Running head: EFFECTIVE LEADERSHIP FOR INNOVATION 1

Effective Leadership for Innovation in Modern Organizations

EFFECTIVE LEADERSHIP FOR INNOVATION 2

Abstract

Most companies strive to find out the perfect portfolio of projects and activities that will drive

growth and position in the market. Innovation is crucial to a company's survival, it is necessary

to achieve a competitive edge for firms especially in today’s growing economy. Characterized by

a significant increase in competition within a global leadership mindset. The purpose of this

paper is to reveal the main common and effective characteristics of leadership style to manage

innovation in modern organizations. Innovation is an important topic to be reviewed, wherein

many firms are dealing with highly volatile markets, and have to re-define their strategies.

Innovation is a concept that provides more insight on how firms compete in these volatile

markets and create a sustainable competitive advantage. This paper identifies the problem in

practice and academia. There is a lack of common understanding to analyze how innovation is

enabled and developed in firms. The prime objective of this paper is to understand what

innovation leadership style look like, and how innovation capability has been built in modern

organizations. The findings have potential to gain deeper insight on organizations leadership and

culture design which impact innovation processes and practices. Solving this problem through a

holistic and multidisciplinary understanding will create awareness for organizations to identify

certain strategies and skills to sustain organizations’ innovation.

EFFECTIVE LEADERSHIP FOR INNOVATION 3

Effective Leadership for Innovation in Modern Organizations

Innovation in organizations has become a main driver of growth strategy and creating

competitive advantage (Hamel 2001; McGrath 2010; Teece 2010), it leads to change the way

companies can compete in single industry .The business Innovation knowledge resulted from

academic studies can potentially help businesses to develop their innovation practices, impacting

their operations to create a superior performance in their activities. Unlike organizations in the

last decade, they had their own unique and special innovation practices and philosophy. Modern

firms are more concerned with having a common, standardized, and comprehensive innovation

framework. Since resources scarcity, businesses large numbers, similarities among them, being

newly established, shortness of product life cycle, and technology pressures are making it

difficult to develop their own framework. Companies should be able to develop dynamic

capabilities to sense and seize new opportunities. By reconfigure knowledge assets,

complementary assets and technology to achieve sustainable competitive advantage (Teece,

2000). Therefore an enabling innovation model is needed to provide the knowledge on how

companies can deal and work to increase their flexibility to respond to opportunities and

challenges (Sammut‐Bonnici & Paroutis, 2013).

Companies are challenged with ecosystems changes. Increasing the intense of rivalry,

turbulent economic conditions, and an enormous rate of technological development. On the

other hand, markets become more global now, the competition and opportunities of expansion

are possible worldwide. Customers’ preferences are changing. They become more demanding

and asking extra features, lower prices, better services, and products customized to their exact

needs. Product life cycle are becoming shorter and shorter, with undefined limits. New

technologies have changed the relationship between companies and customers. Finding
EFFECTIVE LEADERSHIP FOR INNOVATION 4

connection with customers has engendered new business models to create a new value and

opportunities.

Innovation is a competitive strategy used in firms. This growing interest of innovation

management came as a result of many authors, who have been discussing the direct effect it has

on competitive advantage in modern organizations. New ideas require new innovative models to

be commercialized in successful way (Chesbrough 2010; Gambardella and McGahan 2010;

Teece 2010). Innovation leadership makes it a sustainable competitive advantage. This is the

ultimate vision for any company that desires to have sustainable profits. The development of

knowledge assets shift the focus for executives from cost minimization and static optimizations

to value maximization. They are looking for ways to extend company’s life cycle to become

longer. Such as replacing the diminishing returns strategies to increasing returns and offer new

value proposition to customers, company and the key partners (Teece, 2000).

The term “Innovation” is derived from the Latin word “Novus”. Which means new .

