Strategic Innovation Flashcards
What are the 4 Ps of innovation
Paradigm
Position
Product
Process
Paradigm
- Changes underlying mental models
- Totally new way of opperating
Position
-Changes the context in which a product is promoted or used
Product
-Changes the product or service offered
Process
-Changes how the product is created and delivered
Innovation in established firms
- Can be seen as an entrepreneurial process
- And as a change process
Entrepreneurial process
- Finding new markets for existing products and services
- Applying new technologies in current markets
- Setting up new businesses
Change process
- 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
The innovator’s dilemma
-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.
Disruptive innovation
Makes accessible and affordable product that previously was too expensive or complicated except for a specialist few.
The innovators Dilemma: Quote
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’.”
Organising for innovation
- 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
Exploit
- Cost/profit
- Incremental innovation
- Formal, mechanistic
- Operational
- Margins
- Efficiency, low risk quality
- Authoritative
Explore
- Innovation, growth
- Discountinuous innovation
- Entrepreneurial
- Adaptive
- Milestones
- Risk taking, experimentation
- Visionary
Inhibitors of innovation
- Cognitive biases
- Ownership responsibilities and pressures
Cognitive biases
- 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
Ownership responsibilities and pressures
- 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
Innovation: project Portfolio
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:
Innovation: Firm structure
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:
Often addressed by separating ‘explore’ and ‘exploit’ activity in separate units:
- 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
Open innovation
“the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation respectively.”
First Mover Advantage
The initial occupant of a strategic position or niche gains numerous advantages that a follower cannot match:
The gains of a first-mover are;
- 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
But: First mover doesnt mean….
- ‘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.
Forms of ‘Market Pull’ innovation
Lead user innovation
Frugal innovation
Lead user innovation
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
Frugal innovation
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
The concept of a business model:
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.
Strategies based on new business models:
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)
Business model Canvas: critique
- 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
