Powering product innovation

~ Pergamon European Management ]ournal Vol. I5, No. I, pp. 16-27, 1997

Copyright © I997 Elsevier Science Ltd Printed in Great Britain. Ail rights reserved

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Powering Product Innovation CYNTHIA HARDY, Professor of Management, Policy Area, McGi]l University, Montreal; DEBORAH DOUGHERTY, Associate Professor of Management, McGill University, Montreal

The ability to generate successful new products is vital for organizations to adapt to changing markets, technologies and competition. But many large, established organizations f ind sustained innovation difficult. This study explores the role of power to show how it can both inhibit and facilitate innovation. Analysis by Cynthia Hardy and Deborah Dougherty shows that when organizational power is aligned with innovation, innovators can draw on the organization's competencies to develop viable new products. However, when organizational power is aligned against innovation, innovators cannot access these competencies, and must, instead, focus on protecting their new ideas from the anti- innovative context. They explore these implications by drawing on a study of 40 new products in fifteen firms. They then contrast two case studies of product innovation to explore the pro- and anti-innovation configurations of power, and to consider how the latter can be changed. Copyright © 1997 Elsevier Science Ltd

Introduction

The ability to generate a variety of successful new products is vital for many organizations, since sustained product innovation is essential if they are to adapt to changing markets, technologies, and competition. But despite a vast array of books and articles on how to organize for innovation, many large, established organizations still cannot innovate on a sustained basis (Johnson, 1988; Mahajan and Wind, 1992; Dougherty and Heller, 1994). In a recent study, we found that power - - or rather, the lack of it - - underlies the difficulties that large firms encounter with sustained product innovation (Dougherty and Hardy, 1996). When innovators lack the power to mobilize resources, to develop multi-functional participation, or to connect their new product to the firm's strategy, they are unable to solve the problems of product design, creative development, and management which new product efforts inevitably confront.

The purpose of this study is to understand how power in organizations can both inhibit and facilitate sustained product innovation. Our analysis shows that an organization's ability to generate multiple new products successfully depends on aligning the power of the organization systematically with product innovation. We find that when organizational power is aligned with innovation, innovators can draw on the organization's competencies to develop viable new products. However, when organizational power is aligned against innovation, innovators cannot access the organization's competencies, and must focus on protecting their new ideas from the anti-innovative context. The new products themselves suffer from neglect, poor design, and mismanagement. We suggest that established firms cannot truly become more innovative unless managers confront the anti-innovation alignment of power in their organizations. Simply empowering champions or adding resources will not counteract the pervasive effects of an anti-innovation configuration of power. We conclude with some ideas for managers to sustain innovation with power in their organizations, so that power 'over' innovation can become more a productive power 'to' innovate (cf., Knights and Willmott, 1985).

Understanding Power and Innovation

Before moving to the empirical analysis, it is necessary to develop the concept of organizational power. The relationship between power and innovation has been well established. Innovation involves collective action which does not happen spontaneously or magically: power is needed to facilitate, orchestrate, and shape it. Consequently, many writers have developed insights into the role of power and politics in innovation (see, for example: Bums and Stalker, 1961; Schon, 1963; Fast, 1978; Frost and Egri, 1991). As a result, managers know a good deal about the importance of power 'tools' like information, resources, and support (Kanter, 1983); the need for product champions who use their influence to push ideas through the system (Roberts, 1968); and the usefulness of 'heavy- weight' project managers who draw on position power to keep a project viable (Clark and Fujimoto, 1991).

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POWERING PRODUCT INNOVATION

But these power models, ironically, lack the power to explain why so many organizations still do not innovate effectively. One weakness is that such models do not deal with the multi-dimensional nature of power (see Lukes, 1974; Hardy 1994; 1996). Most writers focus on a single dimension, the control of critical resources (see Hickson et al., 1971; Pettigrew 1973; Pfeffer, 1981), which only skims the surface of how power really works. Another weakness is that most models do not recognize that power is systematically ingrained in the very social fabric of the organization. The whole system of power must be changed for innovation to occur, but such change will not ensue if the systemic nature of power is ignored.

We define power in a deliberately neutral and simple fashion: as a force that affects outcomes. Politics is simply power in action. This neutral definition includes the power 'to' - - power to achieve outcomes that could not be achieved alone. Hence power is an integral part of organizational life in general (Hardy, 1994) and innovation in particular. This definition comprises three different dimensions: resources, including funds, information, expertise, and credibility; processes, including denial and non-decision making as well as agenda setting, communication, and budgeting procedures; and meaning, including ideology, symbols, and the underlying structures concerning how thinking and acting are framed in the first place (see Lukes, 1974; Hardy, 1994; 1996; Hardy and Redivo, I994 on dimensions of power). This definition emphasizes multiple dimensions of power and their organization- wide configuration, transcending the traditional focus on resource control and individual mobilization of personal power (see Hardy and Clegg, 1996). Power is mobilized through these three dimensions in ways that either facilitate or hinder innovative activity. 1

The First Dimension: the Power of Resources

Resource power is the most common conception of power in management theory. Many researchers have considered power as the ability to influence the behaviour of others through the control of resources on which they depend (Emerson, 1962). For example, in a study of two USAF Bomber wings, Thompson (1956) found that the less authoritative groundcrew exercised power over the aircrew because the latter depended on the former's technical competence for its survival. Mechanic (1961) and Crozier (1964) also examined 'lower level' organizational members' exercise of power over counterparts through the control of dependencies. Subsequent management theory has addressed power as the control of strategic contingencies (e.g., Hickson et aI., 1971) and of critical, scarce resources (e.g., Pfeffer and Salancik, 1978). Consequently, power is derived from control over critical resources on which others depend, such as information, expertise, credibility, stature and prestige, access to higher echelon members, money, rewards and sanctions (e.g., French and Raven, 1968; Pettigrew, 1973).

