationship in detail, but the authors could have found at least some answers in the service marketing literature. A third interesting theme, which could be developed more, is the importance of firm strategy and the importance of the market situation to the innovation process. A couple of important themes are treated too briefly or are treated with a ``skewed'' approach. The first theme is competence. It is treated in the article, but the general conclusion is that research has not many results on which concrete innovative competencies are needed. Since it is perhaps the hottest core issue in the current innovation discussion, this theme could have been developed further. Although I agree in that we have a limited knowledge of the concrete competencies needed, there are several empirical investigations and a series of theoretical proposals, which could have been included. The competence discussion should be developed into the discussion of organisational learning in relation to innovation. This is another core issue where we may have a lack of knowledge, but still have some. These two issues could contain the answer to many of the ``wishbut-don't know'' questions in the appendix. The second theme is the implicit innovation-maximising approach in the article, for example when it refers to Goldman's (1985) remark that in many cases, firms suffered severely by not innovating. This approach

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is usual in innovation research. However, one may ask if the fact that we as researchers are studying a phenomenon means that the phenomenon should always be improved maximally. Innovation is a risky business and most innovation projects fail and cost a lot of money. It is perhaps not wise for a firm to innovate maximally in all situations. In some situations where the business is going well without any acute signs of collapse, it could be wise not to innovate. Innovation should maybe be optimised instead of maximised. At least it could be interesting to have results on that issue presented. Regardless of such academic comments, the value proof of this article is ``in the pudding'',

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i.e. it is measured in form of how much practitioners can and will use it.

References Burns, T. and Stalker, G.M. (1961) The Management of Innovation, London. Goldman, J.E. (1985), Innovation in large Firms, Research on Technological Innovation, Management and Policy, 2, 1±10. Jon Sundbo is Professor at the Department of Social Sciences, Roskilde University, Roskilde, Denmark.

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Notes from a Marketing Perspective Tony Proctor The paper considers many of the main issues in innovation management but to my mind lacks any systematic structure. This is probably because it addresses a number of questions rather than tries to provide a systematic overview of the subject. Nevertheless, it does run the risk of understating key points, thereby weakening its conclusions.

People, processes and services Two important themes that need to be explored more carefully are the impact of people and processes on innovation management. One also needs to make some distinction between product innovation and process innovation. The paper presented tends to visualise innovation in terms of tangible products. Not only does it neglect processes, but it also ignores something much closer to product innovation, namely service innovation, which has many differences of its own.1 Organisational politics, power and influence structures, CEO management style and organisational structure are all important `people' factors that have a bearing on whether innovative and worthwhile projects come to fruition. Processes include identifying innovative opportunities, developing them within the correct time frame, selling ideas to people who will implement them, and to users, and ensuring that they are implemented effectively and efficiently. Reference is made to Daellenbach and McCarthy's (1995) paper, which highlights the importance of the top management group in affecting the commitment of the company to innovation. This might reasonably be extended to looking at the influence of change in the top management team (particularly the CEO) and the impact that this can have on on-going or proposed innovation projects. It also introduces the need to take account of pressure groups within the organisation and their ability to command resources and support from top management.

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Marketers would argue that the product/ services innovation process should start with an examination of the trends in relevant market drivers, and assess the impact that this will have on customer wants and needs.2 Similarly, one could argue that as far as process innovation is concerned, one should examine trends in organisational lead indicators and assess the implications that these will have for process innovation. The paper relies too much on product innovation management to make its points. It needs to be extended to cover service innovation,3 and its scope adjusted to take account of process innovation.

The importance of internal marketing The Dougherty and Corse paper (1997) deals mainly with rather well known concepts as far as product innovation is concerned. Building-in customer needs and requests at the design stage are regarded as a fundamental procedure in the marketing literature. The same also applies to ``iterative organising'' which is considered to be a fundamental component of internal marketing ± the gaining of commitment to serve the customer from all members of the organisation, irrespective of whether or not they interface with the customer.4 Points by the same authors about situation evaluation are also vitally important, and act as safeguards in preventing the possibility of entrapment in managing innovation. Indeed, the paper would benefit from a discussion of the relevance of entrapment.5 The point about collective responsibility is somewhat idealistic ± though desirable. Collective responsibility can only be encouraged through the development of shared values and even if this is achieved within a single organisational unit there is still the problem of getting it accepted throughout the whole organisation. Once again the importance of internal marketing is raised.

