Description
Innovation is increasingly recognized as a major driver for organizational performance. Whereas most established firms are proficient in enhancing their stream of rents on the current competences, they somehow seem to struggle when it comes to the exploration of radically new opportunities.
Organizing for Exploration at a
High Tech Firm
Master Thesis
Jaap Rosink
UNRESTRICTED VERSION
Organizing for Exploration at a
High Tech Firm
- MASTER THESIS –
Important: This is an unrestricted version. The names of the companies and people
involved have been replaced with fictional names or have been left out. Moreover, a
substantial part of the case description, together with chapters 5 and 6 have been left
out. The final chapter has been partly summarized.
Author
Jaap Rosink
Program Master Business Administration
Track Innovation & Entrepreneurship,
School of Management and Governance
Student number 0049271
E-mail [email protected]
Supervisors
Dr. Ir. Klaasjan Visscher
University of Twente, School of Management and Governance
[email protected]
Dr. Dries Faems
University of Twente, School of Management and Governance
[email protected]
Name of supervisor of the firm is confidential
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
1
Preface
With this thesis I complete the program Master Business Administration at the
University of Twente. The track Innovation & Entrepreneurship I chose, provided me many
interesting insights in organization theory and the management of innovation.
In March 2009 I started this case study at Trion Kromhout, the company which
allowed me to investigate how their organization deals with the exploration of radically
new/different possibilities. By choosing this topic, which was hard to frame initially, I
ensured myself with a long period of investigation, writing and rewriting. However,
eventually I made it to the finish. Therefore I would like to especially thank the R&D director,
for all his support and input to build the case and for his patience and confidence in me. Next
to that I want to thank the Business Development (BD) Director for all the interesting
conversations about innovation related topics and also the history of Trion.
I also want to thank Klaasjan Visscher for all the support needed to write this thesis.
He especially provided me with insights on how to conduct academic research in order to
come up with relevant results and be critical at every stage of the research process. I want to
thank Dries Faems as well for giving me critical remarks about this study and for useful tips
in doing this research.
Of course I want to thank my parents. Without their support, not only during my
period at the University but also before, I probably wouldn’t have come this far. The same
goes for my girlfriend Suus, who repeatedly pushed me to work not only on this thesis, but on
all university related things as well. Who I also want to thank are my father- and mother-in-
law for connecting me with Trion. Finally I would like to thank my grandmother for all her
interest and motivational talks. Thank you all for that.
With finalizing this study, the story does not end for me at Trion Kromhout. Since
January this year I am member of the Trion team. I am now (among others) involved in
innovative processes, intellectual property, and business development, thus a great
opportunity to begin a great career! For this I again would like to thank the directors of BD
and R&D, but also the managing director and head of human resources for having confidence
in my capabilities.
Enjoy reading this paper…
Kind regards,
Jaap Rosink Kromhout, 06-07-2010
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
2
Management summary
Innovation is increasingly recognized as a major driver for organizational
performance. Whereas most established firms are proficient in enhancing their stream
of rents on the current competences, they somehow seem to struggle when it comes to
the exploration of radically new opportunities. Almost a year ago, top management of
Trion Kromhout, a physical amalgamation of several distinct subsidiaries of Trion
N.V., started to recognize the challenges, and moreover the importance of exploration
(i.e. experimenting with new opportunities) within their own organization. Since the
factors that can negatively influence exploration often grow within an organization
and can be deeply rooted in its strategy, processes and structure, an in depth case
study is conducted to answer the following central research question:
“How has Trion Kromhout evolved over time with respect to exploration, and
how can Trion Kromhout enhance exploration?”
The goal of this study is to identify specific factors that negatively influence
exploration at Trion Kromhout. The results of 12 open ended interviews with several
top and middle managers, desk research and the collection of narratives contributed to
an extensive, retrospective case description of Trion in both its early days to create a
contextual view, and the contemporary Trion Kromhout.
Below, the findings of this study are described in general:
1. A large production site with heavy investments is rather inflexible. Data
showed that in several cases, exploration was limited due to the production
site’s inflexibility.
2. A strategic shift from acquiring other companies to explore new opportunities
to positioning an internal R&D department implied that R&D remained
largely occupied after this shift with troubleshooting and optimization of
production. R&D’s capacity to explore remained limited after an increase of
the R&D department.
3. The production department still has a strong voice in early stages of NPD.
Therefore new opportunities are risked to be reflected to the production
capabilities, resulting in refining existing competences.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
3
4. A mechanism of positive mutual feedback between experience and
competences has been recognized, indicating that Trion Kromhout has fallen
into a familiarity/maturity trap. Creating breakthroughs is therefore hard to
achieve at Trion Kromhout.
5. A mainstream management system recently was introduced at Trion
Kromhout. The focus of this system is on doing more with less. Many
ingredients of the mainstream management system are focused on upward
migration, i.e. increasing the stream of rents on current competencies. The
exploration of new opportunities is therefore left unattended. Moreover, e.g.
the handling of strict go-or-kill criteria hardly apply for explorative projects,
decreasing the likelihood of these types of projects to get delayed or even
killed.
Another substantial part of this study was to create directions for Trion Kromhout
to overcome these barriers to exploration. These directions are described below in
general:
1. To get out of the familiarity/maturity traps, Trion Kromhout should
explore novel/emerging technologies. The appendix shows which areas
Trion Kromhout should explore.
2. A boundary spanning role should be formalized to initiate the exploration
of the above mentioned novel/emerging technologies.
3. An innovation management system has to be created to enhance
explorative activities, applying appropriate evaluation metrics. Moreover,
in the case of Trion Kromhout, a platform approach around the mentioned
technologies should be applied to build a knowledge base in these specific
areas and reduce uncertainties.
4. Finally, the above mentioned activities should be conducted in a separate
organizational space, next to the mainstream organization. Key is that
exploitation and exploration will balance healthy, which can be enabled by
applying contingency rewards.
A main recommendation for Trion Kromhout to apply the directions is that
Trion Kromhout should initiate from bottom up. This means that Trion Kromhout has
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
4
to start small with little investments. Over time when uncertainties start to reduce,
investments may increase.
A limitation of this study is that the relation between internal R&D and
external knowledge acquisition has not been investigated. Therefore no comments can
be given about whether Trion Kromhout should continue to acquisition strategy next
to internal R&D. Also what not has been investigated is the initiation and integration
process of the R&D department. This process also can affect the output of the
contemporary R&D department. Finally, a patent analysis has been conducted. The
result is that the model of innovation dynamics (Utterback, 1994) shows similarities
with those at Trion Kromhout. However, Utterback’s model applies on industrial level
and the patent study is on organizational level. No further investigation has been done
in order to validate the results to some extent. The results of the analysis however,
appeared to be useful as an awareness creating tool for a need for exploration.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
5
Content
1 Introduction ....................................................................................................... 7
1.1 Toward the Problem .................................................................................... 7
1.2 Objective ..................................................................................................... 9
1.3 Central Question ......................................................................................... 9
1.4 Research Questions ..................................................................................... 9
1.5 Scope .........................................................................................................11
1.5.1 Not broader .........................................................................................11
1.5.2 Not narrower .......................................................................................11
2 Theoretical Framework .....................................................................................12
2.1 The Dynamics of Technologies and Innovation ..........................................12
2.2 Radical Technological Innovation ..............................................................14
2.2.1 Competences .......................................................................................15
2.2.2 Technology .........................................................................................16
2.2.3 Market ................................................................................................16
2.3 Impediments to exploration ........................................................................17
2.3.1 The myopia of learning .......................................................................17
2.3.2 Mainstream management systems .......................................................19
2.3.3 Conclusion ..........................................................................................21
2.4 Enabling exploration ..................................................................................22
2.4.1 Escaping from competence traps .........................................................22
2.4.2 An innovation management system .....................................................23
2.4.3 An independent organizational space ...................................................26
2.4.4 Conclusion ..........................................................................................28
3 Research Methodology .....................................................................................30
3.1 Research strategy .......................................................................................30
3.2 Research design .........................................................................................31
3.3 Data collection methods .............................................................................31
3.3.1 Principles of data collection.................................................................31
3.3.2 Interviews ...........................................................................................32
3.3.3 Desk research ......................................................................................33
3.4 Data analysis ..............................................................................................34
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
6
4 The Case: Trion N.V. and Trion Kromhout .......................................................36
4.1 Origin and growth of Trion N.V. ................................................................36
4.2 Towards a purification provider (1/2) .........................................................37
4.2.1 Wolf ....................................................................................................38
4.2.2 Elusius ................................................................................................40
4.3 Towards a purification provider (2/2) .........................................................40
4.4 Conclusion .................................................................................................40
5 Analysis ............................................................................................................43
6 Enhancing exploration at Trion Kromhout ........................................................44
7 Conclusions ......................................................................................................45
7.1 The main objective .....................................................................................45
7.2 Discussion ..................................................................................................45
7.2.1 Internal and external R&D ..................................................................45
7.2.2 Integration of an R&D department ......................................................46
7.2.3 Dynamics of innovation on organizational level ..................................46
7.3 Limitations and implications for further research ........................................47
7.3.1 Internal and external R&D ..................................................................47
7.3.2 Integration of an R&D department ......................................................47
7.3.3 Dynamics of innovation on organizational level ..................................48
8 References ........................................................................................................49
9 Appendix A - Overview of novel/emerging technologies ..................................52
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
7
1 Introduction
1.1 Toward the Problem
The field of innovation is increasingly recognized as a major driver of
organizational performance. The American Management Association (AMA)
1
commissioned a global survey of 1,396 top executives conducted by the Human
Resource Institute
2
(HRI). Of all respondents, 68% ranked innovation in their
company as “extremely” or “very” important nowadays. When asked to look 10 years
out, this percentage augmented to 86%
3
.
Through extant literature in the field of innovation, two types of innovative
activities have been generally acknowledged, i.e. exploitation and exploration
(Holland, 1975; March, 1991). The essence of exploitation is the refinement and
extension of existing competences, technologies, and paradigms… The essence of
exploration is experimentation with new alternatives (March, 1991: p.85). As most
established firms are proficient at refining and extending their existing competences
(i.e. exploitation), they seem to struggle with pioneering radically new products and
services (i.e. exploration) (e.g. McDermott & O’Connor, 2002; Hill & Rothaermel,
2003; O’Reilly & Tushman, 2004).
Though, many scholars have pointed out the importance of radical or
breakthrough innovation and an organization’s capability to realize these types of
activities. As many firms fail to maintain leadership when facing radical technological
innovations (e.g. Anderson & Tushman, 1990; Christensen, 1997) and the nature of
radical change is often unpredictable, organizations have to be able to either initiate
these breakthrough innovations or react rapidly (Cohen & Levinthal, 1990). In other
words, organizations have to facilitate explorative activities within their structures.
This will enrich the probability for an organization to flourish on the long run
(McDermott & O’Connor, 2002).
1
http://www.amanet.org/
2
http://www.i4cp.com
3
The percentage of those rating innovation as “extremely” important jumped from 32.5% to 51.3%
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
8
This specific challenge of experimenting with and initiating radical
technological innovations is a major struggle especially for incumbent firms. For
example, established firms can get caught up in a success trap (Levinthal & March,
1993). The results of exploitation are more certain and proximate, and therefore often
favored over exploration, with outcomes that are initially poor and uncertain (March,
1991). Since the development of existing technologies and competences often leads to
early success, further exploitation is emphasized. This process can lead firms into a
‘success trap’, firms can get blindsided for exploration by this.
Leonard-Barton (1992) describes core capabilities and their dysfunctional
flipside (i.e. core rigidities). Since core capabilities are part of the organization’s
taken-for-granted reality, organizations are having difficulties with performing
projects that are misaligned with these core capabilities. Next to that they find little
support from top management for that same reason. As a consequence, important new
competences may be neglected.
Recently, an R&D director of an established firm in the purification industry,
Trion NV, recognized the importance of being able to experiment with and initiate
radical technological innovations. The strategy Trion NV pursued when it involved
getting access to new technology – different from their core competences (i.e.
membrane technology and activated carbon) – often was one of acquiring other
companies and integrating them in the Trion NV organization. This resulted in the
current Trion NV as a conglomerate existing of several subsidiaries, all with different
areas of expertise in the purification sector. The conglomerate, nowadays has
engineering and manufacturing facilities in seven countries and is active in more than
a hundred countries around the world. Trion NV, founded in 1918, has more than
1500 FTEs.
The just introduced R&D director, runs the R&D department of Trion
Kromhout, a ‘physical amalgamation’ of four subsidiaries of Trion NV: Trion Process
Technology (TPT), Trion Membrane Technology (TMT), Trion Wolf, and Trion
Components and Services (TCS). These four companies are all situated under one
roof in Kromhout since 2003. In line with the General Manager and Business
Developer (both from Trion Kromhout), the R&D director’s major concern is how
Trion Kromhout can be enabled to explore the new possibilities themselves. Other
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
9
than that, they want to be sure that Trion Kromhout does not fail to notice promising
technologies, and that Trion Kromhout is able to embed these, in particular radically
new technologies in its own organization.
1.2 Objective
Therefore, the main objective of this thesis is to:
“Draw up recommendations for Trion Kromhout on how it could organize for
exploration”.
1.3 Central Question
As mentioned, especially established firms seem to struggle with this type of
activities (i.e. exploration). Therefore, it is likely to argue that an organization evolves
and undergoes certain processes, which eventually may hamper explorative activities
(e.g. Tripsas & Gavetti, 2000; Chandy & Tellis, 2000). For Trion Kromhout, (as part
of) an established firm, it is important to find out if and why it is struggling with the
exploration of new possibilities and with embracing them. To achieve this goal, the
following central question is posed:
“How has Trion Kromhout evolved over time with respect to exploration, and
how can Trion Kromhout enhance exploration?”
1.4 Research Questions
Although the focus (which will be described later) will be on Trion Kromhout,
it is important to go back further in time. To provide proper insights on the context of
Trion Kromhout as it currently exists and how potential impediments to exploration
may have arisen, the evolution of Trion before the foundation of Trion Kromhout in
2003 has to be analyzed as well, instead of merely analyzing the period of 2003 until
now. Moreover, incidents in the far past may influence today’s explorative capacity as
well. Therefore, the first research question reads:
1. How did Trion evolve from its foundation until 2003, especially concerning its
explorative capacity?
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
10
To analyze the period from 2003, when the four mentioned companies were
clustered into Trion Kromhout, until the present, a multilevel approach will be
employed. This means that Trion Kromhout will be analyzed at both organizational
and project level. The purpose of this multilevel approach is that it enables to analyze
the organizational evolution in extend to research question 1, and the content of
projects aligned with this period. The latter can provide for characteristics (e.g.
alignment with corporate strategy) which could give insights into why a project
thrives or not. For the analysis on project level, several fail- and success cases will be
used. Paragraph 1.5 is used to elaborate more on this research methodology. The
second research question is:
2. How did Trion Kromhout evolve from 2003 until the present, especially
concerning its explorative capacity?
The former two research questions result in a description of the complete
journey that Trion, in specific Trion Kromhout has been through. Aiming for the
central question, the complete journey is being critically assessed. Via this critical
analysis main influential factors impeding exploration, are to be recognized.
Moreover, a closer look is taken at peculiarities which might have positively
influenced explorative behavior. Through the third research question, these influential
factors are evaluated, judged, and criticized:
3. Which major factors negatively influencing exploration can be recognized
throughout the case of Trion Kromhout?
By answering the first three research questions, the first part of the central
question (i.e. how Trion Kromhout has organized for exploration in the past) is
covered and has created a link to the second part, i.e. how Trion Kromhout could
organize for exploration. The specific goal is to indicate how and which enhancing
factors can be emphasized and how and which impeding factors can be turned around
or be made less influential. The fourth and final research question is:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
11
4. How could the explorative activity at Trion Kromhout be enhanced?
1.5 Scope
This study will focus on Trion Kromhout. There are several arguments for this
decision.
1.5.1 Not broader
As pointed out by the director of the R&D department, Trion Kromhout is
functioning as a role model to the other subsidiaries (e.g. Nijhuis, Nafhams, and
Trifix) in several fields (e.g. R&D, marketing, and sales). This way, the latter
companies don’t have to be included in the study. Another reason for excluding these
companies is, just as not making Trion NV the focal organization, that the scope of
the study would be too broad.
1.5.2 Not narrower
Throughout the entire company (Trion NV), Trion Kromhout is considered as
one company, and it is acting this way. The individual corporate identities within
Trion Kromhout are diminishing due to several factors, for instance one General
Manager is governing all four companies. Other factors are joint purchasing,
marketing and sales which make Trion Kromhout act as one company. This is a
reason to not pick one of the (former) individual companies as a focus for the study.
Next to that, the innovation process is multi-faceted (Dougherty, 1992), which
means that this process involves for example R&D, marketing, sales, and production.
Since every department contains employees whose contracts are with either TPT,
Wolf, TMT or TCS, it is a major challenge to derive all employees from only one
company. These are reasons to focus on Trion Kromhout, and not narrower.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
12
2 Theoretical Framework
An unrelenting theme in the literature on the process of innovation is that well-
managed, established firms in the face of radical technological innovations often
struggle to ‘bridge the chasm’. These firms go into decline while new entrants
penetrate and conquer to dominate the market with the new technology. This chapter
first highlights in what way organizations transform their strategies, structures and
processes. Another section elaborates on the definition of radical technological
innovation. Furthermore, one paragraph highlights some of the relevant rationales of
why incumbents find it hard to meet the challenge of dealing with radical
technological innovation. Finally, the flipside of the coin is told, how established
Trion Kromhout could experiment with and initiate radical technological innovations.
2.1 The Dynamics of Technologies and Innovation
In due course, organizations are changing their strategies, structures, and
processes in order to renew their offerings and herewith remain competitive. Extant
literature provides several models which describe how technologies and innovation
change over time. One model that enjoys many support is the principle of punctuated
equilibrium (Gersick, 1991; Romanelli & Tushman, 1994). The punctuated
equilibrium model depicts organizational transformation as long, stable periods of
incremental change, punctuated with short bursts of radical, discontinuous change.
These short bursts of radical change, or revolutionary periods (Romanelli & Tushman,
1994), substantially alter an organization or industry. Whereas the periods of
incremental change are assumed to take place, the focus in literature is on the
discontinuous, revolutionary
periods in the model
(Anderson & Tushman, 1990;
Utterback, 1994; Christensen,
1997).
For example, Anderson
& Tushman (1990) are
elaborating on the punctuated
equilibrium theory by
Figure 2.1 - The Technology Cycle (Anderson & Tushman, 1990)
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
13
describing the technology cycle (see figure 2.1). They state that an ‘era of ferment’
succeeds every technological discontinuity. This era of ferment is characterized by
extensive product-class variation, technological uncertainty, and strong competition
between distinct technologies. Eventually, this tumult period results in the emergence
of a dominant design. A dominant design is defined by Utterback (1994: p.24) as: “…
the one that wins the allegiance of the marketplace, the one that competitors and
innovators must adhere to if they hope to command significant market following. [It]
usually takes the form of a new product … synthesized from individual innovations
introduced independently in prior product variations.” This dominant design
introduces a new set of (technical) standards, rendering the existing standards
obsolete. This dominant design and its standards are then the basis for a lot of future
products.
In his model (see figure 2.2), Utterback (1994) distinguishes rates of
innovation in particular phases. He, for example defines a fluid phase, quite similar to
the era of ferment in the model of Anderson & Tushman (1990). In this fluid phase,
the rate of product
innovation is high,
whereas the rate of
process innovation is
relatively low. The
period in which the
dominant design
emerges, is defined as
the transitional phase
by Utterback (1994).
After the emergence of the dominant design, the needs of customers become
clearer, therefore the focus in this transitional phase is on product variation, aimed to
serve specific customers. The rate of process innovation is increasing rapidly in this
phase, in order to reach significant production volume. Subsequent, a period of
elaboration of the dominant design takes place. This is what is recognized as the
specific phase, or in terms of punctuated equilibrium theory as the period of
incremental change. The final, specific phase is characterized by very specific
R
a
t
e
o
f
i
n
n
o
v
a
t
i
o
n
Figure 2.2 - The Model of Innovation Dynamics (Utterback, 1994)
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
14
products produced at a high level of efficiency, where the rate of innovation is
declining. Product and process innovation are very tightly linked, and a modification
in either product or process is now becoming extremely difficult and expensive. In
this phase, the competitive emphasis is on cost reduction.
In this final specific phase, the rules of the game are apparent. The product and
process are highly specific, and the market is very clear. At some point in time, the
firm reaches a status quo, which it can only get out from through a radical change in
product or process. Existing standards are made obsolete by new technological
discontinuities, and the search for a new dominant design is initiated in a sequential
fluid phase or era of ferment. Characteristics of each phase are presented in table 2.1.
