Rik Aalbers, Assistant Professor of Strategy and Innovation at Radboud University and former consultant at Deloitte, has together with Wilfred Dolfsma, Professor of Strategy and Innovation at the University of Groningen, published the book ‘Innovation Networks: Managing the Networked Organization’. The book, meant for business and management students, as well as managers and directors, explores the world of network organisations and explains how managers and organisations active at this intersection can attain successful strategic innovation.
The business world finds itself in evolution. For CEOs and directors looking ahead, it is no longer a matter of defining a strategy at the end of the horizon and peacefully working towards it. With the rapid rise of globalisation, competition, and disruptive technologies, corporates anywhere in the world need to adapt to the laws of the ‘new normal’. The key question is: how?
Dozens of researchers have looked into what is needed in the new landscape, and although there is no ‘holy grail’, one thing is certain. There are several key characteristics that define future-proof business models, including a clear-cut differentiated strategy, corporate agility, innovation, the ability to embrace the power of digital, and a DNA aligned to a shared vision and common goals.
When it comes to innovation, its importance to success is by no means new. Already in the ‘60s and ‘90s, managers and researchers have given innovation a key role at the forefront of successful entrepreneurialism, yet with the rise of the above trends its importance over the years has accelerated. Its importance can be traced to the growing investment by firms – between 2005 and 2014, the innovation spend by the globe’s 1000 largest corporates increased from $400 billion to $650 billion. It does, however, not all come down to big money – an analysis from Strategy& reveals that big spenders are not necessarily the most innovative, which allows for discussions about which other key elements determine the success of internal R&D or corporate venturing activities.
To make matters more complex – despite all the knowledge, theory and best practices with regards to innovation management – studies show that a large share of programmes linked to innovation either fail or do not realise all their objectives pursued. Dozens of factors contribute to this, which typically vary per region, organisation type and size and innovation product/service, and again researchers have been able to identify the most important factors contributing to the failure of the programmes. In other words, successful innovation, according to many, not only requires that the right contextual and programme factors are in place, but also that the known barriers to innovation are mitigated. With so much under consideration, it comes as no surprise that CxO’s and managers still struggle with the phenomenon on a daily basis.
Innovation Networks: Managing the Networked Organization
To help professionals successfully manage innovation, Rik Aalbers, Assistant Professor of Strategy and Innovation at Radboud University, together with Wilfred Dolfsma, Professor of Strategy and Innovation at the University of Groningen, set up a research programme*. Started in 2004, they have reviewed a large number of models and researches on the topic, and looked into the dynamics of more than dozens of organisations. Their research focuses on innovation within organisations, where they build on theories of social network analysis and systems theory. “Organisations are built out of layers of social systems, which together form a complex network that is not easy to understand,” explains Aalbers. “For innovation to be successful from within, it is essential that the right networks are activated and that communication flows, both between formal as well as informal structures, are optimised. This applies to big organisations, but also to SMEs.”
Businesses have two reasons to reorganise, Aalbers explains. “The first stems from the wish to innovate. The second surfaces when things are not going well and people need to be laid-off: how can we limit the damage?” In both cases it will be useful to map the company’s innovation-DNA. “Improvement – which is always the goal – starts with new ideas. And only when you know where these ideas enter the organisation and how they spread, can you redeem them.” The use of an Organisational Network Analyse (ONA) offers a solution: the model shows where things happen and where not.
In their book, the authors illustrate how managers can – with the help of social network analytics – identify key processes and information flows, and how they can eliminate the information barriers within organisations that derail innovation objectives. These barriers can be removed through changes to the organisational structure, but also through the use of specific intervention methods. According to Aalbers and Dolfsma, ‘massive jumps’ in innovation activity and performance can be achieved by putting people together who ordinarily do not communicate, or by introducing a ‘forced communication governance’.
“This book explains networks, and how managers and organisations can navigate them to produce successful strategic innovation outcomes. Although managers are increasingly aware of the importance of social relations for the inner workings of the organisation, they often lack the insights and tools to analyse, influence or even create these networks,” says Aalbers.
The through network analytics obtained information can be analysed statistically, but can also be displayed in a network graph: an image that reminds of a complex molecule. This is why Aalbers talks about the innovation-DNA of an organisation. A lot can be deduced from the combination of the graph and analysis. A joint-oriented interpretation can provide rapid results. What are the bottlenecks? Where are the gaps? Who are the formal and informal key players? Why do solid and useful ideas for process improvements or product introductions result in a gridlock?
“Most managers know how things are run formally, but the informal contact between employees is just as important. This is something executives have little or no control over. A network analysis will help surface those relationships. Although informal contact cannot be imposed, it can be steered; it can be built into an organisation,” explain the authors.
The book has been released globally, and is meant for both business and management students and managers and directors. Its introduction has so far led to positive feedback from critics. Pieter Hofman, Partner at Deloitte Consulting, describes the book as a “great opportunity to come up to speed on the intersection between innovation and social networks”, while Mark Granovetter, a leading Professor at Stanford University, says that it is “rare for a book to offer value to both theorists and practitioners.” He adds: “The book represents in my view a seminal contribution and an indispensable aid for firms in search of innovation.”
* Rick Aalbers and Wilfred Dolfsma are also associated to the Centre for Organization Restructuring, a research institute focused on research of best practices during reorganisations and restructuring, and the impact of these transitions on performance and innovation.