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EXPLOITATION, EXPLORATION, AND PROCESS MANAGEMENT:
THE PRODUCTIVITY DILEMMA REVISITED
Mary J. Benner
The Wharton School
University of Pennsylvania
Management Department
2000 Steinberg Hall/Dietrich Hall
Phone: (215) 746-5719
Email: benner@wharton.upenn.edu
Michael L. Tushman
Graduate School of Business
Harvard University
313 Morgan Hall
Soldiers Field
Boston, MA 02163
September 17, 2001
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EXPLOITATION, EXPLORATION, AND PROCESS MANAGEMENT:
THE PRODUCTIVITY DILEMMA REVISITED
ABSTRACT
Organization and strategy research has stressed the need for organizations to simultaneously
exploit existing capabilities while developing new ones. Yet this increasingly crucial challenge has
been accompanied by an ongoing wave of managerial activity and institutional pressures for process
management and control. We argue that these pressures stunt a firm’s dynamic capabilities. We
develop a contingency view of process management’s influence on both technological innovation as
well as organizational adaptation. We argue that while process management activities are beneficial
for organizations in stable contexts, they are fundamentally inconsistent with all but incremental
innovation and change. We argue that process management activities must be buffered from
exploratory activities. As dynamic capabilities are rooted in both exploitative and exploratory
activities, ambidextrous organizational forms provide the complex contexts for these inconsistent
processes to co-exist.
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More than twenty years ago, Abernathy (1978) suggested that a firm’s focus on productivity
gains inhibited its flexibility and ability to innovate. Abernathy observed that in the automobile
industry, a firm’s economic decline was directly related to its efficiency and productivity efforts. He
suggested that a firm’s ability to compete over time may be rooted not only in simply increasing
efficiency, but also in its ability to be simultaneously efficient and innovative (Abernathy, 1978:
173; Hayes & Abernathy, 1980). Strategy and organization theorists have similarly observed that
dynamic capabilities are anchored in the ability to both exploit and explore (Ghemawat & Costa,
1993; March, 1991; Weick, 1969). A firm’s ability to compete over time may lie in its ability both
to integrate and build upon its current competencies, while simultaneously developing
fundamentally new capabilities (Teece, Pisano, & Shuen, 1997).
Twenty years after Abernathy’s observations, the pressures for organizations to meet
multiple, often inconsistent, contextual demands have escalated (e.g. Christensen, 1997; Tushman
& O’Reilly, 1997). The notion of balance between exploitation and exploration, or between
incremental and radical organizational change has been a consistent theme across several
approaches to research in organizational adaptation (e.g. Brown & Eisenhardt, 1998; Burgelman,
1994; March, 1991; Levinthal & March, 1993; Gavetti and Levinthal, 2000; Romanelli & Tushman,
1985). Yet this need for dual organizational capabilities arises in the context of a wave of
managerial activity and institutional pressures focusing on process management and control (e.g.
Cole, 1998; Winter, 1994; Hackman & Wageman, 1995; Hammer & Stanton, 1999).
Process management, based on a view of an organization as a system of interlinked
processes, involves concerted efforts to map, improve, and adhere to organizational processes.
Initially building on the seminal work of Deming (1986), Juran (1989), and Ishikawa (1985),
process management practices became popular as a central element of Total Quality Management
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(TQM) programs in the 1980’s (Hackman & Wageman, 1995). Since then, they have continued to
spread in practice as a core element of a continuing progression of quality-related initiatives,
including the Malcolm Baldrige National Quality Award, the International Organization for
Standardization’s Series 9000 program (ISO 9000), Business Process Reengineering, and more
recently, Six Sigma programs. By 1992 every Fortune 100 firm had adopted TQM practices
(Nohria, 1996). Although some have suggested that interest in TQM waned in the 1990’s (Powell,
1995), thousands of organizations subsequently adopted ISO 9000 (Quality Digest, 1999), and
many companies, including highly visible ones like GE, Honeywell, 3M, Amazon.com, Toshiba,
and Ford have recently embraced Six Sigma (e.g. International Quality and Productivity Center,
2000; Gabor, 2001; Feyder, 2001). Process management practices have been institutionally
mandated as powerful suppliers or regulating organizations require adoption (e.g. Westphal, et al,
1997, Harrington & Mathers, 1997).
Although process management techniques were first employed in the domain of
manufacturing and operations improvement, their influence has migrated to other processes,
including those underlying the selection and development of technological innovations (Brown and
Duguid, 2000; Sitkin and Stickel, 1996). Process management practices focus on reducing variation
and increasing efficiency in organizational routines. As these variation-decreasing activities spread
to centers of innovation, or variation-creation activity in organizations, they increasingly affect an
organization’s dynamic capabilities. Yet there has been a lack of theory development about the
effects of these institutionally mandated and pervasive practices on technological innovation or
adaptation.
Much of the managerial literature on process management is prescriptive and aimed at
educating managers on implementing such practices. Process management’s proponents have
promoted process-focused practices as universally beneficial for organizations, spurring continuous
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innovation that results in efficiency improvements, cost reductions, improved customer satisfaction,
and ultimately, higher profits (Hammer & Stanton, 1999; ISO, 1999; Harry & Schroeder, 2000).
Reflecting these assumptions, empirical research on process management’s effects has been limited
to assessing the financial performance implications from process management adoption (eg. Powell,
1995; Ittner & Larcker, 1997; Samson & Terziovski, 1999)1. The results of these studies have been
equivocal. Findings from empirical and case study research suggest that differential outcomes from
TQM adoption arise because organizations implement different practices under the TQM umbrella
(Westphal et al., 1997, Zbaracki, 1998). Similarly, Sitkin, Sutcliffe & Schroeder (1994) argue that
an alternative set of TQM practices be used in task environments with higher uncertainty. While
these studies provide insight into possible contingencies, their focus is specifically on TQM
programs. Similarly, much of the organizational literature on the topic of process management has
been focused on TQM (e.g. Hackman & Wageman, 1995; Easton & Jarrell, 1998; also see the 1994
special issue of AMR, and Cole & Scott, 2000). There has been no attempt to build theory that
links this TQM literature to broader concepts of process management or with more recent research
on dynamic capabilities (e.g. Teece, Pisano & Shuen, 1997; Eisenhardt & Martin, 2000).
