innovation management
TRANSCRIPT
The Management of Knowledge Creation and Innovation Through an Intellectual
Capital Lens
Prof. Göran Roos
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Interest in innovation and R&D performance has been rising on the back of a wide range of
successful products and services
Context
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Remember Innovation is not only based on natural sciences
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What do companies think about innovation?
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What is the real situation?
Booz Allen Hamilton Global Innovation 1,000 Study 2006:
– Innovation can lead to higher performance, but the process isn’t automatic and it does not necessarily require above average levels of investment. The most successful companies combine an integrated process and a supportive culture to create a sustainable competitive advantage
– Money simply cannot buy effective innovation.
– Patents generally don’t drive profits
– Less than 10% of companies are High-Leverage Innovators and distinguish themselves not by the money they spend, but in having a very good innovation management system
Innovation Network Survey, fall 2004 [same result from 2005], new innovation leaders in medium to large companies:
– 71% said they had no metrics for their position
– 60% of them have innovation as part of their mission/job objectives
– 67% are allowed to work on “new” concepts for their company (“new” is not defined)
– 68% have no well defined innovation process within their company
– 54% have no working definition of innovation
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Research vs Innovation – What is the relationship?
Research
Innovation
Research
Innovation
Creativity
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EXPANDING THE INNOVATION HORIZON
Innovation can be ignited by business and technology integration.
Technology can enable and drive innovation. But to truly capitalize on technology’s potential and unleash an organization’s creative energy, technology know-how must be combined with its business and marketing insights. CEOs view consistent business and technology integration as crucial to innovation
Source: Dr.V.S.R.Krishnaiah, Sr.Technical Director, NIC
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Business Model Innovation is key
A Value Proposition is an overall view of a company's bundle of products and services that are of value to the customer.
The Target Customer is a segment of customers a company wants to offer value to.
A Distribution Channel is a means of getting in touch with the customer. The Relationship describes the kind of link a company establishes
between itself and the customer. The Value Configuration describes the arrangement of activities and
resources that are necessary to create value for the customer. Nornally these are expressed in IC-Navigator form and using the (Stabell and Fjeldstad 1998) Value Logics
The identified Resources that can be deployed by the firm to create value including those that form the basis for a competitive advantage
A Partnership is a voluntarily initiated cooperative agreement between two or more companies in order to create value for the customer
The Cost Structure is the representation in money of all the means employed in the business model.
The Revenue Model describes the way a company makes money through a variety of revenue flows.
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Truly understand your customers and your customer’s customers [consumers]
Customers are trading both up and down within categories, demanding differentiated value from businesses
Gro
wth
Historical Demand
Emerging Demand
Price Positioning
Seeking “good enough” quality at rock-bottom prices when they perceive no differentiated value
Willing to pay large premiums for “new luxury” brands when they deliver differentiated value
Source: IBM Institute for Business Value analysis
Value Proposition
Target Customer
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What drives the B2B relationship?Situational Importance of Different Perceived Value Driver Categories
Perceived Knowledge of BuyerPerceived Knowledge of Buyer
Imp
orta
nce
to
Bu
yer
Imp
orta
nce
to
Bu
yer
< Seller< Seller
HighHigh
LowLow
≥ ≥ SellerSeller
DistinctnessDistinctness
Mental ProximityMental Proximity
FunctionalityFunctionality
FunctionalityFunctionalityPricePrice
PricePrice DistinctnessDistinctness
Value Proposition
Target Customer
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Value and knowledge distance
Known byKnown bynobodynobody
Known byKnown byeverybodyeverybody
Known by theSupplier
Known by theCustomer
Knowledgedistance
Potential Valueto be extracted
from the relationshipby the supplier
+-
Value Proposition
Target Customer
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Value Chain
Inbound
logisticsService
Marketing
&
Sales
Outbound
logisticsOperations
Infrastructure
Human Resource Management
Technology development
Procurement
Margin
SupportSupportActivitiesActivities
PrimaryPrimaryActivitiesActivities
Source: Porter, M.E. 1985: Competitive Advantage; Creating and Sustaining Superior Performance, The Free Press
Value Configuration
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Value Shop
Source: Stabel, . B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998
Procurement
Infrastructure
Human Resource Management
Technology developmentSupportSupport
ActivitiesActivities
PrimaryPrimaryActivitiesActivities
Find someone
with a problem
Control/Evaluation
Execute
Develop alternative solutions
Acquire the right
to address the
problem
Co-select with
client one solution
Value Configuration
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Value Network
Source: Stabel, . B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998
PrimaryPrimaryActivitiesActivities
Procurement
Infrastructure
Human Resource Management
Technology development
SupportSupportActivitiesActivities
Promote Network
Manage Member Contracts
Service Provisioning
Infrastructure Operation
& Maintenance
Value Configuration
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The presence of resources with different behaviour
Owned or ControlledOwned or ControlledBy the FirmBy the Firm
Owned or ControlledOwned or ControlledBy the FirmBy the Firm
Owned or ControlledOwned or ControlledBy the FirmBy the Firm
AdditiveAdditive AdditiveAdditive
Owned or ControlledOwned or Controlledby the Other Partyby the Other Party
Owned or ControlledOwned or ControlledBy the EmployeeBy the Employee
Resources
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KnowledgeKnowledgeEconomicsEconomics
IndustrialIndustrialEconomicsEconomics
NetworkNetworkEconomicsEconomics
The utilisation of resources with different behaviour
Resources
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Examples of Resource Transformations
HUMAN
ORGANISATIONAL
RELATIONAL
PHYSICAL
MONETARY
HUMAN ORG. REL. PHYSICAL MONETARY
Investmentin assets
Investmentin building
links
Investmentin brands,image andsystems
Recruitmenttraining,
conditions
Facilities totrain with
Possible new products& know-how
Facilitiesbuild
relationships
Sales ofproducts
Chance tobuild skills inrelationship
handling
Importing IP,processes, associationwith brands
Use of othercompany’s
assets
Relationshipselling,
preferentialdeals
Developingcompetencethrough use
Marketintelligence
ProduceBy
numbers
Sales of IP,processes &knowledge
Knowledgecodification,
new IP
Building &developing
relationships
Developingprototypes
Sales ofman-hours
InvestmentIn financialinstruments
Systemsgenerate
IP
Networking
Equipment generates products
Training
Resources
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Revenue LogicsEffort-based pricing
– A cost-based (or effort-driven) pricing modelValue-based pricing
– A value-based (or perception-driven) pricing modelProfit Sharing
– Revenue-sharing contract with primary customersLicensing
– Charging on copyright (the right to use the IP)Loss Leader-pricing
– Creating customer base (for later revenue) or supporting sales of other parts of the product/service offering
Hybrid/Media model– Vendor sells/leases ad space or information [space] based on
customer relationshipChannel charging
– Vendor charges for carrying information relating to other goods in/on its primary product/offering
Membership fee– Vendor charges for the right to take part in an activity
Negative Working capital– Vendor generates financial returns on the capital held as a
consequence of getting paid by its customers before paying its suppliers
Revenue Model
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Innovation does not happen by itself
It is the result of hard work, well planned and executed and is no happening
Innovation is work rather than genius,…and very much a matter of discipline (Peter F Drucker, 1985)
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Summary
Innovation does make a difference at the bottom line Few companies do it well There is a difference between research and innovation and
especially in their management Innovation is more than technology Innovation Management is Key and is facilitated by applying
the IC lens We know how good innovation management looks It will become even more important in the future