Winning Through Innovation
Winning Through Innovation
Winning Through Innovation
(1998),"Culture and climate for innovation", European Journal of Innovation Management, Vol. 1 Iss 1 pp. 30-43 <a
href="https://doi.org/10.1108/14601069810199131">https://doi.org/10.1108/14601069810199131</a>
(2006),"Inhibitors of disruptive innovation capability: a conceptual model", European Journal of Innovation Management, Vol.
9 Iss 2 pp. 215-233 <a href="https://doi.org/10.1108/14601060610663587">https://doi.org/10.1108/14601060610663587</a>
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Winning
Through
Innovation by Michael L. Tushman
Michael Tushman is Phillip Hettleman Professor of Business at the Graduate
School of Business, Columbia University. He is the co-author with Charles A.
O'Reilly III of Winning Through Innovation: A Practical Guide to Leading
Organizational Change and Renewal (Harvard Business School Press, 1997).
14
s e e m e d , had to die before
" I m a g i n e a valley in the westernmost part of they could be reborn.
the United States, a valley surrounded by T h e expected role of
universities. Lots of entrepreneurs rush
"Once a firm gains con-
managers and corporate
into this valley—most fail, a few succeed; officers is not to oversee
more technical change occurs, more entre trol if a productclassin the destruction of firms
preneurs come—most fail, a few succeed." so they can be reborn,
With these words, one of my doctoral stu an industry, if often it's to make sure that
dents began his dissertation. H e had conducted his death doesn't happen.
research on the 100-year history of the cement industry. Hayek, a Lebanese
T h e valley he is talking about is the Lehigh Valley in
begins to lose in the
immigrant, did what
Pennsylvania in the 1880s. T h e industry in that valley no Swiss manager was
showed exactly the same evolutionary structure as marketplace and excess prepared to do—he
Silicon Valley 100 years later and Switzerland between revolutionized the
1820 and 1980. It seems to make no difference whether profits are Swiss watch industry.
we're talking about cement in the Lehigh In industry after
Valley, mini-computers in California, or industry, leading
watches in Switzerland: the underlying
shifted elswhere." firms almost always
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15
The Evolution of Organizational Architectures them. In industry after industry, the response of first-
Leaders help their organizations clarify strategy—to make class players almost always has been pathological.
choices about the breadth of product and service offer Structural inertia caused by factors located deep in the
ings, target customers, technology strategy, competitive technical infrastructure and executive team can make a
timing, and the strategic intent, vision, or aspirations for a firm great today but can kill it tomorrow. At a company
business unit. In our book, Charles O'Reilly and I call called American Bell, Alexander Graham Bell worked
these the "axioms" of an organization. But strategy with the people at
and vision statements, by themselves, are just "Internal forces forstabilitythatWestern Union to invent
words; almost all firms these days have well-articu the telephone. Company
lated visions and strategies—relatively few execute. executives, believing
Execution depends upon how managers use the and present success run headlong that "any business com
organization's processes, structures, rewards, sys munication without a
tems, roles, competencies, and culture. Success hard copy is a joke,"
comes in the short-term, because organizations are demand c h a n g e . " gave away the patents to
managed for internal congruence and consistency. a company soon to be
Then, these organizations start to grow so they called AT&T.
can handle higher volume. But, the only way To be successful over
they can handle high volume throughput time, a company must be
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16
succession is a powerful force in organizational revolution. Managing Streams of Innovation
Some interesting research has shown that the performance Great companies compete successfully over time by man
of a given firm is associated with the group age of its exec aging innovation streams: processes for incremental, archi
utive team—not the age of specific members of the team, tectural, and radical innovations. These streams of innova
but how long the team has been in place. Very young tion allow them to enter new markets with existing prod
teams don't do well. Performance gradually improves until ucts and to proactively introduce substitute products that
the teams peak at an average group age of 3.5 years. As can create new markets and rewrite industry rules.
