Breakthrough teams in incumbent firms: how relational climate and boundary mechanisms affect radical innovations

Purpose - Incumbent organizations are being challenged to carry out the transformative change induced by digital transformation. They often address the challenge by creating diverse, cross-functional teams called breakthrough teams to imagine, plan and execute the change. The teams operate under two opposing pressures: the team’s members must undertake their daily work in the exploitative environment of the incumbent and engage in bold explorations dictated by the team’s change mandate. To address the poor understanding of what makes such teams effective in such organizations, we ask: What team-level factors influence the extent to which breakthrough teams effectively pursue their radical mandate? Design/methodology/approach - We hypothesize the effect of a team-level factor called “relational climate” – the team’s vision, compassion and relational energy – on team performance defined as innovating radically innovation and engaging in effective processes. We posit that the effect is fully mediated by the team’s two boundary mechanisms – spanning and buffering – which define how the team interacts with its environment. We validate the research model using survey data from 184 teams in 90 organizations engaged in digital transformation. Findings - We find that teams’ boundary mechanisms fully mediate the effect of the relational climate on radical innovation and process performance. Selective incentives and higher-level information technology (IT) capabilities also have a significant effect on radical innovation. Practical implications - This study is motivated by the need for scholars and practitioners alike to better understand how to create and manage teams that have radical change mandates. Managers currently are pushed to explore high-growth, high-risk change by establishing cross-functional teams to accomplish such mandates. Our study suggests a two-pronged approach to improve the performance of these teams: (1) cultivate and sustain a strong intra-team climate, enabling a radical vision to emerge, and (2) apply principles to manage team boundaries by determining what needs to be protected from the environment and what needs to be opened to it. Originality/value - To date, research has focused on organizational and individual-level antecedents of radical change, while team-level studies have focused on marketing and new product development (NPD) teams, which are devoid of radical mandates. The study addresses incumbent firms’ challenge of managing the radical innovation created by digital transformation and demonstrates the significance of three team-level factors on team performance: relational climate, buffering and spanning. To our knowledge, our theoretical model is the first to draw on these constructs to explain team-level radical innovation outcomes.