Strategic Innovation

Question 1

What are the 4 Ps of innovation

Answer 1

Paradigm
Position
Product
Process

Question 2

Paradigm

Answer 2

• Changes underlying mental models

- Totally new way of opperating

Question 3

Position

Answer 3

-Changes the context in which a product is promoted or used

Question 4

Product

Answer 4

-Changes the product or service offered

Question 5

Process

Answer 5

-Changes how the product is created and delivered

Question 6

Innovation in established firms

Answer 6

• Can be seen as an entrepreneurial process

- And as a change process

Question 7

Entrepreneurial process

Answer 7

• Finding new markets for existing products and services
• Applying new technologies in current markets
• Setting up new businesses

Question 8

Change process

Answer 8

• The company’s business model needs to be adjusted.
• Some strategic innovation requires organizational restructuring
• Organizational processes may need to be redesigned
• A change of the firm’s culture may be needed

Question 9

The innovator’s dilemma

Answer 9

-Managers are attached to existing assets and skills
-Incumbents can become too close to an existing customer base
-A disruptive innovation offers a new performance trajectory
Potentially (but not initially) offers significant performance or market gains
New entrants often have the advantage in disruptive innovations.

Question 10

Disruptive innovation

Answer 10

Makes accessible and affordable product that previously was too expensive or complicated except for a specialist few.

Question 11

The innovators Dilemma: Quote

Answer 11

Because companies tend to innovate faster than their customers’ lives change, most organizations eventually end up producing products or services that are too good, too expensive, and too inconvenient for many customers. By only pursuing ‘sustaining innovations’ that perpetuate what has historically helped them succeed, companies unwittingly open the door to ‘disruptive innovations’.”

Question 12

Organising for innovation

Answer 12

• Firms need to balance ongoing exploitation of existing innovation with exploration of new innovations
• Effective structures, processes, expectations and -cultures differ between these two
• Firms struggle to reconcile these differences

Question 13

Exploit

Answer 13

• Cost/profit
• Incremental innovation
• Formal, mechanistic
• Operational
• Margins
• Efficiency, low risk quality
• Authoritative

Question 14

Explore

Answer 14

• Innovation, growth
• Discountinuous innovation
• Entrepreneurial
• Adaptive
• Milestones
• Risk taking, experimentation
• Visionary

Question 15

Inhibitors of innovation

Answer 15

• Cognitive biases

- Ownership responsibilities and pressures

Question 16

Cognitive biases

Answer 16

• Reluctance to explore alternatives which have not been successful in the past
• Tangible and emotional investments in the status quo
• Satisficing – acceptance of innovative progress the seems adequate but does not represent the true potential

Question 17

Ownership responsibilities and pressures

Answer 17

• Innovation can be viewed as an investment into the company’s future
• Requires a positive return on invested resources
• Alternative investments include acquisitions and entering new countries
• The promise of returns only in the long run is riskier than options promising short-term returns

Question 18

Innovation: project Portfolio

Answer 18

Portfolio of innovation projects with limited investments that keep opportunities open.
When uncertainty is high: fail fast, fail cheap, try again
Balanced projects according to levels of uncertainty:

Question 19

Innovation: Firm structure

Answer 19

The ‘explore-exploit paradox’ suggests organisational sub-units may struggle to reconcile incremental and radical innovation.
Often addressed by separating ‘explore’ and ‘exploit’ activity in separate units:

Question 20

Often addressed by separating ‘explore’ and ‘exploit’ activity in separate units:

Answer 20

• Explore or disruptive innovations may be managed in a separate ‘new venture unit’.
• Overarching management still needs to achieve a degree of ‘ambidexterity’.
• The separate units benefit from close relationships

Question 21

Open innovation

Answer 21

“the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation respectively.”

Question 22

First Mover Advantage

Answer 22

The initial occupant of a strategic position or niche gains numerous advantages that a follower cannot match:

Question 23

The gains of a first-mover are;

Answer 23

• Finds itself further down the experience curve
• Gains scale benefits sooner
• Pre-empts scarce resources (if applicable)
• Gains customers who face high costs if they switch to new entrant
• Establishes reputation early

Question 24

But: First mover doesnt mean….

Answer 24

• ‘first inventor’ or ‘first to market’ ….
• There can also be Second (or late) Mover Advantage:
• Free-riding on the original innovation costs ~65% as much.
• Second movers can learn from first movers’ mistakes.

Question 25

Forms of ‘Market Pull’ innovation

Answer 25

Lead user innovation

Frugal innovation

Question 26

Lead user innovation

Answer 26

Build close relationships with ‘lead users’ whose needs are ahead of the general market
Use the relationship to identify unmet needs
Use feedback to help develop product features and quality
Use the community to promote new products

Question 27

Frugal innovation

Answer 27

Respond to the needs of ‘bottom of the pyramid’ markets
Typically inexpensive, robust but basic
Creative solutions are needed to retain adequate performance at much lower prices

Question 28

The concept of a business model:

Answer 28

How an organisation manages incomes and costs through the structural arrangement of its activities.
How it delivers value to users
How it generates income
What parts of the industry value chain it occupies
A way of articulating a new business proposal.

Question 29

Strategies based on new business models:

Answer 29

Disintermediation (Dell, Amazon)
‘Open source’ (linux variants, Android)
Advertising-driven internet businesses (Google, Facebook)
The shift from physical product to electronic delivery and streaming (Blockbuster to Netflix)

Question 30

Business model Canvas: critique

Answer 30

• Doesn’t replace the analytical tools covered in the course-external or internal
• Doesn’t explicitly discuss competitors-existing or potential
• Is meant to be experimented with -see Macmillan McGrath framework