7031SR- GROUP- 1
Sa1_Jyyy
Topic9TechnologyBasedIndustriesandInnovation1.pptxMN7031 Topic 4.2 – Successful Innovation and Strategic Renewal
londonmet.ac.uk
Daniel Jones
Module Overview
Business Simulation – Cesim Global Challenge
1. How and Why Do Businesses Grow?
2. How Do We Diagnose Company Strategy?
5. How Do We Make Sense of the VUCA External Environment?
8. Does Your Simulation Company Need A New Strategy?
9. Why Do Firms Undertale Acquisitions, Mergers and Alliances?
7. How Is Your Simulation Company Performing?
10. How Do Companies Innovate Successfully?
12. Does Strategic Alignment Matter?
4. Why Are Some Industries More Profitable Than Others?
3. How Does A Company Create Competitive Advantage?
6. How Do We Create Strategies?
11. Summative Assessment Presentations
Today’s Agenda
Innovation
Definition
Four dimensions
Process
Innovation and the free market
Government organisations as engines of innovation
Global innovation
New Product Development
Strategic Innovation
Strategic renewal
Exploitation and Exploration
First mover advantages
Dominant Designs and Technical Standards
Organisations, Culture and Innovation
Innovation
What Is Innovation?
“the generation, acceptance, and implementation of new ideas, processes, products, and services.”
“conceptually a process beginning with an original idea and concludes with a market introduction”
“Innovation is a multi-faceted process, not a single or discrete act”
“Innovation must add value to meet customer’s unique needs”.
Roach, O. O., McLaughlin, G. C. and McLaughlin, H. M. (2020) ‘Innovation and Value: Customer Perception, Application, and Concept’, Journal of Management & Public Policy, 12(1), pp. 4–16. doi: 10.47914/jmpp.2020.v12i1.001.
W. Chan, K, & Mauborgne, R 2005, 'Blue Ocean Strategy: FROM THEORY TO PRACTICE', California Management Review, 47, 3, pp. 105-121, Business Source Complete, EBSCOhost, viewed 10 August 2016.
Four Dimensions of Innovation Space
Tidd and Beasant state that there are “Four Dimensions of Innovation Space”:
Product innovation (a new product / service)
Process innovation (a new process, or a change to a process)
Position innovation (adapting to your industry / market – business model)
Paradigm innovation (a new concept altogether)
Each of these four ‘dimensions’ can either apply to:
‘incremental development’ (i.e. improving something to make it better, easier, simpler, more efficient), or (ii)
‘radical development’ (i.e. coming up with something radically new)
Simplified Model of the Innovation Process
The Simplified Model of Innovation is in Four Stages:
Search
Select
Implement
Capture
The Theory And Practice Of ‘Innovation’ Has Many Paradoxes:
is ‘innovation’ a personal thing, i.e. it resides in the individual, or is an ‘organisational’ thing, i.e. it resides in the ‘collective’?
can innovation be taught and developed, or is something that some individuals and organisations have, and others do not have?
does innovation reside in the organisation, or can it reside in a whole nation / country?
Is Innovation Best Left to the Free Market?
But one thing almost all economists, business analysts, technology theorists, and philosophers agree on is that innovation, and its associated areas (creativity, artistry, invention, enterprise), is at its best when it is left to the ‘free market’, and not run by the ‘state’.
In other words, the state ‘gets in the way’ of innovation, as it is too bureaucratic, slow, dull, and lacks the spark of ideas that true innovation processes require...
...on the other hand, the free market of hi-tech-savvy individuals, entrepreneurs, venture capitalists, crowd-funders, and designers are creating a dynamic economy and culture, based around innovation, and leaving governments a step behind...
“Governments have always been lousy at picking winners, and they are likely to become more so, as legions of entrepreneurs swap designs on-line, turn them into products, and market them globally. As the business –technology revolution rages, governments should stick to the basics, like schools. Leave the rest to the revolutionaries.” (Economist, 2012)
Government Organisations as Engines of Innovation
But one person who disagrees with this is Professor Mariana Mazzucato, see: http://marianamazzucato.com
Mazzucato says the reverse: the State (or the government, or government departments) are the true ‘engines’ of innovation, and the ‘free market’ companies simply reap the financial / commercial benefits.
