Beruflich Dokumente
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6472, 2009
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The Inuence of
Leadership on Innovation Processes
and Activities
ADEGOKE OKE
NATASHA MUNSHI
INTRODUCTION
In the August 1, 2005 issue, Business Week magazine
reported that due to the emergence of low cost economies of Eastern Europe and Asia as the preferred
locations for sourcing knowledge related activities
(such as digitized analytic work and manufacturing),
the focus of U.S. corporations is shifting from the
knowledge economy to what is being referred to as
the creativity economy. As a result of the increasing
commoditization of knowledge, the creativity economy represents a change in paradigm where the
focus of competition will be on creativity, imagination
and innovation. Leading through innovation in a creativity economy appears to be the only way (at least for
the moment) that U.S. corporations and western corporations as a whole can gain and sustain competitive
advantage. In a survey of over 900 senior executives by
Boston Consulting Group Inc, innovation was identied as key to driving top-line revenue. This is evidenced in how different types of innovations have
transformed many corporations. For example, the success of the BlackBerry transformed an otherwise
unknown company, Research in Motion. Apple Computer Inc.s iPod, a huge success that integrates technological, business model and branding innovations,
became a high revenue earner for Apple. Another
example is the process innovation of Southwest
Airlines Co. that has enabled it to become a highly
successful low cost airline. Procter & Gamble Co.s
focus has been on design innovation, which has helped
it to transform itself and outperform its industry
competitors.
Innovation can be seen as representing a change in
the status quo and has been dened as involving the
discovery of new things and the commercialization of
such discoveries. To be innovative, it is not sufcient to
be creative and come up with new possibilities and
ideas, implementation is a key aspect of the innovation
process. Innovation has also been categorized as the
discovery of something completely new (often
referred to as radical innovations) and an improvement effort of something that already exists (often
referred to as incremental innovations). James March
referred to the two categories as the exploration of
FRED O. WALUMBWA
new possibilities and the exploitation of old certainties, respectively. Organizations are constantly
required to monitor both their exploitative and
exploratory activities in increasingly uncertain and
competitive environments.
Having the requisite technological or R&D capabilities and complementary assets such as marketing and distribution capabilities are key enablers of
innovation. But of paramount importance is having
the right type of leadership to drive the innovation
process efciently and effectively. Unique leadership
capabilities are the hallmark of rms that are able to
manage different types of innovative activities successfully. Leaders like A.G. Laey, Procter & Gambles
chief executive ofcer (CEO); J.R. Immelt, General
Electric Co.s CEO; Steve Jobs of Apple, and Richard
Branson of Virgin Group Ltd. are constantly pushing
their organizations to remain at the forefront of
innovation. Immelt noted the role of leadership in
fostering innovation at GE as the ability to have the
courage to fund new ideas, lead teams to discover
better ideas, and lead people to take more educated
risks. In the automotive industry, for instance, we
see rms currently juggling societal demands for
greener and more fuel-efcient cars with rising costs
of managing R&D projects. Such types of challenges
require leaders to skilfully transform their organizations into innovative ones. One example of a leader
doing just that is Ratan Tata, the chairman of both the
Tata Group and Tata Motors since 1993. Tata recently
made news headlines by acquiring U.K. based Jaguar
and Landrover from Ford Motor Co. in the U.S. What
makes this even more newsworthy is that it marks
another foray into international waters by the Indiabased Tata in an industry that is dominated by western and Japanese carmakers. This high prole sale
was well received by the U.K. stakeholder groups who
have perceived Tatas style as nurturing rather than
cost cutting. In public, Tata comes across as being
quite understated. Tata is widely admired and well
respected in the Indian and international business
circles and the effect of his leadership style on innovation is evident in the companys successes. For
example, Tatas recent acquisitions come on the heels
of his launch of the Tata Nano the worlds cheapest
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resources. His direction and focus led to the development of the Betamax. Moreover, leaders not only serve
as behavioral role models for innovative ideas, they
also serve as important means for enhancing innovative behaviors and modifying attitudes that are benecial to innovative activities. Thus, the importance of
leadership in building an innovative organization is
not in question. What is less clear, however, is the
process by which leadership relates to or affects innovation processes such as creativity and implementation and innovation activities such as exploration and
exploitation.
