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” Complexity Theory and Innovation Manage ment”. Dr. Harri Jalonen Principal lecturer Turku University of Applied Sciences, Finland harri.jalonen@turkuamk.fi. http://www.youtube.com/watch?v=Naf0jxDd-R0.

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slide1

”ComplexityTheoryand Innovation Management”

Dr. Harri JalonenPrincipal lecturerTurku University of Applied Sciences, Finlandharri.jalonen@turkuamk.fi

slide3

Nowadays private and public organizations have to face new challenges. Complexity, uncertainty, crisis, change, and turbulence are common for all kind of organizations. This also questions traditional approaches for innovation management. More theoretical and practical knowledge is needed for the understanding of the approaches, models and tools for supporting the renew and the development of new business models. Adapting complexity theories, this lecture provides a new perspective on innovation management in complex organizations."

slide4

“One has to make up his mind whether he wants simple answers to his questions – or useful ones… ….you cannot have both.”

(Joseph Schumpeter, in 1930)

slide5

‘creative destruction’

”The question is not how capitalism administers existing structures, but how it creates and destroys them, causing continuous progress and improved standards of living for everyone” (Joseph Schumpeter in 1930s)

slide6

Knowledge/information is the basis for development of new products, production processes, the opening of new markets, adoption of new raw materials, and reorganizing of economic sectors.

(Joseph Schumpeter in 1930s)

slide7

Agenda

1) 10 Starting points2) What is an organization? 3) What is an innovation?4) A short introduction to complexity theory5) Case: ”Managing innovations in complex welfare service systems”

harri.jalonen@turkuamk.fi

slide8

1) 10 Starting points

harri.jalonen@turkuamk.fi

slide9

STARTING POINTS (#1)

DATA – INFORMATION – KNOWLEDGE

harri.jalonen@turkuamk.fi

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STARTING POINTS (#1)

  • a) Data
  • -not yet intrepreted symbols
  • -simple observations
  • -unstructured facts
  • -text that does not answer questions to a particular problem

harri.jalonen@turkuamk.fi

slide11

STARTING POINTS (#1)

  • b) Information
  • -”in form”, ”informare”
  • -a flow of meaningful messages or data with meaning/structured
  • data with relevance and purpose
  • -includes all the documents and verbal messages that make sense
  • or can be interpreted by organizational members
  • -transferred or shared among people
  • -involves actions of sensing, collecting, organizing, processing,
  • communicating, and using expressions and representations of
  • own or others’ knowledge
  • -text that answers the questions who, when, what or where

harri.jalonen@turkuamk.fi

slide12

STARTING POINTS (#1)

c) Knowledge

-justified true belief (Platon)

-the capacity to act (Sveiby)

-experience, values, insights and contextual information

-obtained from experts based on actual experience

-originates and is applied in minds of “knowers”

-personal

-involves understanding, using, applying, interpreting:

the “knowers” know

harri.jalonen@turkuamk.fi

slide13

STARTING POINTS (#1)

EXAMPLE

Data

5 4 5 5 4

 exam results

Information

Extract from a study register

A course code A course mark

2920205 5

2920210 4

2920405 5

2920600 5

Knowledge

Course marks are exceptional  it´s worthwhile to consider postgraduate

harri.jalonen@turkuamk.fi

slide14

STARTING POINTS (#1)

VALUE OF INFORMATION/KNOWLEDGEIncrease the capacity to act.”Train leaves from London to Edinburgh”

”Train to Edinburgh leaves 22nd of November 10:15 a.m. from the King’s Cross”

slide15

STARTING POINTS (#2)

Two types of Knowledge

(Nonaka & Takeuchi 1995 and Polanyi 1967)

  • TACIT KNOWLEDGE
  • (Subjective)
  • Knowledge of experience (body)
  • Simultaneous knowledge (here and now)
  • Analog knowledge (practice)
  • e.g.,
  • Intuitions
  • Unarticulated mental models
  • Embodied technical skills
  • Personal, context -specific
  • EXPLICIT KNOWLEDGE
  • (Objective)
  • Knowledge of rationality (mind)
  • Sequential knowledge (there and then)
  • Digital knowledge (theory)
  • e.g.,
  • Meaningful set of information articulated in clear
  • language incl. numbers or diagrams
  • Formal, objective, codifiable

harri.jalonen@turkuamk.fi

slide17

STARTING POINTS (#2)

Test your tacit knowledge.

http://www.sveiby.com/articles/TacitTest.htm

Karl-Erik Sveiby

www.sveiby.com

harri.jalonen@turkuamk.fi

slide18

STARTING POINTS (#3)

