INNOVATION IN THE AEROSPACE INDUSTRY: THE ROLE OF COMMUNITIES OF PRACTICE

Nicolas Rolland
Director Social Prospective, Danone Affiliated Professor, Grenoble School of Management France nicolas.rolland@hotmail.com

ABSTRACT This paper introduces the concept of knowledge networks to explain how firms sustain the development of innovations. The core premise of this concept is that knowledge networks are conceptualized in the firm as communities of practice, but it cannot be considered as a homogeneous concept that lead to a specific type of innovation. More specifically, this article takes up the challenge of analysing how different types of communities of practice influence the development of different types of innovations. Resulting from a study of 124 communities over the last 3 years and based on 93 innovations developments in 7 firms of the aerospace industry, this research demonstrates that companies wanting to develop radical change need to focus their attention on both unrelated knowledge and open communities, while the development of incremental innovation is deeply related to centralized communities.

KEY WORDS Communities of Practice, Innovation, Knowledge Networks

Innovation in the Aerospace Industry: the role of Communities of Practice

Why are knowledge management strategies crucial for the management of innovations and why should the innovation process be considered in terms of knowledge creation, have been treated extensively by many scholars over this last decade (Nonaka, 1994; Henderson and Clark, 1991; Prahalad and Hamel, 1991, Hansen, 2002) but have left us with an incomplete understanding as regards communities of practice. The concept of communities of practice is in vogue in the field of management and can be considered as a specific type of knowledge network but also as the modern strategy for knowledge management (Lave and Wenger, 1991; Brown and Duguid, 2000). Nevertheless, the way this particular approach of knowledge networks is linked with innovation is still misunderstood. In order to address issues in the field of Management Studies, this paper takes up the challenge of analysing how different types of communities of practice are related to and influence different types of innovation. A knowledge-based theory suggests that the boundaries and the structures of governance are determined by the value to be derived from the deployment of its knowledge. Thus, this paradigm focuses on mechanisms and contexts through which knowledge coordination and knowledge integration are achieved. This theory is supported by the Following this approach, the ability of the firm to continually configure and integrate knowledge through networks into valuecreating strategies or products is a vital condition for the development of the organization (Grant, 1996, Spender, 1996). In this new context, value creation through profitable growth results primarily from knowledge creation or innovations. Understanding the link between knowledge networks and knowledge creation becomes a dilemma for the Management Theory.

1- INNOVATION AND COMMUNITIES OF PRACTICE IN THE LITERATURE

1.1 Innovation

We understand innovation in terms of product or process and we begin to construct its definition with the distinction between incremental and radical innovation (Nelson and Winter, 1982; Dewar and Dutton, 1986). Incremental innovation introduces minor changes to the existing product or process and reinforces the dominant design exploited by the company. Radical innovation generates change in the set of principles involved in the process and implies new ways of thinking (Senge, 1990). Radical innovation refers to a deep and a wide change:

A deep change implies that many different levels inside or outside the firm are influenced by this innovation. Inside the firm, its influences many hierarchical levels in the same business unit. Outside the firm, it influences different companies downstream or upstream in the same supply chain.

A wide innovation is when different business units, divisions, functions or markets are influenced by this new model inside the firm. Outside the firm, this change introduces new applications for the product or process.

This classical distinction between radical and incremental innovation can be enriched with the model developed by Henderson and Clark (1990) which demonstrates the inadequacy of distinguishing merely between radical and incremental innovation. Following this model, innovation is conceived in terms of component and architectural change which is essentially dependant to knowledge involved in components or in the product and process architecture.

Component knowledge is knowledge about each of the core design concepts and the ways they are implemented in a particular component. A component is a part of a product, embedded in an activity.

Architectural knowledge is a structural capital, and concerns the ways in which the components are linked together to form a coherent whole. For the authors, an architectural innovation often implies a radical change.

