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7/26/2019 Tidd Lectures 07
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nov 07 Laestadius: MONTIC/Tidd 1
Managing Innovation -
lectures related primarily to abook byTidd, Bessant & Pavitt
Staffan Laestadius, prof.
Nov 2007
OBS last years lectures!!!!!
Version alpha
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Structure of the lectures (preliminary)
Follows the structure of the book:
lecture one: part I (chpt 1-2) lecture two: part II (chpt 3-6) lecture three: part III-IV (chpt 7-10) lecture four: part V-VI (chpt 11-13) (lecture five: to disposition)
Highly selective on the topics in various chapters Includes comments/reflections, i.e. enlarges the scope of
the text
The ambition is to contribute to an integrated view andunderstanding on the challenges/problems of innovationmanagement rather than focusing on details in the book.
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The key issues (chpt 1) Innovation and competitive advantage 1.1
Innovation and competitive advantage Whilst competitive advantage can come from size, or
posession of assets etc. the pattern is increasinglycoming to favour those organizations which can
mobilize knowledge and technological skills andexperience to create novelty in their offerings(products/services) and the ways in which they createand deliver those offerings
High costs (e.g. wages) are of little importance if
you can charge more (due to productinnovations) or produce more efficiently (due toprocess innovations)
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The key issues (chpt 1)
Innovation and competitive advantage 1.1 Walking on two legs - not only (physical)
product innovations, cf:
Toyota Benetton
Ikea
H&M
The role of the internet
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The key issues (chpt 1)
Types of innovation 1.2
The important thing is changeand novelty
As regards products it is the perceived degree of noveltywhich matters - they are in the eye of the beholder
As regards process innovations - the important thing iscosts, but also the impact on products and how they areperceived (e.g. environmentally friendly processes)
The distinction between product and process innovations isnot important - sometimes it is just a question of
perspective
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The key issues (chpt 1)
Types of innovation 1.2:
Type of innovations
Product innovations
Process innovations
Position innovations
Paradigm innovation
Degree of novelty
Incremental
Radical
The significance of the innovation
System level
Component level
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Systemlevel
Componentlevel
Incremental Radical
Improvementsto components
New componentsforexisting systems
AdvancedMaterialsTo improveComponentperformance
New versions ofmotor car,aeroplanes etc.
New generations of MP3s etc
ICT revolutionBiotech revolution
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The key issues (chpt 1)
the role of incremental innovations 1.3
Cf. Rosenberg Shipbuilding (Gilfillan) Petroleum refineries (Enos)
Airliners (Rosenberg)
Microchips/consumer electronics Cars
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The key issues (chpt 1)Innovation as a knowledge based process 1.4
The two dimensional analysis by
Henderson & Clark
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The structure of innovations
Core concepts
Reinforced Overturned
Incremental
innovation
Modular
innovation
Architecturalinnovation
Radicalinnovation
Link
agesbetweencoreconceptsandcomponents
Unc
hange
d
Ch
ange
d
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The HC-typology: some illustrations
Incremental
Marginal improvement of software
Modular
Digitalizing the AXE system
Internet based e-commerce/shopping
Architectural The typewriter?
Radical penicillin
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What kind of innovation isthis?
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And this??.
Cf box 1.3 in Tidd et al
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The key issues (chpt 1)
The Challenge of DiscontinuousInnovations
1.5
Fluid phase
Rateo
fMajorInnovation
Product innovation
Process innovation
Transitionalphase
Specific phase
Back to the Abernathy-Utterback model
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The key issues (chpt 1)
The Christensen Dilemma of Disruptive
Innovations1.6
Sustaining vs Disruptive TechnologiesIncremental or radical/discontinuous
Disruptive technologies result in worse product performance
Disruptive technologies are typically cheaper, simpler, smaller, more
convenient
Market need vs Technology Improvement
Technologies can progress faster than market demand, they overshoot
Disruptive Technologies vs Rational Investment
Not rational for established companies to invest because Lower margins
Insignificant markets
Leading customers/firms cannot use the products
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Cf. the three Utterback dimensions - theUtterback Cube!
Assembled- non assembled
Substitution - market broadening
Competence enhancing - destroying
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The Christensen cases
The hard disc drives
The excavator: hydraulics
Minimills and continuous thin slab casting
Computers: from main frame (IBM) via minis (Digital) to PC:s(Apple)
Printers: HP on lasers and inkjets
PDA:s - was Newton a failure?
