INTRODUCTION: BACK TO THE FUTURE?
“The challenge for established firms, we believe, is not either
to be well organized and act in unison or to be creative and
entrepreneurial. The real challenge, it would seem, is to be
able to live with the tensions generated by both modes of
action. This will require top management’s exploitation of
existing opportunities to the fullest (because only relatively
few will be available), the generation of entirely new
opportunities (because today’s success is no guarantee for
tomorrow), and the balancing of exploitation and
generation over time (because resources are limited).
Strategic management approaches will have to accomplish all
three concerns simultaneously and virtually continuously.”
(Inside Corporate Innovation, 1986: 191, emphasis added)
This quote from the Epilogue of Inside Corporate Innovation, formulated 30
years ago, unwittingly anticipated large streams of important academic research
that has built on James March’s distinction between “exploitation” and
“exploration” in organizational learning (1991) and on the revival and elaboration
of the idea of “ambidextrous” organizations (1976) by Michael Tushman and
Charles O’Reilly (1997).
This paper retrospectively reviews the book’s presentation of a grounded
substantive theory of internal corporate venturing (ICV) and a grounded formal
theory of corporate entrepreneurship. It also provides a brief discussion of how
these theoretical contributions can be linked to several other prominent concepts
in the strategic management and organization theory literatures. It concludes with
some reflections on its continued relevance for further theory development and
SUBSTANTIVE GROUNDED THEORY OF INTERNAL CORPORATE VENTURING
The genesis of Inside Corporate Innovation was my doctoral dissertation
research at Columbia Business School in the mid-to-late 1970s (Burgelman,
1980). Len Sayles was my extremely supportive thesis advisor (and co-author of
Inside Corporate Innovation), and Mike Tushman a very helpful dissertation
committee member. The dissertation research used quasi-longitudinal field
research and the method of grounded theorizing (Glaser and Strauss, 1967) to
study the internal corporate venturing process in a large diversified major firm.
The ICV research involved studying multiple cases of succeeding and
failing internal corporate ventures in different stages of development. It traced the
history of each of these ventures and followed their further development in real
time over a period of almost a year. This part of the research used Sayles’s
(1964) applied anthropological research approach to study the evolving dynamic
working relationships between corporate R & D, Business Research and Business
Development managers throughout the entire ICV process, from an idea in
exploratory R & D to a multi-product new business. This produced a descriptive
model of the “Stages in ICV Development: ” Conceptualization (Stage 1), Pre-Venture (Stage 2), Entrepreneurial (Stage 3) and Organizational (Stage 4), and
how these stages transformed into each other.
Having decided, after the first interviews, to focus the research on strategy-making in the ICV process, I used Bower’s (1970) process model approach to
document how the simultaneous as well as sequential strategic activities of
actors situated at multiple levels in a complex organizational system - a new
venture division (NVD) in a large corporation - helped shape ICV strategy-making
and the dynamics of the NVD over time.
The combination of the process model and applied anthropological
research method produced insight in patterns of “success breeding success” and
“failure breeding failure,” and resulted in the creation of a new set of categories of
interlocking key leadership activities ( “technical and need linking,” “product
championing,” “strategic forcing,” “strategic building,” “organizational
championing,” “delineating,” “retroactive rationalizing,” “selecting,” “structuring”) of
executives of different levels in the organization that became building blocks in
my attempt to construct a process model of ICV in the tradition of the process
model of Bower and his doctoral students at the Harvard Business School (Bower
and Doz, 1977).
Constructing the process model of ICV, however, required resolving the
anomaly that all the newly found categories of key activities associated with ICV
could not be mapped onto Bower’s process model of strategic capital investment.
Resolving this anomaly required extending the received process model to
encompass “strategic context determination.” Strategic context determination was
the part of the corporate strategy-making process that became activated by
senior executives overseeing ICV project-level initiatives (through strategic
building, organizational championing, and delineating) that were trying to
convince top management to change the existing corporate strategy (through
retroactive rationalization) going forward (Burgelman, 1983b).
The ICV study also developed additional insights into the use of the New
Venture Division (NVD) as an organization design for corporate entrepreneurship.
It examined strategic leadership challenges in the relations between Corporate
R & D management and Business Research and Business Development
management within the NVD. It also studied the causes of frictions in the upward
relationships of the NVD with corporate-level management and in the lateral
relations with mainstream division-level management (Burgelman, 1995).
