S.M. Chapter 13 (Innovation)

Accessibility

: "Making products and services available to customers who previously lacked access to them is another way to create value. This can result from business model innovation, new technologies or a combination of both. NetJets, for example, popularized the concept of fractional jet ownership. Using an innovative business model, NetJets offers individuals and corporations access to private jets, a service previously unaffordable to most customers. Mutual funds provide another example pf value creation through increased accessibility. This innovative financial product made it possible for even those with modest wealth to build diversified investment portfolios."

Patents

A Strategic Asset and the ability to regularly produce them can be an important source of competitive advantage, especially when a firm intends to commercialize an invention and when it competes in a knowledge intensive industry. They create entry barriers for a firms potential competitors Ex: Pharmaceuticals.

Corporate Entrepreneurship

Application of entrepreneurship (including the identification of entrepreneurial opportunities) within ongoing, established organizations. Has become critical to the survival and success of established organizations. Established firms use entrepreneurship to strengthen their performance and to enhance growth opportunities. Innovation and entrepreneurship play a critical role in the degree of success achieved by startup entre- preneurial ventures as well.

Partnership with MNC Partnerhsip with Venture Capitalist Reverse Innovation

Bottom of Pyramid See article

Air BnB

Brian Chesky CEO

Bottom of the Pyramid

Companies should taget the poorest of 4 billion people in China, India and other emerging markets. Less than 2$ per day Purchasing Power Parity (PPP). Sell products such as toothpaste or shampoo in single-use sizes. Boos their profitability and help alleviate poverty by targeting the this level of the pyramid.

Formal

Defined and documented as procedures and practices.

Internal Corporate Venture

Deliberate efforts set of activities firms use to develop internal inventions and especially innovations. Internally developed incremental and radical innovations result from deliberate efforts.

Cross Functional Product Development Teams

Facilitate efforts to integrate activities associated with different organizational functions, such as design, manufacturing, and marketing. These teams may also include representatives from major suppliers because they can facilitate the firm's innovation processes. New product development processes can becompleted more quickly and the products more easily commercialized when cross- functional teams work effectively. Product develop- ment stages are grouped into parallel or overlapping processes to allow the firm to tailor its product development efforts to its unique core competencies and to the needs of the market.

Cirque due Soleil Entertainment

Founder - Guy Laliberte 2013 revenue - $ 850 million Over 34 shows (7 in Vegas)

Radical

Imagination is more critical to ____ than incremental.

managers

In the context of internal corporate ventures, _____ must allocate resources, coordinate activities, communicate with many different parties in the organization, and make a series of decisions to convert the innovations resulting from either autonomous or induced strategic behaviors into successful market entries.

Creativity

Is as Important to efforts to innovative in non profit as it is in for-profit. Outcome of using ones imagination. Does not produce something from nothing. Discovers, combines, or synthesizes current knowledge, often from diverse areas. This knowledge is then used to develop new products that can be used in an entrepreneurial manner to move into new markets, capture new customers, and gain access to new resources.

Informal

More common They are routines or ways of working that evolve over time. Often invisible Critical to successful innovations and are supported properly through horizontal organizational structures more so than through vertical organizational structures. Face to face basis

Wine

Nomacorc based in N.C founded by Belgian Gert Noel Makes 2.4 billion corks a year Worlds largest maker of synthetic wine corks controls 15% of global wine market

Organizational Culture

Refers to the complex set of ideologies, symbols and core values that are shared throughout the firm and that influence how the firm conducts business. The social energy that drives or fails an organization's actions, cultures influence firms effort to innovate.

Entrepreneurship Opportunities

The conditions in which new goods or services can satisfy a need in the market. Exist because of competitive imperfections in markets and among the factors of production used to produce them or because they were independently developed by entrepreneurs. Come in many forms such as the chance to develop and sell a new product and the chance to sell an existing product in a new market.

Increasing dramatically between 2012-2014

The growth of Air BNB?

Product Development Teams

Used to achieve the desired integration across organizational function Involves coordination and applying the knowledge and skills of different functional areas to maximize innovation.

