Organizational innovation: what qualifies as a new technology?

Organizational innovation: what qualifies as a new technology?

With Valery Yakubovich

When does innovation become technology? Many managers and organization scholars would posit that organizational innovations are nontechnological, partly as they cannot be patented. But is this really the case? Valery Yakubovich, professor at ESSEC Business School and Executive Director of the Computational Social Science Lab at the University of Pennsylvania, and Shuping Wu, a Master’s student at ESSEC, examined the patentability of organizational innovations in their latest research. They found that organizational innovations of the 20th century led to patent applications in the 21st century, primarily due to major breakthroughs in information and communication technologies. However, inventors face a major challenge in demonstrating that their inventions are practical tools rather than abstract ideas. To overcome this challenge, they often strategically classify their patent applications as computational rather than organizational innovations. These findings are especially pertinent today given our world’s digital transformation, and raise the question on how we can indeed transform organizational knowledge into digital tools. 

Background

Organizational Innovation refers to any new organizational practice that increases the efficiency of division of labor and integration of effort in modern organizations. Analyzing the extant literature, Yakubovich and Wu identified 114 innovations that diffused around the world over the 20th and early 21st centuries as bold new ideas about organizing and managing people. Among them are scientific management, lean production, project management, agile teams, and other “household names'' of modern management. However, as the saying goes, “Everything new is well forgotten old”: new management ideas are often modifications and re-contextualizations of earlier ones, which makes novelty claims problematic. Moreover, managers often implement such ideas using their own methods and tools that work in their own contexts and cultures, but not in others. This makes organizational innovation distinct from technological innovation that always includes practical and easily transferable tools, i.e. something more concrete than the aforementioned big ideas. To be patentable, inventors of organizational practices have to offer such tools. With new technologies like clouds, chatbots, and more coming into play, this task becomes easier. Accordingly, Yakubovich and Wu hypothesized the blurring of the boundary between organizational and technological innovations and the emergence of  organizational technology (OrgTech) as a new domain of high-tech in its own right. 

OrgTech as a new phenomenon

To explore OrgTech as an emerging phenomenon, Yakubovich and Wu looked at the patentability of organizational innovations in three steps. To start, they compiled a list of 114 organizational innovations since the early 1900s from the extant literature. Next, they searched the US Patents database for the names of these innovations, read a random sample of about 800 applications that included at least one such name, and identified 300 applications submitted between 1970 and 2018 that indeed claimed the invention of innovative organizational practices. Using these applications as seeds, the researchers trained a machine learning algorithm that identified 67,240 patent applications that, as it turned out, represented 95 organizational innovations from their original list of 114. 

This finding confirmed that there was indeed a significant amount of organizational innovations in the patent application pool. Although they represented a diverse applicant population, from individuals, to SMEs, to large corporations, the leaders of digital transformations - Microsoft, IBM, and SAP - are trend-setters here as well.

In the next step, Yakubovich and Wu found that applications for organizational innovations were less successful in getting a patent than applications for generic organizational tools such as meeting scheduling, room assignment, document processing, safety monitoring, and so on. This finding aligns with their aforementioned argument that organizational innovations are often big abstract ideas that lack concrete practical easily transferable tools. As an additional support for this argument, the researchers uncovered certain key trends: 

  • Inventions classified as computational rather than organizational were more successful 

  • Among inventions classified as organizational, those that used fewer “big-idea” terms, such as scientific management or lean production, tended to be more successful

  • Patents were more likely to be granted if the application explicitly featured a concrete tool 

What’s next for OrgTech? 

Yakubovich and Wu conclude that the field of OrgTech holds a lot of promise but also presents challenges that those looking to patent their innovations need to take into consideration. One barrier impeding the translation of ideas into tools is data privacy, as many of the current organizational innovations involve the use of big data and data-driven innovation and management. As this is an area where academia and practice intersect, patentable OrgTech could help both parties protect themselves,work together more effectively, and achieve successful patents.

While organizational innovations have been traditionally treated differently than technological innovations, with scholars assuming the former can’t be patented, we can see from this study that this is no longer the case. Organizational innovations now form a large proportion of US patent applications, and are especially likely to be successful if they propose a practical tool rather than an abstract concept. OrgTech is an emerging phenomenon worthy of a closer look, and it would benefit academics and practitioners to work together to explore this phenomenon in research and practice. 

Reference

Yakubovich, Valery and Wu, Shuping, Is Organizational Innovation a Technology? Evidence From Patent Data (April 26, 2021). Available at SSRN: https://ssrn.com/abstract=3834400

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