How firms can use effectuation to overcome market-based innovation barriers

ESCP researchers tried to understand how firms overcome market-based innovation barriers and achieve innovation performance using a combination of mindsets and actions. In so doing, they provided more nuanced insights into how effectuation orientation can help firms. This has important implications for innovation policy and innovation management.

“The received wisdom from the growing body of literature that addresses innovation performance has highlighted that innovation is closely associated with firms’ competitive advantages and financial performance,” PhD graduate Sebastian Szambelan and professors Yi Dragon Jiang and René Mauer explain in the European Management Journal. “Yet achieving innovation is particularly difficult for established firms because they may face market-based barriers, defined as barriers related to the external market environment the firms are confronted with.” Examples of such barriers are competitive rivalry on price, technology, product quality, reputation or brand, as well as missing market demand. Market-based barriers can be perceived as the given characteristics of a market environment to which organizations must adapt.

However, in a dynamic market many companies have difficulties in overcoming these barriers: In a 2018 survey of 270 corporate leaders in strategy, innovation, and research & development roles by KPMG and Innovation Leader (an online resource for corporate innovation teams), the inability to act on signals crucial to the future of the business was cited as one of the most important obstacles to innovation (42% of respondents). “We asked about two related barriers in our survey: how well does your company ‘pick up’ on signals of change, and how well does it act on them? Only 18% of respondents said that their companies had trouble with the former — so at most companies, there’s awareness of disruptive start-ups entering their sector, or changing customer purchase behaviours. The problem is acting on those signals,” writes Innovation Leader Co-founder and CEO Scott Kirsner in the Harvard Business Review. “Too many companies wait for the annual strategic off-site to roll around before they address the changing dynamics of their market.”

“In fact, we know relatively little about how organizations can overcome market-based barriers”, the researchers add. Recent research on the topic can be organized from two perspectives: the mindset-based view, represented by an organization’s culture and underlying values; and the action-based view, represented by certain actions taken to build leadership, management processes, or human capital. However, little research has systematically investigated how both mindsets and actions can help firms overcome these innovation barriers. “A deeper understanding of this subject could provide new insights into our knowledge of how firms can achieve this, and therefore catalysed our thinking and helped us approach the innovation phenomenon in a novel way.”

To tackle this research question empirically, they relied on a quantitative research design using survey data from 157 established organizations in Germany. Conceptually, they borrowed the effectuation orientation construct from the entrepreneurship literature. Effectuation orientation (EO) is defined as a strategic orientation that reflects a firm’s direction toward proactively shaping and designing the external environment, and creating new markets. The dimensions of this construct fall into two categories: (1) firms’ mindsets, represented by effectual control orientation (ECO); (2) firms’ actions, represented by four effectual action orientation (EAO) dimensions (affordable loss orientation, contingency orientation, means orientation, and partnership orientation).

“The results from our analyses show that EO is highly relevant for studying how firms overcome market-based innovation barriers,” they consider. “Our study further emphasizes variations in how effectual actions are related to perceived market-based innovation barriers, which in turn influence innovation performance. Specifically, it discusses ECO as a firm’s underlying effectual mindset, a mindset that triggers the remaining action-based effectuation orientation dimensions.” The findings thereby offer insights into the effectuation and innovation literature, and they hold several promising implications for practitioners:

First, the study interprets market-based innovation barriers as socially constructed perceptions. Having such a conceptualization in mind instead of seeing innovation barriers as given and uncontrollable obstacles, which might prevent potential innovation activities from being pursued, it shows practitioners that they might be able to reduce and overcome certain innovation barriers.
Second, ECO is introduced as a novel firm-level orientation driven by a mindset towards controlling the environment and co-creating its future. Building on this ECO, the implementation of the effectual action orientation dimensions shows promising effects on the perceived market-based innovation barriers. In particular, focusing on given means rather than inaccessible means or unavailable forecasts could yield more realistic solution spaces.
When looking at the characteristics underlying effectual means orientation, firms could focus more on initiatives for which they have the relevant capabilities or the greatest motivation. This would at the same time help them to leverage existing knowledge and expertise in the best possible way.
Furthermore, an openness to contingencies and their association with opportunities helps in perceiving the market more positively and thus in reducing perceived market-based innovation barriers. Specifically, this effectual dimension suggests that firms establish a firm mindset that allows them to perceive new information or setbacks as opportunities. They could then exploit contingencies effectively.
Additionally, as other publications have already shown affordable loss orientation and partnership orientation are still worth pursuing. However, practitioners should be more aware of their possible consequences on perceived market-based innovation barriers. If these barriers are perceived as higher than before, managers might understand where such an increase originates from and could act accordingly.

