innovating beyond the firm: managing technical professionals in relational networks

IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 41, NO. 1, FIRST QUARTER, MARCH 2013 13

Innovating Beyond the Firm:Managing Technical Professionalsin Relational Networks1—MARIANN JELINEK PH.D.,College of William & Mary

—PAUL K. BERGEY PH.D.,University of Melbourne

IEEE DOI 10.1109/EMR.2013.2244978

Abstract—Managing technical professionals is difficult inside the firm;it takes a whole new skill set to manage technical professionals acrossfirm boundaries, in the relational network across the supply chain. Yetincreasingly, that’s where sharp new product ideas, improvements inprocess, innovation and strategic advantage reside. We first reviewtraditional thinking about managing technical professionals. Next,we define “relational networks,” the increasingly interconnectedcollaborative, interfirm relationships in which much innovation takesplace. This changed locus for innovation requires very differentapproaches to managing technical professionals, as we show. We closewith recommendations for negotiating this new terrain.

INTRODUCTION

INSIDE the Firm: Managingtechnical professionals is awell-recognized challenge incontemporary firms. On theone hand, researchers andother technical professionalscreate value for the firm byexercising their technicalskills—doing research, writingsoftware, designing electronics,carrying out engineering tasks orperforming operational activities.On the other hand, technicalprofessionals are difficult tomanage because they often createvalue by working alone, and(stereotypically, at least) maynot necessarily “play well withothers.” Technical professionalsare often deeply committed to theintegrity of their expertise, andmay be reluctant to compromiseupon it for business purposes.Difficulties can be exacerbated

1This research draws from “RelationalNetworks, Strategic Advantage: NewChallenges for Collaborative Control,”by John Hagel III, John Seely Brownand Mariann Jelinek, in Control inorganizations: New directions intheory and research, ed. Sitkin,Sim B., Cardinal, Laura B., andBijlsma-Frankema, Katinka Cambridge:2010

where the manager is perceivedto be less technically competentthan the professionals beingmanaged—technicians oftensee managerial competencethrough the prism of technicalcompetence. Those responsiblefor managing technicalprofessionals are often promotedfrom the same pool, issuesof managing former peerscan arise. So, too, can issuesof “indispensability,” whereexcellent technical professionalscannot get promoted becausethose above them won’t risklosing their commitment to thecurrent job.

Discussions of technicalprofessional managementcoalesce around this set ofwell-known issues. Courses onmanaging technical professionalscover topics like these, andoften add in managementtopics: the role and valueof management, group andinterpersonal relations, teaminteractions and assessment,human resource planning, andthe like. From the managerialperspective, the core set of issuesare:

14 IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 41, NO. 1, FIRST QUARTER, MARCH 2013

• HR planning for technicalprofessionals: sourcing andretaining appropriate skills;

• Performance assessment:what’s different aboutassessing in technical areas;

• Compensation and promotion:how to reward technicalprofessionals, and difficultieswith technical compensationand promotion levels (versusmanagerial compensationand promotion);

• Career ladders: howto manage technicalprofessionals to retainthem as productive companyassets throughout a career.2

Various forms of dual track(technical and managerial) careerladders, special performancebonuses, and corporate-leveldesignations—TexasInstruments’s TI Fellows, forexample—and formal flow-chartsof hiring needs are all part ofthis picture. Corporate-leveldesignations acknowledgethe technical chops of theirnominees, and often come withdecision rights for innovativeprojects: the Fellows at TI canaward small amounts of riskcapital for proof-of-concept forinnovative ideas. Such positionsboth recognize the expertise oftechnical professionals, and enlisttheir judgment in assuring a flowof innovation—key motivatingfactors that can and do crossdepartmental boundaries. Butthe challenges are more extremein the inter-firm innovationefforts of integrated supply chainpartners that we term relationalnetworks.

2For an informative discussion of toptechnical talent, see: George Ferris andStephen Green, “Summary of findingsthe management of top technical talent,”sponsored by the Center for InnovationManagement Studies & the IRI RORCommittee 30 September 2006; for a moreexhaustive treatment: The Human Sideof Managing Technological Innovation,ed. Ralph Katz (2003) Oxford UniversityPress.

INNOVATION IN RELATIONALNETWORKS:

A brief glance at how corporationswork in the real world todayraises disquieting concerns aboutmuch of this, however: sinceroughly the 1980s, firms haveincreasingly outsourced muchmanufacturing, product designand development. Moreover, nofirm—even enormous ones, likeIBM and Apple—can controlall the resources it needsfor innovation (Prahalad andKrishnan 2008), so creatingstrategic advantage andinnovation have increasinglyrequired collaborative resources,outsourced capabilities, strategicalliances (Doz and Hamel 1998,Doz, Santos et al. 2001, Culpan2002), and “open innovation”(Tuomi 2002, Chesbrough 2003,Chesbrough, Vanhaverbeke et al.2006, Sirkin, Hemerling et al.2008).

