Innovation management and entrepreneurship

by Lars Fuglsang, Roskilde University

The essay describes what is considered a historically founded model of innovation, the innovation chain, and investigates the role of innovation management within that chain. The innovation chain appears from relationships between four innovation mechanisms:

  1. institutional pressure,
  2. firm strategy,
  3. labour roles and
  4. personal positions.

The paper especially focuses on problems in the link between firm strategy and labour roles and explores at the theoretical level how the chain can be sustained through various forms of innovation management implying co-operation. The paper is illustrated with a Danish case of innovation in services.


The innovation chain

This essay deals with innovation within the context of a general systems theory mostly following Luhmann.
Innovation is understood as changes in structures of expectations within a firm that are approved by the firm. Structures of expectation are seen as structures that regulate the behaviour of employees within the firm (cf. below).
Deviations in the firm's expectations can develop from different sources (employees, management, etc) and are a result of a growing complexity within and around the firm. Complexity can be understood as a growing number of mutual obligations within and across firms and organisations making it inappropriate for all actions to take place at the same time or the same place. Complexity increases though the risk of unexpected events and disturbances between actions which in turn may lead to attempts to reduce complexity through structural change.
In order for deviant events to become innovations, the firm's subsystems have to "connect" to them as permanent structural changes. Along these lines, Innovation management can be seen as an activity that informs acceptance or rejection of unexpected events with the purpose to ensure the firm's survival as a system under change.

Expectations are not abstract structures but may take various concrete form. At the general level, we can distinguish between four expectational forms in a firm that management can relate to (partly following Luhmann pp 315):

  1. Expectations to persons. These are expectations within the firm that only one person can fulfil. A person is, following Luhmann, not an human being, but an identity established in order to arrange expectations within the system (the firm).
  2. Expectations to roles. Roles are subsets of a person (that a person must rehearse), but they also represent more abstract identities that can be fulfilled by several persons, for example in an occupation or a job task.
  3. Expectations to strategies. These forms of expectations regulate behaviours which cannot be regulated by a role or a person alone, because the intended behaviour is beyond what a person or a role can take care of. Strategies are programs that co-ordinate actions and regulate under which conditions an action can be performed. Strategies also program actions to fit the requirements of other, neighbour firms or organisations.
  4. Expectations to values. These forms of expectation enables actors to assess the value of specific events in comparison with other events, for example through political or economic assessments.

An innovation understood as an unexpected behaviour which is endorsed by a firm or organisation thus has to be a) programmed at the level of strategy, b) performed at the level of roles, c) rehearsed at the level of persons and d) assessed at the level of values. Innovation management can inform these activities and should not be limited only to one of them.

As a firm and its surroundings become complex they may chose to differentiate into smaller subsystems that each upgrade one of these expectational forms. Here again we may at the general level distinguish between four subsystems (avoiding a distinction simply between physical "departments":

  1. Front stage , where roles are dominant. Front stage is "communities of practice" where actors are oriented towards the roles they may perform.
  2. Back stage are interaction systems where people may step out of their roles, rehearse them or communicate about discrepancies between roles and persons.
  3. Middle stage are organisational systems where actors are oriented towards programming behaviour.
  4. Deep back stage are societal systems (connected to the market or the political system) where actors will assess the value of certain events (for example in economic or political terms).

One can think of a restaurant as an example. Front stage is the dining room where the waiter and the customer orient themselves towards the roles they may perform, especially if they are unknown (anonymous) to each other. Back stage is the kitchen or at home, where the waiter or the customer prepare themselves for (serving the) dinner. Deep back stage is the market place or cultural institutions permitting an assessment of the value of the restaurant and its menus. And middle stage is various meetings where programs concerning working hours, working style, quality and style of food etc are in focus.

The different stages can, because they upgrade different expectational forms, be said also to orient themselves towards different structures of knowledge and governance. Hence, front stage and back stage tend to upgrade experience-based knowledge (knowledge about roles and persons), while middle stage and deep back stage tend to upgrade theory-based or abstract knowledge (knowledge about programs and values). Front stage and middle stage tend to upgrade top-down steering (steering through roles and programs) while back stage and deep back stage tend to upgrade bottom up steering (steering through persons and values) (cf. figure 1).

