Week 4: ORGANIZING DISCONTINUOUS INNOVATION Flashcards
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
Introduction
G. Ahuja & M. Lampert argue that by experimenting with novel, emerging and pioneering technologies, firms can overcome the 3 organizational pathologies that inhibit breakthrough inventions:
- The familiarity trap
- The maturity trap
- The propinquity trap
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
Introduction part 2
Innovatie is de basis van nieuwe technologische trajecten en paradigmas. Ze zijn belangrijk in creative destruction, waar bestaande technieken en benaderingen worden varvangen bij nieuwe.
Sommige bedrijven zijn in staat routines op te zetten die voor tech doorbraken zorgen en zich daarmee heruitvinden en leaders blijven in hun industrie
Leren zorgt voor een trap: als een organisatie capabilities otnwikkel die performance direct verbetert gaat dit vaak direct ten kosten van competences die horen bij het nieuwe paradigma, wat de sleutel tot de toekomstige performance is.
Welke activiteiten helpen bedrijven om die leer val te overkomen.
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
Introduction part 3
Key features of the theoretical model:
- disversiteit en experimenteren in een groot bedrijf zijn centraal aan succesvolle entrepreneurial activiteiten.
- De dynamiek van bestaande organisaties maken voorzien van zulke diversiteit moeilijk, dit leidt de organisatie in de leer val, waarbij gespecialiseerd wordt en verkomt experimenteren
- In doorbraak innovaites zorgen leer vallen zichtbaar in drie organisatie beginsellen:
✓ A tendency to favor the familiar over the unfamiliar (familiarity trap).
✓ A tendency to prefer the mature over the nascent (maturity trap).
✓ A tendency to search for solutions that are near to existing solutions rather than search for completely de novo solutions (propinquity trap).
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
Introduction part 3
Key features of the theoretical model:
Dit kan overkomen worden volgens de auteur door:
- Te experimenteren met nieuwe, opkomende en pioneerende technologieen.
✓ Novel technologies are technologies that are new or unfamiliar to the firm.
✓ Emerging technologies are leading-edge technologies that are recent or new to the entire industry.
✓ Pioneering technologies are technologies that have no technological antecedents.
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
3 organizational pathologies that inhibit breakthroughs
-
Familiarity trap: Favour for familiar technologies
- Remedy: by exploring novel technologies (New/unfamiliar to the firm, not industry)
- Benefits: Heterogeneity in problem solving, cognitive structures are challenged
- Measured**: First apply for a patent, after 4Y
-
Maturity trap: Favour for mature technologies
- Remedy: by exploring emerging technologies (Leading-edge/new to the entire industry)
- Benefits: New knowledge, potential breakthrough
- Measured**: Create very recent patents
-
Propinquity trap: Favour for solutions nearby
- Remedy: by experimenting with pioneering technologies (Not build on any existing tech.)
- Benefits: Not clear
- Measured**: No other patents
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
Hypothesis
H1: Breakthrough inventions have an inverted U shape with the exploration of Novel technologies (Supported
- Confusion of information overload
H2: Breakthrough inventions have an inverted U shape with the exploration of Emerging technologies (Supported
- Demand more focus, poorly understood
H3a: Breakthrough inventions have an inverted U shape with the exploration of Pioneering technologies (Not Supported
H3b: Breakthrough inventions have an positive relationship with the exploration of Pioneering technologies (Supported
Zie Joris Samenvatting voor uitleg
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
Methodology
longitudinal data set
- patenting activities of global chemicals industry
- period 1980-95
- used patent citation counts to identify breakthrough inventions
- 2 phases of data collection:
- 1. identify the most highly cited patents in the chemicals industry
- identify top 1 % of patents for each year as breakthrough inventions
- 2. identify and obtain data on the established firms in the industry
- annual listing of the largest chemicals firms from the leading trade journals
(Chemical Week and C&E News)
- sample of 97 firms
- = yearly patenting histories of firm that they had created over the period
- ⇒ panel data set with each firm’s history of breakthrough inventions across study period
(3) – Ahuja & Lampert (2001) – Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions
Conclusion
Capability-rigidity paradox: bestaande capabilities die de basis vormen voor het huidge bedrijf zijn competitieve positie, maar zonder vernieuwing worden deze capabilities rigide, vast, perken bedrijf is toekomstige ability om te competen.
