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

Process management and its associated set of managerial practices and programs (e.g., total quality management, Six Sigma, ISO 9000) is perhaps the most important managerial innovation of the last 20 years (Cole and Scott, 2000), so much so that it has taken on aspects of a managerial fad (Abrahamson, 1996). Over this period, managers have perfected process methodologies and practices, even as scholars have explored the nature and boundaries of this phenomenon (Cole and Scott, 2000). The promise of process management is that focusing on variance reduction and increased process control will drive both speed and organizational efficiency (e.g., Garvin, 1988; Clark and Fujimoto, 1991; Harry and Schroeder, 2000).

The process revolution's initial focus was on manufacturing, but its reach has since extended into administrative, product development, distribution, and resource allocation processes in organizations (Garvin, 1995, 1998; Powell, 1995; Heaphy and Gruska, 1995; Cole, 1998). In particular, process management's potential to affect technological innovation directly has also increased, through programs like ISO 9001 and Design for Six Sigma, specifically concerned with extending process management techniques into product design and development activities (Harry and Schroeder, 2000; ISO, 2003). As the influence of process-focused activities increasingly spreads to areas of exploration or variation-creation in organizations, the question of how it affects technological innovation is increasingly important (Sutcliffe, Sitkin, and Browning, 2000).

Although Winter (1994: 63) observed that quality management may be "indispensable in the struggle for competitive survival," the emphasis on process management techniques and methods has taken place in competitive contexts that require a firm to be both efficient and innovative, to explore as well as exploit (March, 1991; Tushman and O'Reilly, 1997). As process management techniques celebrate variance reduction and control, they may accentuate incremental, exploitative innovation at the expense of exploratory innovation (Sutcliffe, Sitkin, and Browning, 2000; Benner and Tushman, 2003). While exploitative activities help firms learn and adapt quickly in the short term, those same activities may inhibit experimentation and exacerbate inertia and, in turn, impede organizational responsiveness to environmental shifts (Levinthal, 1991, 1997a; Repenning and Sterman, 2002).

Despite the ubiquity and endurance of process management techniques in practice and their potential to affect exploration, there has been little research on how these practices affect technological innovation. Most process management literature is prescriptive, aimed at practicing managers to promote the use of process management in organizations and citing the expected benefits of improved efficiency and profits (e.g., Garvin, 1988, 1995; Harrington and Mathers, 1997; Harry and Schroeder, 2000). Several empirical studies have explored the cross-sectional relationships between process management adoption and financial performance (Powell, 1995; Ittner and Larcker, 1997; Samson and Terziovski, 1999) but have found no conclusive evidence of the expected benefits associated with process management techniques. Ittner and Larcker (1997) found the use of process improvement techniques associated with improved performance in the auto industry but not the computer industry, while Powell (1995) and Samson and Terziovski (1999) found no evidence that the specific use of process improvement techniques affected financial performance. In addition, research shows that process management may result in paradoxical outcomes, such as poor financial performance following process-focused efforts (e.g., Garvin, 1991; Sitkin, 1992; Sterman, Repenning, and Kofman, 1997). These equivocal results highlight the importance of research into the contingent effects of process management on both short- and long-term organizational outcomes. While some research has begun to explore process management's potential to affect exploration (Sutcliffe, Sitkin, and Browning, 2000; Benner and Tushman, 2003), empirical work has not examined the effects of process management on technological innovation. We undertake that task in this paper.

PROCESS MANAGEMENT AND TECHNOLOGICAL INNOVATION

Process management practices are the shared underlying component of a series of quality-related initiatives, including total quality management (TQM), the Malcolm Baldrige Award criteria, ISO 9000, and Six Sigma programs. Process management techniques focus on improving an organization's efficiency through high-level coordination of an organization's activities in a rationalized system of end-to-end processes. The process management philosophy and associated procedures, focused on rationalizing, coordinating, and repeating organizational processes, are a comprehensive problem-solving heuristic that is process-oriented, customer-focused, fact-based, and participative throughout a firm (Winter, 1994).