W420 Midterm

Innovator's Dilemma

"The reason [why great companies fail] is that good management itself was the root cause. Managers played the game the way it's supposed to be played. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening to customers; tracking competitors actions carefully; and investing resources to design and build higher performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technology change." *A common misinterpretation is that incumbents fail to develop these disruptive technologies or embrace them due to the inability of the organization to adapt operationally or technologically • Incumbents often are the ones to spot and develop new technologies while easily reorganizing themselves to do so. - The problem is they fail to value new innovations properly because incumbents attempt to apply them to their existing customers and product architectures — or value networks. - Often new technologies are too new and weak for the more advanced and mature value networks that incumbents operate. Does investing in immature technologies today at the risk of cannibalizing ourselves make sense in the longer term? Innovator's dilemma is in the R&D portion of the technology life cycle... graphics on slides 22+ week 4

Lean Startup Methodology

"We work in these very complex, deep industrial technologies. You want to get as close to perfection in some of these technologies as possible, but the goal also has to be progress, not just perfection. Lean startup has reminded us that there are things you can get out fast in front of customers..."

Design thinking Process

(Slides 14-15 week 9) 1. Inspiration -understand -Observe -POV 2. Ideation -ideate -prototype -test 3. Implement -Story telling -pilot business model Or, 1.Empathize (Love) 2.Define (POV) 3.Ideate (Brainstorm) 4.Prototype (Build to learn) 5.Test (Show, dont tell)

Motives for Corporate Venturing

* Leveraging to exploit existing competencies in new product or market arenas • Learning to acquire new knowledge and skills that may be useful in existing product or market arenas (e.g., Facebook acquisition of Oculus) • SURVIVAL companies that don't innovate don't survive

Embattled Corporation..

*Customers: Fragmented markets and rapidly rising customer expectations are forcing firms to customize their products, cultivate longer-term customer relationships and learn new skills in serving global markets *Competitors: Lead customers to entirely new market spaces Quickly mimic which makes it harder to differentiate Attack firms' most profitable areas of business by specializing in narrow, profitable niches *Technology: Firms have to change the ways they operate internally and how they compete externally based on: -New information management technologies -New production and service delivery technologies -New customer management technologies *Legal, Regulatory and Ethical Standards: Firms are increasingly accountable to multiple forcing management to make difficult choices and deliver results while behaving responsibly Increasingly litigious environment Increasing regulatory restrictions

Putting Design thinking in practice

*Discover the bigger system *Balance the different elements within the system *Define new future

Strategy as a pattern

- resulting behavior manifesting in a stream of actions; strategic outcomes - Consistency in behavior, whether intended or not What does this mean? "Gradually successful approaches merge into a pattern of action that becomes strategy." Plan ≠ Pattern Plans may go unrealized, while patterns may appear without preconception Intended strategy (espoused theory) v. Realized strategy (theory-in action)

2 Approaches to innovation

1) Closed innovation • Attempt to generate new business breakthroughs through the utilization of the people, knowledge, and technology within the company's boundaries. • Utilizes in-house resources and maintains secrecy about the project until it is brought to market. 2) Open innovation (open source) • Open innovation is an approach where collaborations with external parties are used to help bring forward ideas • Embraces the advantages of the social and digital networks, but makes company activities more transparent. In a quickly • Companies are increasingly turning to open innovation and accepting the trade-off of collaboration for loss of ownership

Dealing with change

1)***Build Social Capital! • Social capital - inventory of trust, gratitude, or obligations that can be "cashed in" when the new project is in demand • Three ways to build: -1 Sharing information -2 Creating opportunities for people to demonstrate their skills and competence -3 Building and using influence networks 2)***Resource Acquisition • Major method of securing necessary resources is through co-optation or leveraging of resources currently underutilized by firm • four ways to build: -1 Borrowing -2 Begging -3 Scavenging -4 Amplifying 3)***Legitimacy - perception, or judgment, that a something is accepted, appropriate and desired within some socially constructed system of norms, values, beliefs and definitions • Evaluation by stakeholders that enhances Stability and Comprehensibility • Legitimacy can be seen to moderate newness: - Less uncertain: • More meaningful • More desirable • More trustworthy • Legitimacy as a resource

The creative process

1. Background and knowledge accumulation 2. The incubation process -Divergence or convergence 3. The idea experience 4. Evaluation and implementation

Richards: Three Lessons On Innovation I Learned During My 12 Years At Apple

1. CONSENSUS IS NOT YOUR FRIEND >Nothing slows work down like waiting for everyone to agree. 2. DON'T RUN BACK AND FORTH SEEKING INTERIM FEEDBACK -You don't need approval to experiment and put innovative ideas into action—or you shouldn't, anyway. >When new products risk cannibalizing old businesses, emotions unavoidably get heated. 3. BE WARY OF RECEIVED WISDOM >Help teammates get more comfortable taking action with incomplete information.

