Innovative and Change

Relationship between Innovation and Imitation

-Firms imitate an innovation when they want the gains of the company that introduced it. -Imitators invest to make improvements to the original innovation and thereby leapfrog the innovation. -The pace of both innovation and imitation are speeding up in the marketplace.

Types of Innovations

1 Incremental Innovations A small series of improvements to an organization's existing products, services, or processes. 2. Radical Innovations Significant innovations that have an impact on markets or companies' ways of doing business. 3. NIH Syndrome Refers to a tendency of technical specialists and managers in a firm to reject valuable external innovations and solutions in favor of ones developed by the firm itself. NIH ("not invented here") is common with the closed model of innovation. 4. Open Innovations The combination of external ideas and technologies with those internal to the firm to pursue innovation.

Select all of the ways individual managers can help reduce barriers to innovation and organizational change. (Select all that apply.)

1. Getting resources and support from senior managers 2. Encouraging employees to take active roles in organizational change initiatives 3. Communicating with and educating employees

Four Phases of the Innovation Process

1. Idea New ideas stem from activities in research and development. 2. Invention Ideas become inventions as they are transformed into a new or enhanced product or process. 3. Innovation Commericalization brings an invention into markets and organizations, thereby making it an innovation. 4. Imitation Other organizations imitate the innovation as they attempt to obtain the gains of the company that introduced the innovation

The industry life cycle has five stages that industries go through over time.

1. Introduction A startup or established company lauches an innovation into the market. 2. Growth The size of the market expands as new buyers come into the market. 3. Shakeout The level of growth begins to decline as the level of competition increases. 4. Maturity Growth slows to zero or even negative growth, the size of the industry becomes stable, and often a few large firms dominate the industry. 5. Decline Growth becomes negative and an industry experiences overcapacity. Firms consider exiting an industry.

Managerial Roles in Innovation and Change

1. Inventors Have superior technical knowledge May not have skills in other aspects of seeing ideas through to completion 2. Champions Help in overcoming obstacles, such as getting the necessary resources or financial support for an initiative Know the right time to push an idea through 3. Sponsors Have the clout to remove some barriers Can also ensure that an idea aligns with the company's strategy 4. Critics Make good sparring partners because they ask tough questions about an idea Serve as a devil's advocate, a person who expresses an opposing view to stimulate debate, enhance decision making, and point out shortcoming

Barriers to Organizational Change

1. Lack of Awareness -Insufficient attention to changing customer needs and wants, new technologies, or new regulations Solution:Use technology scouts to keep track of new developments in technology. 2. Uncertainty- Decision-makers being unclear about the direction and magnitude of change Solution: Encourage executives to be more flexible in responding quickly to possible changes. 3. Co-innovation Risks -Depending on the innovation of other companies, instead of innovating alone Solution: Focus on innovations that aren't dependent on other firms. 4.Adoption Chain Risks- Innovations failing due to bottlenecks, despite the value of a new product or service offers customers Solution: Consider how change will affect those using the product or service. 5. Organizational Rigidity- Getting stuck in a exploitation way of managing and taking less flexible approaches to pursuing short-term profits Solution: Embrace an exploration approach to management. 6. Individual Resistance to Change - Mangers and employees resisting change caused by shifts in the environment or internal change, due to fear of negative consequences Solution: Build trust with employees.

Techniques to Facilitate Organizational Change

1. Team-Building Activities -OD specialists use these activities to build group trust and cohesion and foster improved communications between members. 2. Surveys- An OD specialist distributes a survey to employees. The specialist then analyzes the data and obtains findings on ways the firm can improve. 3.Organization-Wide Change Initiatives -An OD specialist often uses an off-site retreat where hundreds of employees meet to discuss problems an organization is facing and opportunities for positive change. This may include stakeholders outside the organization, such as suppliers, customers, and investors.

Lewin's Model of Organizational Change

1. Unfreezing People become aware of the need for change, with the organization providing motivation to reduce resistence. Benchmarking, a measurement of an organization's products, services, programs, and activities and a comparison of its performance with competitors, happens during this step. 2. Changing Employees begin to experiment with new behavior and learn new skills. 3. Refreezing Organizational change becomes the "new normal" and performance appraisals and rewards reinforce.

