1. Strategic Innovation, Senior Teams, Organizational Architecture and Evolution Ensuring a Future for Strategic Management Research: Important Questions (Paradox, Identity, TMT Cognitive and Emotional Frames) and Credible Answers STR Plenary- AOM 2018
Michael L. Tushman
Baker Foundation Professor Paul R. Lawrence Class of 1942 Professor
Harvard Business School

2. Organizational Evolution: An Important Question
GM ATT, General Radio FBI
Kodak Marks & Spencer EMI
SSIH/Asaug Anheuser-Busch Blockbuster
Apple Ciba-Geigy U.S.Steel
Nokia Sears Polaroid
Siebel RIM, Motorola IBM, Macys
Agarwal and Helfat (2009); Raisch et al (2009); Gupta et al (2006); Sorensen and Stuart (2000); Gibson and Birkinshaw (2004); Boumgarden, Nickerson and Zenger (2012); Kaplan and Henderson (2005); Tushman and O’Reilly (1997); Jansen et al, (2009, 2006); Adner, (2012); Gulati, Puranam, Tushman, (2012); Baldwin and von Hippel, (2011); Afuah and Tucci, (2012); Patel et al, (2013); O’Reilly and Tushman (2008; 2013); Raisch and Tushman (2016); Gans (2016); Lifshitz-Assaf, 2017; Smith and Besharov, 2017, Raffaelli, 2017; Raffaelli, Glynn, and Tushman, 2018; Felin et al, Special Issues; AMP (2013), AMJ (2006), Org Sci (2009), SO (2017).

3. Innovation Streams and Organizational Inertia
GM ATT FBI
Kodak Marks & Spencer Motorola
SSIH/Asaug Apple Blockbuster
IBM Ciba-Geigy U.S.Steel
Nokia General Radio Polaroid
Barnes and Noble? Havas? Time, Inc
DPS, Atlanta Opera? Moleskin? NASA, WBUR?
Deloitte? Analog Devices? Tencent?

4. Healthcare
Functional materials (film--<1%)
Document solutions (optical devices)
2013 Revenues $6.5B $2.5B

5. VS “I was obsessed with not getting trapped by DVDs the way AOL
In 2002, Blockbuster was a $5B firm with more than
5000 stores. Netflix went public with $78M in revenue.
Blockbuster executives watched Netflix revenues grow
for 58 straight months before responding.
By the end of 2008, Netflix’s value was 10X Blockbuster
In 2010, Blockbuster filed for bankruptcy and has been
liquidated.
Netflix is closing distribution centers and today more than
80% of their revenue comes from video streaming.
“I was obsessed with not getting
trapped by DVDs the way AOL
got trapped, the way Kodak did,
the way Blockbuster did…Every
business we could think of died
because they got too cautious.”
Reed Hastings
Founder & CEO
Netflix

6. Felin, Lakhani, Tushman, SO 2017
Fellin, Lakhani,Tushman, 2017
Felin, Lakhani, Tushman, SO 2017

8. General Radio / Gen Rad 1915-72 ($44 million) 1973-80 ($168 million)
(Typically Organizations Do Not Change; If they
Do change, When and How so?; Succession, Agency?)
($44 million)
High price, high quality
Wide, specialized product line
Slow growth, harmony
Engineering dominated
Functional structure
Internal promotion
Human resource oriented
Loose controls
($168 million)
Narrow product line (20–3)
Growth oriented
Marketing and production dominated
Divisional structure
External recruitment
Formal planning & control
Go public in 1978
Tushman and Romanelli (1986); Virany and Tushman (1986); Benner and Tushman (2002)

