Session 1: Winners and Losers of Innovation Flashcards
What is the impact of patent expiry on products?
Patent expiry heightens the need for a constant pipeline of new drugs.
Why innovation matters?
- Innovation can make or break firm performance
- It changes the world around us
- Engine of economic growth
- Innovation strongly tied to reputation of today’s firms
What are the three core frameworks for innovation?
- ADOPTION: How to predict response to innovations?
- CAPTURING VALUE: How to reap the financial benefits of an innovation?
- TIMING OF ENTRY: How to decide when to launch an innovation?
What are the Four managerial challenges in innovation?
- Open Innovation Management
- Creativity Management
- Standards Management
- Collaboration network Management
What is the definition of innovation as an outcome?
“Innovations are qualitatively new products or processes that differ significantly […] from what existed before.” (Jürgen Hauschildt)
“A new way of doing things that is commercialized” (Michael Porter)
“The what’s possible meets the what’s needed (Roy Sandbach, Procter & Gamble)
What types of innovation exist?
- Product innovation
- Service Innovation
- Process Innovation
- Business Model Innovation
What’s the definition of Business Model?
Business model: the “way of doing business” that a firm has chosen: its entire system for creating and delivery value to customers and earning a profit from it.
What went wrong at Blackberry? What can explain their relatively sudden decline in market share and profitability?
- Lack of innovation
- Didn’t differentiate product
- Clashes in management
What can explain the success of zipcar? And why do you think Avis has acquired zipcar?
- Hard to own a car in a modern city
- Millenials dont see the value of it so they prefer to share cars
- Rise in sharing economy is huge
- Avis bought it as a way of tapping into a huge growing market where it can have an advantage through the creation of synergies
Why was Intel so late to the market for mobile phone processors?
Intel had Atom since 2004 but chose not to focus on it…
Intel failed to gain traction in mobile because it wasn’t willing to risk upsetting the economic model that had transformed it into a titan of computing. The company’s fabs, manufacturing strategies, and resources were geared towards large, expensive processors, not churning out huge numbers of low-cost mobile cores. Prioritizing Atom over Core would’ve required the company to retool at least some of its fabs to emphasize throughput and lower costs in order to compete with the ARM processors built at Samsung and TSMC. It would’ve meant lower gross margins and less profit per unit sold.
Why did HMV fail? Why did it not (or could it not) exploit its leading position in the high street in the market for online music?
Throughout the late 90s, HMV’s single biggest mistake was a lack of investment in its online offering. Unfortunately it’s a mistake Fox continued to make. He chose to try and diversify into electronics (a business that was already failing on the high street) and entertainment through venues such as the HMV Apollo, which are now being sold off to pay down debt.
“I have never heard such rubbish”, he said, “I accept that supermarkets are a thorn in our side but not for the serious music, games or film buyer and as for the other two, I don’t ever see them being a real threat, downloadable music is just a fad and people will always want the atmosphere and experience of a music store rather than online shopping.”
dotcom bubble had just burst…
Hubris, arrogance, a feeling of invincibility. Companies fail for many reasons and there was probably a bit of all three involved with HMV but when I read about Kodak selling off its valuable patents to stave off bankruptcy, I saw many parallels with HMV. A company which was overtaken by the march of technology faster than it could ever imagine and which by the time it started reinventing itself and diversifying into other areas, it was too late.
Niccolo Machiavelli’s take on innovators?
“Whoever desires constant success must change his conduct with the times.”
“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. “
The Struggle to innovate: Competence destroying innovation
1. Competency-destroying (rendering firms’ competences obsolete) Competency-enhancing (building on firms’ existing knowledge base) a) Vinyl records to CDs b) Analog radio to Digital Radio
- Competency-enhancing
(building on firms’ existing knowledge base)
a) CD to DVD
b) Mechanical to electric typewriters
Why can competence destroy innovation?
The Thesis: “Well-managed companies often fail because the very management practices that have allowed them to become industry leaders also make it extremely difficult for them to develop the disruptive technologies that ultimately steal away their markets.”
The Dilemma: The logical, competent decisions of management that are critical to the success of their companies are also the reasons why they lose their positions of leadership
What is the definition of core rigidities?
Some firms suffer from “core rigidities”: the core competencies on which their success was built lose relevance through changing markets and changing competing technologies.
Complacency and inertia lead to firms failing to respond on time.
o i.e. Blackberry sticking to the keyboard-operated mobile phone.
o i.e. Nokia “market leader” underestimating the threat of Apple and Google.
It is very difficult for firms to develop technologies that “destroy” the competencies related to their existing technologies.
o HMV not entering the digital, online music market
