Innovation BE701

Pros and cons of formalization and standardization?

Pro: make it easier to manage and control organizations. Con: Hinder creativity and innovation.

The value a new technology offers a customer is a composite of...

the value of the stand-alone technology, and the installed base and the complementary goods available. In industries characterized by increasing returns, this combination will influence which technology design rises to dominance.

What does a successful collaboration require? name 2

1. Choosing partners that have both a resource fit and a strategic fit. 2. Developing clear and flexible monitoring and governance mechanisms to ensure that partners understand their rights and obligations, and have methods of evaluating and enforcing each partner's adherence to these rights and obligations.

What practices are subject to trade offs and how can innovation strategy help solve it?

1. Crowdsourcing. 2. Customer involvement. 3. Innovation processes. (Phase-gate or parallel problem solving). There is no one fits all and to answer these questions we need to go back to the innovation strategy and find what works for the firm best.

What are the four aspects that are overlooked in the disruptive innovation theory?

1. Disruption is a process. It takes time to go from the low end of the market (or new) to the mainstream. 2. Disrupters often build business models that are very different from those of incumbents. 3. Some disruptive innovations succeed; some don't. 4. The mantra "Disrupt or be disrupted" can misguide us. Incumbent firms should continue to strengthen relationships with core customers by investing in sustaining innovations.

What are the 4 types of strategies to manage innovation across borders?

1. center for-global (all innovation activities are conducted at a central hub). 2. local-for-local (each division or subsidiary of the firm conducts its own R&D). 3. locally leveraged (each division or subsidiary of the firm conducts its own R&D activities, but the firm attempts to leverage resulting innovations throughout the company). 4. globally linked (Innovation activities are decentralized, but also centrally coordinated for the global needs of the corporation).

What are core competencies?

A company's core competencies are typically considered to be those that differentiate it strategically. A core competency arises from a firm's ability to combine and harmonize multiple primary abilities in which the firm excels into a few key building blocks of specialized expertise.

What is strategic intent? What tools help to define it?

A firm's strategic intent is the articulation of an ambitious long-term (10 to 20 years out) goal or set of goals. The firm's strategic intent should build upon and stretch its existing core competencies. (Apple- everyone should have a personal computer). How to define a strategy: Red Ocean Blue Ocean strategy. The Balanced Scorecard.

The players in a platform ecosystem

A platform provides the infrastructure and rules for a marketplace that brings together producers and consumers. The players in the ecosystem fill four main roles but may shift rapidly from one role to another. Understanding the relationships both within and outside the ecosystem is central to platform strategy.

What is organic structure?

loose and free flowing, good for creativity and experimentations.

What is the dilemma presented by Gans?

organizing around a modular structure is extremely efficient in developing component innovation, however, the separate divisions create organizational barriers, making it hard for innovation to integrate into the main part of the business.

Explain reaping increasing returns advantages

In an industry with pressures encouraging adoption of a dominant design, the timing of a firm's investment in new technology development may be particularly critical to its likelihood of success.

Network externality value

In industries characterized by network externalities, the value of a technological innovation to users will be a function not only of its stand-alone benefits and cost, but also of the value created by the size of its installed base and the availability of complementary goods.

Dominant design

a new technological design or process that becomes the accepted market standard

To assess the firm's current position we have external and internal analysis tools. Name them.

External analysis: Porter's five forces and Stakeholder analysis. Internal analysis: Porter's value chain.

Explain preemption of scarce assets

Firms that enter the market early can capture scarce resources such as key locations, government permits, patents, access to distribution channels, and relationships with suppliers.

Why is defining an innovation strategy important and what does it offer firms?

Good strategies promote; 1. Alignment among diverse groups within the organization. 2. Clarify objectives and priorities. 3. Help focus efforts around them.

What is collective research organization?

Groups of organizations may form collective research organizations to jointly work on advanced research projects that are particularly large or risky.

What is a mechanistic structure?

Highly formalized and standardized and good for efficient production.

How Our Thinking About Disruption Has Developed?

Incumbent firm's want to serve their existing customers (strategy and internal processes). Disruptors (multiple) populated the low-end and new markets, in which the incumbent firm provided a price umbrella for, allowing them to enjoy profitable growth, until they pull out and then a price based competition begins. Where only the strong will last. This drives everyone upmarket.

Explain How will innovation create value for our potential customers?

Innovation creates benefit if: customers pay more, saves money, or provide societal benefits. You need to chose what value your innovation brings and stick to it.

What is standardization?