We extend the process management literature by developing a model and testable
propositions on the effects of process management activities on both technological innovation and
organizational adaptation. We explore how both technological and organizational contexts
moderate the relations between process-focused activities and organizational adaptation (e.g. Sitkin
et al, 1994). We argue that the utilization of process management techniques stabilizes and
1 Other empirical research explores implications of more broadly-defined Total Quality Management programs. While
process-focused practices may be included in an organization’s adoption of TQM, it is not necessarily the case
(Westphal, Gulati & Shortell, 1997, Zbaracki, 1998). Further, it is not clear from most research on TQM whether and
to what extent the organizations involved undertook practices focused on mapping, improving and adhering to
processes, as such, interpreting existing research is hampered by heterogeneity in the practices adopted. The three
studies cited break out process-focused activities from other practices within TQM, and are particularly relevant to out
topic. We also review the larger body of existing research on process management and TQM later in this paper.
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rationalizes organizational routines, while establishing a focus on easily available efficiency
measures and the satisfaction of existing customers. These dynamics increase efficiency in the
short run. Because of institutional pressures in support of process management and the internal bias
for certainty and predictable results, process management activities spread throughout the firm. The
diffusion of process management techniques favors exploitative innovation at the expense of
exploratory innovation. While exploitation and inertia may be functional for organizations within a
given technological trajectory or for existing customers, these variance reducing dynamics stunt
exploratory innovation and/or responsiveness to new customer segments (Henderson et al, 1998;
Sterman et al, 1997). Finally, we explore how ambidextrous organizational forms provide buffered
contexts such that both exploitation and exploration can coexist (Tushman and O’Reilly, 1997;
Bradach, 1997).
We proceed in three sections. First, we define process management techniques and explore
the empirical evidence of their impact on organizational outcomes. In section 2 we explore the
effects of process management techniques on both exploratory as well as exploitative innovation.
We also consider the structural features and moderating effects of ambidextrous organizational
designs that allow process control activities to be isolated from exploratory activities. In section 3,
we explore how process management practices, through their influence on both technological
innovation and organizational inertia, affect adaptation, and how these effects are contingent on
both organizational form and environment context. Our model is illustrated in Figure 1.
______________________________
Figure 1 about here
_______________________________
This paper makes several contributions. We extend the process management literature with
a more contingent theory and associated testable propositions about the effects of process
7
management on organizations. Our model helps resolve inconsistent empirical findings and
provides a base for further research on the relationship between process management activities and
dynamic capabilities. This paper also contributes more generally to research that considers the
influence of increasingly stable processes on outcomes like technological innovation,
organizational adaptation, and failure (Christensen & Bower, 1996; Henderson & Clark, 1990;
Hannan & Freeman, 1984; Nelson & Winter, 1982; Levinthal & March, 1993). Although such
research has considered the role of routines in organizational outcomes, it has not addressed the
effect of institutionally mandated quality programs that directly target organizational routines and
processes. Thus, this paper extends research more generally by illuminating how specific
organizational practices (in this case, a meta-process focused on stabilizing and refining other
organizational processes) affect an organization’s dynamic capabilities.
BACKGROUND: THE PROMISE AND REALITY OF PROCESS MANAGEMENT
The process revolution has been marked by a shift from the view of organizations as a
collection of departments with separate functions and outputs, to a view of them as systems of
interlinked processes that cross functions and link organizational activities (Dean & Bowen, 1994).
Processes are collections of activities that, taken together, produce outputs for customers (Ittner &
Larcker, 1997; Garvin, 1998). Customers include not only external consumers of the organization’s
products or services, but also a series of internal recipients at linkage points between processes, as
outputs from upstream processes become the inputs for subsequent processes. Although programs
and awards like TQM, ISO 9000, Six Sigma, the Malcolm Baldrige Award, and Business Process
Reengineering differ in scope and approach, they share a core focus on measuring, improving, and
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rationalizing organizational processes (cf. Harrington & Mathers, 1997; Ittner & Larcker, 1997;
Powell, 1995; Repenning, 1999; Winter, 1994; Harry & Schroeder, 2000).
Process management is composed of three main practices: mapping processes, improving
processes, and adhering to systems of improved processes. Once underlying processes have been
recorded through process mapping, process improvement involves developing measures of how
well a process meets customer requirements, and using statistical methods to continually eliminate
variation in processes and outputs (Hackman & Wageman, 1995; Harry & Schroeder, 2000).
Process improvement not only involves rationalizing individual work processes, but also
streamlining the handoffs between processes (Garvin, 1995; Harry & Schroeder, 2000).
Organizational participants are trained in effective ways to facilitate cross-functional team meetings
and learn standard approaches for identifying and solving problems. These tools, by design and
intent, help integrate and coordinate a broad set of activities throughout the organization
(Repenning, 1999).
The last element of process management is adherence to processes that have been mapped
and improved. This ensures that processes are repeatable, allowing for ongoing incremental
improvement, and the realization of benefits of improvement efforts (Hackman & Wageman, 1995;
Harrington & Mathers, 1997; Mukherjee, Lapré, & Van Wassenhove, 1998). The ISO 9000
program, in particular, has a strong, explicit focus on adherence to documented processes. As part
of ISO 9000 certification, third-party auditors ensure that an organization is following its
documented practices (Harrington & Mathers, 1997; Cole, 1998). Similarly, the final stage of Six
Sigma implementation is coordinating standardized best practices throughout an organization
(Harry & Schroeder, 2000).
Proponents of process management have long cited the expected benefits of these practices.
Non-value-added activities are removed as processes are streamlined, resulting in reduced costs and
9
efficiency improvements in the form of increased yields and less rework and waste. Tighter intra-
organizational linkages increase efficiency by streamlining the handoffs between activities, and
speeding development and delivery times (Dean & Snell, 1996; Garvin, 1995). Further, these
products are likely to better satisfy customers, leading to increases in revenues. Ultimately, as
revenues increase and costs decrease, profits are expected to improve.
Yet, empirical research on the effects of process management practices fails to yield
conclusive evidence of these promised benefits. The few empirical studies that consider the
implications of process-focused techniques show no evidence that these techniques are consistently
helpful. Powell (1995) and Samson & Terziovski (1999) found no relationship between measures
of process management utilization and organizational performance. Ittner & Larcker (1997) found
the use of process management techniques associated with increased performance in the automobile
industry, but decreased performance in the computer industry. Others have noted that poor
financial performance has followed the process-focused efforts necessary for winning the Baldrige
Award (Garvin, 1991; Hill, 1993). Winners like Motorola, Cadillac and Federal Express have
suffered subsequent financial setbacks, leading some Wall Street analysts to recommended shorting
the stocks of Baldrige Award winners (Garvin, 1991).
Related research has explored the organizational effects of TQM program adoption.