senior teams get older, performance generally declines. Managing streams of innovation requires an ambidex
One of the cement companies in our research, the trous organization that can do two fundamentally differ
Colorado Portland Cement Company, was founded in ent things simultaneously and well. It calls for managers
1900. The company was led by a four-man senior team who can maintain consistency and encourage continuous
that was in place for 32 years. Imagine the group process improvement in current offerings, while at the same
within that team: old stories, not much conflict, not much time allowing the flexibility and experimentation that
dissent. As long as the environment was stable, the con help the firm create or respond to radical shifts in the
gruence between the company's strategy, structure, peo environment. The organization must host multiple, con
ple, and process was great. But when the economic crash tradictory structures and cultures held in alignment by a
hit in 1929 and a new way of making cement came along single vision and management team. Ambidextrous orga
in the early 1930s, this team didn't have a clue, and the nizations are usually decentralized but have strong finan
company quickly went out of business. The inertia in the
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T wasn't the standard upfront, it became the standard, and level of complicated products and services. For example,
variation stopped. The internal combustion engine had every watch has several subsystems: something that pro
won the variation game. The cost of the car went from vides energy, something that oscillates, something that
$1500 to $500, and it became a car for the masses. This links the oscillation to the face, and a case to hold it all
standard was, in turn, substituted by General Motors' together. In 1970, the actions of variation, selection, and
fully enclosed auto. retention occurred in a battle to control a core subsys
The first juncture in the evolution of a product class is tem—the oscillation. A core subsystem is central to the
the closing on a standard—the shift from an era of fer product—if it is removed it has cascading implications
ment to an era of incremental change. That juncture is for the rest of the product or service. A business unit
crucial. When Windows became the dominant design in must never lose control of the core subsystems in its
the operating system of PCs, Apple and IBM dropped in products or services.
that product class, and Bill Gates became the single rich In real time, no one in the watch industry knew which
est person in the United States. oscillation technology would become dominant—after the
In the stage of variation, it's not a technology game fact, of course, everyone knew it was quartz. Technical
alone. It's partly technology, partly lobbying in and social inertia in organizations often impede perceiving
Washington, and partly coalitions with suppliers, vendors, the need for action as well as the action itself. Internal
and customers. The consequences of losing control of a forces for stability that come from a company's past and
core subsystem are catastrophic. Look at the world of present success run headlong into outside forces that
hand-held phones. There's a European standard, an demand change. As a result, firms often find it difficult to
American standard, and a Japanese standard. One will take a product to new markets, to add new subsystems to
become the global standard. If you're Ericsson you want it an existing product, or to adjust to new technologies that
to be Ericsson; if you're Nokia you want it to be Nokia; if affect their products or services.
you're Lucent you want it to be Lucent. This is a pro In juggling streams of innovation, today's managers
foundly political game that is crucial in the evolution of a must deal with political issues, global competition, and
product class. the time path of technological change in their particular
These ideas come from evolutionary biology, except product classes. Revolutionary change, as described in
that this is not natural selection, it is competitively driven the General Radio example, is often reactive, driven by
selection in which actions taken by firms actually shape a crisis in performance. In other cases such as Prime, rev
the time path of technological change. These actions are olutionary change is driven proactively by the vision of a
not taken inside the firm but on the environment out strategic leader and his or her team, who follow external
side—it's senior managers shaping the outside world. events and are determined to move before change is
After the standard is selected, there is a period of forced on them. At Prime, it was the board of directors
incremental change. It's the period of bells, buzzers, that provided that vision and energy. In multi-divisional
whistles, sizes, shapes, and packaging. This is the mature firms, it's often the corporate officers who see the need
stage of a product class that is driven by incremental for radical change.
