W1: intro Flashcards
Strategic Innovation
In this course, we define strategic innovation as the ideation and implementation of new growth strategies, product/service categories or business models that deeply alter the status quo and generate significant new value for customers and the company
Strategic Innovation and Other Forms of Innovation
CONTINUOUS PROCESS IMPROVEMENT
* Involves countless small investments in process innovations (e.g., General Electric through its Six Sigma program)
PROCESS REVOLUTIONS
* Also improve existing processes, but in major leaps – e.g., a 30% increase in productivity - through the implementation of major technologies (e.g., Wal-Mart which invested in “smart tags” to revolutionize processes for tracking consumer products)
PRODUCT OR SERVICE INNOVATIONS
* Are creative new ideas that do not alter established business models (e.g., Procter & Gamble launching the Swiffer)
STRATEGIC INNOVATIONS
* They may include innovations in products or processes, but always involved unproved business models with major shifts in customer, value propositions and operating models
Characteristics of Strategic Innovations
- They have very high potential for revenue growth (e.g., 10x over 3 to 5 years)
- They target emerging or poorly defined industries
- They depart from the company’s proved business definition and its assumption about how to succeed
- They require the company to develop some new knowledge and capabilities
- They revolutionize the definition of a business rather than enhance performance within
proven business definitions - They involve multiple dimensions of uncertainty across multiple functions (e.g., potential customers, value propositions, processes and technologies)
- They remain unprofitable for several quarters or more and thus are expensive to repeat
- They are difficult to evaluate in advance
3 Directions of Strategic Innovation
Strategic innovation means testing unproven and significantly different answers to these three fundamental questions of strategy:
WHO: Markets and target groups
WHY & WHAT: Reason for buying and function for the client
HOW: Business model
Why is the Success Paradox Accelerating?
- INNOVATION AND TECHNOLOGICAL CHANGE ARE FASTER
- COMPETITIVE THREATS ARE MORE UNPREDICTABLE
- GLOBAL COMPETITION IS GROWING
Strategic Innovation and the Success Paradox
For each incumbent, developing the capability to ideate and implement strategic innovation becomes critical to continuously renew its sources of competitive advantage and overcome the success paradox
Strategic Innovation and Growth
Besides being critical for long-term survival, strategic innovation is the only way to maintain growth over time. The growth potential of any business model eventually decays, and growth by acquisition is often plagued with failures and value dissipation (more than 80% of M&As don’t delivered the promised results in terms of growth)
Why is Strategic Innovation so Difficult?
Finding an idea and a great leader for strategic innovation is not enough.
On top of identifying a great idea, to succeed in strategic innovation leaders of incumbent companies have to:
* Attract and protect funding for the strategic innovation
* Learn quickly from success and failure
* Rally people around a fuzzy idea of the future
* Reorganize to leverage on the lessons learnt
* Manage expectations of performance amidst chaos
* Establish new organizational norms and culture
* Overcome tensions between the established business and the strategic innovation
Examples of Successful Strategic Innovations
- Dell and the DIRECT SALE MODEL
- Amazon and AWS
- Canon and the PHOTOCOPIERS FOR SOHO
- Sap and BUSINESS BY DESIGN
- Apple and ITUNES
- Nestlé and NESPRESSO
- Procter & Gamble and TREMOR
- General Motors and ONSTAR
- Enel and ENEL X Store
Examples of Failed Strategic Innovations
- RCA and CONSUMER ELECTONICS
- Polaroid and DIGITAL PHOTOGRAPHY
- Corning and DNA MICROARRAY
- EMI and the CAT SCANNER
- Nokia and SMARTPHONES
- Xerox and DIGITAL COMMUNICATION PRODUCTS
- Sears and the DISCOUNT STORE
- Macy’s and the SALES THROUGH TV
- Sony and MP3 PLAYERS
Failure Rates in (Strategic) Innovation
- Innovations are found to fail (not meeting the established targets) in the 70-80% of the cases
- We can expect this failure rate to be even higher with strategic innovations, for the reasons we have seen before
- Strategic innovation entails a huge consumption of resources, it becomes a priority to invest our energies in a way that increases our chances of success and give meaning to our efforts
A Framework for Managing Strategic Innovation: Three challenges to succeed in Strategic innovation:
- HOW WE PREPARE FOR STRATEGIC INNOVATION
- Create the conditions for strategic innovation to flourish
- OVERCOMING INERTIA AND ADAPTATION
- LEARNING AND VENTURING
- UNDERSTANDING AND LEADING PEOPLE
- CHOOSE THE PATH
- Ideate the right strategic innovation to pursue
- WHAT AND HOW WE DO
- Design and implement the strategic innovation
THE STRATEGIC COMPASS: - STRATEGY IMPLEMENTATION
- IDENTITY & BRAND
- GOALS
- CULTURE
