research@hec - Issue#3 - (Page III)

Radical Innovations in Major Companies Disruptive innovations are crucial for companies: this is what creates new markets and stimulates declining activities. Yet, the very organization of major companies—a source of competitive advantage in terms of incremental innovation and the optimization of existing products—may become an obstacle when the company wishes to renew itself. So what is the right organizational model to adopt? Traditionally the answer is meant to lie in project management. But project management only enables the development of successful innovations once the technology or customer expertise has arrived at a certain level of maturity. To explore entirely new areas, it is preferable to create an exploratory entity, upstream of the project, in order to generate and test the ideas, and once they have matured they can be developed using the project management method. This unit acts as an incubator for ideas and to show the way for the rest of the company. How do major companies develop disruptive innovations to boost their activities? By creating a dedicated exploratory unit, which is both separate and integrated into the existing organization, responds Sihem Jouini. She based her conclusions on two years’ in-depth analysis of experimentation at a large automotive supplier. Based on an interview with Sihem Jouini and her articles, “Favoriser l’innovation radicale dans une entreprise multidivisionnelle”1 (enhancing innovation in a multidivisional firm) (Finance-Control-Strategy, 2007), and “Multilevel Integration of Exploration Units: Beyond the Ambidextrous Organization”2 (Best Paper Proceeding from the Technology and Innovation Management department of the Academy of Management, 2007, and finalist of the Stephan Shraded Award in this Academy). M SHOULD THE EXPLORATORY UNIT BE SEPARATE OR INTEGRATED? When describing organizational models that combine both incremental and radical innovation, the debate is often reduced to a question of dichotomy. When it develops two separate structures within the company—product line units consecrated to productivity and optimization on the one hand, and exploratory units geared towards radical innovation on the other—companies come up against the difficulties provoked by this structural separation. This leads to the isolation of the exploratory unit, which fails to get its ideas accepted and to draw on the company’s resources. But complete integration of this exploration unit isn’t any better for companies pursuing a disruptive strategy. ‘The real question isn’t about a choice between separation or integration, but rather knowing how to apply the integration to the type of innovation,’ says the HEC professor. STRUCTURING THIS EXPLORATORY ACTIVITY Sihem Jouini investigated a company that managed to overcome this dichotomy. Domauto (a pseudonym) is a global automotive supplier that is divided into autonomous divisions specializing in parts like alternators or gearboxes. To boost its growth through innovation, Domauto created an innovation platform (PTE), whose mission was to explore new offers by placing the accent firmly on innovative synergies across its divisions. In fact, in order to be permanently competitive, western companies need to propose global offers—and not commodities—to customers. Therefore, the creation of a separate, dedicated entity for the exploration of entire systems becomes essential in order to generate ideas upstream and in a different perimeter from the company’s usual one. Starting off at zero, this small team progressively carried out exploratory activities like the identification of new innovation tracks using CAREER Sihem Jouini is associate professor at HEC Paris. She graduated from the École Centrale Lille (graduate engineering school) and was awarded a doctorate in Management from Paris IX Dauphine University. She was also visiting professor at the Stern Business School (NYU) and lecturer at Paris XI. She currently teaches project management, new products development processes, and the strategic management of innovation at HEC Paris. June-July 2008 • research@hec III http://www.hec.fr/hec/eng/professeurs_recherche/p_liste/p_fiche.php?num=141

Table of Contents for the Digital Edition of research@hec - Issue#3

Cover & Contents
The Role of Research Chairs at HEC
Radical Innovations in Major Companies, by Sihem Jouini
How to Develop Profitable Services, by Wolfgang Ulaga
Loss Aversion and Decision-Making, by Mohammed Abdellaoui

research@hec - Issue#3