Kotter's Model of Organizational Change

1. Unfreezing Stage -Establish a sense of urgency. -Create a guiding coalition. -Develop a vision and strategy. -Communicate this plan consistently. 2. Changing Stage -Empower broad based action. -Generate short-term wins. -Consolidate gains and produce more change. 3. Refreezing Stage - Reinforce the change.Leaders show how the change leads to organizational success. They work to deeply embed the change in the organization.

Methods and Agents of Commercialization

1.Entrepreneurs -Business people who start brand new businesses around invention. By doing this, they commercialize inventions, making them innovations. 2.Spinouts-Technology transfer organizations at universities. They encourage scientists and other faculty members to develop businesses based on their research. 3.Intrapreneurs-Employees with an organization who promote innovative activities. They commercialize innovations within a firm. 4.Skunk works- A small, independent laboratory or unit within an organization engaged in innovation. They avoid burdensome approval process and bureaucracy.

Innovation Trends During the Growth Phase

1.Pace- Product innovations happen at a rapid pace. 2.Opportunities-As new customers enter the market, opportunities increase for firms to devise new products and recombine knowledge to offer product variations. 3.Product Features-Companies offer new features to customers to gain their purchases. 4.Customer Feedback-As innovations happen, firms learn from prospective customers what resonates, and what does not. 5.Process Innovations-Fewer process innovations tend to occur and only increase after standards have been established.

Which of the following statements accurately describes Kotter's model of organizational change?

An eight-step model that highlights the steps leaders must take to foster successful organizational change

decline stage

As growth continues to slow and then becomes negative, an industry enters this stage

There are basically two main sources of innovations for firms: closed innovation and open innovation

Closed Innovation Originates within a firm Uses internal R&D efforts Can help firms get to the market first with innovations Helps to control intellectual property Can lead to NIH syndrome, causing firms to ignore valuable innovations from other firms Ignores opportunities to collaborate with other firms Open Innovation Combines ideas within a firm with ideas that originate with other firms Uses collaborative R&D Uses licensing agreements for external sources of innovation Enables a firm to profit from the intellectual property of other firms Allows firms to specialize instead of doing all phases of innovation

Disruptive Innovations

Disruptive Innovations Product innovations that initially emphasize new markets rather than sophisticated technological features Examples Because flash drives are convenient, they have opened up a new market, even though they have less storage capacity than larger drives. Web-based video services, such as Netflix or Hulu, are disrupting the way people watch TV.

Direct and Indirect Network Effects

During the introduction phase, the value a customer places on a new product will often be based on the number of other customers who buy it Direct Network Effects When you can use the product with other customers and collaborate directly Example: People who play the same video game can play remotely against each other. Indirect Network Effects When increased sales to more customers leads to development of other complementary products they might enjoy Example: When a movie becomes a hit, complementary products such as action figures, board games, and video games are developed.

Select all of the statements that accurately describe the industry life cycle. (Select all that apply.)

Each stage of the industry life cycle brings different innovation challenges. There are five phases in the industry life cycle. The industry life cycle begins with introduction and ends with decline.

How can firms prevent organizational rigidity from becoming a barrier to organizational change?

Embrace an exploration approach to management.

How can firms prevent adoption chain risks from becoming a barrier to organizational change?

Ensure that other firms in the ecosystem are also willing and able to change.

Effects of Innovations on Industry Evolution

Established firms are better at sustaining innovations than disruptive innovations. New firms are better at disruptive innovations than sustaining innovations. Disruptive innovations can help new new companies displace established ones. Sustaining innovations can create more demand for established products. Disruptive innovations can cause established companies to "disrupt themselves" before new entrants do.

Select all of the ways innovation is related to how industries evolve. (Select all that apply.)

Established firms can be replaced by new entrants, due to creative destruction. New entrants are able to be more innovative than established companies.

What does it mean that adoption chain risks can be a barrier to organizational change?

Firms can't change, because other organizations in their ecosystems are unable to change too.

Which of the following statements accurately describes the focus of innovation during the shakeout stage of the industry life cycle?

Firms start focusing on obtaining growth by stealing customers from competitors in order to increase market share.

Value Curves

Graphs that depict the attributes of products and services as well as delivery and after-sales support; a tool used in value innovation

Focus on Innovation during the Shakeout Stage

Innovation Focus Less emphasis is placed on product innovation and product features and more emphasis is placed on price. Firms with weaker products exit the industry; firms with strong products prosper and acquire other firms. Process innovation becomes more important to increase efficiency and help firms survive.