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COMMENTARIES

Competition Only a rather a cursory mention of keeping one's eye on competition is made. Competition is of course an important source of new ideas and innovations ± as long as a firm is not intending being first to market with the idea. Mention needs to be made of the various ways of monitoring competitors' activities and plans. Competition also needs to be properly defined and this can be a major task in its own right. One does not simply define competition in terms of those who supply the same generic product to industries or markets as oneself.6 The section referring to the work of Vonortas and Xue (1997) mentions the bargaining power of the customer. This is of course one important element of the Porter model of the five forces of competition,7 which takes us back to the previous argument about competition. Competitive forces are linked strongly to innovation, and one has to consider all five forces ± power of the buyer, power of the supplier, threat of new entrants to the industry, threat of substitute products, and the rivalry among the incumbents of the industry.

Doing things better, doing better things The authors observe the dangers in perpetuating doing the things you are good at instead of learning the things you will have to be good at. It is noted that Markides (1997) suggests that the way to avoid this problem is to change the game being symbolically played out. The development of Schumpeter's ideas can also be seen as a version of dealing with the classic problem of the Prisoner's Dilemma.9 Marketing writers and practitioners tend to adopt the philosophy that cannibalisation is something to avoid, if possible and at the very least to take steps to measure its effect on the organisation's product-market offering prior to adopting as a marketing strategy.10

Other theoretical considerations Towards the end of the article there is an interesting table that illustrates the contingent

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nature of innovation. However, we should remember that there is no common agreement of the operational definition of market ± for example is a market a market segment, or a group of market segments, which includes niches? Referring to Ansoff's well known product-market grid,11 it will be recalled that entering any new product-market, however it is defined, involves an element of risk and uncertainty, hence when new markets are involved their importance should be rated. Even developing new products in existing markets is not without risks, and retaliation from competitors may be substantial. I personally felt that the references to various theoretical perspectives too general, and not explored in adequate depth. I felt that these perspectives deserve further development, perhaps in a subsequent publication.

Notes 1. see, Gabbott and Hogg (1998), Services and Consumers, Wiley. 2. see Piercy (1992), Market led strategic change, Oxford: Butterworth Heinemann. 3. see de Brentani, (1991), Success factors in developing new business services, European Journal of Marketing, 25 (2), 33 ±59. 4. for more on the subject of Internal marketing see for example Piercy (1995), Customer satisfaction and the internal market: marketing our customers to our employees, Journal of marketing Practice and Applied Marketing Science, 1 (1), 22-44. 5. see Proctor (1993), Entrapment in Product Development, Creativity and Innovation Management, 2 (4) 260±265. 6. see Lanmann and Wner (1988), Analysis for Marketing Planning, Plano, TX: Business publications 7. Porter (1980), Competitive Strategy, New York: Free Press. 8. see Piercy note 4. 9. see Luce (1959), Individual Choice Behaviour, New York: Wiley. 10. references include Copulsky (1976), Cannibalisation in the market place, Journal of Marketing, October, 103±105. 11. Ansoff (1965), Corporate Strategy, New York: McGraw Hill.

Tony Proctor is an independent writer, lecturer and consultant.

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Innovations in Time: What can we learn from history? Tony Proctor Failure to move with customer wants and/or adopt technical improvements led to the decline and fall of the British Watch making industry. The lessons learned by the 19th century entrepreneurs has many ramifications for business today. British manufacturers were pioneers in watch-making. They invented, developed and marketed all the improvements associated with watches and yet they fell victim to the shadow of obsolescence for they failed to implement all of their own inventions. Invention is not enough of itself it must be linked to the demands in the market place and marketed as and when the occasion demands. Firms with the best notion of what the customer really wants can turn inventions into real innovations. There is a need to monitor closely market drivers and to assess the impact they have on innovation.

Introduction

I

The marketing and R&D interface Volume 7

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n recent years Dava Sobel has popularised interest in the development of the mechanical watch with her account of the search for the chronometer in her book ``Longitude''. The efforts of John Harrison to produce the first chronometer are well documented in Sobel's book. Of course, the search for accuracy in the measurement of time was driven by seafaring navigation needs and the prize money offered to the first person to produce such an instrument provided a substantial inducement. Less, however, is generally known about the development of portable personal time pieces as epitomised in the pocket watch and the wrist-watch. In modern times the advent of the quartz watch and its impact on the established wrist-watch market has received marked attention but apart from this there is little written in the business history about developments of clockwork movements. With these comments in mind I will trace some of the major developments in the history of the development of the watch and relate it to the notions of invention, innovation and marketing. From this account I hope to draw some interesting conclusions which I believe are very relevant to the Marketing and R&D interface in business today.