9. Innovation Streams and Dynamic Capabilities
Fashion Lens (Ciba)
Ciba/Tilt (Wheat)
Vysodine (Ciba Vision)
USAToday.com
Distance Learning (HBSi)
New
IBM: Life Science
Explore
MARKETS
Network Chip/IBM
Continuous Aim Gunfire
USAToday
IBM: ASIC/LOB
Ciba/Tilt (Corn)
Traditional MBA/Exec Ed
Ciba Vision (Soft Lens)
Exploit
Ciba / Seeds
Disposable & Extended Wear Lens (Ciba Vision)
Existing
Incremental Architectural Discontinuous CE/CD
TECHNOLOGY
March, 1991
Benner and Tushman, 2003
Tushman and O’Reilly,1997
O’Reilly and Tushman, 2008; 2011
Tushman, Smith, Westerman, O’Reilly, 2010; Raisch and Tushman, 2016

10. Structural Ambidexterity, Innovation Streams & Dynamic Capabilities
Executive Team
Inconsistent strategies
Overarching Identity
Few Core Values
Tasks
Mgmt. Team
Individuals
Ciba Vision /
Vysodyne, Daily Disposables
Seiko/Quartz
USAToday.com
IBM Network Tech/Transport
HP Scanner/Zorro
Informal
Organization
Arrangements
Mgmt. Team
Ciba Vision/Conv. Lens, Seiko/Mechanical,
USAToday
IBM Network/ ASIC
HP Flat Bed Scanner
Exploitation: Consistency, incremental change, and continuous improvements
Tasks
Mgmt. Team
Individuals
Informal
Organization
Arrangements
Punctuated Change
Exploration: Multiple failures, experiments, variants (internally
or externally)

11. Characteristics of Structural Ambidexterity
Ambidextrous Designs
Structural differentiation of explore/exploit units
Integration at senior team level
Investment by ‘Meta Manager’
Targeted integration of leveraged resources
Common fate rewards system
Overarching identity to host explore and exploit
TMT Processes (beyond demography)
(Tushman, et al 2010;
O’Reilly and Tushman, 2009; 2011, 2016)
Aspiration: # 1 Supplier of Network Technology chips
J. Kelley (Meta Manager) Group Executive
Chris King (Ambidextrous Manger) Network Technologies
Mfg.
Wireless
Tactical Integration
Senior Team
ASIC (Exploitation)
Network (Innovation Manger)
Transport (Innovation Manger)
Exploration

12. Structural Ambidexterity (Contextual, Switching, Spin-Out)
A single general manager and team
A common vision/identity and values
Strong decentralization
Multiple strategies, structures, processes, and cultures -- each separately aligned
Targeted Integration
Graduation Criteria
Examples:
J&J
H-P
CibaVision
USA Today
IBM
P&G 3M
ABB
Mettler-
Toledo
Hattori-
Seiko
Schwab
Fujikura
Exploitation
General Manager
Growth
[Horizon 1]
Exploration
[Horizon 2]
[Horizon 3]
Variation Selection Retention

13. Ball Corporation: Innovation Streams, Identity, and Four Distinct Transformations
Plastic
1998
Metal
Aerospace
Glass
1942
John Fisher
1996
Wooden

14. Patterns in Organizational Evolution
Magnitude of
Change
Discontinuous Change
Incremental Change
Time
Organization Evolution:
Incremental and punctuated change or Periods of incremental change punctuated by discontinuous change
Executive team succession often associated with discontinuous organizational change
Managing discontinuous change fundamentally different than managing incremental change

15. Ironies of Senior Teams
Irony I: Leadership teams are composed of powerful people—yet they tend to be under-designed, under-led, and under-resourced. Irony II: Membership is important and coveted— but members often don’t know who is on the team, and they do not really want to come to team meetings. Irony III: Members are overloaded— but they tend to waste enormous amounts of time in team meetings Irony IV: Authority dynamics pervade leadership teams and complicate team processes—but members won’t talk about them. Irony V: These dynamics are accentuated the more senior the team….
Source: Wegman, Hackman et al, 2010

