Int. J. Technology Management, Vol. 61, No. 1, 2013 1

Copyright © 2013 Inderscience Enterprises Ltd.

Continuous innovation: towards a paradoxical, ambidextrous combination of exploration and exploitation

Antonella Martini* Department of Energy and System Engineering (D.E.S.E.), University of Pisa, Largo Lucio Lazzarino, 56100, Pisa, Italy E-mail: a.martini@ing.unipi.it *Corresponding author

Bjørge Timenes Laugen UiS Business School, University of Stavanger, Kjell Arholms Gate 39, 4036 Stavanger, Norway E-mail: bjorge.laugen@uis.no

Luca Gastaldi and Mariano Corso Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Via Lambruschini 4b (Building 26b), 20156, Milano, Italy E-mail: luca.gastaldi@polimi.it E-mail: mariano.corso@polimi.it

Abstract: The Continuous Innovation Network (CINet) is a global network studying the innovation processes through which the synergistic combination between exploratory and exploitatory activities fosters a synergistic combination of operational effectiveness and strategic flexibility – allowing firms to achieve superior performance. This paper presents the theoretical field of continuous innovation as an extension of the intersection of three research streams – namely exploration-exploitation, organisational ambidexterity and paradoxical thinking. Moreover, it presents four papers from the International CINet Conference held in Zürich (CH), from the 5th to the 7th of September 2010.

Keywords: continuous innovation; exploration; exploitation; organisational ambidexterity; paradox; continuous improvement; CIM.

Reference to this paper should be made as follows: Martini, A., Laugen, B.T., Gastaldi, L. and Corso, M. (2013) ‘Continuous innovation: towards a paradoxical, ambidextrous combination of exploration and exploitation’, Int. J. Technology Management, Vol. 61, No. 1, pp.1–22.

Biographical notes: Antonella Martini is an Associate Professor of business economics and organisation at the Faculty of Engineering, University of Pisa. She graduated in business economics and obtained her PhD in Managerial

2 A. Martini et al.

Engineering in 2000. Involved in national and international research projects on innovation and knowledge management, she is member of the international board of the CINet and author of more than 70 international publications. Her research interests refer to the role of ICT in innovation (enterprise 2.0, social software, community management, co-creation) and ambidexterity.

Bjørge Timenes Laugen is an Associate Professor of strategy and innovation at UiS Business School at University of Stavanger, Norway. His main research interest is the link between new product development, production, strategy, organisational development and continuous innovation.

Luca Gastaldi is a Researcher at the Faculty of Systems Engineering, Politecnico of Milano. He is the Research Director of the Observatory on ICT in Healthcare. His main research interests are ICT strategy, ICT governance and ICT management.

Mariano Corso is a Full Professor of management engineering in the Faculty of Systems Engineering, Politecnico of Milano. He is the Scientific Director of the Observatory on HR 2.0 and ICT Strategic Sourcing. He is the author or co-author of more than 100 publications at the international level.

1 Introduction

The growth of competitive pressure over markets forces organisations to be excellent not only in the accomplishment of the needs of today’s customers but also in the anticipation of tomorrow’s requests (Corso et al., 2009). Moreover, evidence (Eisenhardt et al., 2010) indicates that many firms inhabit increasingly dynamic environments, where destabilising forces – such as technical innovation, globalised competition, and entrepreneurial action – operate with amplified frequency (Schreyögg and Sydow, 2010; Wiggins and Ruefli, 2005). As a result, organisations in all industries have to continuously reconfigure their structures and processes, sustain stability through replication and optimisation, ensure steady performances, and, at the same time, generate innovations in order to meet or create future demands (Levinthal and March, 1993; Grant, 1996; Floys and Lane, 2000; Corso and Pellegrini, 2007; Eisenhardt et al., 2010).

With these premises as a starting point, the continuous combination of exploratory and exploitatory activities is increasingly becoming a source of sustainable competitive advantage (He and Wong, 2004; Jansen et al., 2006; O’Reilly and Tushman, 2008; Smith et al., 2010), and, thus, an essential lens for interpreting various behaviours and outcomes within and across organisations (Lavie et al., 2010; Eisenhardt et al., 2010).

In his seminal work, March (1991) acknowledged the fundamental distinction between exploration and exploitation. Exploration involves search, variation, risk-taking, experimentation, play, flexibility, discovery and innovation. Exploitation can be defined as refinement, choice, production, efficiency, selection, implementation and execution. Both types of activities are essential for organisational prosperity, but entail inherent contradictions that need to be managed (Tushman and O’Reilly, 1996). Initially, scholars focused on a narrow aspect of this framework to underscore the merits of new knowledge development versus refinement of existing knowledge (Levinthal and March, 1993). Over time, however, the exploration-exploitation framework has been applied quite broadly to

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portray a wide range of phenomena that encompass various manifestations of specialisation and experience, on the one hand, and diversity and experimentation, on the other (Lavie et al., 2010).