18
Building Luck into the Organization tion is a world of "please fail"—by making many small
Some firms win over time because they're systematically mistakes, the organization learns. In this world, the
more lucky than the competition. You actually can maxi very language of quality may get in the way. Unless the
mize the probability that your business unit will be more environment is stable, TQM maximizes short-term,
lucky than its competition. Senior managers are paid incremental improvement, yet truncates innovation
more than others in their companies because they must streams because it seeks to remove variance. Once you
make profound strategic bets on behalf of their firms. If make a bet on one of the variations, you begin to build
they make the wrong bet, even if it's at the right time your luck. You enter the world of retention—the world
and executed well, their business units pay a severe of "never make mistakes." T h e cost of mistakes in this
price. By building an ambidextrous organization, moni world is catastrophic. These worlds must be allowed to
toring technology cycles, and managing streams of inno operate in parallel within a given organization.
vation, an executive team can systematically make these For the senior team who holds it all together, manag
bets more effective than the competition. ing streams of innovation is like juggling three, four, or
Yet, these bets take place in a context of uncertainly. A five balls simultaneously. It takes great skill to be able to
company called General Automation was three times larg articulate a single, clear vision for the enitre unit while,
er than Prime in 1974, and it faced the same competitive at the same time, fostering multiple organizational struc
turbulence. General Automation, too, had a visionary tures within the unit.
manager, Larry Goshorn. Goshorn bet his company on the Almost always, today kills tomorrow, big kills little,
silicon-on-sapphire technology. It turned out to be a poor and centralized kills decentralized. Today's mainframe
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bet, and he was asked to leave. A new executive came in world tries to kill tomorrow's PCs. Given the learnings
to bring the company back to where it was in 1974 and to from ambidextrous organizations, every once in a while
make up for five years of lost competitive time. the senior team must make a bet. As leaders, they must
In retrospect, it is easy to say that Larry Goshorn was break out of the forces for stability that come from
a poor manager and Bill Fisher at Prime was a transfor today's success and be willing to make a bet on these
mational leader, a visionary executive. We know from punctuated changes. Managers must build organizational
some research in this area that in real time it is impossi capabilities such that their firms are systematically more
ble to distinguish the fool from the hero; these "facts" consistent and lucky than the competition.
are only known after the fact. Indeed, the behavioral Innovation streams and puncutated change seem to be
characteristics of transformational leaders arc exactly the a worldwide phenomenon. As companies move through
same as the behavioral characteristics of failed managers! innovation streams, they find it is better to make these
Winning Through Innovation revolutionary changes before being forced to make them.
In today's watch industry, Nicholas Hayek's firm is the When Percy Barnevik brought together ABB, he treated it
dominant watch producer worldwide. SMH controls the as a revolution, not as incremental change. IBM should
low end of the market with Swatch, the middle with have begun its revolution ten years prior to Gerstner. The
Omega, and the high end with Blanepain. Hayek does it Swiss should have done it ten years before Nick Hayek.
by managing streams of innovation to shape the But organizational inertia was too powerful.
product class. Today's senior teams must manage inherent inconsis
To manage these streams of innovation as Hayek tencies consistently if they are to manage innovation and
does, one must build two fundamentally different orga change. They must be architects, building fit, consistent,
nizational architectures in the same business unit to and congruent structures and cultures to execute tasks in
operate, not sequentially, but at the same time. The the service of vision and strategy. They must be network
kind of strategy, structure, people, and process that are builders, shaping coalitions to manage revolutionary
required in a mature era of incremental change of a change and to close on standards in a product class. And
product class is fundamentally different than the kind of they must be skilled artists as they juggle contradictory
strategy, structure, people, and process required in an era strategies, structures, competencies, and cultures in the
of ferment. It is not portfolio management, it is an service of both incremental and discontinuous innova
ambidextrous organization—an organization that has dif tion. While difficult, great firms like Microsoft seem to
ferent cultures, structures, competencies, and processes be able to build ambidextrous organizations and manage
operating in the same business unit at the same time. discontinuous and incremental change in the service of
winning through innovation. ■
The only way to break out of the internal forces for
inertia is by juggling sets of competencies inside the
business unit, or by establishing alliances, joint ven
tures, partnerships, or internal venturing—creating an
organization that has multiple strategies, multiple com
petencies, and multiple structures. T h e world of varia
19
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