WINNING THROUGH INNOVATION MICHAEL L. TUSHMAN (GRADUATE SCHOOL OF BUSNESS, ‘COLUMBIA UnIERSTTY CHARLES A. O'REILLY Ill (GRADUATE SCHOOL oF BUSNESS, ‘STAREORD UNVERSIY Hanvano Business ScHOOL PaessDEFINING PROBLEMS AND Coli ze) arenas eMNPWeNceneess FOR MORE THAN A CENTURY, THE INDUSTRIAL GASES Divison of BOC, age Bish conglomerate, hd joined the rach of infin progress serving the Brash Emp. Is 35,000 people workin 15 cours to produce sd deliver nye, nope, bli, dtr ata ase vaity of ‘srs ging fom fod oe! semicon, TROC Gases aiid tea cours nti 193. The, sup break wii teins, C.K, Chow am aggressive, Hong Kong-based eaepenear sd head of BOCs North Pacific pion, was ponte #CED Chom knew that BOC Gases fazed ‘tof enering problems Sevea afi ky global customers ‘wee complaining about geting mixed messige nd cotusing ‘ports thout prices products andichloge fom he aris feelons. Those caomers were demanding gota sltoos il BOC wasnt on provitingindepedetoeale=ponses. Chow alo believed tat BOC was beginning all being tecoologicaly With competes fori brad with Bld new roduc and process, BOC seme obeinroduing ony acl(ore rouse wo orton: innovaions, In is view th fir’ sity to shape ecology {nudeveop gal ianoatons wa pooe, While Chow sa ase ‘of opprntis fr BOC, he faced se of power regan managers ho ware que oot with BOC's caren pecer- Iunce Chow ew ht without he eioal manages’ energy there would be no change. ‘Manaceniat PROBLEM SOLVING: PROBLEM OR OPPORTUNITY DEFINITION. ‘Whats at BOC or in he U.S. Nav, ifn xgcization faces to thea, nei and the ste quo will undemine pede itnovaton. fn cont, giana cies ten igs ub- stil imovaion and change Allo fequnty th neesity tochange i born of tsi conions for example, TBM and the Swiss watchmakers) The mot succes ims however ‘dost waitor cies osc rate ie mangers ay, "If We fort move now, we ml bein ove inthe ear ar." They frosty gece cries and eppotnites by cresting. and solving problems "We pow focus ca he fal ep in manage problem salvingpeohlem sl opportu Wesieaton Jats phys ian int focus ei patients presenting symsoms, manag fr must deity tie erganzaton’s teal problems. This ‘ae, hey can then dignoe the canes ofthese problems an ints tk honors thon vl avoiding wnexpscted tide fos, Silty once opposed. mana ‘rscananalyzethose gets be cet organization dt il [tin he way of achieving the wits piso. How can managers eter what ether mos porta problems aropprtuniie? Fin manager and hirer em) Dedstote earabutthe rag, objective, ad vison of he tt Sach cary iste bedrock of managing innovation and ‘thnge, Only when sratep, objectives, and vision we dna fan managers move on fan honest appa ef te cues pfomane of tsir rgnization. The comparison between ‘xpi performance (seen stacey. objectives, and isin) fd actual perormance equies manages to sce the pero: Iman of tir organization areal io how they hope, Imagine or wish io be. The diference between expectations sedate performance conte the performance pp th & ‘manage ad is oer eam mis diagnose andre ‘Staegy isnot esrved fr senor evel Iisa cial prt of every manager's job, Kaowing carly how a esuizaton ‘or unt intr to compete an what i objetves and apm tins ao theft step ia disciplined problem definition and obi vig If ther is any arbi rack of ear in thisprocess managers wl nd ite manage cfetvely for ier dy orto, isthe ol cliche hat unless you re clear about where you sre pong any decon ie In our expren, manages have agent desl of icaty snderandng cal problems and opparunies.Confoated ‘the sense presi nd comple of dy today bos ss, opeaing managers fequely lack he ine ad distance receasiry 10 define ebjetvly the problons they toe. Yet ‘vith ating cary in problem Seton, manages my {ake somigly efecive stem aeons hn Ft fal © ‘ies AtBOC, foexanpe, util Chow ad histeamely and gee on the inporuce of global customers and ecaclogy develope, manager ateton wil omic o focus e loc ines. ‘Wie perormance pobre and irmodte ists, ‘pporinities re potent fre probit egaizaion doer not ct oy Excellent mangers ar those whore its have no perfomance gps today but ae abe wo define fue eppornties to energize he organiation now. Contry 9" itsnocbvolen don't fe.” we suggest that ithe egzization isnot broken, consider breaking itby erating opprtnty esp. LE Sime’ ify are in part esas he avy Ha 90 perfomance sap——st was aleady te met acurae nay inthe [emuonica ve 6odd. ook edly Roosvel to perceive that ifthe myc rx iplewentconnacus aim gunfire competi di it wou be in woube in the fate. Defining oppor gape inh fic of t's sucess aha se ‘hesotions considered, Every