16. Senior Team Frames, Paradox, and Identity

17. Important Senior Team Questions/Phenomena: Paradox, Cognitive Frames, and Identity
Smith, W. and Besharov, M, Bowing before Dual Gods: How Structured Flexibility Sustains Organizational Hybridity, ASQ, 2017 Raffaelli, R, Technology Reemergence: Creating New Markets for Old Technologies, Swiss Mechanical Watchmaking 1970–2008, ASQ, 2018 Raffaelli, R., Glynn, M.A., Tushman, M, Flexing the Frame: The Role of Cognitive and Emotional Framing in Innovation Adoption by Incumbent Firms (under review) Felin, T., Lakhani, K, Tushman, M, Firms, Crowds, and Innovation, Strategic Organization, 2017 Lifshitz-Assaf, Hila, Dismantling Knowledge Boundaries at NASA: The Critical Role of Professional Identity in Open Innovation , ASQ, 2017 (Kleinbaum, Adam M. (2012). “Organizational Misfits and the Origins of Brokerage in Intra-Firm Networks.” ASQ, 2012)

18. Dynamic Decision Making:
Differentiating
Allocating domain specific roles
Comparing domains to raise novel distinctions
Seeking info about domains independently
Integrating
Allocating integrative roles Stressing
overarching goals
Solving problems jointly
Strategic Paradox
Explore vs. exploit
Strategic Issues
- Resource allocation
- Organizational design
- Product design
Decisions supporting either explore or exploit
Consistently Inconsistent
Decision Pattern
Engaging paradoxical tensions as an ongoing accomplishment
Differentiating and integrating as key practices for engaging paradox
(Smith, AMJ, 2014; see also Smith and Tushman, 2005)

19. Business Social Smith& Besharov, ASQ, 2018 operationally sustainable
$4.7M in revenues
Covering operational costs since 2009
Social
stop the cycle of poverty
4 offices – Cambodia (2), Laos, Kenya
Over 2000 people hired by DDD
Over 650 “graduates”
>10x average salary
$1M Skoll Award
$1M Rockefeller Award
Smith& Besharov, ASQ, 2018

20. An Induced Model of Structured Flexibility to Sustain Competing Demands
Business
Guardrail
Roles, structures, and external stakeholders supporting the business mission
Adaptive Practices
Alternative practices and approaches for addressing organizational challenges that shift in their focus on the business mission or social mission
Paradoxical Frames
Leaders’ mindset to understand the social and business missions as both contradictory and interdependent; searching for a both/and solution
Social
Guardrail
Roles, structures, and external stakeholders supporting the social mission
Dynamic Decision Making
Capacity to Act
Smith& Besharov, ASQ, 2018

21. “Flexing the Frame: The Role Of Cognitive and Emotional
Framing in Innovation Adoption
by Incumbent Firms”
Raffaelli, Glynn,
and Tushman (under review)
INCUMBENT’S PERCEIVED
LEGACY INNOVATION STRATEGY
Legacy
STRATEGY
Innovation challenge
to existing strategy
Target
INNOVATION
FILTERS
Consistency orientation
Capability development
Co-existence orientation X
P1a
Less elastic
Organizational identity
More elastic
What
we do
Who
we are
CONTRACTED LENS
Who
we are
EXPANDED LENS
What
we do
(Influenced by Incumbent Inertia)
P1b
TMT’s
COGNITIVE FRAME
Narrower scanning
Competitive
boundaries
Wider
scanning
P1c
TMT FRAME FLEXIBILITY
Categorical Classification of the Innovation
P2b
P2a
P2c
-Specific-
fixed
framing
-Intermediate-
flexible
framing
-Abstract-
ambiguous
framing
Extended Team’s
EMOTIONAL FRAME
P3b
P3a
P3c
Threat
Opportunity
Ambivalence
INNOVATION
ADOPTION

22. TMT’s Cognitive Frame; Capabilities
Strategic Growth Opportunities and Blind Spots
Integration of new capabilities
Consistency orientation
Co-existence orientation
We adopt
radical new capabilities even if they are perceived to be different from our existing capabilities.
We adopt
radical new capabilities only if they are seen to be consistent with our existing capabilities.
Turkey sets central strategy, leads unit governance and defines the business planning process
Requires comprise from everyone
Raffaelli, Glynn, Tushman (under review)