Sustained product innovation requires sustained access to organizational resources such as market intelligence, technological expertise, selling and distribution systems, and capital funding. However, if the organization's resource power supports routine business, it can work against innovation. For example, if resources are in the hands of elites who oppose new businesses that do not fit with their skills, innovations may not receive adequate funding or support. If the company's employees are rewarded for following established procedures, they may become inept at applying their expertise creatively to solve the unique problems of innovation, and when assigned to an innovation, they may inadvertently mismanage the process. In organizations with a history of stable operations, departments that control critical uncertainties, such as marketing or R&D, may dominate product management, which prevents the multi-functional participation that is necessary for successful innovation. Managers of major resource systems such as the salesforce and manufacturing can withhold necessary support from innovation if they concentrate instead on routine performance measures (Foster, 1986; Workman, 1993).

Resource power can, however, be aligned with innovation rather than against it. For example, dispersing the control of such resources as budgets, information, expertise, sanctions, political access, and credibility widely in the organization makes it more likely that innovators will get the broad-based assistance they need. Providing ready access to information about customer needs and trends, operating costs and development expenses increases awareness in the organization, and encourages wide commitment. Expertise can be made available by other departments to help resolve problems and to ensure smooth transitions, if innovations are part of people's jobs. Resource systems can be organized to incorporate new products more readily by giving managers the resources for pilot production lines, technical problem solving, and training, and rewarding them for integrating innovations into established product (Kanter, 1988; Clark and Fujimoto, 1991).

The Second Dimension: the Power of Processes

The alignment of resources with, rather than against, innovation will not, however, solve all the problems that innovators face. Resources in organizations do not just lie around, waiting to be picked up: innovators must obtain authorization to use them and know how to arrange for their use. Organizational neophytes, in particular, often do not know the formal and informal steps needed to acquire essential resources. Therefore, innovators need processes that support the flow of resources toward their activities.

This aspect of power resides in the organization's decisionmaking processes, which incorporate a variety of procedures and political routines that may be invoked to influence decision outcomes. Processes encompass inter-

European Management JournaIVo115 No 1 February 1997 17


and intra-organizational linkages that are established through reporting relationships and departmental jurisdictions, as well as the participation, criteria, agendas, and information flows involved in decisionmaking. The decisionmaking arena is not always open to all who want to participate. Schattschneider (1960: 105) argued that: 'It is not necessarily true that people with the greatest needs participate in politics most actively - - whoever decides what the game is about also decides who gets in the game'. Building on this insight, Bachrach and Baratz (1962; 1963; 1970) developed the concept of this second face of power - - a process whereby issues could be excluded from decisionmaking, confining the agenda to 'safe' questions. Non- decisionmaking is typically used to protect the status quo because it tends to support and reinforce existing biases in decisionmaking processes (e.g., Crenson, 1972; Hunter, 1980). However, processes can sometimes be mani- pulated by less powerful groups to their advantage, and can be used to change the status quo by extending access to decisionmaking arenas and agendas (Hardy, 1994; 1996).

The Third Dimension: the Power of Meaning

The power of resources and processes together do not guarantee successful innovation. Indeed, we have found that, even in situations where resources were available and processes were clearly articulated, organizational members still felt uncomfortable with the ambiguous, complex decisions inherent in new product development (Dougherty and Hardy, 1996). Working collaboratively on unclear activities, and allocating scarce resources with no assurance of project completion are very difficult. But, if people perceive that the organization has a clear direction and that innovation is important to that

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If the power of processes supports routine business, it can work against innovation in a variety of ways. First, senior managers or other elites can appropriate the right to decide on all new products behind the scenes, which excludes people who may be more familiar with specific technologies or business opportunities. Decision processes can rely on standards that fit only routine operations (e.g., payback, market share), so innovation proposals never 'measure up', or are 'sent back' for more, perhaps unobtainable, data. Allocation systems such as annual budgeting can be fixed by date rather than opportunity, so new ideas are always put on the back burner. People's jobs and interdepartmental relations can be rigidly defined, thus precluding the kind of reciprocity necessary for effective cross-functional team work (Burns and Stalker, 1961).

direction, they can carry out the activities necessary for product innovation, regardless of the accompanying uncertainty and risk. In such a situation, sustained innovation has legitimacy

. . . . . . . . . . . . . . . despite its ambiguous nature.

The creation of legitimacy for sustained innovation involves the management of meaning (Pettigrew, 1979). The power of meaning can be used to shape peoples' 'perceptions, cognitions, and preferences in such a way that they accept their role in the existing order of things, either because they can see or imagine no alternative to it, or because they view it as natural and unchangeable, or because they value it as divinely ordained and beneficial' (Lukes, 1974: 24). This form of power has been studied primarily by critical theorists interested in how it protects dominant groups by ensuring that threats to their position never arise (e.g., Fox, 1973; Lukes, 1974; Clegg, 1975; Hyman and Fryer, 1975). But the power of meaning can drive collective action just as much as it underpins oppression. For example, Pettigrew (1977; 1979) has shown how interest groups legitimize their strategic demands by managing meaning, while Hardy (1985; 1990) has shown how managers seeking to implement factory closures use strategies to give their decisions positive meaning.

