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Five styles of strategy innovation and how to use them


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The authors draw on their study over the past three years of companies that introduced numerous successful new strategies — and compare them to less innovative peers. They discovered, in particular, successful innovators used five distinct management styles, often at odds with each other, but with internally consistent routines. The five styles are explored in detail, with corporate examples. The challenge for managers is to mobilize many different parts of their organization to execute an appropriate style or styles of innovation. If successful, tremendous innovation breakthroughs are possible.
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European Management Journal Vol. 19, No. 2, pp. 115–125, 2001
2001 Elsevier Science Ltd. All rights reserved
Printed in Great Britain
0263-2373/01 $20.00
PII: S0263-2373(00)00081-5
Five Styles of Strategy
Innovation and How to
Use Them
PIERRE LOEWE, Strategos Inc., Menlo Park, California
ROBERT CHAPMAN WOOD, Harvard Business School
The authors draw on their study over the past three
years of companies that introduced numerous suc-
cessful new strategies — and compare them to less
innovative peers. They discovered, in particular,
successful innovators used five distinct manage-
ment styles, often at odds with each other, but with
internally consistent routines. The five styles are
explored in detail, with corporate examples. The
challenge for managers is to mobilize many differ-
ent parts of their organization to execute an appro-
priate style or styles of innovation. If successful,
tremendous innovation breakthroughs are possible.
2001 Elsevier Science Ltd. All rights reserved
Keywords: Strategy, Innovation, Management
Styles, Innovation Breakthroughs
Today most large companies need a continual flow
of dynamic new strategies. Yet only a handful of
managers really know how to help effective new stra-
tegies to emerge. Companies need to harness their
resources and energy to the cause of continuous
innovation. But let’s be honest: the existing literature
has not provided them with a clear idea of how to
do that.
Several authors have described partial solutions.
Tushman and O’Reilly urge managers to create
organizations with separate units pursuing
incremental change in the existing business model on
one hand and transformational change on the other
(Tushman and O’Reilly, 1997). Brown and Eisenhardt
urge managers to keep their firms on the ‘edge of
chaos’ through ‘improvisation, coadaptation, regen-
eration, experimentation, and time-pacing’ (Brown
and Eisenhardt, 1998). But managers can be forgiven
if they wonder just how to apply these ideas to the
particular problems of their own firms.
Our research suggests that for thoughtful managers,
European Management Journal
Vol 19 No 2 April 2001
however, discovering and launching a powerful ser-
ies of effective new strategies doesn’t have to be quite
as difficult as it now seems. A key part of the prob-
lem is that different kinds of innovation problems
call for different kinds of solutions. Just a few differ-
ent styles of strategy innovation seem to solve inno-
vation problems in the most successful firms. Man-
agers seeking excellent new strategies, then, need to
take two crucial steps. First, they need to decide
which of these styles are appropriate for the opport-
unities before them. And second, they need to ensure
that they are doing the right things to implement the
styles they’ve chosen.
Over the past three years we’ve studied two dozen
successful innovators in detail — companies that had
introduced numerous successful new strategies —
and compared them to less innovative peers. We
asked what allows some companies to innovate more
effectively than others. We did find that successful
innovators had a good deal in common. For example,
almost all successful innovators have big aspirations,
a flexible definition of their business, and a habit of
But what was especially striking — and most
immediately useful for alert managers — was how
the innovation processes in these successful compa-
nies differed from each other. We found five distinct
management styles, often at odds with one another,
and each included internally consistent routines cap-
able of creating tremendous innovation break-
throughs repeatedly. Each addresses different kinds
of innovation problems and requires that managers
utilize a different set of levers. For each of the styles,
we have developed a metaphorical name that sum-
marizes its distinct characteristics:
1. The Cauldron. In this style, perhaps the most
entrepreneurial and demanding, leaders catalyze
the entrepreneurial energy of the entire manage-
ment team so the group repeatedly challenges
everything about the organization. The team con-
stantly rethinks its business models and rapidly
creates new models for both existing and new
businesses. This approach results in rapid change
throughout the organization. Enron and
(especially during the period when it was being
spun off from AT&T) Lucent Technologies’ net-
working businesses are each examples of boiling
Cauldrons of innovation.
2. The Spiral Staircase. Here managers innovate so
consistently and so often in their existing business
that, over time, they repeatedly change its very
nature. Just as a circular staircase takes you
upward without much changing your latitude or
longitude, a Spiral Staircase innovator rises dra-
matically in its chosen business while seeming to
stay in the same place. Charles Schwab & Co.,
Toyota, and (sometimes) British Airways.