Is the degree to which activities in the firm are performed in a uniform manner.

What is formalization?

Is the degree to which the firm utilizes rules and procedures to structure the behavior of individuals within the organization.

What can a disruptive innovation lens reveal?

It is rare that a technology or product is inherently sustaining or disruptive. And when new technology is developed, disruption theory does not dictate what managers should do. Instead it helps them make a strategic choice between taking a sustaining path and taking a disruptive one.

Focus

Managers of pipeline businesses focus on growing sales. For platforms, the focus shifts to interactions—exchanges of value between producers and consumers on the platform. Most successful platforms launch with a single type of interaction that generates high value even if, at first, low volume. They then move into adjacent markets or adjacent types of interactions, increasing both value and volume. Facebook→Harvard student→other students→everyone.

What is a modular product?

Modularity refers to the degree to which a system's components may be separated and recombined. Making products modular can exponentially increase the number of possible configurations achievable from a given set of inputs.

Explain how network externalities influence increasing returns to scale?

Network externality effects arise when the value of a good to a user increases with the size of the installed base. This can be due to a number of reasons, such as need for compatibility or the availability of complementary goods.

Can you copy someone else's strategy?

No! There is no one way system that fits all companies well or works under all circumstances. (Don't copy Apple). It's important to have a clearly articulated innovation strategy-one that is closely linked to a company's business strategy and core value proposition.

Internal analysis- Porter's value chain

Often begins with identifying the firm's strengths and weaknesses. Examining each of the activities of the value chain. Primary activities- Inbound logistics. Operations. Outbound logistics. Marketing, Service. Support activities- Firm infrastructure. HR management. Technology development. Procurement. Once the key strengths and weaknesses are identified, the firm can assess which strengths have the potential to be a source of sustainable competitive advantage.

Innovation ambition matrix, how should firms allocate their innovation resources

On average, high-performing firms direct 70% of their innovation resources to enhancements of core offerings, 20% to adjacent opportunities, and 10% to transformational initiatives. But individual firms may deviate from that ratio for sound strategic reasons.

Explain exploiting buyer switching cost

Once buyers have adopted a good, they often face costs to switch to another good. Example; QWERTY keyboard.

What is loosely coupled organizational structures?

Organizations can also be made modular through the adoption of structures that enable "loose coupling." In a loosely coupled structure, development and production activities are not tightly integrated but rather achieve coordination through their adherence to shared objectives and common standards.

What is outsourcing?

Outsourcing enables a firm to rapidly access another firm's expertise, scale, or other advantages. Firms might outsource particular activities so that they can avoid the fixed asset commitment of performing those activities in-house. Outsourcing can give a firm more flexibility and enable it to focus on its core competencies. Overreliance on outsourcing, however, can make the firm hollow.

Forces exerted by ecosystems

Pipeline businesses often fail to anticipate platform competition from seemingly unrelated industries. Yet platform businesses move aggressively into new terrain and into what were once considered separate industries. Google moving into mapping, mobile operating, etc.

Metrics

The metrics that pipeline managers need to track when shifting to a platform business model change. Here are new metrics managers need to track: Interaction failure. Engagement. Match quality (Poor matches between the needs of users and producers weaken network effects). Negative network effects (Chatroulette- "Naked hairy man" problem).

Explain how learning effects influence increasing returns to scale?

The more a technology is produced and used, the better understood and developed it becomes, leading to improved performance and reduced costs.

What is increasing returns to adoption?

The more they are adopted, the more valuable they become.

Who's job is it to set the strategy? Why them?

The most senior leaders in the organization. Since innovation cuts through the whole organization only senior executives can orchestrate such a system.

What's Gans view on the relationship between incumbent firms and new entrants?

The narrative of a new entrant displacing the incumbent firm isn't the standard plot. Often the incumbent acquires the new entrant or licenses their technology. Often the incumbent firms wait until the new entrant's technology has been proven and then they corporate with them.

Advantages of collaborating, name 5 reasons

1. Acquiring capabilities and resources quickly (gain rapid access to important complementary assets). 2. Increasing flexibility- (obtain capabilities and resources from partner, reduces assets commitment and enhances flexibility). 3. Learning from partners. 4. Resource and risk pooling (share the costs and the risk of the project). 5. Building a coalition around a shared standard (together setting the industry standard, benefit both partners).

4 reasons for going solo

1. Availability of capabilities (have all skills in-house). 2. Protecting proprietary technologies. 3. Controlling technology development and use. 4. Building and renewing development capabilities (Solo development of a technological innovation challenges the firm to develop new skills).