Channels

Channels • How a business communicates with and reaches its customers segments to deliver its value proposition Channel Types: Sales force Web sales Own stores Partner stores Wholesaler Channel Phases: 1. Awareness 2. Evaluation 3. Purchases 4. Delivery 5. After sales

Diagnosing attitudes on change

Adapted Kirton Adaption-Innovation Inventory: The following questions are about your style of work behavior (e.g. decision making) in your organization. You are a person who: 1. Conforms 2. Will always think of something when stuck 3. Enjoys detailed work 4. Would sooner create than improve 5. Is prudent when dealing with authority

Turbulent Environments

Changing domain - external environment: •Technological •Economic •Competitive •Labor •Resource •Customer •Legal •Regulatory •Global •Customer •Social •Supplier

Cohesion vs. Culture

Cohesion vs. Culture • Fine between having a strong culture and operating like a cult Cohesion: • Mission • Values • Focus is on harmony, or getting along • Conflict is avoided Culture • Mission • Values • Focus is on mission -- challenges status quo and asks why • Conflict is good

Structure follows strategy

Have strategy in place, now what? *Need to set up the organization to pervade an entrepreneurial mindset Recommendations: • Know what your goals are • Set the culture • Find a structure that works to support • Set the incentives • Be ruthlessly committed

Set the stage

Ingredients for enhancing innovation at work: • Mentorship • Incentives for the employee • Organizational design • Innovative behavior

Importance of people

Innovation is a capability of the many Only as strong as weakest link. One tiny hole can sink a ship. It's not the mountains you have to climb that wear you out, it's the pebble in your shoe. One bad hire can ruin a team, or even an organization.

Cirque du Soleil EX.

Traditional Circus: (high cost, low price) • Target market: children • Dependent to star performers & animal shows • High fun & humor • High thrills & danger Cirque du Soleil: (Low cost, high price) • Target market: adults • Not dependent to star performers & animals • Reduce fun & humor • Reduce thrills & danger • Unique venue • Theme & theater

So what's the big deal about strategy?

competitive advantage = ƒ(strategy) COMPETITIVE ADVANTAGE IS FLEETING

Critically important that creativity and innovation become the backbone of a company's operations...BUT...

finding ideas for new products and services may be one of the hardest challenges a manager faces • Best practices - managers trained to increase efficiency of doing what has been successful in past • Education based on getting "the" right answer • Inertia

Drivers of Corporate Venturing

External Drivers Factors in environment that prompt firms to innovate and create new lines of business. Internal Drivers Factors inside the business that prompt a specific business unit to innovate and create new lines of business Personal Drivers Individual motivators prompt a person to innovate and create new lines of business

3 D's of Managing Innovation

1. Diversity - Wealth of ideas 2. Discernment - Critical filter or colander; productive 3. Disorder - Chaos and tension

Requisite for creative breakthroughs in an area:

1. Domain skills 2. Creative thinking skills (process) 3. Intrinsic motivation

Organizational Entrepreneurship Characterisitics Model

1. Environmental Antecedents -Top mgmt support -rewards/reinforces -autonomy and discretion -time availability -organizational boundaries 2. Human Resource Mgmt Practice -Knowledge mgmt -compensation mgmt -performance mgmt -policies & procedure administration 3. Entrepreneurial orientation -higher proactiveness -higher risk taking -higher innovativeness These are organizational level issues ^^ (Graphic page 2 week 7)

Levels of work team implementation

1. Functionality Functional teams - team members are from the same work unit Cross functional teams - teams are comprised of members from different functional units or departments to work on mutual projects 2. Purpose Problem solving teams - team members are focused on specific issues to develop and implement solutions Developmental teams - team members concentrate on developing new products or systems 3. Duration Project - the team is created for a specific purpose and is dissolved when the task has been completed. Once the objective is completed they should disband to allow team members to focus on their regular tasks. Permanent - Permanent teams have a long-term focus in mind in order to effectively handle major projects or issues 4.Discretion Semi-autonomous - the team has control over enforcing team norms, but manager still has typical authority for selection, performance selection, performance assessment, and discipline Autonomous - the team has full control over its operations and leadership

Design Thinkers (great balancing act) -Considerations

1. Goals - problems? 2. User Experience -users needs and goals? 3. Technology -can tech support idea? 4. Organization -org have the right resources 5. Business Process -other processes in making the idea happen? 6. Financial -cost, return can be expected?

Closed innovation 5 principles

1. Hire the best and brightest people, so that they work for you and not your competitors 2. Make discoveries and development yourself, so that your company brings new products and services to market 3. Discover something first so that you're the first to market it 4. Invest great amounts in R&D, in order to insure that your company generates the best ideas and stays ahead of the competition 5. Control intellectual property, in order to ensure that your company profits from it and not your competitors

Decision making

1. Identifying/defining the problem 2. Solution generation 3. Ideas to action 4. Implementing the decision 5. Team evaluation

Key organizational elements

1. Management commitment 2. Training and development 3. Information resources 4. Reward systems

Why does corporate entrepreneurship matter?

80% of the Fortune 500 Companies from 40 years back are no longer in existence.

Design v. rationality

A desire for change is often assumed to imply a need for comprehensive analysis, and rational decision making, leading to a clear choice for action • The reality is that analysis often leads to ever-greater numbers of choices, which then require more analysis • The consequence is that decisions cannot, and are not, made rationally - at least not in the rational tradition of scientific comprehensiveness Design - as an alternative to this limit on rationality - uses a process of composing and connecting, which pulls a variety of elements into relationships with one another that are then formed into functional assemblies "Study the science of art. Study the art of science. Develop your senses - especially learn how to see. Realize that everything connects to everything else." Leonardo da Vinci

Apple

An ambitious and compelling dream which provides emotional and intellectual energy for the company and defines the journey to the future. • Winning was everything • Culture of design and innovation curated • Meticulous attention to detail - Obsession with quality of things unseen - "For you to sleep well at night, the aesthetic, the quality, has to be carried all the way through." • Relentless commitment to core

Execution It's never the idea - it's always the execution.