The Entrepreneurial State
And in her influential book, The Entrepreneurial State, Mazzucato explains that Apple (yes Apple!) is not innovative, and that the technology behind it was actually developed in the publically-funded State / university world, not within the ‘free market’.
“Without the frequently targeted investment and intervention of the US-government it is likely that most would-be Apples, would be losers in the global race to dominate the computing and communications age...it is indisputable that most of Apple’s best technologies exist because of the prior collective and cumulative efforts of the driven by the State.” (Mazzucato, 2014: 112)
Is the idea then that the ‘free market’ is more innovative than the State a complete myth?
Innovation, Like Many Things, Is Increasingly ‘Global’.
This means that organisations and firms involved in innovation are doing so across nation states, across continents, and across industries.
This has changed the research and development (R&D) function of many organisations and industries, as R&D is no longer ‘located’ in one place, but is ‘networked’ across a range of organisations, places, and nations, and is also ‘virtual’ or ‘digital’, making its location on-line only.
Clustering
One of the paradoxes of ‘globalisation’ is clustering’. For firms to ‘cluster’, they need to be close to each (finance in the City; retail in the West End; digital start-ups in Shoreditch; jewellers in Hatton Garden; the ‘Garment District’ in NYV; Silicone Valley in California; car manufacturing in Wolfsburg). But this ‘paradox’ goes against ‘globalisation’ and ‘digitisation’.
Michael Porter (one of the advocates of ‘clustering’), recognises this paradox: “In theory, location should no longer be a source of competitive advantage. Open global markets, rapid transformation and high-speed communications should allow any company to source any thing from any place at any time. But in practice, location remains central to competition...” (from Trott, page 243)
Innovation networks: some critics say that contemporary-sounding phrases such as ‘innovation networks’ is just a new term to describe old things that have been going on for years (such as supply chains; import-export; cartels; access to markets; trade quotas; vertical integration).
New Product Development
“conceptually a process beginning with an original idea and concludes with a market introduction”
Prod-ject
Albaidhani et al (2018)
New Product Development Stage Gate Process
Smolnik and Bergmann (2020)
Stage Gate Process
Smolnik and Bergmann (2020)
Strategic Innovation and Strategic Renewal
Nokia – A Long History Of Strategic Renewal
1865 - Nokia founded as a wood-pulp mill making paper.
1922 - partnership with Finnish Rubber Works and Kaapelitehdas (the Cable Factory)
1967 - new Nokia Corporation, restructured into four major businesses: forestry, cable, rubber and electronics.
1981 – builds world’s first mobile network
1982 – launches its first mobile phone
1992 - sell off of the non-tech businesses
1998 - the best-selling mobile phone brand in the world
2007 – Apple launches the iPhon
2008 – first Android device launched
2011- Strategic partnership with Microsoft to adopt Windows Phone 7
2014 – sells mobile phone business to Microsoft to focus on Network equipment
2016 – licensing deal with HMD Global, who now make Nokia mobile phones
2020 - New business groups are Mobile Networks, IP and Fixed Networks, Cloud and Network Services and Nokia Technologies
Innovation
Resources and Capabilities growth and contraction
Turnaround
Partnerships
Mergers and Acquisitions
Licensing
Outsourcing
Disruption
The Issue Of Strategic Renewal
There are 4 different processes for strategic renewal:
Strategising
Entrepreneuring
Changing
Investing
Strategising and Entrepreneuring
Strategic innovation as a Strategising Process
Strategising managers must be aware of the unfolding opportunities and threats in the environment and the evolving strengths and weaknesses of the organisation
Strategists are working in a context of ‘bounded creativity’, constrained by, e.g. lead time and resource availability
Strategic innovation as an Entrepreneurial Process
Companies make use of entrepreneurial managers for strategic activities e.g. finding new markets for existing products and services, applying new technologies in current markets and setting up new businesses
Changing and Investing
Strategic Innovation as a Change Process
The company’s business model needs to be adjusted.