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The verge and the search for its successor The accuracy of a watch is governed by many factors. A watch is a complete system and failure of one part of the system will clearly affect the overall efficiency of the whole system. However given that all components of a watch are in excellent working order, the major components which govern the accuracy of the watch comprise what are known as the escapement mechanism or subsystem. In effect the components which make up the escapement subsystem regulate the absolute speed and the consistency of the speed at which the watch operates. Hence the escapement mechanism is perhaps one of the most critical factors in determining the accuracy of a watch with respect to its time keeping. The earliest watches were not carried in the pocket but were hung from a chain draped around the neck (Pearsall, 1997). The earliest form of escapement was known as the verge escapement and it was first used in clocks as far back as the early 1300s. It consists of a crown escape wheel, a verge which has two flags called pallets, and a balance in the shape of a wheel (see figure 1.). The earliest watches seems to have appeared around 1510 and were most likely spherical though subsequent watches were drum-shaped (Pearsall, op.cit.). # Blackwell Publishers Ltd 1998. 108 Cowley Road, Oxford OX4 1JF and 350 Main St, Malden, MA 02148, USA.

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Watches as we know them today first began to appear in the 1500s, though their construction was somewhat crude and their ability to measure the passage of time was equally crude. However, watches were considered more of a novelty for the better off than useful tool for time measurement during the 16th century. Gilt hinged crucifix watches were not uncommon.1 Later in the 16th century and certainly during the 17th century the situation changed and watches which could measure the passage of time with some degree of accuracy began to appear. Early watches had possessed only a single hour hand but the increase in accuracy brought about by such innovations as the balance spring and the fusee led to the introduction of the minutes hand and later the seconds hand. During the 16th and 17th centuries the verge escapement was developed and refined and was generally regarded as a suitable mechanism for regulating watches. However, it did suffer from one particular defect which detracted from its usefulness. The design and layout of the verge escapement was such that it encouraged relatively rapid wear in the gear train. Verges, as a result, also tended to become inaccurate in use because of the amount of wear that took place. If one combined this with the fact that for the mass of the populace there was no quick way of determining what the correct time was ± radio and TV of course were not invented and church clocks were not necessarily accurate ± owners of verge watches, which had seen some use, were frequently in the position that their watches bore no relationship to the real time at all! Verge watches used even as late as the 18th century could be as much as an hour adrift of the real time at the end of a day ± even if they showed

the correct time at the beginning of the day (see for example Tremayne, c.1948). Many verge watches have in fact survived until the present day and it is interesting to measure their accuracy under modern conditions. A well kept and maintained verge in excellent condition made in the late 18th century will in fact remain accurate to within two or three minutes in twenty four hours.2 The problems with the verge in 16th, 17th and 18th centuries were possibly accentuated by poor maintenance and the fact that it was difficult if not impossible for the majority of owners to make adjustments to their watches from time to time to keep them abreast of the true time. Judging by the decorative nature of these early time-pieces they appear to have been valued more as items of jewellery than functional mechanisms. It is interesting to note that many verges during the late eighteenth century were produced for the Turkish market. The dials of these watches were adorned with Turkish rather than Roman numerals. Today many of these verges appear in auction rooms all over the world in absolutely mint condition. Their owners often viewed them as treasures to be taken out and viewed but not to be used (Camerer Cuss, 1996). During the 17th and 18th centuries the invention and incorporation of the repeater mechanism into watches occurred. The repeater enables the wearer of the watch to tell the time without actually being able to view the dial. A gong struck the hours, quarters and even minutes on pressing a slide on the side of the watch so that time is told to the auditory senses rather than to the visual senses. Early repeaters struck the hour and quarters only. Given the inaccurate accuracy of the verge and the lack of the need to tell the

Balance wheel Pallet Verge Pallet

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time with absolute precision this was regarded as accurate enough for most purposes.