Match each of Kotter's steps with the correct stage of organizational change it represents.

Make clear how the change aligns with the firm's vision.------- Unfreezing Foster early, short-term successes.---------Changing Work to get the change embedded in the organization.------------Refreezing

Challenges of the Maturity and Decline Stages

Maturity Stage Growth slows to zero. A few large firms often dominate the industry. Price wars often emerge. At times, product differentiation declines. Decline Stage Growth becomes negative because of overcapacity; firms' potential output exceeds the industry needs Firms exit the industry. Other firms try to salvage the remaining profit potential by buying companies or selling their firms.

What is the relationship between innovation and the way that industries ultimately evolve?

New entrants are better than established companies at disruptive innovations, because they can afford to explore uncertain and emerging markets

Non-disclosure and Non-compete Agreements

Non-disclosure Agreement A contract between two parties prohibiting the sharing of confidential information acquired during their relationship with others Non-compete Agreement A contract between an employer and employee in which the employee agrees not to compete with the employer (e.g., work for a competitor) during or after employment with the employer Both types of agreements perform the following functions: Protect business value. Discourage rivals from stealing talent. Safeguard investments made in training employees. Enhance client confidence in the protection of their information.

Four Objectives of Industry Standards

Objectives of Standards 1. To reduce complexity in markets 2. To establish minimum quality levels 3. To set common measures 4. To enable compatibility of different products

Patents and Licenses

Patents A firm gains exclusive rights to a technology it developed. In exchange for exclusive rights, the firm publicly discloses the idea on which the invention is based. U.S. firms have exclusive rights to a technology for 20 years from filing date. Firms can operate as a monopoly or sell the product to customers. Licenses Firms license their technology to another firm, called the licensee. In return, the licensee pays the licensor an upfront payment and royalties as a percentage of sales. Some licensors focus on research and development instead of manufacturing or marketing. In turn, the licensee handles the manufacturing and marketing.

Organizational Renewal

Problem: Companies in need of renewal often have behavorial and social problems that need to be addressed for a firm to be more effective. Focus of OD Specialist: OD specialists strive to foster communication, identify ways of being innovative, and bring about change in behaviors to stop the decline of the firm.

Conflict Management

Problem: Conflicts in firms arise for many reasons, including turnover of a CEO, the introduction of new technologies, and restructuring that causes new reporting relationships. Focus of OD Specialist: OD specialists often seek to ease various conflicts between employees, such as political battles for the same promotion.

Mergers and Acquisitions

Problem: Two firms with different structures, cultures, and ways of doing business in day-to-day activities come together. Focus of OD Specialist: Often the OD specialist will try to develop a new, third culture, instead of having the acquiring firm's culture dominate and risk losing key employees and customers.

Product and process innovations have similarities, but their focuses differ.

Product Innovation -New products or significantly improved products -Improvements in what a firm offers -Involves development and marketing -Allows companies to charge a premium price over their competitors Process Innovation -New methods or significantly improved methods -Improvements in how a firm operates -Involves development and implementation -Allows companies to gain an advantage over their competitors

Sustaining and Innovations

Sustaining Innovations Product innovations that emphasize advanced features for demanding customers Examples Companies add greater resolution for smart phones with each generation of the product. Vehicle manufacturers add more features to certain car models, such as GPS and satellite radio, with successive generations.

First-mover advantages include:

The first firm to commercialize an innovation benefits from gains

maturity stage

The process of survival of the fittest that takes place in the shakeout stage ultimately gives rise to this stage

Approaches that Reduce Barriers

Use communication and education to address potential misunderstandings and solve the detailed technical and day-to-day problems brought about by change. Foster participation in interventions and encourage others to take an active role in change initiatives in firms. Support employees who are anxious about change. Negotiate with other groups, which might involve getting resources and support from senior managers. Force compliance with change initiatives, particularly when the organization faces a crisis.

Blue Ocean Strategy

Uses innovation to create value for companies Uses uncontested markets that make competition irrelevant Views boundaries of industries as changeable and subject to discovery Thinks across traditional industries in developing an innovative business Often reduces or eliminates barriers to value that are costly

Red Ocean Strategy

Uses innovation to win battles with competitors Involves highly contested markets, in which competition dominates Views boundaries of industries as firm and fixed Adopts traditional categories for businesses

When can lack of awareness be a barrier to organizational change?

