International Federation for Systems Research

Proceedings of the IFSR Conversation 2012, St. Magdalena, Linz, Austria
Expanding Scope of Systemic Innovation and Socio-Ecological and Socio-Technical Perspectives
Minna Takala
minna.takala@aalto.fi
Summary: In this paper I will introduce an expanding scope of stakeholders involved in innovation activities, especially new institutions for innovation, which include open source communities, Living Labs, development labs, hacker events and crowds. Social computing practices enabling interaction especially crowdsourcing practices will be presented. These new emerging phenomena will be discussed from socio-ecological and socio-technical perspectives, and images of change –framework created by Kenneth Boulding (1956).
Keywords: crowdsourcing innovation, open innovation, systemic innovation, stakeholders, social computing, socio-ecological environment, socio-technical system
Abstract: The seminal research work by Fred Emery, Eric Trist and Tom Burns (1961) by Tavistock Institute was addressing themes related to innovation and collaboration. Socio-ecological, sociotechnical, and socio-psychological perspectives introduced in relation to organizational change as well as organic and mechanistic views. Innovation still offer valuable views to current business challenges. Also Kenneth Boulding’s Images (1956) offers a framework to describe change and currently evolving practices. In the ISSS conference 2011 at University of Hull Mike Jackson brought up in his keynote speech, that it would be very relevant revisit original thoughts of systems thinkers, and see how they would apply in the current business context. IFSR Conversations 2012 at Linz has provided a great opportunity to revisit these original thoughts and enabled inquiry to apply these concepts to current phenomena and challenges.
Recent development of global business networks, emerging new technologies, accelerated speed of development and enhanced access to data, information and knowledge challenge traditional business practices and ways of working. Sustainability has become essential and increasingly important element to long term business success, consumers are becoming more environmentally conscious on socio-ecological issues. There is a shift towards more user-centric development, focus on usability and user experience address socio-technical challenges in earlier stages of development. Social computing and social media application enable interaction with users at earlier stages and in more meaningful ways. Working with communities of practice, user communities and crowds bring up new challenges from socio-psychological perspectives. Wider group of stakeholders are included in innovation practices and new technologies are enabling interactive relationships.
1. From closed towards open innovation systems – expanding scope of stakeholders
The concept of open innovation by Henry Chesbrough (2003) refers to the fact that both internal and external sources can and should be used for innovation. This notion was already brought up by Tom Burns and George Stalker (1961) when they addressed mechanistic and organic structures related to innovation management, whereas mechanistic organizations were bureaucratic, rather rigid and more slow in decision making and in operations; and organic structures were more flexible, dynamic and open. Unfortunately for several decades traditional management practices were applied also to innovation activities and they were considered to be highly secretive and were operated in closed systems mainly within organizations. However, during the past decades, especially companies have been opening up their innovation activities to both directions in the supply chain: towards customers and end-users i.e. downstream and towards suppliers i.e. ipstream part of the supply chain. As a result, companies are increasingly dealing with many external parties including suppliers, customers, end-users, governmental organizations and research organizations (see Figure 1) for the pursuit of new knowledge. Also some new institutions for innovation are emerging globally, offering an interesting potential set of new stakeholders for innovation activities.