However; innovation is more than just a buzzword. it becomes a business discipline such as

marketing, operations, IT, finance, and human resources. It is identified into three themes, new,

improved, or change. The newness could be : new to company level, new to competitors or new

to the whole industry. It can be defined as a solution that satisfy new requirements, hidden needs,

or even current market demands (Crossan & Apaydin, 2010). Innovation concept is important to

success and compete, yet it is hard concept to define. It is more than newness, inventions or

creativity. Innovation as -a value chain- is how to transform ideas to be commercialized

products. Creativity just covers the fuzzy front end of innovation process. Implementation is the

back end of innovation and most important phase. It is the essence of innovation concept.

Creative ideas without implementation are just ideas. Which explain the tension and conflicts
EFFECTIVE LEADERSHIP FOR INNOVATION 5

between creative people team and those who are responsible for implementation those ideas.

They need different requirements and different activities (Shavinina, 2011). This is not limited to

R&D function any more, it’s more integrated and holistic approach among the organization. On

the other hand, the models of innovation in startups and corporations are different.The process

of innovation occurs in two approaches depending on the size and age of the company. If it is

large mature company, the model is “Corporate Innovation “. Small or startup that recently

started by entrepreneurs is called “Entrepreneurship Model”. The question is : “Why big

companies are not dominating and controling all business opportunities?” and ” Why

Entrepreneurs have more successful breakthrough innovations?”. Innovation speed, agility and

flexibility of startups in resources allocation is the answer. It enable them to bring new products

to market quicker than corporates. As startup grows, matures and develops, innovation process

slow and fall in a trap of their own initial advantage (Freeman & Engel, 2007). Entrepreneurship

concept has expanded from classical usage in startup companies to be used in

Corporate Entrepreneurship. They need this concept to activate innovation process and help in

implemention. That's why in many articles they discuss innovation as an Entrepreneurial activity

in corporates.

Innovation in a company may be in the form of new products or services, cost reduction

in certain activities, processes improvements, or even whole innovative business models.

Implementation of successful innovation in organizations will be reflected on their financial

statements. Innovative companies can drive more revenues, charge extra premiums and even

reduce operational costs using improved processes. Gaining such advantages require a

supportive leadership mindset; capable of combining change with risk experimentation.

EFFECTIVE LEADERSHIP FOR INNOVATION 6

However, there still gabs to understand why some companies practice innovation better than

others. (Troy, 2001).

Baregheh, Rowley, and Sambrook (2010) did a study to understand what innovation

really means. They reviewed roots of innovation in different disciplines literature (business

management, economics, organizational studies, technology, marketing and knowledge

management). The findings show that there are 60 different definitions of innovation. They tried

to categorize those definitions and group them according to common themes and attributes. The

results of their work listed six attributes for innovation: stages of innovation (adopt, create, and

implement), social context for innovation (organization, customers, social systems, and

employees), means of innovation (ideas, technology, creativity, markets and inventions), nature

of innovation (new, change and improvement),type of the innovation (product , service and

process) and finally aim of innovation ( success, differentiate and compete).The study concluded

that researches should focus on one group of innovation attributes to have a higher research

quality. Rather than investigating the generic and ambiguous concept of innovation. It is better to

break it down to sub themes for study and measure accurately. This way researchers can have a

common language when it comes to innovation studies.

Global Innovation Management Institute (2013), which is considered the Body of

Knowledge (BOK) of innovation management is using a broad and measurable definition of

business innovation:

“To create and capture new value in new ways, through new offerings, new

processes, new technology applications, new business models, and new value

propositions for both consumers and businesses.”

EFFECTIVE LEADERSHIP FOR INNOVATION 7

Innovation need to be operationalized to be measured , both practitioners and researchers would

like to know what to innovate , where and how to innovate (Johannessen, Olsen, & Lumpkin,

2001).Those critical activities need to be handled by extra ordinary leadership behaviors to lead

and maintain this complex concept. Crossan & Apaydin (2010) did a conceptual and descriptive

study to understand what the dimensions of innovation are. Data had been collected as literature

review for the last 27 years, the analysis shows that innovation happen in organization in two

main focuses (processes and outcome). Most researchers deal with innovation outcome as

mediating variable of performance rather than dependent one. The paper suggest focusing on

those two concepts to understand innovation drivers and how it could be influenced in

organizations.

