Organizational Innovation CapabilityAnu Suominen, Jari JussilaTampere University of Technology, Finland—Pori unit, email: firstname.lastname@tut.fi

Abstract

Self organising team is one of the important characteristics of agile approach. Leading such teamsrequire different perspectives of cultivating innovations. In this chapter, we focus on buildingorganizational innovation capabilities, particularly from the context of self-organizing teams. Based onFriedman test we have developed two practically usable tools to evaluate individual and organizationalinnovation capability. In this chapter, we report results of applying proposed tools in two casecompanies. The main results suggest that innovation capability perspectives of team members could besignificantly different in individual capabilities and organizational capabilities and that bothperspectives provide valuable information in setting collective innovation goals. The self evaluation ofinnovation capabilities is also likely to foster participation from all team members towards thecollective innovation goals.

Introduction

Agile methods and agility have become a way to deal with complexity in turbulent and dynamicbusiness environments. Agility as organizational way of operating efficiently may lead to maximizingefficiency on the cost of innovation. Yet, only with innovations, both incremental and radical, thecompetitive advantage can be found. Therefore, according to Clippinger, organizations should find asweet spot (1999), where efficiency and innovativeness are in balance.

Primarily, people applying agile methods work in self-organizing teams. Yet, leading self-organizedpeople is a difficult challenge to many leaders. According to Hamel (2007), the over hundred year oldleadership paradigm contradicts the needs of the innovation-seeking organizations of the newmillennium. The top-down, managers know it all leadership that may have worked for companies likeFord in the late 19th century does not work any longer.

Success today and in the future requires that organizations put innovation as their priority and mould itas their core competence (Skarzynski, 2008). It has been found that organizational culture (Ahmed,1998; Martins, et al., 2003) and climate (Ekvall, 1996; Amabile, 1997; 1998) are significant in inducinginnovation within organizations. However managing innovation within organizations requires asystemic and holistic approach to managing: the innovation process, the leadership, the organization,the people and their skills, the culture and the climate. All these parts together compose theorganizational innovation capability (Skarynski, 2008). Also, all these components of organizationalinnovation capability include supports or enablers that foster innovation together with barriers orimpediments that hinder it. Both have been previously studied.

Organizational innovation capability can be evaluated with the help of software tools that areintroduced in chapter 10 of this book. In this chapter we introduce the results and implications of using

two tools that reveal both the innovation competence of those individuals and organizations capabilityto support those competencies. Together the results not only present the current status of theorganizational innovation capability, but also the needs for future development. First, this chapter dealswith the concepts of innovation and aims to portray the two components of innovation capability: theindividual and organization. Additionally, the links between the individual innovation competences toorganizational core competences are represented with the conceptual model of organizational enablersand their counterparts in individual innovation competences. Then the self-evaluation method togetherwith the utilization of Senge’s concept of creative tension (1990) is described. Also the analysis methodof the Friedman test, applicable to this kind of non-parametric data is explained in brief. Due to theneed to attain a better understanding of how this gathered information can be used, the results of anempirical study are presented. In the result part of this chapter, those empirical studies of twoorganizations including the analysis with the Friedman test are shown.

Organizational Innovation Capability

In innovation management, the so-called sweet spot describes an area or the state of the organization,where the rigidity of organization does not impede innovation, but at the same time, the lack ofstructure does not lead to chaos, instability and randomness in innovation efforts. Clippinger (1999)argues that control cannot be imposed; rather, control emerges when managers create the rightconditions and incentives for it to do so. The role of management and leadership becomes a matter ofinfluencing the forces of self-organization from below, such as the organizational climate and culture;the leadership and organizational structure; and the innovation process on the front-end, rather thancontrolling from above.

Creativity and innovation are frequently thought of as exchangeable terms (Martins, 2003; McLean,2005), but creativity is a characteristic of an individual (Csikszentmihalyi, 1999) and a prerequisite forinnovation (Holt, 2008); whereas innovation is the process of transforming an idea into action withinthe organization (McLean, 2005) or elsewhere, as in technology transfer (Amabile, 1996). OECD’s2005 definition of innovation is 'the implementation of a new or significantly improved product (goodsor services), or process, a new marketing method, or a new organisational method in business practices,workplace organisation or external relations.'

Skarzynski and Gibson (2008) see organizational innovation capability as a formation includingorganizational culture and values; leadership and organization; as well as processes and tools. Yet italso includes people and their skills. Quite similarly, Andriopoulos (2001) in her literature review hasdivided the components of organizational creativity into these categories: organizational climate;organisational culture; leadership style; structures and systems of an organization; and resources andskills. Therefore, organizational innovation capability can be seen formation of two components—individual and organization. Here the innovation capability is seen as the construct of: organizationclimate and culture; organization leadership and structure; organization processes; tools for idea andinnovation generation; and people’s competencies (Figure 1).