FORMAL GROUNDED THEORY OF THE STRATEGY-MAKING PROCESS
In the course of finishing the doctoral dissertation, I began to realize that
the ICV research findings also produced an anomaly in relation to Chandler’s
(1962) proposition that “structure follows strategy: ” I had found that the creation
of a New Venture Division was, at least in part, a corporate-level structural
response to the company having a number of new venture initiatives dispersed in
different divisions before top management had articulated a deliberate corporate-level diversification strategy. This finding led to postulating the existence of
autonomous strategic initiatives (not driven by the existing corporate strategy) in
parallel with induced strategic initiatives (driven by the existing corporate
strategy) and resulted in developing an evolutionary framework of the strategy-making process (Burgelman, 1983a) in terms of variation-selection-retention
processes (Campbell, 1969; Weick, 1979). This framework offered the possibility
to integrate Chandler’s (1962) insights into the role of top management in the
relationship between strategy and structure (consistent with the induced strategy
process) with Penrose’s (1959) insights into the role of entrepreneurial action in
the growth of the firm (consistent with the autonomous strategy process). It also
offered the opportunity to integrate corporate entrepreneurship with strategic
management (Burgelman, 1983c).
RELATED CONCEPTS IN STRATEGIC MANAGEMENT AND ORGANIZATION THEORY
EMERGENT AND DELIBERATE STRATEGY
The induced/autonomous strategy processes framework can be linked to
Mintzberg’s (1978) landmark framework of deliberate, realized, emergent and
unrealized strategies. Induced and deliberate strategies are similar, but the
induced strategy process provides more detail on what is involved in getting the
organization to actually implement deliberate strategy. The relationship between
autonomous strategic initiatives and emergent strategy is more complicated.
Autonomous strategic behavior usually involves deliberate actions taken by
leaders below top management. The deliberate actions taken by these leaders
help develop new competencies and help create a new strategic position that
may open up a new business opportunity for the corporation. A strategy which is
emergent at the level of the corporation thus often has its roots in autonomous
strategic actions on the part of leaders at lower levels in the corporation.
However, at the time an autonomous strategic initiative “emerges,” its relationship
to the company-level strategy is indeterminate; that is, it is not clear whether top
management should integrate the autonomous initiative into the company-level
strategy going forward. Strategic context determination serves as a discovery
process involving senior executives to resolve the indeterminacy (one way or the
other) of the relationship between autonomous strategic behavior and company-level emergent strategy.
Interestingly, more than thirty years after the introduction of the induced/
autonomous strategy processes, Mirabeau and Maguire (2014) in their field study
of a large telecommunications company have succeeded in showing how
successful autonomous strategic behavior forms the basis for emergent strategy,
and they also identify “ephemeral” (non-successful and disappearing)
autonomous strategic behavior as a parallel concept to unrealized strategy.
EXPLORATION AND EXPLOITATION IN ORGANIZATIONAL LEARNING
The induced/autonomous strategy processes framework can also be linked
to March’s (1991) seminal paper on exploration and exploitation in organizational
learning. The autonomous strategy process dissects exploration into autonomous
strategic initiatives and the process of strategic context determination. The latter
serves to select viable autonomous initiatives and link them to the corporate
strategy thereby amending it. The autonomous strategy process thus goes
beyond exploration. It is also concerned with turning the results of exploration into
new exploitation opportunities.
Tushman and O’Reilly (1997) propose that ambidextrous organizations are
designed to handle both incremental and revolutionary innovation. The idea is
closely related to the three strategic management challenges derived from the
framework of induced and autonomous strategy processes, mentioned earlier,
that are highlighted in the Epilogue of Inside Corporate Innovation. Yet there are
two important differences. First, induced and autonomous initiatives do not
necessarily map onto incremental and radical technological change. Change in
the induced strategy process, while “incremental,” can be very large. For
instance, developing a new microprocessor is incremental for Intel but involves
hundreds of millions of dollars in development costs and billions in manufacturing
investments. In the induced strategy process, incremental simply means change
that is well understood – doing more of what the company knows to do well.
Change through the autonomous process, on the other hand, while “radical” is
initially usually rather small. However, it always involves doing things that are not
familiar to the company – doing what it is not sure it can do well. Second, change
through the autonomous strategy process usually comes about fortuitously and
unexpectedly, and senior and top management have initially no clear
understanding of its strategic importance for the company and how it relates to
the company’s distinctive competencies.
The ICV research indicated that resolving this indeterminacy is the most
difficult challenge facing autonomous strategic initiatives, and by implication also
facing radical innovation in established companies. This highlights again the
importance of the strategic context determination process. Also, how to balance
strategic investment in incremental innovation (through the induced strategy
process) and radical innovation (through the autonomous strategy process) over
time remains a key top management task that all established companies that
aspire to be ambidextrous unavoidably face.
ORGANIZATIONAL ECOLOGY AND EVOLUTION
The induced-autonomous strategy processes framework suggested that a
large, complex organization can be viewed as an ecological system within which
induced and autonomous strategic initiatives compete for the organization’s
resources in patterned ways that are consistent with the variation-selection-retention paradigm of evolutionary organization theory (Campbell, 1960; Weick,
1979). While not pursued, it provided the basis for suggesting in later work
(Burgelman, 1991) that the intraorganizational ecology of strategy-making could
be fruitfully viewed as an additional level in a nested hierarchy of ecological
systems (Hannan and Freeman, 1977; 1984).