The power of processes can, however, be aligned with innovation, if decisionmaking procedures and criteria are designed explicitly to move innovations through development in a visible, open manner. Decision criteria can be widely publicized and then used across the organization to discuss and evaluate the role of new products in all businesses. Collaborative structures such as cross-functional teams and taskforces can be used to work through technical problems, and to make sure organizational structures and processes are designed to accommodate a regular stream of new products. Finally, ongoing operations reviews, open to all employees, can be held regularly to raise issues, clarify and re-negotiate targets, and assure disciplined follow-through (Wheelwright and Clark, 1992).

If the power of meaning supports the routine, it can work against innovation in several ways. First, managers can make innovation illegitimate for all practical purposes, even if they officially espouse it, by punishing mistakes, withholding actual support for innovation, reassigning people without concern for an innovation project, and rewarding short-term results over long-term capability development. The power of meaning will inhibit innovation if projects are killed whenever their senior manager sponsors are moved or fired. Innovation will also remain marginal if people do not see how to connect a specific project with the organization's strategy (Van de Ven and Polley, 1992; Dougherty and Heller, 1994).

The power of meaning can also be aligned with innovation, if espoused support for it is backed up with a visible commitment of time, resources, and rewards. Meaning can also be created for innovation if the strategy-making processes help innovators to connect

18 European Management JournalVo115 No 1 February 1997


their project with existing businesses, and if people throughout the organization are involved in creating procedures and assessment criteria. In this way, strategic 'conversations' (Westley, 1"990) occur between multiple hierarchical levels, enabling middle managers not only to understand how senior managers frame what constitutes business 'potential', but also to participate in developing those frames. Legitimating their input through open, strategic conversations also energizes people, regardless of where they are in the hierarchy (Westley, 1990), especially if they are backed up by the appropriate resources and processes to 'make things happen' (Hardy, 1.996).

The Conf igura t ion of Power : For or Agains t Innovation?

This discussion draws our attention to the multi-faceted nature of power. Power is not just about the control of scarce resources, it also derives from processes and meaning. While these dimensions of power can be exercised by individuals, they are also embedded in past and current organizational decisions and activities that produce certain outcomes without necessarily being

mobilized by anyone in particular (see Parry and Morriss, 1"975). This is the power of the system (Hardy, 1"994; 1"996). If the dimensions of the power of the system are aligned in a way that sustains and reinforces each other, the organization might be said to have a readily discernible power configuration. Table 1" summarizes two such configurations, suggested by the discussion above, which we call the anti-innovation and pro-innovation configurations of power.

This model has two important implications for the management of innovation. First, if an organization's configuration of power supports routine businesses at the expense of innovation, innovators will have a very difficult time acquiring the necessary resources, working through the decision processes, and developing strategic meaning for new products. We argue that large, established organizations with a history of stable operations are most likely to have evolved resource processes, and meaning power that reinforce each other in support of routine management, uncertainty avoidance, and incremental, sequential procedures across the organization. However, innovation by definition is not routine, is fraught with uncertainty, and progresses in a discontinuous manner. Thus, if the

Table 1 The A l i g n m e n t of the P o w e r D imensions

Anti-innovation Configuration Pro-innovation Configuration

Resources Access to critical resources is systematical ly control led by individual groups, departments and individuals rather than being readi ly and widely provided by the organization.

Processes

Meaning

Organizat ion and configuration: all d imensions are al igned in the same direction to reinforce each other in a sustaining, self-correcting manner.

Decisions on new products are central ized, excluding people with specific technologies or business opportunit ies; decision processes rely on vague, unclear criteria; al location systems such as annual budgeting are fixed by date rather than opportunity; jobs; interdepartmental relations are r igidly defined.

Activit ies associated with innovation are penalized; individuals are reassigned without concern for innovation projects; short term capabi l i ty development; projects ki l led when sponsors are moved; connections between projects and strategy are not made.

Innovation is repudiated in favour of the routine; it only occurs piecemeal due to the efforts of individuals able to create innovative 'bubbles' protected from the wider organization.

Seed money, equipment, and expert ise from all functions are available; budget control is decentralized; information about customers, operating costs, development expenses is dispersed; training and rewards are consistent with innovation.

Col laborat ive structures and problem solving processes are extensive; agenda setting is open and participative; decision cri teria are based on collective judgement and link new products to existing businesses; decision making procedures move innovations through development steps in a visible manner; regular reviews clarify and renegotiate targets and assure follow-through.

The symbols of management show that innovation is clearly valued; constituent activities of innovation are understood as proper and legit imate for all organizat ion members; open strategic conversations involve the participation of many people in enacting innovation and constructing its meaning.

Innovation is deeply ingrained in the fabric of the organization, and not dependent on particular individuals or groups; it occurs on a continuing basis.

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Table 2 Use of P o w e r by Successfu l Innovators vs. Others

Status of Innovation Project Resource Power (percentage of problems solved)

Process Power (percentage of prob lems solved)

Meaning Power (percentage of problems so lved)

Commercially successful 54 Cancelled, still in 31 development, or in m a r k e t

but uncertain*

54 52 39 36

t = 2 .26 t = 1.48 t = 1.28

p=O.03 p= 0.14 p =0.02

* Innovators whose projects had failed are excluded from the comparison. The failed innovators solved very few problems, but the i r da ta may be b i a s e d

organization's configuration of power supports routine, successful product innovation is unlikely because much of the individual's effort goes into mobilizing power against the system, literally to protect the innovation from the organization. Fewer innovations are initiated, and those that are have a lower chance of success. Conversely, if innovation projects are surrounded by a pro-innovation configuration of power, innovators will be more successful because they can draw on this power, and devote more attention to effective product development.