The result of this expansion is that the dichotomy between exploration and exploitation is constituting one of the main topics analysed by another theoretical framework that, historically, has been interested in understanding how organisations deal with contrasting and conflicting goals – reconciling diverging tensions within organisational and inter-organisational domains. In a pioneering paper, Duncan (1976) has introduced the concept of organisational ambidexterity, referring to the organisational structures that help to simultaneously deal with contradictory elements. In addition, organisational ambidexterity has embraced an extremely broad spectrum of concepts from many other research streams (Cantarello et al., 2010), and now includes both

1 the initial approaches arguing the necessity of mutually exclusive solutions to support either one or the other contradictory choices (Lubatkin et al., 2006; Jansen et al., 2006)

2 the latest approaches highlighting the necessity to embrace the dichotomous solutions through integration processes (Gibson and Birkinshaw, 2004; Bingham et al., 2007; Ozcan and Eisenhardt, 2009).

Though some authors (e.g., Schreyögg and Sydow, 2010) argue that these two approaches have to be kept separate, others (e.g., Eisenhardt et al., 2010; Boumgarden et al., 2012) see not only a convergent process in act, but also the possibility to combine the different approaches, in order to exploit the respective strengths while avoiding the related weaknesses.

One common point on which all authors seem to agree is the necessity to embrace a paradoxical thinking (Luhmann, 1995; Weick, 2000; De Rond and Bouchikhi, 2004; Smith and Lewis, 2011) in order to solve the dilemmas that most organisations are tackling – especially the exploration-exploitation one (Andriopoulos and Lewis, 2009, 2010). Paradox studies offer a way to cope with contradictory yet interrelated elements that exist simultaneously and persist over time (Lewis, 2000). The basic idea is to use a dynamic equilibrium model – assuming constant motion across opposing forces (Smith and Lewis, 2011) with a continuous pull in opposing directions (Weick and Quinn, 1999; De Rond and Bouchikhi, 2004; Smith and Lewis, 2011).

Starting from these considerations, an increasing number of researchers is progressively focusing on this dynamic process through which it is possible to combine exploratory and exploitatory activities (Magnusson and Martini, 2008) – adopting a comprehensive perspective routed into the innovation management literature (Corso et al., 2008). These researchers are part of the Continuous Innovation Network (CINet), a global network set up in 2000 to bring together researchers and industrialists working in the field of continuous innovation (CI) (for further details, refer to http://www.continuous-innovation.net). CINet members study the innovation processes through which the ongoing interaction between exploration and exploitation fosters a synergistic combination of operational effectiveness and strategic flexibility – allowing firms to achieve superior performance (Boer, 2001; Boer et al., 2006; Magnusson and Martini, 2008). Born in the field of product development (Bartezzaghi et al., 1997), CI has rapidly embraced a broader perspective (Boer and Gertsen, 2003) that has spanned organisational boundaries to reach the topic of innovation management (Boer et al.,

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2006). In doing this, however, CI has maintained a focus on the ambidextrous combination of exploration and exploitation through a continuous cross-disciplinary, cross-functional, and evolutionary process (Corso, 2002), which provides a paradoxical perspective to analyse the tensions characterising the dichotomous nature of exploration and exploitation. In fact, CI is positioned at the intersection of the three aforementioned theoretical lenses (Figure 1), which are not only highly overlapped, but also with boundaries that tend to remain blurred. If further research is necessary to clarify these boundaries, the current interrelatedness is so intense that the isolation of the contributions provided by each stream to the CI literature is not a simple operation (Cantarello et al., 2012, 2010).

Figure 1 CI at the intersection of different theoretical lenses

Paradoxical thinking

Exploration-exploitation

Organisational ambidexterity

Continuous Innovation

The remainder of the paper is structured into five sections. Sections 2 to 4 emphasise the peculiarities characterising each theoretical lens, and outline the challenges that lie ahead calling for further research in the CI literature. Section 5 frames in a comprehensive outlook the different contributions previously raised – emphasising not only the importance of organisational processes as well as their coordination, but also the evolution that has characterised the literature on CI lever. Finally, the last section presents an overview of the four articles in this special issue.

2 Exploration-exploitation framework

A central premise of March (1991) concerns the inherent dichotomy between exploration and exploitation. The opposing nature of these activities derives from several stylised facts about (Lavie et al., 2010)

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1 resource-allocation constraints (Holmqvist, 2004; Leonard-Barton, 1992; March, 1991)

2 organisational inertia (Lewin et al., 1999; Hannan and Freeman, 1977, 1984; Sorensen and Stuart, 2000)

3 desirable organisational outcomes (Benner and Tushman, 2002; Levinthal and March, 1993),

all of which emphasise the tensions produced by a set of antecedents of exploratory rather than exploitatory behaviours (Lavie et al., 2010). As depicted in Figure 2(a), the combined effect of these forces tends to open up the gap between exploration and exploitation axes to the point where they becomes diametrically opposed – leaving no choice but to move in one direction or the other [Figure 2(b)].