At some point, need to execute. • Not just identifying interesting ideas, but viable business opportunities • Still involves feedback and iteration • Includes more analytical scrutiny

Overview of team development

Basic tenet of work teams is that: • Jobs and organizations should be designed around processes instead of functions • Basic production unit should be the team and not the individual Teams are formed for synergy: • Accomplish more than individuals can accomplish separately • Focus is to improve quality and/or quantity of outputs

Challenging the status quo

By definition, most efforts to change the status quo involve a movement by a minority group to challenge a majority Need to seek alliances => teams are a requisite for innovation • One person is easy to dismiss as crazy • Large groups / revolutions are hard to ignore

Design is human

Carefully designed artifacts accompany the remains of our earliest ancestors • Designed implements have been found that predate the earliest human fossil remains discovered so far • In fact, it is evidence of design ability, and activity, which allows an archeologist to distinguish between a species that is not quite human and one that is So it appears it is our very ability to design that determines our humanness

Leonardo Da Vinci as a designer

Conflicting descriptions either as scientist or artist • Missing insight into his essential nature as a designer His practical, purpose-driven and integrative approach to the world is primarily what made him so distinct

Why Corporate Entrepreneurs Remain

Corporate entrepreneurs remain in the corporate environment rather than starting their own ventures for a variety of reasons: 1. The size of the resource base 2. The potential to operate on a fairly significant scope and scale fairly quickly 3. The security they enjoy when operating in an existing company 4. The experience an existing organization provides 5. As a way to gain experience while they build their own ventures 6. To work with talented people on big things 7. Massive user base 8. Unlimited tools

Innovation as a strategy Corporate entrepreneurship:

Corporate entrepreneurship: A vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity.

Setting the culture (Stanford study)

In experiment by Stanford researchers: • People randomly assigned to groups of three • Listened to national anthem "O Canada" under different conditions of synchrony - Control condition - participants read the worlds silently while the song played - Synchronous condition - participants sang the song out loud together - Asynchronous condition - participants sang, but not in unison (they all heard the song at a different tempo) Participants thought they were being judged on singing ability, but there was a twist: • After singing, they moved into what was supposedly a different study • There, they had a chance to keep money for themselves or cooperate by sharing it with the group • The few minutes they spent singing shouldn't have affected their behavior, but it did - The group that sang together shared significantly more - They reported feeling more similar to each other and more like a team than the participants in other conditions

Opportunity recognition

Create a system that captures employee's ideas: • Every idea should be captured for possible future development • Side projects often lead to great advances Process (graphic page 9 week 5 ppt 1): idea> Disclose> Assess> Action (prototype, patent, feedback...)> Evaluation> Idea again...

Creative destruction

Creativity is the process of generating new ideas ---> Innovation turns ideas into reality --->New realities challenge the status quo --->Change Change is the key word in innovation. The more we do something that fundamentally changes our market and forces our competitors to react to us, the more innovative we are.

Customer Relationships

Customer Relationships • Types of relationships a business establishes with its customer segments • Motivations: acquisition, retention, up selling Relationship Types: Personal assistance, Self service, Automated service, Communities, Co-creation

Innovative behavior

Deliberate practice - Deliberate practice is the use of regular, structured, and intense repetition of activities deemed important in becoming highly skilled at something Most prolific innovators not only have the highest originality, they also generate their most original output during the periods in which they produce the largest volume. ex.Thomas Edison -Those periods in which the most minor products appear tend to be the same periods in which the most major works appear

Colleague feedback

Instead of attempting to get immediate feedback from managers, worth turning to colleagues first: • They lack risk-aversion of managers • Open to seeing potential in unusual possibilities, which guards against false negatives • They have no particular investment in your idea, giving them enough distance to offer honest appraisal - guards against false positives • Refines idea and improves communication for when have to pitch to manager

Design (Thought and action)

Design in the ability to imagine that-which-does-not yet-exist and make it appear in concrete form as a new, purposeful addition to the real world Design integrates thought and action

Design ≠ Creativity

Design is inclusive not only of creative thinking but innovative, productive, and compositional activities Innovation and production differ from creativity in that they are oriented to taking action in the real world whereas creativity can be done for its own sake At its core, design is a compound of rational, ideal, and pragmatic inquiry

Fundamental Change

Dynamics of modern business have challenged tenets of traditional business operations - Discontinuous - rapid acceleration of technology - Complex - shift to information economy - Global - larger scale

Corporate Entrepreneurship

Entrepreneurial innovation within an established firm in order to improve organizational profitability and enhance the firm's competitive position. Strategic Entrepreneurship - Strategic Renewal - Sustained Regeneration - Doman Redefinition - Organizational Rejuvenation - Business Model Reconstruction Corporate Venturing - Internal Corporate Venturing - Cooperative Corporate Venturing - External Corporate Venturing

Setting the culture for a team

Establish tone for team: • Identify values and mission • Outline expectations => excellence • Review operations

Look at their Mindset

Look at how they approach things and how curious they are with the world ex. Call Centers: • Armed with data from over 30,000 employees who handled calls for banks, airlines, and cell phone companies • Tried to predict when people would leave job early • Employment history would show commitment • Employees who have held five jobs in five years were no more likely to leave than person who had same job for five years On a whim, looked deeper.. • Only thing he could find in data was that internet browser used when submitting application was predictive of when people would leave sooner - Safari and Explorer à sooner - Chrome and Firefox à 15% longer • 19% less likely to miss work • Higher sales • Call times shorter • More satisfied • Not browser itself that is causing them to stick around • Rather, browser preference signals habits. What? - Obvious answer is more tech savvy - computer proficiency test refuted - Answer lays in how they obtained browser • Explorer and Safari built in • To get Chrome and Firefox had to demonstrate resourcefulness - instead of accepting default option, sought out different alternative - Approached job in same way - didn't see as fixed • Instead of sticking to script in calls, found better ways to connect with customers • When encountered situation they didn't't like, fixed it