This research views innovation as a continuum confronting 2 dimensions: radical & architectural with incremental & component. The distinction between radical and incremental is particularly relevant for process innovation while architectural and component apply to product innovation. Following the work of Nonaka (1994) innovation process is conceived as a knowledge creation process. As a result, firms should support activities that enhance knowledge creation at the organizational level. This means, the key for organizational efficiency is to achieve knowledge integration from individual to a coherent whole. This integration needs cooperation and depends on coordination between individuals and knowledge they detained. Over the last decade, organization theorists and sociologists define organization as a set of networks and have viewed organizations knowledge networks and especially Communities of Practice as ways to support the knowledge creation process (Nohria and Eccles, 1992 ; Nohria and Ghoshal, 1997; Hansen, 2002).

1.2 Communities of practice Originally, the notion of Communities of Practice (CoPs) was used to explain the practice based theory of learning and the theory of situated learning (Brown and al., 1989; Lave and Wenger, 1990). Following Brown and Duguid (1991) learning is defined as the bridges between working and innovating. Learning enhances organizational performance when it takes place through working practices and when the acquisition of knowledge is a social process where individuals learn from each other, based on the same practice. This type of learning is supported by CoPs which are groups of agents who experience a common occupational history, who frequently interact, who share knowledge and who face similar problems within and among organizations. They are organizational forms that encourage individuals to create, refine, share and use knowledge effectively (Brown and Duguid, 2001). CoPs help to develop the appropriate relationships and context that allow knowledge to flow between those who have knowledge and those who require it.

CoPs are social structures whose shared practices, identity and common engagement serve as a living curriculum for the apprentice (Wenger 1998; 1999). Some authors complete this concept with the notion of work, and define communities of practice as collections of individuals (informal groups), bounded by informal relationships, who share similar work roles and a common professional context (Lesser and Prusak, 1999). This means that individuals or groups interact on a regular basis around work-related issues and challenges. We argue that this notion of practice should not be limited to the work dimension but can be extended to a corporate or to a joint enterprise context. That is Ouchis description of the clan networks in present-day enterprises, where members operate on an informal basis of shared information and personal trust (Ouchi, 1980). A common ground for all the authors is that CoPs differ from teams or groups that are taskoriented. CoPs must have a clear identity to really be effective. They give individuals an opportunity to associate themselves with others who share the same interests or the same functions across the value chain, or have similar work-related interests. Collective action and social knowledge claims are legitimized in terms of community identity. With co-specialized knowledge and collective expertise, the community can solve business problems and build personal knowledge in the same time. Indeed, CoPs help retain critical expertise and can improve an organizations responsiveness by enabling the rapid location of knowledge across the organization. Another benefit of these types of knowledge networks is that they contribute to building a sense of trust, a common language and the mutual commitment, which are essentials to the knowledge sharing process (Wenger and Snyder, 2000).

1.3 Innovation and CoPs: the links Innovation is conceptualized as a process of change and it is refereed as a learning process (Senge, 1990; Argyris, 1994). Since learning is defined as a knowledge creation process (Nonaka, 1994) we can characterize innovation as a knowledge creation process. In the same time the literature explains that innovation can be nurtured by knowledge networks (Hansen, 2002). Knowledge networks facilitate learning and provide an environment for innovation. They foster

innovation, mainly in terms of enhancing cross-synergies between business units and in reducing the product time to market (Kostova, 1999; Winter and Szulanski, 2001). In other words, we suppose that, in transferring good practices and in answering specific issues, participants of social networks based on knowledge sharing create actively new products or new processes moreover than project teams. Some authors attempt to distinguish CoPs from other concepts such as projects and then propose dimensions that can be used to discriminate different types of CoPs. These dimensions can be classified as (1) governance, (2) structure, (3) content, (4) motivation and (5) emergence of the CoPs:

Governance: Open versus Closed (Wenger et. al, 2002)

This is the dimension which discriminate the communities regarding to their governance. Open communities are formed through unrestricted participation on a volunteer basis. They are selforganized communities developed under self-management. Potential members may need cooptation but these differ from closed communities where membership is pre-designated and not open to external individuals. Knowledge generated within these closed communities does not transpire outside. We argue that the type of governance should influence learning and therefore innovation.

