Radical innovation in established organizations: Being a knowledge predator

Abstract

Considering the strategic importance of knowledge building as the roots of any radical innovation, this paper focuses on the particular position of established organizations, which are faced with the necessity to explore new and tacit knowledge, while simultaneously exploiting existing competitive advantages depending on their existing knowledge and skills. To manage this paradox, established organizations can find help in partnerships with explorative organizations complementing their exploitative core competencies. With the well-known Lotka–Volterra system, I propose a simple model to demonstrate that a predation relationship is the most relevant to acquire new knowledge from partners and thus allow radical innovation.

Introduction

Radical innovation has been proven as being more and more frequent even in very established sectors. Following the capability organizations have to face it, such a radical change can be a wonderful opportunity to capture new markets and to strengthen a dominant position as well as a threat of obsolescence for the existing business (Strebel, 1995). For an established leader, the only possibility to guarantee a leading position is to be the first on the ball. This ability to remain a leader even through radical change requires the constant acquisition of new knowledge (Drucker, 1991, Grant, 1996), in order to use it on the one hand as the motor for radical innovation and on the other hand as background to detect and evaluate the potentialities of additional new knowledge.

Being an established organization also means having an existing business that must be exploited with increasing efficiency. This exploitation of current advantages requires the maintenance and continuous improvement of existing assets that represent the core business of the organization and the recipe of its success (Marshall, 1965, Murray and Myers, 1997).

Empirical studies (Koberg et al., 2003) have demonstrated that larger and older organizations, in other words established and successful ones, manage incremental innovations rather well but are less likely able to develop radical innovations. Their existing business requires some strategic choices concerning market scope and competency management (McDermott and Colarelli O’Connor, 2002) that are more oriented towards the exploitation of existing competitive advantages.

The necessity to manage both existing and potential assets leads to a management paradox between exploration and exploitation, between radical and incremental innovations. Such a paradox has been called by other authors the “productivity dilemma” (Benner and Tushman, 2003). If all organizations are faced with this paradox, it even affects more established organizations. This paper demonstrates that such paradox can be overcome through the collaboration with more flexible organizations that can be considered as knowledge providers.

As several authors have shown (Cowan et al., 2004, Hall and Andriani, 2003, Mascitelli, 2000), knowledge triggering radical innovation is mainly tacit. The “tacit dimension” (Polanyi, 1958) of all creative processes means that they occur in an uncertain and undefined context. One understands the difficulty of knowledge transfer, mainly based on human relationships (Colarelli O’Connor and Christopher McDermott, 2004). Collaborating organizations must face Arrow's paradox (Arrow, 1963), problems of informational asymmetry (Hayek, 1945, Shapiro and Varian, 1998) and trust management (Blomqvist et al., 2005, Newell and Swan, 2000). However, regardless of the barriers, this paper shows that such relationship can be profitable for the partners.

To study knowledge building and transfer occurring through the partnering between two organizations, I use a simple formalism borrowed from biology: Lotka–Volterra system. This system allows me to analyze the impact of different types of relationships (competition, symbiosis and predation) on the building and transmission of knowledge. The focus is particularly on the predation relationship, where an established organization behaves as a “knowledge predator”, feeding itself with the knowledge produced by the other organization. I demonstrate that such a relationship allows the simultaneous management of positive and negative feedbacks in knowledge building. The resulting evolution of knowledge in both organizations is a spiral in the phase space, where I distinguish and analyze four steps. These recursive steps allow both organizations together to maintain a balance between exploration and exploitation of knowledge.

Balancing between both positive and negative feedbacks in knowledge building has been shown for long as being absolutely necessary to any organization (March and Simon, 1958, Levinthal and March, 1993, March, 1991). The balancing state between stability (negative feedback) and instability (positive feedback) is often called a state “at the edge of chaos” (Senge, 1990).

Our simple Lotka–Volterra model is a first approach of such a state that should be developed more deeply to decrypt the chaotic and quantum mechanisms presiding at radical innovation. I conclude this paper with perspectives of theoretical developments that should help to understand those management phenomena “at the edge of chaos” and to develop better management practices, as it has already been proposed by other authors (Niosi, 1999, Ottosson, 2003, Silverberg, 2002).