23. TMT’s Cognitive Frame; Competitive Boundaries
Strategic Growth Opportunities and Blind Spots
Conceptualization of competitive boundaries
Narrower scanning
Wider
scanning
We generally
define our competitors
based on who we’ve historically competed against.
We often
define our competitors
based on where we sense the market could shift.
Turkey sets central strategy, leads unit governance and defines the business planning process
Requires comprise from everyone

24. TMT’s Cognitive Frame; Organizational Identity
Identity (“who we are”) vs. Strategy (“what we do”)
Organizational Identity (“who we are”) &
Strategy (“what we do”)
Consistency orientation
Co-existence orientation
Tightly coupled
Who
we are
What
we do
Loosely coupled
We don’t always need to define “who we are” by our specific products and services
(“what we do”).
We define
“who we are” mostly by our specific products and services
(“what we do”).
Source: Raffaelli, Glynn, Tushman (under review)

25. Organizational Architecture
Overcoming the Incumbent’s Disadvantage; TMT Cognitive and Emotional Frames
Consistency orientation
Integration of new capabilities
Co-existence orientation
Narrower scanning
Conceptualization of competitive boundaries
Wider
scanning
Organizational Architecture
INCUMBENT INERTIA
Tightly coupled
Organizational identity (“who we are”)
& strategy (“what we do”)
Loosely coupled
Who
we are
What
we do
Who
we are
What
we do
TMT’s Frame Flexibility is associated with their Emotional Frame (Threat, Opportunity, Ambivalence) (Selznick, 1957; Rotemberg and Saloner, 2000)
Source: Raffaelli, Glynn, Tushman (2018)

26. “Flexing the Frame: The Role Of Cognitive and Emotional
Framing in Innovation Adoption
by Incumbent Firms”
Raffaelli, Glynn,
and Tushman (under review)
INCUMBENT’S PERCEIVED
LEGACY INNOVATION STRATEGY
Legacy
STRATEGY
Innovation challenge
to existing strategy
Target
INNOVATION
FILTERS
Consistency orientation
Capability development
Co-existence orientation X
P1a
Less elastic
Organizational identity
More elastic
What
we do
Who
we are
CONTRACTED LENS
Who
we are
EXPANDED LENS
What
we do
(Influenced by Incumbent Inertia)
P1b
TMT’s
COGNITIVE FRAME
Narrower scanning
Competitive
boundaries
Wider
scanning
P1c
TMT FRAME FLEXIBILITY
Categorical Classification of the Innovation
P2b
P2a
P2c
-Specific-
fixed
framing
-Intermediate-
flexible
framing
-Abstract-
ambiguous
framing
Extended Team’s
EMOTIONAL FRAME
P3b
P3a
P3c
Threat
Opportunity
Ambivalence
INNOVATION
ADOPTION

28. TECHNOLOGY REEMERGENCE: Creating New Markets for Old Technologies, Swiss Mechanical Watchmaking 1970–2008
(Raffaelli, 2018)

29. Research Question
How and why does demand for a legacy technology rematerialize to achieve substantive and sustained market growth (institutional entrepreneurship)?

30. Yet after displacement, the market for Swiss mechanical watches experienced significant and sustained growth.

31. Possible Legacy Technology Trajectories
Reemergence
Technology
Retrenchment
Technology
Displacement

32. Findings: Process and Mechanisms of ‘Technology Reemergence’
CONSUMER
FACTORS
ORGANIZATIONAL
FACTORS
COMMUNITY
FACTORS
(mechanisms in red)