Structure : Local versus Distributed (Mc Dermott, 1999; Wenger et. al, 2002 )

This dimension explains differences between CoPs in terms of structure. Local communities are located in a circumscribed location and involved people working in the same place whereas distributed communities includes cross boundaries issues such as inter-countries, inter-activities, or also inter-unit. Local communities are composed of. This dimension is important since social network theory emphasizes the importance of strong links as a feature of efficient networks. Strong links are based on the frequency of physical meeting, therefore, if the CoP is distributed, it will be more difficult for members to meet on regular basis.

Content : Related-knowledge versus Unrelated-knowledge (Hansen, 2002)

This dimension explains a difference in terms of content. To be efficient, CoPs require members to speak the same language. This notion of common language appears as a key dimension for organizational learning (Cohen and Levinthal, 1990). If the firm has developed coherent networks where there is similarity in the knowledge content among parts of the network, this refers to related knowledge networks (Hansen, 2002) If the firm has developed networks with incoherent relation in terms of knowledge: unrelated knowledge networks. Unrelated knowledge networks concern projects that require different knowledge (in nature and in action) to be pursued successfully. Unrelated knowledge networks are structures emergent from individual interactions that can cause complexity in the firm.

Motivation: Knowledge Coordination versus Knowledge Capitalization Intent

One of the dimensions that can discriminate CoP is why they are developed. Usually the literature describes two main motivations: coordination and capitalization. Coordination communities are communities based on the principle of optimizing the use of knowledge inside the company. Usually they are developed for sharing good practices. Capitalization refers to the capacity to identify and to classify knowledge within the company, in order to disseminate it more efficiently. developed for knowledge saving. They are

Emergence : Self-Emerging versus Management initiated (Wenger, 1998)

Emergent CoPs are historically self-dependant and have emerged without any will from the head of the company. Sponsored CoPs are initiated, chartered, and supported by management. Both add value to a company by sharing lessons learned, acting as distribution points for best and emerging practices, providing forums in which issues and problems can be raised and resolved and, in general, by promoting joint learning. One of the main differences is that sponsored CoPs are expected to produce measurable results that benefit the company. They are provided with resources and have formal roles and responsibilities. Even so, they are much more self-governing and wide-ranging than the typical cross-functional project team.

The conceptual framework developed for the empirical phase is the following:

Table I The research framework

2- RESEARCH METHOD

In order to clearly understand the process of innovation and its linkages with the community of practice concept, we chose a qualitative research method based on the work of Eisenhardt (1989) Miles and Huberman (1984) and Yin (1984). We carried out this research within seven firms belonging to the aerospace industry. We chose this industry because as in many other industries the development of innovation is a key success factor for sustaining a competitive advantage and also because these companies need to encourage knowledge management in order to capitalize on knowledge development or to save knowledge as well as to coordinate and continuously integrate new knowledge. We focused our investigation on the innovation event and we repeat in every company the same research method process, in following this scheme:

Govern
8

Open vs

As these companies cultivate a strong knowledge management activity, they all

initiate a department an office for coordinating and supporting the initiatives in KM. The person in charge of this department is the Chief Knowledge Officer (CKO).

Firstly, we meet the CKO who helped us to identify all the different CoPs that the

office has previously listed in the company. All these identified-CoPs have a leader a facilitator who acts as a mediator between the CoP and the CKO. The leaders role is to support a smart and useful exchange of good practices between members of their community.

The interview process was in three stages:

(1) When the CoPs were identified, we conducted a first interview of the CKO

about each community in order to understand the way each community is running and what their structure is. During this phase, we also tried to understand the nature of the links between all these communities and the CKO office.

(2) We conduct structured interviews with the leader of each community. These

interviews deal with the history, the management as well as the characteristics of the CoP. With characteristics, we essentially mean the number of participants, their position (hierarchical level, company business unit and department) in the company (or outside), their main task job, as well as how long do they participate to the CoP. The purpose at that stage was to classify each CoP in the theoretical framework previously developed.

(3) We interviewed the leader a second time as well as two participants of each

community in order to identify the different innovations in which the community was involved or what innovations were leveraged and sustained by the community. We defined all these different innovations using the different dimensions included in the conceptual framework.