INFORMATION SEEKING IS COSTLYThe optimal amount of information is reached when further efforts are not worth their cost.

harri.jalonen@turkuamk.fi

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STARTING POINTS (#3)

”The difference between the information available and the information required for an optimal decision.” (Galbraith, 1973)

”Information can have a positive or negative value depending on whether it is a source of pain or pleasure. People and organizations often do not want more information.” (Weick & Ashford, 2001)

harri.jalonen@turkuamk.fi

slide20

STARTING POINTS (#3)

Information stickiness (von Hippel, 1994)

Information stickiness is a result of costs related to acquire, transfer, and use of information compared to the value or benefit of the information sought

Due the stickiness information seekers and information providers do not encounter each other in a way that they are able come to new insights that were not available based on information from one source.

harri.jalonen@turkuamk.fi

slide21

STARTING POINTS (#4)

”The VALUE of knowledge is a function of TIME”

BUSINESSVALUE

Business event

DATA LATENCY

VALUELOST

Data ready for analysis

ANALYSIS LATENCY

Information delivered

DECISION LATENCY

(Hackathorn 2004)

Action taken

TIME

ACTION TIME

harri.jalonen@turkuamk.fi

slide22

STARTING POINTS (#5)

”All men by nature desire to know”

Aristoteles (384 BC – 322 BC)

”Ignorance is bliss.”

(Gray, 1765)

slide23

STARTING POINTS (#5)

The hidden side of the knowledge behavior = information avoidance

Cognitive

Social

Technological

Cultural

Economic

INFORMATION FILTERS

(Jalonen 2010)

harri.jalonen@turkuamk.fi

slide24

STARTING POINTS (#5)

”ingrained pattern seeking”

”confirmation bias”

Nassim Nicholas Taleb (2007) The Black Swan. The Impact of the Highly Improbable.

harri.jalonen@turkuamk.fi

slide25

STARTING POINTS (#5)

(Taleb 2007)

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slide26

STARTING POINTS (#5)

All swans are white – are they?

harri.jalonen@turkuamk.fi

slide27

STARTING POINTS (#5)

1) Joey seemed happily married. He killed his wife.

2) Joey seemed happily married. He killed his wife to get her inheritance.

(Taleb 2007)

The secondstatementseemsmorelikely…However, it is a pure mistake of logic, since the first, beingbroader, canaccommodatemorecauses, such as he killedhiswifebecause he went mad, becauseshecheatedhimwith the postman, because he entered a state of delusion and mistookher for a financialforecaster……..

harri.jalonen@turkuamk.fi

slide28

STARTING POINTS (#6)

Knowledge Knowledge

exploitation exploration

Logic of convergence

AMBIDEXTROUS ORGANIZATION?

Logic of divergence

Facts

Explicit knowledge

Hierarchy

Boundaries

Decision-Making  choices

Problem-Solving

Measurement

Ideas, intuitions

Tacit knowledge

Interpretation

Autonomy, empowerment

Interaction

Decision-Making  alternatives

Problem-Finding

Dialogue, communication

harri.jalonen@turkuamk.fi

slide29

STARTING POINTS (#7)

harri.jalonen@turkuamk.fi

slide30

STARTING POINTS (#7)

(Eppler & Mengis 2004)

harri.jalonen@turkuamk.fi

slide31

STARTING POINTS (#7)

-too much information

-too little information

 Information anxiety

Uncertainty = absence of information

Equivocality, Ambiquity = existence of multiple and conflicting interpretations and lack of understanding

(Daft & Lengel 1986, Weick 1995)

harri.jalonen@turkuamk.fi

slide32

STARTING POINTS (#8)

INFORMATION REDUNDANCY

PROBLEMANDINEVITABLE CONDITION

…is annoying and time consuming to the user, since

the user may need to read the same information

multiple times in multiple different documents. Once

the user finds a particular piece of information in one

document, time should not be wasted reviewing the

same information in many other documents

(Brill & Dumais 2006).

…is an enabling for knowledge creation which is

defined as the exitence of information that goes

beoynd the immediate operational requirements of

organizational members

(Nonaka &Takeuchi 1995).

harri.jalonen@turkuamk.fi

slide33

STARTING POINTS (#9)

Innovation is a world of uncertainty and equivocality!

But at the same time uncertainty is a basis for new knowledge!

(Moensted 2006)

harri.jalonen@turkuamk.fi

slide34

STARTING POINTS (#10)

A normal problem for managers is

to decide on potential innovation

growth projects at an early stages

of development.