Figure 1. Integrated model of innovation capability

Components and Parts of Organizational Innovation Capability

The Organizational Component

Many researchers have mentioned those characteristics, features or components that are parts of theorganizational innovation capability affecting by enhancing or impeding in the individual level thepeople’s creativity or organizational level the process of innovation. Additionally, some researchershave studied barriers for creativity in organizations thus innovation (Detterfelt, et al., 2008).

Organizational culture is seen very essential part of organizational innovation generation (Ahmed,1998; Martins, et al., 2003). Corporate culture is an organization’s way of life in business passed on viaconsecutive generations of employees, like in general culture as a people’s way of life is transferredfrom generation-to-generation (Zwell, 2000). The concepts of organizational culture and climateregarding innovation are often used interchangeably (McLean, 2005). However, culture includes thosehidden elements that remain mostly invisible, whereas climate is the manifestation of practices and

patterns of behaviour established in the assumptions, meanings and beliefs that constitute the culture.Those characteristics of organizational culture and dimensions of organizational climate mentioned inthe literature (Ekvall, 1996) that either support or impede individual creativity and innovation areconsistent-- often they are the same (McLean, 2005). Thus, they can be viewed here under the samecategory.

Many researchers have studied organizational structure and leadership together with managerialmeasures that either enable or hinder the innovation within organizations (Ahmed, 1998; Damapour,1991)

The innovation process comprises more than solely a process of research and development (Apilo,2006) and it can be divided into phases--idea generation; structured methodology andcommercialization (Ahmed, 1998; Martins, 2003) or concept finding; development of innovationelements; achievement of readiness for marketing and market launch (Boeddrich, 2004) --with asequential nature; but in fact, they are iterative and simultaneous (Ahmed, 1998). Skarzynski andGibson (2008) regard the implementation of the ideas as the easy part of the innovation process, whichmechanisms (e.g., marketing), are quite well known, whereas the idea generation is the fuzzy front end.Essential for the innovation process’ overall success is the importance of methodical, systematic andstructured procedures (Skarzynski, 2008).

People and Their Skills: Innovator’s Competencies

In addition to the three organizational parts of Organizational Innovation Capability, there is the fourthpart, the individual innovation capability. Here the individual innovation capability includescompetencies that are most important of people and their skills as innovators. Those competencies arehere called innovator’s competencies. The innovator’s competencies represent those competences thatthe literature (Jussila, et al., 2008) emphasizes as important characteristics of creative and innovativepeople and they can be divided into two groups: personal and social competencies.

The major components of individual creativity necessary in any domain are expertise, creative-thinkingskills, and intrinsic task motivation (Amabile, 1997). However, rarely is an individual able to relysolely on his own motivation and technical skills to get the job done. Most of us work in environmentsin which we must constantly deal with other people (Merrill, 1981). In a similar sense, innovations arerarely the result of one individual. Therefore, more than creativity is needed in making innovationshappen. The major components supporting creativity are self-awareness, self-regulation, empathy andrelationship management (Goleman, 1998), with a total of 27 competencies (Jussila, et al., 2008).

Christensen (1997) has presented the link between individual competencies and organizational businesscapability. Vertically each organization acts in a business environment consisting of opportunities andchallenges together with resources. The managers in organization find its vision and create the strategy.Each strategy demands certain organizational competences. Those organizational competences requirecertain individual competencies, thus forming the link between human beings in the organization andorganization’s business. Horizontally each HR process and tool or technology should impact theabilities for attaining the organizational vision.

Those individual innovation competencies have a counterpart in organizational supporting enablers(Suominen, et al., 2008). Those counterparts are presented in the Table 1.

Table. 1. Individual innovation competences and organizational innovation enablers.

