” Complexity Theory and Innovation Manage ment”

1. ”ComplexityTheoryand Innovation Management” Dr. Harri JalonenPrincipal lecturerTurku University of Applied Sciences, Finlandharri.jalonen@turkuamk.fi

2. http://www.youtube.com/watch?v=Naf0jxDd-R0

3. 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."

4. “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)

5. ‘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)

6. 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)

7. 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

8. 1) 10 Starting points harri.jalonen@turkuamk.fi

9. STARTING POINTS (#1) DATA – INFORMATION – KNOWLEDGE harri.jalonen@turkuamk.fi

10. 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

11. 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

12. 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

13. 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

14. 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”

15. 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

17. STARTING POINTS (#2) Test your tacit knowledge. http://www.sveiby.com/articles/TacitTest.htm Karl-Erik Sveiby www.sveiby.com harri.jalonen@turkuamk.fi

18. 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

19. 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

20. 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

21. 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

22. STARTING POINTS (#5) ”All men by nature desire to know” Aristoteles (384 BC – 322 BC) ”Ignorance is bliss.” (Gray, 1765)

23. 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

24. 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

25. STARTING POINTS (#5) (Taleb 2007) harri.jalonen@turkuamk.fi

26. STARTING POINTS (#5) All swans are white – are they? harri.jalonen@turkuamk.fi

27. 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

28. 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

29. STARTING POINTS (#7) harri.jalonen@turkuamk.fi

30. STARTING POINTS (#7) (Eppler & Mengis 2004) harri.jalonen@turkuamk.fi

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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.”

38. 2) What is an ORGANIZATION? harri.jalonen@turkuamk.fi

39. WHAT IS AN ORGANIZATION?

40. 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

41. 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)

42. WHAT IS AN ORGANIZATION? ORGANIZATIONa VERB or a NOUN? harri.jalonen@turkuamk.fi

43. 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?

44. WHAT IS AN ORGANIZATION? Is it ”a machine” or ”machine-like OR Is it ”an organism like dynamic living system”? harri.jalonen@turkuamk.fi

45. 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)

46. WHAT IS AN ORGANIZATION? (Paraskevas 2007)

47. WHAT IS AN ORGANIZATION? As the ontologyshifts, epistemological and methodologicalconsequencesareexplicit… harri.jalonen@turkuamk.fi

48. 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

49. 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)

50. 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)