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Intels prosperity Microprocessor Ciscos excellence Routers for internet Pfizers research Cholesterol bursting drug - Lipitor Wal-Mart

al-Mart excellence To locate in small towns. And many more. All these cases raise very interesting questions on innovation and strategy.

Why it is so difficult to innovate? Can anything be done to overcome these difficulties? How does a firm know which innovation is right to exploit the market? Are some regions or nations are better environments for innovation than others? Why? Can a firm control its local environment through innovation? Aren't competitors are also interested to explore the same or similar innovations? Should we use existing assets ( both physical and human) to facilitate innovation ?

Conduct Market Research External customers Internal customers Asses potential of new technology

Plan the Research, and Engineering Portfolio

Conduct Research, Development and Engineering Projects

Sustained Stakeholder Satisfaction

Do Continuous Process Improvement

Apply Know-how to product and Processes

Incremental Radical Life Cycle

Nature of Innovation

Integrate diff functions Market new ideas Low cost or differentiated products/ services

Competencies Ability to design

Environment Micro
Macro Strategy Structure Systems People

Profits

Knowledge

Nature of Innovation Incremental Incremental


Radical Life Cycle

Size, patents, copy rights, location, skill HR, licenses, Sponsors

Assets

Profit
A firm makes profit from selling a product or

service when the revenues it receives from the product are greater than the cost of offering it.

Innovation
Innovation is the use of new technological

and market knowledge to offer a new product or service that customers will want. It is invention + commercialization.

The new knowledge can be technological or market related. Technological knowledge is knowledge of components, linkages between components, methods, processes and techniques that go into a product or service. Market knowledge is knowledge of distribution channels, product application, customer expectations, preferences, needs and wants. Technical innovation is about improved products, services or processes or completely new ones. Administrative innovation pertains to organisation structure and administrative processes

Market - pull is the advancement of technology oriented primarily toward a specific market need, and only secondarily toward increased technical performance. Technology push is the advancement of technology oriented primarily toward increased technical performance, and only secondarily towards specific market needs.

Minor change

Incremental

Architectural

Novel change

Modular

Radical

Existing

Novel

Incremental Innovation: These innovations represent minor improvements or changes to the elements of an existing product or organisational technologies. Modular Innovation: These innovations refer to significant changes in elements of products, organisational practices and technologies without significant changes to the existing configuration of the elements

Architectural Innovation: These innovations use existing organisational practices and technologies but reconfigure them in new or different ways. Thus, their initiation requires an organisational knowledge of how existing components. Radical Innovation: These innovation represent revolutionary changes that require clear departures from existing organisational practices and technologies.

Incremental Innovation Product Technology: Microprocessors Process Technology Continuous Improvement Architectural Innovation Product Technology: Paper Copiers Process Technology Just in time inventories

Modular Innovations Product Technology: Digital Telephone Process Technology Quality Circles Radical Innovation Product Technology: VCR Process Technology Robotics in manufacturing

New Product Low cost Improved attributes New attributes

Competencies and Assets

New Technological Knowledge

New Market Knowledge

Static Models (Incremental Innovation & Radical Innovation)


Abernathy- Clark Model Henderson Clark Model Disruptive Technological Change Model Innovative Value Chain Model

Dynamic Models
Utterback- Abernathy Dynamic Model
S Curve Model

An innovation is said to be radical if the technological knowledge required to exploit it is very different from existing knowledge, rendering existing knowledge obsolete. Such innovations are said to be competence destroying. Refrigerators integrate knowledge of thermodynamics, coolants and electric motors. An innovation is said to be incremental when new product builds on existing knowledge. Such innovations are called competence enhancing. Microprocessors, diet colas

Innovation should have a composite definition: a process whereby a new idea is conceived and detailed in the mind, developed into a physical entity through detailed design, analysis, experimentation, and production, and then introduced to give a company a competitive edge. In simplest terms, however, innovation is simple change for the better.

A means of generating innovation to achieve two objectives that are implicit in any good business strategy: make best use of and/or improve what we have today determine what we will need tomorrow and how we can best achieve it, to avoid the "Dinasaur syndrome. Innovative thinking has, as a prime goal, the object of improving competitiveness through a perceived positive differentiation from others in: Design/Performance Quality Price Uniqueness/Novelty

Almost all products follow a life-cycle curve having a characteristic shape:

Conclusion? - - If a company does not continue to introduce new products periodically, or at least significant improvements on existing products it will eventually be on a going out of business curve. Continuing to come up with the right product for the market takes a lot of innovation (plus a lot of perspiration!).

The right product is one that becomes available at the right time (i.e., when the market needs it), and is better and/or less expensive that its competition. To have the right product, therefore, one must: Predict a market need Envisage a product whose performance and capability will meet that need Develop the product to the appropriate time scale and produce it. Sell the product at the right price

To predict a market need, an organisation needs market analysts To envisage or imagine the right products for that an organisation needs strategic thinkers and highly competent systems engineers To develop and produce the product, one needs highly competent R&D specialists and software/hardware engineers To sell the product at the right price, an organisation needs a highly competent and motivated sales and marketing team.

Overcome the entrenched objections to innovation: Fear of Innovation because, as it is based on creativity, it has a chaotic connotation attached. Waste of resources, dead-ends etc Why leave our comfortable position? We have always done it that way. Establish an environment that encourages it Identified direction and (stretched) objectives Knowledge of the needs of the customers Broad knowledge of of the means to achieve change Adequate budget availability Incentives for people to take the risk Management acceptance of failure Empowerment of people to take part in the process Cross fertilization within the organization Establish an innovation promotion process including risk analysis/reduction and IPR protection procedures.