Strategic alliance networks,especially those aimed atinnovation, are different fromtraditional, transaction-orientednetworks mediated principally bythe market. Instead of one-off orarm’s length transactions whereprice is presumed to summarizeall the information necessary,these relational networks areiterative, long-term partnershipswhere the relationship itself iseven more important than anysingle issue or engagement.Repeated product developmentinteractions over time buildtrust on both sides, enablingcritical information sharing andautonomy of action for partners.Partners bring their expertise tothe project—and they generallyknow (much) more about theirarea of specialty than the focalfirm does. For one thing, themore innovative the product inquestion, the less possible it isto specify in advance what the

inputs will be, or exactly how theproduct will work, or whether itwill be a market success (andthus the value of the ensemble, letalone the value of any partner’scontribution). Figure 1 provides aconceptual view of the networkswe describe.

Innovation networks—like P&G’sinsourcing of new productideas—can involve little byway of ongoing relationshipwith the source of the idea:P&G purchases or licenses theidea, then further develops itin-house. This is, essentially, atransactional network in whichany interchange is simply a one-offtransaction, with no necessaryexpectation of further exchange.It consorts well with traditionalapproaches to managingtechnical professionals, becausemost reside within the firm—thatis, within P&G, in this case.They’ve simply purchased theidea as an input for theirinternal professionals to workwith. By contrast, a relationalnetwork involves increasinglyinterlaced, integrated activitysurrounding innovation, whereinthe relationship is ongoing, andthe partners are profoundlyinterdependent. (See Table 1).

Traditional approaches to controlwithin organizations (e.g., inputcontrol, output control, orbehavioral specification) rest onhierarchical models, economicrationality and managers’ability to enforce compliance(Bijlsma-Frankema and Costa2009). Yet many of the technicalprofessionals firms need toengage and “manage” willreside outside the firm—eitherindependent contractors (suchas Solvers found via InoCentive)or as employees of partnerfirms in relational networks.The key managerial issues aresimilar—achieving engagement

MANAGING TECHNICAL PROFESSIONALS IN RELATIONAL NETWORKS 15

and best effort, fosteringproductive teamwork acrossboundaries. The challengesare notable, and notablydifferent from those within thefirm. Traditional performanceassessment may be mostly orwholly impractical becausetechnical work at the edge of thestate of the art is in question, andthe focal firm cannot specify what“best” performance is. Promotionand career management trackswill be managed by other firms’mangers. In short, much ofthe management of technicalprofessionals will be devolved topartner firms. And yet

“IT’S OUR PROJECT!”Rewards to technicalprofessionals that matterare (mercifully) not limitedsolely to dollars and promotions.Reasonable autonomy withinwhich to exercise technicaltalent; resources, especially ofinformation and interchangethat enable learning; andchallenging problems to workon all play important roles inrelational network managementof technical professionals.

These also play large rolesin edge-of-the-envelope,breakthrough projects.Learning and innovation arefuture-oriented activities, rootedin ongoing exchange thatbuilds trust and familiarity.The first project may be tough,but successful achievementprovides the platform for thenext: partners begin to knowwhat to expect from one anotherover time. Savvy managers aredeeply knowledgeable abouthow valuable trust is: DeeHock, the architect of theoriginal agreement that enabledcollaboration across the bankingsector for the VISA credit card,was a consummate practitioner(Hock and Senge 2005). So,too, were the managers of themultinational, multi-companyflat panel display consortium(Murtha, Lenway et al. 2001).

The critical tasks in relationalnetworks concern orchestratingthe partners, managingtheir ongoing collaborationvia exchange of necessaryinformation, apportioning thenetwork’s gains among theparties, and especially the care

and feeding of the networkrelationship itself. This criticalset cannot be simply managed“top down,” since the focalfirm is critically dependentupon the expertise of partnerfirms. Instead, the firms aremutually influential; theirfate is intertwined. As anexample, consider Apple, widelyrenowned as a particularlyaggressive partner. Apple’sbreakthrough iPod entered themarket a mere nine months fromproduct concept—because Applecould draw on the expertiseof partners like PortalPlayer,whose optimized MP3 chip madethe device possible. The iPodconsortium embedded dozens ofcompanies—PortalPlayer alonedrew on its own network ofrelational collaborators. Speed tomarket, elegance of design, andiPod’s unique form factor (thegeometry of its design, its ease ofuse, and component integration)all speak to the benefits of goingto the trouble to master relationalnetwork collaboration. iPod wasnot first to market as a portablemusic player, nor as an MP3player. Yet in 2008, Apple’smarket share was over 70% of all

Figure 1.

