Organizational Innovation capability

Organizational Innovation CapabilityAnu Suominen, Jari JussilaTampere University of Technology, Finland—Pori unit, email: stname@tut.fiAbstractSelf organising team is one of the important characteristics of agile approach. Leading such teams require different perspectives of cultivating innovations. In this chapter, we focus on building organizational innovation capabilities, particularly from the context of self-organizing teams. Based on Friedman test we have developed two practically usable tools to evaluate individual and organizational innovation capability. In this chapter, we report results of applying proposed tools in two case companies. The main results suggest that innovation capability perspectives of team members could be significantly different in individual capabilities and organizational capabilities and that both perspectives provide valuable information in setting collective innovation goals. The self evaluation of innovation capabilities is also likely to foster participation from all team members towards the collective innovation goals.IntroductionAgile methods and agility have become a way to deal with complexity in turbulent and dynamic business environments. Agility as organizational way of operating efficiently may lead to maximizing efficiency on the cost of innovation. Yet, only with innovations, both incremental and radical, the competitive advantage can be found. Therefore, according to Clippinger, organizations should find a sweet spot (1999), where efficiency and innovativeness are in balance.Primarily, people applying agile methods work in self-organizing teams. Yet, leading self-organized people is a difficult challenge to many leaders. According to Hamel (2007), the over hundred year old leadership paradigm contradicts the needs of the innovation-seeking organizations of the new millennium. The top-down, managers know it all leadership that may have worked for companies like Ford in the late 19th century does not work any longer.Success today and in the future requires that organizations put innovation as their priority and mould it as their core competence (Skarzynski, 2008). It has been found that organizational culture (Ahmed, 1998; Martins, et al., 2003) and climate (Ekvall, 1996; Amabile, 1997; 1998) are significant in inducing innovation within organizations. However managing innovation within organizations requires a systemic and holistic approach to managing: the innovation process, the leadership, the organization, the people and their skills, the culture and the climate. All these parts together compose the organizational innovation capability (Skarynski, 2008). Also, all these components of organizational innovation capability include supports or enablers that foster innovation together with barriers or impediments that hinder it. Both have been previously studied.Organizational innovation capability can be evaluated with the help of software tools that are introduced in chapter 10 of this book. In this chapter we introduce the results and implications of usingtwo tools that reveal both the innovation competence of those individuals and organizations capability to support those competencies. Together the results not only present the current status of the organizational innovation capability, but also the needs for future development. First, this chapter deals with the concepts of innovation and aims to portray the two components of innovation capability: the individual and organization. Additionally, the links between the individual innovation competences to organizational core competences are represented with the conceptual model of organizational enablers and their counterparts in individual innovation competences. Then the self-evaluation method together with the utilization of Senge’s concept of creative tension (1990) is described. Also the analysis method of the Friedman test, applicable to this kind of non-parametric data is explained in brief. Due to the need to attain a better understanding of how this gathered information can be used, the results of an empirical study are presented. In the result part of this chapter, those empirical studies of two organizations including the analysis with the Friedman test are shown.Organizational Innovation CapabilityIn innovation management, the so-called sweet spot describes an area or the state of the organization, where the rigidity of organization does not impede innovation, but at the same time, the lack of structure does not lead to chaos, instability and randomness in innovation efforts. Clippinger (1999) argues that control cannot be imposed; rather, control emerges when managers create the right conditions and incentives for it to do so. The role of management and leadership becomes a matter of influencing the forces of self-organization from below, such as the organizational climate and culture; the leadership and organizational structure; and the innovation process on the front-end, rather than controlling from above.Creativity and innovation are frequently thought of as exchangeable terms (Martins, 2003; McLean, 2005), but creativity is a characteristic of an individual (Csikszentmihalyi, 1999) and a prerequisite for innovation (Holt, 2008); whereas innovation is the process of transforming an idea into action within the organization (McLean, 2005) or elsewhere, as in technology transfer (Amabile, 1996). OECD’s 2005 definition of innovation is 'the implementation of a new or significantly improved product (goods or services), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations.'Skarzynski and Gibson (2008) see organizational innovation capability as a formation including organizational culture and values; leadership and organization; as well as processes and tools. Yet it also includes