33. Innovation Streams, Locus of Innovation, and Complex Architectures
Industrial Economy Logic (Benkler, 2006):
Environmental/Strategic Heterogeneity
Control contingencies, buffering, reduce dependencies via Differentiation and Integration
Strategic Grouping and Linking contingent on strategic interdependencies; Minimize transaction and information processing costs; local search; satisficing; absorptive capacity; boundaries and associated boundary spanning
Industrial R&D, alliances, JV’s (focal firm’s)
Accumulating IP, Secrecy
Agency, Hierarchy
Innovation Streams, exploration/exploitation, and structural ambidexterity
Complex selection contexts, punctuated and incremental change
Senior teams, strategic choice, and paradox

34. Phenomena post 2010: Challenges to Organization Theory, Strategy, and Innovation Theories
Paradoxical, Inconsistent Innovation Logics (Thornton, Lounsbury, Ocasio, 2012)
Industrial Economy Design Logic and Networked Information Economy
Complex, Internally Inconsistent Organization Designs and Logics?
Heterogeneous and Contrasting Boundary Types?
Absorptive Capacity?; Multiple Mechanisms?
Role of Leadership and Agency within and outside the organization?
Importance of Over-Arching Identity; individual, professional, organizational?
TMT’s Cognitive and Emotional Frame (Threat or Opportunity)
(See Lifshitz-Assaf; Altman; Hansen; Felin, Lakhani, Tushman; Raffaelli et al; Smith and Besharov)

35. Felin, T., Lakhani, K, Tushman, M, Firms, Crowds, and Innovation, Strategic Organization, 2017 Lifshitz-Assaf, Hila, Dismantling Knowledge Boundaries at NASA: The Critical Role of Professional Identity in Open Innovation , ASQ, 2017

36. Felin, Lakhani, Tushman, SO 2017

40. InnoCentive Pilot: Challenge Data and Statistics
Challenge Title
Ctr
Posted
Deadline
Proj
Rms
Sub
Award Date
Award Amount
Improved Barrier Layers … Keeping Food Fresh in Space
JSC - SLSD
12/18/2009
2/28/2010
174 22
5/7/2010
$11,000
Mechanism for a Compact Aerobic Resistive Exercise Device
564 95
5/14/2010
$20,000
Data-Driven Forecasting of Solar Events
12/22/2009
3/22/2010
579 11
5/13/2010
$30,000
Coordination of Sensor Swarms for Extraterrestrial Research
LRC
2/27/2010
4/26/2010
423 37
6/4/2010
$18,000 (3)
Medical Consumables Tracking
GRC
5/17/2010
7/27/2010
365 56
in progress
$15,000 (3)
Augmenting the Exercise Experience
5/27/2010
229 18
9/20/2010
$10,000
Simple Microgravity Laundry System
JSC - EA
598
108
9/21/2010
$7,500
Lifshitz-Assaf, 2017 56

41. The World Responded: In 3 months, over 3,000 Solvers from 80 Countries Participated

42. Innovation Was Found on the Margins of the Knowledge Boundaries
The results were successful beyond expectations, in such a short amount of time and money. Out of 14 problems, 4 were solved successfully.
In particular one “home run” solution for predicting solar flares- solved by an radio engineer on the boundaries of the field
New combinations- resistive mechanism device
New material from a different industry- packaging food material for Mars
Significantly Improved optimization of the medical kit for space

43. Attracting a Wide Array of Disciplines and Professions

44. Challenging How New Knowledge Is Created
“Oh, this is a whole different way of ‘doing business’”
Standard R&D Process
Open Innovation Process
Knowledge boundaries
Illustration
Clearly predefined & selectively permeable
Undefined & constantly permeable
Participants 
Experts (from within and outside the organizations)
Anyone (anonymous)
Relationships
Contractual relationships and clear IP regime 
Minimal online consent contracts and unclear IP regime 
Level of hierarchy 
Very hierarchical 
Hardly any, self-selection based
Level of control 
High
Low
Nature of process
Organizational process, negotiation based
Distributed virtual process
Resources 
Heavy
Relatively light
Temporal dimension 
Long [3-5 years]
Short [3-6 months]
Spatial dimension
Geographically concentrated  
Widely geographically spread, unbounded, virtual

