Strategy and Change Flashcards
The strategic importance of technology: (3)
A. Value creation
(producing things which provide value to customers)
B. Value capture
(gaining competitive advantage/ changing competitive structure)
C. Changing the competitive structure of industry
(technologies discontinuities and significant innovations)
Strategic implications of innovation (3)
Value capture:
- Distribution channel
- Business model
- Expansion of scope
Value proposition
- Which features?
- In which form?
Resource Development
- In house or outsource?
- Data management
Cyclical Model of Technological Change:
- Technological discontinuity
- Era of ferment
- Dominant design
- Era of incremental change
- Technological discontinuity
Revolutionary/ breakthrough/ radical innovation
Innovations that either enhance or destroy existing competences, significantly impacting firms’ competitive positions. Discontinuities push industries forward by advancing the price versus performance frontier.
- Era of ferment (3)
- Significant portion of technological progress.
- Higher number of new designs
- Competition (1) between technical regimes (2) within new technical regimes
- Dominant design
- Result of social and organizational selection processes (1) technological merits (2) social (3) political (4) organizational factors.
- Often not the most technologically superior initially
- Signifies the stabilization of the industry standards and directs future incremental innovations.
- Peak of all versions of new technology
- A discontinuity will not itself become a dominant design
- A single dominant design emerges following each technological discontinuity
- Era of incremental change (2)
- Increase in performance and sales
- Guiding incremental innovations until the next discontinuity
Social and Organizational Dynamics (4)
The selection of dominant designs is influenced by
- technological merits
- social
- political
- organizational factors,
highlighting the complex interplay between technological evolution and societal factors.
Types of Discontinuities, based on their effect on existing technological capabilities. (2)
A. Competence-enhancing: build on existing capabilities.
B. Competence-destroying: firms to acquire new skills and knowledge.
Technology lifecycle (4)
- Introduction
- Growth
- Maturity
- Decline
Disruptive Technologies: (3)
- Originates from low-end or new-market footholds.
- Entrants may target overlooked low-segment of the market with a product considered inferior by incumbents most-demanding customers.
- Entrants may create markets where no market exists and turn non-consumers into consumers. - No catch-on with mainstream customers until quality meets their standards.
- Involves some business model innovation.
- Distruption is not about technology alone, but rather the combination of technologies and business model innovation.
Sustaining Technologies
Improve product performance in ways that matter to existing customers.
Why large firms sometimes miss innovation (2)
- Structure (success in stable markets)
- Culture (fail when market shifts)
The innovators dilemma: (3)
A. According to Clayton Christensen Failure to adapt to disruptive innovation is not the result of bad management but rather a result of good management.
B. Large companies depend on their existing customers and investors for resources.
C. They listen closely to these customers and investors and kill ideas for which there is little need.
Managerial Implications and Strategies to be innovative
Creating autonomous units focused on emerging technologies and re-evaluating investment in sustaining technologies when faced with potential disruptors.
What are the key reasons, in your view, for Nokia’s decline during the 2000s?
- High R&D investments but they did not understand the difference of the idea of a smart phone and before developed conventional phones,
- Innovation was hardware-based—highly matrixed and complex organization.
- Not responding to low-end Chinese competitors & not quickly enough to the treat of iPhone.
More broadly, why do good companies like Nokia go bad? (4)
- Disruptive technology
- Competency trap
- Binding commitments
- Behavioral aspects bias & arrogance
Wrap-up disruptive innovation
A. Disruptive technological innovation: lower performance than the current market demands at the higher end. But it is demanded by the low end of the market or by new market segments.
B. Incremental improvements along the demands of the mainstream market.
C. Overtime as the disruptive technology improves it begins to intersect with the needs of more demanding market segments.
-> Overshooting: Performance exceeds the specific markets needs/ not as much valued by customers.