During the interview process we gather data about the structure, about the organization and management as well as about the ambition of each CoP. The treatment of these data allowed us to classify each of the CoPs interviewed regarding to the different dimensions described previously in the theoretical framework. We identified 196 CoPs in these 7 firms and we observed 124 of them over a 3 years period. We conducted 317 interviews. These knowledge networks were at the origin of 93 innovations that we analysed more closely through multiple case studies. Our data gathering activity reached a point of scientific saturation (Miles & Huberman, 1984) with observations from 93 innovation processes, at which point the same or similar elements were extracted from each field site. Innovations produced both process and product innovation. Data were collected using the triangulation technique, through interviews, studies of internal and external documents, and sometimes by participating observation. Data were collected through matrices of dimensions, and analysed according to an open coding technique (Miles & Huberman, 1984; Langley, 1999). Dimensions described in the matrices are based on the research framework. For the open coding technique, data are first broken down by taking apart an observation, a sentence, a paragraph and giving each separate idea or event a name. Data is then regrouped into categories that pull together groups of ideas and events that become subcategories. These categories and subcategories are related to the different dimensions and variables described previously in the theoretical framework. This step aims to identify the characteristics of the different types of CoPs present within the company and the types of innovation are sustained by the company. The next step is the axial coding which aims to identify main categories and to make connexions between these and their subcategories. The purpose of this step is to understand the relation between the different types of knowledge networks and the different types of innovation. We tried to identify the most representative characteristic of each community and to link the innovation with this main characteristic (in Appendix A, B and C all the characteristics are integrated in tables).

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3- RESULTS

This research reveals that innovation is given leverage by communities which are a relevant model for the enhancement of innovation in a company evolving in the aerospace industry. In some cases, the innovation developed by CoPs represents more than 33% of the total developed within the company. That means the innovation strategy of some of these companies is actively supported with informal networks. The following table describe the number of innovations observed in each category. Product Innovation & Process Innovation Component and Incremental Radical and Architectural 42 51 Component Incremental Architectural Radical 24 18 19 32 Table II: Types of innovations observed To better understand what type of CoPs influences the innovation process, we analyse the results using the dichotomy between new product development and new process development.

3-1 Product Innovation The different product innovations observed are synthesised in the following table: Product Innovation Component Innovation Architectural Innovation 0 9 12 0 9 0 0 8 0 0 0 0 0 0 0 0 2 2 1 0 24 19

Knowledge coordination Knowledge capitalization Related-knowledge Unrelated-knowledge Open Community Closed Community Local Network Distributed Network Emergent Community Management Initiated Total Table III Product innovation

The main results are schematized as follow:

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Figure 1 Product Innovation

The first observation reveals that the dimension of governance and the dimension of structure of the community have no direct output in terms of product innovation. The common point between these two dimensions is the physical proximity between the participants. Then, we can argue that, in our context, the nearness of the participant is not a critical factor for enhancing product innovation. We observed that related-knowledge networks and communities that aim for a capitalization of experience lead to component innovation. The similarity in knowledge content among partners within the network facilitates component innovation. After the interview process, we suspected that the intent of these two types of CoP was mainly to link different activities (or units) of the company in order to share or to learn specific knowledge from experts who are disseminated within the organization. The research stresses-up that the output in terms of innovation is mostly component. Individuals learn about a distinct portion of the product that embodies a core design concept because they are specialists in this physically distinct portion and because they share the same language. Participants of the communities share their experiences and their best practices on this component without really focusing on other components or on the way they are linked. At B, the

