Strategy week 5 (strategic innovation, industry context)

Strategic renewal processes

- creating process / strategizing > constantly aware of opportunities, changing views, and being up to date - entrepreneuring > entrepreneurial activity is recognized as the driving force behind new industries and the renewal of existing ones - changing > sometimes innovation requires a change in organizational system (functions, departments, cultures) - investing > requires money and time

Why is strategic innovation important?

- financial results - non financial results - competitive advantage - life extension

(Reading 10.2) Important findings on blue oceans

- not about technological innovations, underlying technologies already exist in most cases - established organizations often create blue oceans - most blue oceans originate from red oceans - organization and industry are not the right unit of analysis - create blue oceans builds brands - can differentiate at the same time as low cost strategy

Business model renewal alternatives 2 (p. 71)

- outside in - value chain - inside out

Business model renewal alternatives (p. 71)

- product offering - value chain - resource base

Criticism a the product life cycle

- the duration of the stages varies widely from industry to industry - industry growth does not always go through the s-shaped pattern, because companies innovate - companies are able to affect the shape of the growth curve by innovations - the nature of competition associated with each stage of the life cycle is different for every industry

(Reading 9.2) Five principles managers need to know to be successful

1. companies depend on customers and investors for resources 2. small markets don't solve growth and needs of large companies 3. markets that do not exist cannot be analyzed 4. capabilities of an organization determine its weaknesses 5. technology does not have to equal market needs

Structural characteristics industries (p. 79)

1. convergence vs divergence 2. concentration vs fragmentation 3. vertical integration vs fragmentation 4. horizontal integration vs fragmentation 5. international integration vs fragmentation 6. expansion vs contraction

(Reading 9.1) Difference between TQM (total quality management) and Six Sigma

1. focus on financial and business oriented results (SS finances on project level, TQM on organizational level) 2. using a structured method for improving the process or introducing new products and services (SS different methods, cohesive approach to problem solving, specialists to improve quality, TQM old method) 3. use of specific matrices (SS extensive use of matrices, TQM less) 4. use of full time improvement specialists (SS extensive use of specialists, TQM not)

Forms of industrial development

1. gradual development > old business model slowely being replaced 2. continuous development > changes happen often, but are relatively average in size 3. discontinuous development > model is dominant but radically replaced by a better model 4. hyper competitive development > continuously being replaced by radically better or different models

(Reading 9.2) The failure framework (p. 76)

1. important difference between sustainable and disruptive technologies (disruptive technologies prevent an organization from failing) 2. speed of technological development can exceed the needs of the market 3. customers and financial structures of the organization determine the type of investments the organization makes

(Reading 9.3) Types of innovation

1. incremental innovation > small changes, building mainly on current capabilities of the company 2. radical innovation > major changes 3. modular innovation > affects subsystems or component technology 4. architectural innovation > changes in how subsystems are linked

Inhibitors of strategic renewal

1. innovation results > organizations often choose paths that worked before 2. inertia and bias > why change a winning team? 3. feedback > why searching for better if results are satisfactory?

(Reading 10.3) How do industries develop

1. radical 2. progressive 3. creative 4. intermediary Should also be in line with industry's change trajectory

(Reading 9.3) effect of process management on technological innovation

1. stabilize resource allocation 2. narrow internal communication links 3. influences technological innovation directly

Factors that contribute to rigidity in industrial development (p. 80)

1. underlying conditions 2. industry integration 3. power structure 4. risk averseness 5. industry recipes 6. institutional pressures

(Reading 9.1) Characteristics of the Six Sigma (p. 73 - 74)

1. uses a parallel - meso structure (theory that takes into account both micro and meso levels) 2. independent specialists are used to ensure improvement 3. structured method 4. different matrices to measure data on finance, strategy and performance are used (customer vs. financial focused)

(Reading 10.1) Important starting point in evolution process

> if mobility barriers increase, the concentration will almost always increase > if there is no concentration, this means that the mobility barriers are non existent > exit barriers indicate consolidation > long term profit depends on the future structure > innovation can push / change the boundaries of an industry