The cylinder escapement While Harrison was trying to produce the chronometer and win the coveted prize for doing so, others were looking for ways of overcoming the basic weaknesses of the verge escapement. Around 1695 Thomas Tompion invented the cylinder escapement which was a great improvement on the verge (Shenton, 1995). George Graham developed the cylinder escapement (Shenton, op.cit.) and the real impetus for overcoming the inadequacies of the verge lay in the hands of the English watchmakers. Strangely, nothing happened ± the invention remained largely dormant and was not generally adopted by the British manufacturers during the 18th century. The verge remained the popular and dominant mechanism. It was not until perhaps the most famous of all watch-makers the Frenchman Abraham Louis Breguet took hold of the cylinder escapement more than a century after its invention by Tompion that it became popular (Camerer Cuss, op.cit.). Even then its popularity was to be in mainland Europe rather than in Britain. English watchmakers stuck to their knitting in the form of producing verges and only a few of the more adventurous toyed with the cylinder movement (Shenton, op.cit.). The advantages of the cylinder escapement were obvious. In the first place the watch movement was much simplified (see figure 2) and the whole movement fitted so that the wheels and gears operated in a single plane (Shenton, op.cit.). This meant that a much thinner watch than the verge could be pro-

duced. The watch mechanism for further simplified by the fact that the fusee was dispensed with (Shenton, op.cit.). In the verge the fusee was an important component in the winding of the mainspring and the release of power from the mainspring. In the verge one did not wind the spring directly, as in the case of the new cylinder escapement watch, but wound a chain on the a conical shaped pinion (the fusee). The chain was attached to the housing of the barrel containing the mainspring and it the rotated the housing and which thence tightened the mainspring.3 Breguet's dispensation with the fusee was in itself a major innovation (Camerer Cuss, op.cit.). He recognised that while the fusee was a very important mechanism in controlling the mechanical power stored in large springs it was much less useful or necessary in small springs. From the time of the Napoleonic Wars (the early 1800s) to the accession of Queen Victoria (the late 1830s) were very strange times indeed as far as watch-making was concerned. On the continent the cylinder was heralded as a major breakthrough in watch technology while in Britain the verge still trundled on relatively unchanged in both form and popularity. Not all watchmakers in Britain held their heads in the sands of time as far as technological innovation was concerned. Several developed their own versions of the cylinder escapement and tried rather unsuccessfully to market them (see Shenton, op.cit.). The English, Scots, Welsh and Irish held tenaciously to the time honoured verge, despite all, and country folk still continued to value the quality and hence the price to pay for a watch by its weight and size. Larger verges fetched higher prices than smaller ones ± indeed, subsequent evaluation in modern

Balance wheel

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Cylinder escapement Figure 2. The cylinder escapement

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times shows that the larger verges tend to be more accurate in terms of time telling (Camerer Cuss, op.cit.). By the turn of the 19th century (1800) pocket chronometers as well as larger chronometers could be purchased (Shenton, op.cit.). These were relatively expensive items which few people wanted to buy. The chief purchasers were owners of sea-going vessels. However, over a period of time many ships were not only well equipped with chronometers but were periodically refurbished with new or improved chronometers. Many of the discarded chronometers found their way into English parsonages (viz. Camerer Cuss, op.cit. p. 297). The true reason for this is unclear, however it may not have been specifically without intent, for with the aid of such chronometers clerics could set the time of the clocks on their steeples with some degree of accuracy. As a result of this the parishioners themselves could then adjust their watches to coincide with the times recorded by the clocks on church steeples. Hence, the verge was able to provide satisfaction to its owner as a time telling piece for the first time. Perhaps this lessened the pressure exerted by the consumer for the development of a replacement for the verge. The cylinder escapement, however, was not without its inadequacies. One of the major problems was that adjustments to position errors could not be made. All mechanical watches are subject to position error (Tremayne, op.cit.). A watch which is regulated to tell the precise time when lying flat on its back on a flat surface will develop errors in time keeping when placed or held in any other position. This, of course was one of the major problems which had to be dealt

with in the development of the chronometer. A chronometer had to made so that it would tell the time accurately irrespective of the constant pitching and rolling movements of the ship on which it was housed. Thus while the cylinder escapement was a substantial improvement on the verge it too could become inaccurate relatively quickly and hence lose its value as a time telling device. On the continent the virtue of the cylinder escapement was its compactness and its ability to be housed in a slim and elegant case ± something which the French and others seemed to value more than the inhabitants of the British Isles (Camerer Cuss, op.cit.). It is interesting today to compare the contents of the Horological Museum in Geneva, for example, with those in the UK. The former reflect the artistry of enamel dials and elegant cases while the latter tend to stress technical developments in movements with less auspicious claims to elegance of appearance.