Pursuing new competences characterized by:
- Variation, experimentation, flexibility, risk-taking, product innovation
Copmany structure: (2+)
A. Mechanic structure:
- Operating styles (must be uniform and restricted)
- Tight control (through sophisticated control system)
- Relucant adaption (sticking to old management principles despite changes in business conditions)
B. Organic structure:
- Operating styles (vary freely)
- Loose, infromal control (with emphasis on norm cooperation)
- Free adaption (by the organization to changing circumstances)
How can we run our business to optimize current revenue streams but also build the foundation for future successes.
Past - Future
Short-termism - Long termism
Stability - Adaptability
- What is contextual ambidexterity? (2)
Managers capabilities to balance exploitation (optimizing) and exploration (innovating new products) within the same business unit/ team. Individuals can flexibly adapt to the environment of the project.
Organizational context:
A. Performance management (stretch/discipline)
B. Social support (support/trust)
- How is it different from structural ambidexterity?
- Structural ambidexterity gives a structure in which exploration and exploitation are separated from one another but dividing it into different business units.
- Can contextual ambidexterity be implemented?
- Creating a culture which supports flexibility. This can include setting clear goals regarding exploration and exploitation. Supporting knowledge exchange, innovation, and collaboration.
Difficulties in separation solution
Too much exploitation -> competency trap
Too much exploration -> failure or renewal trap
Summary: Christensen, C. M., & Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard Business Review, 78(2), 66-77.
The question is why established companies often struggle to innovate successfully in the face of disruptive changes. They have the resources and the talent; however, they apply old organizational structure and processes to new ventures. Which require different approaches. Successful implementing contextual ambidexterity depends heavily on the choice of the right team
Creating capabilities to cope with change: (3)
A. In-house
B. Spin-out
C. Acquisition
Use a lightweight on functional team within the existing organization
- Good fit with organizations processes
- Good (sustaining innovation) fit with organizations values
Use a heavyweight team within the existing organization
- Poor fit with organizations processes
- Good (sustaining innovation) fit with organizations values
Use a heavyweight team in a seperate spinout organization
- Poor fit with organization processes
- Poor (disruptive innovation) fit with organizational values
Development may occur in-house through a heavyweight team, but commercialization almost always requires a spinout-
- Poor fit with organizations processes
- Poor (disruptive innovation) fit with organizations values
- What are the characteristics of disruptive innovation?
- Create a new market and eventually disrupting existing markets. They often start as lower-quality offerings, they target fewer demanding customers and improve over time.
- What does Christensen mean by ‘values?
- Is the standard by which employees prioritize tasks and make decision. This influences the resource allocation and cost structure of the entire company.
- What does a heavyweight team look like?
- A team dedicated exclusively to an innovation project, with complete responsibility for its success.
(1) fully time working members
(2) supports new processes and values
(3) The ability to develop new processes and values, specifically if it is different to prior projects
Internal corporate venturing (3)
- Entrepreneurial initiatives that originate within a corporate structure
- Intended from inception as a new business for corporation
- Structural separated from the parent
Source of innovation (2)
Internal - Market analysis, direct research and development
External - Corporate alliances, research partnerships, open innovation, user innovation
Cycles of internal corporate venturing
Internal corporate venturing (ICV) undergoes cycles of enthusiasm followed by withdrawal.
Driving factors for ICV cycles (3-12 years): (4)
- ICV orphans
- All-out ICV drive
- ICV irrelevance
- Desperately seeking ICV
- It highly depends on the financial health of a company and the outlook of its core business.
- All-out ICV drive
– Bad performance in main business and sufficient financial resources.
- ICV orphans
– Access to financial resources but no motivation for ICV due to good performance of the main business
- ICV irrelevance
– Strong business prospects and financial resources make ICV seem unnecessary
- Desperately seeking ICV
– Bad mainstream business prospects and financial resource constraint
Implication for management: More disciplined approach to ICV integrating it as continuous strategic activity rather than treating it as optional periodic effort. (3)
(1) Understanding strategic value of ICV
(2) Ensuring executive involvement and support, resource allocation
(3) Fostering a culture that encourages innovation.