3. The Fertile Field. In this approach, managers
focus on finding new uses for existing strategic
assets and competencies, sowing them across a
wide field that extends far beyond the company’s
existing operations. Emerson Electric, the St. Louis
electrical equipment manufacturer, is an example,
and so are GE Capital and NiSource, the holding
company that includes Northern Indiana Public
Service Co. in the US.
4. The PacMan. In this model the company effec-
tively outsources much strategy development and
R&D to the marketplace, investing in startups and
gobbling up those that prove themselves. Effective
PacMan investors are not just gobbling up entrepr-
eneurial startups to enjoy the fruits of their labors,
however, but assembling coherent competencies
for the future. Examples include Cisco in com-
puter networking and WorldCom (now MCI
WorldCom) in telecommunications.
5. The Explorer. Here a company sets out work in a
big, poorly understood field where it knows it will
take labor for many years before seeing profits. It
keeps its investments small at first, but achieves
its goal through a series of relatively low-cost
probes that progressively solve the problems that
had prevented the innovation from happening.
Examples include Motorola’s development of cell
phones from 1973 through 1984 and Monsanto’s
pursuit, from 1978 through 1995, of the technology
that underlay its push to apply biotechnology to
The choice of styles will depend on where you think
opportunities for your firm lie (see Appendix A).
Many successful companies practice several styles.
But each style represents an internally consistent
approach to innovating that mobilizes a wide variety
of people. Each involves a coordinated package of
management techniques that nurture it. The levers
management can utilize to promote successful strat-
European Management Journal
Vol 19 No 2 April 2001
egy innovation differ dramatically depending on
which style is being practiced. Levers that are perfect
for one may actually block another. Thus companies
that utilize several styles must generally separate the
pursuit of one style from the pursuit of another,
because the management systems that affect each
have to differ.
Each of the styles mobilizes many people’s brain-
power for innovation. Some chief executives in less-
successful companies we studied sought to establish
the organization’s new strategies single-handed.
Others delegated the task primarily to a corporate
strategy group or relied on ‘expert’ consultants to tell
where the organization should go. In relatively sim-
ple industries, these approaches can work. (We saw
examples of small groups at the top successfully set-
ting strategy in the public utility and insurance
industries.) But the five styles summarized above are
far more powerful because they’re each capable of
applying the intelligence of far more people to the
task of innovation.
Consider how each style works.
Heating Up the Cauldron
Managers start Cauldron-style strategy innovation in
an effort to create fast, radical change. In each Caul-
dron case, we found:
One or more top leaders have had a rough picture
of the radical transformation the organization
The leader shared the rough picture first with a
few trusted associates, who modified and refined
it and begin to experience passion for it.
They then shared it with larger and larger groups,
which refined it further, added details, and started
finding ways to remove the barriers that kept the
vision from happening.
As large numbers of people removed barriers and
began working on changes, innovation after inno-
vation occurred. Effective Cauldron-style strategy
innovation processes often get Spiral Staircase-
style and Fertile Field-style innovation processes
going at lower levels in the firm.
Houston-based Enron, which has grown from a gas
pipeline business company into a diversified $3020.3
billion-a-year global energy firm, exemplifies the
Cauldron-style. The company’s key approaches to
innovation originated in the late 1980s when Jeff Skil-
ling, now Enron’s president, created what evolved
into the Enron Capital and Trade Resources business
unit. Skilling recruited and promoted creative deal-
makers. He showed them that they could make big
money by developing creative new energy deals and
working with their peers in the finance, legal, and
other departments within Enron to get the resources
to make their deals real. Ken Rice, who now heads
the division that Skilling created, describes the
resulting work environment as a ‘nuclear fusion reac-
tion.’ Enron eventually developed ways of evaluating
new ideas that were remarkably well understood
within the organization. A large corps of Enron
people became repeat innovators.
Enron’s experience shows that the vision that drives
successful Cauldron innovation doesn’t need to be
precise, and in fact it can’t be. The senior leader can’t
possibly understand precisely the achievements that
will emerge.
Another example is the launch of Lucent Techno-
logies as a spinoff of AT&T divisions that had been
growing at only 2 per cent a year. Senior managers’
‘roughly right’ picture of the future consisted essen-
tially of three elements:
A strong sense that Lucent had to turn itself into
a ‘high performance growth company,’
A sense of how the organization’s values had to
change to make that possible, and
Some numerical goals developed through bench-
marking successful high tech companies.