With the digital information technologies including social computing as Web 2.0, social media and crowdsourcing it has become easier for organizations to engage these external stakeholders in innovation activities. However, whilst these parties can be regarded as potentially valuable providers of novel knowledge, it may prove challenging for an organization to manage all these interorganizational relationships as they may differ in relationship focus and in the ways of collaboration. Accordingly, organizations are faced with the challenge of managing and structuring their innovation activities in a distributed environment. The first challenge for an organization is identifying relevant stakeholder groups in the external operating environment (L22) and developing ways to engage them in the innovation activities (L12 and L21).
Systemic Innovation has been defined by Chesbrough and Teece (1996) as an innovation whose benefits can be realized only in conjunction with related complementary innovations. According to Teece (1996) systemic innovation requires coordination throughout the system in order to realize the gains from innovations and it requires significant adjustment of parts in the business system they are embedded in. Teece (1996). For systemic innovation it is very relevant to identify related stakeholders and interaction with them.
1.1. Stakeholders for innovation
Stakeholder theory by Edward Freeman (1984) argues that there are many parties involved in corporate management and related business, including governmental bodies, political groups, trade associations, trade unions, communities, financiers, suppliers, employees, and customers. Sometimes in addition competitors are listed among stakeholders – their status being derived from their capacity to affect the company and its other stakeholders. Originally stakeholder view of the firm was addressing business ethics, morals and values. However, it has later been applied in other areas of management.
In innovation activities suppliers can be engaged with early supplier involvement, they can participate in creation of new products and services. Customers can be invited to participate into joint development for delivery process and new product and service creation. End users & non users are very valuable stakeholders for user testing. Also co-creation with lead users can provide novel insights for new product and service creation. With collaborative ethnographic user studies products and services can be developed to better serve the needs of users.
Different partners are need to new service processes and benchmarking. With research institutions including universities joint research programs can bring novel ideas and technologies into new product and service development. Employees are encouraged to participate via idea competitions and suggestions for development initiatives. These activities are also conducted with ex-employees, retirees and alumni.
Government and regulators are important stakeholders for joint development of long term research and education programs. And companies are increasingly working with non-governmental organizations for example in joint environmental and societal development programs as well as local development initiatives. Competitor collaboration has become more common e.g. via co-operation in standardization bodies, and in some industries for recycling practices.
1.2. New institutions for Innovation
Turner (1997) has defined institution as a complex of positions, roles, norms and values lodged in particular types of social structures and organizing relatively stable patterns of human activity with respect to fundamental problems in producing life-sustaining resources, in reproducing individuals, and in sustaining viable societal structures within a given environment.
New institutions for innovation – open source communities, Living Labs, development labs, Fab Labs, hacker events – have emerged in various contexts since 1980’s and they have been enabling new roles, norms and values, new structures and new ways of working. These new institutions have been expanding into other area and countries. Following open innovation principles the original institutions have offered openly information about their activities for interested stakeholders, and new initiatives have emerged globally across the world.
New institutions and practices enable creativity and adaptive approaches for development, addressing both social and economic issues. Open source communities originally operated mainly in the area of software development. Later practices have been applied in other areas as well. The first Fab Lab was established at MIT in 2002, and now there are ~100 Fab Labs globally and ~30 under development. The first Living Lab was established in 2004, and now there are ~300 of them globally and ~50 under development. While other organizations seek new sources for innovation in collaboration with these institutions their own practices need to change as well. New approaches are needed especially for mutually value-added and respectful collaboration between firms and new emerging institutions.
1.3. Crowdsourcing
One stakeholder group that has been gaining importance lately are crowds, anybody willing to collaborate. Various types of classifications have been done to understand the nature of crowdsourcing phenomenon. Originally, Howe divided crowdsourcing activities into four primary types 1) crowd wisdom; 2) crowd creation; 3) crowd voting and 4) crowd funding. Crowd wisdom relates to scientific and professional problem solving (e.g. Innocentive since 2001), collecting geographic content, aggregating location based data and information (e.g. Open Street Map since 2004) and collecting health and medical data (e.g. Patients Like Me since 2004). Crowd creation relates to distributed work (e.g. Mechanical Turk since 2005, Freelances since 2004) and crowdsourcing platforms for design and art (e.g. 99design since 2008; Express in Music since 2009). Crowd voting is an often embedded element in idea crowdsourcing platforms, as for example in Threadless.com, where people can share, score and comment on T-shirt designs; most popular designs are awarded. Crowd funding relates to funding small businesses and investing in new product and service development (e.g. Kiva since 2004; Kickstarter since 2009) for example in the area of music and art (e.g. ArtistShare since 2003). A similar type of categorization for crowdsourcing activities distinguishes between five main application domains cloud labor, crowd funding, crowd creativity, distributed knowledge and open innovation (see www.crowdsourcing.org).
2. Socio-ecological and socio–technical perspectives
Socio-ecological perspective provides framework for describing, analyzing and planning how a system, a company or an organization, (L11) is interacting with its environment (L22). These interactions have been defined as planning (L12) and as learning (L21). This approach can be used to analyze and explain how companies interact with innovation stakeholders and new institutions for innovation.
The concept of “the causal texture of the environment” created by Emery and Trist (1965) noting that the environmental contexts in which organizations exist are themselves changing under the impact of technological change – at an ever-increasing rate, and toward increasing complexity. This phenomenon seems to be still continuing. The rate of technological change seems to be still increasing, yet at the same time technologies enable people to have enhanced access to information and knowledge globally, and provide new opportunities for collaboration and sharing.
Both Participatory Design Workshop (PDW) and Search Conference (SC) methods offer opportunity of mixed stakeholder groups to plan and learn together. And new communication technology and collaborative IT platforms can offer common ground for discussing shared values, missions and goals, planning and reporting activities, as well as working together.
Socio-technical perspective can address the actual work design, how people work together in collaborative settings, how their work related to the whole organization and to relevant stakeholders. It is also possible to connect the activities to macro society and to global challenges.
3. Change in innovation systems – change in images
We need to revisit our beliefs about existing organizations, practices and ways of working, in order to understand the changes happening in the global society. Kenneth Boulding (1956) sserted that the behavior in the society depends upon the images. These images lie behind the actions of individuals, organizations and societies. The recognition of different images and basic assumptions are important for societal development. Boulding (1956 pp.3-18, 45-63) classified different aspects of images in ten elements. These elements and application to current context is presented below:

• Spatial image – the picture of the individual’s location in the space around him. This
  dimension addresses changes in physical environment as well as in information and
  communication technology – ICT supported virtual environments.

• Temporal image – an individual’s picture of stream of time and his place in time. This
  dimension looks into changes in time-based practices, for example short and long term
  connections, and synchronous and asynchronous connections.

• Relational image – the picture of the universe as a system of regularities. This dimension
  focuses on relations between organizations, and relationships among stakeholders.