Fluid Phase Transition Phase Specific Phase
Innovation Frequent major product
changes
Major process changes
required by rising demand
Incremental for product and
with cumulative
improvements in productivity
and quality
Source of innovation Industry pioneers; product
users
Manufacturers; users Often suppliers
Products Diverse designs, often
customized
At least one product design,
stable enough to have
significant production
volume
Mostly undifferentiated,
standard products
Production processes Flexible and inefficient,
major changes easily
accommodated
Becoming more rigid, with
changes occurring in major
steps
Efficient, capital intensive,
and rigid; cost of change high
R&D Focus unspecified because of
high degree of technical
uncertainty
Focus on specific product
features one dominant design
emerges
Focus on incremental product
technologies; emphasis on
process technology
Equipment General-purpose, requiring
skilled labor
Some sub-processes
automated, creating islands
of automation
Special-purpose, mostly
automatic, with labor focused
on tending and monitoring
equipment
Plant Small-scale, located near user
or source of innovation
General-purpose with
specialized sections
Large-scale, highly specific
to particular products
Cost of process change Low Moderate High
Competitors Few, but growing in numbers
with widely fluctuating
market shares
Many, but declining in
numbers after emergence of
dominant design
Few; classic oligopoly with
stable market shares
Basis of competition Functional product
performance
Product variation; fitness for
use
Price
Organizational control Informal and entrepreneurial Through project and task
groups
Structure, rules, and goals
Vulnerabilities of industry
leaders
To imitators, and patent
challenges; to successful
product breakthroughs
To more efficient and higher-
quality producers
To technological innovations
that present superior product
substitutes
Table 2.1 – Phase characterization (Utterback, 1994)
2.2 Radical Technological Innovation
Exploration is defined in this study as experimenting with new possibilities
(e.g. March, 1991). The main premise in this study is that radical technological
innovations are explorative and that exploration leverages the initiation of radical
technological innovations within the company (Levinthal & March, 1993). A further
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
15
definition of the latter (radical technological innovation) is required. This definition is
provided for in this section.
A lot has been written about radical technological innovation, therefore it is
first important to elucidate how radical technological innovation is defined in this
study. Terms like discontinuous vs. continuous, disruptive vs. sustaining, and radical
vs. incremental are used ubiquitously throughout extant literature to define
innovation. What characterizes these terms is that they all describe the degree of
departure from existing technologies, competencies or paradigms. Since in this study
Trion Kromhout is considered as an established firm in the purification sector,
technology is referred to as this existing technology used prior to the radical
innovation (Henderson, 1993). Technology itself is defined as the processing of raw
materials subjected to a certain branch in the industry (derived from Van Dale Online
Dictionary, 11-06-2009).
Throughout extant literature the radicalness of innovations has been evaluated
and characterized several times (e.g. Green et al., 1995; Garcia & Calantone, 2002).
The discussion on the radicalness of innovations however remains rather ambiguous.
Therefore in this study, an attempt is made to define a radical innovation along three
dimensions: (1) a firm’s competences, (2) technology, and (3) market. Through a
literature review these dimensions were recognized as common and underlie most of
the definitions.
2.2.1 Competences
When describing technological discontinuities, Anderson and Tushman (1990)
focused on the firm’s competences and distinguished technological discontinuities as
competence-enhancing and competence-destroying. Competence-enhancing
discontinuities build on know-how embodied in the technology that it replaces.
Competence-destroying discontinuities render obsolete the expertise required to
master the technology that it replaces (1990: p.609). Henderson (1993) used these
terms in a different manner, where she refers to incremental innovation as
competence-enhancing and radical innovation as competence-destroying. An
incremental innovation in this sense requires a logical extension of existing
knowledge and capabilities, whereas a radical innovation makes existing
technological and scientific principles (partially) obsolete. This latter definition
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
16
(Henderson, 1993) is employed in this study, which in turn is in line with
competence-destroying innovations.
2.2.2 Technology
The second dimension proposed in the definition of radical technological
innovation is technology. According to Chandy and Tellis (1998), a radical innovation
incorporates a substantially different core technology relative to the previous product
generation. The technological rules of the game are thus radically changed, whereas
technology doesn’t develop along a sustaining path anymore, but is disrupted by a
new technology with a substantial different set of technological rules (Christensen,
1997). In addition, Rosenkopf & Nerkar (2001) define radical exploration, which
builds upon ‘distant’ technology that resides outside the firm (2001: p.290). The
technological domain differs from the prior source of technology, and is not located in
other sub-units of the firm. Ahuja & Lampert (2001) complement this dimension by
defining radical innovation, or breakthrough inventions as serving as the basis for
future technologies, products, and services.
2.2.3 Market
The third and final dimension of a radical innovation presented in this study is
market related and describes the customer benefits derived from a radical innovation.
Chandy & Tellis (1998) defined radical product innovations along two dimensions,
i.e. technology (as discussed above) and market. The latter determines the extent to
which the new product fulfills key customer needs better than existing products (on a
per-dollar basis) (1998: p.476). The authors presented four types of innovation among
which radical product innovations, innovations that provide substantially greater
customer benefits per dollar, relative to existing products. In their study, Rice et al.
(2001) further specified this increase in customer benefits. Their definition states that
a radical technological innovation means 5-10 fold (or greater) improvement in
performance and/or a 30-50% (or greater) reduction in cost. Moreover, radical
innovations have the potential of opening up entirely new lines of business.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
17
2.3 Impediments to exploration
The importance of radical technological innovation has been pointed out
through the model of punctuated equilibrium. Organizations need to be able to make a
quantum jump in technology to get out of the eventual ‘status quo’ as described.
Moreover, radical technological innovation (facilitating these quantum jumps) has
been defined as well. What has been pointed out as well is that organizations seem to
struggle with conducting exploration. Numerous explanations have been presented
throughout extant literature on why organizations are struggling with exploration.
This section will highlight some key factors that impede the explorative activities of
an organization.
2.3.1 The myopia of learning
Many organization theorists have discussed the differences between
exploration and exploitation (e.g. March, 1991). March (1991) discussed the trade-off
between the exploitation of existing competences and the exploration of new
opportunities. Both exploitation and exploration are competing for the same resources
within the same organizational context, and the main challenge that organizations face
is the creation of a balance in resource allocation between the two. This trade-off
discussion is emphasized by the very distinct characteristics that both phenomena
exhibit. The returns of exploitation are generally recognized as positive, proximate,
and predictable. Outcomes of exploration are the opposite, i.e. uncertain, distant, and
often negative. The struggle arises in the balancing of the two themes, since the
exploitation of existing competencies is often favored over the exploration of new
ones, due to decreased uncertainty in results and more proximate and positive results.
Levinthal & March (1993) further elaborate on this discussion by introducing
the learning trap. The authors state that over time, organizations develop their skills in
particular markets, in particular competences and in particular technologies. Herewith
they propose a mechanism of mutual positive feedback between experience and
competence (1993: p.102). More often organizations tend to engage in activities at
which they are more competent (exploitation) than in activities at which they are less
or not competent at all (exploration). Due to increased positive outcomes of
exploitative activities, it are these activities that are favored over explorative ones and
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
18
firms may enter a success trap. In other words, firms become myopic for explorative
learning.
An emphasis is put on these downsides of a firm’s core competences by
Leonard-Barton (1992), who introduced core rigidities. With core capabilities,
Leonard-Barton refers to a knowledge set that distinguishes and provides competitive
advantage (1992: p.113). In core capabilities reside four dimensions, namely (1)
employee knowledge and skills, (2) technical systems, (3) managerial systems, and
(4) the values and norms. Choices that are made in the past on which technologies,
competences, and markets the focus will be put, are now strongly embedded in a
taken-for-granted mentality and can result in strong path dependence (Garud &
Karnoe, 2001). Managers are influenced by these choices made in the past in
contemporary decision-making and are often not willing to challenge these accepted
core capabilities.
Core capabilities therefore are becoming static in nature, and can eventually
inhibit the adoption or initiation of radical technological change, thus turning into
rigidities. Since managers are not eager to challenge core capabilities, projects that are
misaligned with the core capabilities are often not embraced. For example, when the
necessary skills and knowledge for a project in a certain domain are lacking, the
project is nonaligned and will seldom be pursued. The same goes for technical
systems, which are deeply rooted in the company but can easily get outdated, e.g.
software systems. The adjustment of the current system or shifting to a new one, is
very time-consuming and therefore can cause serious delays. Abernathy and Wayne
(1974) provide a good example of this by describing Ford’s highly efficient
production of the Model T. Ford enabled itself in driving down costs of this
production. However, the transition to the Model A suffered great difficulties and
even required shutting down manufacturing for a considerable period of time.
Next to that, misaligned projects often enjoy little status, and firm and top
management support. Finally, incentive systems discourage employees to pursue
projects that aren’t aligned with the core capabilities. The greatest risk as a result of
embracing only projects that are aligned with the core capabilities of the firm, is that
significant new capabilities get neglected.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
19
Whereas the theme discussed above relates to projects, learning theory also
discusses problem solving as well. Ahuja & Lampert (2001) have defined three
pathologies which inhibit radical technological innovation. The first, the familiarity
trap, is closely related to the theme as discussed above. That is, due to the mechanism
of mutual positive feedback between experience and competence, firms tend to seek
for approaches in problem solving with which they are familiar. The authors describe
it as an example of path dependence that increases the risk of falling into a familiarity
trap. The second trap, the maturity trap, is closely related to the familiarity trap, but
conceptually different. Mature technologies are technologies that have been in
existence for some time and are relatively well known and understood in the industry
(2001: p.527). These technologies are closely tied to the advantages and
characteristics of the established firm. The final trap Ahuja & Lampert (2001) discuss
regarding problem-solving is the propinquity trap, in which the nearby solutions are
favored over distant solutions. Phene et al. (2006) have further defined this
phenomenon of local knowledge search as in the ‘distance’ of knowledge. They state
that knowledge can be both technologically and geographically distant. When
knowledge has no relation with prior knowledge within the company, it then is
considered technologically distant. When knowledge resides outside organizational
boundaries and even outside the industry, the knowledge is considered geographically
distant. Companies tend to favor local knowledge over distant knowledge in their
problem solving activities, which increases the risk of missing out on ‘external’
opportunities (Rosenkopf & Nerkar, 2001).
2.3.2 Mainstream management systems
Large, established firms are enjoying, protecting, and trying to increase their
current stream of rents on their products, which are mostly located in large,
established markets. This need to increase these rents and therewith to grow as a firm,
is termed by Christensen (1997) as upward migration. Firms create routines to serve
customers and investors in the mainstream market well and eventually to realize this
growth. Structural inertia theory explains that firms are favored for cooperation when
they are reliable in producing collective action, and when they can account rationally
for their activities (Hannan & Freeman, 1984). The routines – the capacity to
reproduce a structure with high fidelity – that firms create, are constructive for
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
20
creating reliability and accountability. The downside is that these routines (e.g.
information systems) impede radical change, because the reproducibility of structures
requires bureaucracy and formalization of processes (Hill & Rothearmel, 2003).
O’Connor et al. (2008) build further on this, by describing the key
characteristics of a mainstream, or operational excellence management system which
are proficient at serving mainstream operations. Moreover, they propose it as a system
that nurtures new product development within current lines of business rather than
radical technological innovation. The key characteristics are displayed in table 2.2
below:
Mainstream Management System
Objectives and mandate Efficient, effective management of current markets and operations
Leadership and culture Planning and delivery oriented
Structures Clear and delineated
Processes Stage-gate, project management oriented; avoid deviations from budget or schedule
Governance and decision making Go-or-kill criteria clear in advance, hierarchical decision making
Skills and talent development Functional expertise
System resources Annual budget allocation
Metrics On-time delivery, cost containment, profitability
Table 2.2 - Key Characteristics of a mainstream management system (O’Connor et al., 2008)
As O’Connor et al. (2008) state: “[a system like this] efficiently leverages what the
organization knows for responding quickly and effectively to customer needs or
competitive threads to current product lines or markets” (2008: p.17, emphasis
added). These management systems traditionally do not reward experiment-, or
exploration-oriented activities.
Christensen et al. (2008) have approached one particular aspect of the
management system which is according to the authors one of the major reasons
innovations get killed, i.e. the use of financial tools (especially in the early stages of
radical technological innovations). As the importance of radical technological
innovations already has been pointed out, large established firms also face a
disincentive to invest in them due to initial market size (i.e. often smaller than the
mainstream market). The following example provided by Christensen points out this
disincentive:
…while a $40 million company needs to find just $8 million in revenues to grow at 20 percent … a $4
billion company needs to find $800 million in new sales. No new markets are that large … [therefore]
the larger and more successful an organization becomes, the weaker the argument that emerging
markets can remain useful engines for growth.” (1997: p.xxiv-xxv).
Moreover, Christensen (1997) states that markets that don’t exist can’t be
analyzed, which is often the case in radical technological innovations. Radical
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
21
innovations are often paired with many market and technological uncertainties.
Mainstream management systems of apply financial tools as evaluation metrics in
typical stage-gate processes, and top management demands market data when none or
(too) little exists and make judgments based upon these financial projections when
neither revenues or costs can, in fact, be known sufficiently. And therefore, when
incremental or sustaining projects are compared with projects of radical nature, it will
(often) be the incremental projects that get top management support and prevail, while
radical technological projects get delayed or even die (Christensen et al., 2008).
Mainstream management systems effectively leverage existing technologies to
serve current markets. Product development is therefore mostly based on known
competences and technologies. Song et al. (1998) described that cross-functional joint
involvement in a new product development (NPD) process is not beneficial in all
stages of the process. They for example recognized that in the first stage (i.e. market
opportunity analysis), joint involvement of an R&D department and a production
department (technical system) acts counterproductive. Often new ideas do not fit
within the current production processes and since these are very expensive and time-
consuming to adapt or adjust, new opportunities are often not pursued.
2.3.3 Conclusion
Several mechanisms have been identified that influence the exploration
capability of an organization. A strong mechanism is that of mutual positive feedback
between experience and competences, which results in favoring the existing
competencies over radically different ones. This is reflected on two levels, i.e. on the
level of problem solving, where employees find it difficult to escape the bounded
rationality. The second level is that of projects or organization level, which implies
that only projects will be pursued that fit the current competencies. Moreover, a
management system often is applied by incumbents which is beneficial for
incremental new product developments rather than the initiation of radical
innovations. Thus, individuals and organizations are trapped in a bounded rationality
which impedes them to act properly, especially in the early stages of radical
technological innovations.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
22
2.4 Enabling exploration
This paragraph presents the counterpart of the prior paragraph, in which was
described how incumbent firms suffer from a multitude of constraints and how they
can grow into an inert organization incapable of dealing with radical technological
innovation. This paragraph illuminates how organizations could prevent themselves
from organizational decline and inertia in the face of radical technological
innovations. In this sense, the story of incumbents in the face of radical technological
change will be completed, since some established firms do survive and prosper in the
period after the radical change or can even be the source of radical innovations (e.g.
Schumpeter, 1950; Teece, 1986; Methé et al. 1996; Ahuja & Lampert, 2001).
2.4.1 Escaping from competence traps
The previous section described how firms can get caught up in a competence
trap. Ahuja & Lampert (2001) elaborate on entrepreneurship in large, established
firms, and point out the importance of experimenting with technologies explicitly not
related to prior knowledge to break out of these traps. As mentioned before, firms can
get caught up in either a familiarity trap (i.e. favoring the familiar), a maturity trap
(i.e. favoring the mature), or a propinquity trap (i.e. favoring the nearby). The authors
suggest that in case of each of these traps, a strategy exists to overcome these traps
and enable adaptation or even creation of radical technological innovation.
Succinctly, in the case of the familiarity trap where firms are merely exploiting
technologies known by the firm, organizations should explore and experiment with
novel technologies. These are technologies that are new to the firm, even when they
already exist for a while. In the case of a maturity trap, favoring technologies that are
relatively long in existence and well-known, organizations should explore emerging
technologies. Emerging technologies are technologies that are new in chronological
terms. Finally, when a firm got caught in a propinquity trap, i.e. only exploring the
solutions in the neighborhood of existing solutions, the firm should explore
pioneering technologies. In the case of pioneering solutions, researchers are ignoring
all existing solutions and are exploring fundamental, new solutions. The basic premise
of purposively exploring other technologies is to step out of the bounded thought
process. Sloane (2003) defined this as the process of lateral thinking.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
23
The exploration of novel, emerging or pioneering technologies also points out
the importance of external information and the acquisition and assimilation of it.
Cohen & Levinthal (1990) defined this as absorptive capacity: an organization’s
ability to recognize the value of new, external information, assimilate it, and apply it
to commercial ends (1990: p.128). The authors argue that absorptive capacity
depends (among others) on specialized actors that are intermediating between either
organization and environment, or between different subunits within the firm.
Rosenkopf & Nerkar (2001) elaborated on a critical role needed in innovation and
proposed boundary spanning, essential according to Cohen and Levinthal (1990)
when external information is not closely related to the established knowledge. A
similar role was introduced by Bessant & Von Stamm (2007) as a search strategy to
enhance discontinuous innovation: the Idea Hunter. Rosenkopf & Nerkar (2001)
introduced a typology of boundary spanning where two distinct boundaries can be
crossed, i.e. the organizational boundary and the technological boundary. In terms of
radical technological exploration, the authors suggest that both organizational and
technological boundaries should be crossed. Radical exploration builds upon distant
technology that resides outside the firm (2001: p.290). The boundary spanning role is
emphasized by Reid & De Brentani (2004) who argue that radical innovations only
enter the organization at the discretion of individuals such as boundary spanners.
Huston & Sakkab (2006) investigated in their study the new innovation model
of Procter & Gamble, connect and develop. This is a good example of how boundary
spanners or in terms of Huston & Sakkab, technology entrepreneurs, are used to
explore new opportunities. The main premise is, these technology entrepreneurs
aggressively scan scientific literature and patent databases. The authors however
emphasize that only spanning electronically is insufficient. Technology entrepreneurs
at P&G therefore physically visit research labs, universities, congresses, fairs etc.
Their findings will be actively communicated back to P&G’s decision makers.
2.4.2 An innovation management system
Important in the face of radical technological innovations is to properly
evaluate the opportunities. The previous section described management systems in
established organizations which do not apply for radical technological innovations
(O’Connor et al., 2008). The authors state:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
24
“For example, if the decision-making criteria used to evaluate projects for funding are based on what is
already known about success in familiar markets and with known technologies, but the projects being
evaluated are characterized by high uncertainty and ambiguous outcomes (Will the technology work?
What are the most likely applications? How might we derive value from this as a business? How will
we develop the process innovations necessary to make this economically justifiable?), it’s very unlikely
they’ll be funded.” (2008: p.16)
Here, the mainstream management system’s counterpart is described, i.e. an
innovation management system, which is beneficial to the pursuit of radical
innovations. In table 2.3 the key characteristics of an innovation management system
are displayed.
Innovation Management System
Objectives and mandate New business creation in new and existing markets
Leadership and culture Learning and building oriented
Structures Flexible
Processes Learning and experimentation oriented, allow redirection based on new insights
Governance and decision making Decisions made based on strategic intent and continued learning; criteria not clear in
advance; governance rather than hierarchy
Skills and talent development Entrepreneurial expertise
System resources Resources acquired through many avenues
Metrics Portfolio health and balance; connection with strategic intent of firm; new domains
accessed; new resources garnered; new business starts
Table 2.3 - Key characteristics of an Innovation Management System (O’Connor et al., 2008)
For increasing the survival chances of radical innovations within the
mainstream organization, O’Connor et al. (2008) further elaborate on the discussion
between a project and a platform approach, and state that projects aren’t the way to
go. Instead, platforms (e.g. nanotechnology or energy reuse) create an increased
number of options because they can be the foundation for a variety of business
models, products, and applications (2008: p.62). Again the authors emphasize the
strategic intent which is important, focusing e.g. idea generation in domains of
strategic interest for new opportunities creates more leverage for ideas than one-off
projects.
For the creation of successful technology platforms, firms should get involved
in Open Innovation, a paradigm introduced by Chesbrough (2003). The paradigm
opposes the traditional vertical integration model, where only internal R&D activities
lead to developed products, which he refers to as closed innovation. Chesbrough et al.
(2006) define open innovation as: “the use of purposive inflows and outflows of
knowledge to accelerate internal innovation, and expand the markets for external use
of innovation, respectively” (2006: p.1). R&D is considered an open system in this
paradigm, where (radical technological) innovations can originate within
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
25
organizational boundaries as well as outside these boundaries. Next to that can these
innovations be commercialized from inside the company as well as outside the
company. The processes of both closed and open innovation are visualized in figure
2.3.
Figure 2.3 - The process of respectively closed and open innovation (Chesbrough, 2003)
In table 2.4, the main principles of closed and open innovation are presented.
Chesbrough et al. further emphasized that open innovation enhances both the
creation and capturing of innovations. The use of the required business model thus
enables the initiation of, and response to change.
Table 2.4 - Contrasting Principles of Closed and Open Innovation (Chesbrough, 2003)
Organizations engaging in open innovation, have to find a way to couple the internal
research and external ideas. Moreover, firms need to deploy these ideas within their
own business model and through the business of other firms. Chesbrough (2003)
notes that it is key for firms to identify what the firm is lacking internally, where to
attain those missing parts, and integrate these parts into their systems. The open
innovation paradigm thus emphasizes the importance of interaction with the
Closed Innovation Principles Open Innovation Principles
The smart people in our field work for us. Not all the smart people work for us so we must
find and trap into knowledge and expertise of
bright individuals outside our company.
To profit from R&D, we must discover, develop,
and ship it ourselves.
External R&D can create significant value;
internal R&D is needed to claim some portion of
that value.
If we discover it ourselves, we will get to market
first.
We don’t have to originate the research in order to
profit from it.
If we are the first to commercialize an innovation,
we will win.
Building a better business model is better than
getting to market first.
If we create the most and best ideas in the
industry, we will win.
If we make best use of internal and external ideas,
we will win.
We should control our intellectual property (IP)
so that our competitors don’t profit from our
ideas.