Lucent did not develop routines for evaluating and
approving new ideas as well as Enron. It has recently
experienced some real problems. But the work of
Henry Schacht, Lucent’s CEO during its spin-off,
remains a model of how to launch Cauldron inno-
vation. He demonstrated an honesty which showed
he knew a little bit about the future but admitted
how much remained unknown. This inspired hope
and excitement among people who could make big
contributions to innovation. With widely-shared pas-
sion and broad, albeit vague, vision, the Cauldron
can keep boiling for a long time.
But success also requires structures that make contin-
ual change possible. Groups practising Cauldron
innovation adopt an ‘organic’ style of work, in which
key people are often unsure of exactly what their job
is. They’re expected to find work that’s important
and do it. And yet structure isn’t less important just
because it is looser. The Cauldron innovator needs
institutions and habits that allow ideas and resources
to move effectively from one part to another. It may
require a fast-moving ‘internal market’ for ideas and
people, for instance. If innovators’ ideas fail to win
support in one unit, they need to be able to take them
to another.
Climbing the Spiral Staircase
Leaders manage Spiral Staircase innovation by instil-
ling passionate commitment to a particular business
European Management Journal
Vol 19 No 2 April 2001
and to its customers. Charles Schwab & Co., for
instance, propels continual innovation with an ideol-
ogy that borders on customer worship. ‘In my 15
years here,’ one senior executive said recently, ‘I
never heard Chuck (Schwab) once rant about returns,
profits, or share prices. Not once. He only talks
about customers.’
As our colleague Gary Hamel has observed, this kind
of commitment makes every customer problem an
innovation opportunity. One Schwab executive
describes it this way: ‘Our basic philosophy is to ask,
“Who’s getting screwed, where and why?” And then
we go out and solve that problem.’
In 1989, Charles Schwab & Co. realized that even
phone conversations often served little purpose if a
broker wasn’t going to push products on its cus-
tomers. It introduced Telebroker — automated order
entry from the telephone keypad. About the same
time, a middle manager pointed out that paperwork
burdens to a large extent locked no-load mutual fund
investors into the fund families where they’d
invested. By 1992 Schwab had evolved OneSource, a
center that made the management of no-load invest-
ments easy. And in 1995, when a technology team
within Schwab presented a demo of what the then-
new World Wide Web technology could do, senior
managers almost instantly recognized how the Web
could make life better for Schwab customers. Thus
Schwab invested aggressively in the Web even before
it realized it would face aggressive price-based com-
petition from other web brokers. The result: today it
controls some 30 per cent of all the stock trading that
happens on the Web.
Spiral Staircase innovators can never tell where in
their organization a transforming innovation may
originate. Taiichi Ohno, the developer of the Toyota
Production System, came up with the workflow inno-
vations that were at its core seed when he was a mere
machine shop supervisor in Toyota’s main factory
(Ohno, 1988). This means the levers that managers
use to spur Spiral Staircase innovation have to reach
everyone. The culture of experimentation and com-
mitment to learn can affect every part of the organi-
zation. Toyota had done that well by 1947, when Tai-
ichi Ohno and other Toyota people were inspired by
president Kiichiro’s somewhat overstated insistence
that Toyota must: ‘Catch up with America in three
years. Otherwise, the automobile industry of Japan
will not survive.’
At every level where it is possible, Spiral Staircase
companies create teams with real autonomy whose
charge is making life better for customers. Compared
to other airlines, British Airways has made a great
deal of Spiral Staircase progress. One important con-
tributor to its successes was the decision by Sir Colin
Marshall, British Airways’ former chief executive, to
create brand managers for each British Airways class
of service.
The brand managers as a group came up with the
radical idea that British Airways should design its
own airplane seats — products traditionally bought
off-the-shelf from Airbus or Boeing. Each focusing on
particular customers, each brand manager realized
that well-designed seats could make a dramatic dif-
ference for a modest investment. Moreover, because
of the autonomy BA had established, the brand man-
agers felt they could invest considerable time work-
ing with outside suppliers to develop a comprehen-
sive program for redesigning seats before they even
presented the idea to senior managers. The resulting
seats differentiated BA significantly, especially in the
premium classes. BA’s first-class seat — created by a
leading designer of yachts — provides excellent
space for either sitting or sleeping.