Contrasting styles

The birth of the lever escapement Recognising the problems inherent in the verge and cylinder escapements other watch making pioneers set out to look for a way of producing a relatively cheap escapement which would provide accurate time-keeping for everyone. Harrison's main rival in the search for the chronometer, Thomas Mudge is credited with the introduction of the lever escapement in England and Pierre Le Roy is credited with its arrival in France in about 1759 (Camerer Cuss, op.cit.). The lever escapement for watches owes its origins to the invention of the dead-beat escapement for clocks by George Graham in England and

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Thomas Mudge was in fact Graham's apprentice. Curiously, while the lever escapement was destined subsequently, to become the most widely used watch escapement for millions of watches over the next 200 years, it did not at the time of its invention have any great impact on the watch-making trade in general (Camerer Cuss, op.cit.). The verge was considered robust and serviceable, the principles were well understood and the timekeeping capabilities were more than adequate for the requirements of life in the 18th century. The development of the lever escapement lay in the hands of a small group of technical craftsmen who sought to make technological improvements in the product in advance of the requirements of the market (viz. Cutmore, 1976). In the latter half of the 18th century many craftsmen added improvements to the lever escapement despite the fact it was never adopted as an innovation. Notable among the developers at this time was Peter Litherland of Liverpool who improved the Mudge escapement and produced was what known as the rack lever escapement (Viz. Shenton, op.cit and Cutmore, op.cit). However, it wasn't really until Edward Massey in 1814 invented the crank roller lever that the detached lever escapement as it subsequently became widely adopted in England was brought into existence (Shenton, op.cit.). From about 1814 onwards lever watches began to take on a modicum of popularity but were viewed with suspicion by those who clung to the verge in England and the cylinder on the continent. Moreover, even on the continent, Breguet had experimented with and refined the lever escapement. The new lever escapement watches were less bulky ± thinner than the verges ± but more bulkier than the cylinder watches. The pattern of the early lever movements ± retained by the majority of the later lever watches until as late as the 1880s ± was to mount the balance wheel on top of the plate in the same fashion as had been traditionally adopted in the verge. This ensured that such watches were of necessity rather thick and chunky. Unlike in the case of the verge escapement, however, there was really no need to do this. The crown wheel on the verge necessitated that the balance wheel be mounted high since the pallets were at right angles to the crown wheel and mounted integrally on the spindle which supported the balance wheel. In the case of the cylinder and lever escapements, however, the balance wheel could be mounted in the same horizontal plane as the escape wheel itself thus making it unnecessary for the watch to be overly thick and chunky. As noted above, this

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was a feature which had not been over-looked by employers of the cylinder escapement and they had used it to good effect in the elegant and slim French and Swiss cylinder watches that were produced. In England, some of the developers of the lever escapement recognised that the lever movement could be modified more to the fashion of the cylinder movement. The plate on which the balance and balance cock were mounted was cut away and the whole assembly lowered into the same plane as the escape wheel with noticeable reduction in the bulkiness of the watch. Three quarter plate and half-plate watches began to appear in the 1820s and 1830s. In the first half of the 19th century quality in watches was perceived to be either elegance, compactness or durability. No-one really expected considerable accuracy in terms of time-keeping. It seemed to be a matter of aesthetic taste as to whether one used a verge, a cylinder or a lever watch. Since watches could be adjusted to match with times indicated on church clocks, as long as the watches themselves were accurate to within a few minutes a day and the vicar of the church paid attention to ensuring the accuracy of the church clocks, then this method of time telling was quite acceptable. The limitations of verge and cylinder watches were well-known and the capabilities of the lever watches had yet to be explored. However, in the 1830s it soon became apparent that the lever escapement wore better than the verge and that it was more accurate than either the verge or the cylinder. Nevertheless, while many early adopters of the new innovation either bought such lever escapement watches or had their verges converted, there were still many who did not see the need. In rural Britain time was reflected predominantly in the season and not the hour.

Pressure for the adoption of the lever escapement as the standard escapement Industrialisation and the railways brought about a change in attitude to time-keeping. The growth of the railways in the 1840s and 1850s and the development of commercial transactions on a daily and hourly basis gave impetus to the need to produce accurate portable time-pieces that did not require frequent adjustment to retain their accuracy. The change spelt the death of the verge escapement and precipitated the decline of the cylinder escapement. It was the paradigm shift which gave the necessary impetus to the

