3. Developing the Framework for Innovation Strategy
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Transcript of 3. Developing the Framework for Innovation Strategy
MOI – Innovation Strategy –Framework,
Prof. V.SeshadriNMIMS
Porf.V.Seshadri, MOI- Innovation Strategy 2
Innovation Strategy
2.1 Developing the framework2.2 Positions – National & Competitive
environment2.3 Paths- Exploiting technological trajecteries2.4 Processes – Leveraging R&D; 2.5 Processes - Allocating resources
MOI - Prof.V.Seshadri 3
References
1. Joe Tidd, John Bessant and Keith Pavitt;Managing Innovation – integrating technological, market and organizational change; 3rd ed.; Wiley India.
2. John E Ettlie, Managing Innovation – new technology, new products and new services in a global economy,, Rochester Institute of Technology
3. Harward Business Essentials, Managing Creativity and Innovation , Harward Business School – 2003
4. Shlomo Maital & DVR Seshadri, Innovation Management – Strategies, Concepts & Tools for Growth & Profit
5. Robert A Bungerman & Madisto A Maiidique; Strategic Management of Technology and Innovation; Irwin
MOI - Prof.V.Seshadri 4
References – contd.
6. Peter Drucker, Innovation and Entrepreneurship – Harper & Row, 1985, NY
7. Dr. K.V.Khurana, Management of Technology & Innovation , Ane Books India , 2007
8. Tarek M.Khalil, Management of Technology, Mc Graw Hill9. Curtis R. Carlson & William W. Wilmot, Innovation, Crown
Business, 200610. Wolfgang Grulke with Gus Silver, Lessons in Radical
Innovation, Prentice Hall, 200111. Margret A White & Garry D.Bruton, The Management of
Technology and Innovation, Cengage learning, 2007
Porf.V.Seshadri, MOI- Innovation Strategy, Ref 11 Ch 2
5
What is Strategy?
• Strategy is a coordinated set of actions that fulfill a firm’s objectives, purposes and goals
• Strategic Management is an on-going process in which the organization (org) defines the nature of the businesses in which the firm will be active, the kind of economic and human org it intends to be and the nature of contributions it intends to make to it’s various constituents
Porf.V.Seshadri, MOI- Innovation Strategy Ref 11 Ch 2
6
Levels of StrategyVISION & MISSION
CORPORATE STRATEGY
BUSINESS-LEVEL STRATEGY
FUNCTIONAL - LEVEL STRATEGY
Porf.V.Seshadri, MOI- Innovation Strategy 7
Central role of Technology in strategic management
• Strategic management is critical and it helps the entire org move towards consistent goals
• Technology is considered throughout the stategic process; both internally and externally.
Porf.V.Seshadri, MOI- Innovation Strategy Ref 11 Ch 2
8
Capabilities
• Capabilities are skills that a firm develops.• To be successful any firm needs five or six
capabilities in which it is superior to it’s competitors.
• It is from these capabilities that the firm’s integration of technology with strategic concerns should begin.
• It is these capabilities that are at the root of the firm’s competitive advantage over competitors
Porf.V.Seshadri, MOI- Innovation Strategy 9
Capabilities
There are 2 areas of capabilities:1. Technical2. Market
Porf.V.Seshadri, MOI- Innovation Strategy 10
Technical Capabilities
• How the firm approaches technologies it has or wishes to have.
• Firm may decide strategically to either destroy, preserve or develop the technologies
• The strategic decision is implemented through people, structure and processes.
Porf.V.Seshadri, MOI- Innovation Strategy 11
Market Capabilities
• Knowledge and skills pertaining to Market forces and customers are important.
Porf.V.Seshadri, MOI- Innovation Strategy, Ref 11 Ch 2
12
Competitive Advantage
• A competitive advantage is something a firm does better than any of its competition.
• The activity/area of competitive advantage should be something that the other firms cannot easily duplicate (cost , performance or quality) and something that the customer really values. Only then will it lead to a sustainable and tangible benefit. E.g faster processing by a new computer chip.
• When the competitive advantage involves a hi- tech area or activity, the firm is said to have a technology advantage.
• Firms seek to use this technology advantage towards an innovative venture to launch a new product/process /service. This is called technological innovation strategy.
Porf.V.Seshadri, MOI- Innovation Strategy, Ref 1 Ch 3
13
Guidelines for strategy formation process
1. Explore the implications of a range of possible future trends
2. Ensure broad participation and informal channels of communication
3. Encourage the use of multiple sources of information, debate and skepticism
4. Expect to change strategies in the light of new evidence
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
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Innovation Strategy – essential features
1. Firm-specific knowledge and the capacity to exploit it
2. A Strategy to deliberately accumulate such knowledge
3. Ability to cope with threats from external environment
4. An internal structure that balances potentially conflicting requirements
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
15
Innovation strategy
• A firm’s capabilities is one of the important basis for deciding the technological innovation strategy.
• A firm generally strives to build on those areas where it has competitive advantage.
• At the corporate level, a firm needs to define and implement an innovation strategy. It can adopt one of two approaches for this purpose.