However, as TQM may include actual implementation of different sets of practices within each
organization (Hackman & Wageman, 1995; Westphal, Gulati, & Shortell, 1997), it is difficult to
determine whether organizations implement the process-focused techniques. Even so, this research
has also produced conflicting or paradoxical results. Wruck and Jensen (1994) and Kearns and
Nadler (1992) report on TQM efforts that led to substantial organizational improvements.
Similarly, event studies have found performance benefits from adoption of a TQM program (Easton
& Jarrell, 1998) and winning a quality award (Hendricks & Singhal, 1996), and Dean & Snell
10
(1996) found that TQM as one component of Integrated Manufacturing was associated with
performance benefits.
In contrast, Analog Devices’ adoption of a TQM program resulted in short-term
improvements in efficiency, such as higher yields and less waste, but this was soon followed by
financial performance far worse than the industry average (Sterman, Repenning, & Kofman, 1997).
Similarly, proactive quality efforts at Alcoa initially led to competitive gains (Kolesar, 1993). Yet
soon after this quality effort was initiated, Alcoa’s CEO Paul O’Neill lamented the slow pace of
change and initiated a “quantum-leap improvement” (Kolesar, 1993: 161). Henderson et al. (1998)
found that despite significant returns to process improvements at Hewlett Packard these activities
were underfunded out of concerns that process-focused efforts would impede product innovation.
Sitkin and Stickel (1996) found that TQM efforts in an R&D setting led to organizational conflicts,
distrust, conformity and, in turn, to decreased innovation. Staw & Epstein (2000) found that while
TQM adoption was associated with higher CEO compensation, there was no association between
adoption and financial performance.
Other empirical research has been aimed at resolving these inconsistent findings. This work
suggests that outcomes fall short of anticipated benefits because while firms adopt TQM, they fail
to fully implement the associated efficiency-generating practices (Zbaracki, 1998; Westphal, et al.,
1997; Easton & Jarrell, 1998) or fail to give them sufficient time or the right culture to work (e.g.
Cameron and Barnett, 2000; Sterman et al., 1997). It may also be that the effects of process
management activities are contingent on the technological and organizational contexts to which
they are applied. Process management activities have spread beyond their origins in manufacturing
and operations into other activities, such as processes for selecting and developing technological
innovations. Indeed, the 9001 version of the ISO 9000 program involves processes for product
design, development, and service, while Design for Six Sigma similarly promotes extending process
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control techniques into R&D, including product design and development activities (ISO, 1999,
Harry & Schroeder, 2000). Similarly, these practices have also been applied to senior team
processes (e.g. Garvin, 1995; Ghoshal & Bartlett, 1995; Hammer & Stanton, 1999).
Process management practices may be adopted because of bandwagon effects created by
their adoption by other high status organizations (Abrahamson & Rosenkopf, 1993; Abrahamson,
1996; Meyer & Rowan, 1977; Staw & Epstein, 2000). As these techniques are embraced by highly-
visible organizations like IBM, GE, 3M, Amazon.com, among others (Hammer & Stanton, 1999),
they become taken-for-granted, and viewed as sensible approaches for operating organizations (cf.
Meyer & Rowan, 1977). Once adopted, the spread of process management gives rise to unintended
effects on innovation and adaptation. The ubiquity of process management techniques works to
reduce variation in organizational processes and routines. Variance reducing activities drive out
variance increasing activities and, as such, affect an organization’s ability to innovate and adapt
outside of existing trajectories (e.g. Weick, 1995; Levinthal and March, 1993; Sutcliffe et al, 2000).
Core capabilities may become core rigidities (Leonard-Barton, 1992). Thus, although process
management activities are employed to help organizations adapt, to the extent that these practices
increase inertia and limit variation-creation, they may instead impede adaptation in all but routine
contexts (e.g. Levinthal, 1997a). Yet, there has been no effort to build testable theory to explore
these broader implications of process management activities for innovation and adaptation.
PROCESS MANAGEMENT AND TECHNOLOGICAL INNOVATION
Technological innovation is a central engine of organizational adaptation (Nelson & Winter,
1982; Tushman & Nelson, 1990; Levinthal, 1991; Brown & Eisenhardt, 1997). As such, to
understand how process management techniques affect organizational adaptation, we first address
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how it affects exploratory as well as exploitative innovation. A firm’s ability to innovate provides
its senior team with options to either reinforce or destabilize a technological regime (Burgelman,
1994; McGrath, 1997; Tushman & Murmann, 1998). Innovations generated within or absorbed by
firms provide variation to proactively shape or reactively respond to technological transitions
(Brown & Eisenhardt, 1997; Cohen & Levinthal, 1990; Tushman & O’Reilly, 1997). An
organization’s dynamic capabilities depend on simultaneously exploiting current technologies and
resources to secure efficiency benefits and on creating variation through exploratory innovation
(Ghemawat & Costa, 1993; March, 1991; Teece et al., 1997). As process management techniques
focus on continuous improvement in routines and variation reduction (Anderson et al., 1994;
Hackman & Wageman, 1995; Harry & Schroeder, 2000), their increased utilization in an
organization affects the balance between exploratory and exploitative innovation.
The effects of process management on technological innovations arise in several ways.
First, they stabilize the resource allocation and decision processes that determine which
technological projects will be supported (cf. Christensen & Bower, 1996). Process management
techniques also tighten internal communication linkages and affect the types of technological
changes that are recognized and addressed (cf. Henderson & Clark, 1990). In addition, process
management activities also influence technological innovation directly through adherence to
particular product development or design processes. For example, Design for Six Sigma (DFSS)
ensures that processes for invention and innovation conform to tight statistical standards, while the
ISO 9001 program entails certification in product design and development (Harry and Schroeder,
2000). Process management activities will facilitate some innovation types, but dampen others. We
first need to clarify innovation types.
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Types of innovations
Innovations can be classified along two dimensions, in terms of proximity to the current
technological trajectory, and in terms of proximity to the existing customer/market segment
(Abernathy and Clark, 1985). On the technological dimension, different innovation types have
contrasting determinants and organizational effects (Morone, 1993; Tushman and O’Reilly, 1997).