They often face a pressure both to

avoid failures of investments in

’false positives’ and also projects

later proven successful in other

contexts, i.e. ’false negatives’.

(Moensted 2006)

harri.jalonen@turkuamk.fi

slide35

STARTING POINTS (#10)

Clear tendency to fail

http://www.ideachampions.com/weblogs/archives/2010/06/55_reasons_why.shtml

56 Reasons Why Most Corporate Innovation Initiatives Fail

"Failure is only the opportunity to begin again, only this time more wisely."

Henry Ford

"Success is the ability to go from failure to failure without losing your enthusiasm."

Sir Winston Churchill

slide36

Data-Information-Knowledge

Divergence & Convergence

Uncertainty & Ambiguity

Information

redundancy

Informationfilters

Information

overload

Time

Explicit-TacitKnowledge

Knowledgeexplotion & exploration

Confirmationbias & patternseeking

Value

”Trying is the first step to failure”

Homer Simpson

slide37

PROPOSITION #1

Knowledge cannot be managed – only enabled.

This is done through a process of interaction, in which people interpret information and make judgements on the basis of it.”

slide38

2) What is an ORGANIZATION?

harri.jalonen@turkuamk.fi

slide40

WHAT IS AN ORGANIZATION?

Some features of organization

-it is about people (their needs, ambitions, fears…)

-it is about interaction between people (within the same organizational level and

between different organizational levels)

-it is about other resources (factor of production: capital, machinery…)

-it is about goal (setting and achievement)

-it is about boundaries (in and out)

-it is about management and leadership

 It´s more or less messy!

harri.jalonen@turkuamk.fi

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WHAT IS AN ORGANIZATION?

Organization as a Jigsaw Puzzle

• There are boundaries (straight edged pieces)

• Each piece plays a specific role

• Pieces are highly interconnected

• Each piece is unique in its nature

• The solution may be fragile (breaks)

• The whole is more than the sum of its parts

• Central and peripheral pieces

• There are ‘natural groupings’ (colour)

• Pieces need someone to connect them

• Speed of solution relies on the ability to ‘see’ the whole picture

(Paraskevas 2007)

slide42

WHAT IS AN ORGANIZATION?

ORGANIZATIONa VERB or a NOUN?

harri.jalonen@turkuamk.fi

slide43

WHAT IS AN ORGANIZATION?

”It´s not the strongest of the species that survive nor the most intelligent, but the one most responsive to change”

(Charles Darwin)

In what ways can it be paralleled to an organization?

slide44

WHAT IS AN ORGANIZATION?

Is it ”a machine” or ”machine-like

OR

Is it ”an organism like dynamic living system”?

harri.jalonen@turkuamk.fi

slide45

WHAT IS AN ORGANIZATION?

ORGANIZATION as a SYSTEM

• A system is any set of mutually interdependent elements that co-exist with a purpose.

• The mutual interdependence of a system means that changes introduced into one part of the system will bring about changes elsewhere.

(Paraskevas 2007)

slide46

WHAT IS AN ORGANIZATION?

(Paraskevas 2007)

slide47

WHAT IS AN ORGANIZATION?

As the ontologyshifts, epistemological and methodologicalconsequencesareexplicit…

harri.jalonen@turkuamk.fi

slide48

WHAT IS AN ORGANIZATION?

The Two Cultures of Management*

a nature of problems

a nature of solutions

complexity

uncertainty

unpredictability

Old and

routine

problems

Only old ideas

are needed

Skills and

knowledge

are at use

Risks can be

calculated

Best fit can be

found

New and

changing

problems

New and novel

ideas are needed

New skills and

knowledge are

needed

Uncertainty not

turned into risk

Create knowledge

to meet an evolving

world

* Charles Percy Snow, The Two Culture and Scientific Revolution

traditional management

WHAT IS AN ORGANIZATION?

Traditional Management

It means simply this:

Make an analysis of your

environment , design your

strategies, make everybody

align with them, and act

Plan,

act,

evaluate,

and correct

(Harisalo 2009)

assumptions of traditional management

WHAT IS AN ORGANIZATION?

Assumptions of Traditional Management
  • Knowledge is a product – its only problem is how to find it
  • Knowledge helps to recognize strong trends
  • Strong trends helps to decide what the organization will do and provide to its customers
  • These decisions – strategic of their nature – require biggest possible consensus – unanimity – in the organization
  • Aligning the organization requires hierarchy in division of labor
  • Strategic purposes legitimize the organization’s existence

(Harisalo 2009)

slide51

WHAT IS AN ORGANIZATION?