Also Look For Passion, process and portfolio

Look at past work and focus on how they do things, not just what they've done. Seinfeld • Almost didn't get made • Rick Ludwin (producer) made bet not because of script or even because he was excited about show • Green lighted because watched them revise their concept and observed their ability to get the execution right

Managerial Psychology

Managers tend to be risk averse • Focus on the cost of investing in bad ideas rather than the benefits of piloting good ones • Leads them to commit a large number of false negatives In the face of uncertainly, our first instinct is often to reject novelty, looking for reasons why unfamiliar concepts might fail. When managers vet novel ideas, they're in an evaluative mindset • To protect themselves against the risks of a bad bet, they compare the new notion to templates that have succeeded in the past (heuristics) More experience people gain, the more entrenched they become in a particular way of viewing world.

Opportunity Recognition

Market Feasibility: Is there a market for the concept? Operational Feasibility Is is possible to execute on the concept? Financial Feasibility Is it possible to make money from the concept? Skills and Passion: Does the team and have skills and passion for the concept?

Learning and innovation

Learning how to innovate effectively entails managing knowledge within the organization and offers the potential to enhance the way the organization innovates • How an organization acquires, processes, and learns from the prior knowledge that it has gained is critical to the complete innovation process

3 Strategies for Gaining Legitimacy

Legitimacy building: 1• Conform (passive) to preexisting audiences within current environment 2• Select among multiple stakeholders in pursuit of an audience to support 3• Manipulate (active) environmental structure by creating new audiences and beliefs Get your idea funded! 1. Do something worth investing in 2. Understand why it's worth investing in (and in what context you are operating) 3. Explain that clearly

Blue Ocean Strategy

Strategy as a position variable Red Ocean Represents all the industries in existence today -> known market space -beat competition -exploit existing demand -make the value/cost tradeoff -align the whole system of a company's activities with its strategic choice of differentiation or low cost Blue Ocean Denotes all the industries not in existence today -> unknown market space -create uncontested market space -make the competition irrelevant -create and capture new demand -break the value/cost trade-off -align the whole system of a company's activities in pursuit of differentiation and low cost

Teams and corporate innovation

Teams are an important component to the success of corporate innovation and entrepreneurship Teams are different than groups because they have a common purpose, complimentary skills, common goals, and joint accountability. When utilized effectively, teams enhance performance, quality, efficiency, and innovation.

Optimization

That which is

Innovation

That which is desired to be

Design as leadership

The process of design is always the most effective and efficient means of getting organizations and individuals to new places => leadership Leadership today demands: • Action and the ability to act • Based on an overwhelming amount of insufficient information • Within restrictive limits of resources and time

Case - Google v. Microsoft

Two tech giants • Microsoft built operating systems and office applications • Google wrote a search engine • Both doing great, what's next? - Leave each other alone and prosper independently - Focus on one another and create competition • Competition -> Innovation!!!! • So what happened? - Windows v. Chrome OS - Bing v. Google Search - Explorer v. Chrome - Office v. Docs - Surface v. Nexus Outcome: • Apple came along and overtook both • Jan 2013 market caps: - Apple $500B - Google + Microsoft combined $467B (Just 3 years before, Microsoft and Google were each more valuable than Apple.) Key learning points: • War is costly business • Rivalry can cause us to overemphasize old opportunities and copy what has worked in the past - be different!

Business Model "A business model describes the rationale of how an organization creates, delivers, and captures value"

Value Proposition Customer Segment Channels Customer Relationships Revenue Streams Key Resources Key Activities Key Partnerships Cost Structure Graphics Slides 18-24 week 5 ppt 2

Global revolution

What happens when we've gained everything to be had form fine-tuning the old lines of business that we've inherited? Absent innovation, companies will fail in the future no matter how big their profits remain today. ex. if we dont create the things that kill facebook someone else will

Deliberate Practice

When it comes to idea generation, quantity is the most predictable path to quality. Many people fail to achieve originality because they generate few ideas and then obsess about refining them to perfection.

Genesis is ongoing

When we create new things - technologies, organizations, processes, environments, ways of thinking, or systems - we engage in design To come up with an idea of what we think would be an ideal addition to the world, and give real existence - form structure, and shape - to that idea, is at the core of design as human activity Everyone designs who devises courses of action aimed at changing existing situations into preferred ones.

Creator mindset

When we evaluate new ideas, we can become better at avoiding false negatives by thinking more like creators A Study: • 1000+ adults asked to make forecasts about success of novel products in marketplace • Group 1 - evaluate as mangers, made right bet 51% • Group 2 - evaluate as creators, made right bet 77%

Idea Selection

While we bemoan the lack of originality in the world, we blame it on the absence of creativity. Second edge to that sword, and it's not idea generation, but idea selection. Study of 200+ people: • Dreamed up more than 1000 ideas for new ventures and products • 87% were completely unique Companies must be adept at capturing novel ideas and choosing the rights ones. Feedback: The best way to get better at judging our ideas is to gather feedback. Put a lot of ideas out there and see which ones are praised and adopted by your target audience. The Daily Show cocreator Lizz Winstead • Decades in comedy, but still doesn't know what makes people laugh • Used to desperately try to figure out jokes • Now uses social media to get rapid feedback

Simplified Design Process

Why are we doing this? What are we doing? How are we doing it? How is it going?

