Strategic Managemnet Chapter 13

Imitation•

1 Imitation is the adoption of a similar innovation by different firms. Commonly, imitative products have fewer features and a lower price.

Companies introduce to markets a larger number of incremental than radical innovations, largely because they

1. Are cheaper 2. Are easier to produce 3. Less risky (but also less profitable)

There are two types of internal corporate venturing:

1. Autonomous strategic behavior 2. Induced strategic behavior

THREE WAYS TO INNOVATE

1. Internal - Autonomous vs. Induced• 2. Cooperative Strategies (e.g. Strategic Alliances)• 3.Acquisitions

THREE I'S

1. Invention 2 Innovation• 3.Imitation

Invention

1. the act of creating or developing a new product or process. 2. Invention brings something new into being. 3. Firms use technical criteria to determine the success of an invention

Entrepreneurs:

1. willing to take responsibility for their projects 2. often optimistic 3. Tend to be passionate and emotional about their innovation-based ideas.

Innovation

1.Innovation is a process used to create a commercial product from aninvention 2• Innovation brings something new into use. 3. Commercial criteria is used to determine the success of an innovation.

Incremental Innovation

Evolutionary and linear

Autonomus Strategic Behavior Examples

Frappaccino Big Bertha from Callaway

Incremental

Incremental innovations build on existing knowledge bases and provide small improvements in current products.

Absorptive capacity-

Knowledge must be transferred to othersto enhance the entrepreneurial competence of the firm. Thusadequate absorptive capacity is required for this.

Radical and Incremental Example

Motorola's Razr2 cell phone

13-5c Induced Strategic Behavior Examples

Nokia• Nokia is competing with Apple's iPhone lead in thesmartphone market. Nokia has specific goals inthe development of new products to support theirstrategies. This is an example of induced strategicbehavior.• Netflix• Netflix developed video on demand technologies.This is also an example of induced strategic behavior.

Radical

Radical innovations usually provide significant technological changes and create new knowledge.

Innovation throughCooperative/Acquisition Strategies

Relative to Internal Corporate Venturing:• Cooperative and Acquisition Strategies both are:• Risk - Less• Cost- Less• Speed to market- Faster• e.g. Pharmaceutical firms form alliances with biotechcompanies to develop new products and bring themto market

Radical Innovation

Revolutionary and nonlinear

Two skills that are vital for organizational success are:

The ability to innovate2. The ability to be strategic in marketplace competitions

What is the goal of innovation?

To create wealth = advance society

Entrepreneurial ventures' strategic flexibility andwillingness to take risks

allow them to produce moreradical innovations than do larger, more establishedorganizations.

A partner might appropriate

an alliance member's technologyor knowledge and use it for its own benefit, i.e. become acompetitor.

To be successful,

an autonomous process for developing new products relies on the diffusion of tacit (understood; implied) knowledge.

Panera Bread develops and produces its owndough-based products,

and it works withmanufacturing partners to create new soups. Whichtype of innovative activities is Panera Breadimplementing

What balance is required

between individual initiative and cooperative spirit versus group ownership of innovation

Autonomous strategic behavior

bottom-up process in which a product champion pursues a new idea, often through a political process, whereby she/he develops/coordinates the actions required to convert an invention into an innovative product, bringing it into the market. (e.g. Frappuccino)

Creative Destruction (Joseph Schumpeter)

entrepreneurship 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.

Organizational politics may result

from the competitionfor resources among different organizational units

Entrepreneurs

individuals, acting independently or as part of an organization, who perceive an entrepreneurial opportunity and then take risks to develop an innovation and exploit it.

Thus, cooperative alliances for entrepreneurial new companies may seek

investment capital while moreestablished companies may need new technologicalknowledge.

Induced strategic behavior

is a top-down processwhereby the firm's current strategy and structure fosterinnovations that are associated closely with that strategyand structure

A negative effect of acquiring other firms for the purpose of innovation

is the effect it can have on the firm's own ability to produce innovations.

Corporate Entrepreneurship

is the use or application of entrepreneurship within an established firm.

Panera Part 2 Two types.• What are they?

pursuing innovation through both internal and cooperative strategies.

Alliances formed to foster innovation carry

risk

Growth rates in the wealth of citizens and national wealth in the most entrepreneurial countries

suggest the possibility of a positive relationship between entrepreneurship and economic productivity(development)

Evidence suggests

that firms capable of engaging effectively in international entrepreneurship generally outperform those competing only in their domestic markets.

Research shows

that internationally diversified firms tend to bemore innovative than domestic-only firms

Internal corporate venturing

the term used to describe the set of deliberate activities that firms use to develop internal inventions and particularly internal innovations

Well-established firms have more resources andcapabilities

to manage recognized opportunitiesstrategically in the marketplace.