Incremental innovation, characterized by small changes in a technological trajectory, builds on the
firm’s current technical capabilities, while radical innovation fundamentally changes the
technological trajectory and associated organizational competencies (Green, Gavin & Smith, 1995;
Dosi, 1982). Innovation can be further categorized by how it affects existing subsystems and/or
linking technologies (Baldwin & Clark, 2000; Henderson & Clark, 1990; Tushman & Murmann,
1998). Modular innovations affect subsystem or component technology, leaving linking
mechanisms intact, while architectural innovations involve changes in how subsystems are linked
together (Henderson & Clark, 1990; Iansiti & Clark, 1994). For example, the addition of a stepper
motor was a modular innovation in the photolithography industry, while the move from 14 to 8 inch
disk drives was an architectural innovation in the disk drive industry (Christensen & Bower, 1996;
Henderson & Clark, 1990).
Innovations have also been classified by whether they address the needs of existing
customers or are designed for new or emergent markets (Christensen & Bower, 1996). Products
designed for new customer sets are often organizationally disruptive and require significant
departures from existing activities. For example, the advent of digital photography represented not
only a technological change from chemical-based film, but also involved new distribution channels
for electronic cameras. The change in marketing and distribution presented an equal or greater
challenge as did the technological change for some photography firms (Tripsas & Gavetti, 2000).
Similarly, progressively smaller disk drives were innovations for emergent customer sets in the disk
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drive industry. These technologically simple innovations created organizational challenges for
incumbents and they found it difficult to respond (Christensen, 1998). Incremental technological
innovations and innovations designed to meet the needs of existing customers are exploitative, and
build upon existing organizational knowledge. In contrast, radical innovations or those for
emergent customers or markets are exploratory, as they require new knowledge or departures from
existing skills (March, 1991; Levinthal & March, 1993).
Effects of Process Management Activities on Innovation
As the implementation of process management techniques initially entails an explicit focus
on innovation and change in organizational activities, it is likely to spur innovation (Winter, 1994).
Tacit organizational routines are revealed and made explicit (Brown & Duguid, 1991) leading to
richer cognitive models of organizational activities (Repenning, 1999); firms can learn before doing
(Pisano, 1996). Team approaches to problem solving, decentralized decision-making, and co-
located information facilitate the search for solutions to help drive initial improvements in
efficiency in organizational activities (see also, Wruck & Jensen, 1994; Hackman & Wageman,
1995). In under-performing firms the organizational changes associated with process management
may well be radical (e.g. Kearns and Nadler, 1992). Or in the case of lethargic competitors, process
management efforts can lead quickly to substantial performance gains (eg. Kolesar, 1993).
While this innovative phase of process management entails substantive change, such change
is focused on improving efficiency within an existing technological trajectory. The founders of
process management focused on incremental and exploitative innovation, rather than radical,
architectural, or exploratory innovation. The associated process oriented tools and techniques are
aimed at making an organization more efficient through incremental improvements in processes and
outputs (Anderson, et al., 1994; Harry & Schroeder, 2000). For example, prescriptive literature
encourages organizations to view improvements as controlled experiments that involve repetition of
15
practices and measurement prior to making small, testable changes (e.g. Harry & Schroeder, 2000).
Moreover, process improvement techniques apply to the organization’s current activities;
innovation and change in those activities is accomplished by paring from existing routines. Once
changed, these improved routines become standardized best practices.
After this initial phase of innovation, repetition of organizational routines through adherence
to best practices leads to deepened competence (e.g. Pisano, 1996). As an organization learns and
increases its efficiency through repetition of a set of activities, subsequent innovation is
increasingly incremental (Levitt & March, 1988; Levinthal & March, 1993). Thus, while process
management activities drive innovation, the focus on variation reduction, search for incremental
improvements in routines, and increased proficiency through repetition of organizational activities
ensures that this innovation will be in the neighborhood of existing capabilities. As process
management activities extend in an organization over time, more and tighter linkages between
routines further constrain innovation to incremental changes in existing activities and outputs.
Proposition 1: Increases in the extent of process management activities will lead to increased
incremental innovation.
Process management activities are also focused on delivery to the organization’s target
customers. Organizational processes and the outputs they produce are driven to continuously
improve by better meeting customer requirements. As the locus of decision-making is pushed down
in the firm, multiple levels of the hierarchy are focused on meeting, if not exceeding, customer
needs (Winter, 1994). Measures of customer satisfaction are used as the basis of improvement and
coordination efforts (Cole, 1998; Garvin, 1988; Hackman & Wageman, 1995; Powell, 1995), and
such efforts are reinforced by supportive resource allocation systems. Von Hippel (1988) and
Christensen & Bower (1996) showed how persistent resource allocation processes among
equipment suppliers and disk drive manufacturers channeled innovation away from product
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development for emergent customer sets. Thus, as process management creates an organizational
focus on better understanding and satisfying existing customers, it also channels innovation into
areas that benefit existing customers.
Proposition 2: Increases in the extent of process management activities will lead to increased
innovation that benefits existing customer sets.
Henderson and Clark (1990) found that in the photolithography equipment industry,
increasingly stable routines and communication linkages within firms constrained their ability to
initiate and respond to changes in subsystem and linking technologies. Seemingly minor
architectural innovations were treated as incremental innovations by incumbent firms with
disastrous results. Process management techniques stabilize organizational routines and tighten the
linkages between them, yet make cross boundary, cross community linkages more difficult (Sitkin
and Stickel, 1996). Organizations focused on incremental enhancements of current technology treat
architectural innovation as merely incremental, fail to forge linkages across organizational
boundaries, and in turn, underperform (Lawless & Anderson, 1996; Henderson, 1993; Tripsas,
1997). Although incremental innovation may in some circumstances actually accommodate
architectural or modular innovations, adherence to standardized best practices ensures repetition of
practices through these stable linkages within local domains, and an organization’s ability to
actually take advantage of subsystem and linking technologies is stunted.
Proposition 3: Increases in the extent of process management activities will lead to less architectural
innovation.
Process management techniques, by design and intent, exploit existing capabilities. In the
face of short-term performance pressures, demands of existing customers, and ease of measurement,
exploitation overwhelms exploration (March, 1991; Levinthal & March, 1993; Sitkin et al., 1994).
Process management affects variation-creation through the use of statistical techniques designed to
17
reduce variation, and also through repetition of linked sets of streamlined organizational processes.
Rapid exploitation as employees carry out activities in coordinated processes produces measurable,
short-term benefits. As an organization achieves faster new product introductions, cost reductions,
or improvements in customer satisfaction, these outcomes drive organizations to persist with greater
zeal in extending process activities and linking disparate parts of the organization (Levinthal &
March, 1993). Managers with documented successes from process management may be promoted
and charged with extending such activities to more domains. Those opposed to the encroachment
of process management in creative or innovative domains may opt out of the organization, further
increasing the influence of process-intensive activities (Brown and Duguid, 2000).
