Managing Process Innovation through Exploitation and Exploration: A Study on Combining TQM and BPR in the Norwegian Industry

332 Pages·2014·3.713 MB·English

by  Tor Tønnessen (auth.)

Advances in Information Systems
and Business Engineering
Edited by
U. Baumöl, Hagen, Germany
J. vom Brocke, Vaduz, Fürstentum Liechtenstein
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Prof. Dr. Jan vom Brocke
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Tor Tønnessen
Managing Process
Innovation through
Exploitation and
Exploration
A Study on Combining TQM and BPR
in the Norwegian Industry
Tor Tønnessen
Center for Industrial Production
Aalborg University, Denmark
Dissertation, Center for Industrial Production, Department of Business and Manage-
ment, Aalborg University, Denmark, 2012
ISBN 978-3-658-04402-2 ISBN 978-3-658-04403-9 (eBook)
DOI 10.1007/978-3-658-04403-9
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Preface and Acknowledgements
Managing processes is important for driving enterprise performance. In order to stay efficient
companies need to improve their business processes on a continuous basis. To ensure
competitive edge companies need to change radically when new business opportunities occur
and when external demands change. Exploitation is about continuous improvement of the
existing. Exploration is about radical change. Companies need to do both. However,
experience and research show that companies have difficulties managing exploitation and
exploration in the same system at the same time. Why is this so difficult, and how can the two
development logics be integrated in a mutually supportive manner? This is theme of the book.
To operationalize exploitation in an industrial setting, I use TQM as an approach to
continuous process improvement. To operationalize exploration I use BPR as an approach to
radical process change. The question of how to integrate the business development ap-
proaches that the quality movement and BPR represent is an important enabling factor in the
further development and success of other current and actual change concepts such as Business
Process Management (BPM). The book contributes to the understanding of the challenges of
this integration and ways to accomplish it.
The point of departure for the book is my PhD study at Center for Industrial Production at the
University of Aalborg and case study research in Norwegian industry. Many people have
given their contributions to this book. First of all I thank my PhD advisor Professor Dr. Harry
Boer for all his good comments, discussions, encouraging support, patience and guidance. His
approach to Continuous Innovation made me see how many business development puzzles
can fit together into an adequate way. I thank Associate Professor Dr. Bjørge Laugen for
important contributions in discussions about theoretical and methodical issues, and for having
given me quick and good comments along the way.
My colleagues for many years, Professor Dr. Tor Claussen, Dr. Trond Haga, Senior Advisor
Ove Gandrud and Senior Advisor Rolf Sjursen have contributed in important ways to develop
my skills as a researcher and to widening of my theoretical perspectives. Many years of close
cooperation with Pål Lynne Hansen from LO has made me see the importance of employee
participation in change.
I thank my case companies, Aker Stord, Serigstad and Titania for opening their doors to my
research. I also thank my former employer IRIS for the opportunity to start up and carry out
the work with my PhD, and my present employer Statoil for the opportunity to finish it. Dr.
Sturle Næss at Statoil has supported me refining and clarifying my theoretical discussions and
contributions. I thank Professor Dr. Jan vom Brocke for important contributions to the process
of transforming my PhD thesis into a book.
Finally, I thank my wife Sigrunn and my children Espen, Marianne and Ellen for their
patience with a husband and father who spent too many hours at the computer the last years.
Stavanger 15.07.13 Tor Tønnessen
Résumé
“Maintaining an appropriate balance between exploration and exploitation is a primary
factor in system survival and prosperity” (March 1991:71).
Both exploration for new possibilities and exploitation of the existing are necessary
development strategies for organizations to survive and prosper (March 1991). According to
March, this balancing is not easy, and the two strategies compete for scarce resources as a
trade-off. In other words, they are considered mostly antithetical, where investing more
resources in one of these development strategies may result in having less to invest in the
other. This way of balancing can be accomplished by separating the two in time, at organiz-
ation levels or by departments (Volberda 1998).
Lately, some scholars have questioned whether March’s theory of balancing the two mostly
as a trade-off is always correct, and argue for a “synergistic” approach as a better alternative
in many situations (Sutcliffe et al. 2000, Cole 2002, Boer & Gertsen 2003, Osri et al. 2005,
Boer et al. 2006, Greve 2007, Isobe et al. 2007, Un 2007). More empirical research and
evidence are needed to give insight into and further develop the theory on the balancing of
exploitation and exploration (Sutcliffe et al. 2000, Cole 2002, Oshri et al. 2004, Boer et al.
2006, Andriopoulus & Lewis 2009, Fang et al. 2010, Raisch et al. 2010). My research
contributes to current knowledge through exploratory empirical research.
In order to make the theoretical constructs exploitation and exploration operational in an
industrial setting, and to discuss and further develop March’s balancing theory, I have chosen
to use two business development concepts to represent forms of exploitation and exploration:
Total Quality Management – TQM (Deming 1986, Juran 1989) and Business Process
Reengineering – BPR (Hammer & Champy 1993), respectively.
TQM and BPR have a strong influence on the way in which organizational development and
the striving for business excellence are being carried out in Norway. In particular was this
very visible in the decade before the turn of the century (Røvik 1998, Rolfsen 2000, Neerland
2000, Moltu 2000). TQM and the quality movement is very much associated with continuous
incremental improvement. It is important to keep costs and production under control, and to
eliminate mistakes and reduce variability and other elements related to the idea of exploitation
(March 1991). BPR is associated with radical change. As the name indicates it focuses on
processes, like TQM does as well. However, it is not continuous incremental process
improvement that is in focus. It is thinking fundamentally new, seeing things in new ways and
searching for dramatic changes, new possibilities and other aspects related to March’s idea of
exploration. Even if processes are in focus, the goal and the outcomes of change processes
can also be radically and dramatically directed towards other innovation areas such as
technology, markets, raw materials and organization. I use BPR to represent explorative