Methodology

Self-evaluation of Humans and Systems with the Friedman Test

In research, human actions, opinions, attitudes and values, surveys or questionnaires are importanttools (Vehkalahti, 2008). In a questionnaire, a person can be asked to do a self-evaluation or to evaluatea system that the individual evaluator is part of. With the help of information technology, the self-evaluation can be carried out with variety of tools, such as questionnaires taken online. The results ofself-evaluation could then be used for different purposes, such as motivation; identification ofdevelopment needs; evaluation of potential or performance; or development of career. However, thefollowing has to be taken under consideration while interpreting the results received. Self-evaluation(Stone, 1998) is less reliable in the evaluation of work performance and people have a tendency toevaluate their own performance as being better than others' (Dessler, 2001). Additionally, whileobserving themselves and others, people are limited in accuracy (Beardwell, 1995). Nevertheless,people are able to evaluate themselves, when motivated. Self-evaluation is more effective in evaluatingthe relation between different items, such as competencies, than in comparing individuals' performanceto others' performance (Torrington, 1991). The effectiveness of self-evaluation depends also on contentof the evaluation; the application method; and the culture of an organization (Torrington, 1991). Theresults of individuals will vary to some extent. In the short term, individuals' power of observation,intentions and motives change (Senge, 1990); in the long term, mental growth, learning, changes inpersonality and health affect results.

Creative tension is a pressure for development within an individual introduced by Senge (1990). Thecreative tension is the difference between the current state and the future aspiration. When this conceptof creative tension would be discovered from individuals, self-evaluation is a useful method, as no-onecan tell the future intentions and aspirations of another person. Similar concept for organizations is socalled proactive vision, which can be seen as portraying the tension of the current state and the futurestate at organization while evaluating the organization as an object.

As discussed before, the data generated though self-evaluation does have certain characteristics. Everysingle individual respondent applies their own, personal scale of degree, for instance. Therefore, the useof traditional scientific statistical methods for such data should be applied with care and consideration.Thus, the Friedman test has been used as method of analysis, as it is suitable for non-parametric dataproduced with self-evaluation. The Friedman test is one scientifically valid, nonparametric statisticalmethod (Conover, 1999), named after its inventor Nobel laureate economist Milton Friedman. TheFriedman test sums the ranked values of each respondent. Consequently the ranked values can beclustered into groups (Vehkalahti, 2008).

The Tools for Self-Evaluating Innovation Capability Components

Within the Flexi-project, there has been developed two web-based tools, including questionnaires forself-evaluating and analyzing the data received from the two organizational innovation capabilitycomponents: the organization and the individual.

In two evaluations, organizational innovation capability OIC and individual innovation capability IICpeople evaluate statements regarding various topics of organizational innovation capability for bothcurrent and target state with nominal scale (Figure 2).

Figure 2. View on Yoso-evaluation’s outlook (https://www.yosoevaluation.fi)

In the individual innovation capability (IIC) questionnaire, people evaluate 50 statements regarding the27 innovation competencies for both current and target state. From these evaluations, the creativetension can be calculated.

Similarly, in the organizational innovation capability (OIC) questionnaire, people evaluate 69statements regarding the organizational innovation capability features—also for both current and targetstate in order to calculate the proactive vision of organization, similar tension for development ascreative tension with individuals.

After the completion of the evaluations, each individual can print out their results of their individualevaluations. The results are available as histogram-graphs ordered by current state, future state andcreative tension/proactive vision (Figure 3). The results for the upper-level variables are also presentedin a spider chart-format (Figure 4). Accordingly, the aggregated group results are portrayed for theorganization’s use.

Figure 3. View on Yoso-evaluation’s report outlook for both individual evaluations and aggregated groupresults

Figure 4. View on Yoso-evaluation’s outlook for Spider Chart result report

Results

The results of a self-evaluation run in two organizations (Company A and Company B) are representedafter the Friedman test. The sample populations are described in Table 2.

Table 2. The sample populations of the two organizations Company A and Company B.

The aim of this chapter is to show in practice how this information can be received and how it can beinterpreted. This method can be used to validate the research method and seeing how differentlydifferent groups see things within organization.

Creative Tension and Proactive Vision

In the figures below, the results after Friedman test of individual innovation competences (by itscreative tension) and organizational innovation capability (by its proactive vision) are portrayed for thetwo test organizations: Company A (Figure 3) and Company B (Figure 4). All three viewpoints (currentstate, target state and creative tension/proactive vision) for IIC and OIC results can be analyzed;however, here only the creative tension/proactive vision combination analysis is represented for bothCompany A and Company B. The results of the creative tension/proactive vision are divided into threeto four clusters that reveal different needs of attention or need for development in the organization.Then in the figures represents the number of the respondents in the test. The 'min. diff.' represents theminimum difference used in the Friedman test to cluster the results into the three different clusters. Thegrey area is a cluster of the highest scores at creative tension or proactive vision organizational feature(i.e., people see the most development needs in these competences). The white area is a cluster of themediocre scores (i.e., people see quite neutrally the development needs of these competences). Theblue area is the cluster of the low scores at creative tension or proactive vision (i.e., competences thatpeople don’t see so much need for improvement). The purple area is a cluster of the mediocre scores.They are quite mixed with opinions (therefore, they are purple); those variables can be consideredeither in the high (gray) area or at low (blue) area.