The Role of Leadership

Innovation generates new options for businesses and expands their possibilities. It is

more than an instrument can be used to enhance the brand image of companies. It is a key

element to build an emergent weapons to surprise competitors and satisfy customers (Schmitt &

Ph, 2012). Therefore, the knowledge of business innovation is rising among management and

academia literature. It is in the growing stage and the conditions for business worldwide are

about to change forever (Drejer, 2006). Creating new ideas is easy for most modern companies.

However; moving from ideation end to commercialization end in the business innovation process

is the tough part in this puzzle. Companies are struggling and experience failure more in this

particular phase of innovation process (Sniukas, 2012). Having said that, there is still no

common standardization for comprehensive model of innovation leadership that organizations

can adopt into its DNA. There is no particular leadership style suits all companies to generate

and manage ideation process, investigate the problems, and develop solutions before scaling and
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commercializing. Every company goes through its own experience and builds its own

innovation potential.

Innovation skill is different from innovation leading skill. There are misconception by

academia and practice about those two concepts. The first concept which called sometimes

innovative leadership is related to the leader’s skills and traits as he/she is a source of innovation

by bringing new thinking and different actions on how to lead, manage, and go further in their

work. Also how they can think in different way to overcome challenges they face in their

organizations. In addition, how they can act in a flexible way within scarcity of information. On

the other hand, innovation leadership or sometimes called leadership for innovation focuses on

how to create an organizational environment where other employees can deploy innovative

practices to have new services or products through an innovative culture support. It is not

limited in hiring creative resources, but on how leaders can help others think to capture value in

new ways. It is how to develop, lead, manage processes to innovate with constrained resources,

and to facilitate the team working toward organizational survival and achieving competitive

advantage (Buchner, 2014).

Innovation leadership combine a mix of leadership styles to adopt and facilitate

innovation. It is described as a variety of different actions, activities, behaviors and practices

interacting with each other to produce innovative results. Absence of the leadership for

innovation in organization may cause companies failure. Many companies’ leaders focus on

competing each other and differentiate themselves by their value proposition, targeting the high

end customers who are valuable and profitable segments. Meanwhile, they underestimate other

competitors who focus on the mass customer segments with lower cost offering and lower

performing products or services. The incremental innovation of those companies will generate
EFFECTIVE LEADERSHIP FOR INNOVATION 9

incremental developments to improve performance in such way. Within a period of time they

will reach to the point where they will be able to compete for higher end markets. Offering better

value propositions. Thus those companies will disrupt and kill high end offerings. It will be more

convenient, faster, simpler and cheaper. The main driver for this phenomena is technological

development and industry dynamics with self-awareness organizations leaders. (Christensen,

1997).

This new paradigm shift of innovation represents a switch from information management

to innovation management. The Innovation leader should combine strategies and build structure

and culture support innovation. He/she should be skillful to drive innovation change inside an

organization. However, there is no formula for innovation leadership Its connected with several

leadership theories with different roles , activities and behaviors (Lazarova, 2014). Board of

Directors try to implement similar conditions to produce a successful innovation projects, also

create new titles such as Chief Innovation Officer (CINO), Innovation Management

Professionals (IMP), to lead and promote innovation.(McLaughlin, 2012) .

Companies focus on growth strategies. But most fall in same mistakes in innovation

management, known as “Classic Traps”. To innovate successfully, companies should replace

common mistakes with effective practices and activities. Such as “Process Mistakes”, by

applying tight budgets, planning and control to innovation process. It is recommended to add

more flexibility to planning and controlling systems. Other mistake was observed as “Skills

Mistakes”. By assuming technical leaders are best who lead innovation teams. It is important to

assign a leader who possess strong interpersonal skills, also can facilitate innovation process and

bring life and synergy in active innovation teams (KANTER, 2006).

EFFECTIVE LEADERSHIP FOR INNOVATION 10

Leadership behaviors have been identified by scholars and practitioners as the most

influencer driver for innovation. (Lawton, 2010) .In their article, “What Kills Innovation?”

authors, Nelson H. Soken and B. Kim Barnes (2014) observed specific innovative practices of

leadership and management in organizations correlate to successful innovation environments.