Figure 2 (a) antecedents of the tensions between exploration and exploitation, and (b) divergence towards which the system tends without control over these tensions

Tensions

Balance

Increased tensions

Organizational Inertia

Resource-allocation constraints

Desirable organizational outcomes

Environmental antecedents

Organizational antecedents

Managerial antecedents

(a)

Exploitation . . Exploration

(b)

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Under performance targets to be accomplished, organisations strive more or less intentionally toward a balance between exploratory and exploitatory activities (Corso and Gastaldi, 2011) – focusing on reducing the natural divergence toward which the system drifts without control [Figure 2(b)]. The final result of this operation is the creation of a space between exploration and exploitation axes in Figure 2(a).

Empirical research has produced limited or mixed evidence on the causes of exploration and exploitation. According to Lavie et al. (2010), the main antecedents of these two concepts can however be underlined at three different levels:

1 environmental

2 organisational

3 managerial.

At these levels very few factors have empirically showed the production of consistent effects on exploration rather than exploitation (Lavie et al., 2010). Research also offers little insights into the tendencies to balance the conflicting pressures for these exploration and exploitation (Mom et al., 2009; Raisch and Birkinshaw, 2008; Siggelkow and Levinthal, 2003). An overall examination reveals that the literature has mostly concentrated on the forces that drive organisations toward imbalance between the two activities (e.g., Jansen et al., 2006).

A fundamental conjecture in the exploration-exploitation literature concerns the impact of these activities on organisational performance. Even if scholars are studying this topic since the exit of the germinal paper of March (1991), the relationship between exploration, exploitation and organisational performance is still not straightforward (Auh and Menguc, 2005; Siggelkow and Rivkin, 2006; Lavie et al., 2011).

The general idea is that both exploration and exploitation have the potential to enhance organisational performance. However, the likelihood and the nature of such gains vary across activities, and depend not only on the interplay of organisational (e.g., Lin et al., 2007) and environmental (Venkatraman et al., 2007) contingencies, but also on the specific approach adopted to balance exploration and exploitation (Lavie et al., 2011). From this viewpoint, more empirical research is needed to reveal the multifaceted performance implications of exploration and exploitation.

The theoretical framework of exploration and exploitation is still in its developmental phase, and there are three challenges that call for further research (Lavie et al., 2010). The first is related to the generalisability of the findings. In this case the literature is looking for the best conceptualisation, operationalisation, and context in which to study exploration and exploitation (Lavie and Rosenkopf, 2006). The second is associated with the debates that the literature presents regarding not only the best model to balance exploration and exploitation, but also the importance of intentionality in managing this balance (Vera and Crossan, 2004). As a matter of fact, a final concern is whether or not organisations actually benefit from overcoming the exploration-exploitation dichotomy, and why some organisations tend to pursue exploration while others opt for exploitation (Smith and Tushman, 2005; Andriopoulos and Lewis, 2009; Lavie et al., 2010, 2011).

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3 Organisational ambidexterity

In the anthropological literature, ambidexterity describes the individuals’ power of using both ‘hands’ alike (Cantarello et al., 2010). Duncan (1976) is the first researcher who has applied the concept of ambidexterity within the organisational domain. According to him, ambidextrous organisations succeed in managing conflicting demands. Starting from this initial definition, the concept of ambidexterity has been extensively used to broadly refer to an organisation’s ability to perform differing and often competing, strategic activities at the same time (Simsek et al., 2009).

These competing activities have varied from achieving both search and stability (Rivkin and Siggelkow, 2003), flexibility and efficiency (Adler et al., 1999), search scope and depth (Katila and Ahuja, 2002), exploitative and explorative learning (Kang and Snell, 2009), alignment and adaptability (Gibson and Birkinshaw, 2004), incremental and discontinuous innovations (Benner and Tushman, 2003; Smith and Tushman, 2005), exploratory knowledge sharing and exploitative knowledge sharing (Im and Rai, 2008) and pro-profit and pro-growth strategies (Han, 2005). However, research on ambidexterity most prominently utilises March’s (1991) notions of exploitation and exploration (Simsek et al., 2009).

Even if Duncan is widely considered the father of organisational ambidexterity, the main contributions to the conceptualisation of the theme have come from Tushman and O’Reilly (1996), who refer to the multiple structures that a firm has to adopt in order to cope with the contradictory activities it faces. Starting from this contribution, embedded in organisational design studies, the debate on ambidexterity has progressively extended its roots in other theoretical streams.

The extensive literature analysis performed by Cantarello et al. (2010) emphasises that what all the different viewpoints have in common is that organisational ambidexterity should be conceptualised as a dynamic capability (He and Wong, 2004; Gupta et al., 2006; Antonacopoulon, 2007; O’Reilly and Tushman, 2008; Eisenhardt et al., 2010), used to simultaneously reconcile contradictory and divergent activities (Cantarello et al., 2010).