Sowing the Fertile Field
The Fertile Field innovator focuses on new uses for
existing strategic resources. Emerson Electric, for
example, produces old-line industrial items like com-
pressors, electric motors, and valves. It is a company
full of expertise and experience. But top managers
recognize that its existing businesses won’t make the
best use of all its resources. To reach beyond its tra-
ditional businesses, Emerson CEO Chuck Knight
appointed a ‘growth czar,’ Charlie Peters, who
helped each business develop initiatives, mostly out-
side their traditional customer base. Peters tracked
the initiatives in a central ‘war room.’ In addition to
opportunities within each business unit, the existence
of a growth czar helped business units gather engin-
eering and marketing expertise from throughout the
company to create new business models that cut
across existing divisional boundaries. Combining
resources across divisional boundaries often plays a
key role in cultivating the larger world as a Fertile
NiSource, the $3.1 billion-a-year parent of Northern
Indiana Public Service Co., is another Fertile Field
innovator. It began innovating in the 1980s because
it had to, developing unregulated power plants for
industry because the steel mills and chemical
refineries it served would have gone to someone else
for the services if it had not done so. Under president
Gary Neale the company has expanded that business
to make it the leading developer of on-site industrial
power generation in the US. Beyond that, Neale has
encouraged senior NiSource managers to explore
where the assets and competencies of a good public
utility could contribute most. At first, NiSource kept
individual bets small. The few where NiSource went
far afield didn’t work out. (A used-tires-to-energy
plant in Britain, for example, was closed.) But
NiSource has created value with close-to-home
investments. It is managing unregulated pipelines
and natural gas storage facilities and has installed the
first commercial microgenerator in the US, in a Wal-
European Management Journal
Vol 19 No 2 April 2001
green’s store in Chesterton, Ind. The generator uses
the gas that NiSource supplies to generate electricity
as well as heat on site, cutting costs while increasing
reliability — and opening an enormous potential
market for the company.
Fertile Field challenges differ radically from those of
either Cauldron or Spiral Staircase. Where a Spiral
Staircase manager must nurture passionate loyalty to
customers and to the business, the key to managing
Fertile Field innovation is to encourage exploration
of new frontiers. That frequently means discouraging
people from too much concern with existing cus-
tomers and the existing business. Where Spiral Stair-
case innovation calls for experimentation throughout
the organization to capture the upside in a business
with growth potential, Fertile Field innovation
demands training for people with traditional back-
grounds so they can see opportunity in related fields
and use their skills to seize it. Where Spiral Staircase
innovation demands teams focused on improving the
customer’s experience, Fertile Field innovators gain
more from taskforces that look outside the organiza-
tion. They rarely benefit from training all the rank-
and-file in innovation. (NiSource tried doing so, and
reaped little benefit.)
Teams that work on Fertile Field innovations, then,
are necessarily an elite. That doesn’t mean they
should consist exclusively of senior managers or a
band of young M.B.As. A company’s best customer
service representatives or even its best truck drivers
may understand the real nature of the company’s
assets and competencies — and what can be done
with them — in a way that people on the fast track
may not. But whereas everyone should feel they’re
part of the team working on Spiral Staircase inno-
vations, smaller groups have to drive Fertile Field
Playing PacMan
The three styles discussed so far innovate primarily
based on the strategic assets and competencies
you’ve already got. Virtually all organizations need
to employ at least one of these. But they don’t
exhaust the ways of innovating. Two more styles are
driven by the acquisition of new assets and com-
petencies: PacMan and Explorer. Innovating through
these styles generally takes longer than innovating
through Cauldron, Spiral Staircase, and Fertile Field.
But they can accomplish big tasks that the others by
themselves could not.
The PacMan style works best when you don’t know
what the next big ideas in your industry will be. But
it only works in a fragmented field, where there are
numerous young companies with which a larger firm
can do deals. The PacMan player invests in smaller
firms. They must not only be working on projects sig-
nificant for the long term but also on projects whose
success the player can effectively judge in the
medium term, so that the investor can recognize
which of the struggling young companies should be
purchased. When those conditions apply, a company
with resources can acquire partially proven techno-
logies and put them together into profound strategic
capabilities — sometimes at modest cost. To a certain
extent, Microsoft has pursued PacMan innovation as
a long-term strategy, acquiring companies like
WebTV and effectively betting on its innovation.
The PacMan strategy amounts to outsourcing the
early stages of the innovation cycle — coming up
with ideas and testing them in the market — to
entrepreneurs and venture capitalists. It makes most
sense when there are just too many potential ideas
for a company that might prove winners for any
company, even Microsoft, to bet on them all at the
first stage. Better to let the market screen these down
to fewer promising innovations, absorb these win-
ners, and begin the process of scaling them up to full-
blown businesses. If one’s company has the resources
to pursue this strategy, the PacMan style becomes an
efficient way to acquire successful experimenters.
