HENRICH R. GREVE
  • Home
  • Research
  • Journals
  • Media
  • Blog
  • Q&A

Organizational musings

Learning from Others’ Mistakes: When Ships Go Too Fast

1/20/2020

 
Picture
Can you think of an innovation that looks very promising, especially because so many others have started using it? Can you recall any such innovations that have been disappointing? In consumer markets, cold-press juicers have spread widely and have been marketed by their positive health effects, but there is now evidence that they do more harm than good. Their sales are slowing. In business markets, airlines have long known that larger airplanes were better, and were lining up to buy the giant Airbus 380 and the slightly smaller Boeing 747-8, but they stopped after realizing that the new generation wide-body aircraft were more economical.

There are many cases like this, including worse mistakes than these two. This raises the question of how firms can quickly understand that a new innovation will disappoint, and can stop themselves from adopting it. This was a question I examined in a paper in Strategic Management Journal on the fast ferry innovation, which was briefly popular but soon proved to be a very specialized type of ship. The problem with fast ferries is that they were too fast and too heavy (they carry cars as well as people). Making such a combination go fast is a significant engineering feat, but it is also very expensive, and few routes can charge high enough ticket prices to make it profitable.

Shouldn’t this have been easy to discover? Not really. Fuel prices fluctuate, and maintenance costs are hard to estimate in advance. It is a lot easier to make the cost calculation after buying and operating a ferry (or a few ferries), but then it is too late. Still, the shipping firms learnt how specialized fast ferries were, and it took “only” about five years for this knowledge to spread. Importantly, the shipping firms learnt from each other.

Here is how it happened. Each firm that started using fast ferries accumulated experience with the costs, and this experience must have leaked. We know this because sales of fast ferries made additional sales to nearby shipping firms less likely. Some firms gave up on their fast ferries and sold them in the second-hand market (at a discount, of course), and this also made additional sales less likely. Resales seem like even stronger reason not to buy, but actually the effect of giving up was about the same as the effect of using a fast ferry. Firms learn from the high costs just as much as they learn from resales.

This is a natural finding except for one important detail. If a firm is operating an expensive piece of equipment with disappointing results, it will soon be clear that selling it is the best option. But, in order to sell it without losing too much money, it is important that the costs are kept hidden. This means that the information about the high costs must have leaked from the shipping firms using fast ferries despite their best efforts to keep them hidden.

Inter-organizational learning is hard to stop. Firms learn from the mistakes of other firms, even the mistakes that they try to keep hidden!

Greve, H.R. 2011. Fast and expensive: the diffusion of a disappointing innovation. Strategic Management Journal, 32(9): 949-968.

Woven Networks: Why One Type of Contact Isn’t Enough

1/13/2020

 
Picture
Most people who work know that it is important to have friendly working relations with other workers, especially with managers. Researchers call these relations network ties and have found that they are great for getting work done and improving career outcomes. It is less clear to most, but very obvious to business school professors, that those who are or want to become managers are especially interested in network ties, and not only with other (higher-up) managers. They try to connect with anyone who can be useful, including various specialists in the organization.


A special version of these ties is formed between technologists making inventions and managers launching new products. They need each other, and each knows they are competing with others in the organization who are trying to use other innovations to launch other products. Out of mutual interest in their careers (and to be helpful to their employer), they may partner up, exchange information, and then – importantly – try to influence others to get their innovative product approved for launch. In a recent paper in Administrative Science Quarterly, AnneTer Wal, Paola Criscuolo, Bill McEvily, and Ammon Salter document what may be an especially good way for these partners to influence others for the sake of launching innovative products.

The authors discovered that a special structure – the woven network shown in the figure here – is best for these technologist/manager partners to pursue. In the figure, a manager and a technologist who are collaborating to advance an innovation are both connected to peers and seniors in the organization, and they are both connected to other managers and technologists. In other words, each of them is connected to people who occupy different roles at different levels. This allows them to create buzz for the innovation and to influence their bosses. What’s new about that? Here’s the key: the technologist networks with people in various role sets, and the manager networks with different people in those same role sets. The results of this specific type of influencing create a particularly strong advantage.

Technicians and managers have different knowledge, different goals, and different interpretations of an innovation. A manager always sounds more credible talking about its commercial features and less credible talking about its technological features. For the technician, it’s the other way around. By tapping into this particular kind of networking, the team helps both kinds of information reach people in different functions and at different levels of the organization. The team’s joint influence over different people within a given role/level gets reinforced when those people then talk to each other about the innovation’s potential.

How big are the effects of such interwoven networks? A modest change in the degree of this type of networking increases the likelihood of innovation launch by about 8 percent. In management studies, and especially anything that has to do with innovation, that is a big effect. It is interesting that the effect is so big and the behavior needed to get it is contrary to what many people do. A geeky technician will mostly speak to peer technicians. An instrumental technician will mostly speak to senior managers. Each of them will be missing influence with important roles in the organization, and they will have a better chance to succeed if they are paired with a manager who networks with people in a variety of roles and encourages the technician to do the same. In networking, as in so many other aspects of bringing a new product to life, teamwork is key to producing the best possible result. So let’s start talking—and not just to the people who already know what we know and think how we think.
​
Ter Wal ALJ, Criscuolo P, McEvily B, Salter A. 2020. Dual Networking: How Collaborators Network in Their Quest for Innovation. Administrative Science Quarterly, forthcoming

    Blog's objective

    This blog is devoted to discussions of how events in the news illustrate organizational research and can be explained by organizational theory. It is only updated when I have time to spare.

    Archives

    September 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    October 2023
    August 2023
    July 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    August 2022
    July 2022
    May 2022
    March 2022
    February 2022
    January 2022
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    August 2020
    July 2020
    June 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    October 2019
    September 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    December 2017
    November 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    March 2016
    August 2015
    July 2015
    December 2014

    Categories

    All

    RSS Feed

Proudly powered by Weebly
Photo from pixelmattic
  • Home
  • Research
  • Journals
  • Media
  • Blog
  • Q&A