There are two other interesting elements emerging from the analysis (Cantarello et al., 2010). First, only a small proportion of the studies on ambidexterity use multiple data sources and multiple respondents – exposing the findings to the issues related to the presence of common method variance (Podsakoff and Organ, 1986). Second, the majority of the papers

1 make use of survey research strategies

2 focus on the firm as the unit of analysis

3 try to link a stated ambidextrous status to the firm’s performance.

Only few qualitative papers (e.g., Andriopoulos and Lewis, 2009, 2010) analyse the organisational mechanisms at the basis of the ambidexterity construct.

As it has been already shown for exploration and exploitation, when organisations face opposing activities that simultaneously push in opposing directions, more or less intentionally they try to reconcile the related conflicting pressures through a balancing process (Smith and Tushman, 2005). This one does not denote a mediocre split or bland comprise, but truly excelling at both the diverging pressures (Atuahene-Gima, 2005).

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If on the one hand, there is currently somewhat a consensus about the merits of this balancing process (Uotila et al., 2009; Lavie et al., 2010; Cantarello et al., 2012, 2010), on the other, there is little agreement on the means by which organisations perform the balance (Adler et al., 2009; Simsek, 2009). As a matter of fact, from this perspective literature is divided between two approaches (Eisenhardt et al., 2010; Schreyögg and Sydow, 2010), which differ in terms of their emphases on differentiation rather than integration in tackling the diverging alternatives (Andriopoulos and Lewis, 2009).

On one side there are the differentiation approaches to ambidexterity – the historical approaches proposed by academics to cope with the diverging activities. These approaches achieve an ambidextrous state stressing the usage of structure and strategy in order to enable differentiation among organisational units. Segregated efforts target either one or the other dichotomous activities (Andriopoulos and Lewis, 2009).

On the other side there are the integration approaches to ambidexterity, which – mostly rooted in organisational learning and innovation management literature streams – utilise behavioural, cognitive and social means to integrate the diverging activities (Gibson and Birkinshaw, 2004; Eisenhardt et al., 2010).

Both the differentiation and integration approaches to ambidexterity have weaknesses. Pure differentiation approaches provide different forms of separation that are likely to result in sharp interfaces, ambiguous priorities, and a lack of common orientation (Schreyögg and Sydow, 2010). Moreover, the differentiation solutions raise fundamental concerns about the possibility to achieve an efficient integration among

1 different units (organisational differentiation)

2 different instances of the same unit (temporal and domain differentiation),

given sharply increasing coordination costs (Lewis, 2000). Pure integration approaches, on the other side, not only assume extremely flexible behaviours, diffuse throughout the system (e.g., group, organisation, or industry) and which are often unrealistic (Schreyögg and Sydow, 2010), but also a level of decision interrelatedness that is hardly achievable without having first safe-guarded the development of a cognitive maturity within each unit of the system.

Thus, pure differentiation and integration approaches are mostly ineffective in providing an ambidextrous capability. From this perspective, many authors (Gibson and Birkinshaw, 2004; Smith and Tushman, 2005; Andriopoulos and Lewis, 2009; Lavie et al., 2010; Eisenhardt et al., 2010) suggest combining the approaches – in an attempt to avoid the respective weaknesses. However, there is no empirical evidence on either the presence of this convergence or the effectiveness of the combination of the approaches to ambidexterity: most research offers conceptual, anecdotal or single case studies – inhibiting more holistic empirical insights (e.g., Atuahene-Gima, 2005). Moreover, recent studies underline the extreme difficulty in determining and following the ongoing mix of differentiation and integration approaches that best fit the peculiar setting in which the organisation aims to achieve ambidexterity (Andriopoulos and Lewis, 2009). Finally, even if literature tends to be split between the aforementioned approaches, there are other factors that influence the propensity of a system and/or one of its units to think and act ambidextrously. For example, the context in which ambidexterity is searched (Gibson and Birkinshaw, 2004) or the leadership style of organisation management (Smith and Tushman, 2005).

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Further research is needed to understand the different factors moderating the effectiveness of differentiation and integration approaches, as well as their support in achieving and maintaining an ambidextrous state (Corso and Gastaldi, 2011).

4 Paradoxical thinking

Considering the issues associated to both differentiation as well as integration approaches, Schreyögg and Sydow (2010) suggest to favour an alternative conceptualisation where the concurrent balance of the contradictory activities is achieved and maintained through paradoxical thinking (Luhmann, 1995; Bouchikhi, 1998; Weick, 2000; Lewis, 2000; De Rond and Bouchikhi, 2004; Andriopoulos and Lewis, 2009).