Formal Informal

What are 2 core horizontal processes that are critical to innovation efforts ?

1. Independent frames of reference of team members 2. Organizational politics

What are 2 primary barriers that may prevent the successful use of cross-functional teams as a means of integrating organizational functions?

Implementing Internal Innovation

An entrepreneurial mind-set is required to be innovative and to develop successful internal corporate ventures. Because of envi- ronmental and market uncertainty, individuals and firms must be willing to take risks to commercialize innovations. Although they must continuously attempt to identify opportunities, they must also select and pursue the best opportuni- ties and do so with discipline. Employing an entrepreneurial mind-set entails not only developing new products and markets but also execution in order to do these things effectively. Firms provide incentives to managers to be entrepreneurial and to commercialize innovations. Having processes and structures in place through which a firm can successfully implement the outcomes of internal corporate ventures and commercialize the innovations is critical. The successful introduction of innovations into the mar- ketplace reflects implementation EFFECTIVENESS. Effective integration of the various functions involved in innovation processes from engineering to manufacturing and, ultimately, market distribution—is required to implement the incremental and radical innovations resulting from internal corporate ventures. Pproduct development teams are being used to integrate the activities associated with different organizational functions. Such integration involves coordinating and applying the knowledge and skills of different functional areas in order to maximize innovation.

Entrepreneurs

Are individuals acting independently or as part of an organization, who perceive an entrepreneurial opportunity and then take risks/actions to develop an innovation to exploit them. Can be found throughout an organization—from top-level managers to those working to produce a firm's goods or services. They have an entrepreneurial mind-set Tend to be passionate and emotional about the value and importance of their innovation-based ideas. They are able to deal with uncertainty and are more alert to opportunities than others. To be successful, entrepreneurs often need to have good social skills and to plan exceptionally well (e.g., to obtain venture capital). Entails much hard work to be successful but it can also be highly satisfying. These successful people have an entrepreneurial mind set that includes recognition of importance of competing internationally as well as domestically.

Autonomous Strategic Behavior

Bottom-up process Product champion facilitates the commercialization of an innovation Pursue new ideas, often through a political process, by means of which they develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace. Strategic Context" Large number of RADICAL innovations spring from this strategic behavior. Results in the CHANGE to the firms CURRENT strategy and structure arrangements. Results in influences to change aspects of firms strategy and structure in place to support its implementation. Differ from the firm's current strategy, taking it into new markets and perhaps new ways of creating value for customers and other stakeholders. Strategic behavior is based on a firm's wellspring of knowledge and resources that are the sources of the firm's innovation. A firm's technological capabilities and competencies are the basis for new products and processes. To be effective, an this process for developing new products requires that new knowledge be continuously diffused throughout the firm. In particular, the diffusion of tacit knowledge is important for development of more effective new products. Some of the processes important for the promotion of this new product development behavior vary by the environment and country in which a firm operates. For example, the Japanese culture is high on uncertainty avoidance. As such, research has found that Japanese firms are more likely to engage in autonomous behav- iors under conditions of low uncertainty.

Net Jets

Founder - Richard Santulli (now owned by Berkshire Hathaway) 2013 revenue $ 4 billion Fractional ownership of aircraft (1/16) 50 hours flight time starting at $600,000 plus expenses for a $9 million aircraft Guaranteed availability with 4 hour notice Over 5,000 airports in U.S & Europe (sometimes in half the time) Marquis Jet Card - prepaid 25 hour (increments available) jet card - pricing ranging from $127,000 to $ 350,000 depending on aircraft type selected.

Product Champion

Is an organizational member with an entrepreneurial vision of a new good or service who seeks to create support for its commercialization. Play critical roles in moving innovations forward. In many corporations, "they are widely acknowledged as pivotal to innovation speed and success." Are vital to sell the ideas to others in the organization so that the innovations will be commercialized. Commonly, they use their social capital to develop informal networks within the firm. As progress is made, these networks become more formal as a means of pushing an innovation to the point of successful commercialization.