We should profit from other’s use of our IP, and
we should buy other’s IP whenever it advances
our own business model.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
26
environment, and the creation and maintenance of networks, which is the emphasis in
the connect-and-develop model of P&G as well (Huston & Sakkab, 2006).
2.4.3 An independent organizational space
March (1991) discussed that both exploitation and exploration should co-exist
within organizations and that it is important to make the correct tradeoff between the
two. This means that a mainstream management system as described in the previous
section should not entirely be replaced by an innovation system, since exploitation is
beneficial for success in the nearer term and organizations enjoy greater certainties
from it. This section provides useful insights in how organizations can nurture both
exploitation and exploration.
Christensen & Overdorf (2000) state in their article, that the capabilities of a
firm reside not only in their resources, but also in their processes, and values.
Emphatically, as recognized by many other scholars, the processes of a firm (i.e.
patterns of interaction; coordination; communication; and decision making.
Christensen & Overdorf, 2000) are designed for tasks to be performed efficiently and
or meant not to change. Though, in the face of radical technological change, these
processes are not applicable any longer. Moreover, Christensen & Overdorf (2000)
discuss the values of the firm which also affect what a company can or cannot do.
They define the firm’s values as: “…the standards by which employees set priorities
that enable them to judge whether [something is attractive or unattractive, more
important or less important].” (2000: p.69) The perception of value changes, when
companies grow. Due to increasing overhead costs, the gross margins that were once
attractive, are now becoming unattractive. Besides, small markets don’t solve the
growth needs of large companies (Christensen, 1997; Christensen & Overdorf, 2000).
As the occurrence and importance of radical technological innovations has
been discussed, companies face the challenge to change the capabilities of the firm.
To overcome the mentioned problems, Christensen & Overdorf (2000) suggest to
create a new, independent organizational space alongside the mainstream
organization. In terms of O’Connor et al. (2008), alongside the mainstream
organization with its mainstream management system, an organizational space has to
be created which is managed through an innovation system. This can be achieved in
three different manners:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
27
1. Create new organizational structures within corporate boundaries in which
new processes can be developed.
2. Spin out an independent organization from the existing organization and
develop within it the new processes and values required to solve the new
problem.
3. Acquire a different organization whose processes and values closely match the
requirements of the new task.
(source: Christensen & Overdorf, 2000: p.73)
The authors refer to Wheelwright & Clark (1992) as the first solution,
regarding heavyweight teams. This means that new organizational boundaries are to
be created internally, in which a new group of people is installed suitable for the new
problem. O’Reilly & Tushman (2004) refer to quite a similar solution as the
ambidextrous organization. These organizations involve project teams that are
structurally independent units, each having its own processes, structures, and cultures,
but are integrated into the existing management hierarchy (2004: p.79). O’Reilly &
Tushman (2004) emphasize the advantages of cross-fertilization and no cross-
contamination between the established and the new business, other than in case of for
example unsupported, or cross-functional teams. The ambidextrous organization is
visualized in figure 2.4.
Birkinshaw & Gibson (2004) defined the concept of contextual ambidexterity
which often acts complementary to structural ambidexterity. The authors refer to
contextual ambidexterity as a phenomenon that calls for individual employees to
make choices between alignment-oriented and adaptation-oriented activities in the
Figure 2.4 - The Ambidextrous Organization (O’Reilly & Tushman, 2004)
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
28
context of their day-to-day work (2004: p.49). The capability of alignment is referred
to as a clear sense of how value is being created in the short-term and how activities
should be coordinated and streamlined to deliver that value. Furthermore, the
capability of adaptability, of which the importance is evident, is described as the
ability to move quickly toward new opportunities, to adjust to volatile markets and to
avoid complacency (Birkinshaw & Gibson, 2004). According to Jansen et al. (2008)
the role of transformational leadership is key in creating and sustaining ambidexterity.
They found that the development of a strong shared vision and contingency rewards
have a positive influence on achieving ambidexterity. In specific, these mechanisms
influence management behavior so that resource allocation will be correctly balanced.
Large organizations seem to be incapable in allocating the necessary resources
for a radical technological innovation, located in an emerging, initially small market.
In this case, Christensen & Overdorf (2000) suggest to spin out an independent
organization. Chesbrough & Rosenbloom (2000) acknowledge the lack of a clear
path to market for spillover technologies. They as well suggest that a business model
distinct from the established one is necessary, which can be achieved via spin-offs.
This method is in extension of the open innovation model, which characterizes
technologies that can be either commercialized internally or, in the case of spin-offs,
externally.
The third and final solution Christensen & Overdorf (2000) suggest, is that of
acquiring the necessary capabilities. The authors distinguish between the acquisition
of processes and values, and the acquisition of resources. In the case where a the goal
is to acquire capabilities that reside in the processes and values of the other company,
Christensen & Overdorf suggest that the other business should be left stand-alone.
This is because, when fully integrating the company and its capabilities, the processes
and values will be overruled by, and vaporize within the parent organization. Though,
when the capabilities needed reside in the resources of the firm, than the parent
organization can fully integrate the other company. This is because these resources
(such as people, technologies, etc.) can enhance the parent capabilities.
2.4.4 Conclusion
This last section of the theoretical framework proposed several insights on how
established organizations can overcome the constraints regarding exploration. Three
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
29
main themes have been discussed which can help firms organize for exploration. First,
as many companies favor their known technologies over the unknown due to mutual
positive feedback, it is important that firms which have fallen in a competency trap
that they deliberately explore novel, emerging or pioneering technologies. Second,
mainstream management systems don’t apply for radical innovation, therefore firms
should create an innovation system which entails different evaluation criteria and
where the mandate is not efficiency, but new business creation. However, an
organization cannot rely totally on one management system (either a mainstream or an
innovation system). That is why firms need to create an independent organizational
space which is separated from the mainstream management system and is governed
through an innovation system.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
30
3 Research Methodology
This chapter elaborates on how the answers to the research questions and
herewith the central question are found. Choices on methodology are being explained
and justified. This chapter elaborates on the research strategy, the data collection
methods, and the method of analysis of the data.
3.1 Research strategy
In this research, a retrospective case study will be conducted. Along three
conditions provided by Yin (1994) is discussed why this research strategy is to be
employed.
The first condition provided by Yin is the type of research question. The
central question in this thesis (“How has Trion Kromhout evolved over time with
respect to exploration, and how could Trion Kromhout enhance exploration?”) is a
typical ‘how’ question, and is meant to deal with operational links needing to be
traced over time rather than mere frequencies or incidences. Therefore the preferred
strategy is either a case study, history or experiment (1994: p.6). From these three
strategies, one can be eliminated through the second condition: the extend of control
over behavioral events. After assessing the first condition, an experiment is still an
option. However, when conducting an experiment a control over behavioral events is
required. Since this is not the case in this research, the experiment as research strategy
is no longer an option. The third condition is the degree of focus on contemporary
events. As described along the research questions, this study goes back in time, even
to certain periods where the study can only rely on documents, cultural and physical
artifacts (1994: p.8). Though, this is only part of the study, as data will also be
gathered in the nearer history and current situation, where sources are for example
managers or employees who are still ‘around’. Leonard-Barton (1990) points out that
a case study is actually a history of a past or current phenomenon (1990: p.249),
therefore the strategy will be concluded as a case study.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
31
3.2 Research design
Some aspects of the research design have to be emphasized. Since part of this
research is the study of the evolution of the explorative capacity of an organization,
the case study will be in retrospect. Data are obtained after certain events have
occurred, as comes forth from the research questions provided in chapter 1.
As described before, Trion Kromhout is the focus of this study, which means
that this study is a single case study. Next to that, as proposed before research
question 2, the case study will contain a multilevel approach. Again referring to Yin
(1994), this is called an embedded case study. This leads to a Type 2 case study
design (1994: p.39), a single case (i.e. Trion Kromhout) study with multiple units of
analysis (i.e. projects).
3.3 Data collection methods
3.3.1 Principles of data collection
Elaborating on the collection of data in a case study, Yin (1994) introduced
three distinct principles which enhance the benefits of the evidence collected. First,
Yin (1994) points out that a broader range of historical, attitudinal, and behavioral
issues can be addressed by employing multiple sources of information. Moreover,
findings or conclusions in a case study are likely to be more convincing and accurate
if based on multiple sources of evidence. Therefore, to increase validity of the
research, the data collected in this study is based on different primary or secondary
sources. Sources of evidence in this research are documentation, archival records,
interviews, and physical artifacts.
The second principle proposed by Yin (1994) involves the organization and
documentation of the data collected. Yin points out that documentation in case studies
generally consists of (1) a data or evidentiary base, and (2) the report of the
investigator (e.g. a article, report, or book). The main purpose of this distinction is that
the ‘critical’ reader has a recourse if he or she wants to inspect the database that led to
conclusions. Furthermore, by creating a separate, independent database, other
investigators can easily review this evidence and are not limited to the written report.
This enhances the reliability of the entire case study. For creating a proper database in
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
32
this study, data is collected and archived as case study notes, case study documents,
tabular materials, and narratives.
The third and final principle is to maintain a chain of evidence. This principle
is to enable the reader of the report to follow derivation of any evidence from initial
research questions to ultimate case study conclusions and the other way around. Thus,
implications made in the conclusions of the study have to be traceable throughout the
report. This along with the other two principles generally increases the reliability and
herewith the quality of the study substantially.
3.3.2 Interviews
Interviews were held in an open-ended nature in which respondents were
asked for opinions about events, and to propose their own insights into certain
occurrences. Herewith respondents are considered more an informant instead of a
respondent, which is essential since informants rather than respondents are more
essential to the success of a case study. Open-ended interviews give the interviewer
more flexibility. Moreover, informants can suggest other, surprising sources of
evidence and even give access to them (Yin, 1994: p.84).
The interviews were constructed as semi-structured. These type of interviews
give clear direction toward collecting the right data, but also leave enough room for
the interviewee to propose other interesting insights.
The desired results from the interviews involve data which tell the story of
origin and growth until the current situation of Trion Kromhout and its relevant
subsidiaries. Therefore some of the interviewees were people who are engaged with
Trion for a long time, i.e. ten years or longer.
Since interviews usually take a long time to conduct, the amount of interviews
is limited eventually to 12. Therefore, middle and top management were approached
to take part in the interviews because usually it are these people who can tell (most of)
the story.
Besides interviewing people who are within the company for a long time, the
goal is also to interview people who are around for not so long. The main reason for
this is that usually these people are not influenced by embedded cultures and usually
have a more objective view on the situation. This further enhances the possibility to
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
33
link the past to the present properly and to explain why the current situation is as it
exists.
People have been selected on tenure and position. The goal was to find a right
balance between employees with a rather long tenure (approximately 25 years) and a
shorter tenure (down to 2 years). Experienced employees still active in the company
can face-to-face tell the story as they experienced it. Furthermore, employees with a
shorter tenure are approached because they can give more objective opinion on
contemporary situations since they are not that much influenced by the past.
Moreover, due to long tenure most of the relevant developments will be covered.
Position is another aspect, which influenced the selection of interviewees. That is,
managers and directors are the most involved in organizational processes, strategy etc.
Since barriers to exploration are often embedded in an organizations processes,
structures and strategy, it is considered more likely that employees with a director or
managing function contribute to relevant data since these employees have most of the
insights in this. People that have been interviewed include the general manager, the
R&D director, business development director, directors of sales and marketing and
several technology and patent managers of different departments. Several follow-up
interviews were conducted to gain additional information. All the interviews have
been recorded and transcribed.
Moreover, throughout basically the entire study is searched for narratives by
employees about relevant topics in addition to the interviews. This is done since not
all the data required was retrieved during the interviews. These narratives are from
people within the company ranging from top managers, middle managers and other
employees (e.g. scientists, engineers and sales people).
3.3.3 Desk research
The collection of documentation and archival records is performed via desk
research. Desk research is meant to provide insights in the background of the case, i.e.
Trion. With documentation is meant e.g. press releases, internal memos, websites, and
administrative documents. As for archival data go organizational records (e.g. charts
and budgets) and previously collected survey data. Access was obtained to total of 22
quarterly, internal news bulletins, 16 third party publications, 8 internal presentations,
1 previous survey on employee satisfaction and publicly available documents (from
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
34
the website). The main purpose of the data collected via this desk research is that this
information can confirm and add to other sources of evidence, herewith increasing
reliability. Moreover, these sources of information help to determine the chronology
of the case.
Additional desk research has also been conducted in order to identify
novel/emerging technologies for the benefits of organizing for exploration. Also a
brief study has been conducted in order to identify universities and institutes for
potential joint research activities.
3.4 Data analysis
The analysis of case study data is often difficult since analytic techniques and
strategies are ill-defined. Moreover, there is a strong dependence of outcomes on the
researcher’s own style of rigorous thinking, just as the adequate presentation of
evidence and consideration of alternative interpretations (Yin, 1994). For analyzing
case study data, a researcher should therefore have a general analytic strategy. The
author introduced two general strategies, i.e. (1) relying on theoretical propositions,
and (2) developing a case description. For answering research questions 1 and 2:
1) How did Trion evolve from its foundation until 2003, especially concerning its
explorative capacity?
2) How did Trion Kromhout evolve from 2003 until the present, especially
concerning its explorative capacity?
a case description is build. The transcripts of the interviews form the main input for
the case. In addition, the documents are used to support results from interviews and to
support the creation of a chronologically correct story. All the sources of data (i.e.
transcripts of interviews and organizational documentation) have been read and re-
read in order to identify incidents, statements, actions etc. which could contribute to
the limited capacity in exploration. Phenomena that are repeatedly emphasized during
interviews and in documents were considered relevant for building the case
description. Moreover, before building the case the different phenomena identified
were tested by asking several of the interviewees about the relevance and correctness
of these facts.
The third research question:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
35
3) Which major factors negatively influencing exploration can be recognized
throughout the case of Trion Kromhout?
is answered by applying the theoretical framework as proposed in the previous
chapter. The framework describes different influential factors that could contribute to
a limited exploration capacity. This stage, at theoretical level, served the goal of
creating an explanatory framework in which is tried to emphasize how concepts like
for example learning traps, core rigidities and a mainstream management system are
related to the limited exploration capacity at Trion Kromhout. The goal was to create
a conclusion based explanations that appear most congruent with the facts (Yin,
1981).
The data retrieved through the interviews and desk research is reviewed and facts or
statements that indicate an influencing factor for exploration are categorized and
coded through the themes of the theoretical framework.
The final research question:
4) How could the explorative activity at Trion Kromhout be enhanced?
is addressed by applying the second part of the theoretical framework, which
describes mechanisms that can contribute to enhancing radical innovation capabilities
within the firm. This part of the theoretical framework formed the basis for context
specific solutions on how Trion Kromhout can enhance its exploration capacities,
directly related to the identified impediments to exploration in the firm.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
36
4 The Case: Trion N.V. and Trion Kromhout
This section provides an extensive description of the development of Trion as
a company and some of its relevant subsidiaries with as final point Trion Kromhout as
it currently exists. Research questions 1 and 2 are addressed in this section. The
chapter is structured as follows. First, the origins of Trion are discussed and its growth
in the Activated Carbon (AC) industry. This period reaches to the mid 90’s when
Trion complemented their traditional AC technologies with process and membrane
technology. Then, the second part will go a step back in time and elaborate on the
origins and evolution of the firms which actually delivered the process and membrane
technology at Trion.
Whereas the first two parts of this section mostly describe the context of the
company, hereafter the development of Trion will be discussed more extensively,
especially with regard to the explorative capacity of Trion Kromhout. Starting in the
mid 90’s, several companies were acquired by Trion. Some of these acquisitions will
be discussed regarding their potential influence on exploration. Finally is elaborated
on the period from 2003 until now. From this point several subsidiaries are situated
under one roof in Kromhout. Throughout the case description certain projects will be
used to illustrate and further emphasize the development of the organization. The goal
is to pinpoint the main factors influencing the explorative behavior of Trion
Kromhout. Figure 4.1 shows a timeframe of the case history.
CONFIDENTIAL
Figure 4.1 - Timeframe Trion
4.1 Origin and growth of Trion N.V.
Back in 1910, a vegetable decolorization carbon known as ‘noir épuré’,
‘eponit’ or ‘Trion’ was used in the sugar refining process. Dr. A. Wijnberg, an expert
in the sugar industry those days, recognized the possibilities of using this
decolorization carbon in sugar refinement. This idea eventually led to the
development of Activated Carbon (AC) and its practical application in various
industries. Moreover, this idea led in 1918 to the origin of Trion as NV Algemene
Trion Maatschappij. The company was a merger of the Amsterdamse Suikerfabriek
De Granaatappel, which was the first production facility that used the sugar refining
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
37
technology, the NV Nederlandse Trion Maatschappij Declora, producer of AC from
charcoal and the NV Chemisch-Technisch Handels- en Adviesbureau, which
supported the construction of purification installations in sugar refinement facilities.
In the first decennium several production sites in both the Netherlands and Germany
were acquired, herewith increasing the production capacity of AC. In the late 1920’s,
the German factories were sold to the German Verein für Chemische Industrien.
Eventually this resulted in a cartel established in 1929, called the Carbo-Trion-Union.
In this cartel, several West-European countries were allocated to both Trion and the
Verein.
From the beginning of Trion, the company investigated the growth
possibilities in the United States. This investigation led to the first factory in the U.S.
back in 1933, which was established in Jacksonville, Florida. This was accomplished
in cooperation with the before mentioned German Verein für Chemische Industrien. It
took one year before the American Trion Company started production of activated
carbon obtained by incinerating pine tree stumps. In 1966 the production was brought
to an end due to increasing charcoal prices, but the American Trion Company
remained existence as a sales organization. In 1984 a producer of activated carbon
from lignite named Darco was acquired by Trion. Darco was located with its
production facility in Marshall, Texas and owned a market share of 20-25 percent in
the U.S. Twelve years later, in 1996 Trion acquired another U.S. AC factory, located
in Pryor, Oklahoma from former owner Elf Atochem North Americas, Inc. which led
to a fivefold increase in Trion’s capacity for the production of granular AC from coal.
4.2 Towards a purification provider (1/2)
In the 1990’s, the demand for AC in Trion’s traditional markets like the
chemical and foodstuff industries declined. This was partly due to the increasing
replacement of powdered carbon by granular carbon. Moreover, in the purification
sector more and more use was made of membrane technology. As a response to these
changing market situations, Trion changed its organization drastically. Where it
initially was product-oriented, the company became market-oriented, the profit
accountability changed from centralized to decentralized, and from a single product
focus they shifted to a diversified product line. Most important, the company couldn’t
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
38
be profiled as an AC producer anymore, instead they became a purification solutions
provider. By studying several alternatives for purification methods, Trion found that
membrane technology seemed to be a strategic add-on. Through several acquisitions
Trion enabled itself to expand in that direction. In the succeeding two paragraphs the
companies that were acquired are described. First the company Wolf is described, a
specialist in the area of membrane development and production. Subsequently Elusius
is described briefly along with Elusius Micro, both companies with a focus on the
(process) technology ‘around’ membranes.
4.2.1 Wolf
Wolf was founded in 1984 by Dick Grobben, in 1986 accompanied by the
current Business Development (BD) Director of Trion Kromhout, former classmate
and colleague at the University of Twente. At the time the company was founded, the
market already provided for microfiltration membranes, though all rejecting water,
among experts known as hydrophobic. Therefore their first project involved the
creation of a hydrophilic microfiltration membrane, one not rejecting water. The
project was in cooperation with the University of Twente and was enabled due to 90%
of the project being subsidized. A PhD student, Trion Kromhout’s current R&D
Director, was assigned to the project to conduct the research and took until May 1989.
During this period revenues were besides sales, mostly generated by consultancy.
Whereas at the one side money was coming in, on the other side a tenfold of this
amount was again to be spent in R&D, making Wolf an actual R&D center, exploring
new opportunities on a daily basis. After approximately three years Wolf was able to
produce and sell membranes on a small scale. By the time the membrane was further
developed and made suitable for mass production, Grobben and the BD director
started the search for a corporate partner to exploit their membrane on large scale.
They found in Shell their appropriate partner, since Shell already possessed a
worldwide network of sales offices. Moreover, Shell itself conducted research in
membrane technology as well, herewith already having affinity with this technology.
The interest from Shell was gained by the possibilities with membranes in the oil-
industry. With investments of Shell and the support of Rabobank Almelo, Wolf was
able to move their business from Bedrijfstechnologisch Centrum Twente (BTC) to
Bedrijvenpark Twente in Almelo in 1990. The two main reasons to move their
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
39
business was first to expand production facilities, therefore an appropriate factory site
was built in Almelo. Second, Wolf still ‘suffered’ from a spin-off image, which
wasn’t how Wolf wanted to be recognized. As Grobben quoted: ”People kept looking
at us as young researchers, while we wanted to be an adult company.”
The first few years in Almelo, Wolf still remained a technology-driven
company, with relative high investments in R&D. This resulted in a diversified range
of technologies and products for wine and beer purification and even an artificial skin
(a product that never made it to the market). Moreover, other types of membranes
were developed, e.g. a flat membrane, a tubular membrane with woven and non-
woven structures, and a capillary membrane. Though, a turnaround toward market
pull was about to happen in 1993. At that time, citizens of Milwaukee, Wisconsin,
suffered from the largest waterborne outbreak ever in history, when water supply
became contaminated with a parasite called Cryptosporidium Parvum (‘Crypto’).