We will explore these implications by first considering if the two configurations of power affect the success of product innovation as predicted. We will then contrast two cases of product innovation to explore the dynamics of the pro and anti-innovation configurations of power, and to consider how an anti-innovation configuration can be changed.

Methods

the 37 non-failed products had become commercially successful during these ensuing two years, 16 were in the market but their commercial success was still uncertain, 12 were still in development, and 4 had been cancelled during the period. 2

Relation Between Power Configuration and Innovation Success

Our first question concerns whether or not the anti- innovation and pro-innovation configurations of power hinder and enable innovation respectively. Product innovation can be understood as a complex process of problem solving (Clark and Fujimoto, 1991). Therefore, we measured the use of each dimension of power by analyzing the kinds of problems innovators had, whether or not they solved these problems, and how they did so. First, all problems described in our 134 interviews were categorized according to the three dimensions of power as follows:

To explore this model of power and innovation, we (1) drew on our study of 40 new products in fifteen firms. The identities of the firms cannot be revealed, but they (2) average 96 years in business, 54,000 employees, and $US9.4 billion in annual revenue. All the firms had dominated some markets for decades, but faced (3) heightened competition and technological change at the time of the study. All the product innovations were intended for unfamiliar markets, used unfamiliar technology, or both, and all had been officially approved by senior management.

To learn about the products, we interviewed a total of 134 people who were working on them. The people interviewed averaged 9 years tenure with the firm, and represented the sales, engineering, research, manufacturing, marketing, and accounting functions. In the interviews, people were asked to tell the story of the product; describe what they knew about the market and technology; how they worked with other departments; and whether the organization had helped or hindered their efforts. We also conducted 98 follow-up interviews over the ensuing two years to establish the commercial status of the products that had not already failed. Five of

resources - - problems with the acquisition of funds, information, and expertise; processes - - problems with budgeting, cross functional teams, and working across divisional boundaries; and meaning - - problems in defining the product's value to customers and the firm, establishing the product's strategic fit, and working out corporate priorities. Second, we coded whether or not the three types of problems had been solved. If we assume that the ability to solve problems indicates the use of power, then the proportion of problems solved in each dimension is an indicator of the amount of that dimension of power that is used. 3

Table 2 compares the use of power by successful innovators with those whose products were delayed or cancelled. The successful innovators in our data solved more resource, process, and meaning problems than did those whose products were delayed or cancelled, which suggests that they did indeed use more power. However, the differences are statistically significant only for resource power. These results

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Table 3 Ant i - innovat ion versus Pro- innovat ion Conf igurat ions of Power and Innovat ion Success

Status of Innovat ion Project Ant i - innovat ion Power Conf igurat ion ** Pro- innovat ion Power Conf igurat ion **

Commerc ia l ly successful Cancel led, sti l l in development, or in market but uncertain*

30 70 68 32

t = 3.84 t = 3.84 p=O p=O

* Innovators whosepro jec ts had fa i l eda reexc luded f romthecompar i son . Thefai led innovators so l vedve ry fewprob lems , but their data may be biased. ** Measured by proport ion of solved prob lems that worked against the system (anti), or focused direct ly on effective innovation practice (pro).

suggest that the amount of power used by innovators per se does not distinguish successful and unsuccessful innovations.

We then coded each use of power (solved problem) for whether it occurred within an anti-innovative or a pro- innovative configuration. We reasoned that if innovators were surrounded by an anti-innovation configuration, from the first column of Table I, their problem-solving would involve confronting or circumventing the pressures that inhibit innovation. For example, they would solve market analysis problems by making the new product conform to conventional standards; solve team problems by excluding a function that is difficult to work with; and solve strategic meaning problems by using the personal credibility of project leaders to secure legitimacy. If, on the other hand, innovators were surrounded by a pro-innovation power configuration, their problem solving would channel the firm's resources, processes, and meaning into the more effective design of their product. For example, they would solve market analysis problems by drawing on the knowledge of people in the organization; solve team problems by developing a procedure that establishes the roles and responsibilities of each function; and solve strategic meaning problems by involving senior managers actively and openly in substantive discussions.

Table 3 compares the extent to which an anti- innovation power configuration or a pro-innovation configuration surrounded the innovations. Successful innovators operated, to a greater extent, within a pro- innovation configuration of power and the majority of their problem solutions drew directly on the organization's competencies. In contrast, a majority of the unsuccessful innovators' problem solutions involved combating an anti-innovative configuration. Thus, what differentiated successful innovation had less to do with the quantity of power used, and more to do with its quality: innovators in a pro-innovation configuration drew power from it, allowing them to attend directly to the creation of their new products; those in an anti- innovative configuration had to use much of their effort in fighting it. We infer from these findings that a pro-

innovation configuration of power increases the likelihood of success for new products, while an anti- innovation configuration reduces the likelihood of success. In other words, the right power configuration powers product innovation, while the wrong one enfeebles product innovation.