Porf.V.Seshadri, MOI- Innovation Strategy 16
Approaches
Approaches for mobilization of technology for the purpose of creating a corporate innovation strategy
• Rationalist Strategy• Incrementalist Strategy
Porf.V.Seshadri, MOI- Innovation Strategy 17
Rationalist Strategy
• It consists of the following steps1. Describe, analyze and understand the
environment. ( may use SWOT)2. Determine a course of action in the light of the
analysis3. Carry on the decided course of action • Such a a linear process is usually followed in
the military; but is not always successful in the complex corporate context.
Porf.V.Seshadri, MOI- Innovation Strategy, Ref 1 Ch 3
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Incrementalist Strategy
• Rationalist approach assumes a complete understanding of the present and emerging future. However, this is usually very limited.
• The alternative incrementalist strategy involves1. Make deliberate steps towards the stated
objectives2. Measure and evaluate the effects of the steps
(changes)3. Adjust the objectives (if necessary) and decide on
the next step (change)
Porf.V.Seshadri, MOI- Innovation Strategy 19
Incrementalist strategy (ex: for medical doctors)
Symptom Diagnosis
Treatment
Diagnosis Adjust treatment
Cure
Porf.V.Seshadri, MOI- Innovation Strategy 20
Incrementalist strategy (ex: for product/process innovations)
Design Development
TestAdjust design Retest
Operate
Porf.V.Seshadri, MOI- Innovation Strategy Ref 11 Ch 2
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The strategic process in MTI – Porter’s Model
The strategic process of a firm is made up of three principle activities.
1. Planning2. Implementation3. Evaluation and controlThese activities go on concurrently and are an ongoing internal
process.Planning consist of: 1) Data gathering 2) Mission generation 3)
Objective seeking and 4) Strategy establishmentPorters Industry model is a useful tool for gathering and organizing
information for planning the strategy of a firm in relation to the industry in which it operates.
Porf.V.Seshadri, MOI- Innovation Strategy Ref 11 Ch 2
22
Porter’s Industry Model
• Porter proposed a ‘five forces’ analysis. The model builds on industrial organization’s economics to analyze how various parties influence an industry
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 cH 3
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‘Five forces’ driving industry competition - Porter
According to Porter, the unit of analysis is the industry producing similar products. The goal of competitive strategy is to find a position in the industry where a firm can best defend itself against these competitive forces. The ‘five forces’ driving industry competition are:
1. Relations with suppliers; 2. Relations with buyers3. New entrants 4. Substitute products5. Rivalry amongst established firms
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
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Porters Approach
• Porter linked technology to the five forces driving industry competition.
• In each of these areas, firms must choose from generic market strategies.
• Porters approach situates the firm’s technological activities in a wider context of industry competition.
• He developed a systematic SWOT analysis for this purpose.
• A sixth force: “COMPLIMENTORS” is now added to examine technology – focused concerns
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
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Generic Market Strategies -Porter
• According to Porter, a firm has to decide on which market strategy it is going to adopt:
1. Cost leadership/ Cost focus2. Product Differentiation / Differentiation focus
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
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Generic strategies for firms - Portercost leadership differentiation
Product Development
Lower material inputs
Enhance quality/features
Product Development
Ease of manufacture
Niche market
Process development
New logistics Precision quality control
Process development
Minimize cost Miniaturization
Process development
Economies of scale
Response time
Porf.V.Seshadri, MOI- Innovation Strategy, Ref 1 Ch 3
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Threats and Opportunities from changes in technology -Porter
Potential Entrants and Substitute Products:Increasedthreat
No economies of scale TelecommunicationPublishing
Increasedthreat
Substitute Products Aluminum cans in place of Steel cans
Reduced threat
Lock-in to technological standards
Microsoft
Reduced threat
Patent and Legal protection
Major ethical drugs
Porf.V.Seshadri, MOI- Innovation Strategy 28
Threats and Opportunities from changes in technology -Porter
Power of Suppliers over Buyers
Increasedthreat
Innovations in key components
Microprocessors in computers
Reduced threat
Innovations that reduce dependence
Engineering materials
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
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Threats and Opportunities from changes in technology -Porter
Rivalry amongst established firms
IncreasedThreat of monopoly
Innovations in key areas
Polaroid in instant photography
Reduced threat of monopoly
Imitation in key area
GE in brain scanners
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
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Leadership vs Followership -Porter
A firm should decide which market strategy it intends to follow:
• Innovation leadership or• Innovation followership
Porf.V.Seshadri, MOI- Innovation Strategy Ref 1 Ch 3
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Innovation strategy in small firms
• Small companies have the following charecteristics:• 1) Similar objectives – to develop and technological and
other competencies to provide superior products and services.
• 2) Org strengths: ease of communication, speed of decision making, degree of employee commitment and receptiveness to novelty
• 3) Technological weaknesses• 4) Strong in certain sectors like machinery, instruments
and software; Weak in chemical, electronics and transport
Porf.V.Seshadri, MOI- Innovation Strategy, Ref 1 Ch 3
32
Table 3.2 Misleading assertions about innovation in small firms
©2005 Joe Tidd, John Bessant and Keith Pavitt