Figure 5. The creative tension of IIC and proactive vision of OIC for Company A

Figure 6. The creative tension of IIC and proactive vision of OIC for Company B

Although these samples are not scientifically great enough to make any generalizations, it is noticeablewith these two samples in both organizations that there are six identical competences in the highcreative tension cluster (gray bars on left columns): self-control, absorptive capacity, change

orientation, flexibility, understanding others, and stress tolerance. On the other hand, in the lowcreative tension cluster (blue bars—left column), there are four identical competences: achievementorientation, imagination, teamwork and cooperation and risk orientation.

Table 3. Results of two organizations clustered to four groups after Friedman test and theirinterpretations

For Company B, the majority of the proactive visions of OIC are purple, thus portraying the differenceof opinion among respondents. One has to be quite careful with interpretations. Yet in the Figure 5, itcan be seen that those individual competences gathered in Cluster 1 have their counterparts in highnumber rankings among the organizational variables; therefore, they can be fairly reliably be clusteredin high-high grouping. Similarly, those individual competences that have low creative tension and thusare grouped to clustered number 4, have their counterparts with quite low rankings of creative tensionamong organizational variables.

The results presented here could be interpreted so that people see their individual competences quitesimilarly in these two organizations; whereas their view on their organization is totally different-- notonly when compared with two organizations, but also among their own people. However, as mentionedbefore, no generalizations can be made out of these results, due to their limited samples; therefore,these results and illustrations are merely to portray how the results of gathered with these tools can givevarious insights the innovation capability of the organization.

Implications for Using Innovation Capability tools

Using any tools requires interested parties within an organization, as well as some time resources forthe respondents. However, the positive impact for the usage of the tools is much more than justreceiving numbered data from questionnaires:

First of all, the tools are available on the internet, so the participants can do the evaluation any timeduring the agreed time window. They can also take a break, then return to the evaluation whenconvenient. Second, each and every participant is able to print a report on their individual evaluationsright after their completion of the evaluation. Third, even small groups, such as Scrum-teams can beevaluated with statistically valid methods, such as the Friedman test.

Fourth, if an organization has multiple groups, the results can be aggregated in order to get a biggerpicture of the status of the organization's organizational innovation capability.

Fifth, the combination of the two tools gives a unique view to organizations innovation capability, as itnot only takes into account the two perspectives of organizational innovation capability--theorganization and the individual—but it also portrays the three views to the time: current, future and thecreative tension/proactive vision.

Sixth, this evaluation can also be run periodically, giving the signals of those organizational andindividual features that have improved.

And most importantly, this participatory method is a motivational factor, as the self-organizing teams,like Scrum-teams, want to be lead from bottom-up, not top-down. This way they can give the signals oftheir opinions for change directly to their peers and superiors.

Conclusion

Participatory methods are important motivational factors in software businesses. In such organizations,the teams, like Scrum teams are self-organizing. People in those environments do not want to be leadtop-down, but from bottom-up, genuinely contributing to valuable organizational aspects--like cultureand climate, structure and leadership and innovation process--and more importantly, to assessments oftheir own individual capabilities and competencies. With the participatory self-evaluation method,people in the organization use tools to give signals of their opinions for change directly to their peersand superiors. In this way, innovation is becoming democratized.

