The specialization paradox

Good companies tend to specialize over time. This happens partly because competition drives companies to improve continuously, and partly because they get gradually more and more integrated (interdependent) in business networks, where it makes sense to let others do some of the work (as they have expertise, as the division of work is negotiated, as it enables reducing costs, or as it strengthens marketing/distribution, etc). This continuous and incremental innovation, leads the company towards specialization.

However, to enable more radical (or indeed disruptive) innovation, the company needs a much wider set of skills and resources, simply because such innovation requires the exploration and utilization of new/different knowledge and resources than are being used by the company in its established activities. Hence, we have  a gap between the specialized company, and its need for general (or different) knowledge and resources. It turns out that this gap is not easily bridged. Such bridging requires (1) to reduce the gap as much as possible, partly by reconceptualizing what the gap consists of (making the new more similar to the established), and partly by simplifying the innovation (taking away some of the novel elements). (2) After reducing the gap, the bridging can sometimes be done successfully, e.g. by hiring or partnering with complementary actors, or connecting new resources in creative ways

So, is it possible organize for specialization, and maintain capacity for radical innovation at the same time? To a certain extent this could be possible: First, by maintaining a wider knowledge base, and second, by acknowledging that specialization is unavoidable and therefore develop bridging mechanisms.

Source: “Interaction to bridge network gaps: The problem of specialization and innovation in fish technology”, by Thomas Hoholm and Håkan Håkansson (2012), in The IMP Journal 6(3).


About Thomas Hoholm

Associate Professor at BI Norwegian Business School. Researching and teaching organization, innovation and entrepreneurship. Also interested in music, film, and literature.
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