Incremental

Most innovations are this. They build on existing knowledge bases and provide small improvements in current products. Evolutionary and linear in nature. Tend to be introduced into established markets where customers understand and accept a products characteristics. From firm perspective, tend to yield LOWER PROFIT margins compared to those associated with the outcomes of radical innovation. Markets are well-defined, product characteristics are well understood, profit margins tend to be lower, production technologies are efficient, competition is primarily on the basis of price. Ex: Adding a different kind of whitening agent to a soap detergent Improvements in televisions over the last few decades. Apple- iPhone Companies launch far more of these innovations because they are cheaper, easier and faster to produce, and involve less risk. Can be risk for firms if its frequency of introduction creates more change than can be appropriately absorbed.

R&D

Often leads to firms' filing for patents to protect their innovative work. Results from integrating the skills avail- able in the global workforce. Thus, the ability to have a competitive advantage based on innovation is more likely to accrue to firms capable of integrating the talent of human capital from countries around the world. Although critical to long-term corporate success, the outcomes of this investments are uncertain and often not achieved in the short term, meaning that patience is required as firms evaluate the outcomes of this efforts.

Organizational Politics

Organizations experience a considerable amount of political activity. How resources will be allocated to different functions is a key source of such activity. Inter-unit conflict may result from aggressive competition for resources among those representing different organizational functions. This dysfunctional conflict between functions creates a barrier to their integration. Emphasizing the critical role each function plays in the firms overall efforts to innovate can be used as a method to help individuals see the value of inter unit collaborations. Methods must be found to achieve cross-functional integration without excessive political conflict and without changing the basic structural characteristics necessary for task specialization and efficiency.

Entrepreneurial Mind-Set

Orientation that values the potential opportunities available because of marketplace uncertainty. Values uncertainty in the marketplace Seeks to continuously identify opportunities with the potential to lead to important innovations. Can be a source of competitive advantage for a firm. Fostered and supported when knowledge is readily avail- able throughout a firm. Units within firms are more innovative when they have access to new knowledge. Transferring knowledge, however, can be difficult, often because the receiving party must have adequate absorptive capacity (or the ability) to learn the knowledge. Learning requires that the new knowledge be linked to the existing knowledge. Managers need to develop the capabilities of their human capital to build on their current knowledge base while incrementally expanding that knowledge.

Horizontal Organizational Structures

Support the use of cross-functional teams in their efforts to integrate innovation-based activities across organizational functions. Instead of being designed around vertical hierarchical functions or depart- ments, the organization is built around core ____ processes that are used to pro- duce and manage innovations.

Independent Frames of Reference

Team members working within a distinct specialization (e.g., a particular organizational function) may have this which is typically based on common backgrounds and experiences. They are likely to use the same decision criteria to evaluate issues such as product development efforts as they do within their functional units. These different orientations can create barriers to effective COMMUNICATION across functions and even produce conflict in the team at times

Distruptive Innovations

Technologies that destroy the value of an existing tech- nology and create new markets urface frequently in today's competitive mar- kets. Disruptive technologies such as sequencing technologies in biotech or the battery powered car are examples beyond information technology. Think of the new markets created by the technologies underlying the development of products such as mobile phones, iPods, Wi-Fi and the browser. These types of products are thought by some to represent radical or breakthrough innovations create what is essentially a new industry or can harm industry incumbents. Some incumbents, however, are able to adapt based on their superior resources, experi- ence and ability to gain access to the new technology through multiple sources (e.g., alliances, acquisitions and ongoing internal research)

Invention

The ACT of creating or developing a new product or process. Brings something new into being. Technical criteria is used to determine the success

Imitation

The ADOPTION of a similar innovation by different firms. Usually leads to product or process standardization, and products based on imitation often are offered at lower prices, but without as many features.

Innovation

The PROCESS of creating a commercial product from an invention. Begins after an invention is chosen for development. Brings something new into use. Follows Invention. Comercial criteria are used to determine the success

Strategic Entrepreneurship

The framework firms use to effectively integrate their entrepreneurial and strategic actions. Taking of entrepreneurial actions using a strategic perspective. Firms simultaneously engage in opportunitiy seeking and advantage seeking behaviors. Purpose for the firm is to find opportunities in its external environment that it can try to exploit through innovations. Integrate their actions to find opportunities and to successfully innovate in order to pursue them. In the twenty-first-century competitive landscape, firm survival and success depend on a firm's ability to continuously find new opportunities and quickly produce innovations to pursue them.