Design Thinking

Observe => Reflect => Make Design is to design the design of a design Concept, activity, plan, a finished outcome center of 3 Elements: 1. technology -What can technology do feasability 2. People -desires & needs 3. Business -Viable, sustainable, value get/give Must connect design to reality (fit) Business thinking is problem => solution while in design thinking look at additional problems and solutions and understand them.

The Political Factor

Organizational politics cause corporate entrepreneurs to confront three major challenges: 1. Achieving credibility or legitimacy for the concept and the entrepreneurial team 2. Obtaining resources within the organization 3. Overcoming inertia and resistance Note: Organizational politics is one of the main reasons corporate entrepreneurs leave the company

Fundamental challenge

Organizations focus on optimization, not creativity Foundations of entrepreneurial process starts with creativity creativity -> innovation -> entrepreneurship

Sustainable Competitive Advantage

Originates from application of a bundle of tangible or intangible resources to the firm • Physical, human, knowledge, information, processes, etc. 4 Characteristics of SCA: 1. Valuable 2. Rare 3. Inimitable 4. Non-substitutable Achieved through Innovation Strategy

Legitimacy and corporate innovation

Perceived Liability --> Perceived Asset: • Key factor influencing new innovation survival, growth, and success • Stakeholders are more likely to supply resources to innovations that appear desirable, proper, or appropriate • Stakeholder support leads to resource acquisition

Strategy as a purpose

Perspective - strategies about what? To what ends? • Persistent mindset regarding the world in which the organization operates What does the organization care about? • Processes • Customers • Citizens • Social responsibilities • Self interests • Control • Color ^^ --> core --> strategic intent

Strategy as a plan

Plan - some sort of consciously intended course of action (or set of guidelines) to deal with a situation Core characteristics: • Made in advance • Developed consciously and purposefully (deliberate strategy)

Strategy as a ploy

Ploy - specific maneuver intended to outwit component • Derived from plan • Company can threaten to move into market area to discourage a competitor from entering - Strategy (as a plan, that is, the real intention) is the threat - Move itself is the ploy

The New Workplace

Poll showed only 28.9% engaged at work HBR laid out 5 ways for executives to adapt management and communication style to improve: 1. Create a deeply compelling vision of what the company or team is contributing to society 2. Train managers and supervisors to communicate openly, effectively, and frequently 3. Embrace technology and make collaboration a way of doing business 4. Build an entrepreneurial environment that encourages employees to research and develop their ideas 5. Loosen up the notion of the career ladder

Strategy as a position

Position - means of locating organization in environment Five Forces that Shape Industry Competition: 1. Threat of new entrants 2. barganining suppliers 3. Bargaining buyers 4. Threat of substitutes 5. Rivalry among existing competition

Graphics for Simplified and complex model of corp entrepreneurship page 18 class 4

people process context -> market &feedback -. success or informed failure

STRATEGIC INTENT reading

strategy as a purpose variable obsession with a vision of excellence at all levels of the organization (Hamel and Prahalad, 1989)

Innovation as strategy

sustainable competitive advantage = ƒ(innovation strategy) ƒ(strategy): a{Strategy as a plan} b{Strategy as a ploy} c{Strategy as a pattern} d{Strategy as a position} e{Strategy as a purpose} = Sustainable Competitive Advantage

What makes a creative person?

• Ability to see value in unexpected places • Vision of a new way of doing things or a unique insight • Look for new problems, trends, and opportunities for making things better • Don't take things at face value • Not constrained by current resources • Look at the world in new and different ways

Who to look for?

• Ambitious • Motivated • Collaborative • Curious • Values • Perspective • Other buzzwords... Insider-Outsider: Not just about work: Look for broad and deep experience Nobel Prize • Compared winning scientists from 1901-2005 with typical scientists of same era • Both groups have attained deep expertise in respective fields of study • Nobel Prize winners dramatically more likely to be involved in the arts than less accomplished scientists Entrepreneurs and Inventors People who started businesses and contributed to patent applications were more likely than their peers to have leisure time hobbies Hobbies -> Creative Insight Just as scientists, entrepreneurs, and inventors often discover novel ideas through broadening their knowledge through hobbies, one can likewise gain breadth by widening our cultural repertoires. • Study showed more creative adults spent time moving to new cities more frequently • Another study, creativity linked to time spent abroad Exposure to different cultures and values -- encouraged flexibility and adaptability

Entrepreneurial Similarities between intre and entre

• Both involve opportunity recognition and definition • Both require a unique business concept • Both are driven by an individual champion who works with a team • Both require that the entrepreneur balance vision with managerial skill, passion with pragmatism, and proactiveness with patience • Both involve concepts that are most vulnerable in the formative stage • Both find the entrepreneur needing to develop creative strategies for leveraging resources • Both involve significant ambiguity • Both require harvesting strategies

Value Proposition

• Bundle of products and services that create value for a customer segment • Solves a customer problem or satisfies a customer need ex. Brand, Status, Price, Cost reduction, Risk reduction, Accessibility, Usability

Strategic intent

• Captures the essence of winning • Stable over time • Sets a target that deserves personal effort and commitment Whereas traditional view of strategy focuses on the degree of fit between existing resources and current opportunities, strategic intent creates an extreme misfit between resources and ambitions

Yellowtail Example

• Casella saw that most US consumers preferred beer, spirits and pre-packaged cocktails to wine • Consumers saw wine as a turn-off due to: - Perception of being pretentious - Taste was too complex - Could be intimidating **Created a wine that broke out of red ocean: - Appealed to beer and spirits drinkers by being fun and unpretentious - Had less complex, sweeter and smooth taste - Was easy to select - did not focus on winery, region, aging, etc - Essentially, eliminated all factors that wine had long competed on

Revenue Streams

• Cash a company generates from each customer segment • Fixed versus dynamic pricing Ways to generate revenue streams: Asset sale; usage fee; subscription fee; leasing or renting; licensing; brokering; advertising

What happens when a corporation adopts this mind-set?