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creation of a new component involved in the suspension of the landing train is the result of a knowledge sharing experience within a community of specialists in this domain. They all have an experience and a background in this technology and they were looking for a domain of application for this component. Members, across units, do not discuss the rest of the product but only the evolution of the specific component and how it can perform better. Capitalization communities also lead to component innovation. In these communities each member accesses resources that he / she could not develop alone. The main purpose is to save knowledge related to a specific situation and to access knowledge in relation to this specific situation or with a specific topic, a brand or a specific technology. Capitalization concerns accumulating knowledge in a learning sense about a specific interest. People interacting in these CoPs share best practices with a technical context without really trying to understand the architecture of the product. At A, they sustain CoPs for reusing improved shared experiences. Most of their innovations initiated from CoPs are component innovations. In increasing the value of each knowledge of component with the help of a capitalisation strategy, members of the A1 Community are tacitly encouraged to use this component knowledge in their innovations and then sustain component innovation. According to the leader of this community, 78% of their innovations are component. On the other side, the research maintains that architectural innovation is mostly driven by unrelated knowledge. People in unrelated knowledge networks do not depend on the same business unit, do not specialize on the same component or do not necessarily speak the same language. This type of community allows cross synergies between specialty and component knowledge. Participants try to better understand how components are linked and how they interact. They do not spend too much time on the specificity of a component, but much more on how it should be better related to another component and what is the most efficient internal map of each product. At B, the development of the X system for engines propulsion that will considerably change the way satellite engines and aircrafts will be propelled is the result of an un-related knowledge network. People from different business units and different technological activities share knowledge on the same interest in the same network.

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Coordination communities also lead to architectural innovation. Mainly because they aim at better use knowledge present in the knowledge-base or in the company. They try to link specialists in different activities or to establish relationships between different projects or units. Focusing on actionable knowledge and on tacit managerial knowledge, they avoid learning difficulties between individuals who do not speak the same language and thus increase the number of architectural innovations. At E, the purpose of CoPs is to create cross synergies between business units. They define KM as a process that aims to continuously enhance efficiency of business processes through an improved use of knowledge by people in action. This credo supports coordination CoPs and most of their innovations coming from knowledge networks are architectural. The landing train community which involves different business units and different country managers has created a new product based on new way of organizing component in the XXX landing train. Theses findings lead to the following propositions: Proposition 1: the structure and the governance of the community are not related to the process of product innovation. Proposition 2: the content of the CoPs influences the product innovation. The less knowledge between the members is related, the more the innovation is architectural. Proposition 3: the intent of the development of the CoPs influences the product innovation. The more the CoPs are created to facilitate the better use of knowledge inside the organization, the more the CoPs lead to architectural innovation.

3-2 Process Innovation Process Innovation Incremental Innovation Radical Innovation 0 8 4 3 2 1 5 1 0 2 6 10 3 2

Open Community Closed Community Centralized Network Distributed Network Emergent Community Management Initiated Coordination Intent

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Capitalization Intent Related-knowledge Network Unrelated-knowledge Network Total Table IV- Process Innovation The main results are schematized as follow:

1 1 0 18

0 0 1 32

Figure 2 Process Innovation In terms of process innovation, we clearly observed that incremental innovation is driven by closed, local and management initiated communities. Closed communities focus on how the process can evolve rather than how components evolve, but since they are isolated from the rest of the firm, their impact on organizational change could not be conceived as a deep and a wide change. Firms used closed communities as project development with no end-terms, and top management often takes in consideration knowledge developed through these communities to answer specific questions but we never observed radical innovation descending from this type of community. At E a community belonging to the corporate finance team located in the South America headquarters has developed a new process for consolidating accounts in the different business units in a short period of time after the closing date. As they are not members of the Group Headquarters and as they are located in a specific area,

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they could not share their experience with the other regional headquarters. Their innovation is still isolated and so has lead to an incremental change. Management initiated communities are also closed to project management in some ways and mainly because someone decides when the community begins and what are the deliverables of this community. According to all the CKO interviewed, if they are not business driven they often disappear. This type of community is often over the control of the top management and could not generate a revolution in the way of doing things. This is why innovation is mostly incremental in this type of community. What we observed is the fact that participants do not want to upset the direction of the company in generating knowledge that modify the way of thinking. They focus their action in improving existing things without renewing things. Centralized communities lead to incremental innovation because they are not wide and mainly focus on local problems. Sometimes they imply radical innovations when they concern a local but central activity they can be deep - or when the problem is transversal. Radical innovation is driven by open, self-organized and distributed communities. Open communities are wide and when they deal with wide problem they often lead to radical innovation. The emergence of innovation and new processes is driven by the heterogeneity of people and from divergences in the points of view. It is often difficult for closed communities to deal with this issue as it is proper to open communities to be shaped by different natures of people. In fact, this type of community is based on the order by chaos managerial principle, which means when an innovation appears; it has more influence on the whole. When the F community at D has developed a new way of understanding customers which led to a spectacular increase of sales, the D Company decided to create a new process for becoming a customer centric organization with the principles developed by the F community. The change was quick and radical. It introduced new beliefs and ways of thinking for the whole organization. While open communities can be management initiated, self-organized communities are free to create, decide or modify the component as well as the architecture of a product. They develop mainly radical innovation due to their ability to change architectural knowledge. In these communities external environments cannot influence systems because anything that influences the

