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(G1) [BGS] (week4) Growth through Innovation (10.Team Members (Andri,…
(G1) [BGS] (week4) Growth through Innovation
10.Team Members
Andri
Cindy
May
Miki
Jamie
Joanna
2.Innovation Strategies
Follower strategy
Avoid the costs/risk of innovation and imitate first- movers
Leverage complementary capabilities to out-compete rivals
Innovator strategy
Continually innovate to capture temporary economic rents before imitators dilute profits
Capture a valuable market position, use superior capabilities/industry structure to fend off rivals
Which one is the best?
Firm's innovative capability
manage the innovation process
develop new products/services
Firm's ability to appropriate gains from innovation
maintain margins for at least some reasonable period after bringing an innovation to market
1.Growing through Innovation
Development of new ways to create and deliver value
Why innovation is important?
Drives much of economic growth
"Innovation, not efficiency, is the hallmark of market-based economies" (Joseph Schumpeter)
"Creative destruction", no strategic position is sustainable in the long run
Innovation is difficult
R&D expense
Large capital investment
ROI is difficult to access
NPV is hard to calculate
Innovative breakthroughs often arrive unannounced and from far afield
Gorilla Glass
1960's, Tried to sell but never materialized
1970's, Had abandoned the project
1950's, Innovations led to Chemcore
Forward 35 years, Steve Jobs would like to have a glass product for new phone
Innovated by Corning
Who innovates?
Demand pull vs technology push
Users vs producers
Entrepreneurs vs large incumbents
Breadth vs depth of expertise
Explorer vs exploiters
"Skunk works" vs planners
4.Keys to Innovation
Integrate diverse knowledge
Create cross functional teams
Create broad vision and shared values
Establishing effective lines of communication
Manage expectations
Provide motivation for innovation
Invest in creative search
Establish high-powered upside incentives
Give greater ownership to managers
Encourage risk taking by sharing responsibility
Build absorptive capacity
Invest in basic/leading edge research
Reward individuals on the basis of their standing outside the firm
Take part in joint ventures/industry consortia that keep the firm in the loop
Give away key ideas in orders in other to be a player
Encourage diversity
6.Appropriating Value from Innovations
What for?
Control of important complementary assets
Ability to protect intellectual property
Who?
Suppliers
Customers
Innovator
Imitators, Competitors
9.Determining an Innovation Strategy
weak IP protection, strong complementary assets
integrate
strong IP protection, weak complementary assets
use market
strong protection, strong complementary assets
have bargaining power
license or integrate
weak IP protection, weak complementary assets
difficult to make money
no good options
8.Complementary Assets
assets necessary to translate an innovation into commercial returns
hardware products requiring software products to go along with them
dependence
perspective of the innovation and
from the perspective of the asset
specialized
high on dependence from the innovator
high on dependence from the asset
cospecialized
asset
tightly held
asset is rare, it's not widely possessed
it's hard for someone to imitate or substitute for.
freely available
purchased on factor markets
easy to build or develop
7.Intellectual Property Protection
When is ability to protect IP strong?
First-mover advantages
Learning curves effects
e.g.microprocessor industry
Branding or create customer loyalty
e.g. Kleenex, Xerox
network externalities
e.g. telephone, social media companies
Imitation by competitors is difficult
Trade secret
e.g. Coca-Cola
Technologically or socially complex innovation
Legal protection
Patent, copyright, or a trademark
e.g. pharmaceuticals and drug discovery
e.g. Software
Easy to that competitors use your basic to innovate
Trade secret
Diffusion among customers is fast
Easy to adopt products
e.g. Billy Bass
Ability to meet growing demand
Large, lucrative early market
The reason of difficult to protect IP
Hard to keep the secret
Value may be created by a collection of advances
Not that easy to acquire and enforce
Tacit knowledge eventually gets diffused
3.Developing an Innovative Capability
The two key factors of growth through innovation
the innovative capability
The firm's ability to develop new products and services and to manage the innovation process.
the ability to appropriate the gains from innovation
The firm's ability to maintain margins for at least some reasonable period after bringing an innovation to market.
The process about innovation
Some idea of going out
Generate ideas
Design ideas
Develop ideas
Commercialize ideas in the market.
Necessary conditions
Create a climate to generate novel ideas
Provide mechanisms for information exchange
The underlying incentives to innovate
The freedom to fail or the idea of failing fast
Encourage free flows of information
Have effective development processes
Selecting and articulating clear product ideas
The organization of tasks
Team composition and tenure
Coordinate with other partners
Open Innovation
Assimilate knowledge outside the boundaries of the firm
Important knowledge distributed throughout the firm and the market
Basic research is often a public good residing in universities and other institutions
Understand outside developments and invest in the underlying science
5.Organizing for Innovation
Sequential (functional)
Decision at each point in the process
Can be looping
Passed from one function to the next
(*) takes time
(*) step by step
(*) good when the project is uncertain
(*) good for stable market environment
Chaotic (unidivisional)
Generate idea :arrow_right: act
Disorder and conflict
(+) easy and creative solutions
(+) best for "breakthrough" products
(-) difficult to control
(-) many conflicts
Overlapping (matrix)
Interaction between functions by overlapping
Create cross-functional "design house" from marketing & engineering
(*) large amount of time and effort
(*) limits hand-off problems
Concurrent (project)
All functions work together for the entire project
(*) improves learning
Overlapping cross-functional teams
(*) needs a lot of resources
(*) best for evolving "incremental" products
(*) big time commitment from the team