First movers advantages? (name them) 4

1. Brand Loyalty and Technological Leadership. 2. Preemption of Scarce Assets. 3. Exploiting Buyer Switching Costs. 4. Reaping Increasing Returns Advantages.

According to the disruptive innovation model, why doesn't Uber qualify as a disruptive company? 2

1. Disruptive innovations originate in low-end or new-market footholds, not mainstream. 2. Disruptive innovations don't catch on with mainstream customers until quality catches up to their standards. Their product was already good.

What are bigger firms better at? name 4

1. Economies of scale in R&D. 2. Access to complementary resources (like capital and market access). 3. Can take on risky innovation projects. 4. Learning benefits.

3 categories for timing of entrants

1. First movers. 2. Early movers. 3. Late entrants.

How does strategy changes for platforms? name 5

1. Forces within the ecosystem. 2. Forces exerted by ecosystems. 3. Focus. 4. Access and governance. 5. Metrics.

What does the shift from pipeline business to platform business involve? name 3

1. From resource control to resource orchestration. 2. From internal optimization to external interaction. 3. From a focus on customer value to a focus on ecosystem value.

What question should an innovation strategy answer? 3

1. How will innovation create value for our potential customers? 2. How will the company capture a share of the value its innovation generates? 3. What types of innovation will allow the company to create and capture value, and what resources should each type receive?

What are the risk with not having an innovation strategy?

1. Inability to make trade-off decisions- the firm won't be able to make trade-off decisions and choose the elements of the innovation system. 2. Conflicting priorities- without a clear innovation strategy the different parts of the orgainzation can pursue different things even if their business strategy is clear.

What types of organizations do ambidextrous organizations encompass? name 2

1. exploiting existing capabilities for profit. 2. exploring new opportunities for growth. As this table indicates, the two require very different strategies, structures, processes, and cultures.

What is joint ventures?

A joint venture is a partnership between firms that entails a significant equity investment and often results in the creation of a new separate entity. Joint ventures are usually designed to enable partners to share the costs and risks of a project, and they have great potential for pooling or transferring capabilities between firms.

Forces within the ecosystem

consumers, producers, and providers— typically create value for a business, but for a platform, they can defect or directly compete with the platform. Hence, platforms must constantly develop and improve their ecosystems while monitoring participants that may harm the platform. This is a delicate governance challenge.

Winner-take-all market

Increasing returns can lead to winner-take-all markets where one or a few companies capture nearly all the market share.

What is licensing?

Licensing involves the selling of rights to use a particular technology (or other resource) from a licensor to a licensee. Licensing is a fast way of accessing (for the licensee) or leveraging (for the licensor) a technology, but offers little opportunity for the development of new capabilities.

Name the 3 ways in which companies can survive supply side distribution

1. Integrated organizational model. 2. Ownership of a feature important to the end customer. 3. Strong sense of corporate identity.

Questions to identify the firm's core competencies? 3

1. Is it a significant source of competitive differentiation? Does it provide a unique signature to the organization? 2. Does it cover a range of businesses, both current and new? 3. Is it hard for competitors to imitate?

What are the primary sources of increasing returns? name 2

1. Learning effects. 2. Network externalities.

Factors influencing optimal timing of entry? 7

1. Margin of advantage offered by the new innovation. 2. The state of enabling technologies and complements. 3. The state of customer expectations. 4. The threat of competitive entry. 5. Whether the industry faces increasing returns. 6. Firm's resources. 7. Length of the cycle development process.

What are the two major (traditional) types of organization structures?

1. Mechanistic structure. 2. Organic structure.

What are risks with alliances? name 3

1. Redundant resources investment. 2. Competitive conflict between partners. 3. Giving too much away to a potential competitor.

First mover disadvantages? (name them)

1. Research and Development Expenses. 2. Undeveloped Supply and Distribution Channels. 3. Immature Enabling Technologies and Complements. 4. Uncertainty of Customer Requirements (most important)

What are the 4 categories of innovation?

1. Routine innovation- an innovation that builds on the companies existing technological competencies and fits with its current business model. 2. Disruptive innovation- innovation that requires a whole new business model but not necessarily a technological breakthrough. 3. Radical innovation- an innovation that purely challenges the technology. 4. Architectural innovation- innovation that combines a disruption of booth technology and business model.

5 types of collaborative arrangements

1. Strategic Alliances. 2. Joint Ventures. 3. Licensing. 4. Outsourcing. 5. Collective research organizations.

Porter's five forces, name the 6 forces.