As systems of improved routines are repeated throughout an organization, an organization
becomes more competent and efficient, but variation in the outcomes of those activities decreases
(March, 1991). The objective of stabilizing organizational routines and “attacking variation”
(Harry & Schroeder, 2000) contrasts with the variation-increasing roles played by internal corporate
venturing units (Burgelman, 1983), or redundant and overlapping information designed to increase
organizational innovation and variety (Nonaka & Takeuchi, 1995). This explicit focus on
incremental innovation and increased proficiency with local search makes it unlikely that process
management activities will produce innovations that significantly depart from the neighborhood of
an organization’s existing technological or market competencies.
Further, over time, process management further influences variation creation by affecting
the selection of innovations. Short-term, easy-to-measure efficiency improvements make vague,
uncertain, difficult-to-quantify exploratory activities less attractive (March, 1991; Levinthal &
March, 1993). As process management practices spread in an organization, the predominant
measures of effectiveness are increasingly focused on speed, efficiency, and reductions in costs or
waste. These dynamics lead to selecting innovations that leverage efficient, streamlined
18
manufacturing or distribution processes, or that utilize materials that are cost-effectively obtained
from streamlined purchasing processes. Such innovations build on existing firm capabilities and
will tend to be closer to existing products. As innovation development and selection processes are
linked with other improved processes, the focus shifts away from creating variation. A focus on
refining project selection processes to yield continuous improvement in the speed or success rates
of new products tips project selection toward those with greater predictability, lower variation, and
increased certainty. Thus, as the reach of process management activities extends further into
research, R&D project selection activities, or product development, radical innovation projects
increasingly give way to more certain, incremental activities (e.g. Henderson, et al, 1998). As
process intensity increases, even structures designed to produce radical innovations (e.g. heavy
weight teams or independent units) will increasingly produce innovations close to past innovations
(e.g. Tripsas and Gavetti, 2000; Sitkin and Stickel, 1996; Brown and Duguid, 2000).
Incremental innovation associated with process management reduces significant
exploratory activity and learning outside the existing technological trajectory (March, 1991;
Levinthal & March, 1993). The path-dependent nature of innovation suggests an even longer-term
effect of process management practices. Past innovative activities play a role in future innovation
by providing a firm with a knowledge base that allows it to absorb technological competence from
external sources (Cohen & Levinthal, 1990; Levitt & March, 1988). An organization that lacks
exploration in one period may be excluded from areas of future exploratory activity by the lack of a
relevant knowledge base (e.g. Teece et al., 1997; Cohen & Levinthal, 1990). As process
management techniques reduce a firm’s exploratory activities, its absorptive capacity will be
stunted. As such, a firm’s likelihood of subsequent innovations that incorporate new technologies is
reduced.
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Proposition 4: Increases in the extent of process management activities will lead to less radical
innovation.
Measures of customer satisfaction drive improvement efforts though an increasingly
coordinated system of processes. As improved manufacturing or distribution processes create
measurable improvements for existing customers, process management will drive innovations that
continuously improve products for existing customers. Emergent customer sets or market segments
often do not lend themselves to measurement or are highly uncertain (Von Hippel, 1988; Sitkin, et
al, 1994). Thus, exploratory innovation into new markets becomes increasingly unattractive
compared to the short-term, tangible, measurable successes from further improvement in existing
capabilities (Leonard, 1992; Christensen, 1998). Through process management practices, an
organization becomes increasingly skilled at producing outputs that leverage existing knowledge
about inputs, technologies, manufacturing techniques, or distribution channels. New innovations
that further utilize these capabilities will benefit from these efficiencies and lend themselves to even
more measurable successes. As these codified and tightly linked processes begin to further
influence the development and delivery of technological innovations, innovations for emergent or
new markets are squeezed out. This is likely to further exacerbate the tendency to innovate for
existing customers that Christensen and Bower (1996) observed in the disk drive industry.
Proposition 5: Increases in the extent of process management activities will lead to less innovation
that benefits new customers.
Exploration, Exploitation and Ambidextrous Organizations
Abernathy (1978) highlighted the inconsistencies between activities focused on productivity
improvements and cost reductions and those focused on innovation and flexibility. He questioned
whether it was possible for organizations to pursue both types of activities simultaneously. While
20
both types of activities are important for organizational survival, exploration and exploitation are
contradictory organizational processes (March, 1991; Adler, Goldoftas, & Levine, 1999; Teece et
al., 1997). How can organizations balance these potentially conflicting activities? While
organizational literature has stressed the importance of a balance between efficiency and
exploration, there are multiple points of view on how organizations actually strike this balance.
Hedberg, Nystrom and Starbuck (1976) suggest that organizations engage in multiple forms
of learning by switching back and forth between alternate organizational designs and by being
alternatively consistent and inconsistent in their actions. Similarly, Brown and Eisenhardt (1998)
suggest that dynamic capabilities are rooted in an organization’s ability to rhythmically switch
between more organic and more mechanistic structures. In contrast to switching between organizing
modes, others argue for creating loosely coupled organizations where the experimenting units are
highly buffered from the exploiting units (Weick, 1976; Levinthal, 1997b). For example,
Burgelman (1991) describes buffered induced and autonomous processes at Intel, while Leonard
(1995) describes experimenting units failing forward, distinct from units focused on more
incremental innovation. At the extreme, Christensen (1998) suggests that because of the disruptive
nature of the technology, experimenting units must be completely separated from exploiting units.
In these loosely coupled organizational forms it is unclear where the integration required to drive
streams of innovation is accomplished.
Ambidextrous or dual organizational forms are organizational architectures that build in
both tight and loose coupling simultaneously (Tushman and O’Reilly, 1998; Sutcliffe et al., 2000;
Bradach, 1997). These organizational forms are not loosely coupled, nor do they switch between
contrasting structures. Rather, ambidextrous organizations are composed of multiple tightly coupled
subunits that are themselves loosely coupled from each other. Within subunits, the tasks, culture,
individuals and organization arrangements are consistent, but across subunits, tasks and cultures are
21
inconsistent and loosely coupled. Strategic integration, the ability to drive innovation streams and
take advantage of contrasting organizational capabilities, occurs at the senior team level of analysis.
In contrast to Lawrence and Lorsch (1967), ambidextrous organizational designs are
composed of highly differentiated but weakly integrated subunits. While the exploratory units are
small and decentralized with loose cultures and processes, the exploitation units are larger, more
centralized with tight cultures and processes. Exploratory units succeed by experimenting, by
creating small wins and losses frequently (Sitkin, 1992). As process management tends to drive out
experimentation, it must be prevented from migrating into exploratory units and processes. In
contrast, exploitation units that succeed by reducing variability and maximizing efficiency and
control are an ideal location for the tight coordination associated with process management efforts.
