Boundary-setting strategies for escaping innovation traps

MIT Sloan Management Review

Volumn 46, Issue 3, 2005, Pages

  Välikangas, Liisa ^a   Gibbert, Michael ^b  

^a Woodside Institute   (United States)

^b BOCCONI UNIVERSITY   (Italy)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 18444402806     PISSN: 7653697     EISSN: 1782155X     Source Type: Journal    
DOI: None     Document Type: Article

References (22)

1. "The Charlie Rose Show," July 2003, U.S. public television.
2. W. Ocasio, Towards an Attention-Based View of the Firm," Strategic Management Journal 18 (July 1997): 187-206.
3. D. Levinthal, and J. March, "The Myopia of Learning," Strategic Management Journal 14 (1993): 95-112.
4. Innovation is a term used in this article to denote explorative activities in an organization that are novel and/or nonconformistic from the point of view of existing operating procedures and/or dominant business strategies. We are thus particularly concerned with innovation activities that do not fall within the current set of existing business activities but require broader accommodation on the part of the company's management.
5. The performance trap, for instance, is essentially the success and failure traps identified by J.G. March in "Exploration and Exploitation in Organizational Learning," Organization Science 2, no. 1 (1991): 71-87.
6. The success trap is a management myopia in which exploitation drives out exploration; the failure trap is the oversampling of successes and undersampling of failure in organizational experience. The failure trap may also lead to frequent, impatient changes in the operating model, thus making it difficult to test the potential performance of any one approach. The commitment trap aligns with the weakness of will trap, or the inability to sustain commitment over longer periods of time, discussed by S. Postrel and R.P. Rumelt in "Incentives, Routines, and Self-Command," Industrial and Corporate Change 3, (1992): 397-425.
7. It also aligns with traps of self-confidence, which are manifest, for instance, in the field of acquisitions. See, for example, M. Hayward and D.C. Hambrick, "Explaining the Premiums Paid for Large Acquisitions: Evidence of CEO Hubris," Administrative Science Quarterly 42, no. 1 (1997): 103-127.
8. And, finally, the business model trap is related to the competency trap identified by March (1991), which states that as an organization becomes increasingly competent in a particular activity, it will tend to engage more and more in that activity regardless of other considerations such as diverging environmental change. In addition, the business model trap echoes the power trap in which an organization's capability to change its environment rather than adapt to it renders business model change impossible because it is not supported by emerging competencies. This is described in Levinthal and March, 'The Myopia of Learning."
9. Also contributing to the business model trap is a lack of alternative strategy options in which following the current, sub-optimal course may remain the only (perceived or real) possibility. This is explored in G. Hamel and C.K. Prahalad, "Competing for the Future" (Boston: Harvard Business School Press, 1994) and
10. I. MacMillan and R. McGrath, "Discovering New Points of Differentiation," Harvard Business Review 75 (July-August 1997): 133-145.
11. It should be noted, however, that it is often the spectacularly successful companies, such as Microsoft today or IBM in the 80s, that invest in R&D most heavily. In this way success seems to lead to R&D rather than vice versa.
12. The president and COO of Sun Microsystems, Jonathan Schwartz, has publicly admitted that many Sun engineers work on open-source software.
13. C. Christensen, "The Innovator's Dilemma" (Boston: Harvard Business School Press, 1997).
14. This is a worry of many corporate innovators who are concerned about innovation losing its distinctiveness in standard product development processes, for example.
15. See R.A. Burgelman, "Corporate Entrepreneurship and Strategic Management: Insights From a Process Study," Management Science 29, no. 12 (December 1983): 1349-1364; and
16. R.A. Burgelman, "Strategy Is Destiny: How Strategy-Making Shapes A Company's Future" (Free Press, 2002).
17. K.E. Weick, "Small Wins: Redefining the Scale of Social Problems," American Psychologist 39, no. 1 (1984): 40-49.
18. During fall 2003, Nokia divided its businesses into Mobile Phones, Networks, Multimedia, and Enterprise Solutions (see Financial Times, Sept. 27, 2003). Nokia Ventures Organization is currently part of Nokia's companywide strategy function.
19. G. Hamel, "Bringing Silicon Valley Inside," Harvard Business Review 77 (September-October 1999): 70-84.
20. Now named Corporate Technology.
21. A. Muller and L. Välikangas, "An 'ODD' Reaction to Strategy Failure in America's (Once) Largest Telco," European Management Journal 21, no. 1 (February 2003): 109-118.
22. See G. Hamel and L. Välikangas, "The Quest for Resilience," Harvard Business Review 81 (September 2003): 52-63.