• Corporate entrepreneurship is understood and embraced - Culture of innovation - Long term orientation - Tolerance for failure • Performance is benefitted - Increased production of products and services - Competitive posture Ideas come from people. Innovation is a capability of the many

Creativity ≠ Innovation

• Creativity - generating ideas • Innovation - transforms ideas to outputs Innovation ≠ Entrepreneurship ≠ Wealth • Entrepreneurship requires business model

Cost Structure

• Describes all costs incurred to make the business model work • Two broad cost structures: Cost Driven versus Value Driven Characteristics of cost structures: Fixed costs Variable costs Step costs Upfront vs. ongoing costs

Apple ex.

• Digital music (mp3) players in the late 1990s - Technology literate teens and twenty year olds - mp3 file traders Two options: 1) Flash mp3 player • Inexpensive ($100-200) • Small size • Small storage (1 CD songs) 2) Hard drive mp3 player • Expensive ($300-800) • Bulky size Big storage (up to 5,000 songs) • Poor UX iPod - Targeted noncustomers (34-year-olds) - Great capacity (5GB=1,000 songs) - Portability and ease of use of flash memory - Simplified UX - one wheel, four buttons - iTunes software application • Simple to use, transfer, CD to player • Automatic and fast sync • Automatic charging • Easy to manage digital collection - Fun to use - Sleek design - Priced at $399

Customer Segment

• Groups of people an organization aims to reach and serve. • Segmented according to needs, channels, relationships, profitability, payment preferences. ex.Mass Market, Niche, Segmented, Diversified, Multi-sided platforms

Corporate Venturing

• Internal corporate venture - Create and invest in new product-ideas within firm (e.g., Apple self driving cars) • External corporate venture Leverage external innovation to create value for the firm -Internally (e.g.,ExactTarget acquisition, now Salesforce Marketing Cloud) -Externally (e.g., Visa leading investment round in Stripe at $5B valuation) -Operate independently, sometimes unrelated markets or niches - Enrich ecosystem around firm's core business • Cooperative corporate venture - Joint venture or collaboration agreement that extends scope of firm (e.g., Bell Atlantic + Vodafone = Verizon)

4 Methods of innovation

• Invention: the creation of a new product, service, or process, often one that is novel or untried- revolutionary • Extension: the expansion of a product, service, or process already in existence • Duplication: the replication of an already existing product, service, or process adding the entrepreneur's own creative touch to enhance or improve the concept to beat the competition • Synthesis: the combination of existing concepts and factors into a new formulation

Open innovation can entail:

• Licensing arrangements in which the firm sells its technology and/or acquires technology from others • Joint ventures • Corporate spin-offs of new businesses that are enabled by the firm's resources but not central to the firm's strategy, venture • Capital investments • Participation in external R&D consortia/alliances • Community networks

Market Feasibility

• Market size? • Market growth? • Market accessibility? • Competition in the market? • Value for the intended market?

Key Resources

• Most important assets required to make a business model work Categories of key resources: Physical, Intellectual, Human, Financial

Key Activities

• Most important things a company must do to make a business model work Examples of key activities: Production, Problem solving, Platform/network, Marketing/sales

Key Partnerships

• Network of suppliers and partners that make a business model work • Alliances, coopetition, joint ventures, buyer-supplier relationships Motivations for partnerships: Optimization and economies of scale Reduction of risk and uncertainty Acquisition of resources or activities

Obstacles to corporate innovation process

• No time • Poor rewards • Under funded / no resources • Job domain • No allies • Fellow employees - Uniformed judgments - Neophobia - Not my job - Caution - Politics These obstacles share a common element: CHANGE -They represent situations in which to meet the needs of a new project, the corporate innovator must attempt to convince someone or some unit to change current behavior patterns from what the person or unit might otherwise prefer to do "The day I took on my new role I said that our industry does not respect tradition - it only respects innovation. I also said that in order to accelerate our innovation, we must rediscover our soul - our unique core." - Satya Nadella, Microsoft CEO

Theory to practice:

• Organizations need guidelines to direct or redirect resources toward establishing effective innovation strategies (e.g., how do we set our strategy?) • Continual reassessment of the components which predict, explain, and shape the environment in which corporate innovation flourishes (e.g., how do we refine our strategy) *Successfully applying the innovative process within larger, established organizations requires that managers appreciate the unique nature of corporate entrepreneurship/innovation.

3 Types of innovation

• Product innovation - making beneficial changes to physical products • Process innovation - making beneficial changes to the processes that produce products or services • Service innovation - making beneficial changes to services that customers use

Financial Feasibility Is it possible to make money from the concept?

• Profit per transaction? • Investment required? • Time to breakeven? • Revenue and cost certainty?

Common barriers to performance

• Resistance to change • Lack of proper direction • Employee scrutiny • Communication

Operational Feasibility Is is possible to execute on the concept?

• Technical requirements? • Complexity to deliver? • Risk?

Skills and Passion Does the team and have skills and passion for the concept?

• Technical skills and competencies? • Business skills and competencies? • Passion and excitement? • Competitive advantage over others in the market?

Fundamentals of innovative mind-set:

• Today's "best practices" lead to dead ends. The best paths are new and untried. • The first step to thinking clearly is to question what we think we know about the past. • It's easier to copy a model than make something new. Easy often means wrong.