To be competitive, an innovative idea should result in a positive perceived differentiation to improve competitiveness.
As a few examples will show, however, not all innovation achieves this:

Abernathy- Clark Model


Preserved Destroyed

M a r k e t

Preserved

Regular

Revolutionary

Destroyed

Niche

Architectural

Technical

Focus on radical innovation An innovation is regular if it conserves the manufacturers existing technological and market capabilities, niche if it conserves technological capabilities but obsoletes market capabilities, revolutionary if it obsoletes technological capabilities but enhances market capabilities, and architectural if both technological and market capabilities become obsolete. Eg: From x-rays to CT scan to MRI scan

C o m p o n e n t

Enhanced

Incremental

Architectural

Destroyed

Modular

Radical

Architectural

Focus on incremental innovation. If an innovation enhances both component and architectural knowledge, it is incremental; if it destroys both components and architectural knowledge, it is radical. However, if only architectural knowledge is destroyed and component knowledge enhanced , the innovation is architectural, where component knowledge is destroyed but architectural knowledge enhanced, is called modular innovation. Eg: transistors radio ( transistors, audio amplifiers and loud speakers) to portable radio

Disruptive Technological Change Model


Sustaining technologies tend to maintain a rate of improvement, thereby giving customers something more or better in attributes that they already values. Disruptive technology introduce a new package very different from what the mainstream customer historically values, often being inferior along one or two performance dimensions that are particularly important to the customers. Here, a technology in its infancy, is likely to be inferior to an existing one that it eventually displaces. Proposed by Prof Clayton Christensen

They create new markets by introducing a new kind of product or service. The new product or service from the new technology costs less than existing products or services from the old technology. Initially, the products performs worse than existing customers value. The technology should be difficult to protect using patents

P e r f o r m a n c e

A C D

Year

This model focuses on what the innovation does to the competitiveness and capabilities of firms suppliers, customers and complementary innovators. Eg: Electric cars

TECHNOLOGY

Value Chain

Competitive Advantage

Value Creation

Technology enables a firm to introduce change in its value chain. Such changes provide the firm an opportunity to create competitive advantage. Process technology innovations that reconfigure value chain and value assemblage lie at the heart of many fundamental changes. First order change: Focus on learning by doing incremental innovations with the existing value chain configuration. Second order change: Focus on the fundamental reconfiguration of value chain and value constellations ( grouping).

Process innovation enable firms to introduce change in the value chain that affect the design of work, organisational structure and process. Process innovation may be either hardware or software dominant. Hardware dominant process innovation infuse a higher level of technology in terms of equipment or physical characteristics. Software dominant process innovation may require a firm to create not only new skills but also new attitudes and mindsets among its employees.

Existing
Hardware Dominant (Upgrading of Equipment) Software Dominant ( Training Programs)

New
Hardware Dominant ( Voice Transmission) Software Development ( Job Design)

Existing

Hardware Dominant ( Information Architecture)

Hardware Dominant

(Robotics)
Software Dominant ( Re-engineering)

New

Software Dominant

(Socio-technical systems)

Four modes of configuring value chain and value constellation.


Craft Production: First wave: Craftsmen or

artisans, Used their skills or know-how to turn raw materials into finished goods. Mass production: Second wave: Partly in response to the demand for producing goods on a larger scale and volume. Principles of mass production;
Value Chain Configuration: Interchangeable parts, specialized machines, focus on process, division of labour, free flow System of Management: Focus on low cost and low price, product standardization, degree of specialization, vertical integration, Operational efficiency.

New Products

Long Product Life Cycle

Mass Production Processes

Stable Demand

Low Cost, Quality Standardized Products

Firm Infrastructure Human Resource Management

Technology Development
Procurement
Inbound Logistics
Operations Outbound Logistics Marketing & Sales

Services

Lean Production: Team organisation Training Continuous improvement Just-in-time manufacturing Mass Customization: Synthesis of craft production and mass production Flexible manufacturing systems Computer Aided Design (CAD) Computer Integrated Manufacturing ( CIM) Use of Information and Telecommunication Technologies Use of Computerised Databases

Firm Infrastructure Human Resource Management

Technology Development
Procurement
Inbound Logistics
Operations Outbound Logistics Marketing & Sales

Services

Technology strategy is the revealed pattern in the technology choices of the firms. The choices involve the commitment of resources for the appropriate, maintenance, deployment and abandonment of technological capabilities. These technology choices determine the character and extent of the firms principal capabilities and the set of available product and process platforms.

Strategic Diagnosis

Formulation of Technology Strategy

Implementation Approach

Execution

Technology Inventory Firm Competitive Position Technology Requirements

Appropriation of Technology Deployment in Products Deployment in Value Chain

Mode of Implementation Organisational Strategies IPR

The kind of technologies that a firm selects for acquisition development, deployment or disinvestment. Technology strategies are not confined with only high technology industries or firms. Even a capacity or service driven industry or firm requires a technology strategy. Technology strategy embrace both the hardware and software elements. Commitment to introduce strategy is required.

Objectives Drivers Environment

Technological opportunity Appropriability

Firm
Technology development Technology deployment

Decision Criteria

Technology Leadership Strategy: Consists of establishing and maintaining through both technology development and deployment and gaining competitive domain. Niche Strategy: Consists of focusing on a limited number of critical technologies to seek leadership. Follower Strategy: This strategy is focussed on deployment, avoiding the risk of basic research. Technology Rationalization: Involves maintaining adequacy only in a select set of technologies.