Are We Ready to Innovate?

Are We Ready to Innovate?

Picture by: Keven Law


By Eric Doctors (MSLOC student)

Organizations in the current global competitive environment are under increasing pressure to innovate rapidly to deliver breakthrough ideas and products to the market in what has been described as a shift from a Knowledge Economy to a Creativity Economy (Berner, Brady, & Nussbaum, 2005). To compete, organizations rely increasingly on cross-functional teams to leverage a diversity of skills and ideas, but there are many challenges in integrating "divergent orientations and expertise" (Im & Nakata, 2010, p.554). Given the intended use of cross-functional teams to innovate to meet key strategic and performance goals, it is important for organizations to get maximum benefit from these team's efforts (McDonough III, 2000). The question is: how well do organizations understand what it takes to form cross-functional teams for innovation purposes and what can they do at the team formation stage to improve team performance over the life-cycle of the project?

Organizations form teams to innovate without fully appreciating the success factors required to effectively form teams (McDonough III, 2000) leading to inconsistent innovation results (Boerner, Gebert, & Kearney, 2006). This article will explore the antecedents of cross-functional innovation teams (CFITs) and focus on those factors that the research indicates are more closely correlated with successful innovation performance:

  • Establishing and implementing superordinate goals (McDonough III, 2000; Pinto, Pinto, & Prescott, 1993)
  • Creating effective internal and external communication mechanisms (Keller, 2001; Montoya-Weiss, Schmidt, & Song, 1997)
  • Ensuring top management support (Bunduchi, 2009; Hitt, Hoskisson, Kochhar, & Nixon, 1999; Keller, 2001; Park, Sehti, & Smith, 2001)

Illuminating which antecedents organizations ought to pay the most attention to when forming CFITs, will provide the MSLOC community with a clearer understanding, as practitioners and researchers, of where to focus efforts in assisting organizations to improve innovation outcomes.

Although the focus of this article is on forming teams to innovate, which is not the same as creativity, it is still intended to contribute to the body of knowledge about the role of creativity plays on teams. Creativity is about the generation of ideas, while innovation, a result of creativity on teams, is about the implementation of ideas (Amabile, Conti, Coon, Lazenby, & Herron, 1996).

Forming Cross-Functional Teams for New Product Development

When forming CFITs for new product development (NPD) initiatives, teams are built using representatives across functions: research and development (R&D), marketing, sales, manufacturing, and other functions in the hope of leveraging a diversity of expertise and points of view (Keller, 2001). In Anderson, Hulsheger, and Salgado's (1996) meta-analysis of studies of innovation teams, they tested hypotheses of various antecedents relative impact on CFIT performance outcomes, and found that goal-interdependence was the most important team input variable and that external and internal communication, and management support for innovation were the most important team process variables (Anderson et al., 1996). Task orientation, also cited as an important team process variable, is highly dependent on the existence of goal-interdependence (Anderson et al., 1996).

Superordinate Goals

The presence of interdependent, or superordinate goals, defined as "goals that are urgent and compelling for all groups involved but whose attainment requires the resources and efforts of more than one group" (Sherif, 1962, p. 3), is a critical antecedent for CFITs (Park et al., 2001).

Goal Interdependence Drives Success

Establishing common team goals which are aligned with the organizational vision has the effect of aligning team behavior which reduces diversity affects and sets the tone and expectations for the entire duration of the project (Anderson et al., 2009). Alignment can best be achieved by "providing collective rather than individual goals, providing group feedback, and linking performance evaluations and rewards to those team goals" (Anderson et al., 2009, p. 1138). The high impact of goal interdependence may be due to the positive motivational, communication and cooperation effects that appear to follow as a result (Anderson et al., 2009).

Superordinate Goals Limit Conflict

The use of existing organizational goals operates as the starting point to develop project specific goals, which can serve as a "rallying point" for the diverse members of CFITs who then "share common purposes" (Pinto et al., 1993, p. 1293). Once superordinate goals are established, they can be used to structure tasks and differentiate roles on CFITs leading to more efficient team performance (Pinto et al., 1993). There is also evidence that setting common goals improves cross-functional cooperation and leads to more positive psychosocial outcomes (Pinto et al., 1993).

Internal and External Communications

There are a number of points of view about the role communication plays in CFIT performance and whether internal team communication or external communication, that leverages outside expertise, opinions, and suggestions, is more critical for success. The evidence suggests that both are key antecedents for CFITs and there are different aspects of team performance that is addressed with each (Keller, 2001; Montoya-Weiss et al., 1997). Internal team communication is much more closely aligned with creating the optimal team environment (Montoya-Weiss et al., 1997) whereas external team communication is more aligned with developing truly breakthrough innovations (Keller, 2001).