(Leadership and management) behaviors that build focus, trust, and effective communication

about the company’s innovation strategy, most likely to success in presences of other vital

capabilities. Such as financial, project management skills, and motivation. Most leaders realize

that innovation is a main driver for their organization’s ability to grow and survive in a

competitive environments. However; innovation enabling is not created by chance. It is the

result of organizational strategy, a supportive culture, and effective leaders who learn from

failure. Over 94 percent of executives -McKinsey worldwide survey- found that "people and

culture are the most important drivers of innovation in organizations”. Businesses top executives

recognize human capital as a center of their strategies. The culture of an organization can host or

poison creativity and innovation (Teece, 2000). A proactive and effective leadership style is a

major pillar in the failure or success of an organization’s culture that supports innovation.

Leaders of organizations need to establish a clear vision, mission and strategic objectives.

It should be well communicated throughout all levels in the organization to achieve alignment to

master business innovation process as a holistic and integrated approach. (H. Soken & Kim

Barnes, 2014). On the other hand, some companies put a holistic innovation system in place but

struggle keeping it consistent in their performance and fail to sustain business innovation

internally. The organization culture could be the missing piece in the puzzle. Creating innovation

requires strong leadership style to drive long term innovation strategy that leads to a creative

culture that encourages and host on-going innovation. Another research shows innovation has a
EFFECTIVE LEADERSHIP FOR INNOVATION 11

statistically significant positive correlation with adhocracy cultures. However, negative

correlation with hierarchy and clan cultures. (Zheng, 2009). Innovation leaders influence

organizational culture by forming and allocating structures, resources, and processes in the place.

creating a learning environment, opening up to outside ecosystem, in addition of accepting

failure and consider it as a part of learning cycle (Morris, Kuratko & Covin, 2010).

The Innovation Process

Roland bell in his written chapter of “leadership and innovation “(2010) describe

innovation as two ends. The front end which include the ideation and conceptualization, the back

end of innovation which is development and implementation end. Those two different steps need

different types of behaviors, the front end require uncertainty and visioning. While the back end

require discipline and commitment. The innovation value chain depends on internal and cross

functional teams in addition to external partners. The first phase is emphasizing variety of

generated ideas and how much far it is from the company’s playing sandbox. In second phase the

team should do screening, filtering and prioritization activities for the generated ideas. So they

can take few ideas into further steps and convert them into business concepts. However, the

selected ideas should be aligned with the company innovation strategy as well as the emerging

trends. After that, the team should convert the business concept into business case and test it in

real world (Hansen & Birkinshaw, 2007).

Roland bell (2010) recommends a mix of shared behaviors from his observation of

innovation leaders. Such as mix of emotions and realism, acceptance of uncertainty and failures,

high degree of passion, proactivity and openness, courage to stop zombie projects and talent to

assign right resources. In addition to some traits like humility and well, skillful and ability to

reward, supportive, ability to promote team working, good communication skills, motivator and
EFFECTIVE LEADERSHIP FOR INNOVATION 12

can switch to be specialist and generalist. He suggests even different traits to develop according

to the employee seniority in the organization as much he/she go higher position as executive

levels as much he/she need to be more inspiring, driving, enabling and advising. For lower

operational levels, the innovation leaders should focus to have advocating, and rewarding

supporting traits.

The main challenge is how to get the innovation-supporting leadership and organizational

practices into the mainstream of management and firm behavior. Many theories and frameworks

tried to solve this challenge, ranging from MBO to achieve the strategic objectives of the firm,

theory X and theory Y to understand the employee’s motivation drivers, raising of HR practices

to influence employee’s engagement and performance. “Theory I” for innovation was one of

those theories explains how the knowledge is widely distributed within organizational units and

across firms operating in complementary markets. Leaders according to theory I, maintain a trust

culture that generate high rates of innovation and encourage efforts to find new knowledge

sources (Miles, 2007).

The Innovation Leadership

It is clear that there are two dimensions to classify Innovation leaders. The first

dimension is vertical, which depends on the level of the leader in organization hierarchy.