Sources of innovation

• Trends • Unexpected Occurrences • Incongruities • Process Needs • Industry and Market Changes • Demographic Changes • Perceptual Changes • Knowledge-Based Concepts

Kodak vs Fuji-film

"How Fujifilm succeeded serves as a warning to American firms about the danger of trying to take the easy way out: competing through one's marketing rather than taking the harder route of developing new products and new businesses."

Design

"Design is not style. It's not about giving shape to the shell and not giving a damn about the guts. Good design is a renaissance attitude that combines technology, cognitive science, human need, and beauty to produce something that the world didn't know it was missing."

Strategic Entrepreneurship

1. Strategic renewal - Change the basis on which firm competes (e.g., Netflix shift from DVD rental to streaming) 2. Sustained regeneration - Continuous new products (e.g., Apple iPhone) 3. Domain redefinition - Compete in new markets (e.g., Nike move into technology) 4. Organizational rejuvenation - Alteration of processes, structures and capabilities (e.g., Nike move into technology; IBM from hardware to services) 5. Business model reconstruction - Changing the fundamental model of the business (e.g., IBM from hardware to services) 3-5 Often related as one has causal effect on the other

5Ps of Strategy

1. Strategy as a Plan 2. Strategy as a Ploy 3. Strategy as a Pattern 4. Strategy as a Position 5. Strategy as a Purpose

Intuit Design Thinking and Corporate DNA:

1.Stop talking, start doing - "We were so intellectual — we sat around for months — pontificating how to roll this out. We had so many ideas and kept arguing with each other on what to do. We were almost paralyzed thinking about how to scale to all employees." - The biggest lesson: you can't steer if you're not moving. So, get going. 2. Principles over Process - "I know design thinking is a process, and I worked really hard to create a diagram for everyone to understand the process in the context of software development. Know what happened? Nothing. They didn't understand how to reconcile this new process with their existing go-to-market or create-an-offering process." - Boiled it down to three core principles for teams to focus on, principles that could apply to any process they were already using. They're understandable, memorable, and repeatable: • Deep customer empathy • Good broad to go narrow • Rapid experimentation with customers 3. Take the long view - On product and on people - It takes about six to 10 experiential, immersive, contextually relevant experiences before someone finally "gets" it and can make it their own 4. Don't bother measuring why design is a must do - the fact of the matter is, you'll never be able to show causality between the technique by which you design an experience and the financial outcomes of that experience. Ever. - It's an investment in your employees to make them more capable of solving the right problems in the best way for your customers. - And there's enough evidence in the industry and on your most successful teams that design thinking is the way to do it. So, take the leap. 5. Quality over quantity - Having go-to tools and techniques — some that are time-tested and some that are made from within - Reduce the noise for folks so they can concentrate on the content, not the method. 6. Give it away - "We really wanted to incent folks to go out and create experiences for others — of which half the class did. The other half? Nothing. They kept it to themselves, did better work on their teams, and took the credit. Which made us realize: when you want to make this kind of change, it takes a certain type of personality, one of humility and of service to others." - Find the folks that are ready, willing, and happy to give it away. Enlist their help first because this is work of passion and commitment, not ego. 7. Be bold - Think big, take on challenges, and stop trying to control everything - Building innovation capabilities that are sustainable doesn't happen overnight. Ultimately, it requires a company's leadership to make a bold commitment, and set up the right conditions for creativity to thrive. Re: control: - Lionel Mohri, director of customer insights and design strategy at Intuit wanted to help leaders understand how they slow down decision making and get in the way. - He grouped all the leaders into teams of three to build a Lego truck in 30 minutes. Easy, right? • Except, he made them build a deck to justify why they had to build the truck. • Then he made them get approval from three different people for the color of the truck, where to put the stickers, and for the timing of its creation. • Then, to get the tires for the truck, you had to go to a "Chief Tire Officer," who held all the tires for everyone's trucks. Outcome: - Only one team finished putting the truck together — and they did it by totally ignoring what was asked of them. - The experience was so effective in helping the leaders understand how they get in the way that many went back to their teams to apologize and started removing barriers immediately.

5 things to achieve Strategic intent?

1• Create a sense of urgency 2• Develop a competitor focus at every level through widespread use of competitive intelligence 3• Provide employees with the skills they need to work effectively 4• Give the organization time to digest one challenge before launching another 5• Establish clear milestones and review mechanisms to track progress

***5 Elements of corporate innovation process

1• Create the vision (set the strategy) 2• Encourage innovative thinking (set the process) 3• Establish innovative environment (set culture) 4• Develop innovative managers (set the tone) 5• Commit to innovation teams (set the team)

5 Drivers of corporate innovation process:

1• Increased global competition 2• Continual downsizing of organizations 3• Dramatic changes in the marketplace 4• Weaknesses in traditional management 5• The exodus of innovative minded employees

What is it about the 3M organization and management model that allows it to continuously innovate?

3M Innovation Practices & Culture • Respect for the individual "Stimulate ordinary people to produce extraordinary performance" • Supportive policies 15% bootleg rule "Make a little, sell a little" • Standards and expectations 10% sales growth; 20% profit before tax; 27% return on capital employed 30% sales from new products • Unwritten rules Acceptance of "well-intentioned failure" • Share/leverage resources "Technology belongs to the company"

3m Institutionalized Entrepreneurship

3M is a company that has institutionalized entrepreneurship better than almost any other major industrial company in the world. It grew from humble origins as a sandpaper manufacturer to become a $30bn global organization with a diverse portfolio of 60,000 products. At the heart of their success is the company's continued ability to spark entrepreneurial initiative and to back success while also recognizing the need to manage "well intentioned failure."

