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Innovation The Missing Dimension

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Contents 1 Reference 2 Lester, R.K.; Piore, M.J. (2004) Innovation. The Missing Dimensin. London: Harvard University Press 2.1 Introduction 2.2 1. Integration in cell phones, blue jeans, and medical device 2.3 2. Where do problems come from? 2.4 3. Conversation, interpretation and ambiguity 2.5 4. The missed connections of modern management 2.6 5. Combining Analysis and Interpretation 2.7 6. Public space 2.8 7. Universities as Public Space 2.9 8. Learning the Right Lessons about Competitiveness

Reference

Lester, R.K.; Piore, M.J. (2004) Innovation. The Missing Dimensin. London: Harvard University Press

Introduction

• The central insight to emerge from these case studies is that the most important capability of the U.S. economy (and indeed of any advanced economy) -its ability to generate a stream of new products, to improve upon old ones, and to produce existing products in an increasingly efficient way- depends on two fundamental processes, which we call analysis and interpretation.
  • Analytical process work best when alternative outcomes are well understood and can be clearly defined and distinguished form one another. Analysis is the easier process to understand and implement. It is essentially rational decision-making -an approach that underlies much economic and managerial theory as well as theories of scientific inquiry... What analysis comes down to, essentially, is problem and associated series of decision and choice about which of those problems to solve and how best to solve them.
  • Interpretative processes are more appropriate when the possible outcomes are unknow -when the task is to create those outcomes and determine what their properties actually are... What we found from our case studies is that not all of the activity thaht take places within firms, or in the economy more generally, is about solving problems... The activity out of which something innovative emerges -a new insight about the customer, a new idea for a product, a new approach to producing or delivering it- is what we call interpretation... In this interpretative way of looking at business, the role of the manager has less to do which solving problems or negotiating between contending interests than with initiating and guiding conversations among individuals and groups.

1. Integration in cell phones, blue jeans, and medical device

• Integration during product design and manufacturing
  • Integration was a central in each of our three cases, but there were at least two qualitatively different processes at work.
    • One involved integration among technical specialties and across the boundaries of the different firms and organizational units involved in the design and production process.
    • The sencond type of integration involved the boundaries between producers and final consumers.
• Integration between Producer and Final Consumer
• Managing Boundaries, Not Dismantling Them
• The problem of language and vocabulary

2. Where do problems come from?

• The ubiquity of problem solving
• The limitation of problem solving
  • But the kind of uncertainty involved in the design of new products is more often radical uncertainty. Radical uncertainty is not simply an inability to predict which of several possible configurations of the product turn out to be the preferred one, or which segment of the market will yield the highest profit margins. In these situations the world appears so complex and uncertain that not even the possible outcomes are unknown. And in the absence of a specific outcome in the form of a well-defined product, it is unclear ow to break the problem up into a set of separable parts that can be assigned to different specialists. Indeed, it is not even clear what those specialities should be.
  • Tacit recognition of this missing dimension manifested itself in considerable scepticism not only about ISO 9000 but about any efforts to systematize innovation.
  • From our interviews, we concluded that the way in which problems come to identified and clarified to the point where a solution can be developed is through a process of conversation among people and organizations with different backgrounds and perspectives. Sometimes the process literally is a conversation; more often, conversation is a useful metaphor for the interactions that actually occur.
  • A critical role for the manager is to remove the organizational barriers that would otherwise prevent these conversation from taking place.
  • If American business organization are to be fluid as well as focused, creative as well as decisive, we need a framework that is as well-suited to problem of managing ongoing, open-ended processes -of managing ambiguity without trying to eliminate it -as our analytical portfolio is for bringing projects to closure.

3. Conversation, interpretation and ambiguity

• The way that problems came to be identified and clarified to the point where a solution could be discussed was trhrough conversation among people from different backgrounds and with different perspectives.

• The manager's role was to remove organizational barriers that would have prevented these conversations form taking place.

• Because of the way in which conversations are focused on particular objects and practices, and because they are an exploration of different views of what is essentially the same situation, we came to see the activity in which the participants are engaged as interpretation. This contrasts with analysis, which entails a different kind of interaction altogether.

• In stark contrast with analysis and problem solving, interpretation plays in the space of ambiguity.

• The key to understanding the difference between analysis and interpretation lies in their very different views of what is involved in human communication: the precise exchange of information, on one hand, and open-ended, unpredictable conversation, on the other.

• The other view of communication is that the rules and vocabulary create a space which delimits the range of possible meanings, but that the meaning of any particular exchange is constructed through the interaction of the participants in the conversation.

• The lessons of the cocktail party:
  • Step One: choose the guest
  • Step Two: keep the conversation
  • Step Three: keep the conversation going
  • Step Four: refresh the conversation with new ideas

• Disruptive Innovation (Clayton M. Christensen, The Innovator's Dilemma. Boston: Harvard Business School Press, 1997).