SSSP4SSSP2 Focal

FirmSSSP1

SSSP3

Upstream Partners Downstream Partners

Stage1 Stage2 Stage 3 Stage 4

TRANSACTIONAL NETWORK

P4

FocalFirm

P3

P1

P1 P2

P2P3

P3P3

P4P4

P4

P1

P1

P2

P2

(Loosely Coupled)P4

Focal Firm

P3

P1

P1 P2

P2

P3

P3P3

P4

P4

P4

P1

P1

P2

(Tightly Coupled and Encapsulated)RELATIONAL NETWORK RELATIONAL PROCESS NETWORK

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MP3 player sales (Elmer-DeWitt2008), while iTunes was alreadythe largest seller of music in anyformat in the U.S.

NETWORK BENEFITS’ FUTURITY:

For network partners, continueddevelopment—of their skillsat the edge of their state ofart; of their knowledge ofparticipating partners; of theproducts, and thus their futurerevenue streams—is the nameof the game: this is what makescontinued participation in thenetwork so highly attractive. ForApple’s partners, some sharein the success of one productsurely whets the appetite forparticipation in “the next insanelygreat thing,” in the words ofSteve Jobs. Apple’s move into cellphones was certainly not obvious,yet the iPhone built upon theiPod to a startling dominancein the industry—despite apersistently high price. Relationalnetworks enabled Apple to enterand prosper in new areas. Itsextremely rapid moves andstellar execution maximizedthe benefits of its innovations,redefining markets where productstyle, ease of use and stabilitysucceeded precisely becausethe company could draw on itspartners’ deep expertise.

The critical elements of relationalnetwork success are profoundlysimple to state, if enormouslychallenging to achieve in practice.Dee Hock described how theinitial VISA network came to be:

At critical moments, allparticipants had feltcompelled to succeed. And atthose same moments, all hadbeen willing to compromise.They had not thought ofwinning or losing, but of alarger sense of purpose andconcept of community that

could transcend and enfoldthem all.

(Hock and Senge 2005): 245

This kind of networkcontrol diverges dramaticallyfrom the ownership-based,command-and-control notionsof organization embedded inmost corporations and in mostinter-corporate interactions. Thenetwork was the whole point:without the active participation ofmany independent banks aroundthe U.S. (and later, the world),VISA would fail. Yet withoutthe trust and collaborationand information sharing ofthe network Hock built, thesesmaller banks would not havejoined to be subservient toBank of America. By engagingthese collaborators as equalpartners, calling forth theirideas and inputs to shape theideas, opening communicationon problems and solutions, Hockbuilt an extraordinary communityin which shared visions, peerpressure and trust fueled anongoing innovative relationalnetwork.

These insights provide aroadmap for managing technicalprofessionals beyond theboundaries of the firm, withina relational network. Clearly,building trust is a critical,overarching concern: withouttrust, no relational networkcan operate. This has twoimplications. First, trust, wheretechnical professionals areconcerned, implicates technicalcompetence on the part ofthe manager—so the focalfirm needs to engage its besttechnical talent in managingthe technical talent it “borrows”from network partner firms.Secondly, partners who breechthe expected trust can destroythe relationship, or dramatically

degrade its potential. Frank,open communication is essential,and vigorous debate is to bedesired: disciplinary differencesand perspectives will conflict: thechallenge is to assure that theconflicts are productive, insofaras they turn on genuine technicaldifferences—not on personalities,biases or power games betweenthe firms (de Rond 2003).

It’s well to remember thatsome innovative efforts areinherently serendipitous, whileothers—especially in the physicalsciences, like electronics—aremore predictable. Developmentideas to reduce the size ofcircuits, or to combine previouslydisparate functions in a singlecircuit or device are of quite adifferent nature than clinicalresearch, or drug discovery.Yet even in the apparentlywell-characterized physicalworld, the applications of laserstoday (barcode readers, lasereye surgery, CDs and DVDs) areastonishingly different and vastlymore extensive than the initiallyidentified possibilities. Thisreality underlines the importanceof trustworthy partners to whomsubstantial autonomy mustbe granted, because the focalfirm is not sufficiently expertto micromanage their partners’activities. Thus the structure ofthe deal, to include participationin future benefits of success,will also be crucial. After all,all partners collaborated tocreate any success, so all shouldbear some risk for the project’ssuccess—and enjoy its fruits.