Interaction as a Strategic Way to Create Value

It means simply this:

Value is created together with

service professionals and clients

Designing,

experimenting,

implementing, and

correcting are

reciprocal processes

(Harisalo 2009)

assumptions of reciprocal management

WHAT IS AN ORGANIZATION?

Assumptions of Reciprocal Management
  • Its true nature is research and development:
    • from implementing to meeting new challenges in work
  • Novel ideas and knowledge are created in interaction:
    • from knowledge management to managing ignorance in work
    • from executing plans to discovering possibilities
  • Divergent thinking, different thinking, paradoxes, and constructive opposites are needed to speed up interaction:
    • the job of managers is to pave way to these things which in traditional management were barriers of efficiency and effectiveness
  • Experiments in small scale must be allowed and managerial responsibilities must be decentralized

(Harisalo 2009)

slide53

PROPOSITION #2

Organizations are organic, living systems. People in complex organizations hardly even accomplish their joint actions and goals following entirely the designed systems and processes. Pre-designed systems simply cannot encompass every event in complex environments. However, coherent efficient action can (and should) take place also in complex environments.

harri.jalonen@turkuamk.fi

slide54

3) What is an INNOVATION?

harri.jalonen@turkuamk.fi

slide55

WHAT IS AN INNOVATION?

Innovation is the generation, acceptance

and implementation of new ideas,

processes, products or services which have

(economic) value (Rogers 1983)

Radical innovation

The creation of something entirely new

Incremental innovation

Primarily adaption of an existing product or process

harri.jalonen@turkuamk.fi

slide56

WHAT IS AN INNOVATION?

“Seeing things in a new way” &“Doing things differently”

(Joseph Schumpeter, 1934)

Novelty in action (Altshuler & Zegans 1997)

harri.jalonen@turkuamk.fi

slide57

WHAT IS AN INNOVATION?

Novelty is context-dependent!

Every idea has been an innovation sometimes.

Any list of innovations must change with the times.

(Rogers & Shoemaker, 1971)

harri.jalonen@turkuamk.fi

slide58

WHAT IS AN INNOVATION?

“Innovation is work rather than play:

Everything always comes from

work, including the free gift of the idea

that arrives.”

(Meier 2007)

“Chance favours only the prepared

minds.”

(Pasteur 1822-1895)

harri.jalonen@turkuamk.fi

slide59

WHAT IS AN INNOVATION?

Innovation is not good nor bad!

“Innovation is a ’moment of danger’

because you loose control.”

(Meier 2007)

harri.jalonen@turkuamk.fi

slide60

http://freakonomics.blogs.nytimes.com/2010/02/09/change-happens/http://freakonomics.blogs.nytimes.com/2010/02/09/change-happens/

harri.jalonen@turkuamk.fi

slide61

SERENDIPITY

SERENDIPITY

http://www.nautis.com/2007/07/what-is-serendipity/

harri.jalonen@turkuamk.fi

slide62

WHAT IS AN INNOVATION?

harri.jalonen@turkuamk.fi

slide63

WHAT IS AN INNOVATION?

Dilemmas in management of innovations

Equilibrium Dynamic

Stability Change

Fit to model Creating model

Analysis Intuition

Exploiting opportunities Exploring opportunities

Known Not yet known

Management Entrepreneurship

Closeness Oppeness

AMBIDEXTROUS ORGANIZATION?

harri.jalonen@turkuamk.fi

slide64

PROPOSITION #3

What is needed is not ‘good design’ for innovation per se, but creation of the conditions that allow the emergence of innovation.

slide66

COMPLEXITY THEORY

Complexity - a situation or a problem that is difficult to understand or complicated to handle

English word ”complex” is derived from the LatinComplex behaviour arises from the intricate inter-twining or inter-connectivity of elements within a system and between a system and its environment (Mittleton-Kelly 2003)

harri.jalonen@turkuamk.fi

slide67

COMPLEXITY THEORY

Complexity – a basic property of a system

Complexity enriches traditional systems theory by amplifying additional characteristics of complex systems and by stressing their inter-relationship and interdependence (Mittleton-Kelly 2003)

Complexity does not comprise a single, unified theory but rather a family of theories, arising from the fields of biology, physics, chemistry, computer simulation, evolution and mathematics (Mittleton-Kelly 2003).

harri.jalonen@turkuamk.fi

slide68

COMPLEXITY THEORY

1) SELF-ORGANIZATION

Self-organization is a more or less spontaneous process without externally applied coercion or control.

Entropyis important factor of the process of self-organization. Self-organization consisting of phases such as production of entropy, disequilibrium and chaos, reduction of entropy and finally new organization.