Discussion of paradox from the late 1980s (Cameron and Quinn, 1988; Poole and Van de Ven, 1989; Smith and Berg, 1987) has motivated research in such domains as change (e.g., Seo et al., 2004), communication and rhetoric (e.g., Jarzabkowski and Sillince, 2007), identity (e.g., Fiol, 2002), and leadership (Smith and Tushman, 2005). The latest and most promising applications, however, seem to be the ones in both the exploration-exploitation as well as organisational ambidexterity (e.g., Andriopoulos and Lewis, 2009, 2010; Smith and Lewis, 2011) domains.

Even if immersed in a pre-paradigmatic phase (Kuhn, 1970), where a lack of conceptual clarity and theoretical coherence is still registered in most of the literature (Smith and Lewis, 2011), paradox thinking proposes a provocative and powerful lens through which to analyse the exploration-exploitation dilemma.

Given the pre-paradigmatic stage of paradox theories, there are many definitions available on this concept in the literature (for a review, see Lewis, 2000). Recently, Smith and Lewis (2011) have proposed the following encompassing one: a paradox is a set of contradictory yet interrelated elements that exist simultaneously and persist over time. Such elements seem logical when considered in isolation, but irrational, inconsistent, and even absurd when juxtaposed.

The distinguishing characteristics of paradox are illustrated by the Taoist symbol of yin yang (Lewis, 2000). First, paradox denotes elements, or dualities, that are oppositional to one another yet are also synergistic and interrelated within a larger system (Cameron and Quinn, 1988). Boundaries separating these elements highlight their distinctions, reinforced by formal logic that encourages either/or thinking and accentuates differences. The external boundary integrates the overall system and highlights synergies. Yet this external boundary also binds and juxtaposes opposing elements and amplifies their paradoxical nature – creating a dynamic relationship between dualities and ensuring their persistence over time (Smith and Lewis, 2011).

The underlying idea beyond paradox management is that exploration and exploitation – as well as the other forces tackled by ambidextrous organisations – represent overarching demands, spurring nested tensions throughout the organisation (Andriopoulos and Lewis, 2009). This last one tends toward homogeneity – finding comfort as it develops mindsets and routines supporting one activity, and escalating its effort in its preferred mode to the neglect of the other (Smith and Tushman, 2005).

As a result, organisation becomes trapped within a set of reinforcing cycles that, if on one hand serve as a trigger for change, on the other hand perpetuate and exacerbate the tensions between the dichotomous alternatives – making both their management, as well

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as the potential re-alignment choices in the relative differentiation and/or integration approaches more difficult (Lewis, 2000).

Paradox thinking assumes that tensions not only persist within complex and dynamic systems (like organisation), but also that – if adequately harnessed – these tensions can be beneficial and powerful (Andriopoulos and Lewis, 2010) because the juxtaposition of coexisting opposites intensifies experiences of tension, challenging actors’ cognitive limits, demanding creative sense making, and seeking more fluid, reflexive, and sustainable management strategies (Smith and Lewis, 2011). In other words, managing a paradox means capturing its enlightening potential (Lewis, 2000). Smith and Lewis (2011) suggest two, often interrelated, means of managing a paradox:

• acceptance: learning to live with the paradox, passively or proactively avoiding continuous debates on its nature that might spark vicious cycles (Schneider, 1990; Clegg, 2002; Beech et al., 2004; Luscher and Lewis, 2008)

• resolution: facing the paradox, discussing the related tensions, and finding a means of meeting competing demands or considering the diverging ideas simultaneously (Poole and Van de Ven, 1989; Smith and Lewis, 2011)

If literature agrees on acceptance means, there is not a unique idea regarding resolution strategies. For example, while Poole and Van de Ven (1989) suggest

1 spatial separation

2 temporal separation

3 synthesis;

others explore cognitive shifts that reframe the relationship between polarised elements (Bartunek, 1988) – clarifying mixed messages that invoke contradiction (Argyris, 1988), or meta-communicating about tensions to identify both/and possibilities (Seo et al., 2004).

With these debates in mind, Smith and Lewis (2011) propose the holistic model depicted in Figure 3, which describes both the inherent and socially constructed features of organisational tensions, and integrates management strategies of acceptance and resolution. The metaphor of dynamic equilibrium is the model’s key feature.

According to the model, organisations emerge as leaders respond to foundational questions, constructing boundaries that foster distinctions and dichotomies (Ford and Backoff, 1988). The tensions emanating through the act of strategising persist entangled in the organisational processes because of the complex and adaptive nature of organisational systems (Cyert and March, 1963). Even as tensions persist, they may remain latent until environmental factors – namely plurality, change and scarcity (Smith and Lewis, 2011) – or an individual paradoxical cognition accentuate the oppositional and relational nature of dualities. Once rendered salient, paradoxical tensions spur responses that – according to paradox studies (Lewis, 2000) – can be both positive and negative. The former are connected first, with the acceptance of the paradox (fostered by both the individual and the organisational factors depicted in Figure 3), and, then, its resolution through an opportune mixture of the aforementioned differentiation and integration approaches. The latter stem from such factors as both cognitive and behavioural forces for consistency, emotional anxiety and defensiveness, as well as organisational inertial forces. Together, these individual and organisational forces fuel a

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negative reinforcing cycle that not only forces the focus on a single alternative, but also generate further latent tensions within the organisational processes.