1. The degree of existing rivalry. Competition. 2. Threat of potential entrants. New entrant. 3. Bargaining power of suppliers. 4. Bargaining power of buyers. 5. Threat of substitutes. 6. Complements.

What are smaller firms better at? name 2

1. They are more flexible and entrepreneurial 2. Monitoring employees and rewarding them for their effort or success at innovation. 3. More motivated to choose projects more carefully, leading to higher rates of new product success. Small firms often outperform large firms in innovation.

What are the 4 task in creating and implementing innovation strategy?

1. To answer "How are we expecting innovation to create value for our customers and our company?". 2. Create a high-level plan for allocating resources to the different types of innovation. 3. Manage trade-offs. 4. Recoginze when the innovation strategy needs to evolve.

How can firms manage customers' perception?

Advertising. Public announcements of preorders. Distribution agreements.

The Ambidextrous Organization-O'Reilly and Tushman. Idea in brief

Ambidextrous organizations segregate exploratory units from their traditional units, encouraging them to develop their own unique processes, structures, and cultures. But they also tightly coordinate these new units with existing organizations at the senior management level. Top-level integration ensures that fledgling units have access to established resources—cash, talent, customers—and simultaneously shields them from the innovation-chilling effects of "business as usual." Meanwhile, existing units—freed from the distractions of a start-up—can maintain their focus on refining operations, improving products, and serving customers. Companies that use ambidextrous structures are nine times more likely to create breakthrough products and processes than those using other organizational structures—while sustaining or even improving their existing businesses.

What is platform ecosystems?

An ecosystem refers to a system where elements share some form of mutual dependence. A platform in this context is a stable core that mediates the relationship between a range of components, complements, and end users. Thus platform ecosystem refers to a system of mutually dependent entities mediated by a stable core.

Explain how and which organizational model enables tackling the supply-side disruption?

An organiztion that is able to imagine and respond to new product architecture. With a wide range of capabilities and experience across all the technology generations. In contrast the other incumbent firms organized around the traditional product and generating rapid incremental innovation. This organizational model resist the innovation. The integral organization model also offers the incumbent to understand the relationship between the already existing components (Canon and the new aligner).

Centralization effect on innovation

Centralization has a more ambiguous effect in innovation. It can enable innovation to occur more rapidly. decentralization fosters more innovation by enabling managers to respond quickly to local needs.

centralized and decentralized R&D

Centralization is the degree to which decision-making authority is kept at top levels of the firm, while decentralization is the degree to which decision-making authority is pushed down to lower levels of the firm.

Making sense of anomalies

Differentiate between low-end markets and new markets. Low-end disrupters come in at the bottom of the market and take hold within an existing value network before moving upmarket. New-market disruptions take hold in a new value network and attract customers who have previously gone without the product. Another intriguing anomaly was the identification of industries that have resisted the forces of disruption, at least until very recently, such as higher education.

What are dynamic capabilities?

Dynamic capabilities are competencies that enable a firm to quickly reconfigure the firm's organizational structure or routines in response to change in the firm's environment or opportunities.

Access and governance

In a pipeline world, strategy revolves around erecting barriers. With platforms, while guarding against threats remains critical, the focus of strategy shifts to eliminating barriers to production and consumption in order to maximize value creation. To that end, platform executives must make smart choices about access (whom to let onto the platform) and governance (or "control"—what consumers, producers, providers, and even competitors are allowed to do there). Google open governance, Apple less open governance. Most successful platforms similarly manage openness to maximize positive network effects.

Explain how a strong sense of corporate identity enables tackling supply side disruption?

Some architectural disruption triggers fundamental changes in the value proposition as well. This requires a reinvention of the corporate strategy as well as the ways in which a firm develops and manufactures. By defining your firms identity broader you open the opportunity for the firm to develop architectural innovation without it being out of your strategic scope.

What are the risk of core rigidities?

Sometimes the very things that a firm excels at can enslave it, making the firm rigid and overly committed to inappropriate skills and resources.

Stakeholder Analysis

Stakeholder analysis involves: 1. identifying any entity with an interest in the firm, 2. what it wants from the company, 3. and what claims it can make on the company.

What is disruptive innovation- Christensen (Article). The core essence of the article.

THE ISSUE- The ideas summed up in the phrase "disruptive innovation" have become a powerful part of business thinking—but they're in danger of losing their usefulness because they've been misunderstood and misapplied. THE RESPONSE- The leading authorities on disruptive innovation revisit the central tenets of disruption theory, its development over the past 20 years, and its limitations. THE BOTTOM LINE- Does it matter whether Uber, say, is a disruptive innovation or something else entirely? It does: We can't manage innovation effectively if we don't grasp its true nature.