Two key levers drive successful PacMan strategy
Starting with strong internal R&D capability, so
you know the fields you’re investing in.
Developing a well-defined process of integrating
purchased companies into your existing busi-
Launching the Explorer
The Explorer style requires, by its very nature, a
long-range strategy commitment and a lot of organi-
zational stamina. It demands that a company make
many small advances toward a big innovation over
many years. Explorer-style innovations typically
begin with a champion. At Monsanto, it was research
director Howard Schneiderman who in the 1970s per-
suaded two successive chief executives that the com-
pany, which was then a fairly conventional chemical
firm, should bet big on biotech. Explorers pursue
new business models that are initially hazy, but
where the potential payoffs are huge. Christopher
Columbus setting out to discover what became
known as the Americas is an apt analogy.
Senior executives need not invest an inordinate
amount of time in the Explorer project. But they have
to understand it and back it repeatedly. In budget
processes, many elements of the organization will
fight to kill investments whose immediate payoff is
Key levers in making Explorer innovation work
European Management Journal
Vol 19 No 2 April 2001
Keeping researchers focused on specific business
goals. Other firms invested more money than
Monsanto in biotech, but even before they had
succeeded, Monsanto’s researchers were famed
for their clear focus on creating real products.
Keeping each experiment and probe as inexpen-
sive as possible. Big experiments will only reveal
large numbers of difficulties; they’re not likely to
shorten the time to market to an extent that will
justify their cost.
Resisting the temptation to try to make a big busi-
ness of the new idea before it is fully understood.
Several pharmaceutical companies bought large
seed companies in the 1980s thinking they would
apply biotech knowledge to them. They found that
in the 80s biotech couldn’t add value to seed com-
panies, and wound up selling them several years
later. By the mid-1990s Monsanto was making the
same effort with more success. But Monsanto’s
serious failures and public relations disasters in
application of biotech to the seed business in
recent years seems to have resulted from Mon-
santo, too, trying to push biotechnology in agricul-
ture too fast.
The Explorer style is most powerful when a company
has an intuition that’s significantly more profound
than its competitors’ about some long-term chal-
lenge. Company leaders sense a big opportunity and
also recognize that dozens of complex questions must
be answered before profitable products and services
can be sold. They must be willing and able to under-
take many years of work. They’ll require executives
to protect the development team from short-term
pressures. The Explorer style works best in concen-
trated industries, where small, nimble competitors
can’t steal your ideas. If the right conditions apply,
the rewards from an effectively managed Explorer
process can be incredible.
The Opportunity for Managers
Many companies practice more than one style at a
time. But doing so effectively requires sensitivity to
the different tasks that different styles involve. Most
commonly, different units within an organization
pursue different styles. For example, Lucent Technol-
ogies’ optical networking business has practiced the
Cauldron style, its traditional telephone switching
business has followed the Spiral Staircase style, and
parts of Bell Labs the Explorer style. The challenge
for senior managers — one that Lucent’s leaders have
not always been up to — is to find one or two styles
that are right for the senior management team and
at the same time help each unit to follow the logic of
its style.
Despite the difficulties, a real revolution in manage-
ment begins when managers effectively mobilize
many different parts of the organization to execute
an appropriate style or styles of innovation. Under
each of the five styles, innovation becomes more than
the exclusive preserve of strategic planning depart-
ments and top management. A few managers suc-
cessfully choose styles of innovation that are right for
their companies (or for their piece of it), learn the
rules of their chosen styles, and find the right people
to execute them. These managers are laying the
essential groundwork for repeated breakthroughs.
The authors would like to acknowledge the invaluable contri-
bution made by Mark S. Bonchek and the corporate members
of the Strategos Institute to the research on which this article
is based.
Appendix A
Choosing the Right Styles for Your Firm
What style or styles will solve your company’s innovation problems? Consider each style in turn.
The most dramatic, fastest strategy innovation accomplishments come through Cauldron strategy inno-
vation. Does your company face a crisis? Does dealing with the crisis require a whole series of big
changes? If the answer to both questions is ‘Yes,’ it’s probably worthwhile taking your company through
the difficult but exciting process of heating the Cauldron. Moreover, if there is no obvious crisis the
usefulness of Cauldron innovation may make it worthwhile for leaders to create one. General Electric
didn’t face any obvious crisis when Jack Welch took over in 1981, but Welch created a crisis by insisting
that every GE business had to be No. 1 or No. 2 in its industry, and that crisis launched Cauldron-style
strategy innovation at GE.