As mentioned, these four arenas differentiate from each other as a result of a complexity in the firm and its surroundings, allowing certain expectational forms to be present only at a certain times and certain places. First of all, the firm may want to differentiate an arena for programming activities because of the growing complexity in the firm's situation, making it impossible to regulate behaviour through roles and persons alone. This implies that the level of strategy tend to break away from the level of roles and persons.

Persons may also increasingly be "set free" or differentiated from roles. Complexity means that each individual will participate in a growing number of subsystems inside and outside the firm and have different kinds of obligations that are not consistent with one role.
Once the arenas have been differentiated, roles may tend to become squeezed between the strategic and the person-oriented forms of expectations. Furthermore, as this goes on, the different subsystems of the firm or organisation may tend each to promote a particular expectational form and become immune towards other forms. This is true particularly under processes of innovation and learning, where a discrepancy may emerge between back stage expectations to persons (what a person wants for herself) and front stage expectations to roles (what the firm requires of that person). The potential discrepancy explains why strategies and roles sometimes are rejected by the personnel all together, while bottom-up, experience oriented approaches are promoted.

In a Luhmann perspective we can say that the different subsystems, once they have differentiated from each other, may still be dependent on each other, even if they do not communicate directly with one another. But in order for the system not to destabilise, they have to participate in and disturb each others communication, they must communicate with each others communication. Thus, actors have, for example, to move around between the subsystems and participate in various communications about the firm.

The subsystems may be connected to each other in many ways, but most normally they would be connected through a chain as described in figure 1:

In a "right turn," middle stage connects to front stage by programming the roles of the firm. Front stage connects to back stage by recruiting persons to the roles. Back stage connects to deep back stage by evaluating the performance of roles. Deep back connects to middle stage by assessing the strategy.

In a "left turn," middle stage connects to deep back stage by reconceptualising its strategy. Deep back stage connects to back stage by adjusting the value frame according to evaluations. Back stage connects to front stage by rehearsing roles. Front stage connects to middle stage by performing roles.

As an example, we can again think of the restaurant. Some unexpected events may happen in one of the restaurant's subsystems, for example deep back stage. Customers want to combine eating with an experience of culture for example. The various subsystems of the restaurant must connect to this deviant value in order for it to become an innovation (it can also choose to ignore the change). The firm must reconceptualise its strategy and programme new roles. It must recruit personnel and perform roles. It must rehearse roles and evaluate them. And it must assess the value of the strategy and adjust it to specific evaluations of customers and personnel.


Innovation management

Above we have seen how complexity within and around the firm may lead the firm to distinguish more between different forms of expectation structure. We have distinguished between four stages or arenas, front, back, middle and deep back stage, each becoming more differentiated and centred around one of the firm's expectational forms. For an innovation to take place, each arena has to deal with unexpected behaviour in its own terms.

I argue that the managers' role can be to ensure that all subsystem communicate about changing expectations perceived within one or more of the firm's subsystems. The manager can so to speak communicate about the deviant event in different "languages," programming language, performance language, rehearsal language and assessment language.

Middle management is a special case that most often deals with front stage and back stage events. But the role of the middle manager is changing. More and more time is spent on strategic issues.
For example, the middle manager rehearses with the employees back stage, performs roles together with them front stage. But an increasing portion of her time is spent on administrative work and meetings with top management.

An example may here serve as an illustration.
Home-help in Denmark was created during the late 1950s. Various narrations about home-help tells us that it has passed through three major phases of system differentiation that can illustrate some of the points above.

In a first phase, during the late 1950s, it was, according to respondents, mainly regulated through person expectations -- on the client side as well as the side of the home-helper. Elderly could withdraw from role identities in working life while not having to submit themselves to the strict roles of old peoples homes. They could instead remain in their home, participate in interaction systems with family and friends and here connect to new person expectations for their lives. The home-helper considered on her side herself as a "housewife", and this role was largely consistent with her person expectations at this time.

