MGCR 222: Introduction

to Organizational
Behaviour

Session 3: Organizing for

innovation

Simon Blanchette – Fall

2021
 Learning
objectives/Agenda

Define Discuss Introduce Evaluate Recognize

organizational two forms of a framework how we use that
learning & organizational for studying organizational innovation is
distinguish it learning: organizational design to often a
from exploration design encourage problem of
individual and different motivation
learning exploitation types of
learning

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 In ovation can happen in two major ways:
• Firms must continually develop and
deepen their sources of competitive
advantage to preempt imitation
• Firms may want to change their

Exploration strategies to pursue new forms of

competitive advantage

and This implies two types of organizational

learning:

Exploitation
• Exploitation: Getting better at what we
already do
• Exploration: Discovering new things to
You won’t have a business if you’re making products that do
aren’t relevant i.e. cable but not HD. You want to innovate
but up to what extent?

Certain industries don’t need to be explored all the time

i.e. washer and dryer.
These are best thought of as lying on a
continuum.
Exploration: looking for creative, innovative products.

Exploitation blackberry is the best at physical keyboards.

You don’t have to sacrifice one to have the other.

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 Apple - no one saw a need for the ipad at first

Many people use ipad for replacement as a laptop

You need to be an exploring organization to find solutions to things people don’t know they want.

Exploration and Exploitation

Organizational Resources and
Attention Devoted to Different
Phases of Organizational
Retention Learning
Resources

Variation
Selection • Sampling and experimentation
to discover possibilities
Selection
• Discerning wanted solutions &
Variation discovering product-market fit
Retention
• Transfer and grow business
repeatedly and reliably
Exploration Exploitation
 • Explorers
– Design tends to emphasize variation
– Design puts less emphasis on
coordination between units, allows

Org’l for less control, encourages non-

consensus thinking, and tolerates
slack

Learning • Exploiters
– Design tends to emphasize selection

and Org’l
and retention, often at the cost of
variation
– Design often optimizes coordination

Design between units, particularly where

interdependencies matter, and tries
to minimize slack
We don’t want to centralize everything

Accounting is not the place for creativity

• Successful learners of both types worry
Give control to where things are happening; want to encourage unconventional
about retention, though they retain
and diverse thinking as you want people to bring you ideas and not just agree different things
with you

Tolerate slack; procrastination and incubation - actively working and thinking

Exploitation: you don’t want a groundbreaking idea but rather something that
will be successful in the market. Minimize slack and minimize risk.

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 3M was a classic explorer, as
Evaluating a evidenced by the emphasis of
its organizational design on
Learning mechanisms that promoted
variation and retention, and its
Organization: 3M outsourcing of selection to the
market.
Variation: who is creative? who can generate ideas and change
the way things are done? units allowing for people to experiment
and work on different products.

Failure is celebrated.

People Structure Routines Culture

Variation Hire and promote on Small units Bootlegging Scientific prestige
innovation Subsidiaries Carlton Society War stories of
Organic growth % new required accidental successes
Cluster by tech.
Selection Evaluation based on Market performance “Make a little, sell a Failure tolerated as
ultimate market metrics little” part of a learning
performance process

Retention Global horizontal Tech. Council “Science Fair” “Product is yours, tech
career development Senators Seminars is 3M’s”
Dual career tracks Conferences

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 Leading
Exploration
• 2019: Exploration is the
“received wisdom"
– Modern firms, including
Google, often imitate
aspects of the 3M example What do companies like facebook and apple do when they want innovation?
They acquire new companies.
in an effort to generate Most organizations try to rid you of procrastination because it looks inefficient
innovations.
– The consensus view
worldwide is that all firms
should be able to innovate
in this way, event firms that
might be better off
exploiting.
• Yet great explorers are rare.
Why?

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 1. “Variability” often looks like foolishness
– Non-consensus ideas are the source of
folly and genius.
– Thus, difficult to predict or defend genius
before proven.
Why is 2. Hard to create motivation for exploration
– Benefits of exploration are longer-term

Exploration
and riskier
3. Many leaders say they value exploration,
while they reward exploitation and
penalize failure

Hard? 4. Investors may prefer to have returns paid

to them
– Example: Shareholder activists vs.
retained earnings for R&D
– Depends on leadership making their
case for the logic of exploration

In management it’s harder to predict or defend before proven

Skills CEOs say they want: creativity is always in the top list

You need to convince executives to invest in exploration

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Slack Today, Profits Tomorrow?
Innovating in the future often requires holding some resources
in reserve today. Slack today: you get decent ideas.
not bad ideas but not great ones
Slack today: having time and resources to explore - the luxury to fail i.e. slack

either.

ex: looking for a new idea with a 2

Slack
week deadline. okay ideas.
Payoff
result: nokia phone. not bad ideas

today but not the best ideas.

tomorrow
Quality

Quality
Payoff tmrw: you get the idea when
you let people be creative.

ex: you give employees a chance to

make creative ideas and give them
the time they need to revolutionize
ideas and create the best new
product for the market - no timeline.

result: iphone

Low Cost Low Cost

Period 1, Market 1 Period 2, Market 1 9

 Exploration will lead to competitive advantage

• Exploratory innovation creates new

sources of advantage
– If successful, these grow and mature
into exploitation businesses
• To reap the rewards of exploration,
The firms end up also creating an
organizational design around
Sustainability exploitation, too
– Many firms eventually develop
of Exploration parallel divisions and often separate
managers for the exploitation and
exploration functions
– This is also why so many firms end
up buying new ideas instead of
making them

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11
 What can other organizations do to be like 3M?
- they would need to change their entire culture so it
would be very challenging
- people, structure, etc that 3m had which catered
creativity i.e looking for entrepreneurship
- companies can launch a new marketing campaign but it
takes a lot of effort to decide if you won’t have a super
structured advertising plan

WHAT DO
Open YOU KNOW
Question
ABOUT
12

3M?
DISCUSSION QUESTION: how has 3M managed to remain so
innovative over the last 100 years?

- they created needs that weren’t already there

- they were very curious and rewarded those who explored it
- science fair allowed colleagues to bounce ideas off each other
- they invested in technology for employees to explore their
interests
- different departments got to interact with each other
- people were encouraged to be creative and failure was not
- the value shared knowledge
- multiple company restructures i.e. splitting up departments

They are everywhere because they’ve entered so many

different areas of the office product industry

They were able to sustain market power to constant

restructuring
 Next Class

13

• Session 4: Read
chapter 2 and do
the quiz!
• "Tell me about
yourself"