Kittyhawk and HP (1.3HD)
Honda and the small scale motorbike
Intel and the microprocessor
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Changes in Market Leadership -- Hard Disk Drive Industry
Product Generation:
14-inch (1973)
8-inch (1978)
5.25-inch (1981)
3.5-inch (1986)
2.5-inch (1990)
1.8-inch (1994)
Leading Firm:
Control Data
Priam, Shugart
Seagate, Miniscribe
Conner, Quantum
Conner, Quantum
Integral
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1
10
100
1000
10000
74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90
HardDiskCapacity(MB)
14-inchD
riveTech
nology
Demandin
Mainframe
Market
8-inc
hDrive
Techn
ology
5.25-in
chDri
veTec
hnolog
yDemandi
nMinicom
puterMarket
Demandi
nDesktop
PCMarket
3.5-in
chTechno
logy
Demand
inPorta
blesMa
rket
2.5-in
ch
Noteb
ooks
Intersecting Trajectories of Capacity Demanded vs. Capacity Supplied in Rigid Disk Drives
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Number of Firms in the U.S. Rigid Disk Drive Industry
Years (from 1976 to 1989)
NumberofFirms
0
10
20
30
40
50
60
76 77 78 79 80 81 82 83 84 85 86 87 88
entry
exit
total
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HP printersThe Apple and Newton
Honda motorbikes HP Kittyhawk
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Christensen: the message in one picture
Capacity
Year
New (disruptive) technology
Low end demand
High end demand
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Performance oversupply and the evolution ofproduct competition
Performance oversupply changes the basis forcompetition, eg.
Capacity
Size
Reliability
Price
Creates a vacuum/niche waiting to be filled
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The choice of strategy: incumbants
Market segmentation - high-end & low end?
pricing
Ambidextrous organization (Tushman-Anderson)?
HP inkjet
IBM pc:s
Revitalize the old technology?
ADSL/XDSL
Railroads - high speed trains
Integrate with/buy/join the entrant firms
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A
B
Ca1
a2
a3
Waves of technologies - attacks and counter attacks
time
performance
Pommernland
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Small markets do not meet the growth needs of largecompanies.
Yet the greatest opportunities for the future are in smallmarkets today.
The pattern seen in the disk drive industry is remarkably
similar to e.g. that of the typewriter industry. Each change in market requirements, even though some
changes seemed trivial, resulted in a change in leadershipin the industry.
Conclusions I
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Complexity, over-complication of products, often leads to
failure in the market.
Simplicity and functionality lead to enduring classicdesigns.
Conclusions II
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Innovation as a management process(chpt 2:1)
The real challenge not invention - but innovation
a core business process involving: searching
selecting
Implementing (acquiring/executing/launching/sustaining)
Learning (all the time!!!)
Similarity in most processes/situations
Innovation management is a learned capabilitity Cook book recipes not enough
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Innovation as a management process
(chpt 2:1, cont.) Size matters (but not only big!!)
The context (=> position)
Networks and systems
Project organizations
Do better/do different
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Innovation as a management process
(chpt 2:2-3)
Rothwell: from simple linear model to systemsintegration
Examples on partial (mis)understanding of theinnovation process (bounded vision):
seeing innovation as a linear technology push process
seeing innovation in terms of major breakthroughs only
seeing innovation as a single isolated change
seeing innovations as product or process only
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Innovation as a management process(chpt 2:4)
Can we manage innovation?
not every innovation fails, and some actors havelearned ways of responding and managing them so thatthe probability to succeed increases
Success in innovation appears to depend upon twokey ingredients- technical resources(people,equipment, knowledge) and the capabilitiestomanage/mobilize them
The creation of routinesbased on shared beliefs
on how to do things
The trade off between routines and creativity
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Innovation as a management process
(chpt 2:4) Reflections on innovative routines (cf Nelson &
Winter) not necessarily repetitive but backbone driven
how to organize projects (project management theory isnormally noy related to innovativeness) routines become built in into organizational structures/
artefacts/policies some routines are better that others
possible to learn - although not easy to acquire the negative side of routines - NIH/core rigidities
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Innovation as a management process
(chpt 2:5-6)
Innovation is a process, not a single event
The process can be manipulated to become
more innovative - innovation is (to someextent) manageable
The need for an integrated view cf. Rank Xerox
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Innovation as a management process
(chpt 2:7)
Roadmaps for success Searching (and creation)
selection
Implementing Acquiring knowledge resources
Executing the project
Launching the innovation
learning and reinnovation
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II: Developing the framework for an
innovation strategy
(integrated view on chpt 3)
Rationalist or incrementalist strategies forinnovations (3:1)
Technology and competitive analysis (3:2)
Assessment of Porter (3:3)
The dynamic capabilities of firms (3.4)
Innovation strategies in small firms (3:5)
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The rationalistic strategy tradition.