Some strategic innovation processes require organisational restructuring
Organisational processes may need to be redesigned and a change of the firm’s culture may be needed.
Strategic innovation as an Investing Process
Strategic innovation requires resources
Investments in innovation compete with mergers, acquisitions and entering new countries
Investments that promise to generate returns in the long term are riskier than short-term options
Managers must think of the entire process of change
Strategic innovation combines: Strategising, Entrepreneuring, Changing and Investing processes
Inhibitors of Strategic Innovation
Effects of innovation results – strategists may be reluctant to explore alternatives which have not been successful in the past
Effects of inertia and bias
Effects of feedback – when innovation results are satisfying strategists are not challenged to explore innovations that could be even more successful
Business Model Renewal
In order to prepare for a competitive future, strategising managers may need to renew several elements of the business model
Strategists can renew each element of the company’s business model:
resource base
value chain
product offering
The Issue of Strategic Renewal
Outside-in Renewal - Managers can renew their value proposition by increasing the perceived product and service value and lowering prices, e.g. improve reliability of its products or create new markets or market segments with existing products
Inside-out Renewal - Managers can renew the company’s resource base to create new products and services and improve existing ones e.g. invest in technological R&D, marketing campaign and training of staff
Value Chain Renewal - Managers can renew some or all elements of the value chain e.g. IKEA has redesigned its processes, from standardising production processes, developing flat pack designs and lowering transportation costs.
The Paradox of Exploitation and Exploration
Should the company renew itself by improving the current organisation (exploitation) or by radically rejuvenating the organisation through disrupting technologies and processes (exploration)?
Renewal processes of exploitation can be measured in terms of realised client value (lower price and higher quality).
Radical renewal by exploration is measured by the extent to which a new industry is created or new customer value is realised.
Innovators, Followers and Winners
The Demand for Sustained Renewal
Refers to the process of permanently improving products and services to strengthen the company’s competitive position
Standards are continuously raised
Based on factual information e.g. customer feedback and market research as well as ideas from within and outside the firm
The Demand for Disrupting Renewal
Refers to the process in which current competitive positions are challenged by introducing new technologies and business models
Disruptive innovations do not follow from the facts but need to be invented
Creative thinking is necessary
2005: Steven Sasson poses with his 1975 prototype and Kodak’s latest digital camera offering, the EasyShare One
The Strategic Improvement Perspective
Companies should focus on improving their business model
All employees should be committed to improving all elements of the business model
Radical innovation initiatives are risky and absorb the most precious resources for corporate renewal
The Radical Rejuvenation Perspective
Companies should focus on breakthrough innovations
The more radical the departure from the industry rules, the more difficult it will be for competitors to follow and the higher the benefits for the innovator will be
Old ways must be discarded before new methods can be adopted – ‘creative destruction’
Strong company leadership is essential
Sustained improvement comes at the expense of strategically more effective innovations
The Emergence of Dominant Designs and Technical Standards
Emergence of a dominant design paradigm
Model T in autos
IBM 360 in mainframes
Douglas DC3 in passenger aircraft
Emergence of technical standards
Emerge in industries where they are network externalities
Entrenchment of the dominant designs and technical standards
Learning effects: incremental improvement of the dominant design
Switching costs
Need for coordinated action by multiple players
Dominant Design - Cars
1886 – Benz No.1
Companies that Own or Owned Technical Standards
| Company | Product Category | Standard |
| Microsoft | PC operating systems | Windows |
| Intel | PC microprocessors | X86 series |
| Sony/Philips | Compact disks | CD-ROM format |
| ARM (Holdings) | Microprocessors for mobile devices | ARM architecture |
| Oracle Corporation | Programming language for web apps | Java |
| Rockwell & 3Com | 56K modems | V90 |