(Ståhle 2004)

harri.jalonen@turkuamk.fi

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COMPLEXITY THEORY

In case of social systems, entropy can be understood as a capability to produce and reduce information. Entropy forms the basic dynamics of social systems.

An increasing of information may have various consequences. When considered in the context of social system, increasing of information opens up new possibilities, but it also means exclusion of others.

Information can be understood simultaneously both as a potential as well as a significant source of threat.

harri.jalonen@turkuamk.fi

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COMPLEXITY THEORY

2)EMERGENCE

Emergence means complex organizational structure growing out of simple rules.

The whole is something that cannot be foreseen from what is known of the component parts.

(Lewin 1993)

harri.jalonen@turkuamk.fi

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COMPLEXITY THEORY

What is important is that systems may have a great diversity of components but relatively simple relations between parts such as most machines and technical systems.

In other words, it is not just the great number of interactions but the quality of those interactions.

Complex behaviour of the system emerges from the connectivity and interdependence its parts (Mitleton-Kelly 2003).

harri.jalonen@turkuamk.fi

slide72

COMPLEXITY THEORY

3) FAR-FROM-EQUILIBRIUM, SPACE OF POSSIBILITIES, BIFURCATION and PATH-DEPENDENCYFar-from-equilibrium means that the complex system is continually changing. To ensure its survival, the system has to be able to produce and reduce entropy.

Bifurcation point is a choice between two or more possibilities which are constrained by earlier choices (path-dependency). Space of possibilities implies that it is impossible to explore all possibilities. Path-dependency means that every choice of individual is the result of a individuals selection among a finite set of perceived choices as well as the past choices made that have shaped that individuals life path.

harri.jalonen@turkuamk.fi

slide73

COMPLEXITY THEORY

(Mitleton-Kelly 2003, Nicolis & Prigogine 1989)

slide74

COMPLEXITY THEORY

The complexity theory sees conflicts and opposite interests as triggers which create tensions and multiply interactions of the system

Conflicts and opposite interests can be seen as imperative nodes that forces system to make choices. In complexity theory, these nodes are called bifurcation points. They are some kind of the moment of truth in which the system has different options.

When a social entity is faced with a bifurcation point, it endows

the entity space of possibilities (Mitleton-Kelly 2003).

Therefore, the bifurcation can be seen as a source of innovation. The alternatives at the bifurcation point “are sources of innovation and diversification, since the opening up of possibilities endows the individual and the system with new solutions” (Mitleton-Kelly 2003)

harri.jalonen@turkuamk.fi

slide75

COMPLEXITY THEORY

4) DIVERSITY

Diversity is the state or quality of being different. Increasing the diversity of the system means more observation capabilities and fewer blind spots.

An actor of the system”World” that the system can observe

(Jalonen 2007)

harri.jalonen@turkuamk.fi

slide76

COMPLEXITY THEORY

Ashby´s law of requisite variety (1957): a system has to have enough resources at its disposal to be able to cope with the complexity of its environment.

In other words, the principle of requisite variety implies that the complexity of environment can be met by the complexity of system.

(Clippinger 1999)

harri.jalonen@turkuamk.fi

slide77

COMPLEXITY THEORY

ORGANIZATION

ENVIRONMENT

ENVIRONMENT

ORGANIZATION

ENVIRONMENT

ENVIRONMENT

ORGANIZATION

ORGANIZATION

harri.jalonen@turkuamk.fi

slide78

COMPLEXITY THEORY

5) CONNECTIVITY and INTERDEPENDENCE Connectivity and interdependence points that actions by any individual may affect (constrain or enable) related individuals and systems.

Because of limited information capacity of individual actors, to solve highly interconnected and multidimensional (i.e. wicked) problems or to realize promising policies and generating innovations, there is the need to for interactions between a wide variety of actors (Kooiman 1993; Castells 1996, Sotarauta 1997).

Such interaction may generate not only a larger information and knowledge base than an individual, but also a better one on which to base decisions.

harri.jalonen@turkuamk.fi

slide79

COMPLEXITY THEORY

(Jalonen 2007)

harri.jalonen@turkuamk.fi

slide80

COMPLEXITY THEORY

6) FEEDBACK and NON-LINEARITY

Without feedback there is no emergence or self-organization. Positive feedback enhances and stimulates systems capability, whereas effects of negative feedback are opposite (detracting, inhibiting).

Non-linearity implies that behavior of the system may not depend on the values of the initial conditions. In complex systems, dynamical interactions are non-linear, i.e. small causes can have large results, and vice versa. A system is dynamical when it changes over time.