Figure 3 Dynamic-equilibrium model to manage a paradox

IF: Paradoxical cognition

EF: Plurality, change, scarcity

Acceptance

IF: Emotional equanimity, cognitive complexity

OF: Dynamic capabilities

Management strategies

Salient tensions Resolution

Negative reinforcing cycle Latent tensions

IF: Drive for consistency and defensiveness

OF: Inertial forces

Organisational process

Notes: IF = individual factors and OF = organisational factors.

It is important to note that – given the interrelatedness of most organisational tensions (Andriopoulos and Lewis, 2009) – the persistence of conflicting forces and purposeful, cyclical responses over time allows the continued emergence of tensions (Lewis, 2000), which – once rendered salient – will require further responses.

The theoretical framework of paradox thinking is still in its developmental phase, and there are three main challenges that call for further research. First, it is necessary to test the effectiveness of the dynamic model developed by Smith and Lewis (2011) in describing the processes that are applied by organisations to cope with their paradoxical activities.

Second, there are a series of methodological issues to be faced. Paradox studies encourage methodological strategies that can

1 investigate tensions

2 enable contextual richness

3 consider more cyclical dynamics (Lewis, 2000).

The studies that are currently applying the paradox concepts demonstrate the value of alternative methodological tools – such as case studies (Andriopoulos and Lewis, 2009), action research (Beech et al., 2004), systems approaches (Sterman, 2000), and agent-based models (Axelrod, 1997) – for enabling more nuanced insights. According to Smith and Lewis (2011), the development of a paradox theory is strictly related to the

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development of alternative methodologies able to explore paradoxical tensions, their management, and their impact.

Finally, if the dominant utilisations of paradox focus on the underlying tensions as dualities between two activities (Ford and Backoff, 1988), the relative theories should also consider trialectics (Ford and Ford, 1994) or pluralistic tensions (Jarzabkowski and Sillince, 2007) in order to completely understand paradox phenomena.

5 CI: an innovation-based perspective

Following the analysis of the three literature streams, it is useful to combine the respective theoretical contributions into a unique picture. As already anticipated in the first paragraph, we propose CI as a theoretical field at the intersection of the three streams. In fact, successful CI leads to sustained peak performance and requires organisations to continually combine:

• operational excellence: satisfying today’s stakeholders, including owners/shareholders, employees, customers and suppliers, and society as a whole

• innovation excellence: continually developing new products/services, processes, managerial and organisational systems and practices, and markets, to satisfy tomorrow’s stakeholders

• strategic excellence: making the right strategic choices.

Achieving and sustaining CI excellence requires company-wide involvement and commitment, cross-departmental and inter-organisational collaboration, ongoing learning (and unlearning), and deep insight into the process of CI.

CI is an essentially cross-disciplinary field of research. It is the ongoing process of operating and improving existing configurations, and developing and putting into use new configurations of products, market approaches, processes, technologies and competencies, and organisational and management systems. In other words, CI is the ongoing interaction between operations, incremental improvement, learning, radical innovation and strategy aimed at effectively combining operational effectiveness, innovation and strategic excellence, or exploitation and exploration.

We can review the concept of CI, tracking how it evolved towards an integrative perspective along two main dimensions (see Figure 4): the focus and the context of the CI activities.

The first one highlights an evolution in the management literature. In the ‘90s the commensurability of exploration and exploitation held a minority position in the debate and empirical evidence was scarce, although a number of leading firms seemed to be able to handle the paradox quite well, revealing good operational and innovative performance over time, since the early 2000s it seems that the awareness of commensurability has increased.

The second dimension demonstrates the level to which contributions in the literature progressively extend from product/process, to unit, to inter-organisational context. Up until the early ‘90s the majority of the publications pertained to shop floor level continuous improvement (CIM) in manufacturing: “The majority of this literature is Japanese or western, mostly American, publications on kaizen or on comparisons between kaizen and Western-style CIM” (Boer and Gertsen, 2003). Most of the

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contributions about CIM omits the behavioural aspects of CI. In particular, as suggested by Bessant et al. (2001), there are two main criticisms of the literature: first of all the literature is usually prescriptive and does not consider the implementation phase, or, when it does, it assumes a direct correlation between tool utilisation and performance improvement, while completely ignoring any aspects connected to ability creation; secondly, the literature approaches CIM as a binary variable (yes/no) rather than interpreting it as a pattern of learned behaviours that evolve over time.