Whither he/she is in an executive level and don’t deal directly with individuals and teams to

manage innovation, or if he/she in operational level dealing with innovation directly and leads

innovation projects. For this dimension findings shows adopting transformational leadership

style in higher executive positions have a positive correlation with innovation management.

Which include those following skills: inspire teams about certain vision, develop trust to pursue

changes in strategies. Processes structure and culture to motivate and adopt innovation
EFFECTIVE LEADERSHIP FOR INNOVATION 13

ecosystem to support innovation. Employees look for a meaning of what they are doing.

Communicating vision of transformational leader will help to develop this meaningfulness , that

has a positive influence on organizational innovation readiness (Rosing, Frese, & Bausch,

2011). However; lower levels leaders who use transactional leadership style have a positive

correlation with innovation , since teams usually motivated by rewards and controlling them to

certain specific goals.(Vaccaro, Jansen, van den Bosch, & Volberda, 2012).

The other dimension is horizontal, related to the innovation process. There are two main

phases, creativity and implementation (the front and back end focus). Both of them is in low

operational levels, however; leadership requirements for each phase is different. Front end

characteristics are: ideation, motivation, creativity, nonlinear process, diverge, curiosity and

openness. While back end activities are: get the job done, engineering, process focus, converge,

time and project oriented. Each phase needs different leadership behaviors (Deschamps, 2005).

Companies need to have certain type of teams to capture voice of customers to capitalize on the

emerging trends in order to have successful innovation process. Such project teams need to be

formed of different functions with certain talents. In addition, they need to have a well-organized

efforts to produce effective results. In “Heavyweight Development Teams” most innovations and

significant growth leaps are born. It is difficult to manage and lead heavyweight teams. The

leader in such teams has a direct access to and responsibility for the work of all those involved in

the project. They are senior managers within the organizations, with highly influential practices

over people working in the development projects, and they have a significant input on member

performance evaluations as well as the functional manager. “Tigers”- the extreme structure of

development teams that have been observed in large firms- are assigned from different functions,

dedicated and collocated to the project team. A heavy weighted senior leader is assigned as a
EFFECTIVE LEADERSHIP FOR INNOVATION 14

project leader and has given a full control over the resources contributed by different functional

groups. The project leader become the sole evaluator of member’s performance. It is like having

a new business unit inside the organization, the leader empowered enough to do many activities

freely to serve the project objectives (Clark & Wheelwright, 1992).

A new leadership theory was emerged in 2011 by German strategy professors (Rosing,

Frese, & Bausch) called Ambidextrous Leadership. This comprehensive research was funded by

Volkswagen auto company. The authors use meta-analysis on existing literature, linking

leadership effectiveness with innovation performance. The purpose of their research was to

understand what behaviors will effectively influence innovation. However, the ambidextrous

organization theory exist but not elaborated well enough. It discuss organization capability to

focus on both short and long term objectives at the same time. In contrast, the ambidextrous

leadership discuss leadership behaviors on teams and individuals level not the organizational

level. It discuss the behaviors of leaders who has direct contacts with innovation teams. In their

research, they found broad variation between some leadership styles such as (transfer leader,

supervisor support, transformational, transactional leadership, and Leader member exchange)

with innovation in individual/team’s levels. This inconsistency of correlation is explained by the

nature of innovation concept. They noticed if they add some moderating behaviors to the

leadership styles, it have more positive correlation impacting innovation.

The authors agreed on the two ends structure for innovation process (Creativity and

Implementation ends). These two phases require opposed and contradict (exploration and

exploitation) behaviors. Exploration refer to have out of the box thinking, beyond boundaries and

explorative activities. Unlike exploitation part which refer to efficiency, goal oriented, and

routine execution. Innovation process requires both behaviors and in a nonlinear format by
EFFECTIVE LEADERSHIP FOR INNOVATION 15

switching between both of them back and forth according to the nature of the task. Authors’

main concern was to figure out what the complementary leadership behaviors are necessary for

innovation, and how leaders can help teams and individuals to be more innovative and influence

innovation process. Also what the innovation leadership behaviors should be to manage those

two contradict and opposed phases. In their research, most of the famous and current leadership

styles have wide range of correlation and sometimes negative correlation. It shows that some

styles behaviors can foster and hinder innovation at the same time. Transformational leadership

has different opening and closing behaviors as other leadership styles, and this is the problem.