“The flap of a butterfly´s wings in Brazil set off a tornado in Texas” (Lorenz, 1963

harri.jalonen@turkuamk.fi

slide81

COMPLEXITY THEORY

Circular interdependence

(Jalonen 2007)

slide82

COMPLEXITY THEORY

7) CO-EVOLUTIONConnectivity applies not only to components within a system but also to related systems. It can be said that a system and its environment “co-evolves”, with each adapting to the other.

Interactions and interdependencies between system and its environment.

Co-evolution means “that the evolution of one domain or entity is partially dependent on the evolution of other related domains or entities, and that one domain or entity changes the context of the other(s)” (Mitleton-Kelly 2003).

Adaptation & Selection

harri.jalonen@turkuamk.fi

slide84

COMPLEXITY THEORY

Adapted Sotarauta & Srinivas 2005

harri.jalonen@turkuamk.fi

slide85

PROPOSITION #4

Organisations as complex systems: i) do not ‘behave’ in a straightforward predictable way, ii) consist of a huge number of diverse interrelated elements, iii) trivial causes can have massive effects (no linear relation between cause and effect), iv) control over the system is virtually impossible and v) dapt to environmental changes and evolve together with their environment.

harri.jalonen@turkuamk.fi

slide87

5) Case: ”Managing innovations in complex welfare service systems”byHarri Jalonen & Pekka JuntunenA paper presented at ICEG 2010 in Cape Town, South Africa.

The paper is currently in review process to be published in Baltic Journal of Management

harri.jalonen@turkuamk.fi

slide88

CASE

A Starting Point (1/2)

A growing number of welfare services are being provided through co-operation between the public and private sectors.

i) Co-operation = fertile ground for innovations in welfare services.

ii) Co-operation = creates complicated organisational interlacing, which, in turn, may lead to a situation where this innovation potential remains unrealised.

 It is these public-private partnerships that are seen to produce complex welfare service systems that cannot be understood on the basis of what is known about the individual components of these systems.

slide89

CASE

A Starting Point (2/2)

Innovation = novelty in action

Innovation = “seeing things in a new way” and “doing things differently”

Experimentation and high tolerance of risk-taking and fail as success mechanisms for innovation.

It is argued that the public sector suffers from a lack of success mechanisms. The public sector has ‘asymmetric incentives’ for innovations. The incentives are asymmetric because successful innovations are not rewarded, while unsuccessful innovations may have grave consequences.

However, innovations are needed, partly due to an increasing pressure to respond to the demands from the customers and partly due to diminishing resources for supplying services.

slide90

CASE

Aim and research question

The main aim of this paper is to develop a framework that deepens our understanding of managing innovations in a welfare service system.

What kinds of management practices can be used in supporting innovative actions in complex welfare systems?

The paper concentrates on the interaction processes within the welfare service system and between the welfare system and the surrounding environment.

slide91

CASE

Research design

Qualitative methods  purpose is to gain an understanding of how practitioners “define the situation”.

The empirical data was collected by conducting semi-structured interviews with leading office holders and representatives [n=50] of welfare service providers in the Helsinki region of Finland.

All of the interviewees hold a manager or director position in their organization. Based on the interviewees’ experience, it is reasonable to expect that they have “something to say on the topic”.

The topics for the interviews were determined by issues identified in the relevant innovation and complexity literature. The empirical material collected in these interviews was analyzed using Yin’s (2003) pattern matching logic. In our paper, pattern matching refers to a method whereby the interview material was interpreted with the concepts of complexity theories.

slide92

CASE

Research site

The value network of social services in the City of Helsinki (Finland).

The City of Helsinki is a large municipal organization with around 40,000 employees and an annual expenditure of around 3,000 million Euros.

-highly fragmented and difficult to perceive  the value network has been launched as a strategic concept for describing the complex operating environment.

The Social Services Department has five responsibilities: Child Day Care Services, Services for Families with Children, Adult Services, Elderly Services and Management and Development Centre. The department produces welfare services in about 700 units. Services are also bought from about 600 external producers. The amount of outsourced services has steadily increased and in 2008 the department was buying services with about 220 million Euros. The value network of Social Services Department has formed during a long historical continuum and today, it forms a multi-layer network of very diverse agreements and relationships.

This particular service system provides an interesting field for the development of system-level innovation thinking due its societal importance and its highly intangible outputs and outcomes.

COMPLEXSYSTEM

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CASE

Complexity as Theoretical Framework (1/3)

Complexity refers to the feature of the system.