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refinement and improvement of the lever escapement. From about 1860 onwards the verge became almost obsolete ± though verges continued to be produced in diminishing quantities until the 1880s. History still provides us with excellent working verges dating back to the mid to late 19th century. Many of these watches are in excellent working order because they went out of fashion so quickly that they were only lightly used by their owners. Correspondingly, numbers of surviving early 19th century lever watches are relatively few. They were not produced in great quantities and many have not stood the test of time. Examples of surviving English lever watches dating from about 1850 onwards are in plentiful supply ± particularly those dating from about 1870 onwards. The lever watch became the watch of the worker and for the large part retained the relative size of the verge. The cylinder watch was to continue into the early part of the 20th century alongside the lever watch. The role of the cylinder watch was on the whole different. It was a useful escapement to employ in dress watches since its relative thinness made it relatively easy to portray elegance in a watch. However, it was flimsy in comparison both to the verge and the new English lever escapement watches and was correspondingly more difficult to service. By 1860 in Britain the lever escapement was firmly established. The working man's lever watch was fashioned after the verge in silver cases and full plate. Some dress watches, that did not adopt the cylinder movement, used half and three quarter plate designs to reduce the chunkiness of the watch. Keyless watches began to appear from about 1850 onwards, though there had been earlier attempts to produce such a watch to satisfy customer requirements. It seemed in 1870 that English lever movement, as it was called, was the dominant international product and that its producers could look forward to a rosy future. However, there were clouds on the horizon for the English watch making industry. The first of these was caused by the refusal of English watch-makers to accept the limitations imposed on design which was produced by continued inclusion of the fusee. Its retention caused virtually insurmountable problems for the development of keyless watches.

The American and Swiss Challenges During the 19th century American watch companies had begun to spring up ± notably around Waltham, Massachusetts. The

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American Watch Company ± later abbreviated to Waltham ± and the Elgin Watch Company were just two of a large number of watch companies that developed in response to fulfil the needs of a large growing market in the USA. Both of these companies were destined to achieved world renown for the quality of their watches and the Waltham Company was to survive in business as a manufacturer of mechanical watches well into the first half of the 20th century. All of these companies had a focus on quality (viz. Shugart et al. op.cit.) ± they produced reliable, accurate and keyless watches.. The American Companies were production oriented in their business and believed that the customer could best be served by keeping prices low. They perceived that this could be achieved by employing mass production techniques from which could be derived economies of scale in production. Large scale production would also enable them to gain the economic benefits of the well known experience curve of learning. The latter of these concepts argues that as a result of experience we become more efficient at performing tasks and hence the trues cost of performing the tasks decreases with experience. The lowering of costs and the marketing in Europe on a marginal pricing basis proved to be too much competition to many of the English watch makers who had not adopted mass-production methods. Even the Lancashire Watch Company, at Prescot, which had introduced a degree of mechanisation was eventually succumb to the Americans and the Swiss, for that matter, who had followed suit with mass production methods. The death knell of the English watch manufacturers was sounding as Queen Victoria departed in 1901. Some British watch-makers were still producing fusee wound watches as late as 1913 and by the end of World War only Benson and Russell remained in business in Britain and both of them used imported Swiss movements for their watches.

American production orientation

Lessons to be learned There are many lessons to be learned from this short account of the history of the English watchmakers. First and foremost, of course is the fact that even if a firm, or an entire industry for that matter, is at the leading edge of technology, is the prime innovator in the market place, and is the market leader in world markets, unless it keeps abreast of: a. its competitors b. state of the art technology

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c. customer wants and needs d. the appropriate mix of the foregoing (a to c above) in any specific period of time.

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then eventually, like the Lancashire Watch Company it too may be doomed to extinction. Competition in the case of the watch industry arose in several different ways. We can understand the nature of competition either by studying consumer behaviour or by looking at the concept of substitute products. Both essentially define competition for us. From the point of view of consumer behaviour we note that consumer satisfaction with the watch was governed primarily by the benefits it created for the wearer. Benefits could be of several kinds ± e.g., functional benefits;4 status benefits.5 In looking to serve the interests of their consumers it is noticeable that manufacturers of watches did in fact strive to do these things. Pre 1800 the verge was virtually the only escapement available to the consumer so competition sought to differentiate its products from one another through the decorative nature of the watches. Enamelled dials adorned with pictures or jewels and repousse work in which figures were hammered into relief in gold and silver cases distinguished the high quality watches from those of lesser quality which were usually in plain cases often made of inferior metals. The advent of the cylinder movement and later the lever movement along with the shift towards a need to have better timekeeping shifted consumer tastes more in the direction of functionality though the watch for many still retained an aesthetic aspect. The interesting question concerns the extent to which customer wants and needs as opposed to technological developments acted as the principal market drivers in this case. Evidence would seem to indicate that it was the market pull as reflected in customer wants and needs that was the prime driving force. Technology was relatively slow to respond to wants and needs of customers6 and even if paradigm shifts could have been implemented through the use of new technology it often languished in the form of prototypes that never really turned into large scale marketable products.7 In England the moment at which the lever escapement actually took over from the time honoured verge escapement as the main escapement mechanism in use is not clear. That a detached lever movement, as developed by Massey, was widely used in the 1830s seems to be clear, according to the historical accounts. However, verge escapements which have survived until today reflect in their numbers that the verge escapement was produced in relatively large numbers between