Over 400,000 people got infected and about 120 people died from this. Due to this
outbreak, legislation on drinking water supply was more emphasized and tightened.
The result of this was that membrane technology retrieved more attention than before,
which triggered Wolf to explore the possibilities in the water purification industry.
At the end of 1994, a collaboration started with PWN, a clean water supplier
that time located in Andijk, Netherlands. This company was interested in the
purification of water with membranes. Wolf at that time, already invested in research
on water purification with membranes. The goal of the project which was initiated in
collaboration with PWN was to deliver a testing facility including membranes of
Wolf. The building of the pilot was subsidized by the government and performed by
Elusius Micro, a company which is discussed later. The project resulted in the AGIX
concept, a concept of water purification by ultra-filtration membranes. Another result
from this project was that with the AGIX concept, a global standard was introduced of
8-inch modules, which still is the standard. The reason for becoming a global standard
was that it was the first and only module with capillary membranes. Moreover, the 8-
inch modules were successfully evaluated on performance and outcome.
That time Wolf was only providing the membrane modules. This was and still
mainly is their strategy, i.e. only providing for membrane modules and selling to
original equipment manufacturers (OEM). Their main consideration was that it was
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
40
almost impossible to enter the filtration market themselves, since then they should
possess knowledge and expertise in building processes. This they found undoable,
therefore they mainly focused on the OEM sector. Though, from the moment of
initiation of AGIX, Wolf got more involved in the processes and the system in which
the membranes would be put, still this was rather limited. This involvement in the
process side of purification with membranes was because membranes require very
specific settings in the process to function the right way, which could not totally be
left over to the OEMers. The main reason was to decrease the risk of failure in
installations.
4.2.2 Elusius
It was the acquisition of Elusius in 1996 that was the first step into the
direction of process and membrane technology. Elusius, originally founded in 1915,
became Elusius Projects & Engineering (EPE) in 1988. The company’s expertise was
liquid flow process systems, where projects involved the food and beverage industry.
In 1994 the current BD director left Wolf to set up a daughter company at EPE called
Elusius Micro (EM), because he found more should be done with the applications
around the technology. Whereas Wolf merely delivered membrane modules to
OEMers, EM’s goal was to link membrane technology to different applications in the
market, initially in beer membrane filtration (BEMEFI). This was achieved in
cooperation with Heineken, where EM developed BEMEFI mainly on the cost of
Heineken. In their role as technology supplier, EM mostly used membrane modules of
Wolf in their systems.
4.3 Towards a purification provider (2/2)
This part is CONFIDENTIAL. The next section provides a general summary of the
entire case.
4.4 Conclusion
In this chapter is tried to answer the first (“How did Trion evolve from its
foundation until 2003, especially concerning its explorative capacity?”) and second
research question (How did Trion Kromhout evolve from 2003 until the present,
especially concerning its explorative capacity?). The case initiated with the very
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
41
origins of Trion N.V., its rather abundant growth and acquired facilities abroad (e.g.
Jacksonville, USA), and the dramatic strategic change of adopting two core
technologies alongside Activated Coal, namely process and membrane technology.
This period only provides for a contextual view on the organization in total and
describes where the roots of the process and membrane technology lie within Trion
N.V. In this first part no particular incidents have been identified regarding
contemporary exploration at Trion Kromhout.
Thereafter, the first steps of Trion N.V. towards a purification provider are
described. Trion acquired TPT, Wolf, and TMT in a short period of time and was
herewith enabling itself in process and membrane technology. These subsidiaries of
the later Trion Kromhout were discussed from their foundation until the moment they
were acquired by Trion. Whereas the main focus in this section still is providing
contextual insight, some criticalities can already be recognized. For example, a key
decision made that time was to put a narrow focus on Wolf’s technological directions.
Wolf moved from a ‘fluid’ organization with multiple technological and market
directions toward a more focused organization with three main areas of markets (beer,
water, wastewater). The last decade Wolf and herewith also Trion Kromhout (in later
stages) developed core competencies in these three domains. The choice to focus is
still influencing contemporary activities since the markets mentioned are still the main
focus today (e.g. taking the road to excellence into account, where core competences
are used to ‘do better’ in existing markets).
Moreover, the integration of Steng Friesland in Wolf can also be recognized as
rather critical. That is, the integration of two companies, or merger/acquisition, is not
a straightforward thing. Difficulties have been recognized in cultural differences for
example. This has strongly influenced the (strategic) decision making process within
the company. At this point it became clear that Wolf/Steng and later on Trion
Kromhout seem to struggle with the cannibalization of existing products.
The physical amalgamation in 2003 of all TPT, TMT and Wolf also has
implications for the explorative character of the firm (Trion Kromhout). For example,
the large production site that was created. Herewith, a substantial inflexibility arose
within the company. Although Trion Kromhout enabled itself in efficient production
of membranes, the large spinning machines also were costly (both monetary and
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
42
timely) the adjust to (radically) new products. Moreover, the large production site
asked for a substantial amount of troubleshooting or attention in other kind. The
relative small R&D department therefore spent most of their time serving the
production site, herewith leaving little time for explorative (actual R&D) activities. In
2008 this changed due to a substantial increase in R&D employees at Trion
Kromhout. Examples were given on how Trion Kromhout enhanced R&D and
herewith exploration.
In the beginning of 2009, the road to excellence was introduced to the company,
a process also with some implications for exploration at Trion Kromhout. Again a
focus was put on the three customer groups/markets as was done before. Moreover,
the entire company is now organized around these markets (water, wastewater and
beverage), core competences are thus evermore emphasized. Also, the road to
excellence involves certain processes among which the Product Development Review,
in which financial tools are strongly influencing decision making, even in the fuzzy
front end.
The Efficient Performance Technology understanding is part of the road to
excellence process, which stimulates a lean culture in which the basic premise is to do
more with less. The focus herewith is put on decreasing costs (energy, waste,
materials etc) and increasing outcome and reliability; thus doing better what they
already do.
In sum, certain choices or incidents in the past are still influencing today’s
explorative behavior. Moreover, very recent developments have had implications for
exploration as well. However not all is negatively influencing exploration at Trion
Kromhout, an example is the substantial increase in employees on the R&D floor. The
next chapter will analyze the case through the theoretical framework. Here will be
discussed what the criticalities are explicitly what they imply for the contemporary
organization of exploration at Trion Kromhout.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
43
5 Analysis
This part is CONFIDENTIAL.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
44
6 Enhancing exploration at Trion Kromhout
This part is CONFIDENTIAL.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
45
7 Conclusions
7.1 The main objective
This part is CONFIDENTIAL. A succinct summary is provided. According to
the data, several barriers to exploration are present at Trion Kromhout. The barriers
described in the first part of the theoretical framework were all recognized in this case
to some extent. The ultimate goal was:
“Draw up recommendations for Trion Kromhout on how it could organize for
exploration”.
These recommendations were based on the second part to the theoretical framework
and to large extend applied in the specific context of Trion Kromhout.
7.2 Discussion
In this final section remarkable patterns in the case of Trion (Kromhout) will be
discussed. Some aspects which were not discussed in the case description and analysis
will be highlighted.
7.2.1 Internal and external R&D
Looking at exploration at Trion, it is remarkable to see that the organization has
shifted from first acquiring other companies to later doing endogenous R&D. It is a
rather unusual pattern because many firms often adjust their strategy one from
conducting R&D internally to acquiring knowledge externally. Moreover, Cohen &
Levinthal (1990) stressed the importance of a stock of prior knowledge to effectively
scan the environment for external knowledge and increase the absorptive capacity.
Considering this it is remarkable that the explorative acquisitions (Wolf, Elusius
(EPE), and Steng Friesland) seem to proved their success, because there was very
limited prior knowledge in this case (i.e. mainly in the production of AC and
decolorization processes). When looking at the acquisition of Steng Friesland,
according to Cohen & Levinthal the relative success seems more plausible due to the
created knowledge stock prior to this acquisition.
Cassiman & Veugelers (2004) suggest that both internal R&D and external
knowledge acquisition can well be complementary, i.e. because the one can leverage
the other and have positive impact on innovative behavior of an organization. In sum,
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
46
companies should be engaged in both internal R&D and external knowledge
acquisition. Additionally, e.g. Christensen & Overdorf (2000) have suggested that
companies should, in the face of radical change, should create an independent
organizational space and argue that this could be also achieved through the acquisition
of an external organization.
Concluding, it remains unclear why Trion (Kromhout) shifted from buying to
making. Due to the experience they have built up in the buying exercise, it remains a
remarkable, non logic shift. Regarding the above elaboration on internal and external
R&D, Trion should also be engaged in both. Thus, the buying experience should be
further exploited alongside the internal R&D activities.
7.2.2 Integration of an R&D department
In this case study, themes like core rigidities and mainstream management
systems have been discussed. However, what also could have influenced the limited
exploration is the cost of integrating the R&D department in the organization. Before,
R&D was more a production process improvement and implementation department.
Hiring many employees to compose an actual R&D department also involves an
integration trajectory of such a department in the mainstream organization. Integration
aspects or a lack of an adequate integration protocol may influence the output of an
R&D department as well.
7.2.3 Dynamics of innovation on organizational level
Prior to the actual analysis of the case of Trion an analysis of patent data of
Trion Kromhout (and its prior subsidiaries) has been conducted. A remarkable aspect
is that the theory of Utterback (1994) about innovation dynamics, which applies on
industrial level, also can be recognized at organizational level. The patent data
analysis was conducted in order to support to some extent the original central problem
(i.e. a need for exploration). Interesting about this patent case was that once the
analysis was done and put on paper, the document started to be distributed very fast
within the organization, although it was only sent to two employees. Apparently the
analysis created awareness of the current situation at Trion Kromhout. This type of
analysis could be applied in other organizations as well to do such a kind of awareness
creating exercise.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
47
7.3 Limitations and implications for further research
7.3.1 Internal and external R&D
The previous section described how organizations can combine internal R&D
with external R&D. This leads to a first limitation of this research and also to an
implication for further research. That is, Trion Kromhout is currently focusing on
internal R&D, however a large stock of knowledge has been built up in membrane
technology, process technology and also biotechnology. Therefore, the already built
up experience in acquiring other companies and the extensive stock of knowledge
present at Trion, the company should be able to proceed in this strategy of buying
companies to access external knowledge. The limitation is that this research focused
in the solution side only on the internal R&D and has not analyzed the strategy of
acquiring external knowledge through acquisitions. This is mainly because several
internal issues have been recognized with regard to exploration that needed to be
addressed and external knowledge acquisitions are a complex, not straightforward
exercise and thus need more careful and in depth analysis. Therefore further research
is suggested.
Since there is enough support in extant literature to engage in external
knowledge acquisition, an implication for future research is to examine if Trion
should again initiate a strategy of explorative acquisitions. Moreover, characteristics
could be identified which contributed to the success of the previous acquisitions. The
reproducibility can help determine whether to again acquire external knowledge
beneficial to exploration. Moreover, in specific a closer look could be taken at the
acquisitions of EPE and Wolf, which to some extent challenge what Cohen &
Levinthal (1990) argue about a prior knowledge stock and absorptive capacity. The
acquisitions have proven successful which implies that prior knowledge is not a
requisite for acquiring external knowledge.
7.3.2 Integration of an R&D department
In implication for further research can be the analysis of the integration
process of the R&D department within the organization. What is needed to conduct
successful creation and integration of an R&D department? Moreover, how could
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
48
Trion Kromhout use this information to improve the explorative output of the R&D
department?
7.3.3 Dynamics of innovation on organizational level
As discussed before the type of patent analysis could be applied to create
awareness in an organization on how their technological trajectory’s state is.
However, since the model on process and product innovativeness of Utterback applies
for industries, an implication for further research is to investigate whether this pattern
of innovation dynamics can be validated on organizational level as well. Thus, is
product innovation in the early days of an organization higher and eventually
decreasing, followed by increasing process innovativeness, and ultimately a status quo
in which the organization might get into? The study could involve an analysis of
patent data of competitors in the same industry, or organizations in industries with the
same pace of technological change, in order to validate that innovation dynamics
apply also on organizational level.
The above discussed analysis to some extent is pointing out the relevance of
exploration in addition to the introduction chapter, moreover this study has pointed
out several impediments to exploration and how to overcome them. A limitation in
this study however, is the timing aspect. This means, the current technologies are
believed (among Trion managers) to lead the industry for a while. However, it is still
not certain when Trion has to come up with a radical technological innovation or
when the market will be disrupted. An implication for further research therefore is to
identify for example where Trion’s technologies are located in the product life cycle,
or S-curve (Christensen, 1997). However, this does not mean that exploration
shouldn’t be enhanced on immediate terms since firms engaging in both exploitation
and exploration are on average more successful.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
49
8 References
• Abernathy, W.J. & Wayne, K., 1974. Limits of the Learning Curve. Harvard Business Review,
52: 109-119.
• Ahuja, G., & Lampert, C.M., 2001. Entrepreneurship in the Large Corporation: A
Longitudinal Study of How Established Firms Create Breakthrough Inventions. Strategic
Management Journal, 22, 6/7: 521-543.
• Anderson, P., & Tushman, M.L., 1990. Technological Discontinuities and Dominant Designs:
A Cyclical Model of Technological Change. Administrative Science Quarterly, 35, 4: 604-
633.
• Benner, M.J., & Tushman, M.L., 2003. Exploitation, Exploration, and Process Management:
The Productivity Dilemma Revisited. The Academy of Management Review, 28, 2: 238-256.
• Birkinshaw, J. & Gibson, C., 2004. Building Ambidexterity into an Organization. Sloan
Management Review, 45, 4: 47-55.
• Cassiman, B. & Veugelers, R., 2006. In search of complementarity in the innovation strategy:
Internal R&D and external knowledge acquisition. Management Science, 52: 68-82
• Chandy, R.K., & Tellis, G.J., 1998. Organizing for Radical Product Innovation: The
Overlooked Role of Willingness to Cannibalize. Journal of Marketing Research, XXXV: 474-
487.
• Chesbrough, H., 2003. The Era of Open Innovation. MIT Sloan Management Review, spring:
35-41.
• Chesbrough, H., & Rosenbloom, R.S., 2000. The Role of the Business Model in Capturing
Value from Innovation: Evidence from Xerox Corporation’s Technology Spin-Off
Companies. Mimeo, Harvard Business School.
• Chesbrough, H.; Vanhaverbeke, W.,& West, J. (Eds.) 2006. Open Innovation: Researching a
New Paradigm. Oxford University Press, Oxford.
• Christensen, C.M., 1997. The Innovator’s Dilemma: When New Technologies Cause Great
Firms to Fail. Cambridge, MA: Harvard Business School Press.
• Christensen, C.M., & Overdorf, M., 2000. Meeting the Challenge of Disruptive Change.
Harvard Business Review, 78, 2: 66-76.
• Christensen, C.M.; Kaufman, S.P. & Shih, W.C., 2008. Innovation Killers: How Financial
Tools Destroy Your Capacity to Do New Things. Harvard Business Review, jan.: 98-105
• Cohen, W.M. & Levinthal, D.A., 1990. Absorptive Capacity: A New Perspective on Learning
and Innovation. Administrative Science Quarterly, 35, 1: 128-152.
• Dougherty, D. 1992. Interpretive Barriers to Successful Product Innovation in Large Firms.
Organization Science, 3, 2: 179-202.
• Garcia, R. & Calantone, R., 2002. A Critical Look at Technological Innovation Typology and
Innovativeness Terminology: a Literature Review. The Journal of Product Innovation
Management, 19: 110-132.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
50
• Garud, R. & Karn?e, P., 2001. Path Dependence and Creation. Mahwah, NJ: Laurence
Elbaum Associates.
• Gersick, C.J.G., 1991. Revolutionary Change Theories: A Multilevel Exploration of the
Punctuated Equilibrium Paradigm. The Academy of Management Review, 16, 1: 10-36.
• Green, G.G.; Gavin, M.B. & Aiman-Smith, L., 1995. Assessing a Multidimensional Measure
of Radical Technological Innovation. IEEE Transactions on Engineering Management, 42, 3:
203-214.
• Hannan, M.T., & Freeman, J., 1984. Structural Inertia and Organizational Change. American
Sociological Review, 49: 149-164.
• Henderson, R., 1993. Underinvestment and Incompetence as Responses to Radical Innovation:
Evidence from the Photolithographic Alignment Equipment Industry. The RAND Journal of
Economics, 24, 2: 248-270.
• Hill, C.W.L., & Rothaermel, F.T., 2003. The Performance of Incumbent Firms in the Face of
Radical Technological Innovation. Academy of Management Review, 28, 2: 257-274.
• Holland, J. H., 1975. Adaptation in Natural and Artificial Systems. Ann Arbor, MI: University
of Michigan Press.
• Huston, L. & Sakkab, N., 2006. Connect and Develop: Inside Procter and Gamble’s New
Model for Innovation. Harvard Business Review, 84, 3: 58-66.
• Jansen, J.J.P.; George, G.; Van den Bosch, F.A.J. & Volberda, H.W., 2008. Senior team
attributes and organizational amdibexterity: The moderating role of transformational
leadership. Journal of Management Studies, 45, 5: 982-1007.
• Leonard-Barton, D., 1990. A Dual Methodology for Case Studies: Synergistic Use of a
Longitudinal Single Site with Replicated Multiple Sites. Organization Science, 1, 3: 248-266.
• Leonard-Barton, D., 1992. Core Capabilities and Core Rigidities: A Paradox in Managing
New Product Development. Strategic Management Journal, 13: 111-125.
• Levinthal, D.A., & March, J.G., 1993. The Myopia of Learning. Strategic Management
Journal, 14: 95-112.
• March, J. G. 1991. Exploration and exploitation in organizational learning. Organization
Science, 2: 71-87.
• McDermott, C.M. & O’Connor, G.C., 2002. Managing Radical Innovation: An Overview of
Emergent Strategy Issues. The Journal of Product Innovation Management, 19: 424-438.
• Methé, D.; Swaminathan, A., & Mitchell, W., 1996. The underemphasized role of established
firms as the sources for major innovations. Industrial and Corporate Change, 5, 4: 1181-
1203.
• Nijssen, E.J.; Hillebrand, B., & Vermeulen, P.A.M., 2005. Unraveling Willingness to
Cannibalize: a Closer Look at the Barrier to Radical Innovation. Technovation, 25: 1400-
1409.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
51
• O’Connor, G.C.; Leifer, R.; Paulson, A.P. & Peters, L.P. 2008. Grabbing Lightning: Building
a Capability for Breakthrough Innovation. San Francisco: Jossey-Bass.
• O’Reilly, C. A., & Tushman, M. L. 2004. The ambidextrous organization. Harvard Business
Review, 82: 74-81.
• Phene, A.; Fladmoe-Lindquist, K. & Marsh, L. 2006. Breakthrough Innovations in the US
Biotechnology Industry: The Effects of Technological Space and Geographic Origin. Strategic
Management Journal, 27: 369-388.
• Reid, S.E. & De Brentani, U., 2004. The Fuzzy Front End of New Product Development for
Discontinuous Innovations: A Theoretical Model. The Journal of Product Innovation
Management, 21: 170-184.
• Rice, M.P.; Kelley, D.; Peters, L. & O’Connor, G.C., 2001. Radical Innovation: Triggering
Initiation of Opportunity Recognition and Evaluation. R&D Management, 31, 4: 409-420.
• Romanelli, E., & Tushman, M.L., 1994. Organizational Transformation as Punctuated
Equilibrium: An Empirical Test. The Academy of Management Journal, 37, 5:1141-1166.
• Rosenkopf, L. & Nerkar, A., 2001. Beyond Local Search: Boundary-spanning, Exploration,
and the Impact in the Optical Disk Industry. Strategic Management Journal, 22, 4: 287-306.
• Schumpeter, J.A., 1950. Capitalism, Socialism, and Democracy, 3
rd
edition. New York:
Harper & Row.
• Sloan, P., 2003. The Leader’s Guide to Lateral Thinking Skills: Powerful Problem-Solving
Techniques to Ignite Your Team’s Potential. London: Kogan Page.
• Song, X.M.; Thieme, R.J. & Xie, J., 1998. The Impact of Cross-functional Joint Involvement
Across Product Development Stages: an Exploratory Study. Journal of Product Innovation
Management, 14, 1: 35-47
• Teece, D.J., 1986. Profiting From Technological Innovation. Research Policy, 15, 6: 285-305.
• Tripsas, M. & Gavetti, G., 2000. Capabilities, Cognition, and Inertia: Evidence from Digital
Imaging. Strategic Management Journal, 21: 1147-1161.
• Utterback, J., 1994. Mastering the Dynamics of Innovation. Cambridge MA: Harvard
Business School Press.
• Utterback, J.M., & Abernathy, W.J., 1975. A Dynamic Model of Process and Product
Innovation. Omega, 3: 639-656.
• Wheelwright, S.C., & Clark, K.B., 1992. Revolutionizing Product Development: Quantum
Leaps in Speed, Efficiency, and Quality. New York: Free Press.
• Yin, R.K., 1981. The Case Study Crisis: Some answers. Administrative Science Quarterly, 26,
1: 58-65.
• Yin, R.K., 1994. Case Study Research: Design and Methods, 2
nd
edn. Sage Publications,
Newbury Park, CA.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
52
9 Appendix A - Overview of novel/emerging technologies
CONFIDENTIAL
doc_182847181.pdf
Innovation is increasingly recognized as a major driver for organizational performance. Whereas most established firms are proficient in enhancing their stream of rents on the current competences, they somehow seem to struggle when it comes to the exploration of radically new opportunities.