• Language and Ambiguity.

4. The missed connections of modern management

• Over the past two decades, a host of new concepts, tools, and maxims has entered the managerial lexicon, each of them intended to help firms respond to a business environment that seems to have become increasingly unpredictable.
• A central purpose of all these approaches -we refer to them collectively as the new management- is to increase the flexibility of the firm and to accelerate the speed with which in it can adapt to rapid and unforessen changes in its environment.
• The Voice of the Customer
  • This shift reflects the decline of the mass-production system, in which economies of scale in the production of a single standardized product so dramatically reduced costs that customer could be induced to buy standard product no matter how remote it was from their specific needs.
  • The signal, moreover, is complex; it must indicate to outsiders the user's membership in a group, but it maust also express her individuality to others with the group.
• Core Competencies
  • The problem lies in its implication that economy can be deconstructed into a set of basic elements -the competencies- and that certain of these will be the key to the firm's competition position. But in fact it is the precisely the dissolution of the sharp boundaries between the different components of the economic structure that is the hallmark of the new economy.
  • In the analytical view, the firm identifies a set of core competencies that it them may or may not decide to embrace as its own.
  • What the interpretative approach suggests, however, is that the question for the firm is how to introduce itself into the kinds of intense interactions (that is, conversations) that will lever the competencies it brings from its past activities.
  • Networks are generally constrasted with the traditional hierarchical, bureaucratic organization. They are often presented as a set of nodes connected to one another by crisscrosing channels of communication. You treat those networks and nodes in an analytical way (structural hole) or in a interpretative way (isolation island linked by conversation).
  • Similarly, there are two different ways of understanding teams.
• The Deep Roots of Analysis
  • Adam Smith
    • Economic growth and development depend on the progressive division of labor into a set of separate operations and on the specialization of productive resources to perform these operations.
    • This process of specialization creates a problem of coordinating the specilized resources. The formal rules and procedures of the corporate bureaucracy substitute for the price signals of the markets as the means -the language- of coordination.
  • When economic activity is characterized by ambiguity, other organizational forms are required. The new management literature can be understood as a response to this need.
• Ambiguity without Paralysis
  • The next and more difficult task is to see how the interpretive and analytical approaches can be combined within the same organization without obscurinf the fundamental differences between the two.

5. Combining Analysis and Interpretation

Main differences between the analytical and interpretive ways of looking at product development

ANALYSIS	INTERPRETATION
The focus is a project, with a well-defined beginning and end	The focus is a process, which is ongoing and open-ended
The thrust is to solve problems	The trrust is to discover new meanings
Managers set goals	Managers set directions
Managers convene meeting and negociate to resolve different viewpoints and eliminate ambiguity	Managers invite conversations and translate to encourage different viewpoints and explore ambiguity
Communication is the precise exchange of chunks of information (bits and bytes)	Comunication is fluid, context-dependent, undetermined
Designers listen to the voice of customers	Designers develop an instinct for what customers want
Means and end are clearly distinguished, and linked by a causal model	Means and ends cannot be clearly distinguished

• Analysis, Interpretation, and the Product Lifecycle
  • Part of the answear is that at different times ones approach becomes more important and receives more emphasis than the other.
  • As the number of customers and the menu of technological options expands, the cost of this kind of customization -with its engineering overhead, long manufacturing cycle, and extra inventory- can quickly become unaffordable.
• Analysis, Interpretation, and the Corporate Lifecycle
• Simultaneous Analytical and Interpretive Processes
• The Need for Public Space

6. Public space

• The Firm as a Public Space
• Industrial Districts as Public Spaces
• The Regulation as a Public Space
• The Uniersity as a Public Space

7. Universities as Public Space

8. Learning the Right Lessons about Competitiveness

• The dominant approach to innovation seeks to stregthen and extend the domina of market competition. But the interpretative perspective points in the opposite direction, toward the creation of sheltered spaces that can sustain public conversation among a diversity of economic actors who would be unable to interact in this way on their owns.
• How Did We Get to This Point?
  • The two prescriptions -more competition, more coordination and integration- were contradictory in their view of the market.
  • Increased competitive pressure generated by globalization, technological change, and desregulation have certainly helped to raise the efficiency of the U.S economy over the past decade. But their role in stimulating innovation is not nearly as clear.
• Analysis and Interpretation in Product Development

• First the Not-So-Good News
  • The decline of mass production as the dominant paradigm for technological development (economies of scale, standardized product). But over the past thirty years, as advances in onformation technology and the techniques of flexible manufacturing have reduced the cost of product variety, the economy has moved away from the mas production model.
• The Good News
  • The standing of our university system in the international scholarly community.
  • The role of inmigration, the ethnic and the racial diversity of the American work force.
  • The place of American media in the global culture.
• What To Do?

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