A system can be defined as a complex system if it exhibits an emergence phenomenon occurring due to the connectivity and diversity of its parts.

‘Emergence’ refers to the “coming-into-being of novel, ‘higher’ level structures, patterns, processes, properties, dynamics and laws, and how this more complex order arises out of the interactions among components that make up the system itself”.

While the complex system is aggregated from its parts, the interplay between these parts produces emergent patterns that cannot be analytically reducible to the constituent parts.

In practice emergence results from the process whereby each welfare service provider continually decides which other organizations it will engage with, and what information and other resources it will exchange with them.

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CASE

Complexity as Theoretical Framework (2/3)

Complexity arises from the nature of the issues in the welfare domain.

Public policy problems can be characterized as ‘malignant’, ‘vicious’ and ‘tricky’. Such problems, especially in the welfare domain, are “wicked problems” in the sense that they have no definitive formulation; solutions are not true or false; there is no test for a solution; every solution has a consequence; they do not have simple causes; and they have numerous possible explanations, which, in turn, frame different policy responses.

In health care, for instance, a good example of a wicked problem is the goal of increasing equality in the service delivery while simultaneously trying to decrease the costs of the care.

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CASE

Complexity as Theoretical Framework (3/3)

Complexity of objectives and values in the public sector.

Compared to the private sector, the public sector fulfils various values and pursues multiple goals.

Efficiency = reduction in the cost of operation and in the generation of profits AND procedural adherence to the rule of law, due process and obedience to legislative mandates.

The public sector suffers ‘innovation deficit’, which can be explained by the detrimental side-effects of pursuing efficiency. Innovation is difficult in the public sector because the goal of efficiency is inconsistent with the goal of innovation.

Paradoxically, ‘good values’, such as efficiency, accountability and transparency, may lead to the emergence of higher level [a]dynamics, which can ossify the structures of welfare provision. An emergence, in this sense, manifests itself as an inability of the welfare service system to change and grow through experimental endeavour in order to meet new environmental threats and opportunities.

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CASE

A story of successful innovation is actually that ‘form follows failure’.“When fear of failure replaces a capacity to experiment and create trial and error learning, the result is unlikely to be an artefact that actually works” (Potts, 2009)

The real issue is how, on the one hand, to facilitate the processes of “seeing things in a new way”, and, on the other hand, how to ensure that “things are done differently”.

”Trying is the first step to failure”

Homer Simpson

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CASE

Innovation supportive conditions (1/4)

TRUST

“...new ideas are often generated when someone discovers the problem. If you can trust that you are not in trouble when you tell problems, it could encourage more innovation”.

“...service providers do not always bring out the problems involved service provision because they fear that it worsens their position in the negotiations with the Social Services Department.. ...it is this uncertainty or lack of confidence that pull the rug from under the development of new ways of action”

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CASE

Innovation supportive conditions (1/4)

Creating trust 

Trust helps to build up space for creativity innovation, and encourages people to ’see things differently’. It enables playing with ideas .

Personal and system trust  new ideas are given every chance to succeed.

Important is that personal and system trust not only reduces complexity and makes up for obscurity caused by imperfect knowledge but also increases certainty, because certainty does not call for correct and certain knowledge but rather the fact that the actors can predict each other’s behaviour.

Trust increases the welfare service system´s ability to take risks and withstand failures. An atmosphere of trust lowers the mental threshold that suppresses thinking that differs from the conventional.

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CASE

Innovation supportive conditions (2/4)

RESPONSIVENESS

“…ifyouwantrealpartnership, I meannot just rhetoric of partnership, the servicedeliveryshouldbeconsidered in open and dialogicconversationsbetweenserviceproviders and the Social Services Department... dictatedonotlead to bestoutcomes”.

“The cruel fact is that we [private sector service providers] compete to get the contract with the Social Services Department.”

“it is not reasonable to regard other service providers just as rivals... ...sometimes the most valuable innovation impulses come from them... ...therefore it is important to seek informal settings where you can meet and exchange thoughts with colleagues from outside your own organization.”

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CASE

Innovation supportive conditions (2/4)

Increasing communication responsiveness

Responsiveness refers to reciprocal communication processes where the actors of the system co-create relationships that “evoke potential in a trusting environment”. Responsive communication processes create trust, which, in turn, can increase the welfare service system’s capacity to renew itself and generate new services.

Innovations are rooted in the interplay between the cooperative–competition intentions of the actors. Instead of imposing innovation from the ‘centre of the welfare service system’, innovation should be allowed to emerge from the ‘periphery of the welfare service system’.

