Lecture 5: Strategic Innovation Management

scenario analysis

-Multiple variables are varied by predicting most probable scenarios -When these scenarios are determined, find the best- and worst-case scenarios -This tool is used to compare possible scenarios -Firms should employ strategic actions to minimize probability of undesirable scenarios and increase probability of desirable scenarios

monte carlo simulation

-Using a programming tool, all variables are varied based on probability distribution -Provides an overview of all outcomes and the risks and probability attached to each given output

displaced technology

-standardization tech used or substituted -divest or innovate

innovation strategy

-technology attractiveness -relative resource strength

normal innovators

Adopting to changes within the environment in order to move from average performance to high performance

disruptive innovators

Competing for new consumers while simultaneously disrupting the markets of average performance firms

Identification of technology

Identify core (essential to the use of the product), peripheral (sizeable contribution to product use) and supporting (improves technology) technologies

technology

Knowledge, facts, and abilities for solving technical problems as well as equipment and methods for the practical realization of scientific results anything that manages to simplify or improve tasks

Diffusion

Measures the current state of the technology possibilities and is the inverse of opportunities for differentiation The lower diffusion, the higher differentiation and the higher the market attractiveness

early majority

Well connected and average opinion leadership

architectural innovation

existing technologies in new markets -alters products architecture -reconfigures components -hacks the product example: polyurethane in swim suits

Transformation of the technology portfolio:

• Determine current technology used in the respected field • Determine other technological opportunities • Based on this assessment, decide on the most effective strategy to employ in order to take advantage of the most promising technology

Green

(Creativity) = Generate new ideas, solutions, varieties, possibilities, etc.

White

(Facts/information) = What are the existing relevant facts and information and what information needs to be gathered

Red

(Feelings) = Think about ideas using emotion, feeling and intuition

Yellow

(Logic-positive) = Conduct a benefit assessment of the ideas and probability of the most desired outcome

Blue

(Overview) = Put all the notes together and provide an overview and summary

morphological matrix

-List the attributes of the product in a column matrix -Construct as many possible alternatives for each attribute in the relevant column -Generate as many possibilities as possible from the alternatives by selecting one entry from each column -Evaluate the value (marketability) of each possible combination -varied by diff combinations possible which generates a product variation space -evaluate combinations marketability -house example

parallel thinking tool

-Use one metaphorical hat at a time to control the method of thinking -six hats give direction and framing -Provides a well-rounded perspective over possible ideas -Shifts all opinions from personal preference centrism to thinking performance -Participants are forced to think beyond stereotypes

coopers state gate process

-gates to advance only the most profitable ideas -straining and channeling idea pools in larger companies

embryonic technology

-high R&D needed -high risk, investment, difficult value assessment -high differentiation potential

innovator

-highest risk tolerance, interest, financial resources, and societal status -excellent contacts to scientific frontier and other innovators

four types of innovation

-incremental -radical -architectural -disruptive

key technology

-major player dominant -application of tech and competitive strategies -potential for differentiation and comp advantage

Creativity

-must generate value in a business setting -creativity first, then criticism

radical innovatoin

-new technologies in new markets -introduction of new product concept with significantly new tech, which leads to formation of new market -innovative product functionality -results in new markets example: automobile

pace maker technology

-no reliable technological standard and potential for diffusion -still high risk, high potential -continuous development to capture growing market

market attractiveness of technology

-openness of the technology -diffusion

hidden champions

-small but relatively successful companies -must be privately held or family controlled, revenue <5 billion euro, not well known in public, and market leader on its continent or among top 3 worldwide -no other country in the world has as many hidden champions as Germany

mittelstand booster

-smaller firms that make a difference -family firms dominate this -79% of all german inventions are made in family firms

basic technology

-technology is an established standard in the whole industry -differentiation potential is exhausted

sensitivity analysis

-used to determine key drivers for value creation -Plot expected firm performance over an expected period in time based on a set of input variables and how they will likely be employed -Change one variable while keeping all others constant in an attempt to test the sensitivity of firm performance in relation to the specific variable -Variables which cause the greatest disruption are likely to have the biggest impact on value created

adopter catagories

1. Innovator 2. Early adopter 3. Early majority 4. Late majority 5. Laggards

Black

Assess risks, sensitivity and be critical about existing problems or ones that might potentially arise