ReferencesAhmed P. K. 1998. Culture and climate for innovation. European Journal of Innovation Management. 1(1): 30–43.Amabile T. M. 1997. Motivating Creativity in Organizations: On Doing What You Love and Loving What You Do.California Management Review. 40(1): 39-58.Amabile T. M. 1998. How to Kill Creativity. Harvard Business Review. 76(5): 76–87.Amabile T. M., R. Conti, H. Coon, et al. 1996. Assessing the Work Environment for Creativity. Academy of ManagementJournal. 39(5): 1154-1184.Andriopoulos C. 2001. Determinants of Organisational Creativity: A Literature Review. Management Decision. 39(10):834–840.Apilo T. 2006. Innovaatioiden Johtaminen. Espoo, VTT: Engl. Managing Innovations.Beardwell I. 1995. Human Resource Management: A Contemporary Perspective. London: Pitman.Boeddrich H. 2004. Ideas in the Workplace: A New Approach Toward Organizing the Fuzzy Front End of the InnovationProcess. Creativity & Innovation Management. 13(4): 274-285.Christensen R. 1997. Where is HR? Human Resource Management (1986-1998). 36(1): 81—84.Clippinger J. H. 1999. The Biology of Business: Decoding the Natural Laws of Enterprise. San Francisco: Jossey-Bass.Conover W. J. 1999. Practical Nonparametric Statistics. New York: Wiley.Cronbach L. J. 1990. Essentials of Psychological Testing. New York: Harper & Row.Csikszentmihalyi M. 1999. Implications of a Systems Perspective for the Study of Creativity. In Handbook of Creativity.Sternberg R. J. (ed.) New York: Cambridge University Press. 313-335.Damanpour F. 1991. Organizational Innovation: A Meta-Analysis of Effects of Determinants and Moderators. Academy ofManagement Journal, 34(3): 555–590.Dessler G., 2001. A Framework for Human Resource Management. Upper Saddle River, NJ : Prentice Hall.Detterfelt J., E. Lovén & N. Lakemond. 2008. Contradicting views on creativity obstacles in efficient new productdevelopment. Proceedings of the XIX ISPIM Conference, 15-18 June 2008, Tours, France.Ekvall G. 1996. Organizational Climate for Creativity and Innovation. European Journal of Work & OrganizationalPsychology. 5(1): 105-123.Farr J. L., H. P. Sin & P. E. Tesluk, Eds. 2003. Knowledge Management Processes and Work Group Innovation. InShavinina, L.V. (ed.) The International Handbook on Innovation. Amsterdam, Elsevier. 574–586.Georgsdottir A. S., T. I. Lubart & I. Getz. 2003. The Role of Flexibility in Innovation. Shavinina, L.V. (ed.). TheInternational Handbook of Innovation. Oxford: Elsevier. 180-190.Goleman D. 1998. Working with Emotional Intelligence. London, Bloomsbury.Hamel G. 2007. The Future of Management. Boston: Harvard Business School Press.Holt David H. 2008. Entrepreneurship and Innovation. In The Strategy of Managing Innovation and Technology. Millson,M.R. & Wilemon, D. (eds.), Upper Saddle River, NJ : Pearson Prentice Hall. 4–26.Jussila J., Suominen A. & Vanharanta, H. 2008. Competence to Innovate? In 2008 AHFE International Conference, 14-17July 2008, Las Vegas, Nevada.

Martins E. C. & F. Terblanche. 2003. Building Organisational Culture that Stimulates Creativity and Innovation. EuropeanJournal of Innovation Management. 6(1): 64-74.McLean L. D. 2005. Organizational Culture's Influence on Creativity and Innovation: A Review of the Literature andImplications for Human Resource Development. Advances in Developing Human Resources. 7(2): 226–246.Merrill D. W. 1981. Personal Styles and Effective Performance: Make Your Style Work for You. Radnor: Chilton.Nonaka I. & H. Takeuchi. 1995. The Knowledge-Creating Company: How Japanese Companies Create the Dynamics ofInnovation. New York: Oxford University Press.OECD. 2005. Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data. 3rd. ed,http://213.253.134.43/oecd/pdfs/browseit/9205111E.PDFSenge P. M. 1990. The Fifth Discipline: The Art and Practice of the Learning Organization. New York. CurrencyDoubleday.Skarzynski P. & Gibson, R. 2008. Innovation to the Corea Blueprint for Transforming the Way Your Company Innovates.Boston, Mass., Harvard Business School Press.Stone R. J. 1998. Human Resource Management. Brisbane: John Wiley.Suominen A., Jussila,J , Porkka, P. 2008. Interrelations of development needs between innovation competence andinnovation culture? Advances in Manufacturing Technology: XXII, Proceedings of the Sixth International Conference onManufacturing Research (ICMR08), 9-11 September 2008, Brunel University, UK. 1: 345-352.Torrington D. 1991. Personnel Management : A New Approach. London: Prentice Hall.Trott P. 2005. Innovation Management and New Product Development. Essex: Pearson Education Limited.Vehkalahti K. 2008. Kyselytutkimuksen Mittarit Ja Menetelmät. Helsinki: Tammi.Zwell M. 2000. Creating a Culture of Competence. New York: Wiley.

Author BiographyAnu Suominen: Anu Suominen is a Researcher and PhD student at Tampere University of Technology(TUT). She holds an MSc (Industrial Management and Engineering) and her research interests aretowards leadership and management: from innovation, knowledge and strategy perspectives. Anu has aprior working experience in operational logistics, mainly exports, in metal- and telecommunicationsindustry and she has been working at TUT since 2007.

Jari Jussila: Jari Jussila is a Managing Director at IT and consultancy provider Yoso Service Oy. He isalso a PhD student at Tampere University of Technology (TUT), holding an MSc at IndustrialManagement and Engineering. Jari’s field of expertise is knowledge and innovation management.