The chapter addresses a central dilemma from the viewpoint of dynamic capabilities and the resource based view of the firm: how to manage creativity within New Product Development without sacrificing financial control. The empirical evidence examined concerns 3M’s NPD activity in the United Kingdom from a holistically viewed management control perspective at the organizational level, and a study of the development and launch of a highly successful and radically new product, Genesis. It is concluded that NPD processes within 3M in the United Kingdom display a large measure of coherence juxtaposed with flexibility through the manner in which controls, holistically viewed, are embedded within organizational routines. Using case evidence clear distinctions can be made between dynamic capabilities, resources and product outcomes, and the elements of 3M’s capability can be discerned. The authors conclude that a dynamic capability can consist of both replicable elements, and elements embedded in the culture and routines of the firm that are difficult to imitate.
“Controlling” New Product Development
On the one hand, many have argued the basic incompatibility between creativity and financial control from an essentially cultural viewpoint (Armstrong and Tomes, 1996), whilst others focus on the key role of uncertainty in new product development (Cooper, 2001).
The cultural barriers discussed by Armstrong and Tomes (1996) are set out in Table 1. They argue that design within new product development follows quite different imperatives from those of management control, with the designer being akin to ‘hero artist.’ Once it is attempted to render design accountable to managerial control, Armstrong and Tomes argue that outstanding financial returns are unlikely because such bastardized design is likely to be so watered down that the resulting new product is predictable, and so little different to that offered by the competition. It is the very unpredictability of outcomes of the design activity that make it both difficult to manage, but also as offering the possibility of super normal profits.Table 1.
The incompatibility of design and managerial control (Armstrong & Tomes, 1996)
|Language of design as ‘quite incommensurate with written and verbal language’ (Armstrong & Tomes, p. 115)|
Communication achieved by design does not work on the rational level (A&T, p. 117).
The designer as hero artist (A&T, p. 117)
|Languages of audit are those of word and number (Armstrong & Tomes, p. 122)|
Accountable design unlikely to achieve outstanding financial returns as likely to be the result of ‘corporate-level group-think’ and so ‘to relate to the product field in predictable ways.’(A&T, p.123)
‘Self-defeating nature of accountable design stems from the impossibility of planning for an outcome which depends, in its nature, on unpredictability.’(A&T, p.123)
Armstrong and Tomes’ views as to the potentially huge divide existing between those responsible for the creative aspects of new product development and accountants seeking to control the activity are echoed in Lothian (1984), who comments:
Key Terms in this Chapter
Performative: The actual performance of the routine(Feldman & Pentland, 2003).
Economic Profit: This is a general term which can be defined broadly as Net profit after tax less risk-adjusted cost of capital.
Dynamic capability: (Following Zollo & Winter, 2002, 340, emphasis added) ‘a learned and stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness.’
Collegial Control: A form of management control where peer review constitutes an important part e.g. as in universities or in Research & Development departments.
Ostensive Versus Performative Aspects of Routines Ostensive: This is the structure or abstract understanding of the routine.