people and their skills. Quite similarly, Andriopoulos (2001) in her literature review has divided the components of organizational creativity into these categories: organizational climate; organisational culture; leadership style; structures and systems of an organization; and resources and skills. Therefore, organizational innovation capability can be seen formation of two components—individual and organization. Here the innovation capability is seen as the construct of: organization climate and culture; organization leadership and structure; organization processes; tools for idea and innovation generation; and people’s competencies (Figure 1).Figure 1. Integrated model of innovation capabilityComponents and Parts of Organizational Innovation CapabilityThe Organizational ComponentMany researchers have mentioned those characteristics, features or components that are parts of the organizational innovation capability affecting by enhancing or impeding in the individual level the people’s creativity or organizational level the process of innovation. Additionally, some researchers have studied barriers for creativity in organizations thus innovation (Detterfelt, et al., 2008). Organizational culture is seen very essential part of organizational innovation generation (Ahmed, 1998; Martins, et al., 2003). Corporate culture is an organization’s way of life in business passed on via consecutive generations of employees, like in general culture as a people’s way of life is transferred from generation-to-generation (Zwell, 2000). The concepts of organizational culture and climate regarding innovation are often used interchangeably (McLean, 2005). However, culture includes those hidden elements that remain mostly invisible, whereas climate is the manifestation of practices andpatterns of behaviour established in the assumptions, meanings and beliefs that constitute the culture. Those characteristics of organizational culture and dimensions of organizational climate mentioned in the literature (Ekvall, 1996) that either support or impede individual creativity and innovation are consistent-- often they are the same (McLean, 2005). Thus, they can be viewed here under the same category.Many researchers have studied organizational structure and leadership together with managerial measures that either enable or hinder the innovation within organizations (Ahmed, 1998; Damapour, 1991)The innovation process comprises more than solely a process of research and development (Apilo, 2006) and it can be divided into phases--idea generation; structured methodology and commercialization(Ahmed, 1998; Martins, 2003)or concept finding; development of innovation elements; achievement of readiness for marketing and market launch (Boeddrich, 2004)--with a sequential nature; but in fact, they are iterative and simultaneous (Ahmed, 1998). Skarzynski and Gibson (2008) regard the implementation of the ideas as the easy part of the innovation process, which mechanisms (e.g., marketing), are quite well known, whereas the idea generation is the fuzzy front end. Essential for the innovation process’ overall success is the importance of methodical, systematic and structured procedures (Skarzynski, 2008).People and Their Skills: Innovator’s CompetenciesIn addition to the three organizational parts of Organizational Innovation Capability, there is the fourth part, the individual innovation capability. Here the individual innovation capability includes competencies that are most important of people and their skills as innovators. Those competencies are here called innovator’s competencies. The innovator’s competencies represent those competences that the literature (Jussila, et al., 2008) emphasizes as important characteristics of creative and innovative people and they can be divided into two groups: personal and social competencies.The major components of individual creativity necessary in any domain are expertise, creative-thinking skills, and intrinsic task motivation (Amabile, 1997). However, rarely is an individual able to rely solely on his own motivation and technical skills to get the job done. Most of us work in environments in which we must constantly deal with other people (Merrill, 1981). In a similar sense, innovations are rarely the result of one individual. Therefore, more than creativity is needed in making innovations happen. The major components supporting creativity are self-awareness, self-regulation, empathy and relationship management (Goleman, 1998), with a total of 27 competencies (Jussila, et al., 2008). Christensen (1997) has presented the link between individual competencies and organizational business capability. Vertically each organization acts in a business environment consisting of opportunities and challenges together with resources. The managers in organization find its vision and create the strategy. Each strategy demands certain organizational competences. Those organizational competences require certain individual competencies, thus forming the link between human beings in the organization and organization’s business. Horizontally each HR process and tool or technology should impact the abilities for attaining the organizational vision.Those individual innovation competencies have a counterpart in organizational supporting enablers (Suominen, et al., 2008). Those counterparts are presented in the Table 1.Table. 