But not every company needs the radical transformations of the Cauldron-style. After considering Caul-
dron strategy innovation, consider whether you want to focus on radical improvements in your existing
business through Spiral Staircase strategy innovation. You can’t know how great are the opportunities
for improvement in your existing business till you’ve focused on creating them. But you can ask, ‘Can
my business grow?’ ‘Can it inspire passionate loyalties?’ A business with growth potential or passionate
loyalties is worth trying to transform with Staircase innovation.
If you’re neither igniting your company with Cauldron innovation nor wedding yourself to your cus-
tomers as you climb a Staircase with them, you should pursue Fertile Field. Understand your portfolio
of assets and competencies and then advance with them in new directions.
Finally, does your company face opportunities you can’t capture through any of these three styles? If
your fragmented industry has difficulty serving customers well, if it’s moving in many directions at
once, and if you have the resources to build a first-rate capability of acquiring and assimilating outside
technology, you can achieve great things through the PacMan style.
And if you sense a big opportunity where there are dozens of questions that must be answered and
probably many years of work before profitable products can be sold, the Explorer style can effectively
create a transforming set of new strategies.
European Management Journal
Vol 19 No 2 April 2001
1. The style we describe as Explorer is also presented in
Lynn et al. (1996).
Brown, S.L. and Eisenhardt, K.M. (1998) Competing on the Edge:
Strategy as Structured Chaos. Harvard Business School
Press, Boston.
Lynn, G.S., Morone, J.G. and Paulson, A.S. (1996) Marketing
and discontinous innovation: the probe and learn pro-
cess. California Management Review Spring, 8–37.
Ohno, T. (1988) Toyota Production System. Productivity Press,
Cambridge, MA.
Tushman, M.L. and O’Reilly III, C.A. (1997) Winning through
Innovation. Harvard Business Review Press, Boston.
5 Styles of Innovation: A Quick Guide
Table 1
Style Key Characteristics When to Employ It Ways of Managing that Make
It Work
Cauldron Leaders catalyze the Rapid change is creating many A rough but exciting picture of
entrepreneurial energy of an entire challenges and opportunities how the company can and must
management team so the group change.
repeatedly questions everything, Sharing of the picture with larger
rapidly creating new business
and larger groups of ‘intrapreneurs’,
. who get a chance to refine it.
An internal market for ideas,
resources and rewards.
Spiral Managers focus on their
Existing business offers important Passionate commitment to the
and innovate so opportunities for growth business and its customers.
dramatically that they change its A culture of experimentation and
nature over and over. commitment to learning that infects
the whole company.
Autonomous teams with real
power and the charge to make life
better for customers.
Fertile Field Managers leverage existing Limited opportunity for growth or Clear understanding of the crucial
strategic assets and core
need for radical change in core assets and competencies that
in new directions, business; many ideas for expansion innovation can build on.
largely outside their existing outside it. Helping people with traditional
businesses. backgrounds to see opportunity in
related fields outside their existing
Taskforces aimed at finding and
seizing opportunities.
A series of low-cost probes
You sense a big opportunity, but Research carefully focused on
progressively solve the problems many questions remain specific business goals.
that had prevented a big innovation Careful cost control on each
from happening and make it a experiment and probe.
reality. Patience and stamina: avoiding
efforts to make a big business of a
new idea before it is fully
PacMan Managers
outsource much initial
You have the resources to leverage Strong internal R&D capacity
creativity and screening to the
to discoveries made by many helps executives know the
, investing in startups smaller players in your field industries they’re investing in.
and gobbling up those that prove Continuous prospecting for
themselves. potential acquisitons and the ability
to execute them quickly.
Well-defined process of
integrating new companies into the
existing business and scaling them
European Management Journal
Vol 19 No 2 April 2001
European Management Journal
Vol 19 No 2 April 2001
European Management Journal
Vol 19 No 2 April 2001
egos, Sand Hill Road, Ste INSEAD EURO-ASIA
202, Menlo Park, California CENTRE, Boulevard de
94002, USA. E-mail: mlee- Constance, 77309 Fontaine- bleau, Cedex, France. E-
mail: peter.williamson@-
Pierre Loewe is a Founding
Director of Strategos, an
international strategy inno- Peter Williamson is Pro-
vation firm based in Menlo fessor of International Man-
Park, California. His pri- agement and Asian Business
mary focus at Strategos has at INSEAD Fontainebleau,
been on guiding client teams charged with identifying France and Singapore. His research spans globaliz-
new opportunities and developing breakthrough stra- ation, strategies in Asia and strategic alliances. His
tegies for their companies. Previous posts include latest book, From Global to Metanational: How
Senior VIP at the MAC Group, Inc., and Director of Companies Win in the Global Knowledge Econ-
Marketing for Salomon North America. omy, sets out a blueprint for how multinationals can
prosper in the global knowledge economy by developing
their capability for ‘learning from the world’.