Pro and Anti-innovation Configurations at Foodco

To understand how these two configurations influence innovation in practice, and to consider how organizations might change their configurations, we contrast two cases of product innovation in one large food products firm, headquartered in the US, which we call Foodco. One new product was a successful refrigerated snack item which now generates several hundred million dollars a year in gross revenues. The other new product was a packaged meal based on a new canning method which languished for several years before being cancelled. Both the anti- and pro-innovation configurations of power existed within one firm, because Foodco senior managers temporarily imposed a pro- innovation configuration on the firm's traditional anti- innovation configuration. Unfortunately, as we shall see, this change was limited in time and effect.

About five years before our first round of interviews, Foodco senior managers had started a strategic initiative to develop new products with more potential for market growth. They recognized that their traditionally packaged, mass marketed food products (via canning, drying, or freezing), were losing market share to foreign competition (Japanese dried soup, for example) and alternate preparation techniques. One vice president explained:

Five years ago, Foodco looked at its portfolio and said: 'We are not aligned with the future. We make coffee and dried foods, but the market growth seems to be in the ready-to-eat products'. We decided that we need to be in microwavable products and beverages, and we need to extend some of our side dish brands into ready-to-eat meals. We said: 'We are not playing in the middle of the plate'.

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The refrigerated product was initiated early during this new-found support for innovation and, consequently, derived considerable impetus from a temporary pro- innovation configuration of organizational power. However, several years into the process, Foodco was acquired by a large conglomerate, which began the painful process of merging Foodco's product lines with those of its other acquisitions, and of eliminating duplicate employees. These changes undermined the support for innovation, and Foodco's configuration of power reverted to its traditional anti-innovation orientation. Innovators involved in the packaged meal initiative, which was less well established when these changes occurred, were forced to deal with the implications of this less receptive configuration.

The Success

The refrigerated snack was an important new category for Foodco because it allowed the company to take advantage of the ready-to-eat market trends, one of the company's new strategic directions. Foodco's strategic initiative for new products allowed Steve Hill, the refrigerated-product champion, to develop his idea for a new business. Steve explained that the business idea came from Europe:

I went to Europe and saw refrigerated products all over the place. Europe is a good predictor of American food trends. The product we eventually came up with was partially intuitive and partially based on a real product..

Steve also explained that he developed a business, not just a single idea:

I was able to sell management on a vision for the total business, not just a specific product idea. This was a huge new category for us.

The idea of a refrigerated product was not new to the world, but Foodco had previously been slow to react to new trends, according to Steve:

I am in marketing, but marketing is dunce work, because there are so many basic and obvious trends in the market and in consumer needs. People want quality foods and they will pay for them. It doesn't take great imagination to ferret out the marketing trend. The difficulty is in taking action. For example, we knew about the microwave for ten years before we did anything about it, I am embarrassed to say.

Steve's championing was therefore essential for this new product, but so was the power of meaning. Without the active strategic support for innovation, Steve would not have been able to get the venture off the ground. Another person who worked with Steve confirmed the importance of the interaction of meaning power and championing when she said: 'Foodco was experimenting, and Steve got on line to be an experiment'. Senior managers at Foodco had put the power of meaning behind product innovation by developing a new

strategic force that encouraged several new efforts. Steve's championing capitalized on these changes in a way that would not have been possible either earlier or, as we will see, later.

The power of meaning sustained the project during its first two years, because although Steve began with a general idea of the food category, it took his team more than a year to come up with a particular product concept that would sell. They carefully tested each product concept and developed an extensive knowledge of the market and competition, and because they could draw on the power of meaning to justify their work, the team had sufficient time to complete its work. Normally, according to a participant, Foodco pressured people to get products out in the market as quickly as possible.

The new pro-innovation configuration also realigned Foodco's power of resources and processes to support this venture. These innovators not only drew directly on Foodco's considerable resources and competencies in packaging, product design, production, selling, and marketing; they were also able to recombine them to design their new and different product. For example, Steve got permission to cut through the usual (and non- innovative) approach to human resources to staff his project with people from all functions who were experts in their area, although not necessarily corporate stars. The venture also got resources for team-building so the team members could learn how to apply their expertise to innovation rather than follow routine procedures, as one of the team members explained:

The original core team averages I5 to 20 years of experience, and they are high quality. Most people on the team are misfits, not stars. They are good at their functions, but maybe had never led a team, or the finance guy dresses funny - - they have limited promotability at Foodco .... We had lots of team building in the beginning, because we demand that everyone be good at their function, and we cover for each other as long as each does our function well.

Foodco's processes for rewarding employees and for managing projects were also re-aligned to support the venture. Steve explained that rather than having to fight against the constant transfer of personnel that was typical at Foodco, he was able to set up a separate venture and reward people for staying with the project until it was fully developed:

From the beginning, we created a radically different organization, with two basic concepts. First, we did not want turnover. We want people to spend four or five years in the business, with extended continuity, the theory being, that if you are going into a business you know nothing about, you do not want to keep retraining people. At Foodco people normally move every nine months, so new businesses are never taken seriously. Second, we had a long-term incentive program installed. At FOODCO there is usually an annual bonus payout, which rewards only incremental results that people win at the expense of another person.

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This well functioning, committed team developed a thorough business plan to justify the investment of considerable money into new capital. Senior managers responded to the plan with quick decisions, allowing the venture to build a new plant that used a new (and thus risky) processing technology. The power of meaning continued to be aligned with this innovation, so both senior managers and the venture team continued to discuss the project's benefits and costs. The manufacturing manager described their ongoing, substantive strategic dialogue with senior managers:

We have been very fortunate that the whole venture has built a high level of trust in the senior people we are dealing with. We have kept them informed and we communicate with them on a regular basis. We have made commitments and we have kept them. We had five budgets over the past five years, and we have made them all.