Holistic Design (pirate metrics)

AARRR Acquisition -users willing to try Activation -enjoy first experience and try again Retention -users come back mult. times Referral -like product enough to refer others Revenue -conduct monetization behavior

Engagement: it Doesn't stop at the hire

Have to be committed to reevaluating where people fit and how they are doing Provide room for growth and feedback on performance (but don't make feedback only driver, focus on results) Seek feedback about organization and management Find ways to engage and improve ex. Google • Realized sales and administration employees didn't have the same perceived freedom, status, or moon-shot projects as the company's engineers • Hired brilliant Yale professor, Amy Wrzesniewski, to help enrich jobs • Found that many were so committed that saw their jobs as defaults - set like plaster and did not question where they could control or adjust them To unlock mindsets, designed workshop introducing hundreds of employees to the notion that jobs are not static sculptures but flexible build blocks • Gave them examples of people becoming architects of their own jobs - customizing their own tasks and relationships to better align with their interests, skills, and a values - Artistic salesperson volunteering to design a new logo - Outgoing financial analyst communicating with clients using video chat instead of email • They looked at their jobs in unfamiliar way *Google (outcomes): • Set out to create new vision of roles that were more ideal, but still realistic • Spike in both happiness and performance having considered jobs as malleable and taking steps to improve • Saw more people take steps to gain new skills • 70 percent more likely than peers to land promotion or transition into more coveted role • Many of their limits were of their own making

Context, not Control - Netflix Process

Highly aligned, loosely coupled • Run loose (little rules), set broad context • Managers inspire and lead people, not micromanage • Context must be set - What are we trying to do - Set constraints - Big problem, little problem - Need to get right, or fix later

**Extreme measures: Holocracy

Holacracy • Comprehensive practice for structuring, governing, and running an organization. • It replaces today's top-down predict-and-control paradigm with a new way of achieving control by distributing power. • It is a new "operating system" that instills rapid evolution in the core processes of an organization. (SLIDE 4 week 7) *Dynamic Roles replace static job descriptions *Distributed authority replaces delegated Authority *Rapid iterations replaces big re-orgs *Transparent rules replace office politics *Tensions Drive Everything (slide 7) *Extreme measures, profound insight Holacracy sits on one side of the spectrum BUT it's principles offer great insight • Flatten organization, remove artificial hierarchy • Limit bureaucracy • Commit to innovation • Move fast • Dynamic roles • Transparent decisions • Clear rewards • Great talent "Research shows that every time the size of a city doubles, innovation or productivity per resident increases by 15 percent. But when companies get bigger, innovation or productivity per employee generally goes down. So we're trying to figure out how to structure Zappos more like a city, and less like a bureaucratic corporation. In a city, people and businesses are self-organizing. We're trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do."

The first tradition

Humans did not discover fire - they designed it The habit of labeling significant human achievements as "discoveries," rather than "designs," discloses a critical bias in our Western tradition whereby observation dominates imagination

Idea creation and evolution

Much of Warby Parker's success is due to way they involve peers in evaluating ideas Warbles; • Everyone in company can submit suggestions and requests for new technology features at any time • Instead of limiting access to ideas and leaving up to managers, introduced complete transparency - Google Doc - Everyone could read and comment and discuss - Employees guide decision making and improve ideas - Managers can vote up/down - can be campaigned/convinced - Technology teams have ultimate decision -- can build immediately and get feedback (start fast, then slow down) • Before Warbles, received 10-20 ideas/quarter • After, 400+/quarter (especially once they saw it was meritocratic)

Groupthink

Psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision making outcome 1. Deeply involved in a cohesive in-group 2. Strivings for unanimity override their motivation to realistically appraise alternative courses of action Yale psychologist Irving Janis identified groupthink as the culprit behind numerous American foreign policy disasters, including the Bay of Pigs invasion and the Vietnam war Bay of Pigs • Many of Kennedy's advisors has reservations about mission • Decision came down to straw poll, nobody spoke up Why? • Members of administration were concerned about "being to harsh" and destroying the "cozy, we feeling atmosphere" • Cohesion => Groupthink

Trajectories of innovation

Radical innovation is the launching of major breakthroughs ex. overnight mail delivery or a new pharmaceutical Incremental Innovation refers to the systematic evolution of a product or service into newer or larger markets. Ex. typical improvements and advances in current products and services Disruptive Innovation goes beyond radical innovation and transforms business practice to rewrite the rules of an industry. In other words, the business practice of an entire industrial sector could be changed radically

Characteristics of Corporate Entrepreneurs

Slide 8 Class 1

Entrepreneurial Differences

Start-up Entrepreneurship -Entrepreneur takes the risk -Entrepreneur "owns" the concept or innovative idea -Potential rewards for the entrepreneur are theoretically unlimited -Speed of decision-making -Little security Corporate Entrepreneurship -Company assumes the risks, other than career-related risk -Company owns the concept, and typically the intellectual rights surrounding the concept -Clear limits are placed on the financial rewards entrepreneurs can receive -Longer approval cycles -Job security

purpose

Strategic Intent focuses on That-which-is desired-to-be NOT.. That-which-is

What are we trying to capture with process:

Strategies that benefit, require and/or expand • Corporate entrepreneurship • Corporate innovation • Corporate venturing • Intrapreneurship Why? • To increase the competitiveness of the firm • Achieve a sustainable competitive advantage

Why "Process" of corp innovation

Strategy (and intent) require action • Simply wanting to be innovative doesn't yield results • Saying you're innovative doesn't make it so Process both captures and prescribes action • Describes dynamics of organization • Not just what to do, but how (functional)