Process management and technological innovation: a longitudinal study of the photography and paint industries

Administrative Science Quarterly,  Dec, 2002  by Mary J. Benner,  Michael Tushman

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Process management's influence on exploitation. Process management activities can influence technological innovation by affecting an organization's tendencies to build on familiar knowledge in its innovation efforts. There are two main mechanisms by which process management activities might influence innovation in organizations: process management's effects could unfold both through incremental learning, as process management activities are increasingly applied to an organization's routines (e.g., Levitt and March, 1988; Lant and Mezias, 1992), and through its influence on the internal selection environment for innovation projects.

Process management as a system of incremental learning arises following the adoption of process management initiatives, as best practices are established and organizational activities are repeated in these standard processes. Process management specifically prescribes a focus on incremental change in existing organizational routines, and its accompanying practices support this philosophy (e.g., Adler, 1993; Anderson, Rungtusanatham, and Schroeder, 1994). Process management entails a view of improvements as controlled experiments that involve repetition of practices and measurement prior to making small, testable changes (Hackman and Wageman, 1995; Harry and Schroeder, 2000). Organizations collect and rely on measures of efficiency (e.g., time to market for new products) and quality (customer satisfaction) to guide improvement efforts. Christensen and Bower (1996) showed that among disk drive manufacturers, stable resource allocation processes that were focused on existing customer satisfaction channeled innovation away from architectural innovations for emergent customer sets. As process management creates an organizational focus on measurements to satisfy existing customers, it is also likely to channel innovation into areas that benefit existing customers and exploit existing knowledge.

Organizational learning research suggests that repetition of and incremental improvement in established practices results in both increased efficiency and proficiency in those activities (Levitt and March, 1988; March, 1991; Levinthal and March, 1993). Repetition through routines not only reduces the time to carry out the activity but also reduces the variance in performance of the routine, reflecting increased proficiency. Thus, as incremental learning associated with process management extends in an organization, the organization becomes not only more efficient in a set of practices but also increasingly reliable as the variation in its performance is reduced (March, 1991; Levinthal and March, 1993). Moreover, as process management activities apply directly to product development processes (Cole and Scott, 2000), this increased efficiency and reduction in variation associated with increasingly reliable processes directly affects the firm's innovations. Organizations will innovate more rapidly as they incrementally improve innovation processes, yet the variance in the resulting innovation and/or new product development outcomes will be reduced. Increased process management activities will be associated with enhanced incremental learning along a given technological trajectory.