WOOD, 874 Union Street,
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02370, USA. E-mail:
Robert Chapman Wood is
Post-doctoral Research Fel-
low in the Program on
Organizational Change at
Harvard Business School
and Researcher affiliated
with the Strategos Institute, California. His recently-
completed doctoral dissertation at Boston University
examined how large firms successfully begin processes
of continuing strategy innovation.
European Management Journal
Vol 19 No 2 April 2001
... on antecedents of innovation failure and success). Loewe et al. (2001) describe five types of innovation: (1) The Cauldron: most entrepreneurial in nature among the five, it capitalises on entrepreneurial spirit of the management team that challenges assumptions and reinvents business models; (2) The Spiral Staircase: continuous innovation within the core business inevitably leads to significant change to the business; (3) The Fertile Field: where managers find new ways to leverage company's competencies; (4) The PacMan: where companies invest in start-ups that proved market demand for their innovation; (5) The Explorer: a truly grassroots innovation, where the company is plunging into the unknown and anticipates a long and iterative project. Loewe et al. (2001) claim that choice of approach depends on where the company anticipates the biggest opportunities to be. ...
... Loewe et al. (2001) describe five types of innovation: (1) The Cauldron: most entrepreneurial in nature among the five, it capitalises on entrepreneurial spirit of the management team that challenges assumptions and reinvents business models; (2) The Spiral Staircase: continuous innovation within the core business inevitably leads to significant change to the business; (3) The Fertile Field: where managers find new ways to leverage company's competencies; (4) The PacMan: where companies invest in start-ups that proved market demand for their innovation; (5) The Explorer: a truly grassroots innovation, where the company is plunging into the unknown and anticipates a long and iterative project. Loewe et al. (2001) claim that choice of approach depends on where the company anticipates the biggest opportunities to be. Jacobs & Heracleous (2005) relied on this taxonomy in development of a conceptual model for strategic innovation. ...
... Different types of innovation require different strategies, different leadership, and different management techniques to make these approaches work (Baghai et al., 2000;Christensen, 1997Christensen, , 2013Leifer et al., 2000;Loewe et al., 2001). For example, Leifer et al. (2000, p. 8) specify managerial capabilities such as uncertainty-mapping, and ability to follow a learning plan as critical for an exploratory project's success. ...
Full-text available
This research examines middle-managers’ construing of exploratory and exploitative innovation projects in two large US high-tech companies. The theoretical basis for this research is that of organizational ambidexterity and agency theory. Answering a call from multiple researchers, this research focuses on ambidexterity at the individual level. The research follows a phenomenological paradigm with its focus on individual experiences as evidence, and constructivism as epistemological stance. It is based on a case study design, with data collection completed in two stages, using Repertory Grid Technique in stage 1 and Key Informant Interviews in stage 2. Emergent findings indicate that a) prior experience type (exploitative/exploratory) and function (Engineering / Product management) are the key leading indicators of differences in the construing of project success; b) there is mostly alignment in how managers from different levels construe what is important for exploratory and exploitative innovation projects; c) there is a difference in the extent to which managers apply approaches to these two types of project; and d) managers rarely apply exploratory-innovation specific approaches even when merited. The emergent root cause for lack of exploratory innovation specific approaches appears to be a result of inertia, and of the expectations of the extant corporate culture. A model is developed to indicate how a change can be introduced in an organization to address this finding. This research contributes to study of ambidexterity, managerial sensemaking, and project management by offering an insight into how managers from the Product Management and Engineering functions think about project success. It offers possible explanations for the lack of distinction between exploration and exploitation when it comes to selection of approaches and metrics; it presents implications to practice and makes recommendations for improving chances of success of exploratory innovation projects.
... As decisões estratégicas de aprendizado e inovação estão relacionadas às possibilidades e às decisões de explorar as oportunidades. Essas oportunidades podem ter uma natureza de curto ou longo prazo e, em ambas as condições, podem estar relacionadas ou não à indústria em que a organização atua e aos ativos e competências de que a organização dispõe (Loewe et al., 2001). As estratégias gerais da empresa devem orientar essas decisões, e o processo organizacional deve ser analisado levando-se em conta se está estruturado para favorecer a identificação de oportunidades, a inovação e o aprendizado, e de que modo esse processo pode ser melhorado em função das decisões estratégicas. ...