When firms don't change, because they don't realize that they need to change

Indirect Network Effects

When increased sales to more customers leads to development of other complementary products they might enjoy Example: When a movie becomes a hit, complementary products such as action figures, board games, and video games are developed.

Direct Network Effects

When you can use the product with other customers and collaborate directly Example: People who play the same video game can play remotely against each other.

Trade Secrets

are information (e.g., a formula, pattern, compilation, program, device, method, technique or process) used in business to obtain an opportunity for an economic advantage over competitors who do not know or use it.

Creation of uncontested market space by a company, which makes the competition irrelevant and leads to greater buyer value and reduced costs, is known as ______.

blue ocean strategy

Innovation Challenges of the Introduction Stage

companies test out innovations, such as product features, to determine which ones resonate with customers. Innovation Challenges The uniqueness of innovations are more important than price. Companies must educate customers as to why they should value an innovation. Success depends on getting access to distribution channels for innovations. Companies must convince retailers that they should devote shelf space to innovations.

Innovation often breeds

imitation by other firms. Innovation and imitation relate to each other in several ways.

Commercialization involves

introducing products, services, and processes into markets and organizations.

Process innovation and product innovation both involve ______.

introducing something new

Innovation

is about staying relevant. Characteristics of Innovation -Consists of doing something new that touches all parts of an organization -Can be embedded in products or services or focused on processes -Needs to be executed, communicated, and add value to an organization -Needed for companies to stay relevant

Process innovation

is the development and implementation of a new or significantly improved method or technique. Key Characteristics It happens when a company carries out its activities more effectively or efficiently than the competition. Examples Zara has created an innovative manufacturing process that enables them to sell clothes to consumers on demand. They produce 18,000 different models of clothes each year. The product reaches consumers in four weeks. Nike has come up with a four-part process that allows for a lot of flexibility. Embrace disruption. Build in time for change. Partner with the best. Hold company culture close.

Product innovation

is the development and market introduction of a brand new or significantly improved good or service. Key Characteristics This might involve the invention of a brand-new product. It could also entail significant quality improvement or new technical specifications to an existing product. Examples Nintendo Switch has produced significant quality improvement by providing consumers a user-centered design in gaming. Zipline introduced a drone-delivery system to deliver blood and plasma to remote areas in East Africa.

Creative destruction

is the displacement of established companies by new ones through product and process innovations. Key Characteristics New firms are born and succeed while formerly successful ones die off. Creative destruction is an essential feature of capitalism that leads to the accumulation and loss of wealth. Examples Netflix disrupted the videotape and DVD rental business. Smartphones and tablets have replaced most cameras and video recorders.

Organizational Development

is the planned effort by top management to improve organizational effectiveness and health. This effort is done through surveys, interviews, and interventions in the organization. Key Characteristics OD specialists are external consultants who enhance training and personal development programs to deal with organizational change. They collect and analyze data, bring company cultures together, and conduct company interventions. In essence, they manage the social difficulties associated with change. Examples In a firm that has significant political battles between employees, an OD specialist conducts team-building activities such as small group discussions to build group cohesion. In a large firm that requires change in many different departments, an OD specialist conducts an off-site retreat to discuss problems and invites a broad-range of employees from the firm.

Rather, they focus on secondary demand

or obtaining growth by stealing customers from rivals to increase their market shares.

During the shakeout stage, firms focus less on primary demand

or satisfying new customers' demand.

When the firms' potential output exceeds the industry's needs, ______ has occurred.

overcapacity

Organizational change

refers to significant transformations that organizations go through to remain or become competitive. Key Characteristics For changes to be effective, leaders must guide several processes of change within a firm. Also, external consultants can diagnose a firm's problems. Lower-level managers often implement change in firms. Examples The new CEO of Microsoft implemented major restructuring, changing a stagnant company to a thriving one. To reverse the declining fortunes of British Airways, the company hired a new chairperson who reduced the workforce, eliminated unprofitable routes, and modernized the fleet. As a result, within 10 years, the company had the highest profits in its history.

Value innovation (also called blue ocean strategy)

stresses how innovation shapes the values customers attach to firms' products and services, and the cost of producing them. Both product and process innovations can be value innovations. Creation of uncontested market space by a company that makes the competition irrelevant and leads to greater buyer value and reduced costs

Companies use non-disclosure agreements and non-compete agreements

to protect their trade secrets. Examples of each are below.