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1830 and 1850. Correspondingly the number of surviving lever escapement watches from the same period seems to be relatively small. One could take this to indicate that either the lever escapement did not achieve predominance until after 1850 or that early lever escapement watches were of relatively poor quality and have not proved robust enough to survive until the present day. It has been argued that the development of the railways and growing industrialisation exerted pressure for more accurate time keeping devices. Certainly in the case of the railroads in the USA there is anecdotal evidence to support this general argument later on in the 19th century following a notorious railroad accident in which two train collided on the same stretch of single track railway line. The cause of the accident was put down to time keeping errors of the driver's watches and this led to the introduction the USA of very strict standards with respect to the use of authorised railway watches carried by all railroad staff (Shugart, 1998). However, how the transition to the lever escapement in England occurred is not at all clear. There was no one large paradigm shift as occurred in the USA in the latter half of the century and, indeed, the shift away from the verge is supposed to have occurred in the middle of the second quarter of the 19th century. In England the second quarter of the 19th century was characterised by the growth in the railways and the change in the principle form of transportation from carriage or coach to rail. The Manchester-Liverpool line was opened in 1830 and the ensuing 20 years saw the growth of a nation-wide growth in rail networks and competing lines. The accent was on who could provide transport from A to B in the shortest time. In 1845, for example, there were no fewer than 620 railway projects in Britain (Larsen, 1961), though in actual reality only a few of them materialise. However, this does underline the importance of railways as a focus of public attention. This accent on speed and time placed a new importance on the ability not only to measure time accurately but to ensure that time measurement was consistent in all parts of the country. Especially, this was the case, where there were no clocks readily available. It meant the end of the verge escapement, which even with regular updating could easily be five to ten minutes adrift of the standard time adopted for the country. We might reasonably conclude that mass transportation mechanisms and time measurement devices are interdependent entities. Development in transportation methods may be viewed as the lead indicators for demands

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Verge Railways

Quartz

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Airways

Horse and Carriage Cylinder

1400

1550

1700

1850

2000

Figure 4. Life cycles of escapements and market drivers in terms of time measurement (see figure 3). Looking many years into the future one might speculate that if time travel ever becomes a reality then devices which can actual measure shifts in time will be required. For the shorter term, however, we need to focus our attention on more practical interrelated entities and how shifts in the technology of one will impact on the need for technological breakthroughs in the other.

Notes 1. These watches were housed in cases taking the shape of a cross. Pearsall (op.cit.) provides good illustrations of these watches. Note also the collection of crucifix watches on display in horological museums, such as those in Geneva, and collections of watches in other museums ± e.g. the top floor of the main Liverpool Museum on William Brown St. 2. The author's experience of using several verges dating between 1790±1840. 3. See for example Shugart et al. (1998) for illustration. 4. It enabled the consumer to know the time as he or she went about his or her daily chores. 5. It bestowed on the user the status of being in the know, up to date or even wealthy. 6. Viz. the development of the marine chronometer. 7. The rack lever escapement and all earlier 18th century lever escapements.

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References Britten, F.J. (1915), The Watch and Clock Makers' Handbook, 11th edition, republished 1995 in the UK by the Antique Collectors' Club. Camerer Cuss, T. (1996) The Camerer Cuss Book of Antique Watches, Suffolk: The Antique Collectors' Club. Cutmore, M. (1976) The Watch Collector's Handbook, Vancouver: Douglas David & Charles Ltd. Larson, E. (1961) A History of Inventions, London: Phoenix House. Pearsall, R. (1997) A Connoisseurs Guide to Antique Clocks and Watches, Twickenham: Tiger Books. Shenton, A. (1996) Pocket Watches 19th and 20th Centuries, Woodbridge, Suffolk: The Antique Collectors' Club. Shugart, S., Engle, T. and Gilbert, R.E. (1998) Complete Price Guide to Watches, Cleveland, TN: Cooksey Shugart Publications. Sobel, D. (1995), Longitude, USA: Walker Publishing Company, Fourth Estate, London, 1996. Tremayne, A. (c.1948) Everybody's watches, London: N.A.G. Press.