Bedrijven moeten en balans vinden tussen huidige activiteiten, dat wat ze kennen en kijken naar nieuwe activiteiten en kansen omzichzelf te vernieuwen ‘‘rejuvenate’’.
De study ondersteund het idee dat nieuwe, opkomende en (maar niet pioneerende) technologieene ene manier zijn om de leer val te overkomen.
Exploreren van nieuwe en opkomende technologieeen is curfliniear geassocieert met daarop volgende breakthrough innovaties (inverted U-shape), eerst omhoog dan omlaag dat een bedrijf een breakthrouhg innnovatie doet.
Dit komt doordat:
- Hoewel buitensporig experimenteren met baanbrekende technologieën aanzienlijke kosten met zich mee zal brengen, zullen deze kosten uiteindelijk misschien niet tot uiting komen in een daling van het aantal baanbrekende uitvindingen, maar in plaats daarvan zouden ze als grotere uitgaven voor middelen of monetaire kosten worden gezien.
- Niet genoeg bedrijven bereikten het experimentele niveau van deze variabele dat hoog genoeg was om de negatieve effecten van de versnippering van hulpbronnen statistisch significant te maken.
Dit betekend (implications):
- Organisatorisch leren: bedrijven raken vaak verstrikt in leervallen.
- In de context van baanbrekende uitvindingen komen ze tot uiting in de 3 soorten organisatorische pathologieën (vertrouwdheid, volwassenheid, propinquity).
- Uitbreiding van het argument van de leerval door de mogelijkheid van tweede-orde- of doubleloop-leren op te nemen. Double-loop learning vereist de heroverweging en verandering van de heersende waarden van de organisatie vanuit het perspectief van langeafstandsresultaten. Organisatorische routines die er niet in slagen dergelijke uitvindingen te produceren, zullen waarschijnlijk opnieuw worden beoordeeld en geherformuleerd.
Belangrijk verschil:
Invention refers to the development of a new idea or an act of creation.
Innovation refers to the commercializing of the invention.
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
Introduction
Dit artikel biedt een framework (resource-processes-value framework) dat helpt bij het begrijpen wat organisaties tot in staat zijn te bereiken. Het laat zien hoe bedrijven een disabilities scherper worden op het moment dat de core capability groter wordt. Het is een manier om verschillende soorten veranderinging zichtbaar te maken, en om gepaste organizatie reacties te doen aan de hand van de kansen die voorkomen.
Large companies are bad at coping with disruptive change, because managers don’t see the change coming or lacking resources. Managers lack to think in an organizations’ capabilities as they think about individuals’ capabilities.
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
Three factors that affect what an organization can & can’t:
- Resources:
a. access to abundant, high-quality resources increases an organization’s chances of coping with change - Processes:
a. = patterns of interaction, coordination, communication, and decision making employees use to transform resources into products and services of greater worth.
b. formal ( explicitly defined) and informal (routines or ways of working that evolve over time)
c. dilemma: processes are meant not to change, or if they must change, to change through tightly controlled procedures
- Values:
a. = the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less
important etc. → prioritization decisions
b. a company’s values reflect its cost structure or its business model → define rules its employees must follow for the company to prosper
c. here focus on 2 sets of values that evolve in most companies in very predictable ways (gross margins and size of business opportunities) → the evolution of these values
make companies progressively less capable of addressing disruptive change successfully
d. the way the company judges acceptable gross margins: As companies add features and functions to their products and services, trying to capture more attractive customers in premium tiers of their markets, they often add overhead cost. As a result, gross margins that were once attractive become unattractive.i. e.g. Toyota; selling more cars at lower margins is a better way to boost profits and equity values than selling more Camrys, Avalons, and Lexuses.
e. how big does a business opportunity have to be before it can be interesting: an opportunity that excites a small company isn’t big enough to be interesting to a large
company.
f. one of the ‘bad’ results of success is that as companies become large, they lose the ability to enter small, emerging markets. This is caused by an evolution of in values.