Figure 4 Evolution of CI theoretical concept

Continuous Innovation (CI)

Focus

Exploitation Exploration and Exploitation

Con

text

A

cros

s bo

rder

s Pr

oduc

t/pr

oces

s

Exploration

Uni

t

Continuous improvement (CIM)

Incremental and radical innovation

Shop-floor CIM (tools and methods)

CIM in R&D and NPD

CIM implementation (barriers, levers)

CIM and learning CIM and KM

Contingency theory (organisational,

managerial, technological

factors)

Innovation project (single, portfolio)

CI enablers (ICT, HR)

Capability development

Continuous product

innovation

Collaborative improvement

Collaborative innovation

5.1 Evolution of CI field

The combination of the two dimensions previously outlined produces a two-dimensional space within which the evolution of CI theory can be mapped.

Since the mid ‘90s, three new topics have emerged (Aloini et al., 2011). First of all, the application of the CIM principle was extended to non-routine activities, including product innovation and administrative processes (Caffyn, 1997; Bartezzaghi et al., 1997), and successively to inter-organisational settings, where it becomes collaborative improvement (Middel et al., 2006; Cagliano et al., 2005; Kaltoft et al., 2007). Another research trend is the attention paid to implementation issues, such as success/failure factors, enablers/disablers, and the role of action learning and experimentation (Corso and Pavesi, 2000; Boer and Gieskes, 2001). The third emerging topic is the integration of CIM and organisational learning (Mitki et al., 1997).

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Differentiating CIM and CI is difficult as the concepts are partly overlapping. In one sense there is really no point in attempting such a differentiation as both the small step continual improvement activities are necessary, as well as the more dramatic, ongoing technological-, organisational- and market-based changes normally considered under the term innovation. Many scholars from different fields of management studies have reinforced the essential need for organisations to change and improve their performance continuously in order to cope with market demands, global competition and changing technology (Porter, 1990; Hamel and Prahalad, 1994; Douma, 1997). These requirements establish the need for firms to be simultaneously good at operational effectiveness and strategic flexibility, attributes previous considered to be antithetical (Boer and Gertsen, 2003). The merging of CIM into CI is a consequence of increasing market turbulence and customer sophistication with simultaneous pressures for reduced lead times greater product complexity.

If we focus our attention on innovation theory, incremental and radical innovation have been analysed separately in the literature, with radical innovation in conditions of discontinuity being investigated only recently (Bessant, 2008; Aloini and Martini, 2012). Incremental innovation builds on existing knowledge – in both processes and products. Since 1980 three main research streams have emerged in the management literature regarding new product development (NPD): concurrent engineering, multi-project management and organisational learning. From a learning perspective, such streams shift the focus from the quick and intense socialisation of knowledge in cross-functional, often co-located teams, to knowledge sharing through commonality and reuse of design solutions, through to the overall dynamic of knowledge creation and knowledge transfer either in tacit for more embedded into processes and organisational routines (Corso et al., 2001).

While most contributions share the assumption that product innovation is the outcome of NPD projects over time, hence implicitly considering downstream phases only as sources of information for feeding next generation product development, or even constraints to be anticipated during development (Clark and Fujimoto, 1991), others highlight the necessity to extend the innovative efforts to the overall product life-cycle (Bessant et al., 1994; Caffyn, 1997; Corso, 2002). Focus in innovation management therefore shifted from NPD projects to what can be defined the process of continuous product innovation (CPI). This embraces all activities aimed at creating and accumulating knowledge from different sources and combining it, whenever possible to innovate the product. Innovation therefore takes place not only in the development stage, but also in all subsequent phases in the product life cycle, including manufacturing, installation, consumption, and maintenance. The object of the analysis, moreover, should be extended from a single product to an entire product family over time.

Focusing attention on the overall process of knowledge creation, management and transfer, it becomes clear how innovation, rather than being bounded within temporary NPD projects, becomes a continuous learning process that extends throughout the product life cycle and involves the overall organisation. This new perspective entails a completely different way of considering and integrating contributions from downstream and in-field activities. The latter are relevant to innovation not only because of feedback that can be collected for future innovations, but also because they may represent additional opportunities to enhance the product and extend its life cycle. Not only the generation of knowledge but also its actual use to innovate the product becomes therefore a task for the overall organisation. From this perspective, the traditional distinction between radical

Continuous innovation 15

innovation and incremental improvement becomes fuzzier as these two are different events in a continuous learning and innovation process.

Radical innovation is innovation in new and uncharted territories (Bessant, 2008). It deals with discontinuities, characterised by significant instability and uncertainty. Such discontinuities redefine the space and the boundary conditions and open up new opportunities, while challenging incumbents to create new routines in order to cope with discontinuous innovation.

While in the past, research-intensive companies believed that research in the organisation’s core area of expertise should remain in house, with only less important support activities provided by outsiders, today businesses are using external sources throughout all phases of innovation, from discovery and development to commercialisation and even product maintenance. This evolution, which gives organisations the opportunity to access disruptive new ideas, implies the necessity to deploy a sourcing strategy in order to manage innovation holistically, as opposed to managing innovation transactionally, where the major shortcomings are failure to leverage organisational learning (no method for applying the lessons learned from one external relationship to the others) and, most importantly, unintentional loss of knowledge (Linder et al., 2003).