The enduring intent of relationalnetworks is worth underliningagain: the purpose is therelationship, from which theparties anticipate ongoingbenefits. Beyond shared profits,those benefits include growthfrom engaging in state-of-the-art,

MANAGING TECHNICAL PROFESSIONALS IN RELATIONAL NETWORKS 17

edge-of-the-envelope projectsthat stretch the partners’capabilities; the reputationalfallout from having beenamong the perpetrators ofsuccess; learning to learn fromrelational network partners;and shared insights from otherstate-of-the-art practitioners.These growth and learningbenefits imply a thoughtfulnessand process reflection on thepart of managers of the technicalprofessionals dong the work.Just as in-firm leadershipnudges subordinates to extractlearning from day-to-dayactivity, leadership of technicalprofessionals outside the firmwill seek to encourage attentionto what is being accomplished,and what can be learned fromthis. Explicit acknowledgement

of partners’ contributions—andexplicit acknowledgement ofthe contributions of particularindividuals—can convey statusrewards and can also influencethose technical professionals’managers, even outside thefocal firm. More formally,debriefing sessions solicitingpartner input, followed bywritten acknowledgment and“lessons learned” can crystalizethe relationship by capturinginsights and building trustthrough honest exchange.

THE BOTTOM LINE:As a rough rubric, the lengthierthe relationship is expected tobe, and thus the greater thevalue it is expected to deliver, themore sense it makes to invest

management time and effort intobuilding the relationship. Thisrationale engages both the focalfirm—which ideally assigns itsbest technical talent to importantnetwork projects—and thepartner firms, which put forththeir best efforts. The deeper thetrust developed, the easier it isto share potentially proprietaryinformation—best practicesfor managing, best designapproaches, best interfaces,and more, enhancing theproject and the relationship.The more such informationis shared, the more efficientcommunication becomes betweenthe partners. This is a key sourceof relational networks’ greaterspeed and quality—criticalcompetitive advantages. Themore tightly linked the firms’

Often market-mediated, partners access resources through short-term exchanges or transactions.

On-going or repeated exchanges, predicated ontrust, where partnersdepend on one another tocreate and deliver newvalue. May be loosely ortightly linked.

On-going, trust-basedrelationships where partnersdevolve essential businessprocesses to one another, collaborating to achieve aconjoint business model.

Examples: InnoCentive Tightly Linked: Toyota's Taiwanese Original Designsupply chain. Dell’ssuppliers.For its corporate clients, Dell operates as a “virtualIT department.”

Manufacturers (ODMs)

Loosely Linked: VISA’s shared process network; Flat Panel Display developmentPartners orchestrated byLi & Fung

Network Types: Transactional Networks Relational Networks Relational Process Networks

Table 1. Innovation Networks: Any Broad-Based Resource Mobilization Across Boundaries

Table 2.

Pure Transactional Networks

Iterated TransactionalNetworks

Loosely-coupledRelational Networks

Tightly -Coupled

Networks

Relational Process

Networks

Market

Mediated

Trust

BasedRelational

Pure TransactionalNetworks

IteratedTransactionalNetworks

Loosely-coupledRelationalNetworks

Tightly -Coupled

Networks

RelationalProcessNetworks

Relational

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communications, the more deeplytheir practices (especially aroundinnovation) may be said to beintertwined. That said, there isgenuine value in the partners’real independence—they canlearn from others, they arenot wholly dependent uponone another (so each retains acertain freedom of action to dobusiness with others, and not todo business with a partner simplyto keep them from going out ofbusiness). This tighter end of thespectrum is what Hagel et al.call relational process networks.Table 2 summarizes.

All parties in these networksengage in them to make aprofit, to be sure; and theinterests of the focal firm do notdisappear. But the expectation ofongoing interchange and futureshared benefits from jointlyco-created successes are the gluethat holds the network firmstogether. The key to managing

technical professionals withinsuch a relational network iscreating the relationships,trust, information sharing andproductive friction that make itso, and then acknowledging thecontributions of those who didit. Longstanding partnershipscan and do develop inter-firmassessment of performance:some external consultants arein high demand by clients,for instance; others, not somuch. But assessing technicalprofessionals in relationalnetworks is a bit more complex,and multi-firm partnershipswill require assessment notjust of work output, but alsoof team relationships andcontributions. Team leaders andteam members on any subprojectwill clearly have a legitimatestake in assessing the technicalprofessionals they work with;so, too, will those with whomthese professionals interact.Interpersonal skills—especially

trustworthiness, communication,and professional integrity—willbe significant drivers ofteam success, and thus ofrelational network maintenance.Some form of “360-degreeassessment” seems one likelyapproach; “state-of-the-network-relationship” opinions another.In short, shared assessmentsand consultative debriefingsare likely the most productiveapproaches to foster fairjudgments, enhanced trust, andlearning from experience.

Managing technical professionalsbeyond the firm is both necessaryand possible. But nobodyever said it would be easy!Boeing’s recent Dreamlinerwoes suggest the costs offailure to manage across theboundaries. Still, the benefits ofrelational networks—innovation,speed to market, integrateddevelopment—are well worth theeffort.

REFERENCES

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