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
The migration of capabilities
- Bedrijven moeten niet zoveel focussen op zijn resources, maar meer op de processen en values.
- Processen en values zullen groeien in een bedrijfs cultuur. Cultuur zorgt er vervolgens voor dat employees ‘‘are on the same page’’
- Maar… Als cultuur ge ‘‘established wordt’’ is verandering extreem moeilijk.
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
Sustaining vs. Disruptive innovation
Sustaining innovation: Making a product/service better
Disruptive innovation: Create a new kind of product/service
Maar: Disruptive innovations occur sporadically, so processes are not yet at hand, showing lower profit margins.
Note: Disruptive innovation is a market based distinction. That does not offer value initially. At a certain time it is only serving low end customer. However, it can exceed the advantaged customer, while sustaining innovation is serving the advantaged customers.
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
Sustaining vs. Disruptive innovation
Why are do established companies never introduce (or cope well) with disruptive innovations?
- Industry leaders are organized to develop sustaining technologies because they promise higher margins + fits with the customers’ needs
- Disruptive innovations occur irregularly that no company has routine process for handling them + because disruptive products nearly always promise lower profit margins and are not attractive to the company’s best customers, they are inconsistent with the established firm’s values.
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
E. creating capabilities to cope with change
Processes en values zijn niet zo flexibel of aanpasbaar zoals resources zijn. Managers moeten een organisatie ruimte creeren waar deze capabilities ontwikkeld kunnen worden. hiervoor zijn drie verschillende manieren:
- create new organizational structures within corporate boundaries → create internally
- spin out an independent organization from the existing organization → create internally
- acquire different organization whose processes and values closely match the requirements of
the new task → acquire externally
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
1. Creating new capabilities internally
create new organizational structures, namely ‘heavyweight teams’ = teams entirely dedicated to the new challenge, team members are physically located together, and each member is charged with
assuming personal responsibility for the success of the entire project.
⇒ new team boundaries facilitate new patterns of working together that ultimately can merge as new processes.
(3) – Christensen & Overdorf (2000) – Meeting the challenge of Disruptive change
2. Creating capabilities through a spinout organization
when the mainstream organization’s values would render it incapable of allocating resources to an innovation project, the company should spin it out as a new venture.
When a disruptive innovation requires a different cost structure in order to be profitable and competitive, or when the current size of the opportunity is insignificant relative to the growth needs of
the mainstream organization, only then is a spinout organization required.
requirement: the spinout organization’s independence from the normal decision-making criteria in the resource allocation process = the project should not be forced to compete for resources with projects in the mainstream organization.
which team to use:
(3) – Veryzer (1998) – Discontinuous innovation and the New Product Development process
Model of Veryzer to define ‘discontinuous’:
Discontinuous = Radical, breakthrough and revolutionary.
Model of Veryzer to define ‘discontinuous’:
- Technological capability: Expanding capabilities beyond boundaries
- Product capability: The benefits of the product perceived by the customer
- It is important to take the customer benefit in the definition, as he decides if it becomes a success
(3) – Veryzer (1998) – Discontinuous innovation and the New Product Development process
Types of innovation
Figure 1 shows a useful way to represent innovation. The technological Capability discusses the degree to which a product involves expanding technological capabilities beyond existing borders. The Product Capability looks at the product as perceived by the user. Thus 4 types of innovation arise:
- Continuous – products may be new however they are not very innovative
- Commercially Discontinuous – perceived by customers as completely new
- Technologically Discontinuous – significant new technology
- Technologically and Commercially Discontinuous – New technology + perceived as new by
(3) – Veryzer (1998) – Discontinuous innovation and the New Product Development process
The process of discontinuous innovation looks similar as that on continuous innovation. The main differences are:
Discontinuous innovation involves:
- Extremely high degree of technological uncertainty
- A sequence of innovations
- Long development times
Also, During the initial stage customers do not play an important role. However, After the formal evaluation screen, feedback from customers becomes important. (Example of Henry Ford, customers don’t know what they want)
