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

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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

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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

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Levels of StrategyVISION & MISSION

CORPORATE STRATEGY

BUSINESS-LEVEL STRATEGY

FUNCTIONAL - LEVEL STRATEGY

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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.

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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

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Capabilities

There are 2 areas of capabilities:1. Technical2. Market

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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.

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Market Capabilities

• Knowledge and skills pertaining to Market forces and customers are important.

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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.

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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

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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

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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.

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Approaches

Approaches for mobilization of technology for the purpose of creating a corporate innovation strategy

• Rationalist Strategy• Incrementalist Strategy

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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.

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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)

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Incrementalist strategy (ex: for medical doctors)

Symptom Diagnosis

Treatment

Diagnosis Adjust treatment

Cure

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Incrementalist strategy (ex: for product/process innovations)

Design Development

TestAdjust design Retest

Operate

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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Leadership vs Followership -Porter

A firm should decide which market strategy it intends to follow:

• Innovation leadership or• Innovation followership

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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

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Table 3.2 Misleading assertions about innovation in small firms

©2005 Joe Tidd, John Bessant and Keith Pavitt