It took five years to develop and test-market the product, construct the plant and get the processing techniques up and running, launch the product, and stabilize the business. During this time the venture encountered a number of serious and unexpected problems, as is the nature of innovations. For example, they had runaway mould in production, they had to negotiate a joint-venture to develop a national distribution system, and they had to respond immediately to the unexpected entry of a competitor right at launch. However, because the pro-innovation configuration of resources, processes, and meaning continued to support the venture, the team was able to react effectively to all these problems. The manufacturing manager explained how this project's processes and meaning allowed it to make effective use of the extensive experience of the team members:

I have been involved with a lot of different development projects, because that has been my job. But this project is very different, in that we have much more authority and responsibility, and make more of our own decisions. The team sits as a group to make decisions, which gives us more responsibility.

Two years after our interviews, the new refrigerated snack had become one of Foodco's all time success stories.

The Failure

was also to develop a whole business, in this case with a new brand name.

The packaged meal was sponsored by Mary Williams, a vice president of one of Foodco's divisions. While this product also drew on Foodco's new openness to innovations, it was not as closely connected to the corporate senior managers. Because of its more distant connection, the power of meaning surrounding this product was relatively weak. Mary explained that the idea had little meaning for, or value to, employees and managers who were concentrating on their regular, routine work. Mary was therefore forced to sponsor it in addition to her not inconsiderable divisional management duties:

This idea had been rummaging around for a year with no interest, because everyone was focused on their regular products, regular frozen meals, and established markets. Initially, I was a sponsor but the product started off very quietly. No one wanted to help, so I was heading it up along with managing five very sizable businesses.

Mary felt that Foodco's newly-found emphasis on innovation was rather limited. In our terms, the power of meaning was not fully aligned behind all innovations in the company. It is clear that she did not enjoy the same open strategic dialogues with senior management as did Steve's team:

M y theory is that innovation needs to be done in a low key fashion because of the tremendous uncertainty. "You need to go underground. In most ventures, senior management's focus is external, on the press and on how wonderful the product is. It is in the test market for three weeks and it becomes the second coming. You need to be realistic from the top to the bottom. You have to manage the PR both inside and outside.

This lack of meaning power also meant less resource and process power for the project. For three years, the packaged meal project was staffed by just one full time person, and was supervised by another who also had a number of established products to oversee. The product concept development, initial product design, and test- marketing work were completed mainly because this is exactly what Foodco's brand management system routinely did. Only after three years, when the product concept was fully developed and a large market potential was discovered, did Foodco management approve the assignment of 12 people to the project.

The packaged meal product began a year later than our first example and was not as developed when the downsizing and restructuring started at Foodco. This product was a shelf-stable (i.e., canned) packaged meal that could be put into a microwave oven, because the canning process did not use metal. A few products using similar technology were under development by other companies, but, like the refrigerated snack, this was a new product category and a new processing technology for Foodco. The plan for this packaged meal innovation

Despite this development, the product continued to face an anti-innovation context. Consequently, when it came time to pull Foodco's capabilities and know-how together to bring the project to fruition, things began to fall apart. For example, the human and other resources made available to the project were oriented to routine activity, not innovative activity. Mary explained that the personnel assigned to the project were not oriented to the forward-looking, creative problem solving necessary for innovative work:

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I wish we had the human resources to do both the day-to-day work and work on the future. The woman who runs the project can't step back and see the large issues• We are organized around the resources we have, versus the ideal.

More devastating was the project's inability to acquire the necessary capital to create the unique packaging and production system. Senior management insisted they use existing facilities, which meant that members of the project team could not effectively address the design and development issues very effectively. For example; they never knew if the packaging system was not feasible or if it simply would not work with the available machinery. The technical director of the packaged meal described senior management's refusal to make timely decisions. One can see in his description that Foodco's power of processes was aligned with the incremental changes associated with familiar production systems, and could not accommodate major changes:

From where I sit, the problem is getting the capital to expand nationally, and in balancing a significant multi-million dollar investment versus a risk profile the senior people will accept. The balance is not settled... We will go see George (the CO0) tomorrow and talk about doing an acquisition versus doing it all ourselves, and the options within each• There is no simple answer, and I understand that when you spend 70 million dollars, it is a problem. But when the troops see the indecision they are uncertain that the organization is committed• You can also get problems in the marketplace the longer you dilly- dally.

As the technical director also points out, the project's lack of resources, processes, and meaning power heightened its uncertainty. We learned in our follow- up interviews that the option of building a new plant was turned down, and the team was authorized only to acquire and convert an existing facility. In contrast to Steve's project, in this case, the necessary production resources were withheld for four years, causing packaging and processing problems to fester. In addition, employees on .whom the project depended became increasingly disillusioned as they saw the vulnerability of the project.