1. Individual innovation competences and organizational innovation enablers.MethodologySelf-evaluation of Humans and Systems with the Friedman TestIn research, human actions, opinions, attitudes and values, surveys or questionnaires are important tools (Vehkalahti, 2008). In a questionnaire, a person can be asked to do a self-evaluation or to evaluate a system that the individual evaluator is part of. With the help of information technology, the self-evaluation can be carried out with variety of tools, such as questionnaires taken online. The results of self-evaluation could then be used for different purposes, such as motivation; identification of development needs; evaluation of potential or performance; or development of career. However, the following has to be taken under consideration while interpreting the results received. Self-evaluation (Stone, 1998) is less reliable in the evaluation of work performance and people have a tendency to evaluate their own performance as being better than others' (Dessler, 2001). Additionally, while observing themselves and others, people are limited in accuracy (Beardwell, 1995). Nevertheless, people are able to evaluate themselves, when motivated. Self-evaluation is more effective in evaluating the relation between different items, such as competencies, than in comparing individuals' performance to others' performance (Torrington, 1991). The effectiveness of self-evaluation depends also on content of the evaluation; the application method; and the culture of an organization (Torrington, 1991). The results of individuals will vary to some extent. In the short term, individuals' power of observation, intentions and motives change (Senge, 1990); in the long term, mental growth, learning, changes in personality and health affect results.Creative tension is a pressure for development within an individual introduced by Senge (1990). The creative tension is the difference between the current state and the future aspiration. When this concept of creative tension would be discovered from individuals, self-evaluation is a useful method, as no-one can tell the future intentions and aspirations of another person. Similar concept for organizations is so called proactive vision, which can be seen as portraying the tension of the current state and the future state at organization while evaluating the organization as an object.As discussed before, the data generated though self-evaluation does have certain characteristics. Every single individual respondent applies their own, personal scale of degree, for instance. Therefore, the use of traditional scientific statistical methods for such data should be applied with care and consideration. Thus, the Friedman test has been used as method of analysis, as it is suitable for non-parametric data produced with self-evaluation. The Friedman test is one scientifically valid, nonparametric statistical method (Conover, 1999), named after its inventor Nobel laureate economist Milton Friedman. The Friedman test sums the ranked values of each respondent. Consequently the ranked values can be clustered into groups (Vehkalahti, 2008).The Tools for Self-Evaluating Innovation Capability ComponentsWithin the Flexi-project, there has been developed two web-based tools, including questionnaires for self-evaluating and analyzing the data received from the two organizational innovation capability components: the organization and the individual.In two evaluations, organizational innovation capability OIC and individual innovation capability IIC people evaluate statements regarding various topics of organizational innovation capability for both current and target state with nominal scale (Figure 2).Figure 2. View on Yoso-evaluation’s outlook (https://www.yosoevaluation.fi)In the individual innovation capability (IIC) questionnaire, people evaluate 50 statements regarding the 27 innovation competencies for both current and target state. From these evaluations, the creative tension can be calculated.Similarly, in the organizational innovation capability (OIC) questionnaire, people evaluate 69 statements regarding the organizational innovation capability features—also for both current and target state in order to calculate the proactive vision of organization, similar tension for development as creative tension with individuals.After the completion of the evaluations, each individual can print out their results of their individual evaluations. The results are available as histogram-graphs ordered by current state, future state and creative tension/proactive vision (Figure 3). The results for the upper-level variables are also presented in a spider chart-format (Figure 4). Accordingly, the aggregated group results are portrayed for the organization’s use.resultsFigure 4. View on Yoso-evaluation’s outlook for Spider Chart result reportResultsThe results of a self-evaluation run in two organizations (Company A and Company B) are represented after the Friedman test. The sample populations are described in Table 2.Table 2. The sample populations of the two organizations Company A and Company B.The aim of this chapter is to show in practice how this information can be received and how it can be interpreted. This method can be used to validate the research method and seeing how differently different groups see things within organization.Creative Tension and Proactive VisionIn the figures below, the results after Friedman test of individual innovation competences (by its creative tension) and organizational innovation capability (by its proactive vision) are portrayed for the two test organizations: Company A (Figure 3) and Company B (Figure 4). All three viewpoints (current state, target state and creative tension/proactive vision) for IIC and OIC results can be analyzed; however, here only the creative tension/proactive vision combination analysis is represented for both Company A and Company B. The results of the creative tension/proactive vision are divided into three to four clusters that reveal different needs of attention or need for development in the organization. Then in the figures represents the number of the respondents in the test. The 'min. diff.' represents the minimum difference used in the