You need an innovation Strategy- Pisano. (Article). Core essence.

THE PROBLEM- Innovation remains a frustrating pursuit. Failure rates are high, and even successful companies can't sustain their performance. the root cause is that companies fall into the trap of adopting whatever best practices are in vogue or aping the exemplar innovator of the moment. THE SOLUTION- Managers should articulate an innovation strategy that stipulates how their firm's innovation efforts will support the overall business strategy. this will help them make the trade off decisions so that they can choose the most appropriate practices and set overarching innovation priorities that align all functions. THE STEPS- Creating an innovation strategy involves determining how innovation will create value for potential customers, how the company will capture that value, and which types of innovation to pursue. Just as product designs must evolve stay competitive, so must innovation strategies as the environment changes.

Pipelines, Platforms, and the New Rules of Strategy- Van Alstyne (article). Core essence.

THE SEA CHANGE Platform businesses that bring together producers and consumers, as Uber and Airbnb do, are gobbling up market share and transforming competition. Traditional businesses that fail to create platforms and to learn the new rules of strategy will struggle. THE NEW RULES With a platform, the critical asset is the community and the resources of its members. The focus of strategy shifts from controlling to orchestrating resources, from optimizing internal processes to facilitating external interactions, and from increasing customer value to maximizing ecosystem value. THE UPSHOT In this new world, competition can emerge from seemingly unrelated industries or from within the platform itself. Firms must make smart choices about whom to let onto platforms and what they're allowed to do there, and must track new metrics designed to monitor and boost platform interactions.

What is an ambidextrous organization?

The ability of an organization to behave almost as two different kinds of companies at once. Different divisions of the firm may have different structures and control systems, enabling them to have different cultures and patterns of operations. They attempt to achieve both the the efficiency advantages of large mechanistic firms and the creativity and entrepreneurial spirit of small organic firms.

Explain brand loyalty and technological advantage

The company that introduces a new technology earns a reputation as a leader in that technology domain. Including monopoly rents (the additional returns a firm can make from being a monopolist, such as high prices). The first mover has an opportunity to build brand loyalty before the entry of other competitors.

What is modularity?

The degree to which a system's components can be separated and recombined.

what is strategic alliance and how to categorize them?

The term strategic alliances refers to a broad class of collaboration activities that may range from highly structured (e.g., joint ventures) to informal. Strategic alliances can enable simple pooling of complementary resources for a particular project, or they may enable the transfer of capabilities between partners. The transfer of capabilities often requires extensive coordination and cooperation.

Stand Alone Value

The value a new technology offers to customers can be driven by many different things, such as the functions, aesthetic qualities, and ease of use. To help managers identify the aspects of utility a new technology offers customers, the "Buyer Utility Map" can be used.

Explain how ownership of features important to the end customer helps your survival in supply-side disruption?

There is a risk of giving up on the first mover's advantage, however, these are eliminated if the company owns a core element of the products whose architecture is being disrupted - something that has value to the customer (like Helvetica font).

Explain: How will the company capture a share of the value its innovation generate?

Valuable innovations attract imitators, hence you need to make sure you have included how to reap the fruits of your innovation.

The Other Disruption- Joshua Gans. (Article). The core essence of the article.

WHY IT HAPPENS- Many disruptions necessitate changes to the basic architecture of a product— the way it's put together. Adapting to this requires deep organizational integration across tasks and functions, but most large companies organize R&D and operations around product components. THE PROBLEM- The defensive playbook for confronting disruptive innovations calls for companies to set up separate units to develop competing technologies. In practice, though, companies struggle to transfer new innovations and capabilities back into their mainstream operations. THE SOLUTION- Incumbent firms that survive changes to product architecture usually owe their success to one or more of three key factors: an integrated organizational model, ownership of a feature important to the end customer, and a strong sense of corporate identity.

Explain: What types of innovation will allow the company to create and capture value, and what resources should each type receive?

When choosing an innovation strategy a firm have a choice of how much to focus on technological and how much on business model innovation. (See the innovation landscape map). The innovation strategy should specify how the different types of innovation fit into the business strategy and the resources that should be allocated to each. Many argues that disruptive, radical and architectural innovation are the key for growth, however, often most of the profit comes from routine innovation. And the answer to "what proportion each part should get" varies between companies and depends.