During the next six months (by which time, the successful refrigerated product was well established in its market), Foodco's restructuring and downsizing accelerated. The senior managers, some of them new, shifted Foodco's strategic orientation away from innovation, to focus on risk reduction and asset management• Decision criteria changed in favour of risk reduction, and only conventional activities had any strategic meaning. Without any meaning, the team had no basis for strategic discourse, and could not negotiate criteria for evaluation that made sense to both sides. Instead, the project had become a win-lose situation, with the new management in a position to impose its strategic vision, which did not include major, risky investments, as the packaging engineer described in a follow-up interview:

There were two diametrically opposed views. One was you can only afford to put so much in this business because of its margins• Therefore you have to come up with a plan to make that work with minimal investment. Another was that the potential for this business was so huge that you need to invest early to make sure you can get there. From these two camps there was almost a win-lose approach being taken. But the strategic imperatives of the new owners took precedence, meaning that they said: 'We want you to invest in growth opportunities but we want you to manage and minimize the risk associated with that'. The plan prepared by the project team was for a high capitalization and high investment, which was unacceptable. The people who strongly believed that the business would not succeed without the high risk profile left the company.

The anti-innovation configuration of power in which this project was fostered deprived it of the resources, processes and meaning necessary to solve many of its normal development problems. Accordingly, the managers associated with it were forced to subvert this power simply to keep their project alive. They had done so by making big promises, since honest discussion had become out of the question. Ironically, it was this use of the only power that the system provided them which was their downfall, as the packaging engineer explained:

I would say that some of the commitments made by the project managers were not based on the pragmatics of the situation and the knowledge of what was really occurring. They had full knowledge, but they committed [to senior managers] based on what they thought the senior people wanted to hear. Based on their powers of persuasion and their credibility with the company, they thought they could dance around the goals they had set if they did not meet those goals. But the merger brought continued pressures against the businesses to perform. Management decided that the project management team had lost their power base.

As a result, Mary Williams, the division vice president who initiated the project, 'left', and two of the project team members who we interviewed were fired. The product idea continued for a time under new managers, because the market studies still showed a very strong positive potential. However, after about eight years of development time and millions of dollars worth of people's time and energy and other resources, little ever came of Mary's idea.

While the mergers and downsizing did not hinder the commercial success of the refrigerated product, because it was well under way when they started, it nonetheless had an effect. One participant said that the project's close working relationship with senior management had been cut: 'What is more awkward is our new corporate structure. We have no clout with them'. This venture, too, lost the power of meaning. In the follow-up interviews, we learned that the new corporate management decided that Steve was not a good manager for routine products (which the product had by then become), and removed him from the venture. Rather than develop additional products as originally

2 4 European ManagementJournalVol 15 No 1 February 1997


planned, the venture was disbanded, and its single product was merged into another division. The new managers also decided that the process through which this product had been born would not continue. One participant explained: 'Despite its success, this process was a one time only endeavour'. Within the next year, Steve also 'left' the company.

meaning in many established organizations also centres strongly on cost control and reducing risk, which in the short term precludes new product development.

Discussion

m~dHple dimensions of or,~4~mizing ":: : : "::: ....

These cases vividly illustrate the importance of power both for and against innovation. They show that power involves multiple dimensions of organizing, and is systematically ingrained in the very social fabric of the organization. These insights explain why so many established organizations have such difficulty with ongoing, or sustained, product innovation. If the power of organizational resources, processes, and meaning is aligned with routine, low-risk, readily measured activities, effective new product development is prevented. Product innovation goes against the grain of this configuration of power, and literally does not fit. In contrast, a pro-innovation power configuration allows innovators to make effective use of the firm's funds, know-how, operational systems, and managerial skills.

The first step in developing the organization's capability for sustained product innovation, therefore, is to diagnose the configuration of power that operates in the company. A thoughtful assessment of how resources are allocated, decisions are made, and strategies are formed should reveal whether the company fits the anti- or pro-innovation configuration outlined in Table 1. Organizations with a long history of stable operations or protected markets are likely to have the anti-innovation configuration. Such organizations must make fundamental changes in this configuration if they are to become capable of sustained product innovation. A few incremental changes to a particular dimension of power here and there - - more champions, fewer boundaries, more money - - are not enough to sustain effective product innovation over time. The case analysis suggests how short-lived a pro-innovation configuration of power can be in the face of other strategic pressures.

The second step in developing the organization's capability for sustained innovation is to determine why the anti-innovation configuration is so deeply rooted. At Foodco, it seems that senior management's strategy was deeply rooted in a false sense of control and an inaccurate perception of risk. The new managerial elite that took over after the merger focused strategic attention on conservative brand management, established procedures over new ideas, and existing asset management rather than new investment. Given all the attention paid to 'process re-engineering' and downsizing of late, we suspect that the power of

Managers need instead to confront the possibility that routine-based strategic control in fact increases risk over the long term, if the new products that are important to the firm's viability

never materialize. For example, Foodco's reversion to the anti-innovation configuration of power resulted in an enormous waste of human, capital, and knowledge-based resources in unsuccessfully developing the packaged meal project. We suggest that attempting to respond to market, competitive, and technological changes without changing the anti-innovative system of power is what puts the organization at risk, not innovation per se. In contrast, the albeit temporary change in Foodco to a pro- innovation configuration reduced risk by producing a more comprehensive, more carefully thought out project through the mobilization of people with extensive expertise, experience, and capability. Moreover, the successful refrigerated snack did not involve a loss of managerial control - - its development was well managed, closely scrutinized, and carefully evaluated. We suggest, then, that keeping the routine-based power of meaning in place is far more costly than the conversion to an innovative configuration (see also Johnson, 1988).