... As estratégias de inovação relacionadas à indústria em que a organização atua são aplicadas quando existe potencial de crescimento na indústria ou dentro dela, ou ainda perspectiva de oportunidades futuras, originadas por um novo ciclo de inovação. Para as oportunidades de curto prazo, a organização deve promover inovações e aprendizados rápidos, com vistas a gerar melhorias e mudanças rápidas (Loewe et al., 2001). As estratégicas de inovação relacionadas a novos usos para os ativos e competências se aplicam em duas situações principais: quando a empresa percebe a necessidade de buscar novos usos para os ativos e competências ou quando são identificadas novas oportunidades para estes. ...
Full-text available
This paper presents a strategic analysis model for science-based industries in process of innovation and technological development, operating in developing countries. The model is based on five main elements: technological regime; marketing structure; organizational process; knowledge and available resources, and governmental role. It can be applied in both industry and firm level, and aims to support the alignment of innovation strategies to general firm strategy. Applied to the Brazilian vaccines industry, the framework highlighted the Brazilian vaccine manufacturers' limitations in terms of technological regime and organizational processes, as well as the opportunities of market growth.
Survival of a company is dependent on the importance it assigns to change. Innovation is a key to change. There are different types of innovation. The most significant is product innovation. A company should strive to achieve the best in its field. Speed, market orientation and flexibility are the three factors which accelerate this type of innovation leading to creation of market value.
Innovation has been widely recognized as a key for competitive advantage and success in business and requires a lot of effort and discipline. The purpose of this article is to present a new reference model which aims to assist leaders to implement innovation management systems in their companies. This model is composed of six stages that include the basic activities for the innovation practice, taking in account the internal and external firm's environments, the interdependencies throughout its stages and the required networking for the establishment of the innovation process. This reference model uses a business accessible language and its main distinction from the other existing models is the classification of "intelligence environment" and "strategies definition" as independent stages, once these are essential activities that deserve dedicated coordination.
Knowledge is the lifeblood of e-commerce (EC). Processes and activities involved in EC are technological means that contribute to managing knowledge. This paper reviews the major perspectives on EC and examines their relationships with concepts of collaborative commerce and electronic business, particularly in terms of the technological handling of knowledge. From this, it is noted that knowledge management (KM) can provide insights for helping e-business achieve a competitive advantage. The Knowledge Chain model is summarized and its nine knowledge management activities are discussed. It is proposed that these activities can serve as focal points for improving competitiveness of an e-business by enhancing organizational innovation. The concept of "KM Audits" is introduced, Structured in terms of the Knowledge Chain model, they give a way to assess and analyze effectiveness of e-business knowledge handling processes. Results of these audits can be the foundation for finding ways to enhance e-business competitiveness through KM improvements.
The disappointing performance of U.S. firms during the 1980s in technology-intensive, global markets (such as consumer electronics, office and factory automation, and semiconductor memories) has been widely attributed to a failure to continuously and incrementally improve products and processes. In "The Breakthrough Illusion", Florida and Kenney wrote that "The United States makes the breakthroughs, while other countries, especially Japan, provide the follow-through" on which competitive advantage is built. Gomory made a similar point. contrasting "revolutionary" innovations with "another, wholly different, less dramatic, and rather grueling process of innovation, which is far more critical to commercializing technology profitably...Its hallmark is incremental improvement, not breakthrough. It requires turning products over again and again, getting the new model out, starting work on an even newer one. This may all sound dull, but the achievements are exhilarating." In "The Machine that Changed the World", the most influential work on the subject of the 1980s, Womack, Jones, and Roos measured the competitive effects of this lack of attention to continuous incremental improvement throiugh a benchmarking study of the global automobile industry. Other studies reinforce this message: compared to their Japanese competitors, U.S. firms lagged in cost, quality, and speed; and in large measure, the problem stemmed from a relative........
This article is based on Professor Tushman's well-received presentation at the 1997 international trategic leadership conference in Washington, D.C., in April
Strategy at the Leading Edge features short reports on conferences, new research and experiments by academics, organizations and consultancies for all those involved in strategy and strategic management. Contributions (two hard copies and a disk) should be sent to Martin Whitehill, City University Business School, Frobisher Crescent, Barbican Centre, London EC2Y 8HB E-mail:
Partial translation of: Toyota Seisan Hooshiki Datsukibo no Keiʻei e Mezashile (romanized) With Japanese text. Thesis (M.A.)--Monterey Institute of International Studies, 1987.