These contrasting, inconsistent units must be physically and culturally separated from each other,
have different measurement and incentives, and have distinct managerial teams (Nonaka, 1988,
1991; Bradach, 1997; Sutcliffe et al., 2000; Tushman and O’Reilly, 1998). For example in HP’s
Scanner Division, the more routine flatbed scanners had a completely different organizational
architecture than the emerging consumer/knitting technology scanners. These distinct units were
physically separated from each other and had their own management teams.
Because dynamic capabilities are rooted in driving streams of innovation in a product class
(Teece et al., 1997; Morone, 1993), these highly differentiated but loosely coupled subsystems must
be strategically integrated by the senior team. Such strategic linkage is anchored by common
aspiration levels and a senior team that provides slack to the experimental subunits and holds the
differentiated units to fundamentally different selection and search constraints (Levinthal and
March, 1993; Levinthal, 1997b). To be effective, ambidextrous senior teams must develop their
own processes such that they can establish new forward-looking cognitive models for exploration
22
units, while allowing backward-looking experiential learning to rapidly unfold for exploitation units
(Gavetti and Levinthal, 2000; Louis and Sutton, 1989).
To create dual organizational structures, senior teams must develop techniques that permit
them to be consistently inconsistent as they steer a balance between the need to be small and large,
centralized and decentralized, and focused short-term and long-term simultaneously (Weick, 1995,
Hedberg et al., 1976; Gavetti and Levinthal, 2000). If the locus of strategic integration is low in the
firm, experimentation is stunted as the short-term successes of rapid exploitation drive out
exploration. If this integration is at too high a level in a multidivisional firm or done across
independent firms (e.g. Christensen, 1998), the underlying understanding of an innovation stream’s
dynamic is dampened and the ability to drive disruptive or radical change is restricted. For example
at HP, when the division’s general manager and his senior team provided the integration between
the unit’s two highly differentiated units, the division was able to effectively both explore and
exploit. However when the general manager was promoted, the consumer unit was spun out to a
sector executive. As this corporate executive did not deeply understand the competitive issues in the
scanning industry, he cancelled the more exploratory consumer unit when it did not show quick
profits.
While complex and politically difficult, ambidextrous organizational forms permit a firm
with highly differentiated units to drive process management with its associated variation-reduction
and control, as well as exploration and option creation. Experimental units provide variation from
which the senior team can learn about and, in turn, bet on the future, even as the exploitation units
build capabilities for short-term effectiveness (McGrath, 1999). These internally inconsistent
operating modes are strategically linked by the senior team through their aspirations, actions, and
through a limited set of core values (Hambrick, Nadler and Tushman, 1998). We depict such units
integrated through the senior team in Figure 2.
23
The impact of process management activities on innovation outcomes will be contingent on
organizational context. In ambidextrous organizational forms, process management activities drive
exploitative innovation even as they are buffered from intruding on exploratory innovation.
Proposition 6: In the context of an ambidextrous organizational form, increases in process
management activities will lead to greater increases in exploitative innovations, but will have less
effect on exploratory innovations.
PROCESS MANAGEMENT AND ORGANIZATIONAL ADAPTATION
Process management activities affect a firm’s technological capabilities. As technological
capabilities affect organizational fate, process management activities may also affect organizational
adaptation. Process management activities, through their impact on organizational processes, also
accentuate organizational inertia. This inertia, in turn, affects organizational responsiveness to
technological transitions. We now explore process management’s effects on organizational
adaptation in contrasting technological contexts.
Technology cycles
Organization environments are characterized by cycles of technological variation,
alternating between periods of incremental change and periods of rapid innovation (Sanderson &
Uzumeri, 1995; Tushman & Anderson, 1986, Abernathy & Utterback, 1978). Discontinuous
technological advances are often introduced by organizations outside an industry and trigger
periods of rapid innovation and change (Foster, 1986; Sull et al., 1997). This period of rapid
innovation, or era of ferment, ends when a dominant technology design emerges (Abernathy, 1978;
Anderson & Tushman, 1990; Tushman & Rosenkopf, 1992). With the emergence of a dominant
technological regime, the nature of technical change shifts from product innovation to a relatively
24
long period of process innovation and incremental refinements of the selected technology
(Abernathy & Utterback, 1978; Ettlie & Reza, 1992; Utterback, 1994). This period of incremental
technical change is, in turn, punctuated by the subsequent technological discontinuity. Thus in the
videocassette recorder (VCR) market, after a period of variation between alternative formats, VHS
became the industry standard. Once this standard emerged, subsequent innovation focused on
incremental improvements and cost reductions in VHS technology (Cusumano, 1994). Similar
innovation dynamics have been found in a range of industries including typewriters, televisions,
computers, disk drives, operating systems, browsers, and microprocessors (see Tushman &
Murmann, 1998; Van de Ven, Angle and Poole, 1989).
Adaptation in stable environments
The shifting nature of innovation requirements embedded in technology cycles require that
organizations develop capabilities to move with, if not shape, these cycles (Henderson, 1993;
Tushman & O’Reilly, 1997). During eras of incremental change, organizations that sustain
incremental innovation will be more effective than those that initiate variance-increasing
innovation.
As process management activities stimulate incremental innovation, these activities will benefit
organizations when technological environments are characterized by incremental refinements of an
existing technological design. Greater consistency and efficiency will be beneficial in periods of
incremental change. Rapid improvements in customer satisfaction while reducing waste and costs
is likely to further enhance organizational effectiveness.
Organizations with routines and procedures stabilized through process management
activities are thus likely to do well in stable or predictable contexts (Donaldson, 1995; Hannan &
Freeman, 1984). Indeed, Ittner & Larcker (1997) found that process management was positively
associated with performance in the stable auto industry but not in the more dynamic computer
25
industry. These environmentally contingent results are also supported by Sitkin et al., (1994) and
Sterman et al., (1997).
Proposition 7: Increases in the extent of process management activities will lead to better
performance in eras of incremental technological change.