Entrepreneurship

The process by which individuals, teams, or organizations identify and pursue entrepreneurial opportunities without being immediately constrained by the resources they currently control. Positively contributes to individual firms performance and stimulates growth in countries economies. Is to identify and exploit entrepreneurial opportunities—that is, opportunities others do not see or for which they do not recognize the commercial potential. Results in the "creative destruction" of existing products (goods or services) or methods of producing them and replaces them with new products and production methods. Firms engaging in this place high value on individual innovations as well as the ability to continuously innovate across time. Is the economic engine driving many nations' econo- mies in the global competitive landscape. Is important for companies competing in the global economy and for countries seeking to stimulate economic climates with the potential to enhance the living standard of their citizens. Is critical to innovative activity in that it acts as the linchpin between invention and innovation.

Induced Strategic Behavior

Top-down process Firms current strategy and structure facilitates the development and implementation of product or process innovation. Large number of INCREMENTALl innovations come from this strategic behavior. DRIVEN by the organizations CURRENT CORPORATE STRATEGY Results from influences of the strategy and structure the firm currently has in place to support efforts to innovate. In this form of venturing, the strategy in place is filtered through a matching structural hierarchy. Results in internal innovations that are highly consistent with the firm's current strategy. Top management team plays a key role in induced strategic behavior, Composition and the effectiveness of the team are important.

Radical Innovation

Usually provide significant technological breakthroughs and create new knowledge. Are revolutionary and NONLINEAR in nature, typically use new technologies to serve NEWLY CREATED markets. Have strong potential to lead to significant growth in revenue and profits. Developing new processes is a critical part of producing these type of innovation. Have the potential to contribute more significantly to a firm's efforts to earn above-average returns. Are rare because of the difficulty and risk involved in developing them. The value of the technology and the market opportunities are highly uncertain. Creates new knowledge and uses only some or little of a firm's current product or technological knowledge, creativity is required. Strong, supportive leadership is required for the type of creative and imagination needed to develop this type of innovation. Ex: The development of the original personal computer (PC) Toyota prius

1. Incremental 2. Radical

What are the 2 types of Innovations?

Autonomous Strategic behaviors Induced Strategic Behaviors

What are the 2 types of strategic behaviors of internal corporate venturing?

1. Invention 2. Innovation 3. Imitation

What are the 3 types of Innovative activities?

Time orientation Interpersonal orientation Goal orientation Formality of structure

What are the 4 dimensions that functional departments vary along?

Wine Entertainment Hospitality and Transporaton Industries

What are3 industries with Disruptive Innovations?

Research and development

What efforts in a firm are the source of internal innovation?

Start Ups

What is another word for Entrepreneurial ventures?

Innovation

Which is the most critical of the 3 types of innovative activities? Many companies are able to create ideas that lead to inventions, but commercializing those inventions has, at times, proved difficult. Peter Drucker argued that this is the specific function of entrepreneurship, whether in an existing business, a public service institution, or a new venture started by a lone individual. Is "the means by which the entrepreneur either creates new wealth-producing resources or endows exist- ing resources with enhanced potential for creating wealth." Should be an intrinsic part of virtually all of firms activities. Is a key outcome firms seek through entrepreneurship and is often the source of competitive success, especially for companies competing in highly competitive and turbulent environment.

Entrepreneurship

Which part of Strategic Entrepreneurship is the part of Identifying opportunities to exploit through innovations?

Strategic

Which part of Strategic Entrepreneuship is that part of determining the best way to manage the firm's innovation efforts is the strategic dimension.

Nike

Who ahas identified as the most innovative company?

Teams

Who must help to make decisions as to which projects should be commercialized and which ones should end? Although ending a project is difficult, sometimes because of emotional commitments to innovation-based projects, effective teams recognize when conditions change such that the innovation cannot create value as originally anticipated.