Therefore, the task of innovation management is not to control the actors but to facilitate responsive processes, which, in the words of Schön (1973), include “detecting significant shifts at the periphery, paying explicit attention to the emergence of ideas in good currency, and deriving themes of policy by induction”.

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CASE

Innovation supportive conditions (3/4)

Connectivity and interdependencies

“Wedon´toperateverywell in the systemlevel. There is a lot of administrativehurdlesbetween the social services and the healthcareservices... especially in elderlycare... ...Thesehurdleshinderdevelopingcustomer-orientedservices... ...sometimesweforgetthat the customers’ problemsdon´tfollow the logic of administration.”

“...it is noteasy to talkabout new ideas... ...itseemsthatthey [the Social Service Department] just politelylistenwhatwetellthem... ...toooftenideasremainideas... ...don´tproceed to the implementationstage... ...there is somekind of culturalstickiness.”

“Sometimesweaskserviceproviders to introduce new ideas of how to meet the changingneeds of citizens. I thinkit is reasonable to expectthatserviceproviderswith the bestexperience in the fieldcouldthinkservicesfrom the new perspectives and develop new kind of services... ...However, wehavefoundthatthereareserviceprovidersthatarenotveryagile... ...itseemslikethey miss oldgooddays and don't want to see the reality of what happened.”

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CASE

Innovation supportive conditions (3/4)

Utilising connectivity and interdependencies

Connectivity and interdependency are essential for the system´s evolution. It is the degree of connectivity which determines the network of relationships and the transfer of information and knowledge.

‘Strong’ and ‘weak’ ties (Granovetter, 1973).

Weak ties improve the welfare service systems´ ability to see things “in a new light”, whereas strong ties support the conversion of seeing into “doing differently”. Weak and strong ties increase information redundancy in the welfare service system. Information redundancy is important for innovation because it means the use of more elements than necessary to maintain the performance of the system in the event of failure of one or more of the elements. In other words, information redundancy reduces the fear of failure, which, is one of the main obstacles to innovation.

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CASE

Innovation supportive conditions (4/4)

Diversity

“Diversity is important because the needs of clients are varied… …it is not possible to develop new services without understanding of various needs, and getting understanding requires knowledge that is dispersed different actors.”

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CASE

Innovation supportive conditions (4/4)

Pursuing diversity

Most people take risks on the basis of known rather than unknown probabilities. ‘Playing safe’ may be disastrous in the decision domains around innovation, because the usefulness of innovation cannot be known a priori may induce public organizations to play safe and stay away from uncertainty and experimentation.

 ’Boundary spanning’ = a combination of the different functions, processes and roles that are used by the actors who try to guide their interaction in a direction that produces results.

‘Boundary spanners’ = information filters & knowledge interpreters regulate the flows of information that both come into the system from the environment and go out of the system, and change information into forms others can understand . They ensure that the welfare service system not only has clearly expressed rules and guidelines but also openness to new ideas and influences, and a willingness to change old patterns.

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CASE

Conclusions

While adapting the complexity-based interpretation that the innovation is emergent in its nature, we do not claim that an emergence is the result of a process of pure self-organization.

Instead of claiming that innovations “simply happen” or “bubble up”, we believe that a new order, i.e. innovation, is more appropriately constructed rather than self-organized as such (cf. Hazy et al 2007, Goldstein 2003).

Adapting Hazy et al (2007), we think that innovation requires constant support and resources. The ‘success’ of an innovation much depends on the attention the actors bring to the innovation process. We argue that by paying attention to trust, responsive communication processes, connectivity, interdependencies and diversity, it is possible to create favourable conditions for innovations in complex welfare systems.

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INNOVATION as a COMPLEX PROCESS

‘CREATIVE DESTRUCTION’

POSITIVE FEEDBACK

  • DYNAMIC CREATIVE ABRASION

Strengthen

INNOVATION

Equivocality

INTERACTIONCommunication in strong & weak ties

Emerges

TRUST

  • Diversity of ideasInformation redundancyPower conflictsControversial interests

Enables

Builds

DEADLOCK

Ambiquity

Crumbling

NEGATIVE FEEDBACK

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See more....

Aasen, T. M. B. (2009) Innovation as social processes. A participative study of the Statoil R & D program Subsea Increased Oil Recovery (SIOR), Norwegian University of Science and Technology.

Fonseca, J. (2002) Complexity and innovation in organizations. New York: Routledege.

Jalonen, H. & Juntunen, P. (2011?) “A Framework for Enabling Innovation in Complex Welfare Service Systems”, Baltic Journal of Management