45. Contrasting Heroes, The Role of Identity (professional and organizational)

46. Results were successful beyond expectations
The R&D Problem (as posted online)
Solution
The platform 1
Improved barrier layers-keeping food fresh in space
Partially Solved
Innocentive, Yet2.com 2
Mechanism for a compact aerobic and resistive exercise device
Solved
Innocentive 3
Data-driven forecasting of solar events 4
Coordination of sensor swarms for extraterrestrial research 5
Medical Consumables Tracking 6
Simple microgravity laundry system 7
Augmenting the Exercise Experience with Audio Visual Inputs - 8
Bone imaging- IA clinically-useful technology sensitivity to assess the microstructure of “spongy” bone
Yet2.com 9
Preventing growth of and removing microorganisms and bio-films from a potable water system 10
Real-time analysis and reporting of water-borne microorganisms 11
Radioprotectants for humans exposed to chronic and acute radiation 12
Life on Mars-Seeking Ideas and protocols that can differentiate terrestrial life from indigenous exobiological life 13
Miniaturized & portable diagnostic scanning systems for remote environments 14
Medical kit optimization algorithm 
Top Coder

47. Innovation Streams and Dynamic Capabilities
Ciba/Tilt (Wheat)
Vysodine (Ciba Vision)
USAToday.com
Distance Learning (HBx)
New
Explore
USAToday
Ciba/Tilt (Corn)
Traditional MBA/Exec Ed
Ciba Vision (Soft Lens)
NASA, Havas, Lego, WBUR,DPS
MARKETS
Exploit
Ciba / Seeds
Disposable & Extended Wear Lens (Ciba Vision)
Open Innovation: NASA,V&S/ Lego/DPS, Podcast/WBUR
Existing
Incremental Architectural Discontinuous (CE, CD)
TECHNOLOGY
Hansen, 2018; Truelove, 2018
Tushman and O’Reilly, 1997
O’Reilly and Tushman, 2008; 2011
Tushman, Smith, Westerman, O’Reilly, 2010
Lakhani et al, 2013
Benner and Tushman, 2015

48. Innovation, Strategy, and Organization Design in Digital Information Economy (Benkler, 2006)
Logic of Communities, Peers Autonomous, self-selected, decentralized action Decentralized coordination; emergent social structure Intrinsic (and extrinsic?) motivation Non-market production; share resources and outputs Peer, non-proprietary innovation Open, shared IP Social, emergent, distributed architectures

49. Modularity, Knowledge Distribution, and Locus of Innovation
Contests
Strategic Partner(s)
High
(Modular)
Open Innovation
Community
Structural Ambidexterity
Task Decomposition
Multi-Firm Collaboration (eg, alliances, consortia, JV, patent pools)
Low (Integrated)
Intra-Firm
Narrow
Problem Solving Knowledge Distribution
Broad

50. The Increasing Intrusion of Open Innovation on Incumbents
NASA: Open Innovation Contests
Apple: Open Source Community LEGO: AFOL & NXT Hackers, LEGO MUPS & Ambassadors
Contests
Strategic Partner(s)
High
(Modular)
Community
Task Decomposition
Ambidextrous
design
Multi-Firm Collaboration
Low (Integrated)
Internal Firm Effort
Narrow
Problem Solving Knowledge Distribution
Broad

51. Senior Teams: Paradox, Cognitive and Emotional Framing, and Organizational Identity: Important Questions yet Credible Answers?

52. Innovation Streams and Organizational Inertia
GM ATT FBI
Kodak Marks & Spencer Motorola
SSIH/Asaug Apple Blockbuster
IBM Ciba-Geigy U.S.Steel
Nokia General Radio Polaroid
Barnes and Noble? Havas? Time, Inc
DPS, Atlanta Opera? Moleskin? NASA, WBUR?
Deloitte? Analog Devices? Tencent?