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Growth through Innovation (Who Innovates? (Entrepreneurs vs. large…
Growth through Innovation
Example: Gorilla Glass, Corning
tough fracture resistant glass for smart phones invented in 1950s & implemented in 2007
Innovation
the development of
new ways
to create & deliver value
innovation is
invention + commercialization
or
creativity + appropriability
Creativity is not sufficient. you have to
appropriate gains
from that innovation/ initial idea
Why important?
opportunity for growth
:
innovation drives
much
of economic growth
"Innovation, not efficiency, is the hallmark of market-based economies" - Joseph Schumpeter
opportunity to avoid "Creative Destruction" process
:
given the ever-unfolding process of creative destruction,
no strategic position is sustainable in the long run
as innovation occurs
innovate to continue winning consumers
Innovation is difficult
R&D is a
large capital investment
80% of R&D spent by established firms
ROI is difficult to access
NPV hard to calculate
MES for R&D tends to be moderate
breakthrough products are rarely mandated
Innovation Strategies
1. Innovator (first-mover) strategy
capture
a valuable market position, then use superior capabilities or industry structure to fend off rivals
continually innovate
to capture temporary economic rents before imitators dilute profits
2. Fast follower (second-mover) strategy
avoid costs & risks of innovation and
imitate
first-movers,
Apple
leverage
complementary capabilities
to out-compete rivals, ex.
Microsoft
Who Innovates?
Entrepreneurs vs. large incumbents
despite entrepreneurs' potential for creative destruction,
large incumbents
in certain industries are most likely to come up with
large innovations
ex. Corning, Pharma industry
Demand pull vs. Technology push
demand pull is the idea that the
market is demanding
a certain good or service
technology push is the idea that
technology itself is evolving
. historically, technology pushes forward before there's actually a market demand for a product or service
Users vs. producers
In lots of different sectors it's the users themselves who actually push innovation along. In the
medical devices
industry,
surgeons
are often the lead innovators in that sector as users of the technology
However, there're other industries where producers are the drivers of innovation,
Apple's iPhone
Breadth vs. depth of expertise
At one depth level, having
rich
technological expertise is often necessary to be able to innovate
evidences & research shows, innovation often arises from bringing diversity of novel ideas, infos together
sometimes having
breadth of expertise is more important than depth of expertise
Explorers vs. exploiters
explorers, those who are
out looking broadly
for new ideas
exploiters, those who are able to take
their technical knowledge
&
apply it in a narrow domain
Skunk works vs. planners
organizational structure where skunk works, very ill-formed, no strong rules or procedures, people are out there just doing their thing
organizations that are very rigid in their planning, and how they approach innovation and R&D
Be First or Second Mover?
2 key factors
b) Appropriating Value from Innovations
a) Innovative Capability
firm's
ability
to
develop
new products & services and to
manage
the innovation process
Rational plan model
of innovation (
Ideal development path
)
start with lots of different concepts that feed into a
funnel
investigate those concepts, do research on them
then narrow the funnel into
one idea
that gets
developed
and comes out as a
product
on the back end
Actual development process
ideas originated in
different parts of the organization
, research, marketing, manufacturing, or top management team
put together in a
hodgepodge
of ideas that are circulated around, some are
investigated
, and some are not
dice
: maybe organizational
politics
plays a role, maybe there's some
luck
involved
then some things start to pop out the other end; some of which might turn out to be
viable products
, but others might go all the way through and put in the
garbage
can or thrashed
compared to ideal development path in textbooks, actual development path is a
more chaotic process
, influenced by many
internal & external factors
What drives organization’s innovative capability?
1. Create a climate to generate & pursue novel ideas
-
2. Having effective development processes in place
-
3. Absorptive capacity
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