• Personal image – the picture of an individual in the midst of the universe of people, roles
  and organizations around him. This dimension views personal aspects and changing roles.

• Value image – the ordering of the scale of better and worse of the various parts of the whole
  image. This dimension invites us to investigate what are the value systems in use, how we
  appreciate wealth, health, beauty and truth in our activities.

• Emotional image – various items in the rest of the image are imbued with feeling or affect.
  This dimension addresses human behaviors based on emotions, for example the passion
  for innovation and the fear of failure or success.

• Conscious, unconscious & subconscious image – an individual is capable being conscious
  of all parts of the image with the same degree of intensity, ability to perceive varies, a very
  small part of an image is exposed to our internal view at the same time. This dimension
  looks into sources of creativity, imagination beyond rational thinking.

• Certain / uncertain, clear / vague image – every aspect of an image is tinged with some
  degree of certainty and uncertainty. This dimension relates to the vagueness of fuzzy front
  end of innovation process. Risks are always related to new innovative activities.

• Real / unreal image – an image of the correspondence of the image “itself” with some
  “outside” reality. This dimension challenges us to investigate deeper levels and leads to
  implementation in real contexts.

• Public / private image – whether the image is shared by others or is peculiar to the
  individual. This dimension provides us an opportunity to address the themes of open
  innovation and transparency.

Each image is rich and complex. The dimensions above provide a framework for description of complex phenomena. Boulding emphasized that the image is a property of the individual person, so he described different images in the individual level. However, he noted that different dimensions of image could be used by the way of metaphor or analogy for organizations and societies. Some image dimensions are more certain in their nature, some of them are more uncertain e.g. the relational image, value image, emotional image.
Change can be perceived as a mutation of the image created by the true entrepreneurs of society. This change is happening based on emergent activities rising on people’s own initiatives. Without this mutation of the image, societies would rapidly settle down in a stagnant equilibrium. As the world moves on, the image does not. This has happened in many societies. In the INSCO project Boulding’s image framework is used to describe difference between traditional and emerging new institutions for innovation. The new images can be seen as extensions and modifications of the old.
4. INSCO Project – Innovation in Sourcing Competencies
This paper is based on research done for INSCO Project, which is a TEKES (the Finnish Funding Agency for Technology and Innovation), university and industry funded parallel research consortium project, conducted at Aalto University during 2011 – 2012. The project is carried out with co-operation with researchers from Aalto University, Oulu University, Kasetsart University (KU) (Thailand), CSIR / Meraka Institute and Rlabs, ReConstructed Living Lab (South Africa). Collaboration with Finnish industry is conducted with three partners: Konecranes, NSN and Teleste. These industrial partners have also their own parallel development projects, derived from specific and concrete development and business needs. Collaboration between the industrial partners and research team form a natural platform for research and benchmarking. Research methods included case studies, interviews, participatory workshops, development projects and identification and benchmarking of new practices.
The INSCO Project includes six work packages: 1) collaborative practices with suppliers in early life cycle phases, 2) management of innovation focused sourcing relationships, 3) use of demos, prototypes and pilots, 4) practices for indirect sourcing, 5) approaches with developer communities, living labs and practices for early customer involvement and 6) approaches for crowdsourcing. Research methods include case studies, interviews, participatory workshops, development projects and identification of and benchmarking with new practices. INSCO Project is looking into new practices for sourcing and new practices for sourcing innovation.
5. Conclusions
Expanding scope of innovation addressing both systemic and social perspectives is elementarily important for addressing global and local societal and environmental challenges. There are more and new kind of stakeholders involved in innovation activities. Socio-ecological and socio- technical perspectives provide good approach for collaboration towards desired future.
Further work is needed on understanding how these new institutions are managed and how they can successfully collaborate with more traditional institutions. Also the creation of sustainable financial models is an important theme for further studies. Next step will also include research on the creation of global community -based Hub network for entrepreneurs. More research activities, interviews and workshops will be conducted during spring 2012 together with selected Living Labs and other new institutions.
Other approaches to organizational design e.g. heterachy by Gunnar Hedlund, holographic organizations by Arthur Koestler, democratic organizations by Russ Ackoff, fractal organizations by Margaret Wheatley, living organizations by Rene Dubos and network organizations by Manuel Castels will be addressed to investigate this further.
6. References
Boulding, K. (1956) The Image – Knowledge in Life and Society. The University of Michigan Press. Ann Arbor
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Burns, T; Stalker, G.M. (1961) The Management of Innovation. 2nd ed. London: Tavistock Publications.
Chesbrough, H. (2003) Open Innovation – New Imperative from Creating and Profiting from Technology. Harvard
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Chesbrough, H. and Teece, D.J. (1996) Organizing for Innovation: When is Virtual Virtuous? Harvard Business
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Emery, F. and Trist, E. (1965). The causal texture of organizational environments. Human Relations, 18, 21-32.
Freeman, R.E. (1984). Strategic Management: A stakeholder Approach. Boston: Pitman
Teece, D.J. (1996) Firm Organization, Industrial Structure, and Technological Innovation, Journal of Economic
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Turner, J. (1997) The Institutional Order. Longman