Post-dissertation work that examined the links between strategy-making
and evolutionary theory also anticipated the development of a capabilitiesbased
perspective in strategic management (Burgelman, 1986). This is also briefly
elaborated in the Epilogue of Inside Corporate Innovation, by suggesting that the
further development of the theory of corporate entrepreneurship “(…) will be
grounded in increased understanding of the evolutionary processes of
organizational learning.” And, that in these processes entrepreneurial individuals
at the operational and middle levels will play an important role because “(…) such
individuals elaborate the organization’s capabilities and enact the new
opportunities that are associated with the elaboration efforts.” (1986: 190).
STRATEGY-MAKING AND COMPLEXITY THEORY
Ideas from complexity theory have become viewed as providing a useful
perspective in organization theory and strategic management. Ideas of
deterministic chaos concern organizations that experience counteracting forces
that produce nonlinear dynamics. Some forces push the organization toward
stability and order; other forces push the system toward instability and disorder.
In 1981, I stumbled onto Belgian Chemistry Nobel Prize winner Ilya Prigogine’s
book (1980) that argued for moving research in the physical sciences from
phenomena related to “being” to phenomena related to “becoming” and
highlighted the importance of innovations and mutations that appear
stochastically and get incorporated into a system’s deterministic relations and
thereby secure its continued evolution. It seemed immediately clear to me that
the induced/autonomous strategy processes framework that views strategy
making as the adaptive organizational capability that balances variation-reduction
(induced) and variation-increasing (autonomous) processes at any given time
and over time could be related to Prigogine’s perspective. I briefly incorporated
this parallel view in the paper that links corporate entrepreneurship and strategic
management into one conceptual framework (Burgelman, 1983c).
The punctuated equilibrium view of company evolution posits that
organizations evolve through long periods of incremental change punctuated by
discontinuous, frame-breaking change. While there are many examples of
sudden radical changes, punctuated equilibrium views beg the question of where
these sudden radical changes come from. Truly exogenous shocks such as large
meteorites hitting the earth and destroying existing ecosystems are always a
possibility but fortunately a remote one. Many radical changes – technological or
otherwise – are the cumulative result of continuous small changes over a long
period of time. Sometimes these changes originate in the company’s autonomous
strategy process and sometimes outside of the company altogether. Often they
happen inside and outside simultaneously. Companies always want to spot such
changes sooner rather than later. The introduction of intra-company variation,
selection, retention and competition processes to study strategy making provides
a tool for identifying the underlying, more continuous and finer grained strategic
leadership activities that eventually, through sheer accumulation, cause lumpy
radical strategic change.
IMPLICATIONS AND CONCLUSIONS
The substantive grounded theory of ICV and the formal grounded theory of
the strategy-making process and the role of corporate entrepreneurship
presented in an integrated fashion in Inside Corporate Innovation have suggested
a new way to think about the role of strategy-making in firm evolution. For
instance, the Bower-Burgelman process model of strategic resource allocation
has become part of received knowledge in the strategy field (Mintzberg,
Ahslstrand and Lampel, 1998). Looking forward, the recent research by Mirabeau
and Maguire (2014) has provided perhaps a first step in further examining the
different types of strategic behavior in large, complex organizations that drives
the four strategy categories identified by Mintzberg (1978). Further research on
how the types of leadership behaviors and dynamic managerial relationships in
the Sayles/Mintzberg tradition, and exemplified in the ICV study, give shape to
what is called “dynamic capabilities” (e.g., Teece, 2013) would also seem to be
potentially fruitful, both for theory development and for managerial practice.
With respect to managerial practice, Inside Corporate Innovation has also
provided insights into a new approach for strategically managing the ICV
process (Burgelman, 1984a) and for examining the appropriateness and
effectiveness of various alternative designs for corporate entrepreneurship as a
function of “strategic importance” and “operational relatedness” (Burgelman,
1984b). This made it possible to derive the three key strategic leadership
challenges – exploitation of existing opportunities, generating new opportunities,
and balancing exploitation and generation over time – listed in the quote from the
Epilogue that opens this retrospective review of Inside Corporate Innovation.
More than thirty years later, I believe that the extensive literatures about
exploitation/exploration and ambidexterity clearly support the proposition that the
three strategic leadership challenges derived from the substantive and formal
grounded theory presented in Inside Corporate Innovation remain as salient for
established companies as they were then. The strategic process and
organization design tools provided for augmenting established companies’
corporate entrepreneurial capability also remain highly relevant.
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Pour citer cet article
reviewed by Burgelman Robert A., « Robert A. BURGELMAN & Leonard R. SAYLES (1986), Inside Corporate Innovation: Strategy, Structure and Managerial Skills. Paperback: 240 pages Publisher: Free Press (1986) Language: English ISBN: 978-0029043417 », M@n@gement, 2/2015 (Vol. 18), p. 179-185.
URL : http://www.cairn.info/revue-management-2015-2-page-179.htm
DOI : 10.3917/mana.182.0179