manage contons similares ‘vey dyeing which ote many problems or opportu Ss may affect short-serm performance Unles the manages ‘lea abou te diflewce bec exactions ad otconss, problems or oppornits are likely tobe een asmbiguoes or Pola, and anovation an change we, ini ied LUNDERSTANOING STRATEGIC CONTEXT Bt how ae decisis made about win state toot which bjectvesto shot for and wha wile a nit giding vison? Although here are 20 easy aes, te Key factor he ‘context which mange ands or tea determin their Sty objectives and Vso: (1th evitoameatin which he ‘et operates, (2) th resarces sail the maser and (3) the hitler ofthe organiaton or nt se Fig 3.1), Under. Standing tes opportuni nd cosas elp a manager fexnult eas eprtons acl Sections fri ore nit? Environment CConpermve: In deciding ose, cbectves, a vison, Imaniers mast fit anesthe competitive oppornites and ‘hea facing heir These nla enies in andes rom tor?) andthe mate ofthe congestive rivalry (es, sevice, ne produ), Chow and his tea, for iste, enti key cerpettive vary toh frm exising instal gs pliers Mahe ce ——_—_—_—————— (Cie Liguide and Prana) aswell 6 fom new supplies of ‘nisi gases. Thos got players werecompetingonservie, product quai an innovation, scat PouncaL Soci. Managers also need 1o consider ow lea, pita and soil factors fect thei by to emt. This requires tht they understand the competve consequences of regulation, dergulion, and pvaization st ‘ella ecological esac changing customer demograpics, Depending om the anit or onpniaton, his acne my include so actors asthe pening up of rope in 1992, he rassage of the North American Free Trade Agreement, de hoshment of apart in South Aa, the eatin of (Germany, ors shit in goverment Hong Kon in 1997 At(_ erm roms no rome ROC forexample th oping ofthe Cha directions ‘nthe nau of competion a Europe even a thee of apa i funda changed ther onion in South Aca, “Tecsmotoctea. Act indsts, rom high low echo 043 fr seve nd pros, ecological change can poe & profound compe opprtanty ordi. Technological sis {hd the evolton of indy standards can rpily change a roc clase (recal einderes Bs Ta 1). Wher in information services, baking, akiminsm, or stomobie anaacuring ifsintecnology occas: competition oropen ‘periods of frment th ae often teste otra fis Unvofer oppor or new errant Given the expense aa Complexity of tosnoogies and the nature of teckuoogcal ‘ange, noone fm can conta the pace and dietion of tecnologia change. Yet anges mi erick tchnoloical typos and tress a they make sae deisons For ‘ample st BOC, Chow ands team ho comse te ingact tf poncvorenic ps suppl. The indostal aes business ‘areal dominated by enogeni sepa cee, bat ‘Fnoneryopeic ecology were perfected cold wasn, the ay ‘customer Dewan, Folly in ane of ttl quliy ange Inet, managers ned tourna er ‘stra evolving erm: For example, Chow's eam 1 BOC obyerved tht te and more of her astm: were ltl nd wee ntepatepa supply solutions, as opposed {BOCs ran oun county sluts. Resources Every managers lo aprecieteullange of esau financial ectnolgial, repens, and personne—avaable tothe organi, ad relist ser theses and eaknestes compared o those of mpi, Managers with substi Fnacia, tchalopel and ham rescues have enter sapien anranagers wiliniedresoures ‘dean ata wealthy, pia call, fo example, ike 0 have more stag ois than a dean of ply spared History ‘Te fnal context ctor a manager mast be tentve isis cer unit’ nig history. The bev of ay orgtization ‘ody. t eating efecto pees and precedes, Organizational istry can ave power, motos effects ot presen behaves Magers odo undertand heir a's, how twasfounded roma hk ever cre ta ape ‘eevoluon and how te unit as bea managed This istry {Soften ree in cont cle, process, src, a competencies, At BOC, Chow item gil reine hat ‘hey would be unable ode wth costar requ fr mera gas sluins unless they were able get beyond 'BOC'S his lepsy of independent eons, The oer and ‘moe dings the ogriation th moe istry eds tote considered. Ines of novation and change, ogni ional sty ten ald rn wtp is pat ‘Managers mist slo understand who thei predecesor was ad wha is or her epay i, what hei processors id and ‘id ot do, These prio ations pe toy opportunis an Conenins, I these precedents are ignored, anges rn the risk falling iti o phos of eae pst. Fo example, a 'BOC, Chom uentoodthat hispredocesestnk lisse fie aypoach 16 managing BOC a a fleesion of atonnmous ‘snes units. The eionaldeioshadoperated ts mous enzeqreneurs for decades, With this Knowledge Chow ‘ld aesens the apts Of BOC's sory tat woul impede ‘eed chang.