Organizing for Exploration at a
High Tech Firm
Master Thesis
Jaap Rosink
UNRESTRICTED VERSION
Organizing for Exploration at a
High Tech Firm
- MASTER THESIS –
Important: This is an unrestricted version. The names of the companies and people
involved have been replaced with fictional names or have been left out. Moreover, a
substantial part of the case description, together with chapters 5 and 6 have been left
out. The final chapter has been partly summarized.
Author
Jaap Rosink
Program Master Business Administration
Track Innovation & Entrepreneurship,
School of Management and Governance
Student number 0049271
E-mail [email protected]
Supervisors
Dr. Ir. Klaasjan Visscher
University of Twente, School of Management and Governance
[email protected]
Dr. Dries Faems
University of Twente, School of Management and Governance
[email protected]
Name of supervisor of the firm is confidential
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
1
Preface
With this thesis I complete the program Master Business Administration at the
University of Twente. The track Innovation & Entrepreneurship I chose, provided me many
interesting insights in organization theory and the management of innovation.
In March 2009 I started this case study at Trion Kromhout, the company which
allowed me to investigate how their organization deals with the exploration of radically
new/different possibilities. By choosing this topic, which was hard to frame initially, I
ensured myself with a long period of investigation, writing and rewriting. However,
eventually I made it to the finish. Therefore I would like to especially thank the R&D director,
for all his support and input to build the case and for his patience and confidence in me. Next
to that I want to thank the Business Development (BD) Director for all the interesting
conversations about innovation related topics and also the history of Trion.
I also want to thank Klaasjan Visscher for all the support needed to write this thesis.
He especially provided me with insights on how to conduct academic research in order to
come up with relevant results and be critical at every stage of the research process. I want to
thank Dries Faems as well for giving me critical remarks about this study and for useful tips
in doing this research.
Of course I want to thank my parents. Without their support, not only during my
period at the University but also before, I probably wouldn’t have come this far. The same
goes for my girlfriend Suus, who repeatedly pushed me to work not only on this thesis, but on
all university related things as well. Who I also want to thank are my father- and mother-in-
law for connecting me with Trion. Finally I would like to thank my grandmother for all her
interest and motivational talks. Thank you all for that.
With finalizing this study, the story does not end for me at Trion Kromhout. Since
January this year I am member of the Trion team. I am now (among others) involved in
innovative processes, intellectual property, and business development, thus a great
opportunity to begin a great career! For this I again would like to thank the directors of BD
and R&D, but also the managing director and head of human resources for having confidence
in my capabilities.
Enjoy reading this paper…
Kind regards,
Jaap Rosink Kromhout, 06-07-2010
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
2
Management summary
Innovation is increasingly recognized as a major driver for organizational
performance. Whereas most established firms are proficient in enhancing their stream
of rents on the current competences, they somehow seem to struggle when it comes to
the exploration of radically new opportunities. Almost a year ago, top management of
Trion Kromhout, a physical amalgamation of several distinct subsidiaries of Trion
N.V., started to recognize the challenges, and moreover the importance of exploration
(i.e. experimenting with new opportunities) within their own organization. Since the
factors that can negatively influence exploration often grow within an organization
and can be deeply rooted in its strategy, processes and structure, an in depth case
study is conducted to answer the following central research question:
“How has Trion Kromhout evolved over time with respect to exploration, and
how can Trion Kromhout enhance exploration?”
The goal of this study is to identify specific factors that negatively influence
exploration at Trion Kromhout. The results of 12 open ended interviews with several
top and middle managers, desk research and the collection of narratives contributed to
an extensive, retrospective case description of Trion in both its early days to create a
contextual view, and the contemporary Trion Kromhout.
Below, the findings of this study are described in general:
1. A large production site with heavy investments is rather inflexible. Data
showed that in several cases, exploration was limited due to the production
site’s inflexibility.
2. A strategic shift from acquiring other companies to explore new opportunities
to positioning an internal R&D department implied that R&D remained
largely occupied after this shift with troubleshooting and optimization of
production. R&D’s capacity to explore remained limited after an increase of
the R&D department.
3. The production department still has a strong voice in early stages of NPD.
Therefore new opportunities are risked to be reflected to the production
capabilities, resulting in refining existing competences.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
3
4. A mechanism of positive mutual feedback between experience and
competences has been recognized, indicating that Trion Kromhout has fallen
into a familiarity/maturity trap. Creating breakthroughs is therefore hard to
achieve at Trion Kromhout.
5. A mainstream management system recently was introduced at Trion
Kromhout. The focus of this system is on doing more with less. Many
ingredients of the mainstream management system are focused on upward
migration, i.e. increasing the stream of rents on current competencies. The
exploration of new opportunities is therefore left unattended. Moreover, e.g.
the handling of strict go-or-kill criteria hardly apply for explorative projects,
decreasing the likelihood of these types of projects to get delayed or even
killed.
Another substantial part of this study was to create directions for Trion Kromhout
to overcome these barriers to exploration. These directions are described below in
general:
1. To get out of the familiarity/maturity traps, Trion Kromhout should
explore novel/emerging technologies. The appendix shows which areas
Trion Kromhout should explore.
2. A boundary spanning role should be formalized to initiate the exploration
of the above mentioned novel/emerging technologies.
3. An innovation management system has to be created to enhance
explorative activities, applying appropriate evaluation metrics. Moreover,
in the case of Trion Kromhout, a platform approach around the mentioned
technologies should be applied to build a knowledge base in these specific
areas and reduce uncertainties.
4. Finally, the above mentioned activities should be conducted in a separate
organizational space, next to the mainstream organization. Key is that
exploitation and exploration will balance healthy, which can be enabled by
applying contingency rewards.
A main recommendation for Trion Kromhout to apply the directions is that
Trion Kromhout should initiate from bottom up. This means that Trion Kromhout has
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
4
to start small with little investments. Over time when uncertainties start to reduce,
investments may increase.
A limitation of this study is that the relation between internal R&D and
external knowledge acquisition has not been investigated. Therefore no comments can
be given about whether Trion Kromhout should continue to acquisition strategy next
to internal R&D. Also what not has been investigated is the initiation and integration
process of the R&D department. This process also can affect the output of the
contemporary R&D department. Finally, a patent analysis has been conducted. The
result is that the model of innovation dynamics (Utterback, 1994) shows similarities
with those at Trion Kromhout. However, Utterback’s model applies on industrial level
and the patent study is on organizational level. No further investigation has been done
in order to validate the results to some extent. The results of the analysis however,
appeared to be useful as an awareness creating tool for a need for exploration.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
5
Content
1 Introduction ....................................................................................................... 7
1.1 Toward the Problem .................................................................................... 7
1.2 Objective ..................................................................................................... 9
1.3 Central Question ......................................................................................... 9
1.4 Research Questions ..................................................................................... 9
1.5 Scope .........................................................................................................11
1.5.1 Not broader .........................................................................................11
1.5.2 Not narrower .......................................................................................11
2 Theoretical Framework .....................................................................................12
2.1 The Dynamics of Technologies and Innovation ..........................................12
2.2 Radical Technological Innovation ..............................................................14
2.2.1 Competences .......................................................................................15
2.2.2 Technology .........................................................................................16
2.2.3 Market ................................................................................................16
2.3 Impediments to exploration ........................................................................17
2.3.1 The myopia of learning .......................................................................17
2.3.2 Mainstream management systems .......................................................19
2.3.3 Conclusion ..........................................................................................21
2.4 Enabling exploration ..................................................................................22
2.4.1 Escaping from competence traps .........................................................22
2.4.2 An innovation management system .....................................................23
2.4.3 An independent organizational space ...................................................26
2.4.4 Conclusion ..........................................................................................28
3 Research Methodology .....................................................................................30
3.1 Research strategy .......................................................................................30
3.2 Research design .........................................................................................31
3.3 Data collection methods .............................................................................31
3.3.1 Principles of data collection.................................................................31
3.3.2 Interviews ...........................................................................................32
3.3.3 Desk research ......................................................................................33
3.4 Data analysis ..............................................................................................34
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
6
4 The Case: Trion N.V. and Trion Kromhout .......................................................36
4.1 Origin and growth of Trion N.V. ................................................................36
4.2 Towards a purification provider (1/2) .........................................................37
4.2.1 Wolf ....................................................................................................38
4.2.2 Elusius ................................................................................................40
4.3 Towards a purification provider (2/2) .........................................................40
4.4 Conclusion .................................................................................................40
5 Analysis ............................................................................................................43
6 Enhancing exploration at Trion Kromhout ........................................................44
7 Conclusions ......................................................................................................45
7.1 The main objective .....................................................................................45
7.2 Discussion ..................................................................................................45
7.2.1 Internal and external R&D ..................................................................45
7.2.2 Integration of an R&D department ......................................................46
7.2.3 Dynamics of innovation on organizational level ..................................46
7.3 Limitations and implications for further research ........................................47
7.3.1 Internal and external R&D ..................................................................47
7.3.2 Integration of an R&D department ......................................................47
7.3.3 Dynamics of innovation on organizational level ..................................48
8 References ........................................................................................................49
9 Appendix A - Overview of novel/emerging technologies ..................................52
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
7
1 Introduction
1.1 Toward the Problem
The field of innovation is increasingly recognized as a major driver of
organizational performance. The American Management Association (AMA)
1
commissioned a global survey of 1,396 top executives conducted by the Human
Resource Institute
2
(HRI). Of all respondents, 68% ranked innovation in their
company as “extremely” or “very” important nowadays. When asked to look 10 years
out, this percentage augmented to 86%
3
.
Through extant literature in the field of innovation, two types of innovative
activities have been generally acknowledged, i.e. exploitation and exploration
(Holland, 1975; March, 1991). The essence of exploitation is the refinement and
extension of existing competences, technologies, and paradigms… The essence of
exploration is experimentation with new alternatives (March, 1991: p.85). As most
established firms are proficient at refining and extending their existing competences
(i.e. exploitation), they seem to struggle with pioneering radically new products and
services (i.e. exploration) (e.g. McDermott & O’Connor, 2002; Hill & Rothaermel,
2003; O’Reilly & Tushman, 2004).
Though, many scholars have pointed out the importance of radical or
breakthrough innovation and an organization’s capability to realize these types of
activities. As many firms fail to maintain leadership when facing radical technological
innovations (e.g. Anderson & Tushman, 1990; Christensen, 1997) and the nature of
radical change is often unpredictable, organizations have to be able to either initiate
these breakthrough innovations or react rapidly (Cohen & Levinthal, 1990). In other
words, organizations have to facilitate explorative activities within their structures.
This will enrich the probability for an organization to flourish on the long run
(McDermott & O’Connor, 2002).
1
http://www.amanet.org/
2
http://www.i4cp.com
3
The percentage of those rating innovation as “extremely” important jumped from 32.5% to 51.3%
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
8
This specific challenge of experimenting with and initiating radical
technological innovations is a major struggle especially for incumbent firms. For
example, established firms can get caught up in a success trap (Levinthal & March,
1993). The results of exploitation are more certain and proximate, and therefore often
favored over exploration, with outcomes that are initially poor and uncertain (March,
1991). Since the development of existing technologies and competences often leads to
early success, further exploitation is emphasized. This process can lead firms into a
‘success trap’, firms can get blindsided for exploration by this.
Leonard-Barton (1992) describes core capabilities and their dysfunctional
flipside (i.e. core rigidities). Since core capabilities are part of the organization’s
taken-for-granted reality, organizations are having difficulties with performing
projects that are misaligned with these core capabilities. Next to that they find little
support from top management for that same reason. As a consequence, important new
competences may be neglected.
Recently, an R&D director of an established firm in the purification industry,
Trion NV, recognized the importance of being able to experiment with and initiate
radical technological innovations. The strategy Trion NV pursued when it involved
getting access to new technology – different from their core competences (i.e.
membrane technology and activated carbon) – often was one of acquiring other
companies and integrating them in the Trion NV organization. This resulted in the
current Trion NV as a conglomerate existing of several subsidiaries, all with different
areas of expertise in the purification sector. The conglomerate, nowadays has
engineering and manufacturing facilities in seven countries and is active in more than
a hundred countries around the world. Trion NV, founded in 1918, has more than
1500 FTEs.
The just introduced R&D director, runs the R&D department of Trion
Kromhout, a ‘physical amalgamation’ of four subsidiaries of Trion NV: Trion Process
Technology (TPT), Trion Membrane Technology (TMT), Trion Wolf, and Trion
Components and Services (TCS). These four companies are all situated under one
roof in Kromhout since 2003. In line with the General Manager and Business
Developer (both from Trion Kromhout), the R&D director’s major concern is how
Trion Kromhout can be enabled to explore the new possibilities themselves. Other
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
9
than that, they want to be sure that Trion Kromhout does not fail to notice promising
technologies, and that Trion Kromhout is able to embed these, in particular radically
new technologies in its own organization.
1.2 Objective
Therefore, the main objective of this thesis is to:
“Draw up recommendations for Trion Kromhout on how it could organize for
exploration”.
1.3 Central Question
As mentioned, especially established firms seem to struggle with this type of
activities (i.e. exploration). Therefore, it is likely to argue that an organization evolves
and undergoes certain processes, which eventually may hamper explorative activities
(e.g. Tripsas & Gavetti, 2000; Chandy & Tellis, 2000). For Trion Kromhout, (as part
of) an established firm, it is important to find out if and why it is struggling with the
exploration of new possibilities and with embracing them. To achieve this goal, the
following central question is posed:
“How has Trion Kromhout evolved over time with respect to exploration, and
how can Trion Kromhout enhance exploration?”
1.4 Research Questions
Although the focus (which will be described later) will be on Trion Kromhout,
it is important to go back further in time. To provide proper insights on the context of
Trion Kromhout as it currently exists and how potential impediments to exploration
may have arisen, the evolution of Trion before the foundation of Trion Kromhout in
2003 has to be analyzed as well, instead of merely analyzing the period of 2003 until
now. Moreover, incidents in the far past may influence today’s explorative capacity as
well. Therefore, the first research question reads:
1. How did Trion evolve from its foundation until 2003, especially concerning its
explorative capacity?
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
10
To analyze the period from 2003, when the four mentioned companies were
clustered into Trion Kromhout, until the present, a multilevel approach will be
employed. This means that Trion Kromhout will be analyzed at both organizational
and project level. The purpose of this multilevel approach is that it enables to analyze
the organizational evolution in extend to research question 1, and the content of
projects aligned with this period. The latter can provide for characteristics (e.g.
alignment with corporate strategy) which could give insights into why a project
thrives or not. For the analysis on project level, several fail- and success cases will be
used. Paragraph 1.5 is used to elaborate more on this research methodology. The
second research question is:
2. How did Trion Kromhout evolve from 2003 until the present, especially
concerning its explorative capacity?
The former two research questions result in a description of the complete
journey that Trion, in specific Trion Kromhout has been through. Aiming for the
central question, the complete journey is being critically assessed. Via this critical
analysis main influential factors impeding exploration, are to be recognized.
Moreover, a closer look is taken at peculiarities which might have positively
influenced explorative behavior. Through the third research question, these influential
factors are evaluated, judged, and criticized:
3. Which major factors negatively influencing exploration can be recognized
throughout the case of Trion Kromhout?
By answering the first three research questions, the first part of the central
question (i.e. how Trion Kromhout has organized for exploration in the past) is
covered and has created a link to the second part, i.e. how Trion Kromhout could
organize for exploration. The specific goal is to indicate how and which enhancing
factors can be emphasized and how and which impeding factors can be turned around
or be made less influential. The fourth and final research question is:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
11
4. How could the explorative activity at Trion Kromhout be enhanced?
1.5 Scope
This study will focus on Trion Kromhout. There are several arguments for this
decision.
1.5.1 Not broader
As pointed out by the director of the R&D department, Trion Kromhout is
functioning as a role model to the other subsidiaries (e.g. Nijhuis, Nafhams, and
Trifix) in several fields (e.g. R&D, marketing, and sales). This way, the latter
companies don’t have to be included in the study. Another reason for excluding these
companies is, just as not making Trion NV the focal organization, that the scope of
the study would be too broad.
1.5.2 Not narrower
Throughout the entire company (Trion NV), Trion Kromhout is considered as
one company, and it is acting this way. The individual corporate identities within
Trion Kromhout are diminishing due to several factors, for instance one General
Manager is governing all four companies. Other factors are joint purchasing,
marketing and sales which make Trion Kromhout act as one company. This is a
reason to not pick one of the (former) individual companies as a focus for the study.
Next to that, the innovation process is multi-faceted (Dougherty, 1992), which
means that this process involves for example R&D, marketing, sales, and production.
Since every department contains employees whose contracts are with either TPT,
Wolf, TMT or TCS, it is a major challenge to derive all employees from only one
company. These are reasons to focus on Trion Kromhout, and not narrower.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
12
2 Theoretical Framework
An unrelenting theme in the literature on the process of innovation is that well-
managed, established firms in the face of radical technological innovations often
struggle to ‘bridge the chasm’. These firms go into decline while new entrants
penetrate and conquer to dominate the market with the new technology. This chapter
first highlights in what way organizations transform their strategies, structures and
processes. Another section elaborates on the definition of radical technological
innovation. Furthermore, one paragraph highlights some of the relevant rationales of
why incumbents find it hard to meet the challenge of dealing with radical
technological innovation. Finally, the flipside of the coin is told, how established
Trion Kromhout could experiment with and initiate radical technological innovations.
2.1 The Dynamics of Technologies and Innovation
In due course, organizations are changing their strategies, structures, and
processes in order to renew their offerings and herewith remain competitive. Extant
literature provides several models which describe how technologies and innovation
change over time. One model that enjoys many support is the principle of punctuated
equilibrium (Gersick, 1991; Romanelli & Tushman, 1994). The punctuated
equilibrium model depicts organizational transformation as long, stable periods of
incremental change, punctuated with short bursts of radical, discontinuous change.
These short bursts of radical change, or revolutionary periods (Romanelli & Tushman,
1994), substantially alter an organization or industry. Whereas the periods of
incremental change are assumed to take place, the focus in literature is on the
discontinuous, revolutionary
periods in the model
(Anderson & Tushman, 1990;
Utterback, 1994; Christensen,
1997).
For example, Anderson
& Tushman (1990) are
elaborating on the punctuated
equilibrium theory by
Figure 2.1 - The Technology Cycle (Anderson & Tushman, 1990)
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
13
describing the technology cycle (see figure 2.1). They state that an ‘era of ferment’
succeeds every technological discontinuity. This era of ferment is characterized by
extensive product-class variation, technological uncertainty, and strong competition
between distinct technologies. Eventually, this tumult period results in the emergence
of a dominant design. A dominant design is defined by Utterback (1994: p.24) as: “…
the one that wins the allegiance of the marketplace, the one that competitors and
innovators must adhere to if they hope to command significant market following. [It]
usually takes the form of a new product … synthesized from individual innovations
introduced independently in prior product variations.” This dominant design
introduces a new set of (technical) standards, rendering the existing standards
obsolete. This dominant design and its standards are then the basis for a lot of future
products.
In his model (see figure 2.2), Utterback (1994) distinguishes rates of
innovation in particular phases. He, for example defines a fluid phase, quite similar to
the era of ferment in the model of Anderson & Tushman (1990). In this fluid phase,
the rate of product
innovation is high,
whereas the rate of
process innovation is
relatively low. The
period in which the
dominant design
emerges, is defined as
the transitional phase
by Utterback (1994).
After the emergence of the dominant design, the needs of customers become
clearer, therefore the focus in this transitional phase is on product variation, aimed to
serve specific customers. The rate of process innovation is increasing rapidly in this
phase, in order to reach significant production volume. Subsequent, a period of
elaboration of the dominant design takes place. This is what is recognized as the
specific phase, or in terms of punctuated equilibrium theory as the period of
incremental change. The final, specific phase is characterized by very specific
R
a
t
e
o
f
i
n
n
o
v
a
t
i
o
n
Figure 2.2 - The Model of Innovation Dynamics (Utterback, 1994)
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
14
products produced at a high level of efficiency, where the rate of innovation is
declining. Product and process innovation are very tightly linked, and a modification
in either product or process is now becoming extremely difficult and expensive. In
this phase, the competitive emphasis is on cost reduction.
In this final specific phase, the rules of the game are apparent. The product and
process are highly specific, and the market is very clear. At some point in time, the
firm reaches a status quo, which it can only get out from through a radical change in
product or process. Existing standards are made obsolete by new technological
discontinuities, and the search for a new dominant design is initiated in a sequential
fluid phase or era of ferment. Characteristics of each phase are presented in table 2.1.
