How standardization affects innovation?

Benner and Tushman (2003) explore how process management techniques affect technological innovation and adaptaition. Total Quality Management, ISO standardization, BPR, Six Sigma, and other management concepts are based around process based view of an organization, and they help to map and improve organizational processes. They fuel continous innovation that results in improved efficiency, cost reductions, improved customer satistfaction and higher profits. However, long term success is not only based on (efficient) exploitaiton of existing resources.

Yes, companies do get better and better while integrating and building upon existing capabilities, however, core capabilities can become competency traps (Leonard-Barton, 1992; Levinthal & March, 1993). A firm's ability to compete in a long run also depends on simultaneously developing fundamentally new capabilities (Teece, Pisano & Shuen, 1997). In other words, while incremental innovations develop existing technology and serve existing customers, exploration into new knowledge or departure from existing skills leads to radical innovation serving emergent customers or markets (March, 1991).

New products for new customer designed around new technology are often organizationally disruptive and require significant departures from existing activities. On the other hand, (Benner & Tushman, 2003) argue, process management leads to stabilization and rationalization of organizatioanl activities while establishing a focus on easily available efficiency and customer satisfaction measures. This triggers bias towards certainty and favors exploitative at the expense of exploratory innovation. Namely, as an organization learns and increases its efficiency through repetition of a set of activities, its subsequent innovation is increasingly incremental (Levinthal & March, 1993). Moreover, organization is focused on understanding and satisfying existing customers, thus, innovation is channeled into areas that benefit existing customers. Non-standard, exploratory activities outside the existing technological trajectory are unwanted (Levinthal & March, 1993). Process management techniques stabilize organizational routines, making cross-community linkages more difficult (Benner & Tushman, 2003), which is however in contradiction with Nonaka & Takeuchi's (1995) suggestion of a need for such organizational design that connects redundant and overlapping knowledge bases in order to increase organizational innovation. Also, compared to easy-to-measure efficiency improvements, dilficult-to-quantify exploratory activities are less attractive (Levinthal & March, 1993).

Benner & Tushman (2003) warn agains explicit focus on incremental innovation which is achieved by process management orientation which results in innovation that is closesly related to existing technological or market competencies. Organizations that must meet current customer requirements and new customer demands must deal simultaneously with the inconsistent demands of exploitation and exploration. Authors suggest that appropriate answer is an ambidextrous organization which allows for both exploratory and exploitative activities to be spurred by loose and tight organizational arrangements. Benner & Tushman (2003) suggest that within processes, the tasks, culture, individuals, and organizational arrangements are consistent, but across subunits tasks and cultures are inconsistent and loosely coupled. Tight exploitation units in technologically stable settings, will benefit by reducing variability and maximizing efficiency and control by introducing process management techniques. On the other hand, n turbulent environments, for new customer segments and for radical innovation, process management activities are less conducive to organizational effectiveness. Exploratory units will succeed by experimentation, which is encouraged by introducing variety and loose control.

Benner, M. J., & Tushman, M. L. (2003). Exploitation, Exploration, And Process Management: The Productivity Dilemma Revisited. Academy of Management Review, 28(2), 238-256.
Leonard-Barton, D. (1992). Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development. Strategic Management Journal, 13, 111-125.
Levinthal, D. A., & March, J. G. (1993). The myopia of learning. Strategic management journal, 14(Winter), 95-112.
March, J. G. (1991). Exploration and Exploitation in Organizational Learning. Organization Science, 2(1), 71-87.
Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company : how Japanese companies create the dynamics of innovation. New York ; Oxford: Oxford University Press.
Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509-533.

[Summary Posted by: Peter Baloh]