FRONT END PROCESS FORMALIZATION

Management can try to ensure that activities considered necessary and critical for the success of new product innovations are thoroughly accomplished for example by setting up formal processes, reviewing results periodically, monitoring work activities and progress, and establishing reporting procedures. Process formalization in this study means specifying the procedures to be followed and monitoring that work activities are proceeding in accordance with the defined procedures.

Process control is typically used in routine, structured and independent work tasks when appropriate work processes leading to the desired end results are known426. Classical contingency theory makes the distinction between mechanistic and organic structures427 stating that an increase in task uncertainty causes a reduction in formalization and an increase in decentralization428, leading toward more organic organization structures. The front end phase, being an experimental and even chaotic endeavor, is not so fertile ground for process control or process formalization based on the above arguments.

Process models have been developed to decrease fuzziness and increase a systematic approach in the front end of innovation429. The novel development problems call for information transfer between organizational functions, which further increases interdependence between functions and the need for integrating work activities.

425

Thomke and Fujimoto 2000 426

Ouchi 1977, Ouchi 1979, Eisenhardt 1985 427

Burns and Stalker 1961, Donaldson 2001 428

Donaldson 2001 429

See e.g. Cagan and Vogel 2002, Nobelius and Trygg 2002, Koen et al. 2001, Cooper 1998, Khurana and Rosenthal 1998, McGrath 1996. See Chapter 2.3.1 for the introduction of different process models.

Formalization removes the need for excess communication and brings structure in the middle of uncertainty and chaos. Ulrich and Eppinger state that the front end phase, compared to other development phases, is the phase where the coordination of different expertise is the most essential430. Khurana and Rosenthal emphasize that a formal approach means implementing an explicit and widely known process with clear decision-making responsibilities and specific performance measures431. The decision-making structure in the form of decision gates or review points is typically defined together with the front end process model. Tatikonda and Rosenthal have pointed out that periodic reviews are important especially for senior management providing a time and place for intervention and for giving guidance regarding project decisions432. The existence of specific review points also decreases the probability that senior management gets too involved, i.e. too deeply, in operative decision- making. The right timing and existence of adequate information to make decisions in these review points is critical433. A variety of benefits have been associated with process formalization, e.g. the ability to focus, the possibility for managers to intervene and give guidance on project decisions, the possibility for replication and learning, and improved coordination and integration434. Tatikonda and Rosenthal found in their survey study that a greater degree of formality in development projects in general led to project execution success435. Some other studies suggest that new product success may, at least partly, depend on the existence and efficiency of a defined, formal process model also in the front end of innovation436.

On the other hand, formal process models have been criticized because they promote using one single model for the front end without considering any contextual requirements, e.g. differences between incremental and radical innovations437. Some process models, indeed, favor a more iterative and informal approach that draws attention to the main tasks in the front end or prevailing innovation culture rather than

430

Ulrich and Eppinger 2003 431

Khurana and Rosenthal 1998 432

Tatikonda and Rosenthal 2000 433

McGrath 1996 434

Tatikonda and Rosenthal 2000, McGrath 1996, Bonner et al. 2002, Ulrich and Eppinger 2003, Hertenstein and Platt 2000, Thomke and Fujimoto 2000

435

Tatikonda and Rosenthal 2000 436

Koen et al. 2001, Montoya-Weiss and O’Driscoll 2000, Khurana and Rosenthal 1998 437

their linear order or decision-making points438. Several disadvantages have been connected with process formalization, e.g. decreased innovativeness, increased corner-cutting activities, negative attitudes among employees, excess bureaucracy, and decreased flexibility439. In addition, strict formal procedures may hinder adaptation to changing circumstances and emerging new information440. Kirsch has shown in her case studies that unstructured and novel characteristics of the requirements determination phase of an information system project did not enable the use of existing formal mechanisms, but forced the use of more informal mechanisms441. Amabile emphasizes that granting a choice over applied work processes fosters creativity by increasing employees’ sense of ownership and intrinsic motivation and allows employees to maximally utilize their substance expertise and creative-thinking skills442. Ramaswami warns that excessive process formalization may actually lead to dysfunctional behavior among employees443.

Formal process control has also been negatively associated with project performance444, e.g. in terms of delays, cost overruns, lower product performance, and lower team performance in projects. Abernethy and Brownell found that process formalization led to negative results especially in projects with high uncertainty445. Again, prior research has typically investigated development projects as a whole without considering the differences between project phases. As prior research tends mostly to associate the use of process formalization with negative consequences in uncertain conditions, and because the front end of innovation is characterized by high uncertainty (e.g. compared to the development project phase), the following hypotheses for front end process formalization are stated:

H2a: Front end process formalization is negatively associated with product concept superiority.

H2b: Front end process formalization is negatively associated with strategic renewal.

438

Koen et al. 2001, Khurana and Rosenthal 1998 439

Bonner et al. 2002, Tatikonda and Rosenthal 2000, Hertenstein and Platt 2000, Amabile 1998, McGrath 1996

440

Bonner et al. 2002, Tatikonda and Rosenthal 2000 441 Kirsch 2004 442 Amabile 1998 443 Ramaswami 1996 444

Bonner et al. 2002, Abernethy and Brownell 1997 445