Fluid Phase Transition Phase Specific Phase
Innovation Frequent major product
changes
Major process changes
required by rising demand
Incremental for product and
with cumulative
improvements in productivity
and quality
Source of innovation Industry pioneers; product
users
Manufacturers; users Often suppliers
Products Diverse designs, often
customized
At least one product design,
stable enough to have
significant production
volume
Mostly undifferentiated,
standard products
Production processes Flexible and inefficient,
major changes easily
accommodated
Becoming more rigid, with
changes occurring in major
steps
Efficient, capital intensive,
and rigid; cost of change high
R&D Focus unspecified because of
high degree of technical
uncertainty
Focus on specific product
features one dominant design
emerges
Focus on incremental product
technologies; emphasis on
process technology
Equipment General-purpose, requiring
skilled labor
Some sub-processes
automated, creating islands
of automation
Special-purpose, mostly
automatic, with labor focused
on tending and monitoring
equipment
Plant Small-scale, located near user
or source of innovation
General-purpose with
specialized sections
Large-scale, highly specific
to particular products
Cost of process change Low Moderate High
Competitors Few, but growing in numbers
with widely fluctuating
market shares
Many, but declining in
numbers after emergence of
dominant design
Few; classic oligopoly with
stable market shares
Basis of competition Functional product
performance
Product variation; fitness for
use
Price
Organizational control Informal and entrepreneurial Through project and task
groups
Structure, rules, and goals
Vulnerabilities of industry
leaders
To imitators, and patent
challenges; to successful
product breakthroughs
To more efficient and higher-
quality producers
To technological innovations
that present superior product
substitutes
Table 2.1 – Phase characterization (Utterback, 1994)
2.2 Radical Technological Innovation
Exploration is defined in this study as experimenting with new possibilities
(e.g. March, 1991). The main premise in this study is that radical technological
innovations are explorative and that exploration leverages the initiation of radical
technological innovations within the company (Levinthal & March, 1993). A further
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
15
definition of the latter (radical technological innovation) is required. This definition is
provided for in this section.
A lot has been written about radical technological innovation, therefore it is
first important to elucidate how radical technological innovation is defined in this
study. Terms like discontinuous vs. continuous, disruptive vs. sustaining, and radical
vs. incremental are used ubiquitously throughout extant literature to define
innovation. What characterizes these terms is that they all describe the degree of
departure from existing technologies, competencies or paradigms. Since in this study
Trion Kromhout is considered as an established firm in the purification sector,
technology is referred to as this existing technology used prior to the radical
innovation (Henderson, 1993). Technology itself is defined as the processing of raw
materials subjected to a certain branch in the industry (derived from Van Dale Online
Dictionary, 11-06-2009).
Throughout extant literature the radicalness of innovations has been evaluated
and characterized several times (e.g. Green et al., 1995; Garcia & Calantone, 2002).
The discussion on the radicalness of innovations however remains rather ambiguous.
Therefore in this study, an attempt is made to define a radical innovation along three
dimensions: (1) a firm’s competences, (2) technology, and (3) market. Through a
literature review these dimensions were recognized as common and underlie most of
the definitions.
2.2.1 Competences
When describing technological discontinuities, Anderson and Tushman (1990)
focused on the firm’s competences and distinguished technological discontinuities as
competence-enhancing and competence-destroying. Competence-enhancing
discontinuities build on know-how embodied in the technology that it replaces.
Competence-destroying discontinuities render obsolete the expertise required to
master the technology that it replaces (1990: p.609). Henderson (1993) used these
terms in a different manner, where she refers to incremental innovation as
competence-enhancing and radical innovation as competence-destroying. An
incremental innovation in this sense requires a logical extension of existing
knowledge and capabilities, whereas a radical innovation makes existing
technological and scientific principles (partially) obsolete. This latter definition
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
16
(Henderson, 1993) is employed in this study, which in turn is in line with
competence-destroying innovations.
2.2.2 Technology
The second dimension proposed in the definition of radical technological
innovation is technology. According to Chandy and Tellis (1998), a radical innovation
incorporates a substantially different core technology relative to the previous product
generation. The technological rules of the game are thus radically changed, whereas
technology doesn’t develop along a sustaining path anymore, but is disrupted by a
new technology with a substantial different set of technological rules (Christensen,
1997). In addition, Rosenkopf & Nerkar (2001) define radical exploration, which
builds upon ‘distant’ technology that resides outside the firm (2001: p.290). The
technological domain differs from the prior source of technology, and is not located in
other sub-units of the firm. Ahuja & Lampert (2001) complement this dimension by
defining radical innovation, or breakthrough inventions as serving as the basis for
future technologies, products, and services.
2.2.3 Market
The third and final dimension of a radical innovation presented in this study is
market related and describes the customer benefits derived from a radical innovation.
Chandy & Tellis (1998) defined radical product innovations along two dimensions,
i.e. technology (as discussed above) and market. The latter determines the extent to
which the new product fulfills key customer needs better than existing products (on a
per-dollar basis) (1998: p.476). The authors presented four types of innovation among
which radical product innovations, innovations that provide substantially greater
customer benefits per dollar, relative to existing products. In their study, Rice et al.
(2001) further specified this increase in customer benefits. Their definition states that
a radical technological innovation means 5-10 fold (or greater) improvement in
performance and/or a 30-50% (or greater) reduction in cost. Moreover, radical
innovations have the potential of opening up entirely new lines of business.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
17
2.3 Impediments to exploration
The importance of radical technological innovation has been pointed out
through the model of punctuated equilibrium. Organizations need to be able to make a
quantum jump in technology to get out of the eventual ‘status quo’ as described.
Moreover, radical technological innovation (facilitating these quantum jumps) has
been defined as well. What has been pointed out as well is that organizations seem to
struggle with conducting exploration. Numerous explanations have been presented
throughout extant literature on why organizations are struggling with exploration.
This section will highlight some key factors that impede the explorative activities of
an organization.
2.3.1 The myopia of learning
Many organization theorists have discussed the differences between
exploration and exploitation (e.g. March, 1991). March (1991) discussed the trade-off
between the exploitation of existing competences and the exploration of new
opportunities. Both exploitation and exploration are competing for the same resources
within the same organizational context, and the main challenge that organizations face
is the creation of a balance in resource allocation between the two. This trade-off
discussion is emphasized by the very distinct characteristics that both phenomena
exhibit. The returns of exploitation are generally recognized as positive, proximate,
and predictable. Outcomes of exploration are the opposite, i.e. uncertain, distant, and
often negative. The struggle arises in the balancing of the two themes, since the
exploitation of existing competencies is often favored over the exploration of new
ones, due to decreased uncertainty in results and more proximate and positive results.
Levinthal & March (1993) further elaborate on this discussion by introducing
the learning trap. The authors state that over time, organizations develop their skills in
particular markets, in particular competences and in particular technologies. Herewith
they propose a mechanism of mutual positive feedback between experience and
competence (1993: p.102). More often organizations tend to engage in activities at
which they are more competent (exploitation) than in activities at which they are less
or not competent at all (exploration). Due to increased positive outcomes of
exploitative activities, it are these activities that are favored over explorative ones and
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
18
firms may enter a success trap. In other words, firms become myopic for explorative
learning.
An emphasis is put on these downsides of a firm’s core competences by
Leonard-Barton (1992), who introduced core rigidities. With core capabilities,
Leonard-Barton refers to a knowledge set that distinguishes and provides competitive
advantage (1992: p.113). In core capabilities reside four dimensions, namely (1)
employee knowledge and skills, (2) technical systems, (3) managerial systems, and
(4) the values and norms. Choices that are made in the past on which technologies,
competences, and markets the focus will be put, are now strongly embedded in a
taken-for-granted mentality and can result in strong path dependence (Garud &
Karnoe, 2001). Managers are influenced by these choices made in the past in
contemporary decision-making and are often not willing to challenge these accepted
core capabilities.
Core capabilities therefore are becoming static in nature, and can eventually
inhibit the adoption or initiation of radical technological change, thus turning into
rigidities. Since managers are not eager to challenge core capabilities, projects that are
misaligned with the core capabilities are often not embraced. For example, when the
necessary skills and knowledge for a project in a certain domain are lacking, the
project is nonaligned and will seldom be pursued. The same goes for technical
systems, which are deeply rooted in the company but can easily get outdated, e.g.
software systems. The adjustment of the current system or shifting to a new one, is
very time-consuming and therefore can cause serious delays. Abernathy and Wayne
(1974) provide a good example of this by describing Ford’s highly efficient
production of the Model T. Ford enabled itself in driving down costs of this
production. However, the transition to the Model A suffered great difficulties and
even required shutting down manufacturing for a considerable period of time.
Next to that, misaligned projects often enjoy little status, and firm and top
management support. Finally, incentive systems discourage employees to pursue
projects that aren’t aligned with the core capabilities. The greatest risk as a result of
embracing only projects that are aligned with the core capabilities of the firm, is that
significant new capabilities get neglected.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
19
Whereas the theme discussed above relates to projects, learning theory also
discusses problem solving as well. Ahuja & Lampert (2001) have defined three
pathologies which inhibit radical technological innovation. The first, the familiarity
trap, is closely related to the theme as discussed above. That is, due to the mechanism
of mutual positive feedback between experience and competence, firms tend to seek
for approaches in problem solving with which they are familiar. The authors describe
it as an example of path dependence that increases the risk of falling into a familiarity
trap. The second trap, the maturity trap, is closely related to the familiarity trap, but
conceptually different. Mature technologies are technologies that have been in
existence for some time and are relatively well known and understood in the industry
(2001: p.527). These technologies are closely tied to the advantages and
characteristics of the established firm. The final trap Ahuja & Lampert (2001) discuss
regarding problem-solving is the propinquity trap, in which the nearby solutions are
favored over distant solutions. Phene et al. (2006) have further defined this
phenomenon of local knowledge search as in the ‘distance’ of knowledge. They state
that knowledge can be both technologically and geographically distant. When
knowledge has no relation with prior knowledge within the company, it then is
considered technologically distant. When knowledge resides outside organizational
boundaries and even outside the industry, the knowledge is considered geographically
distant. Companies tend to favor local knowledge over distant knowledge in their
problem solving activities, which increases the risk of missing out on ‘external’
opportunities (Rosenkopf & Nerkar, 2001).
2.3.2 Mainstream management systems
Large, established firms are enjoying, protecting, and trying to increase their
current stream of rents on their products, which are mostly located in large,
established markets. This need to increase these rents and therewith to grow as a firm,
is termed by Christensen (1997) as upward migration. Firms create routines to serve
customers and investors in the mainstream market well and eventually to realize this
growth. Structural inertia theory explains that firms are favored for cooperation when
they are reliable in producing collective action, and when they can account rationally
for their activities (Hannan & Freeman, 1984). The routines – the capacity to
reproduce a structure with high fidelity – that firms create, are constructive for
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
20
creating reliability and accountability. The downside is that these routines (e.g.
information systems) impede radical change, because the reproducibility of structures
requires bureaucracy and formalization of processes (Hill & Rothearmel, 2003).
O’Connor et al. (2008) build further on this, by describing the key
characteristics of a mainstream, or operational excellence management system which
are proficient at serving mainstream operations. Moreover, they propose it as a system
that nurtures new product development within current lines of business rather than
radical technological innovation. The key characteristics are displayed in table 2.2
below:
Mainstream Management System
Objectives and mandate Efficient, effective management of current markets and operations
Leadership and culture Planning and delivery oriented
Structures Clear and delineated
Processes Stage-gate, project management oriented; avoid deviations from budget or schedule
Governance and decision making Go-or-kill criteria clear in advance, hierarchical decision making
Skills and talent development Functional expertise
System resources Annual budget allocation
Metrics On-time delivery, cost containment, profitability
Table 2.2 - Key Characteristics of a mainstream management system (O’Connor et al., 2008)
As O’Connor et al. (2008) state: “[a system like this] efficiently leverages what the
organization knows for responding quickly and effectively to customer needs or
competitive threads to current product lines or markets” (2008: p.17, emphasis
added). These management systems traditionally do not reward experiment-, or
exploration-oriented activities.
Christensen et al. (2008) have approached one particular aspect of the
management system which is according to the authors one of the major reasons
innovations get killed, i.e. the use of financial tools (especially in the early stages of
radical technological innovations). As the importance of radical technological
innovations already has been pointed out, large established firms also face a
disincentive to invest in them due to initial market size (i.e. often smaller than the
mainstream market). The following example provided by Christensen points out this
disincentive:
…while a $40 million company needs to find just $8 million in revenues to grow at 20 percent … a $4
billion company needs to find $800 million in new sales. No new markets are that large … [therefore]
the larger and more successful an organization becomes, the weaker the argument that emerging
markets can remain useful engines for growth.” (1997: p.xxiv-xxv).
Moreover, Christensen (1997) states that markets that don’t exist can’t be
analyzed, which is often the case in radical technological innovations. Radical
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
21
innovations are often paired with many market and technological uncertainties.
Mainstream management systems of apply financial tools as evaluation metrics in
typical stage-gate processes, and top management demands market data when none or
(too) little exists and make judgments based upon these financial projections when
neither revenues or costs can, in fact, be known sufficiently. And therefore, when
incremental or sustaining projects are compared with projects of radical nature, it will
(often) be the incremental projects that get top management support and prevail, while
radical technological projects get delayed or even die (Christensen et al., 2008).
Mainstream management systems effectively leverage existing technologies to
serve current markets. Product development is therefore mostly based on known
competences and technologies. Song et al. (1998) described that cross-functional joint
involvement in a new product development (NPD) process is not beneficial in all
stages of the process. They for example recognized that in the first stage (i.e. market
opportunity analysis), joint involvement of an R&D department and a production
department (technical system) acts counterproductive. Often new ideas do not fit
within the current production processes and since these are very expensive and time-
consuming to adapt or adjust, new opportunities are often not pursued.
2.3.3 Conclusion
Several mechanisms have been identified that influence the exploration
capability of an organization. A strong mechanism is that of mutual positive feedback
between experience and competences, which results in favoring the existing
competencies over radically different ones. This is reflected on two levels, i.e. on the
level of problem solving, where employees find it difficult to escape the bounded
rationality. The second level is that of projects or organization level, which implies
that only projects will be pursued that fit the current competencies. Moreover, a
management system often is applied by incumbents which is beneficial for
incremental new product developments rather than the initiation of radical
innovations. Thus, individuals and organizations are trapped in a bounded rationality
which impedes them to act properly, especially in the early stages of radical
technological innovations.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
22
2.4 Enabling exploration
This paragraph presents the counterpart of the prior paragraph, in which was
described how incumbent firms suffer from a multitude of constraints and how they
can grow into an inert organization incapable of dealing with radical technological
innovation. This paragraph illuminates how organizations could prevent themselves
from organizational decline and inertia in the face of radical technological
innovations. In this sense, the story of incumbents in the face of radical technological
change will be completed, since some established firms do survive and prosper in the
period after the radical change or can even be the source of radical innovations (e.g.
Schumpeter, 1950; Teece, 1986; Methé et al. 1996; Ahuja & Lampert, 2001).
2.4.1 Escaping from competence traps
The previous section described how firms can get caught up in a competence
trap. Ahuja & Lampert (2001) elaborate on entrepreneurship in large, established
firms, and point out the importance of experimenting with technologies explicitly not
related to prior knowledge to break out of these traps. As mentioned before, firms can
get caught up in either a familiarity trap (i.e. favoring the familiar), a maturity trap
(i.e. favoring the mature), or a propinquity trap (i.e. favoring the nearby). The authors
suggest that in case of each of these traps, a strategy exists to overcome these traps
and enable adaptation or even creation of radical technological innovation.
Succinctly, in the case of the familiarity trap where firms are merely exploiting
technologies known by the firm, organizations should explore and experiment with
novel technologies. These are technologies that are new to the firm, even when they
already exist for a while. In the case of a maturity trap, favoring technologies that are
relatively long in existence and well-known, organizations should explore emerging
technologies. Emerging technologies are technologies that are new in chronological
terms. Finally, when a firm got caught in a propinquity trap, i.e. only exploring the
solutions in the neighborhood of existing solutions, the firm should explore
pioneering technologies. In the case of pioneering solutions, researchers are ignoring
all existing solutions and are exploring fundamental, new solutions. The basic premise
of purposively exploring other technologies is to step out of the bounded thought
process. Sloane (2003) defined this as the process of lateral thinking.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
23
The exploration of novel, emerging or pioneering technologies also points out
the importance of external information and the acquisition and assimilation of it.
Cohen & Levinthal (1990) defined this as absorptive capacity: an organization’s
ability to recognize the value of new, external information, assimilate it, and apply it
to commercial ends (1990: p.128). The authors argue that absorptive capacity
depends (among others) on specialized actors that are intermediating between either
organization and environment, or between different subunits within the firm.
Rosenkopf & Nerkar (2001) elaborated on a critical role needed in innovation and
proposed boundary spanning, essential according to Cohen and Levinthal (1990)
when external information is not closely related to the established knowledge. A
similar role was introduced by Bessant & Von Stamm (2007) as a search strategy to
enhance discontinuous innovation: the Idea Hunter. Rosenkopf & Nerkar (2001)
introduced a typology of boundary spanning where two distinct boundaries can be
crossed, i.e. the organizational boundary and the technological boundary. In terms of
radical technological exploration, the authors suggest that both organizational and
technological boundaries should be crossed. Radical exploration builds upon distant
technology that resides outside the firm (2001: p.290). The boundary spanning role is
emphasized by Reid & De Brentani (2004) who argue that radical innovations only
enter the organization at the discretion of individuals such as boundary spanners.
Huston & Sakkab (2006) investigated in their study the new innovation model
of Procter & Gamble, connect and develop. This is a good example of how boundary
spanners or in terms of Huston & Sakkab, technology entrepreneurs, are used to
explore new opportunities. The main premise is, these technology entrepreneurs
aggressively scan scientific literature and patent databases. The authors however
emphasize that only spanning electronically is insufficient. Technology entrepreneurs
at P&G therefore physically visit research labs, universities, congresses, fairs etc.
Their findings will be actively communicated back to P&G’s decision makers.
2.4.2 An innovation management system
Important in the face of radical technological innovations is to properly
evaluate the opportunities. The previous section described management systems in
established organizations which do not apply for radical technological innovations
(O’Connor et al., 2008). The authors state:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
24
“For example, if the decision-making criteria used to evaluate projects for funding are based on what is
already known about success in familiar markets and with known technologies, but the projects being
evaluated are characterized by high uncertainty and ambiguous outcomes (Will the technology work?
What are the most likely applications? How might we derive value from this as a business? How will
we develop the process innovations necessary to make this economically justifiable?), it’s very unlikely
they’ll be funded.” (2008: p.16)
Here, the mainstream management system’s counterpart is described, i.e. an
innovation management system, which is beneficial to the pursuit of radical
innovations. In table 2.3 the key characteristics of an innovation management system
are displayed.
Innovation Management System
Objectives and mandate New business creation in new and existing markets
Leadership and culture Learning and building oriented
Structures Flexible
Processes Learning and experimentation oriented, allow redirection based on new insights
Governance and decision making Decisions made based on strategic intent and continued learning; criteria not clear in
advance; governance rather than hierarchy
Skills and talent development Entrepreneurial expertise
System resources Resources acquired through many avenues
Metrics Portfolio health and balance; connection with strategic intent of firm; new domains
accessed; new resources garnered; new business starts
Table 2.3 - Key characteristics of an Innovation Management System (O’Connor et al., 2008)
For increasing the survival chances of radical innovations within the
mainstream organization, O’Connor et al. (2008) further elaborate on the discussion
between a project and a platform approach, and state that projects aren’t the way to
go. Instead, platforms (e.g. nanotechnology or energy reuse) create an increased
number of options because they can be the foundation for a variety of business
models, products, and applications (2008: p.62). Again the authors emphasize the
strategic intent which is important, focusing e.g. idea generation in domains of
strategic interest for new opportunities creates more leverage for ideas than one-off
projects.
For the creation of successful technology platforms, firms should get involved
in Open Innovation, a paradigm introduced by Chesbrough (2003). The paradigm
opposes the traditional vertical integration model, where only internal R&D activities
lead to developed products, which he refers to as closed innovation. Chesbrough et al.
(2006) define open innovation as: “the use of purposive inflows and outflows of
knowledge to accelerate internal innovation, and expand the markets for external use
of innovation, respectively” (2006: p.1). R&D is considered an open system in this
paradigm, where (radical technological) innovations can originate within
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
25
organizational boundaries as well as outside these boundaries. Next to that can these
innovations be commercialized from inside the company as well as outside the
company. The processes of both closed and open innovation are visualized in figure
2.3.
Figure 2.3 - The process of respectively closed and open innovation (Chesbrough, 2003)
In table 2.4, the main principles of closed and open innovation are presented.
Chesbrough et al. further emphasized that open innovation enhances both the
creation and capturing of innovations. The use of the required business model thus
enables the initiation of, and response to change.
Table 2.4 - Contrasting Principles of Closed and Open Innovation (Chesbrough, 2003)
Organizations engaging in open innovation, have to find a way to couple the internal
research and external ideas. Moreover, firms need to deploy these ideas within their
own business model and through the business of other firms. Chesbrough (2003)
notes that it is key for firms to identify what the firm is lacking internally, where to
attain those missing parts, and integrate these parts into their systems. The open
innovation paradigm thus emphasizes the importance of interaction with the
Closed Innovation Principles Open Innovation Principles
The smart people in our field work for us. Not all the smart people work for us so we must
find and trap into knowledge and expertise of
bright individuals outside our company.
To profit from R&D, we must discover, develop,
and ship it ourselves.
External R&D can create significant value;
internal R&D is needed to claim some portion of
that value.
If we discover it ourselves, we will get to market
first.
We don’t have to originate the research in order to
profit from it.
If we are the first to commercialize an innovation,
we will win.
Building a better business model is better than
getting to market first.
If we create the most and best ideas in the
industry, we will win.
If we make best use of internal and external ideas,
we will win.
We should control our intellectual property (IP)
so that our competitors don’t profit from our
ideas.