One view of how leadership relates to innovation is
to examine the inuence of leaders on innovation
through creating an organizational context or an
environment where innovation thrives. As we discussed earlier, innovation processes can be said to
consist of different stages. The early stages of the
innovation process are typically where creative activities occur (e.g., idea generation, product/concept
design, etc.). Creativity is an important aspect of
innovation, and it has been dened as a product of
imagination. It is where the process of innovation
begins. It may be difcult or perhaps impossible for
a leader to directly improve the creativity of his/her
followers. In special forums undertaken by the
authors to discuss the impact of leadership on innovation, industry leaders and executives observed that
by providing appropriate stimuli including an
appropriate environment and a culture where creativity thrives a leader may be able to positively
inuence the creativity of his/her followers and hence
the innovative capability of the organization. A leaders role in the later stages of innovation, on the other
hand, may involve the management of processes and
systems that are required to efciently transform
design ideas into reality.
It will be recalled that we dened innovative activities as either exploratory (creation of something that is
completely new or radical in nature) or exploitative
(rening and improving for example, existing products
and services resulting in an incremental outcome).
Because of the strategic imperative of innovation, it
could be argued that both exploratory and exploitative
activities would be inuenced by different leadership
styles.
In order to establish the link between leadership
and innovation processes and activities, we draw
from the observations of industry leaders in special
forums that were formed to address two important
questions what leadership styles would be most
appropriate for creativity and implementation innovation processes and exploration and exploitation
innovation activities in organizations? What organization factors moderate the relationship or link specic leadership styles to innovation processes and
activities?
68 ORGANIZATIONAL DYNAMICS
Randall Stross ascribed the inability of the great inventor Thomas Edison to achieve as much as he could have
done to the fact that he did not nish or commercially
develop many of the inventions that he made. While
Thomas Edison clearly had the skill set of a great
inventor, perhaps what he lacked was the transactional leadership guidance required to implement
and develop his brilliant ideas.
THE INFLUENCE OF TRANSACTIONAL
LEADERSHIP ON INNOVATION
IMPLEMENTATION PROCESS
When the innovation process involves, for example,
the implementation and development of a product
concept, the need for blue sky thinking is minimized
and the need for appropriate systems, processes and
structures to achieve efciency is required. The transactional form of leadership through its focus on
management, clear structures, formal systems, reward
and discipline is likely to be more effective in the
implementation stage of an innovation than transformational leadership.
In the AXA example described above, John ONeil
also displayed some elements of transactional leadership by establishing a position of innovation manager.
The innovation manager was responsible for putting
appropriate formal processes, structures, measures
and systems in place to ensure that the output from
the creative innovation activity of the MadHouse program was efciently translated into commercially
viable new products and services. For example, MadHouse teams were required to meet for only two
months. During that time, they were to come up with
two new ideas and develop a comprehensive business
plan for presentation to a committee responsible for
selecting the ideas to take forward to the implementation stage. Shell Oil Co.s GameChanger program,
which encourages, supports and funds creative and
radical game-changing initiatives, is another good
example of how transactional leadership encourages
formal processes that ensure implementation. The
GameChanger process involves a series of gates
(including panel reviews, action lab, presentation to
the committee of managing directors) that must be
passed before an idea is funded. Such processes ensure
discipline, focus, timeliness, and reduce the risk of
failure of new ideas.
THE INFLUENCE OF TRANSACTIONAL
LEADERSHIP ON EXPLOITATIVE
INNOVATION ACTIVITIES
We argue that the transactional form of leadership will
be appropriate for exploitative innovation activities
that involve rening and improving on existing products and services, due to minimal risk-taking such
69
MANAGERIAL IMPLICATIONS
This paper has implications for the leadership of innovation efforts at different levels within an organization. An awareness of the need to utilize different
leadership styles to lead different innovation processes and activities is important. For example, a
transformational leader must recognize the need to
focus more on the transactional aspect of leadership
style than the transformational leadership style to
direct innovation efforts in the implementation stage.
The study also has implications for training, job allocation and recruitment and selection in organizations.