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system is a part of it. Indeed, at T, members of this type of community try to better understand and change the way components are linked before changing the component in itself. With this approach, the consequences are often more important in terms of structures and concepts than with other types of communities. Distributed communities often lead to radical innovation because participants are present in different places of the organization and when they adopt new knowledge its implementation will have more impact on the organization. At the same time, this is a radical innovation because it is deep and wide. This radical innovation is often cross-frontiers and new processes are adopted by different levels and divisions of the organization. This type of community is the best adapted for networked organization which develop specific knowledge within different parts of the network. The development of the new commercial aircraft at B illustrates this position. The development of this innovation is the result of a new process created by a community that shares knowledge on the way things should be done in the B Company. This community thought in 2000 that thinking about the new aircraft only in terms of market expectation was not enough. The members developed a new way of thinking product development which include new dimensions such as solutions for new customers (DHL, UPS,) or Internet development or enhancing competitive intelligence in the different phases of the value chain. This new way was described in a process that lead to the development of the new aircraft. This type of community can be the origin of a radical process development.

These findings lead to the following propositions: Proposition 4: the governance of the CoPs influences the process innovation. The less the CoPs are open, the more they lead to incremental innovations. Proposition 5: the kind of emergence influences the process innovation. The more the CoPs are self-emergent, the more they create radical innovations. Proposition 6: the structure of the CoPs influences the process innovation. The more the community is distributed, the more it develops radical innovations.

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CONCLUSION

This study has provided evidence of different types of CoPs and of linkages between CoPs influence and the innovation process. What make this research unique is the established link that it defines between the different types of communities and the different types of innovation. If a company tries to develop a specific innovation, it must focus on a specific community. Organization theory has already explained the role of learning for this type of knowledge network and it is now possible to describe its implications in terms of organization for innovation process. This study emphasizes the different roles of knowledge networks in the innovation process and the way to use them in order to provide leverage for incremental or radical change. At the same time the study highlights that innovation is closely related to the way that knowledge is created and coordinated in the product development process Theoretically, it is interesting to notice that the way knowledge is coordinated influences the way knowledge in integrated in a coherent whole (new product or new process). The main limit of this research is that it is limited to a specific industry and further researches can extend this research to others industries. The last figure (Figure 3) synthesizes the links of influence between the kinds of communities and the types of innovation.

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Figure 3 Impact of different kind of CoPs on innovation

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APPENDIX A

Product Innovation & Process Innovation Component and Radical and Architectural Incremental

Community of practice

Open vs. Closed Local vs. Distributed Coordination vs. Capitalization Related vs. Unrelatedknowledge

53 (57%) 41 (43%) 55 (60%) 47 (50%)

40 (43%) 52 (57%) 38 (40%) 46 (50%)

Self-Emerging vs. Management Initiated

50 (53%)

43 (47%)

Table V Innovations observed

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APPENDIX B

Knowledge coordination Intent Knowledge capitalization Intent Related-knowledge Network Unrelated-knowledge Network Open Community Closed Community Local Network Distributed Network Emergent Community Management Innitiated Table VI Product Innovations

Product Innovation Component Innovation Architectural Innovation 0 29 50 0 43 3 5 40 2 3 5 1 4 0 1 3 10 12 3 0

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APPENDIX C Process Innovation Incremental Innovation Radical Innovation 87 1 2 85 59 30 39 51 10 61 58 32 1 8 1 1 0 0 1

Open Community Closed Community Centralized Network Distributed Network Emergent Community Management Initiated Knowledge coordination Intent Knowledge capitalization Intent Related-knowledge Network Unrelated-knowledge Network Table VII Process Innovations

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