In a second phase, the complexity of home-help grew. Some elderly had more physical, economic and intellectual resources than just a few years ago. They could enter into new role obligations with friends, weak elderly persons or grandchildren for example. Other elderly stayed in their homes in a more week condition than before because they could no longer easily be accepted as residents in old age homes. The weaker elderly required more intensive, professional care than was possible for the traditional home-helper (the "housewife"). Furthermore, the "housewife" disappeared as a role identity for the home-helper, as women's relationship to the labour market grew more complex during the1960s. Home-helpers were thus to become better trained (building a professional role), they were organised in a different way with own office, real colleagues and collective organisation of work in groups.

In a third phase, the complexity of home-help grew once again, first of all because of a growing complexity of the welfare state. The procedure for the allocation of home-help became more systematic, with a legal requirement for written consideration of cases and attempts by the municipalities to create a more standardised "language" for dealing with home-help services. In 1995 elected committees of the elderly (ældreråd) and committees taking care of complaints (klageråd) became obligatory for the municipalities. Several municipalities started to distinguish explicitly between the "ordering" of services (allocation procedures) and the "carrying out" of services. Most municipalities took into use new computer-based administration programmes to streamline services and be able to document labour. A service plan was required from the municipalities, and firm plans and strategic plans were often required.

The evolution of home-help can be understood as a story about innovation through deviant behaviours of elderly and home-helpers resulting from a growing complexity within and around care for the elderly. The growing complexity also led to a differentiation of different arenas that tended to upgrade different expectational forms. In the first phase, there was no clear distinction between front stage and back stage, role and person expectations. A differentiation between front and back emerged in the second phase, when the elderly's home (front) and the office of the home-helpers (back) were clearer distinguished from each other and home-help became a professional occupation or role in its own right (different from "housewife"). In the third phase, the management of home-help at the strategic and organisational level became more important.

The evolution of home-help along these lines makes it today both more easy and more difficult to change. At the level of the subsystems, it becomes more easy to detect an unexpected behaviour (for example a special preference of a specific elderly person). But at the level of the organisation as a whole, it becomes more difficult to communicate across the various subsystems about a deviant behaviour. This is where the manager comes in. New forms of middle management have been launched such as "team management" or "group management" in order to facilitate communication.

Home-helpers distinguish between at least three forms of middle management that we can call front management, back management and entrepreneurial management. Front management is the most archaic form. The manager focuses on the performance front stage in the homes of the elderly. Back management is a more recent form. The manager seeks to protect back stage, makes use of specific person competencies, listens to employees, canalises their ideas upwards in the organisation. Entrepreneurial management is the most recent form. The manager spends more time on strategic issues. She seeks to regenerate the role and person expectations of the home-helper by "living out" the strategy and convincing others to do so as well. This entrepreneurial role appears to be very time-consuming and stressing for the manager.

A crucial problem for home-help today is thus to connect the different subarenas of action through some kind of management participation in communications. Entrepreneurial management is obviously helpful, but difficult to instrumentalise, since the entrepreneur per definition is tied to her own person expectations and personal competencies (but as such, the entrepreneur can be considered a role at the strategic level). Front and back management is easier to establish, because these management roles have their point of view and loyalty more strongly deposited in a subsystem that they build on But, as mentioned, they may tend not to facilitate communication across the subarenas

Recruitment of entrepreneurs as managers may become more important because of the differentiation between the subsystems of a firm and the need for them to "communicate about each others communication". This creates a more dynamic situation at the labour market with an upgrading of person-oriented forms of expectation and individual competencies. Today, middle managers are the ones who must have personal charisma rather than top managers who are supposed to work with strategic programs.


References

Fuglsang, Lars (forthcoming). Management problems in welfare services: The role of the "social entrepreneur" in home-help for the elderly, the Valby case. In Scandinavian Journal of Management (forthcoming).
Goffman, Erving (1959): The Presentation of Self in Everyday Life. Garden City, NY: Doubleday.
Lave, Jean & Wenger, Etienne (1991). Situated learning. Legitimate peripheral participation. Cambridge University Press, 1991
Luhmann, Niklas (1995, 1984). Social systems. Calif.: Stanford University Press.

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