Internal Communication Improves Team Integration

Good internal communication leads to more effective functional integration of CFITs and supports a general hypothesis that internal, rather than external factors, results in cross-functional cooperation and NPD success (Montoya-Weiss et al., 1997). The effects beyond team integration are increased team member cooperation, more effective team work and more timely completion of projects (Montoya-Weiss et al., 1997). Top management plays a key role in instituting policies and procedures that enable internal communication and ensuring that all functional areas be brought into the cross-functional team at the inception of the project to foster a culture of cooperation (Montoya-Weiss et al., 1997).

External Communication Leads to Breakthroughs

Functional diversity of teams is crucial for innovation success and external communication allows team members with diverse backgrounds to tap into a broader reservoir of ideas than if they limited themselves to internal sources (Anderson et al., 2009). Teams should be encouraged to participate actively in external communications with colleagues and through knowledge sharing networks and organizations should provide methods of effectively disseminating the information gathered to other team members (Keller, 2001). Additionally, to sustain the flow of fresh ideas from the outside, team members should focus on relationships outside their teams to maintain their "domain-relevant knowledge" (Anderson et al., 2001, p. 1139).

See Developing Innovative Ideas by Rehabilitating the Devil's Advocate for a further discussion of the role of external points of view in innovation teams.

Internal vs. External

As Keller (2001, p. 553) states, Cross-functional teams "tend to have lower group cohesiveness than single functional groups" which can be reduced by attending to internal team communications. In fact, team cohesiveness, which improves due to internal communication, can be negatively affected by an over-emphasis on external communications (Keller, 2001). This is supported by the finding that social cohesion can hinder group creativity and the presence of conflict can enhance creativity (see Collective creativity wiki page). Thus, both internal and external communications play important roles in CFIT performance and there needs to be a balance in forming and managing CFITs to optimize performance (Keller, 2001).

Expanding the Team

An emerging perspective is that to have truly "breakthrough" innovations, teams should be composed of internal and external team members such as customers, suppliers, subject matter experts, other members of the organization not officially part of the innovation team as well as those in the general public domain who might contribute ideas (Ancona & Bresman, 2007). Forming "X-Teams" requires a new way of thinking about innovation and teams and takes full advantage of the positive effects of strong external communication and team management approaches to be able to rapidly and efficiently innovate (Ancona & Bresman, 2007).

Proctor & Gamble, long known as an innovation leader, is turning to a high-powered external communication approach to drive more breakthrough innovation results. They found that while they were doing a great job at generating lots of new product ideas, they were not developing innovation breakthroughs, and it was the addition of outside points of view, either from P&G staff outside the innovation teams or experts outside the organization, who added the necessary ingredient they were looking for (Koch, 2007). Partnering with their IT department, they are creating a sophisticated database to share lab notebooks with others across the organization and with their contractors. The hope is that these lab notebooks will serve as "talisman's" which will link together innovation efforts more broadly (Koch, 2007, p. 42). This is part of a larger effort by P&G to open up the innovation process to bring in the broadest possible variety of ideas.

Top Management Support

Although there is variability about the degree of top management support required for CFIT success and what form it might take, it shows up consistently as an important antecedent. How top management engages in the team formation process can be the most valuable addition to the team formation process, a precursor of and connective tissue across a number of antecedents (Hitt et al., 1999; Im & Nakata, 2010; Park et al., 2001).

Limiting Functional Dominance

When cross-functional teams are formed, there is an inherent risk that one function will dominate either as a result of positional power, controlling resources or organizational politics (Hitt et al., 1999). Top management plays a pivotal role in setting expectations at the team formation stage that ensures no functional tilt in the team occurs (Hitt et al., 1999). After all, they have sponsored the project and decided what functions should participate, but if they don't provide the clarity about how the project connects to broader organizational mission and goals, then the project is much more likely to fail and there will be longer-term negative effects for future cross-functional projects (Hitt et al., 1999). By managers reinforcing the superordinate identity through shared goals this reduces the "adverse effects of functional identities or thought worlds" (Park et al., 2001, p. 82).

Recommendations for Champions of Innovation Teams
  • As discussed earlier, the presence of superordinate and aligned goals result in better CFIT performance, but top management has to establish the goals and give the project the support (Montoya-Weiss et al., 1997). It is through this direction-setting and championing that the project is most effectively launched and leads to better team cooperation (Montoya-Weiss et al., 1997).
  • Risk-taking is important in discovering "novel linkages" in the innovation process and management has the most control in establishing a culture which supports risk-taking and leads to more unique products (Hitt et al., 1999; Park et al., 2001). Encouraging risk taking improves team integration, cohesion, and overall potency to innovate (Im & Nakata, 2010).
  • Management also can improve CFIT outcomes by establishing reward structures that align with superordinate goals and are reinforced by evaluation procedures (Montoya-Weiss et al., 1997). As top management follows the recommended steps of establishing goals and reward structures, they should also plan to closely monitor teams during project execution as this has been found to improve project outcomes (Park et al., 2001).