process innovation.
VIII Résumé
The specific setting that I am referring to is Norwegian industry. Prevailing management
traditions and concepts of business excellence are international and have been developed
elsewhere within other industrial traditions. Norwegian companies are being exposed to these
international concepts and use them to achieve business excellence and innovation. A
challenge both from an academic as well as a managerial perspective is to see whether these
international management concepts can be combined synergistically. Where do TQM and
BPR conflict? What do they have in common? Do we have to choose between them, or can
they work in a reciprocally reinforcing manner to increase companies’ innovation capability?
If adjustments are needed, what kinds of adjustments and what enabling factors seem to be
important? My specific contribution is to propose theory on the balancing of these two
concepts.
Over the last two decades, these two approaches to process improvement have gradually
merged and constitute important elements in Business Process Management (BPM). BPM is a
concept for managing business performance by managing end-to-end business processes for
successful enterprise performance (Hammer 2010). Consequently, BPM can be considered as
one approach to the integration of forms of exploitation and exploration. This book
contributes with insight in the challenges of integrating TQM and BPR, provides examples of
how to do it and with knowledge of enabling factors. Managing the integration of the kinds of
approaches that the quality movement and BPR represent is decisive for successful BPM,
which is still in its infancy (Hammer 2010).
My research is part of the two Norwegian national research programs “Business Development
2000” and “Value Creation 2010”. These two programs are action research programs, and
have been the most comprehensive research efforts related to combining international
management concepts and Norwegian industrial traditions over the last decades.
Through my involvement in these two research programs, I have facilitated and participated
in development processes in a large number of individual companies and in companies
cooperating in networks. The exploratory research reported here is based on three of those
projects, one of which is best characterized as a longitudinal case study, while the other two
are forms of action research.
In the longitudinal case study I describe and analyze a company’s efforts to combine TQM
and BPR into one development process. Various methods of data gathering have been used,
such as observations, field notes, interviews, reports from meetings and company
conferences, analysis of documents from the participating companies and statistics. The
results from the case study are discussed in relation to and compared with the results from a
national survey on quality management that was carried out together with the University of
Stavanger and “Norsk Forening for Kvalitet og Ledelse – NFKL” (Norwegian Association
for Quality and Management).
TQM and BPR are analyzed in relation to where and how they conflict with and/or support
each other. After having identified conflicting and reciprocally supporting elements, I will
Résumé IX
present my efforts to combine these two management concepts into one approach in
Norwegian industrial context. An important question is whether this kind of combination in
the same system is advisable. And if so, what further developments of TQM and BPR
practices are necessary in order to promote both incremental and radical innovations, and
which enabling factors seem to be important? How can this contribute to the further
development of the theory of exploitation and exploration?
Thus, my research objective is to contribute to the further development of the theory of
exploitation and exploration through proposing theory on the balancing of TQM and BPR.
More specifically, my research question is:
Can TQM and BPR be combined synergistically, – if so, how?
After having discussed and presented my approach, I will give examples of the kinds of
change techniques and methodologies that I believe are needed to pursue a new approach to
combining characteristics of TQM and BPR synergistically. I will try out some steps towards
this new approach and also show the practical use of what I regard as the most important
elemens and change techniques.
Two of the new techniques that I developed to pursue my approach will be discussed and
analyzed in detail. The “Enterprise Development Conference” is a technique for enabling
employee participation in higher-level strategy discussions and innovation. This will be
followed by a presentation and discussion of a technique that I have developed to strengthen
employee participation in process innovation, the Actor-Process Diagram. These two
techniques and my approach to combining TQM and BPR synergistically are tested through
action research. The results from the action research projects are presented and discussed in
relation to theory.
My main findings are that exploitation capability can support exploration capability, and
thereby support exploration, and that TQM and BPR can work reciprocally supportive in the
same development process. An industrial democracy (ID) context and a strong management
commitment seem to be important enabling factors, and support the synergistic combination
of characteristics of exploitation and exploration, thereby promoting both incremental and
radical innovations in the same system at the same time. Thus, March’s (1991) mostly
antithetical theory of balancing exploitation and exploration should be modified.
Finally, important limitations of my research design are summarized, and directions for
further research identified.
Contents
1 Introduction 1
1.1 Combining exploitation and exploration 1
1.2 Research question 3
1.3 Structure 3

2 Theoretical departure and approach – balancing exploitation and exploration 5
2.1 Process models 8
2.2 Exploitation and exploration capabilities. Trade-off or mutually reinforcing? 10
2.3 Summary 16

3 Total Quality Management 17
3.1 Background 17
3.2 Definitions 18
3.2.1 Quality defined 18
3.2.2 Total Quality defined 19
3.2.3 Total Quality Management defined 19
3.3 TQM as a complete management concept 20
3.4 The EFQM Excellence model 22
3.5 Some challenges 24
3.6 TQM as one approach to the building of exploitation capability 24
3.7 Summary 25

4 Business Process Reengineering 27
4.1 The process hierarchy 29
4.2 Some challenges, contradictions and vagueness in the BPR concept 30
4.3 Common stages in BPR processes 31
4.4 BPR as one approach to the building of radical process exploration capability 32
4.5 Summary 33

5 Is a synergistic approach to the combining of TQM and BPR appropriate? 35
5.1 The interdependence between radical innovations and continuous
improvement 36
5.2 Slow or fast growing economies – different needs at different times, or? 38
5.3 Learning as a driving force to a synergistic combining of continuous
improvement and radical innovation 39
5.4 Business Process Management (BPM) 41