(Reading 9.1) Six sigma as structural exploration mechanism

> open and flexible to new different perspectives > built in boundaries can be shifted

(Reading 9.1) Six sigma as structural control mechanism

> relate to output, behavior and social control > always measurable > behavior is monitored

(Reading 9.1) Six Sigma DMAIC Model (p. 73)

D - Definition phase M - Measurement phase A - Analysis phase I - Improvement phase C - Control phase

Difference between exploration and exploitation

Exploration involves activities such as search, variation, risk taking, experimentation, discovery, and innovation. Exploitation involves activities such as refinement, efficiency, selection, implementation, and execution

Industrial dynamics perspective

Industrial development is an autonomous process, adaptation is mandatory: join or drop out, free will and self determination of the future seems nice but is a misunderstanding according to supporters of this perspective

Industrial leadership perspective

Industrial developments can be formed but then there must be an innovative organization that is willing and able to take on the role of the leader

Managing the paradox of exploitation vs exploration

Parallel processing, navigation, balancing

(Reading 10.2) Structuralist view of environmental determinism

With red oceans, one thinks that industrial conditions are given

Demand for disruptive renewal

a process in which current competitive positions are challenged by introducing new technologies and business models, need to be invented (radical rejuvenation perspective)

(Reading 9.3) Process management

a system of processes that are linked to each other, refers to coordinated actions to: 1. mapping organizational processes 2. improve the processes 3. comply with eh systems of improved processes

(Reading 10.2) Red oceans

all industries that exist today, the well known market space

Managing the paradox of compliance and strategic choice

balancing, parallel processing, juxtaposing

(Reading 10.2) Reconstructionist view (blue oceans)

blue oceans are thought to be able to deform and create their own boundaries

Strategic innovation

changing the business model of the organization to create and defend a sustainable competitive advantage, it involves all technologies, resources, activities and processes in which new ideas are generated that are transformed into products and services

(Reading 10.2) Why do organizations prefer to operate in red oceans?

competition is linked to strategy, there is hardly focus on creating new markets without competitors, because all attention goes to competing

Rigidity

difficult to change

The paradox of exploitation vs. exploration

does an organization need to innovate by continuously improving the current organization (exploitation) or radically innovating by completely changing technologies and processes in one go (exploration)

Plasticity

easy to change

Demand for compliance (adapting to the environment)

every organization has to adapt to environment, it is too difficult to invent new rules

International perspective: external locus of control

fate is largely the result of circumstances over which you have no influence, you yourself have little influence on succes and failure (industrial dynamic, Asia)

Perspective on strategic innovation: radical renewal

focus should be on radical change, changing the rules of the game, the more radical the harder to match with competitors

(Reading 9.2) Innovators dilemma

if you want to invest in a market, it is useful to first collect data and know what the market looks like. Not possible with new markets because they do not exist in that capacity

Path dependency

industrial evolution depends on what the industry has done in the past and limits the extent in which the industry can develop in the future

(Reading 10.2) Blue oceans

industries that do not exist yet, demand is created and there is plenty opportunity to grow

Perspective on strategic innovation: strategic improvement

organizations should focus on improving their current business model, improved products will attract customers, radical change too risky

International perspective: internal locus of control

people are in control of their own destiny, trouble and succes, failure is your own fault (industrial leadership, USA)

The demand for sustained renewal

permanently improving products and services to strengthen the company's competitive position, based on facts (customer feedback, market research) (strategic improvement perspective)

(Reading 9.1) Six Sigma structure

reduces variation in organizational processes, by using improvement specialists, a structured method and performance metrics with the aim of achieving strategic objectives

(Reading 9.3) Productivity dilemma

short term efficiency and long term adaptability are inherently incompatible

Paradox of compliance vs choice

sometimes is it safer to follow the rest, but taking risk and being innovative will lead to greater competitive advantage

Demand for strategic choice

to be unique, and organization must do something different, the more innovative the greater the competitive advantage