Systems analysis, linear programming the military inheritage, Clausewitz
the linear, rationalistic model of action appraice
determine act
The classic : Igor Ansoff
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..is far from unproblematic
Influences our focus: is the target to defeat anenemy or to create satisfied customers?
Civic society has totally different sticks andcarrots (structrures of incentives)
The shortcomings of military intelligence
The linear, rationalistic model lacks - in its simpleform - a cognitive dimension, i.e. learning
the rationalist approach tends to underestimate the
cultural heritage, i.e. to overestimate the degreesof freedom.
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Famous illustrations
When the analysis can go wrong:
The war in Vietnam i going well and will succeed (RobertMacNamara, 1963)
Cf. the Iraqui war
When overestimating the strength of own resources:
I cannot conceive of any vital disaster happening to this vessel(Captain of Titanic, 1912)
When underestimating new technology
I think there is a world market for about five computers (T. Watson,IBM, 1948)
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The rationalistic view tends to have
an industry (branch) focus
Structural properties of industries
Barriers for entry
Product differentiation
Demand elasticity
In short the competitive situation, i.e.primarily exogenousmechanisms
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The alternatives
the incrementalist view
Mintzberg: position, plan,
Focus on pattern of behaviour, revealed strategy
the resource based approach
Teece & Pisano, the dynamic capabilities approach
orig. Penrose, The Theory of the Growth of the Firm
processes, positions, paths
Normally starts in the unique resource combinations of the
firm, i.e. endogenousmechanisms
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Porter - rooted in the rationalist
school
Porters field of forces - five structural forces
Porters strategy matrix - three (four) strategies
From competitive analysis to SWOT
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The field of forces
New entrants
Rivalry among existing
firms
Strength of buyers
Strength of suppliers
Substitute products
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Porters strategy matrixStrategic advantage
Unique advantagesfor the customer
Low costposition
Strategic
targetgroup
Total industry
Selectedsegment
Diffe-
rentiation
Cost
leadership
Differentia-
tion focus Cost focus
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SWOT-analysis(related to the Porter tradition)
Strengths internal
Weaknesses internal
Opportunititesexternal
Threats external
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Consequences of the matrix thinking -in between positions are
underestimated
profitability
Market share
X
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Critical reflections
Underestimates the the power/strength of technology(technological trajectories)
Overestimates the ability of management to enforce/
implement strategies i.e. To break with the product base,the base of customers, the technology base, thecompetence base etc.
getting stuck in the middle not necessarily a problem
To focused on competition and rivalry - where are
cooperative relations and (win-win) networks?
where is learning, innovativeness, dynamics?
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The Dynamic Capabilities of the
Firm (cf. Section 3.4)
A firm can accumulate large resources/assets andstill lack useful competences/capabilities
The ability to utilize the resources of the own firm
and acquire (assimilate) external ones may belabelled dynamic capabilities
The foundation in this approach is that capabili-tites/competencies not easily can be bought/sold
on the market but to a significant extent have to bebuilt outside the market.
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The core of the resource based/capabilities approach
A successful firm is characterized by its capabilitytocreate heterogenitythrough transforming existent oracquired resources.
This heterogenity is not possible to imitate in the short
perspective or possible to instantly buy/sell on the market. We may thus talk about a temporary excess interest
(monopoly or entreprenurial interest or profit)
The dynamic capabilitites may be analyzed through theconcepts:position, path, process
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II: Positions (chpt 4)
National systems of innovation (4.1)
Relation to competitors (4.2)
Appropriability conditions (4.3)
Positioning of small firms (4.4)
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Positions: national systems of innovation
(4.1)
National competence profiles
R&D landscape
National institutions
Cultural institutions (often neglected)
Cf. Porters diamond
Catching up: from the first to the second tiertigers
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The role of design culture
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The Porter diamond
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Positions: relation to competitors (4.2)
Comparing with competitors -benchmarking
Learning, imitating, match racing
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Positions: appropriability conditions
(4.3)
From technological leadership to economic benefits:
Translate technological advantage into commerciallyviable products/processes
Capacity to defend the advantage against imitators
Cf. Xerox which did not reap the harvest it created (theWYSIWYG, the mouse.)
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4.3 cont: The factors of appropriability
Secrecy
Accumulated tacit knowledge Lead times and after sales-service The learning curve
Complementary assets
Product complexity Standards Pioneering radical new products
Strength of patent protection
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II: Paths: exploiting technological
trajectories (chpt 5)
Major technological trajectories (5.1)
Revolutionary technologies (5.2)
On firm-specific competencies (5.3) The core competence problem
Technological paths in small firms (5.4)
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Major technological trajectories (5.1)
A taxonomy on major technologicaltrajectories (Pavitt) Supplier dominated firms, eg. agriculture
Scale intensive firms, eg. pulp&paper
Science based firms, eg. pharma
Information intensive firms, eg finance,
Specialized supplier firms. Eg. mach. equipm.