A transformational leader that is expected to lead
innovation efforts at the implementation stage can
be exposed to or trained in the transactional leadership style. Where this is not practicable, the transformational leader may be supported by a leader who has
more of the transactional leadership skills. As James
March put it, organizations must strive to achieve a
balance between exploratory and exploitative innovation activities. Similarly, a right mix of transformational and transactional leadership is required in
organizations to achieve successful outcomes in innovation processes and activities.
71
SELECTED BIBLIOGRAPHY
This paper builds on an earlier work by N. Munshi, A.
Oke, M. Stafylarakis, P. Puranam, S. Towells, K. Moslein,
and A. Neely, Leading for Innovation: The Impact of
Leadership on Innovation, Advanced Institute of Management Research (AIM research) report (www.aimresearch.org), 2005.
For more information about the research that studied innovation processes and activities see M. Iansiti,
Technology Integration: Making Critical Choices in a
Dynamic World (Harvard, MA: Harvard Business School
Press, 1998); J. Tidd, J. Bessant, and K. Pavitt, Managing
Innovation: Integrating Technological, Market and Organisational Change, 2nd Ed. (Chicester, England: John
Wiley & Sons, 2001); J. March, Exploration and
Exploitation in Organizational Learning, Organization
Science, 1991, 2(1); and C. A. OReilly and M. L. Tushman, The Ambidextrous Organization, Harvard Business Review, 2004, 82(4), 7481.
For more information on leadership styles, see B.
Bass and B. J. Avolio, Transformational Leadership
and Organizational Culture, Public Administration
Quarterly, 1993, 17(1), 112121; and Avolio and Bass,
Transformational
Leadership,
Charisma
and
Beyond, in J. G. Hunt, B. R. Baliga, H. P. Dachler,
and C. A. Schriesheim (Eds.), Emerging Leadership Vistas (Lexington: DC Heath and Company, 1988), chapter 3: 2949.
The use of the multi-factor leadership questionnaire to relate leadership with performance outcomes
has been demonstrated in Bass, Does the Transactional Transformational Leadership Paradigm Transcend Organizational and National Boundaries? in
American Psychologist, 1997, 52.
For more about the AXA Ireland example, see A.
Oke, Improving the Innovative Capability of a Service
Company, Journal of Change Management, 2002, 2(3),
272281. The description of the Google case example
was retrieved on 1/16/08 from (http://en.wikipedia.org/wiki/Google#Corporate_affairs_and_culture).
For more about the survey research that shows
small rms and service rms tend to focus more on
incremental and exploitative activities than on
exploratory and radical innovation activities, see A.
Oke, G. Burke, and A. Myers, Innovation Types and
Performance in growing UK SMEs, International Journal of Operations and Production Management, 2007,
27(7), 735753; as well as A. Oke, Innovation Types
and Innovation Management Practices in Service Companies, International Journal of Operations and Production Management, 2007, 27(6), 564587.
Thomas Edisons story is contained in the book
written by Randall Stross, The Wizard of Menlo Park:
How Thomas Alva Edison Invented the Modern World
(Crown Publishers, New York, 2007).
Adegoke Oke is the associate director of the Center for Productivity, Innovation and
Quality at Arizona State University. He obtained his Ph.D. in operations management from
Craneld University, U.K. He is widely published in the areas of innovation management
and supply chain management. He is a U.K. Advanced Institute of Management Scholar.
Prior to a career in academia, he was a project engineering manager for Shell for 10 years
(Tel.: +1602 5436209; fax: +1602 5436221; email: Adegoke.oke@asu.edu).
Natasha Vijay Munshi is an assistant professor in the Department of Management at
Wright State University, Ohio. She obtained her Ph.D. in strategic management from the
University of Pittsburgh. She teaches, publishes and advises on strategic management,
technology strategy, science entrepreneurship, corporate social responsibility and
international stakeholder management issues.
Fred O. Walumbwa is an associate professor of management at Arizona State University.
He received his Ph.D. at the University of Illinois at Urbana-Champaign. His research
interests include leadership development, organizational culture/identity, organizational
justice, cross-cultural research, business ethics, multilevel issues in research, and social
networks. He is also a senior scientist with the Gallup Organization (Tel: +1 602 543 6240;
fax: +1 602 543 6221, email: Fred.Walumbwa@asu.edu).
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