Friedman test to cluster the results into the three different clusters. The grey area is a cluster of the highest scores at creative tension or proactive vision organizational feature (i.e., people see the most development needs in these competences). The white area is a cluster of the mediocre scores (i.e., people see quite neutrally the development needs of these competences). The blue area is the cluster of the low scores at creative tension or proactive vision (i.e., competences that people don’t see so much need for improvement). The purple area is a cluster of the mediocre scores. They are quite mixed with opinions (therefore, they are purple); those variables can be considered either in the high (gray) area or at low (blue) area.Figure 5. The creative tension of IIC and proactive vision of OIC for Company AFigure 6. The creative tension of IIC and proactive vision of OIC for Company BAlthough these samples are not scientifically great enough to make any generalizations, it is noticeable with these two samples in both organizations that there are six identical competences in the high creative tension cluster (gray bars on left columns): self-control, absorptive capacity, changeorientation, flexibility, understanding others, and stress tolerance. On the other hand, in the low creative tension cluster (blue bars—left column), there are four identical competences: achievement orientation, imagination, teamwork and cooperation and risk orientation.Table 3. Results of two organizations clustered to four groups after Friedman test and their interpretationsFor Company B, the majority of the proactive visions of OIC are purple, thus portraying the difference of opinion among respondents. One has to be quite careful with interpretations. Yet in the Figure 5, it can be seen that those individual competences gathered in Cluster 1 have their counterparts in high number rankings among the organizational variables; therefore, they can be fairly reliably be clustered in high-high grouping. Similarly, those individual competences that have low creative tension and thus are grouped to clustered number 4, have their counterparts with quite low rankings of creative tension among organizational variables.The results presented here could be interpreted so that people see their individual competences quite similarly in these two organizations; whereas their view on their organization is totally different-- not only when compared with two organizations, but also among their own people. However, as mentioned before, no generalizations can be made out of these results, due to their limited samples; therefore, these results and illustrations are merely to portray how the results of gathered with these tools can give various insights the innovation capability of the organization.Implications for Using Innovation Capability toolsUsing any tools requires interested parties within an organization, as well as some time resources for the respondents. However, the positive impact for the usage of the tools is much more than just receiving numbered data from questionnaires:First of all, the tools are available on the internet, so the participants can do the evaluation any time during the agreed time window. They can also take a break, then return to the evaluation when convenient. Second, each and every participant is able to print a report on their individual evaluations right after their completion of the evaluation. Third, even small groups, such as Scrum-teams can be evaluated with statistically valid methods, such as the Friedman test.Fourth, if an organization has multiple groups, the results can be aggregated in order to get a bigger picture of the status of the organization's organizational innovation capability.Fifth, the combination of the two tools gives a unique view to organizations innovation capability, as it not only takes into account the two perspectives of organizational innovation capability--the organization and the individual—but it also portrays the three views to the time: current, future and the creative tension/proactive vision.Sixth, this evaluation can also be run periodically, giving the signals of those organizational and individual features that have improved.And most importantly, this participatory method is a motivational factor, as the self-organizing teams, like Scrum-teams, want to be lead from bottom-up, not top-down. This way they can give the signals of their opinions for change directly to their peers and superiors.ConclusionParticipatory methods are important motivational factors in software businesses. In such organizations, the teams, like Scrum teams are self-organizing. People in those environments do not want to be lead top-down, but from bottom-up, genuinely contributing to valuable organizational aspects--like culture and climate, structure and leadership and innovation process--and more importantly, to assessments of their own individual capabilities and competencies. With the participatory self-evaluation method, people in the organization use tools to give signals of their opinions for change directly to their peers and superiors. In this way, innovation is becoming democratized.ReferencesAhmed P. K. 1998. Culture and climate for innovation.European Journal of Innovation Management. 1(1): 30–43. Amabile T. M. 1997. 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Anu has a prior working experience in operational logistics, mainly exports, in metal- and telecommunications industry and she has been working at TUT since 2007.Jari Jussila: Jari Jussila is a Managing Director at IT and consultancy provider Yoso Service Oy. He is also a PhD student at Tampere University of Technology (TUT), holding an MSc at Industrial Management and Engineering. Jari’s field of expertise is knowledge and innovation management.。