We should profit from other’s use of our IP, and
we should buy other’s IP whenever it advances
our own business model.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
26
environment, and the creation and maintenance of networks, which is the emphasis in
the connect-and-develop model of P&G as well (Huston & Sakkab, 2006).
2.4.3 An independent organizational space
March (1991) discussed that both exploitation and exploration should co-exist
within organizations and that it is important to make the correct tradeoff between the
two. This means that a mainstream management system as described in the previous
section should not entirely be replaced by an innovation system, since exploitation is
beneficial for success in the nearer term and organizations enjoy greater certainties
from it. This section provides useful insights in how organizations can nurture both
exploitation and exploration.
Christensen & Overdorf (2000) state in their article, that the capabilities of a
firm reside not only in their resources, but also in their processes, and values.
Emphatically, as recognized by many other scholars, the processes of a firm (i.e.
patterns of interaction; coordination; communication; and decision making.
Christensen & Overdorf, 2000) are designed for tasks to be performed efficiently and
or meant not to change. Though, in the face of radical technological change, these
processes are not applicable any longer. Moreover, Christensen & Overdorf (2000)
discuss the values of the firm which also affect what a company can or cannot do.
They define the firm’s values as: “…the standards by which employees set priorities
that enable them to judge whether [something is attractive or unattractive, more
important or less important].” (2000: p.69) The perception of value changes, when
companies grow. Due to increasing overhead costs, the gross margins that were once
attractive, are now becoming unattractive. Besides, small markets don’t solve the
growth needs of large companies (Christensen, 1997; Christensen & Overdorf, 2000).
As the occurrence and importance of radical technological innovations has
been discussed, companies face the challenge to change the capabilities of the firm.
To overcome the mentioned problems, Christensen & Overdorf (2000) suggest to
create a new, independent organizational space alongside the mainstream
organization. In terms of O’Connor et al. (2008), alongside the mainstream
organization with its mainstream management system, an organizational space has to
be created which is managed through an innovation system. This can be achieved in
three different manners:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
27
1. Create new organizational structures within corporate boundaries in which
new processes can be developed.
2. Spin out an independent organization from the existing organization and
develop within it the new processes and values required to solve the new
problem.
3. Acquire a different organization whose processes and values closely match the
requirements of the new task.
(source: Christensen & Overdorf, 2000: p.73)
The authors refer to Wheelwright & Clark (1992) as the first solution,
regarding heavyweight teams. This means that new organizational boundaries are to
be created internally, in which a new group of people is installed suitable for the new
problem. O’Reilly & Tushman (2004) refer to quite a similar solution as the
ambidextrous organization. These organizations involve project teams that are
structurally independent units, each having its own processes, structures, and cultures,
but are integrated into the existing management hierarchy (2004: p.79). O’Reilly &
Tushman (2004) emphasize the advantages of cross-fertilization and no cross-
contamination between the established and the new business, other than in case of for
example unsupported, or cross-functional teams. The ambidextrous organization is
visualized in figure 2.4.
Birkinshaw & Gibson (2004) defined the concept of contextual ambidexterity
which often acts complementary to structural ambidexterity. The authors refer to
contextual ambidexterity as a phenomenon that calls for individual employees to
make choices between alignment-oriented and adaptation-oriented activities in the
Figure 2.4 - The Ambidextrous Organization (O’Reilly & Tushman, 2004)
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
28
context of their day-to-day work (2004: p.49). The capability of alignment is referred
to as a clear sense of how value is being created in the short-term and how activities
should be coordinated and streamlined to deliver that value. Furthermore, the
capability of adaptability, of which the importance is evident, is described as the
ability to move quickly toward new opportunities, to adjust to volatile markets and to
avoid complacency (Birkinshaw & Gibson, 2004). According to Jansen et al. (2008)
the role of transformational leadership is key in creating and sustaining ambidexterity.
They found that the development of a strong shared vision and contingency rewards
have a positive influence on achieving ambidexterity. In specific, these mechanisms
influence management behavior so that resource allocation will be correctly balanced.
Large organizations seem to be incapable in allocating the necessary resources
for a radical technological innovation, located in an emerging, initially small market.
In this case, Christensen & Overdorf (2000) suggest to spin out an independent
organization. Chesbrough & Rosenbloom (2000) acknowledge the lack of a clear
path to market for spillover technologies. They as well suggest that a business model
distinct from the established one is necessary, which can be achieved via spin-offs.
This method is in extension of the open innovation model, which characterizes
technologies that can be either commercialized internally or, in the case of spin-offs,
externally.
The third and final solution Christensen & Overdorf (2000) suggest, is that of
acquiring the necessary capabilities. The authors distinguish between the acquisition
of processes and values, and the acquisition of resources. In the case where a the goal
is to acquire capabilities that reside in the processes and values of the other company,
Christensen & Overdorf suggest that the other business should be left stand-alone.
This is because, when fully integrating the company and its capabilities, the processes
and values will be overruled by, and vaporize within the parent organization. Though,
when the capabilities needed reside in the resources of the firm, than the parent
organization can fully integrate the other company. This is because these resources
(such as people, technologies, etc.) can enhance the parent capabilities.
2.4.4 Conclusion
This last section of the theoretical framework proposed several insights on how
established organizations can overcome the constraints regarding exploration. Three
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
29
main themes have been discussed which can help firms organize for exploration. First,
as many companies favor their known technologies over the unknown due to mutual
positive feedback, it is important that firms which have fallen in a competency trap
that they deliberately explore novel, emerging or pioneering technologies. Second,
mainstream management systems don’t apply for radical innovation, therefore firms
should create an innovation system which entails different evaluation criteria and
where the mandate is not efficiency, but new business creation. However, an
organization cannot rely totally on one management system (either a mainstream or an
innovation system). That is why firms need to create an independent organizational
space which is separated from the mainstream management system and is governed
through an innovation system.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
30
3 Research Methodology
This chapter elaborates on how the answers to the research questions and
herewith the central question are found. Choices on methodology are being explained
and justified. This chapter elaborates on the research strategy, the data collection
methods, and the method of analysis of the data.
3.1 Research strategy
In this research, a retrospective case study will be conducted. Along three
conditions provided by Yin (1994) is discussed why this research strategy is to be
employed.
The first condition provided by Yin is the type of research question. The
central question in this thesis (“How has Trion Kromhout evolved over time with
respect to exploration, and how could Trion Kromhout enhance exploration?”) is a
typical ‘how’ question, and is meant to deal with operational links needing to be
traced over time rather than mere frequencies or incidences. Therefore the preferred
strategy is either a case study, history or experiment (1994: p.6). From these three
strategies, one can be eliminated through the second condition: the extend of control
over behavioral events. After assessing the first condition, an experiment is still an
option. However, when conducting an experiment a control over behavioral events is
required. Since this is not the case in this research, the experiment as research strategy
is no longer an option. The third condition is the degree of focus on contemporary
events. As described along the research questions, this study goes back in time, even
to certain periods where the study can only rely on documents, cultural and physical
artifacts (1994: p.8). Though, this is only part of the study, as data will also be
gathered in the nearer history and current situation, where sources are for example
managers or employees who are still ‘around’. Leonard-Barton (1990) points out that
a case study is actually a history of a past or current phenomenon (1990: p.249),
therefore the strategy will be concluded as a case study.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
31
3.2 Research design
Some aspects of the research design have to be emphasized. Since part of this
research is the study of the evolution of the explorative capacity of an organization,
the case study will be in retrospect. Data are obtained after certain events have
occurred, as comes forth from the research questions provided in chapter 1.
As described before, Trion Kromhout is the focus of this study, which means
that this study is a single case study. Next to that, as proposed before research
question 2, the case study will contain a multilevel approach. Again referring to Yin
(1994), this is called an embedded case study. This leads to a Type 2 case study
design (1994: p.39), a single case (i.e. Trion Kromhout) study with multiple units of
analysis (i.e. projects).
3.3 Data collection methods
3.3.1 Principles of data collection
Elaborating on the collection of data in a case study, Yin (1994) introduced
three distinct principles which enhance the benefits of the evidence collected. First,
Yin (1994) points out that a broader range of historical, attitudinal, and behavioral
issues can be addressed by employing multiple sources of information. Moreover,
findings or conclusions in a case study are likely to be more convincing and accurate
if based on multiple sources of evidence. Therefore, to increase validity of the
research, the data collected in this study is based on different primary or secondary
sources. Sources of evidence in this research are documentation, archival records,
interviews, and physical artifacts.
The second principle proposed by Yin (1994) involves the organization and
documentation of the data collected. Yin points out that documentation in case studies
generally consists of (1) a data or evidentiary base, and (2) the report of the
investigator (e.g. a article, report, or book). The main purpose of this distinction is that
the ‘critical’ reader has a recourse if he or she wants to inspect the database that led to
conclusions. Furthermore, by creating a separate, independent database, other
investigators can easily review this evidence and are not limited to the written report.
This enhances the reliability of the entire case study. For creating a proper database in
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
32
this study, data is collected and archived as case study notes, case study documents,
tabular materials, and narratives.
The third and final principle is to maintain a chain of evidence. This principle
is to enable the reader of the report to follow derivation of any evidence from initial
research questions to ultimate case study conclusions and the other way around. Thus,
implications made in the conclusions of the study have to be traceable throughout the
report. This along with the other two principles generally increases the reliability and
herewith the quality of the study substantially.
3.3.2 Interviews
Interviews were held in an open-ended nature in which respondents were
asked for opinions about events, and to propose their own insights into certain
occurrences. Herewith respondents are considered more an informant instead of a
respondent, which is essential since informants rather than respondents are more
essential to the success of a case study. Open-ended interviews give the interviewer
more flexibility. Moreover, informants can suggest other, surprising sources of
evidence and even give access to them (Yin, 1994: p.84).
The interviews were constructed as semi-structured. These type of interviews
give clear direction toward collecting the right data, but also leave enough room for
the interviewee to propose other interesting insights.
The desired results from the interviews involve data which tell the story of
origin and growth until the current situation of Trion Kromhout and its relevant
subsidiaries. Therefore some of the interviewees were people who are engaged with
Trion for a long time, i.e. ten years or longer.
Since interviews usually take a long time to conduct, the amount of interviews
is limited eventually to 12. Therefore, middle and top management were approached
to take part in the interviews because usually it are these people who can tell (most of)
the story.
Besides interviewing people who are within the company for a long time, the
goal is also to interview people who are around for not so long. The main reason for
this is that usually these people are not influenced by embedded cultures and usually
have a more objective view on the situation. This further enhances the possibility to
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
33
link the past to the present properly and to explain why the current situation is as it
exists.
People have been selected on tenure and position. The goal was to find a right
balance between employees with a rather long tenure (approximately 25 years) and a
shorter tenure (down to 2 years). Experienced employees still active in the company
can face-to-face tell the story as they experienced it. Furthermore, employees with a
shorter tenure are approached because they can give more objective opinion on
contemporary situations since they are not that much influenced by the past.
Moreover, due to long tenure most of the relevant developments will be covered.
Position is another aspect, which influenced the selection of interviewees. That is,
managers and directors are the most involved in organizational processes, strategy etc.
Since barriers to exploration are often embedded in an organizations processes,
structures and strategy, it is considered more likely that employees with a director or
managing function contribute to relevant data since these employees have most of the
insights in this. People that have been interviewed include the general manager, the
R&D director, business development director, directors of sales and marketing and
several technology and patent managers of different departments. Several follow-up
interviews were conducted to gain additional information. All the interviews have
been recorded and transcribed.
Moreover, throughout basically the entire study is searched for narratives by
employees about relevant topics in addition to the interviews. This is done since not
all the data required was retrieved during the interviews. These narratives are from
people within the company ranging from top managers, middle managers and other
employees (e.g. scientists, engineers and sales people).
3.3.3 Desk research
The collection of documentation and archival records is performed via desk
research. Desk research is meant to provide insights in the background of the case, i.e.
Trion. With documentation is meant e.g. press releases, internal memos, websites, and
administrative documents. As for archival data go organizational records (e.g. charts
and budgets) and previously collected survey data. Access was obtained to total of 22
quarterly, internal news bulletins, 16 third party publications, 8 internal presentations,
1 previous survey on employee satisfaction and publicly available documents (from
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
34
the website). The main purpose of the data collected via this desk research is that this
information can confirm and add to other sources of evidence, herewith increasing
reliability. Moreover, these sources of information help to determine the chronology
of the case.
Additional desk research has also been conducted in order to identify
novel/emerging technologies for the benefits of organizing for exploration. Also a
brief study has been conducted in order to identify universities and institutes for
potential joint research activities.
3.4 Data analysis
The analysis of case study data is often difficult since analytic techniques and
strategies are ill-defined. Moreover, there is a strong dependence of outcomes on the
researcher’s own style of rigorous thinking, just as the adequate presentation of
evidence and consideration of alternative interpretations (Yin, 1994). For analyzing
case study data, a researcher should therefore have a general analytic strategy. The
author introduced two general strategies, i.e. (1) relying on theoretical propositions,
and (2) developing a case description. For answering research questions 1 and 2:
1) How did Trion evolve from its foundation until 2003, especially concerning its
explorative capacity?
2) How did Trion Kromhout evolve from 2003 until the present, especially
concerning its explorative capacity?
a case description is build. The transcripts of the interviews form the main input for
the case. In addition, the documents are used to support results from interviews and to
support the creation of a chronologically correct story. All the sources of data (i.e.
transcripts of interviews and organizational documentation) have been read and re-
read in order to identify incidents, statements, actions etc. which could contribute to
the limited capacity in exploration. Phenomena that are repeatedly emphasized during
interviews and in documents were considered relevant for building the case
description. Moreover, before building the case the different phenomena identified
were tested by asking several of the interviewees about the relevance and correctness
of these facts.
The third research question:
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
35
3) Which major factors negatively influencing exploration can be recognized
throughout the case of Trion Kromhout?
is answered by applying the theoretical framework as proposed in the previous
chapter. The framework describes different influential factors that could contribute to
a limited exploration capacity. This stage, at theoretical level, served the goal of
creating an explanatory framework in which is tried to emphasize how concepts like
for example learning traps, core rigidities and a mainstream management system are
related to the limited exploration capacity at Trion Kromhout. The goal was to create
a conclusion based explanations that appear most congruent with the facts (Yin,
1981).
The data retrieved through the interviews and desk research is reviewed and facts or
statements that indicate an influencing factor for exploration are categorized and
coded through the themes of the theoretical framework.
The final research question:
4) How could the explorative activity at Trion Kromhout be enhanced?
is addressed by applying the second part of the theoretical framework, which
describes mechanisms that can contribute to enhancing radical innovation capabilities
within the firm. This part of the theoretical framework formed the basis for context
specific solutions on how Trion Kromhout can enhance its exploration capacities,
directly related to the identified impediments to exploration in the firm.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
36
4 The Case: Trion N.V. and Trion Kromhout
This section provides an extensive description of the development of Trion as
a company and some of its relevant subsidiaries with as final point Trion Kromhout as
it currently exists. Research questions 1 and 2 are addressed in this section. The
chapter is structured as follows. First, the origins of Trion are discussed and its growth
in the Activated Carbon (AC) industry. This period reaches to the mid 90’s when
Trion complemented their traditional AC technologies with process and membrane
technology. Then, the second part will go a step back in time and elaborate on the
origins and evolution of the firms which actually delivered the process and membrane
technology at Trion.
Whereas the first two parts of this section mostly describe the context of the
company, hereafter the development of Trion will be discussed more extensively,
especially with regard to the explorative capacity of Trion Kromhout. Starting in the
mid 90’s, several companies were acquired by Trion. Some of these acquisitions will
be discussed regarding their potential influence on exploration. Finally is elaborated
on the period from 2003 until now. From this point several subsidiaries are situated
under one roof in Kromhout. Throughout the case description certain projects will be
used to illustrate and further emphasize the development of the organization. The goal
is to pinpoint the main factors influencing the explorative behavior of Trion
Kromhout. Figure 4.1 shows a timeframe of the case history.
CONFIDENTIAL
Figure 4.1 - Timeframe Trion
4.1 Origin and growth of Trion N.V.
Back in 1910, a vegetable decolorization carbon known as ‘noir épuré’,
‘eponit’ or ‘Trion’ was used in the sugar refining process. Dr. A. Wijnberg, an expert
in the sugar industry those days, recognized the possibilities of using this
decolorization carbon in sugar refinement. This idea eventually led to the
development of Activated Carbon (AC) and its practical application in various
industries. Moreover, this idea led in 1918 to the origin of Trion as NV Algemene
Trion Maatschappij. The company was a merger of the Amsterdamse Suikerfabriek
De Granaatappel, which was the first production facility that used the sugar refining
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
37
technology, the NV Nederlandse Trion Maatschappij Declora, producer of AC from
charcoal and the NV Chemisch-Technisch Handels- en Adviesbureau, which
supported the construction of purification installations in sugar refinement facilities.
In the first decennium several production sites in both the Netherlands and Germany
were acquired, herewith increasing the production capacity of AC. In the late 1920’s,
the German factories were sold to the German Verein für Chemische Industrien.
Eventually this resulted in a cartel established in 1929, called the Carbo-Trion-Union.
In this cartel, several West-European countries were allocated to both Trion and the
Verein.
From the beginning of Trion, the company investigated the growth
possibilities in the United States. This investigation led to the first factory in the U.S.
back in 1933, which was established in Jacksonville, Florida. This was accomplished
in cooperation with the before mentioned German Verein für Chemische Industrien. It
took one year before the American Trion Company started production of activated
carbon obtained by incinerating pine tree stumps. In 1966 the production was brought
to an end due to increasing charcoal prices, but the American Trion Company
remained existence as a sales organization. In 1984 a producer of activated carbon
from lignite named Darco was acquired by Trion. Darco was located with its
production facility in Marshall, Texas and owned a market share of 20-25 percent in
the U.S. Twelve years later, in 1996 Trion acquired another U.S. AC factory, located
in Pryor, Oklahoma from former owner Elf Atochem North Americas, Inc. which led
to a fivefold increase in Trion’s capacity for the production of granular AC from coal.
4.2 Towards a purification provider (1/2)
In the 1990’s, the demand for AC in Trion’s traditional markets like the
chemical and foodstuff industries declined. This was partly due to the increasing
replacement of powdered carbon by granular carbon. Moreover, in the purification
sector more and more use was made of membrane technology. As a response to these
changing market situations, Trion changed its organization drastically. Where it
initially was product-oriented, the company became market-oriented, the profit
accountability changed from centralized to decentralized, and from a single product
focus they shifted to a diversified product line. Most important, the company couldn’t
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
38
be profiled as an AC producer anymore, instead they became a purification solutions
provider. By studying several alternatives for purification methods, Trion found that
membrane technology seemed to be a strategic add-on. Through several acquisitions
Trion enabled itself to expand in that direction. In the succeeding two paragraphs the
companies that were acquired are described. First the company Wolf is described, a
specialist in the area of membrane development and production. Subsequently Elusius
is described briefly along with Elusius Micro, both companies with a focus on the
(process) technology ‘around’ membranes.
4.2.1 Wolf
Wolf was founded in 1984 by Dick Grobben, in 1986 accompanied by the
current Business Development (BD) Director of Trion Kromhout, former classmate
and colleague at the University of Twente. At the time the company was founded, the
market already provided for microfiltration membranes, though all rejecting water,
among experts known as hydrophobic. Therefore their first project involved the
creation of a hydrophilic microfiltration membrane, one not rejecting water. The
project was in cooperation with the University of Twente and was enabled due to 90%
of the project being subsidized. A PhD student, Trion Kromhout’s current R&D
Director, was assigned to the project to conduct the research and took until May 1989.
During this period revenues were besides sales, mostly generated by consultancy.
Whereas at the one side money was coming in, on the other side a tenfold of this
amount was again to be spent in R&D, making Wolf an actual R&D center, exploring
new opportunities on a daily basis. After approximately three years Wolf was able to
produce and sell membranes on a small scale. By the time the membrane was further
developed and made suitable for mass production, Grobben and the BD director
started the search for a corporate partner to exploit their membrane on large scale.
They found in Shell their appropriate partner, since Shell already possessed a
worldwide network of sales offices. Moreover, Shell itself conducted research in
membrane technology as well, herewith already having affinity with this technology.
The interest from Shell was gained by the possibilities with membranes in the oil-
industry. With investments of Shell and the support of Rabobank Almelo, Wolf was
able to move their business from Bedrijfstechnologisch Centrum Twente (BTC) to
Bedrijvenpark Twente in Almelo in 1990. The two main reasons to move their
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
39
business was first to expand production facilities, therefore an appropriate factory site
was built in Almelo. Second, Wolf still ‘suffered’ from a spin-off image, which
wasn’t how Wolf wanted to be recognized. As Grobben quoted: ”People kept looking
at us as young researchers, while we wanted to be an adult company.”
The first few years in Almelo, Wolf still remained a technology-driven
company, with relative high investments in R&D. This resulted in a diversified range
of technologies and products for wine and beer purification and even an artificial skin
(a product that never made it to the market). Moreover, other types of membranes
were developed, e.g. a flat membrane, a tubular membrane with woven and non-
woven structures, and a capillary membrane. Though, a turnaround toward market
pull was about to happen in 1993. At that time, citizens of Milwaukee, Wisconsin,
suffered from the largest waterborne outbreak ever in history, when water supply
became contaminated with a parasite called Cryptosporidium Parvum (‘Crypto’).