“Ultimately, this study shows that lowered perceived market-based innovation barriers are positively associated with a firm’s innovation performance,” the researchers conclude. “This highlights the importance of understanding the perceived levels of innovation barriers, what they originate from, and how they can be overcome.”

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How to Take Your Career to the Next Level With an EMBA?

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How to Take Your Career to the Next Level With an EMBA?

Odile Bocande-Koffi - CEO and founder of OBK Performance

“Other people have done it successfully, so why not you?” As CEO and founder of OBK Performance, this question is at the centre of Odile Bocande-Koffi’s life and career. An Executive Business Coach who specialises in leadership development, Odile uses the knowledge she gained at the Executive MBA at ESCP Business School (Class of 2012) to help her clients leverage their strengths. In her master class “How to take your career to the next level with an EMBA”, she encourages you to push beyond your imagined limits, to ask yourself “why not me?”, and to consider the Executive MBA (EMBA) as an investment in your career that will transform your life. Here’s how.

Learning Different

Because your outlook has evolved since you started your career, the EMBA is an opportunity to learn differently. When you have a wealth of professional experience, how you learn is more efficient and yet more profound. Beyond the classroom, you will also learn from your peers and their diverse professional backgrounds, allowing you to expand your knowledge in a unique way.

Working in groups is a core feature of the EMBA experience at ESCP Business School, where Odile was a participant. In addition to learning about the latest techniques in strategy and leadership, or the foundations of economy and finance, hands-on group work allows you to discover the power of interpersonal relationships, how to motivate people working at your company, and how to be a positive influence.

A One-Shot Boost in Your Network

There’s a common thread that unites the people who decide to do an EMBA: their desire to enact positive change in their life and to empower their careers. From the first day of the programme, your network instantly grows across industries and the world. The camaraderie that comes from working together towards a common goal despite different personalities and cultures creates a solid and longlasting bond. The relationships you form throughout an EMBA push you to explore and adopt new mindsets.

Personal Development

When she joined the EMBA at ESCP Business School, Odile’s goal had been to progress in the corporate world where she had spent most of her professional life. But as she moved forward in the programme, she started to notice something interesting. While she could have chosen electives to specialise in finance or marketing, her course selection revealed a deep fascination in personal development, specifically a passion for helping people to grow. Those courses became the foundation of her current professional life. Odile left the corporate world to make the exciting leap into becoming a business owner in the personal development sector. She continues to apply skills she honed during her EMBA to ensure the success of her company where she delivers coaching services to executives and various individuals, while also organising conferences and group trainings.

As Odile says, “you have the option to choose the area where you want to develop yourself.”

There is a common misconception that you need to have a specific project to be able to get the most out of an EMBA. What Odile’s experience shows is that this programme can take you on an unexpected career path or spark a new idea that reveals a passion for something previously unknown. It is the chance to take stock of where you are now and look forward to where you can go. The EMBA can change your mindset from wondering whether something is possible, to knowing that it is and having the tools and confidence to make it a reality.

Overview of the Benefits

Career boost

Positive and sometimes unexpected outcomes
The knowledge to choose your career path

Salary increase

Graduates of ESCP see an average 78% salary increase in the three years following their EMBA.
Confidence to ask for the salary you know you deserve

Major attractiveness and Opportunities

The EMBA is a stamp of approval, a gauge of quality.
Headhunters recruit EMBA participants even before the end of the programme
ESCP’s programme is ranked 7th in the world by the Financial Times

Capacity to dare

You seek out new challenges because you have the tools to figure out how
You can make things happen

Mindset

You begin to think differently
Classes and peers that push you to dig deeper
“It’s just magic. You see yourself growing, you see yourself thinking differently, and the people around you tell you ‘You’re different’ in a good way.”

Executive MBA at ESCP Business School

For Odile, the Executive MBA at ESCP was a choice based on authenticity and mutual exchange. When she first encountered the programme at a fair, she felt that the school valued her goals and her needs. Indeed, the programme is designed to adapt to your unique career trajectory. You can personalise your curriculum on the most a granular level, be it in length, in location, or content. With over 50 electives across 5 European campuses, you will go beyond the fundamentals of business management and acquire in-depth knowledge in a variety of subjects. The unique elective structure means that throughout the programme, regardless of the campus you choose, you will meet and work closely with different participants from around the world and broaden your world-view.

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As a high-potential executive, there comes a time when you decide to take your career to the next level. Whether it’s because you’re ready for a new challenge or you want to make a more dramatic career shift, this webinar will help you determine if an Executive MBA (EMBA) is what you need to take control of your future.

Join us and Odile Bocande-Koffi, a highly-experienced Executive Business Coach, to see how an EMBA can help you achieve your personal and professional goals.

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