Pixar's Operating Principles

Ed Catmull (2008), president of Pixar, credits creating the right environment for innovation, designing teams to innovate, and establishing communication mechanisms that take into account internal and external points of view as critical ingredients in Pixar's long string of box office successes.

On the heels of success with the movie Toy Story, Pixar put in place the same team to work on the movie, A Bug's Life. Simultaneously they had to form a new team consisting of technical leaders from across the organization to work on Toy Story 2. This new team had no prior experience in leading a movie production and could not tap into the "experts" busy working on A Bug's Life. Pixar management thought this was a low risk situation, since the so-called expert team had never led a full-length animated project before they produced Toy Story. Essentially, they formed the new team in the same way as the old team and expected the same performance.

Instead, what Pixar experienced was a crisis with the initial production of Toy Story 2. The team failed miserably. They were unable to produce storyboards that lived up to the quality of the movie concept and had unacceptable delays in production. There was observed team dysfunction and production was halted. Once A Bug's Life was completed, the "expert" team was inserted to finish "Toy Story 2" which was a commercial success. This crisis resulted in Pixar's leadership rethinking how they would form and manage innovation teams in the future.

Creative power needs to reside with the film's creative leadership (Catmull, 2008). There was creative magic in the Toy Story Team that they were able to leverage when stepping in to fix "Toy Story 2", but it was the team's ability to effectively generate ideas that was the at the heart of their repeatable success (Catmull, 2008). The challenge was creating the conditions to enable other teams to have the same kind of results in the future. After Toy Story 2, Pixar changed the mission of their development department from being the idea generators to forming small incubation teams. Made up of a director, a writer, some artists and storyboard people who work well together and share a common vision for the film they are developing, these incubation teams focused on generating ideas to make the best possible film. This is consistent the finding of that forming CFITs with common goals will lead to better innovation outcomes (Anderson et al., 2009).

Develop a culture of peer support as a sounding board for ideas (Catmull, 2008). During the production of Toy Story it was observed that the team members had complementary skills and they formed relationships built on trust that allowed the team to have heated discussions yielding significant creative improvements in the movie (Catmull, 2008). Pixar decided to leverage this idea of having a safe space to share ideas with peers by instituting a "Brain Trust" (see Collective creativity). Whenever a director felt the need to get assistance with their movie while in production, they could convene a group of other directors to review the current version of the movie and provide advice and ideas. Pixar has landed on the idea that by tapping into ideas from outside the innovation team, they are more likely to achieve innovation breakthroughs (Keller, 2001) and better movies.

Break down the barriers between functions (Catmull, 2008). Pixar recognized that a performance threat to cross-functional teams and getting the right mix of technology and art, is when one function is more valued than another. Additionally, they recognized that their organization is a director and producer meritocracy and this could inhibit great ideas from being shared effectively. This supports the finding of the role that functional dominance can play in limiting CFIT performance (Hitt et al., 1999), and led Pixar to establish the following operating principles:

  • Everyone must have the freedom to communicate with anyone.
  • It must be safe for everyone to offer ideas.
  • We must stay close to innovations happening in the academic community.


While there are many potential barriers to CFITs being successful due to diversity of membership, lack of experience working together, functional perspectives, and the variability of organizational climate to support their efforts, there are steps organizations can take to increase the likelihood of better performance.

  • The presence of superordinate goals has the effect of aligning team efforts towards a shared purpose (Anderson et al., 2009; McDonough III, 2000), reducing conflict and leads to clearer definition of team tasks (Pinto et al., 1993).
  • Effective internal team communications reduces diversity effects and contributes to improving team cohesion (Montoya-Weiss et al.,1997).
  • External team communications brings in fresh ideas through the team members networks and leads to more break-through innovations (Keller, 2001).
  • Top management establishes the vision, goals and reward structures of the team (Montoya-Weiss et al., 1997), sets the tone for risk-taking (Hitt et al., 1999; Park et al., 2001), and reduces functional dominance (Park et al., 2001).

To supplement the information in this article on forming CFITs, there is an emerging set of tools for evaluating innovation teams and related performance factors (see Innovation Team Performance Measurement).

  • Team Climate Inventory (TCI) See Anderson & West (1996). There are some studies testing the accuracy of this instrument: Curral, Dawson, Forrester, & West (2001), and West (2002),
  • Team Factors Inventory (TFI) See Moger & Rickards (2000) and Al-Beraldi & T. Rickards (2003). The latter article is a comparative study with the TCI.


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