Capstone Project
badrbanan
790videolectureslides_CorporateStrategy_Technology-Innovation.pptx
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Corporate Strategic Management
Technology and Innovation
Business Strategy - summary
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The Question: How to compete in one business – ‘competitive’ strategy within a single industry
Rivalry! – Similar goods/services to the same market
Single-path ‘strategic alignment’ concept
Corporate Strategy
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Corporate strategy is about managing an enterprise with multiple business units, each having distinct business contexts and thus different business strategies
Organic – expanding into new arenas with new business unit
Not merely an extension of current unit’s strategy: Product Focus/Market Focus; topic is about a new business unit entirely
Inorganic – acquisitions of businesses in other arenas
Doesn’t matter if integrated or operated as distinct ‘entity’
The questions:
What businesses should we be in?
How do we make the whole more valuable than the parts (synergy…value-added)?
How do we optimize shareholder value?
Corporate Strategic Management
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Porter article -
Portfolio management (selector; banker)
Restructuring (intervenor)
Transferring skills/competencies (integrator)
Sharing/Economies (integrator)
Two general modes of managing multiple units:
Financial Control
Strategic Control
Portfolio Management
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What businesses should we be in and how to best allocate resources among them? Example:
Restructuring
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Step into the business unit and intervene (“fix it”)
We can take business XYZ and do a better job of increasing performance than its current management
Transform via altered structure, strategy, etc.
Buy low…enhance performance, then retain or sell
Integrating skills and activity
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The integrator approach relates to the concept of the value chain
Firm level
Industry level
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…Transferring Skills
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Synergies!
Related businesses – overlap/linkages in value chains
Caution – synergies are often ‘mirages’ (Goold et al)
Unrelated businesses – no value chain connections
Exploit a source of competitive advantage in business A
Take (transfer) our superior ability to do XYZ and leverage that in business B to enhance performance
What overlapping slice of the value chain is an opportunity
PepsiCo – expertise and supplier power in grocery channel; acquisition of Frito Lay…related distribution channel/customers
Honda – small engine expertise from cars to motorcycles, lawn equipment, small aircraft, robotics…related engineering/mfging
Sharing resources/capabilities
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What slice of the value chain can we consolidate for economies of scale or enhanced efficiency?
Business A has excess distribution capacity
Business B has excess distribution capacity
Consolidate! – optimize unit A’s capacity and close B’s
Common rationale = ‘Back end’ consolidations – share HR, Finance, IT (staff/corporate functions)
Two general modes of managing multiple units (Goold & Campbell, 1987)
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Which best describes your firm’s approach?
Is diversification into entirely new arenas wise?
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Porter: Evidence clearly shows most diversification efforts do not produce positive returns.
WHY not?
Acquisition premiums (costs to buy or costs to enter)
Venturing into Unrelated businesses (complexities; lack of knowledge)
Barriers to exiting
Coordination complexity and costs
Inability to integrate distinctive cultures to retain value/valuable people and skills
Unrealistic expectations of economies/ability to consolidate
Inaccurate assessment of synergies or competencies (hubris, not objective, etc.)
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Technology and Innovation
Technological Innovation
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Why should we study this?
Technology - a key driver of new sources of competitive advantage…and is increasingly so
“Every business is a technology business now” (Fortune, 2016)
Think about it…..even mundane, old industries increasingly rely on, compete around, or are being destabilized by new technologies ….just two examples:
Agriculture – Genetic modification of seeds; micro-level crop management (satellite imaging; water-fertilizer delivery)
Trucking – RFID/scanning tracking; autonomous vehicles
The effects are widespread: firms-industries-national economies!!
Technological progress is an autocatalytic system…think ‘geometric progression’. It feeds on itself! Each new development spawns multiple other developments which in turn spawn multiple other developments. Each development is a catalyst for further development…and it never reverts back
Anderson & Tushman – Managing technological change
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This article is from 1991 and describes some ‘old’ innovations. What are some current technological discontinuities that are affecting – or will affect – your industry?
Describe the cycle of technological change.
Discontinuous innovation
Era of ferment
Era of competition for dominant design
Emergence of dominant design – era of incremental change
What are the implications of cycles of technological change on strategic management?
Adaptability is critical – develop ‘generalizable’ adaptation competencies
Recognize and shift perspectives depending on which ‘era’ you are in
Recognize and shift perspectives depending on who is doing what – new entrants, start-ups, incumbents
What is the importance here of ‘competencies’?
Competence-enhancing v competence-destroying
Technological Innovation
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Key terms/concepts
Invention – Innovation (not always clear/used correctly)
Invention is the creation of something new
Innovation is the commercialization or use of a new idea, method, material (first or early)
*not all invention is commercialized!