The third step is to integrate innovation into the corporate strategy. This is done by first specifying a direction for the firm in terms of the value it provides for whom and how, and then stating how product innovation will contribute to that direction. Innovative firms have a clear vision for their business, and include innovation with a simple directive such as 'profitable growth through innovation'. Managers then must back up their words with a visible commitment of time, resources, and rewards for innovation; and with the development of appropriate controls that, for example, measure the percentage of revenue from products developed in the past five years, and reward all senior managers accordingly. The strategy-making process must become open, so that people throughout the organization are involved in strategic 'conversations' (Westley, 1990). Such conversations enable middle managers not only to understand how senior managers frame what constitutes business 'potential', but also to participate in developing those frames (see Wheelwright and Clark, 1992). Managers must, then, create organization-wide meaning for and commitment to innovation as part of an enduring strategic initiative that is able to withstand ebbs and flows in the bottom line, changes in senior management, as well as downsizing, re-engineering and other diversions.

The power of meaning for innovation must be supported with the re-alignment of the power of processes and resources. Regarding processes, innovative organizations adopt stage-gate processes throughout all their business units, which clearly and rigorously specify market and

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business analyses, degrees of technology development or investment, and other critical assessment steps that must be completed before any business development - - innovation and ongoing management alike - - receives additional resources or priority access. These procedures provide a common set of evaluation criteria and other procedures, while allowing project managers to work creatively to solve their specific problems in the best way they can (Cooper, 1994). Additional ways to re- align process power with innovation include the organization-wide use of various market assessment techniques for new products (Griffin and Hauser, I993); milestone management (Brock and MacMillan, 1993), and multi-functional team organizations (Souder, 1987). Thus the power of process must accommodate both management's needs for control and innovation's need for flexibility.

Aligning the power of resources behind innovation requires changes in the organization's management of R&D and manufacturing, from a short-term oriented system that is focused on abstracted measures of inputs and outputs (such as number of projects started, scrap rates, volume, meeting budgets), to a long-term system based on measures of capability improvements (such as advances in the ability to solve technological problems, improved yields, increased customer satisfaction - - see Roussel et al., 1991). Foodco's packaged meal languished because senior managers could not commit themselves to a $70 million investment. Most innovations require major investments that look very risky if a company focuses on the use of current assets, However, if the company continually invests in the capability of its assets with a long-term plan, individual innovation projects do not require overwhelming investments (Ford, 1988). Resources are also mobilized by organization systems that put teams on implementation and transition issues, so that plants are converted readily, sales-forces trained for new products quickly, and information systems are updated routinely over time. In this way, a broad panoply of resources are readily available to innovators.

Finally, senior managers must focus on maintaining the alignment of resource, process, and meaning power with innovation, and leave the day-to-day work to the operating and technical level employees. They must engage in strategic conversations regularly, and update corporate directions and policies accordingly. They must monitor organizational processes, to make sure they are developed, implemented and changed as necessary so that decisionmaking, budgeting, and team management works smoothly for all businesses, including new ones. And they must make the long term investments in organizational capability to keep the company's value- creation abilities competitive. In these ways, then, the organization can power sustained product innovation.

Notes

I We attempt here to apply the key themes of a complex body of literature to the management of innovation. We

refer readers interested in learning more about the nature of power and the different approaches to studying it to Clegg (1989) and Hardy and Clegg (1996). This is a rich data set and contains considerable variety on industry (firms are from chemicals, food, office equipment, building products, services, machinery industries), degree of product innovativeness, and the extent of change the finn was undergoing. However, this is not a representative sample, since most of the firms were not good at innovation, and only one was headquartered outside North America. The coding proceeded as follows: (1) first, all discussions of problems were noted and then categorized by two researchers, following a set of coding rules; to make sure that the problem coding was stable, all problems were coded three times, with discussions between the researchers each round; (2) then, whether or not each problem was solved it was coded, and if solved, whether the solution involved working around issues or really solving the problem itself; inter-rater reliability was 84 per cent. See Dougherty and Heller (1994) for more details on coding. The analyses in Tables 2 and 3 exclude all innovators whose products had already failed, since they were reflecting back in the interviews and so their comments may be biased. We also checked to see if degree of innovativeness and stage of product development affected the results. The differences between the successful innovators and the others remain when these factors are controlled for.

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C Y N T H I A H A R D Y , Faculty of Management, McGill University, 100I Sherbrooke Street West, Montreal H3A IG5, Canada

Cynthia Hardy is a Professor in the Policy Area at the Faculty of Management at McGill University. She received her Ph.D. from

Warwick University and, since 198I, has been teaching at McGill. Her research interests focus on the role of power and politics in organizations, especially with regard to inter-organizational collaboration; strategy making in universities; and downsizing. She is currently heading a team of researchers in Canada and Australia which is examining collaboration between business, government and nongovernment organizations from a critical perspective. She has published articles in Organizat ion Studies, Journal of Managemen t Studies, California M a n a g e m e n t Review and Journal of Applied Behavioral Studies, as well as other journals and books.

~RAH 3HERTY, Faculty of ;emenL McGill sity, I001 Sherbrooke West, Montreal H3A 7anada

~h Dougherty is an #e Professor at I University's Faculty nagement. After g for 10 years as a

social worker and university administrator, she received a Ph.D. from MIT's Sloan School of Management in I987, and has taught at the Wharton School, University of Pennsylvania. Deborah has published a number of articles on new product development and how to organize for more effective innovation. A current research project in this field is yielding preliminary results which suggest that underlying capacities for organizing innovation - central knowledge, activities, and interpersonal relations - differentiate non-innovative from innovative firms.

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Powering product innovation

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