| Adobe Systems | Common file formats for creating and viewing documents | Acrobat Portable Document Format |
| Adobe Systems | Web page animation | Adobe Flash |
| Adobe Systems | Page description language for document printing | PostScript |
| Bosch | Antilock braking system | ABS & TCS (Traction Control System) |
| IMAX Corporation | Motion picture filming/projection system | IMAX |
| Apple | Music downloading system | iTunes/iPod |
| Sony | High definition DVD | Blu-ray |
Parallel Processing
Involves separating exploitation and exploration processes in different organisational units while integration takes place at a different (higher) organisational level – ‘spatial separation’
Parallel processing internally – build a separate R&D unit that develops new technologies – outcomes are then transferred to other organisational units
Parallel processing with external partners
Navigating – the entrepreneur explores and then exploits – navigates over time ‘temporal separation’
Balancing – processes can be combined in the same unit
Apple, Alphabet, Microsoft, IBM and Facebook
Global Revenue
Apple 2001 2002 2003 2004 2005 200 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 5363 5742 6207 8279 13931 19315 24006 32479 42905 65225 108249 156508 170910 182795 233715 215639 229234 265595 Alphabet 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 86.4 439.5 1465.9 3189.2 6138.6 10604.9 16594 21795.6 23650.6 29321 37905 50175 59825 66001 74989 90272 110855 136819 Microsoft 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 25296 28365 32187 36835 39788 44282 51122 60420 58437 62484 69943 73723 77849 86833 93580 91154 96571 110360 IBM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 85866 81186 89131 96293 91134 91424 98786 103630 95758 99871 106916 102874 98367 92793 81741 79919 79139 79591 Facebook 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 3711 5089 7872 12466 17928 27638 40653 55838
Strategic Innovation - an International Perspective
Countries differ in the strategies they prefer. Japanese companies generally favour the gradualist approach while Western companies generally favour the leap forward.
Geography and individual brilliance – differences in developmental trajectories are determined by the possibilities to foster technologies that enabled progress.
Governmental support – proactive governmental support is often crucial, e.g. development of aviation to support the war.
Culture and Technology
Tangible knowledge can be codified and transferred but culture plays an important role and its values are intangible
Countries that are considered to be the most individualistic, US and UK, are capable of great innovations. The US leads the world ranking of Nobel Prizes.
Collectivist cultures have different merits, e.g. Japanese very good at improving processes and products.
Different cultures deal differently with time – Kaizen sees time as a circle improving production methods also seen as a circle.
Ownership of inventions – Eastern societies have a different attitude towards private intellectual ownership. The teachings of Confucius stress that knowledge is for the benefit of everybody – an obligation to share your wisdom with others. What in the West is considered to be stealing intellectual property rights, in the East is seen as copying and improving on the findings of an honorable father figure.
Innovation In Practice
Paradox Of Control And Chaos
Managers want to control the development of the organisation but understand that letting go of control is often beneficial
Need for top-down imposition and bottom-up initiative
Demand for top management control – top managers need to be able to direct developments in the organisation and to have the power to make the necessary changes. They need strategic control.
Demand for organisational chaos – a period of disorder is often a prerequisite for strategic renewal, allows experimentation, pilot projects, encourages self-organization and frees the way for bottom-up ventures
WLGore
References
Chandler-McDonald, K (2013) Innovation: How Innovators Think, Act, and Change our World, Kogan Page
De Wit, B. (2017). Strategy An International Perspective. 6th ed. Andover: Cengage
Grant, R.M. 2012. Contemporary strategy analysis : text and cases 8th ed. New York: John Wiley and Sons Ltd.
Hill, C., Jones, G. & Schilling, M. (2015) Strategic Management; Theory & Cases: an integrated approach, 11e, Stamford, Cengage
Reeves,M, Moose,S and Venema,V. (2014). BCG Classics Revisited: The Growth Share Matrix. Available: https://www.bcg.com/publications/2014/growth-share-matrix-bcg-classics-revisited.aspx. Last accessed 26th November 2019.
Tidd, J and Bessant, J (2013) Managing Innovation: Integrating Technological, Market and Organizational Change, 5th Edition, John Wiley & Sons, (Chapter 1)