Types of innovation (what is it that is new)
Product – a novel product or service; new to the market
Process – a new way to produce the good/service
Strategy/Business Model – a new way to deliver/create/capture value in the industry
Technological Innovation
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Types of innovation (degree and nature of novelty)
Continuous/evolutionary/incremental
Ongoing improvements to features, value, service, etc. (Examples?)
DIScontinuous/REVolutionary/Radical
“Punctuated” technological shifts – abrupt/disrupt industry practices and competitive positions (Examples?)
Radical = the greatest degree of change/novelty; requires new knowledge, skills, capabilities to be able to adapt.
Competence-enhancing or competence-destroying
Do existing competencies relate to/allow exploitation or must firms develop/acquire all new knowledge, skills, and capabilities?
Thus…think about impact on the bases of competitive advantage and the existing positions! These are either reinforced or made obsolete!
Timing and Competitive advantage
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First-mover advantages? Maybe, but can’t assume.
Depends on 1) excludability or IP; 2) strength of complementary assets; and 3) potential to establish a standard or exploit network externalities
Network externalities/Virtuous cycles – winner take all markets
The value to any user is somewhat dependent on how many other users
Difficult for followers to catch up Examples?
Angie’s List; Ebay; Facebook; Windows OS; iOS and Android
Fast responder or follower advantages – benefit of existing strengths
Speed; Flexibility; Production Scaling
Exploit developed market AND/OR more developed technological underpinnings (sometimes you are too early)
Apple first in PCs but IBM (user demand; market reach and Brand)
Netscape first in browsers but Microsoft (user demand; embedded base; brand; bundling)
Nintendo and Sony vs Atari (speed, memory advances)
Tesla is by no means the first electric car company!! (battery technology has advanced significantly)
When/How do firm’s address this?
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Invent – create
Innovate – make commercially viable and introduce into market/use
‘endogenous’ – internal initiation
Adapt – others initiate, we follow or take other next steps
‘exogenous’ – change was initiated external to firm
Organizational innovativeness (OI)
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Five dimensions (Ruvio, Shohan, Vigoda-Gadot, & Schwabsky, 2013)
Creativity
Openness to new ideas and change
Future orientation
Risk taking
Proactiveness
Internal - Being Innovative
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Adapted from Galbraith & Kazanjian (1986)
Invention isn’t where the money is…
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An idea is just an idea until COMMERCIALIZATION; being able to effectively take advantage of a new idea is key
Scientists, engineers, and inventors enter the different and challenging world of competition!
Do you know who Philo Farnsworth is?
The Wright Brothers – why aren’t we all flying around on “Wright Bros., Inc.” aircraft?
Inventors often fail to exploit the value of their creations
Polaroid – early leaders in digital photography, yes…DIGITAL
Xerox (PARC) – developers (not inventors) of ‘mouse’ that Apple exploited, and same for the ‘windows’ GUI interface that helped Microsoft win the operating system war (Mouse and GUI – via Stanford Res. Inst)
Did Apple create the mobile phone? – No!
Commercializing
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Path to commercialize - Compete or Cooperate?
Market for products vs. market for ideas (licensing, JV, SA, equity sale)
Depends on several factors
Excludability (ability to protect IP)
Is it ‘safe’ to tell people about the idea?
Who possesses complementary assets
Can we do this alone?
Motives of potential partners – will they be attracted to cooperating?
Is cooperating attractive or threatening?
Being adaptive
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Compete or cooperate?
Choices depend on opportunity for competitive advantage; therefore…consider this
Advantages of innovation are eroded in two ways
Imitation
Mechanisms to protect/delay imitation
Patents? – How effective?
Not very!!
More effective in most industries: Lead Time; Secrecy; and Advantages in complementary assets
Innovation
Degree that rivals are/will innovate around and over us
Being adaptive
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Absorptive capacity – learn, apply, exploit
Dynamic capabilities
Ability to reconfigure resource base to new uses
Organizational ambidexterity – exploit AND explore
Structure and/or cultural ‘both-and’ approach
Generalizable competencies - experience, knowledge
Strategic Options
Small attention/investments in possible developments
Get ‘toe in the water’ and be ready to go all in or get out
REMINDERS as we head toward the finish!
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Module 4 closes on May 8 – 10pm (Discussion Forum and Quiz)
Your Major Case report (Dave and Busters) is also due on May 8th at 11:55pm
On May 8, you will find a “Course Reflection Survey” in the Assignments tab – this is a simple wrap up/feedback sheet I’d like you to complete and submit. This is due by May 12
In Files Directory, you will also find a Study Guide for the Final Exam
The Final Exam, if you choose to take it, will open on May 15th at 12a.m. and remain open until 10pm May 17 (that is you will need to begin it no later than 7:30pm if you want the full time allowed)