Stage gate method (6)
- Idea screen: Discovery idea generation
- 2nd scree: Scoping
- Go to development: Build Business Case
- Go to test: Development
- Go to launch: Testing & validation
Post launch review: Launch
Downsides of state gate model and solutions
- Limit flexibility and learning
-> Making gates more flexible
Three financial tools hindering innovation: (3)
Christensen, Kaufman, and Shih “Innovation Killers How Financial Tools Destroy Your Capacity to Do New Things” Harvard Business Review, 2008, 98-105.
- Discounted cash flow & 2. Net present value:
- Considering fixed and sunk costs to evaluate future investments
- Earnings per share (EPS): Makes companies prioritize short-term gains.
- Discounted cash flow & 2. Net present value:
- Focuses on short term and predictable returns
- Underestimate the real return of innovation investments, primarily because of two intense discounted future cash flows and diminishing value of long-term innovation benefits.
- Considering fixed and sunk costs to evaluate future investments (4)
- Managers stall decisions to avoid accountability
- Market changes faster and in different ways than asset depreciation allows us to account for
- Focus on strategies not technologies
- exploration exploitation dilemma / full-cost vs. marginal cost dilemma
- Earnings per share (EPS):
- Earnings per share (EPS): Makes companies prioritize short-term gains.
- Focuses on short term stock performance and less on company’s long-term health
- Cash is more often used to buy stock back
- What are the problems with using the stage gate method, as well as DCF, fixed/sunk costs and earnings per share measures?
- Focusing too much on meeting specific criteria at each stage rather than on the dynamic learning and adoption required for breakthroughs innovation.
- Fixed and sunk costs can discourage investment in new projects and prefer utilizing existing assets over exploring new opportunities.
- What do Sethi and Iqbal mean by “learning failure”, and how does a rigorous stage gate lead to it?
- Rigorous stage-gate process might lead to barriers to experimentation and exploration.
- What is discovery-driven planning?
it is often possible to iterate the ideas in a plan, encouraging experimentation at lowest possible cost.
Clarks Three “Laws” (3)
- When distinguished but elderly scientists states that something is possible, they are almost certainly right. When they say something is impossible, they are very probably wrong.
- The only way to discover the limits of the possible is to venture past them into the impossible.
- Any sufficiently advanced technology is indistinguishable from magic
- Assess Alcatel-Lucent’s experience with its boot camps: what went well, and what could have been improved? (4)
Case study: Intrapreneurship at Alcatel-Lucent (HBR).
+ Participation from various departments
+ Successful projects, some of them were commercialized
+ Increased high potential employees, positive impact on employee engagement and talent development
- Resource allocation challenges,
- What does success look like for an intrapreneurial boot camp? (2)
Case study: Intrapreneurship at Alcatel-Lucent (HBR).
- Innovation and value creation
- Entrepreneurial culture
- Personal professional development, what are the elements of a successful boot camp?
Case study: Intrapreneurship at Alcatel-Lucent (HBR).
- Diverse participation, supportive infrastructure, clear objectives and metrics, alignment with strategic goals, alignment with strategic goals, career pathways for participants, open and continuous communication.
Open innovation:
principles recognize the value of external R&D, the need to profit from others’ use of your IP, and the potential benefits of taking others’ innovations to market.
- Commercializing own as well as innovations from other firms
- To bring in-house ideas to market by deploying outside pathways
- Boundary between involved partners is porous
- too enable to innovations to move easily
Drivers of an open innovation model, where companies leverage both internal and external ideas and paths to market: (3)
- Increasing mobility of highly skilled workers
- The availability of venture capital
- External options for ideas lying outside a company’s core business areas.
Changes in the business landscape due to a shift towards more open innovation:
This shift towards open innovation represents a more distributed, decentralized approach to R&D, where the silos of knowledge and expertise that once defined and protected market leaders are increasingly permeable. The article suggests that firms adopting open innovation can maintain a competitive edge by effectively managing and navigating the complex innovation landscape, where the integration of external and internal ideas is key to sustained success.