Further, tighter coordination and repetition of activities in best practices increases an
organization’s speed and efficiency. As processes for identifying and addressing problems and
opportunities in the environment are further refined and routinized by process management’s
influence, decision-making and problem solving becomes faster (Miller, 1993). Increasing
organizational proficiency in recognizing and addressing recurring challenges leads to stable and
increasingly efficient communication channels and information filters (Henderson & Clark, 1990;
Tyre and Orlikowsky, 1994). These stable patterns of communication and interaction lead to the
development of norms, rules, and roles which further channel individual and group behavior into
streamlined activities that more efficiently carry out an organization’s mission (Hackman, 1992;
Nadler & Tushman, 1998; Repenning, 1999). Over time, stable procedures and norms also drive
increased demographic homogeneity within the organization, which further speed decision-making
and problem solving (Keck & Tushman, 1993; Williams & O’Reilly, 1998). For example, the rapid
screening and selection of innovations that leverage the efficient and tightly coordinated processes
for manufacturing and distribution allows for fast response to incremental technological change.
Proposition 8: Increases in the extent of process management activities will speed organizational
responsiveness during eras of incremental technological change.
26
Adaptation in turbulent environments
Conversely, the ability to rapidly develop new technological capabilities is especially
critical in environments characterized by rapid innovation and change (Tushman & Anderson,
1986; Brown & Eisenhardt, 1997; Teece et al., 1997). Periods of technological ferment are
characterized by substantial product variation and market uncertainty. Responding to
environmental uncertainty and variation requires similar variety within the firm (Daft & Weick,
1984). A reduction in variance-increasing activity within the firm prevents it from registering
and/or responding to environmental uncertainty (Burgelman, 1994). The variation reducing focus
of process management restricts the development of alternatives to respond to environmental
changes. For example, Sitkin and Stickel (1996) found that TQM efforts in R&D settings not only
bred distrust and dissension across the firms, but they also drove out variability in R&D.
Organizational outcomes are affected by delayed or inadequate responses to environmental
turbulence (Meyer, Brooks & Goes, 1990; Henderson, 1993). For example, IBM’s relatively slow
response to personal computers resulted in the successful entry of other less-inertial competitors
that fundamentally changed the nature of the computer industry (Mitchell, 1989). Slow or
incompetent responses to environmental shifts prevented incumbents from retaining their leadership
positions in the disk drive (Christensen & Bower, 1996), photolithographic equipment (Henderson
& Clark, 1990), and watch industries (Glassmeier, 1991), among others (Tushman & O’Reilly,
1997). Similarly, TQM practices have been associated with lower performance in the dynamic
computer industry environment (Ittner & Larcker, 1997; Sitkin et al., 1994).
Proposition 9: Increases in the extent of process management activities will lead to lower
performance in eras of technological ferment.
27
The same practices that help an organization learn and achieve efficiency more quickly can
also impede an organization’s adaptation to major technological transitions (Levinthal, 1991,
1997a). Over time, as process management activities permeate an organization, the increasingly
stable, tightly-linked, and efficient routines that span an organization make anything more than
incremental organizational change difficult (Hannan & Freeman, 1984). Organizations that have
honed their skills in making incremental changes in processes and products develop momentum that
works to impede major change (Miller & Friesen, 1980), or transforms core competencies into
rigidities (Leonard-Barton, 1992).
Case studies of process management efforts and simulation studies of problem solving
dynamics provide evidence of this tendency for increased resistance to change resulting from
process management activities. Following successful implementation of a process improvement
program, Analog Devices’ financial performance fell far below the industry average. The company
subsequently underwent a major reorganization, including a reorientation of its product
development efforts away from its core business and into emerging markets (Sterman et al., 1997:
505). While process improvement efforts were underway, internally generated innovations
necessary for successful performance in a changed environment were not executed. Extending this
work, Repenning (1999) argued that over time process improvement activities trigger cycles of
increased managerial control and bureaucratic procedures, which undermine initial gains.
Similarly, Alcoa’s CEO’s frustration with the slow pace of continuous improvement might also be
explained by the increased inertia associated with practices focused on incremental change and
improvement (Kolesar, 1993). Finally, Levinthal’s (1997b) modeling of adaptation dynamics finds
that tightly coupled organizations are subjected to heightened inertia and high failure rates in
changing environments. Because organizational inertia is so strong, successful firms moved through
environmental change by initiating reorientations.
28
Thus, the influence of process management techniques on integrating and coordinating
processes can drive rapid exploitation and efficiency, but also longer-term momentum and
resistance to change. While tightly coordinated and streamlined processes in product development
and manufacturing may allow for rapid response with extensions and enhancements of current
capabilities, the associated inertia is likely to make such an organization slower to respond to
subsystem, linking, or radical technological change.
Proposition 10: Increases in the extent of process management activities will slow organizational
responsiveness during eras of technological ferment.
Moderating effects of ambidextrous organizational forms
To maximize short-term performance and survive in periods of incremental technology
change, firms need to accentuate incremental change, momentum, and inertia associated with
process activities. Multiple functions and activities must be seamlessly linked throughout the
organization to efficiently deliver to and satisfy existing customers. Without this concerted
refinement of capabilities, firms may not survive long enough to be faced with or initiate
technological change. But process intensity also stunts incumbents’ ability to take advantage of
internally generated opportunities for discontinuous change (Cooper & Smith, 1992; Foster, 1986).
For example, even though Swiss producers invented the quartz movement, it was American and
Japanese firms that actually introduced this technological discontinuity (Glassmeier, 1991). Thus,
process management provides only one side of the dynamic capabilities story. Firms that achieve
success with process management are likely to increase their commitment to process intensity and
broaden its influence to ever more processes. Yet, firms must be capable of forgetting their past,
breaking rules and traditions, and increasing variation in the service of architectural and/or radical
innovation or in meeting the needs of new customer segments (Hedberg et al., 1976; Weick, 1995).
29
As competencies are hard to develop and the rates of environmental change are substantial,
dynamic capabilities are not rooted in sequential attention or rhythmic pacing (e.g. Brown &
Eisenhardt, 1998), but rather in exploiting and exploring simultaneously (Sutcliffe et al., 2000;
Tushman & O’Reilly, 1997).
Over time, process management crowds out exploratory innovation. A decrease in
exploratory behaviors stunts an organization’s ability to adapt in environments characterized by
technological ferment and uncertainty. Ambidextrous organizational forms isolate process
management activities in subunits where reducing variation and increasing control is strategically
vital. An ambidextrous organizational design allows for uncoupling the variance-decreasing units
and activities from those units where variation is strategically vital. For example at CibaVision, a
single senior team created highly differentiated subunits where one subunit pursued low cost lenses
even as another subunit developed a substitute (disposable) lens. Similarly at Ciba’s Crop
Protection Division, a single general manager built multiple internally inconsistent subunits in order
to drive an innovation stream to keep plants healthy. One unit based in Switzerland focused on the
efficient development of chemical based fungicides. Anchored in molecular biology, another unit
based in the United States, was focused on the development of a seed that would grow plants that
would not need fungicides. If this latter unit were successful, it would cannibalize the chemical
based unit in Switzerland (Tushman and O’Reilly, 1997). These experimental, variance-creating
units provide the options from which a firm’s senior managers can select to shape an evolving
innovation stream. These ideas suggest modifications in propositions 7 and 8.