They foster and hinder the innovation at the same time. For example transformational leader

style motivate new ideas as an opening behavior. However, it support improvements and

efficiency which is a closing behavior.

Those findings encourage the authors to establish ambidextrous leadership behaviors,

Ambidextrous means the ability to use both right and left hand in writing at the same time. They

start to categories opening behaviors which support the exploration activities, as well as closing

behaviors that support exploitation activities. The innovation leader should be flexible enough to

switch between those two behaviors according to the phase and task. Those opening behaviors

include (different way to accomplish tasks, encourage risk taking, room for new ideas, allow

errors and lessons learned), While the closing behaviors include ( mentor and control goal

attaining, establish routines, corrective actions, committed to rules, limit error and stick to the

plan). Creativity and control is the innovation paradox in teams and individuals level. Creativity

may boost with flat and flat/organic structures and open communication channels. Moreover,

leadership that support projects implantation as well as allowing mistakes is most likely be
EFFECTIVE LEADERSHIP FOR INNOVATION 16

successful in generating innovative products (Morris, Kuratko & Covin, 2010; Freeman & Engel,

2007).

According to the authors opening and closing behaviors are not something new. They

already exist in both classical and conventional leadership styles.(Rosing et al., 2011) The new

thing in ambidextrous style is the gathering between two groups of opening and closing sets to

respond to exploration and exploitation activities in the innovation different phases. Unlike

situational leadership from path goal theory, the leader switch between different set of behaviors

according to employee motivation and knowledge capability to reach goals. The Ambidextrous

leaders have to switch alternatively between two sets of behaviors opening or closing in intuit

way according to the team requirements as exploration or exploitation within time dimension

in context of innovation.

Implication for Future Research

The emerging theory of Ambidextrous Leadership changed the way we understand

innovation leadership. It explains the innovation process as two ends, front end as exploration

and back end as exploitation. It suggest two opposite sets of behaviors that can deal with those

phases. Ambidextrous leadership have a potential for businesses, since those behaviors can be

trained to innovation leaders. However; still more empirical research is needed to prove the

effectiveness and applicability of this theory in different industries. Another study is needed to

measure the effectiveness of applying this ambidextrous theory to separated teams into different

functions like R&D as exploration and production as exploitation, or merge the two activities

together as one function. A future study is recommended to measure transformational leadership

impact on organizational culture and innovation, Academia can form a comprehensive

framework for innovation leadership if such studies are conducted.

EFFECTIVE LEADERSHIP FOR INNOVATION 17

Conclusion

A comprehensive review of innovation leadership resulted from this paper will contribute

to fill the gap in literature and practice field of management. It will provide new insights for

organizations executives to understand what they need to focus on to implement and develop

business innovation capacity. Giving room to customize some practices according to the industry

characteristics.

The review for innovation leadership in this paper will also help provide more novel

explanations. Uncover the strategic mix needed to enable, adopt and build Innovation capacity in

modern organizations. Whether they are startups or corporates that use traditional strategic

analytical leadership. Innovation management is a systematic, holistic approach focusing on

producing more than discontinuous, or breakthrough innovations. Innovation becomes

“Strategic” when it is intentionally produced and repeated using well-structured processes that

creates a significant value to be delivered to customers, and companies. Innovation leadership

challenge organizations to look beyond boundaries or conventional leadership styles, to join and

contribute in an open exploration of new models. While the businesses is in search of the next

magic stick, leaders should recognize that you don’t need to be innovative as you facilitate

business innovation across your organization. Being innovative is creating something new never

exist before. Facilitate Innovation is the creation of something new repeatedly and systematically

using innovation leadership model. Steve Jobs noted that, “Innovation is the difference between

a leader and a follower.”

If innovation is done right, it will have enough power to change a company, an industry, a

country, even the whole world.

EFFECTIVE LEADERSHIP FOR INNOVATION 18

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