Tony Proctor is an independent writer, lecturer and consultant.

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Index to Volume 7 (e.g. 2/79 = number 2, page 79)

1. Articles

NAUDEÂ, Pete, BLACKMAN, Ian and DENGLER, Steve. The Managerial Implications of Real-Time New Product Development in Financial Services

2/54

BUIJS, Jan. Viewpoint: Towards a New Theory X

1/17

CARRIER, Camille. Employee Creativity and Suggestion Programs: An Empirical Study

2/62

DENTON, D. Keith. Viewpoint: Blueprint for the Adaptive Organisation

È M, Harry. The Dynamic NYSTRO Marketing-Entrepreneurial Interface: A Creative Management Approach

3/122

2/83

PROCTOR, Tony. Innovations in Time: What can we learn from history?

4/204

ECKERT, Claudia and STACEY, Martin. Fortune Favours Only the Prepared Mind: Why Sources of Inspiration are Essential for Continuing Creativity

1/9

EKVALL, GoÈran and RYHAMMAR, Lars. Leadership Style, Social Climate and Organizational Outcomes: A study of a Swedish University College 3/126 FAIRHEAD, J ames. Paradigm Change and Leveraged Learning During the Rover-Honda Collaboration 2/93 HUBER, George P. Synergies between Organizational Learning and Creativity & Innovation JONES, Oswald. From Maturity to Entrepreneurship: A Stakeholder Model of Innovation MCCOSH, Andrew M., SMART, Alison U., BARRAR, Peter and LLOYD, Ashley, D. Proven Methods for Innovation Management: An Executive Wish List

1/3

RICKARDS, Tudor and MOGER, Susan. Special Feature: The Second Great Industrial Revolution

3/140

STAFFORD, Sue P. Capitalizing on Careabouts to Facilitate Creativity

3/159

TAN, Gilbert. Managing Creativity in Organizations: a Total System Approach

1/23

TASSOUL, Marc. Making Sense with Backcasting: the Future Perfect

1/32

2/107

2. Commentaries 4/175

MCFADZEAN, Elspeth. The Creativity Continuum: Towards a Classification of Creative Problem Solving Techniques 3/131 MEULENBROEKS, Cees. Creating a Competitive Advantage through Quality

PROUDLOVE, Nathan. `Search Widely, Choose Wisely': A Proposal for Linking Judgemental DecisionMaking and Creative Problem-Solving Approaches 2/73

3/148

# Blackwell Publishers Ltd 1998. 108 Cowley Road, Oxford OX4 1JF and 350 Main St, Malden, MA 02148, USA.

ABETTI, Pier A. Notes on Unanswered Questions

4/197

BESSANT, John. Some Contingency Issues

4/194

LEFEBVRE, Louis A. What about Networks?

4/196

È M, Harry. Managing the NYSTRO Paradoxes of Innovation

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December 1998

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CREATIVITY AND INNOVATION MANAGEMENT

BRUCE, M. and JEVNAKER, B. H. (eds). Management of Design Alliances; Sustaining Competitive Advantage

3/171

3. Books of the Quarter (Review Articles)

ELLINOR, Linda and GERARD, Glenda. Dialogue: Rediscover the transforming power of conversation

2/119

BRANSCOMB, Lewis M. and KELLER, James. (eds). Investing in innovation: Creating a research and innovation policy that works 3/168

HARPER, Richard R. H. Inside the IMF: An Ethnography of Documents, Technology and Organisational Action

3/172

SIMON, Herbert A. Models of Bounded Rationality Vol 3: Empirically Grounded Reason

KARLOF, Bengt. Conflicts of leadership: good for people or good for business?

1/48

KLEINER, Art. The age of heretics: Heroes, outlaws, and the forerunners of corporate change

2/118

TIDD, J., BESSANT, J. and PAVITT, K. Managing Innovation: Integrating Technological, Marketing and Organizational Change 2/115

RUBENSTEIN, A. Modelling bounded rationality

3/171

4. Book Reviews

5. Other Items

BENNIS, Warren and WARD BIEDERMAN, Patricia. Organizing genius; the secrets of creative collaboration

Tribute ± J. Daniel Couger PhD by Susan Moger

1/51

Wiping with a Viper!

2/92

PROCTOR, Tony. Notes from a Marketing Perspective

4/202

SUNDBO, Jon. Wishes and Knowledge in Innovation Management 4/200

SUNDBO, Jon. The Organisation of Innovation in Services

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Number 4

December 1998

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# Blackwell Publishers Ltd 1998