Proposition 11: In the context of an ambidextrous organizational form, increases in process
management will be positively associated with responsiveness and performance in eras of
incremental technological change, but will have less effect on responsiveness or performance in
eras of technological ferment.
31
DISCUSSION
Twenty years after Abernathy’s admonition about the productivity dilemma, the ideology of
process management has ever increased its influence on organizations. Over the past two decades,
there have been substantial institutional pressures for firms to adopt TQM, QFD, BPR, get ISO
9000 certified, or compete for the Baldrige or Deming awards. While the symbolic importance of
process management may be important, its substantive benefits are much less clear. Our review
suggests that inconsistent outcomes of process management practices can be reconciled with
attention to the context in which these practices are employed. Process management activities are
positively associated with organizational effectiveness in a limited set of conditions: during periods
of stability or incremental change, and for incremental innovation or existing customers. In contrast,
in a much wider set of conditions, during eras of ferment, in turbulent environments, for new
customer segments, and for architectural, modular and radical innovation, process management
activities are less conducive to organizational effectiveness. Under these frequently occurring
conditions, process management activities build resistance to change, momentum, and in turn,
inhibit organizational variability. These inertial outcomes of process management activities stunt a
firm’s ability to adapt.
But organizations must outcompete rivals both in the short and long run. Organizations that
must meet current customer requirements and new customer demands do not have the luxury of
choice—they must deal with the inconsistent demands of both exploitation and exploration. Process
management capabilities speed exploitation and efficiency and may allow organizations to survive
in the short run, but simultaneously dampen the exploration required for longer-term adaptation.
Ambidextrous organizational forms reconcile these paradoxical demands by building internally
32
inconsistent architectures within a single organization. These contrasting architectures retain the
benefits of experimentation and variability along with the benefits of exploitation and process
control. These tightly coupled, internally inconsistent architectures must be tactically uncoupled.
However, to drive streams of innovation, these inconsistent units must be strategically integrated by
the senior team. It may be that heterogeneous senior team capabilities coupled with complex
organizational architectures are at the root of dynamic organizational capabilities.
Implications for future research
Our model provides a starting point for future research on how process management
practices affect firm dynamic capabilities. We advance testable propositions about the effects of
these institutionally mandated practices on both technological innovation and adaptation.
Moreover, our propositions provide a base for understanding how the effects of process
management practices unfold over time in an organization. Future empirical work to test and
modify these propositions will benefit from incorporating a longitudinal perspective and assessing
how increases in such activity affect organizations, rather than comparing differences associated
with nominal adoption of quality programs across firms.
While our ideas may be relevant for all types and sizes of firms, they apply most readily to
firms whose strategies include both exploitative and exploratory innovation. Our discussion
concerns the effects of increased process management intensity for such firms already challenged
with balancing such activities. Our propositions are less relevant for firms whose strategies focus
either solely on exploitation or exploratory innovation. In addition, these ideas may not apply to
small startups in their initial phases, not yet challenged with balancing exploitation of their initial
project with the exploratory development of subsequent products. Finally, these ideas may not
apply to service organizations. Future research could further test the boundaries of our
propositions.
33
Our review also suggests that to more fully understand the relations between process
activities and organizational outcomes, research and theory in process management, organizations,
and strategy need to be more explicitly coupled. There is much to be gained by integrating these
perspectives on the phenomena and by taking a contingency approach to process activities and
organizational outcomes. Technological, environmental, and structural conditions clearly moderate
the relations between process activities and organizational outcomes. If dynamic capabilities require
exploitation as well as exploration, more complex organizational forms are required which, in turn,
demand more complex senior team capabilities. This review, then, indicates the potential in
exploring more deeply the relations between organizational architectures, senior team behaviors,
innovation streams, and process management.
Implications for managerial practice
Finally, our review has implications for practice. The powerful institutional pressures to
adopt process management practices have cut across industries and firms, regardless of age or size.
Despite the coercive pressure and promise of legitimacy, managers need to exercise great care in
when and where to adopt these practices. While in stable, technologically certain settings these
practices may be productive, in uncertain or technologically complex contexts, these practices may
be quite counterproductive. Indeed, the utility of process management practices may be much more
constrained than the popular literature suggests. Process management and its associated
technologies and philosophies are conservative and resistant to anything but incremental or
competence-enhancing innovation. This variance-hostile focus on incremental change and existing
customers, from the senior team to lower levels of the firm, severely stunts a firm’s dynamic
capabilities. It is the promise of ambidextrous organizational forms and heterogeneous senior teams
that provide the possibility of building organizations capable of both celebrating process activities
as well as limiting their damage.
35
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Extent of process
Management
Activities
•Mapping processes
•Streamlining processes
•Adhering to
Improved processes
Exploration:
•Architectural innovation P3
•Radical innovation P4
•Innovation for emergent P5
customer sets
Exploitation:
•Incremental innovation P1
•Innovation for
current customer sets P2
Adaptation:
•Responsiveness
P8, P10
•Performance
P7, P9
Process Management Technological Innovation
Adaptation
Technology cycles
•Incremental technological
change
•Non-incremental technological
change
Environment
FIGURE 1 – PROCESS MANAGEMENT’S EFFECTS ON TECHNOLOGICAL INNOVATION AND ADAPTATION
Organizational Form
Ambidextrous or dual
organization
•Tight coupling within subunits
•Loose coupling across subunits
P6
P11
45
Ambidextrous Senior Teams
Multiple strategies
Common vision
Loosely-coupled
subunits
Mgt Team
Tasks
Culture
Organization
arrangements
Individuals
Mgt. Team
Tasks
Culture
Organization
arrangements
Individuals
Mgt. Team
Exploitation
Ciba Crop/Tilt
HP/Flatbed scanners
Ciba Vision/Low cost lens
Exploration
Ciba Crop Protection/
genetically engineered
seeds
HP/Knitting scanners
Ciba Vision/Disposable
lenses
Sales
FIGURE 2
Ambidextrous Organizational Form: Exploitation and Exploration Within Business Units
Exploration
Selection Environments
Exploitation
Selection Environments
