Final exam - additional readings Flashcards
What is disruptive innovation? (Christensen et al)
The process where a smaller company with fewer resources successfully challenges established incumbent businesses. Incumbent firms often focus on improving products and services (sustaining innovation) for their most demanding, and usually profitable, customers. Hence, they exceed the needs of some segments while ignoring the needs of others. Disruptive entrants begin by successfully targeting those overlooked segments, gaining a foot-hold by delivering more suitable functionality at a lower price. When mainstream customers start adopting the entrant’s offerings in volume, disruption has occurred.
Where does disruptive innovation originate and when does it catch on with mainstream customers?
- In low-end or new market footholds (overlooked)
- When quality catches up to their standards
What are the two types of disruptions explained by Gans?
- Demand side. New innovations adopted over time -> threat for incumbents.
- Supply side. Incumbents may find themselves unable to transfer new technologies into their mainstream operations since it requires fundamental change of manufacturing and distribution. The basic architecture of the product changes along with customer expectations and preferences.
What are three prescriptions for long-term survival through changes to product architecture (Gans)?
- An integrated organisational model.
- Ownership of a feature important to the end customer.
- A strong sense of corporate identity.
Companies that survive are generally not the leading player, but a solid competitor.
What is an innovation strategy (Pisano)?
The commitment to a set of coherent, mutually reinforcing policies or behaviors aimed at achieving specific competitive goals, and helping to promote alignment, and clear objectives and priorities.
What can an explicit innovation strategy help with (Pisano)?
- Design a system to match specific competitive needs.
When lacking innovation strategy, different parts may pursue conflicting priorities, even if there is a clear business strategy. Diverse perspectives are critical to successful innovation, but without a strategy to integrate and align those perspectives around common priorities, the power of diversity is blunted.
What questions should a robust innovation strategy answer (Pisano)?
- How will innovation create value for potential customers?
- How will the company capture a share of the value its innovations generate?
- What types of innovation will allow the company to create and capture value and what resources should each type receive?
Who should decide on the innovation strategy (Pisano)?
The senior management, who are not blinded to the benefits of a certain division, but can look at what us best for the company as a whole
What are the four categories of innovation (Pisano)?
- Routine Innovation. Builds on existing technological competences and fits with the existing business model (and customer base).
- Disruptive Innovation. Requires a new business model but not necessarily a technological breakthrough. Challenges the business model of other companies.
- Radical Innovation. Good fit with existing business model, but technological challenge.
- Architectural Innovation. Combination of technological and business model disruptions. Most challenging for incumbents to pursue.
What distinctions does O’reilly and Tushman make regarding ambidextrous organizations?
New units are tightly coordinated with existing organization at senior management level, to ensure access to established resources.
- Existing/exploitative business (present)
- Emerging/Exploratory business (future). Shielded from “business-as-usual” to be able to innovate.
What is exploratory business characterised by?
Innovation, growth, adaptability, entrepreneurial, loose, risk taking, flexibility, visionary
What are the three levels of innovation and what share should they ideally have to outperform S&P500 (Nagji/Tuff)?
- 70% : enhancements to core offerings
- 20% : pursuit of adjacent opportunities
- 10% : transformational initiatives
What are things that affect the optimal investment allocation ratio (Nagji/Tuff)?
- Industry
- Competitive position
- Stage of development
What are some ideas about R&D management in Nagji/Tuff?
- Diverse set of skills and deal with ambiguous data
- Separate teams from day-to-day operations
- Funding from outside normal budget cycle
- Pipeline management not focus on filtering many ideas, but iterative development of few
- Metrics should recognise non financial achievements in early phases
How is exploration and exploitation described in the video?
- Exploitation: Making full use of resources, known technologies, existing markets. Harvesting fully from familiar, incumbent established worlds. Continuity over time assumption = what is today will also be in the future.
- Exploration: Experiment, try things out, to understand how we transition from today’s successes to the successes and activities that enable us to survive in the future.