Relative firm strength

Determined by a firm's competence and know-how (level of and stability of know-how) and financial strength (current budget and its continuity)

Technology attractiveness

Determined by market potential (degree of diffusion and openness) and fulfilment of customer needs (key success factors, basic requirements and superior performance requirements)

Idea generation tools

Different tools can be applied in the process of innovation management in order to determine whether an innovative idea is feasible and/or profitable

late majority

High skepticism and lower resources -high degree of skepticism -lower financial and societal status -adoption due to economic necessity or peer pressure

stage gate process I

Idea Generation & Evaluation -using professional thinking tools

technology portfolio analysis

Illustrates current and potential technology strategies Possibilities are measured by the external variable of market attractiveness and the internal variable of firm strength with the purpose of ultimately providing recommendations regarding, current and possible future technologies as well as their potential investments 1. identify tech 2. evaluate based on tech attractiveness and firm resource strength 3. deduct norm strategies and courses of action 4. transform tech portfolio

Openness

Indicates the degree to which it holds potential for future value creation and is determined by: -compatibility with established technologies -potential for further development -breadth of application possibilities -network effects -higher openness -> higher market potential -> higher attractiveness

strategic risk modeling

Methods used to determine the probable effectiveness of an idea (potential innovation)

early adopter

Opinion leaders and relatively high financial resources and risk tolerance

laggards

Traditional and risk averse -older, tradition oriented, less capable / risk averse -lowest financial and opinion building status -sometimes isolated in network

reverse brainstorming

Work from the end to the beginning (reverse) Determine what the goals for the company are and decide on which actions would be constructive and destructive towards these goals by brainstorming for possible ideas -define your topic and goal -reverse the goal by asking "how can I possibly serve the customer most badly" -generate and note ideas, then reverse -evaluate the ideas and check for a solution

incremental innovation

existing technologies in existing markets -Slight improvement in functionality of product, while retaining core product features example: servo steering for automobiles

Deduct norm strategies and courses of action

i. As you move from low on both scales to high, you shift actions from disinvesting to selecting to investing • You invest when you are either the technology leader or a successful follower • As you move from top left to bottom right you do selective investments which range from in-licensing and R&D cooperation to development and acquisition of market and technology potential to out-licensing and sales cooperation • As you move back you either rationalize reasoning for investment or conduct a spin off where you ultimately exit the technology field in the bottom left corner

follower

imitates and customizes the innovative product -high risks and maybe high costs (catching up) -low need to allocate funds to R&D -lower tech risks -non consumption barrier already overcome

disruptive innovation

new technologies to attack existing markets -attack the market from bottom up -first inferior but with time outperforms -low cost example: low cost airlines vs established carrier -very dangerous to market leaders and established companies -shifts products towards simplicity and affordability -Attacking an existing market with a renewed strategy, shifts products towards affordability ad simplicity

family firm

one or several families own collectively >50% of a firm and exert influence on its strategic course via the board or owner management in a manner that is potentially sustainable across generations

first mover

the first to offer an innovative product to the market -high risk and high costs -defense by entry barriers (customer lock in- doesnt want to switch costs)

marketing innovation

the implementation of a new marketing method involving significant changes in product design or packaging, product placement, promotion, or pricing

innovation

the implementation of a new or significantly improved product (good or service), process, a new marketing method, or a new organizational method -build on new or existing technologies -target new or existing markets

process innovation

the implementation of a new or significantly improved production or delivery method. Changes in techniques, equipment, and or software

organizational innovation

the implementation of a new organizational method in the firms business practices, workplace organization or external relations

product innovation

the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. Improvements in technical specifications, components/materials, software, user friendliness.