The exploitation of network relationships, which root in the stream of inter-organisational design (Corso et al., 2001), seems to be the most comprehensively investigated area, with particular attention being paid to the role played by customers as sources of innovation.

To sustain competition, firms need to excel at combining the operating excellence required to satisfy the needs of today’s customers and the innovativeness, both incremental and radical, that is necessary to satisfy tomorrow’s customers. In other words, firms have to balance exploitation and exploration. The resulting situation calls for a new ability, namely to innovate concurrently in conditions of low complexity (steady-state innovation) and of instability (discontinuous innovation). In other words, firms have to simultaneously manage two ‘spaces’ – one defined by technological and market trajectories within which innovation is concerned with ‘doing what we do better’ routines, and another, with an open outcome space, in which a different set of routines is needed to fulfil the objective of ‘doing differently’ (Bessant et al., 2005). Handling this balance, and overcoming it, is at the heart of CI and requires firms effectively to combine excellence in operations, innovation and strategy (Hyland and Boer, 2006).

5.2 Open issues in CI field

There are some key concepts for CI: knowledge and its management, mechanisms to achieve and maintain the exploration-exploitation balance, the human side and HRM.

As for the role of knowledge and knowledge management for CI, the need for change over time introduces the dynamic capability view of innovation, in which not only learning and routines are involved, but also the ability to manage the transformation of routines. The knowledge-based nature of dynamic capabilities requires knowledge creation, reconfiguration, absorption and integration processes. KM plays a key role in this context. It creates an environment that encourages people to learn and share knowledge by aligning goals, integrating bits and pieces of information within and across organisational boundaries, and producing new knowledge that is usable and useful to the

16 A. Martini et al.

organisation. In this sense, KM can stimulate the development of dynamic capabilities needed both for exploitation (optimisation) and exploration (innovation).

Mechanisms are levers (i.e., managerial, organisational and technological choices) that management can use for shifting beyond the present constructed paradoxes and to develop change strategies to translate this to the operative level. In other terms: to develop usable knowledge, while providing empirical underpinning of the phenomenon.

Key questions currently unanswered include:

• What is the role ICT and particularly social software can play in managing the paradox?

• How, in terms of practices, should organisations adopt in order to be able to balance and maintain short term efficiency and long-term innovation capabilities?

• To what extent are these practices context dependent, and what are the most important contingencies that managers need to cope with when adopting the (appropriate) practices?

• Will a single company be the best unit in which to balance exploitation and exploration, or is the better solution to design a network of organisations focusing on either exploitation or exploration that in total will create a continuous innovative network? In case of the latter, how should such a network be coordinated and managed?

The CINet community aims at supporting the competitiveness of firms, through the development and validation of an integrated system of models, methods, as well as organisational, managerial, and technological (ICT) tools and guidelines for managing CI.

6 Presentation of the papers included in the special issue

This special issue from the 2010 Continuous Innovation Network (CINet) conference contains four articles. The authors bring up four different, but related, themes, all relevant for the management of CI in organisations. The authors also use a variety of methods to investigate and analyse research objectives, spanning from a single-case study and action research, to fairly advanced quantitative techniques using structural equation modelling (SEM). As a result, the articles in this special issue present much of the variety that exist in CINet, both in terms of the themes that are studied and the methods used to investigate them. In addition, they demonstrate some of the complexity associated with managing CI in organisations.

The article by Aloini and Martini investigates the relationships between search practices and performance. Using SEM to analyse a large number of Italian companies, the authors demonstrate that the use of a broad set of search practices improve companies’ innovativeness and business performance. While most previous literature focus on where to search, this paper provides insights related to how to search for innovative ideas. SEM provides a rigorous and novel analytical approach to investigating search strategies in particular and to innovation management in general.

Further, Michl, Gold and Picot investigate how the spin-along approach could increase strategic ambidexterity. With detailed insights from a single company, the

Continuous innovation 17

authors present that spinning along, as a contrast to spinning out, could be an effective way for companies to be able to balance the ability to achieve short-time goals while at the same time develop and maintain long-term innovation capabilities.

Eppinger and Vladova contribute with a study of intellectual property (IP) practices, and demonstrate the challenges with IP practices and how these could be managed in small companies. Using action research methods the paper describes the often pragmatic choices small companies have to make regarding IP management. The authors suggest that small companies could benefit by having a more professional management of IP practices.

The relationships between size and IT assimilation to improve NPD are the subject of the article by Neirotti, Paolucci and Raguseo. The authors conclude that IT can be a useful tool in order to improve the new product development function. Studying more than 300 Italian SMEs, the article shows that medium size companies have a positive effect of IT investments in turbulent environments. This effect, however, is not visible among small firms.

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