Over 400,000 people got infected and about 120 people died from this. Due to this
outbreak, legislation on drinking water supply was more emphasized and tightened.
The result of this was that membrane technology retrieved more attention than before,
which triggered Wolf to explore the possibilities in the water purification industry.
At the end of 1994, a collaboration started with PWN, a clean water supplier
that time located in Andijk, Netherlands. This company was interested in the
purification of water with membranes. Wolf at that time, already invested in research
on water purification with membranes. The goal of the project which was initiated in
collaboration with PWN was to deliver a testing facility including membranes of
Wolf. The building of the pilot was subsidized by the government and performed by
Elusius Micro, a company which is discussed later. The project resulted in the AGIX
concept, a concept of water purification by ultra-filtration membranes. Another result
from this project was that with the AGIX concept, a global standard was introduced of
8-inch modules, which still is the standard. The reason for becoming a global standard
was that it was the first and only module with capillary membranes. Moreover, the 8-
inch modules were successfully evaluated on performance and outcome.
That time Wolf was only providing the membrane modules. This was and still
mainly is their strategy, i.e. only providing for membrane modules and selling to
original equipment manufacturers (OEM). Their main consideration was that it was
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
40
almost impossible to enter the filtration market themselves, since then they should
possess knowledge and expertise in building processes. This they found undoable,
therefore they mainly focused on the OEM sector. Though, from the moment of
initiation of AGIX, Wolf got more involved in the processes and the system in which
the membranes would be put, still this was rather limited. This involvement in the
process side of purification with membranes was because membranes require very
specific settings in the process to function the right way, which could not totally be
left over to the OEMers. The main reason was to decrease the risk of failure in
installations.
4.2.2 Elusius
It was the acquisition of Elusius in 1996 that was the first step into the
direction of process and membrane technology. Elusius, originally founded in 1915,
became Elusius Projects & Engineering (EPE) in 1988. The company’s expertise was
liquid flow process systems, where projects involved the food and beverage industry.
In 1994 the current BD director left Wolf to set up a daughter company at EPE called
Elusius Micro (EM), because he found more should be done with the applications
around the technology. Whereas Wolf merely delivered membrane modules to
OEMers, EM’s goal was to link membrane technology to different applications in the
market, initially in beer membrane filtration (BEMEFI). This was achieved in
cooperation with Heineken, where EM developed BEMEFI mainly on the cost of
Heineken. In their role as technology supplier, EM mostly used membrane modules of
Wolf in their systems.
4.3 Towards a purification provider (2/2)
This part is CONFIDENTIAL. The next section provides a general summary of the
entire case.
4.4 Conclusion
In this chapter is tried to answer the first (“How did Trion evolve from its
foundation until 2003, especially concerning its explorative capacity?”) and second
research question (How did Trion Kromhout evolve from 2003 until the present,
especially concerning its explorative capacity?). The case initiated with the very
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
41
origins of Trion N.V., its rather abundant growth and acquired facilities abroad (e.g.
Jacksonville, USA), and the dramatic strategic change of adopting two core
technologies alongside Activated Coal, namely process and membrane technology.
This period only provides for a contextual view on the organization in total and
describes where the roots of the process and membrane technology lie within Trion
N.V. In this first part no particular incidents have been identified regarding
contemporary exploration at Trion Kromhout.
Thereafter, the first steps of Trion N.V. towards a purification provider are
described. Trion acquired TPT, Wolf, and TMT in a short period of time and was
herewith enabling itself in process and membrane technology. These subsidiaries of
the later Trion Kromhout were discussed from their foundation until the moment they
were acquired by Trion. Whereas the main focus in this section still is providing
contextual insight, some criticalities can already be recognized. For example, a key
decision made that time was to put a narrow focus on Wolf’s technological directions.
Wolf moved from a ‘fluid’ organization with multiple technological and market
directions toward a more focused organization with three main areas of markets (beer,
water, wastewater). The last decade Wolf and herewith also Trion Kromhout (in later
stages) developed core competencies in these three domains. The choice to focus is
still influencing contemporary activities since the markets mentioned are still the main
focus today (e.g. taking the road to excellence into account, where core competences
are used to ‘do better’ in existing markets).
Moreover, the integration of Steng Friesland in Wolf can also be recognized as
rather critical. That is, the integration of two companies, or merger/acquisition, is not
a straightforward thing. Difficulties have been recognized in cultural differences for
example. This has strongly influenced the (strategic) decision making process within
the company. At this point it became clear that Wolf/Steng and later on Trion
Kromhout seem to struggle with the cannibalization of existing products.
The physical amalgamation in 2003 of all TPT, TMT and Wolf also has
implications for the explorative character of the firm (Trion Kromhout). For example,
the large production site that was created. Herewith, a substantial inflexibility arose
within the company. Although Trion Kromhout enabled itself in efficient production
of membranes, the large spinning machines also were costly (both monetary and
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
42
timely) the adjust to (radically) new products. Moreover, the large production site
asked for a substantial amount of troubleshooting or attention in other kind. The
relative small R&D department therefore spent most of their time serving the
production site, herewith leaving little time for explorative (actual R&D) activities. In
2008 this changed due to a substantial increase in R&D employees at Trion
Kromhout. Examples were given on how Trion Kromhout enhanced R&D and
herewith exploration.
In the beginning of 2009, the road to excellence was introduced to the company,
a process also with some implications for exploration at Trion Kromhout. Again a
focus was put on the three customer groups/markets as was done before. Moreover,
the entire company is now organized around these markets (water, wastewater and
beverage), core competences are thus evermore emphasized. Also, the road to
excellence involves certain processes among which the Product Development Review,
in which financial tools are strongly influencing decision making, even in the fuzzy
front end.
The Efficient Performance Technology understanding is part of the road to
excellence process, which stimulates a lean culture in which the basic premise is to do
more with less. The focus herewith is put on decreasing costs (energy, waste,
materials etc) and increasing outcome and reliability; thus doing better what they
already do.
In sum, certain choices or incidents in the past are still influencing today’s
explorative behavior. Moreover, very recent developments have had implications for
exploration as well. However not all is negatively influencing exploration at Trion
Kromhout, an example is the substantial increase in employees on the R&D floor. The
next chapter will analyze the case through the theoretical framework. Here will be
discussed what the criticalities are explicitly what they imply for the contemporary
organization of exploration at Trion Kromhout.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
43
5 Analysis
This part is CONFIDENTIAL.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
44
6 Enhancing exploration at Trion Kromhout
This part is CONFIDENTIAL.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
45
7 Conclusions
7.1 The main objective
This part is CONFIDENTIAL. A succinct summary is provided. According to
the data, several barriers to exploration are present at Trion Kromhout. The barriers
described in the first part of the theoretical framework were all recognized in this case
to some extent. The ultimate goal was:
“Draw up recommendations for Trion Kromhout on how it could organize for
exploration”.
These recommendations were based on the second part to the theoretical framework
and to large extend applied in the specific context of Trion Kromhout.
7.2 Discussion
In this final section remarkable patterns in the case of Trion (Kromhout) will be
discussed. Some aspects which were not discussed in the case description and analysis
will be highlighted.
7.2.1 Internal and external R&D
Looking at exploration at Trion, it is remarkable to see that the organization has
shifted from first acquiring other companies to later doing endogenous R&D. It is a
rather unusual pattern because many firms often adjust their strategy one from
conducting R&D internally to acquiring knowledge externally. Moreover, Cohen &
Levinthal (1990) stressed the importance of a stock of prior knowledge to effectively
scan the environment for external knowledge and increase the absorptive capacity.
Considering this it is remarkable that the explorative acquisitions (Wolf, Elusius
(EPE), and Steng Friesland) seem to proved their success, because there was very
limited prior knowledge in this case (i.e. mainly in the production of AC and
decolorization processes). When looking at the acquisition of Steng Friesland,
according to Cohen & Levinthal the relative success seems more plausible due to the
created knowledge stock prior to this acquisition.
Cassiman & Veugelers (2004) suggest that both internal R&D and external
knowledge acquisition can well be complementary, i.e. because the one can leverage
the other and have positive impact on innovative behavior of an organization. In sum,
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
46
companies should be engaged in both internal R&D and external knowledge
acquisition. Additionally, e.g. Christensen & Overdorf (2000) have suggested that
companies should, in the face of radical change, should create an independent
organizational space and argue that this could be also achieved through the acquisition
of an external organization.
Concluding, it remains unclear why Trion (Kromhout) shifted from buying to
making. Due to the experience they have built up in the buying exercise, it remains a
remarkable, non logic shift. Regarding the above elaboration on internal and external
R&D, Trion should also be engaged in both. Thus, the buying experience should be
further exploited alongside the internal R&D activities.
7.2.2 Integration of an R&D department
In this case study, themes like core rigidities and mainstream management
systems have been discussed. However, what also could have influenced the limited
exploration is the cost of integrating the R&D department in the organization. Before,
R&D was more a production process improvement and implementation department.
Hiring many employees to compose an actual R&D department also involves an
integration trajectory of such a department in the mainstream organization. Integration
aspects or a lack of an adequate integration protocol may influence the output of an
R&D department as well.
7.2.3 Dynamics of innovation on organizational level
Prior to the actual analysis of the case of Trion an analysis of patent data of
Trion Kromhout (and its prior subsidiaries) has been conducted. A remarkable aspect
is that the theory of Utterback (1994) about innovation dynamics, which applies on
industrial level, also can be recognized at organizational level. The patent data
analysis was conducted in order to support to some extent the original central problem
(i.e. a need for exploration). Interesting about this patent case was that once the
analysis was done and put on paper, the document started to be distributed very fast
within the organization, although it was only sent to two employees. Apparently the
analysis created awareness of the current situation at Trion Kromhout. This type of
analysis could be applied in other organizations as well to do such a kind of awareness
creating exercise.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
47
7.3 Limitations and implications for further research
7.3.1 Internal and external R&D
The previous section described how organizations can combine internal R&D
with external R&D. This leads to a first limitation of this research and also to an
implication for further research. That is, Trion Kromhout is currently focusing on
internal R&D, however a large stock of knowledge has been built up in membrane
technology, process technology and also biotechnology. Therefore, the already built
up experience in acquiring other companies and the extensive stock of knowledge
present at Trion, the company should be able to proceed in this strategy of buying
companies to access external knowledge. The limitation is that this research focused
in the solution side only on the internal R&D and has not analyzed the strategy of
acquiring external knowledge through acquisitions. This is mainly because several
internal issues have been recognized with regard to exploration that needed to be
addressed and external knowledge acquisitions are a complex, not straightforward
exercise and thus need more careful and in depth analysis. Therefore further research
is suggested.
Since there is enough support in extant literature to engage in external
knowledge acquisition, an implication for future research is to examine if Trion
should again initiate a strategy of explorative acquisitions. Moreover, characteristics
could be identified which contributed to the success of the previous acquisitions. The
reproducibility can help determine whether to again acquire external knowledge
beneficial to exploration. Moreover, in specific a closer look could be taken at the
acquisitions of EPE and Wolf, which to some extent challenge what Cohen &
Levinthal (1990) argue about a prior knowledge stock and absorptive capacity. The
acquisitions have proven successful which implies that prior knowledge is not a
requisite for acquiring external knowledge.
7.3.2 Integration of an R&D department
In implication for further research can be the analysis of the integration
process of the R&D department within the organization. What is needed to conduct
successful creation and integration of an R&D department? Moreover, how could
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
48
Trion Kromhout use this information to improve the explorative output of the R&D
department?
7.3.3 Dynamics of innovation on organizational level
As discussed before the type of patent analysis could be applied to create
awareness in an organization on how their technological trajectory’s state is.
However, since the model on process and product innovativeness of Utterback applies
for industries, an implication for further research is to investigate whether this pattern
of innovation dynamics can be validated on organizational level as well. Thus, is
product innovation in the early days of an organization higher and eventually
decreasing, followed by increasing process innovativeness, and ultimately a status quo
in which the organization might get into? The study could involve an analysis of
patent data of competitors in the same industry, or organizations in industries with the
same pace of technological change, in order to validate that innovation dynamics
apply also on organizational level.
The above discussed analysis to some extent is pointing out the relevance of
exploration in addition to the introduction chapter, moreover this study has pointed
out several impediments to exploration and how to overcome them. A limitation in
this study however, is the timing aspect. This means, the current technologies are
believed (among Trion managers) to lead the industry for a while. However, it is still
not certain when Trion has to come up with a radical technological innovation or
when the market will be disrupted. An implication for further research therefore is to
identify for example where Trion’s technologies are located in the product life cycle,
or S-curve (Christensen, 1997). However, this does not mean that exploration
shouldn’t be enhanced on immediate terms since firms engaging in both exploitation
and exploration are on average more successful.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
49
8 References
• Abernathy, W.J. & Wayne, K., 1974. Limits of the Learning Curve. Harvard Business Review,
52: 109-119.
• Ahuja, G., & Lampert, C.M., 2001. Entrepreneurship in the Large Corporation: A
Longitudinal Study of How Established Firms Create Breakthrough Inventions. Strategic
Management Journal, 22, 6/7: 521-543.
• Anderson, P., & Tushman, M.L., 1990. Technological Discontinuities and Dominant Designs:
A Cyclical Model of Technological Change. Administrative Science Quarterly, 35, 4: 604-
633.
• Benner, M.J., & Tushman, M.L., 2003. Exploitation, Exploration, and Process Management:
The Productivity Dilemma Revisited. The Academy of Management Review, 28, 2: 238-256.
• Birkinshaw, J. & Gibson, C., 2004. Building Ambidexterity into an Organization. Sloan
Management Review, 45, 4: 47-55.
• Cassiman, B. & Veugelers, R., 2006. In search of complementarity in the innovation strategy:
Internal R&D and external knowledge acquisition. Management Science, 52: 68-82
• Chandy, R.K., & Tellis, G.J., 1998. Organizing for Radical Product Innovation: The
Overlooked Role of Willingness to Cannibalize. Journal of Marketing Research, XXXV: 474-
487.
• Chesbrough, H., 2003. The Era of Open Innovation. MIT Sloan Management Review, spring:
35-41.
• Chesbrough, H., & Rosenbloom, R.S., 2000. The Role of the Business Model in Capturing
Value from Innovation: Evidence from Xerox Corporation’s Technology Spin-Off
Companies. Mimeo, Harvard Business School.
• Chesbrough, H.; Vanhaverbeke, W.,& West, J. (Eds.) 2006. Open Innovation: Researching a
New Paradigm. Oxford University Press, Oxford.
• Christensen, C.M., 1997. The Innovator’s Dilemma: When New Technologies Cause Great
Firms to Fail. Cambridge, MA: Harvard Business School Press.
• Christensen, C.M., & Overdorf, M., 2000. Meeting the Challenge of Disruptive Change.
Harvard Business Review, 78, 2: 66-76.
• Christensen, C.M.; Kaufman, S.P. & Shih, W.C., 2008. Innovation Killers: How Financial
Tools Destroy Your Capacity to Do New Things. Harvard Business Review, jan.: 98-105
• Cohen, W.M. & Levinthal, D.A., 1990. Absorptive Capacity: A New Perspective on Learning
and Innovation. Administrative Science Quarterly, 35, 1: 128-152.
• Dougherty, D. 1992. Interpretive Barriers to Successful Product Innovation in Large Firms.
Organization Science, 3, 2: 179-202.
• Garcia, R. & Calantone, R., 2002. A Critical Look at Technological Innovation Typology and
Innovativeness Terminology: a Literature Review. The Journal of Product Innovation
Management, 19: 110-132.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
50
• Garud, R. & Karn?e, P., 2001. Path Dependence and Creation. Mahwah, NJ: Laurence
Elbaum Associates.
• Gersick, C.J.G., 1991. Revolutionary Change Theories: A Multilevel Exploration of the
Punctuated Equilibrium Paradigm. The Academy of Management Review, 16, 1: 10-36.
• Green, G.G.; Gavin, M.B. & Aiman-Smith, L., 1995. Assessing a Multidimensional Measure
of Radical Technological Innovation. IEEE Transactions on Engineering Management, 42, 3:
203-214.
• Hannan, M.T., & Freeman, J., 1984. Structural Inertia and Organizational Change. American
Sociological Review, 49: 149-164.
• Henderson, R., 1993. Underinvestment and Incompetence as Responses to Radical Innovation:
Evidence from the Photolithographic Alignment Equipment Industry. The RAND Journal of
Economics, 24, 2: 248-270.
• Hill, C.W.L., & Rothaermel, F.T., 2003. The Performance of Incumbent Firms in the Face of
Radical Technological Innovation. Academy of Management Review, 28, 2: 257-274.
• Holland, J. H., 1975. Adaptation in Natural and Artificial Systems. Ann Arbor, MI: University
of Michigan Press.
• Huston, L. & Sakkab, N., 2006. Connect and Develop: Inside Procter and Gamble’s New
Model for Innovation. Harvard Business Review, 84, 3: 58-66.
• Jansen, J.J.P.; George, G.; Van den Bosch, F.A.J. & Volberda, H.W., 2008. Senior team
attributes and organizational amdibexterity: The moderating role of transformational
leadership. Journal of Management Studies, 45, 5: 982-1007.
• Leonard-Barton, D., 1990. A Dual Methodology for Case Studies: Synergistic Use of a
Longitudinal Single Site with Replicated Multiple Sites. Organization Science, 1, 3: 248-266.
• Leonard-Barton, D., 1992. Core Capabilities and Core Rigidities: A Paradox in Managing
New Product Development. Strategic Management Journal, 13: 111-125.
• Levinthal, D.A., & March, J.G., 1993. The Myopia of Learning. Strategic Management
Journal, 14: 95-112.
• March, J. G. 1991. Exploration and exploitation in organizational learning. Organization
Science, 2: 71-87.
• McDermott, C.M. & O’Connor, G.C., 2002. Managing Radical Innovation: An Overview of
Emergent Strategy Issues. The Journal of Product Innovation Management, 19: 424-438.
• Methé, D.; Swaminathan, A., & Mitchell, W., 1996. The underemphasized role of established
firms as the sources for major innovations. Industrial and Corporate Change, 5, 4: 1181-
1203.
• Nijssen, E.J.; Hillebrand, B., & Vermeulen, P.A.M., 2005. Unraveling Willingness to
Cannibalize: a Closer Look at the Barrier to Radical Innovation. Technovation, 25: 1400-
1409.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
51
• O’Connor, G.C.; Leifer, R.; Paulson, A.P. & Peters, L.P. 2008. Grabbing Lightning: Building
a Capability for Breakthrough Innovation. San Francisco: Jossey-Bass.
• O’Reilly, C. A., & Tushman, M. L. 2004. The ambidextrous organization. Harvard Business
Review, 82: 74-81.
• Phene, A.; Fladmoe-Lindquist, K. & Marsh, L. 2006. Breakthrough Innovations in the US
Biotechnology Industry: The Effects of Technological Space and Geographic Origin. Strategic
Management Journal, 27: 369-388.
• Reid, S.E. & De Brentani, U., 2004. The Fuzzy Front End of New Product Development for
Discontinuous Innovations: A Theoretical Model. The Journal of Product Innovation
Management, 21: 170-184.
• Rice, M.P.; Kelley, D.; Peters, L. & O’Connor, G.C., 2001. Radical Innovation: Triggering
Initiation of Opportunity Recognition and Evaluation. R&D Management, 31, 4: 409-420.
• Romanelli, E., & Tushman, M.L., 1994. Organizational Transformation as Punctuated
Equilibrium: An Empirical Test. The Academy of Management Journal, 37, 5:1141-1166.
• Rosenkopf, L. & Nerkar, A., 2001. Beyond Local Search: Boundary-spanning, Exploration,
and the Impact in the Optical Disk Industry. Strategic Management Journal, 22, 4: 287-306.
• Schumpeter, J.A., 1950. Capitalism, Socialism, and Democracy, 3
rd
edition. New York:
Harper & Row.
• Sloan, P., 2003. The Leader’s Guide to Lateral Thinking Skills: Powerful Problem-Solving
Techniques to Ignite Your Team’s Potential. London: Kogan Page.
• Song, X.M.; Thieme, R.J. & Xie, J., 1998. The Impact of Cross-functional Joint Involvement
Across Product Development Stages: an Exploratory Study. Journal of Product Innovation
Management, 14, 1: 35-47
• Teece, D.J., 1986. Profiting From Technological Innovation. Research Policy, 15, 6: 285-305.
• Tripsas, M. & Gavetti, G., 2000. Capabilities, Cognition, and Inertia: Evidence from Digital
Imaging. Strategic Management Journal, 21: 1147-1161.
• Utterback, J., 1994. Mastering the Dynamics of Innovation. Cambridge MA: Harvard
Business School Press.
• Utterback, J.M., & Abernathy, W.J., 1975. A Dynamic Model of Process and Product
Innovation. Omega, 3: 639-656.
• Wheelwright, S.C., & Clark, K.B., 1992. Revolutionizing Product Development: Quantum
Leaps in Speed, Efficiency, and Quality. New York: Free Press.
• Yin, R.K., 1981. The Case Study Crisis: Some answers. Administrative Science Quarterly, 26,
1: 58-65.
• Yin, R.K., 1994. Case Study Research: Design and Methods, 2
nd
edn. Sage Publications,
Newbury Park, CA.
Organizing for Exploration at a High Tech Firm
UNRESTRICTED
Master Thesis - Jaap Rosink
52
9 Appendix A - Overview of novel/emerging technologies
CONFIDENTIAL
doc_182847181.pdf