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Major technological trajectories (5.1,contd.)
Questions to ask: Where do the companys technologies come
from?
How do they contribute to competitiveadvantage?
What are the major tasks of innovationstrategy?
Where are the likely opportunities and threats,and how can they be dealt with?
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Revolutionary technologies (5.2)
Revolutionary technologies (science based???): ICT
Biotechnology
Materials
More?? (nano??)
Impacts: Pervasiveness, genericness
Revolutionary impact: products, processes, industries
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Firm-specific competencies (5.3)
Prahalad & Hamel: the core competence problem
The strength of the cc appoach Technology diversification Multitechnology firms Core rigidities (limited visions)
The strategic function of technology/competence
Core/critical Background/enabling Emerging/key
Developing and sustaining competencies
And identifying them!!
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II: Processes: integration for strategic
learning (chpt 6)
Locating R&D activities Corporate vs divisional (6.1)
Global vs local (6.2)
Allocating resources for innovation (6.3)
Technology and corporate strategy (6.4)
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Corporate vs Divisional location of R&D(6.1)
What is the role of the R&D/innovation/design unit?
Corporate intelligence - contribute to absorptive capacity?
Create capabilities/competencies?
Produce radical innovations?
Contribute to incremental innovations?
Focus on products, on processes?
Other?
A multi dimension problem: Physical location to different corporate levels/divisions
Funding responsibility
Decentralization - centralization
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Global vs local R&D (6.2)
Hitherto most multinational firms have localized theirR&D units to their home countries - why??
There is now a tendency to globalize also R&D - why?
Analyzing R&D strategies:
Market oriented R&D
Process/technology/competence oriented R&D
Global networks in R&D?
Huawei & ZTE have R&D units in Kista - what are they
doing there?
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Global network? Global hub system
The problem of global knowledge formation
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How to finance R&D? (6.3)
Quantitative methods for evaluating resource allocation inR&D are not so used as you could imagine, although theyare there:
NPV
Probability/uncertainty
Project management methods (earned value)
What is the product from the R&D unit? (learning,competence, positioning)
Two leg strategy in R&D?:
The R-leg (scanning, competence building)
The D-leg (product/process development)
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Technology and corporate strategy (6.4)
A two way link between technology strategy and corporatestrategy in general
The dependence on the technological path (you cannot
reasonably decide to be best on everything!!)
Strategy styles:
Financial control
Strategic planning (centralized)
Strategic control (decentralized)
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III: Learning from markets (chpt 7)
How do technology and markets affectcommercialization (7.1)
Differentiating products (7.2)
Creating architectural products (7.3)
Marketing technologival products (7.4)
Commercializing complex products (7.5)
Forecasting diffusion of innovations (7.6)
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high
low
high
Noveltyofte
chnology
Novelty of markets
Technological
Complex
Differentiated Architectural
The market learning problem (7.1)
(new solutionsto exist. probl.
Novel comb. Of
Exist. Techn.)
(compete on qual. And features)
(everything newand open)
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Nokia: between design and innovation
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Customerrequirements
Competitorassessment
Technical assessment
Financial assessment
Design options
Options
QualityFunctionDeployment
7.2
Differentiating/
optimizing
Matrix of relationships
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Architectural products (7.3)
The segmentation problem
Consumer markets (B2C)
Business markets (B2B)
Identifying potential niches to develop in the existingmarkets or to create new markets
Cf. Christensen
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Design - the neglected dimension?
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but not neglected in the automotiveindustry!
A complex relation between form
and function
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Technological products (7.4)
Identifying reverse salients in segments ofthe existing markets - real shortcomingswhere our product may have a role to play
Identify customer value for potentialcustomers to upgrade their technology
IPR problems
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7.5 Complex products
The CAT scanner
Cf von Hippel - user led innovations
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7.6 Forecasting the diffusion - and non
diffusion - of technologies
Penetration of:
mobile phones
TV-sets
Automobiles
DVD players.
The conventional wisdom
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The classical diffusion problem:
Why did - or did not - theMid-West farmers in the USA
Transform to high yield hybrid
Corn in the 1930s and 1940s?
Cf:
Griliches (1960)
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Diffusion of clay storage of maize in Benin
(Maboudu et al)
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The diffusion matrixLaestadius (2005)
Not
informed
Informed
Does not fit Fits
The improvement dimension
Th
ecommu
nication
dimens
ion
(fitness is a social
construction)
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Is this diffusion?
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III: Learning through alliances (chpt 8)
Why collaborate? (8.1)
Forms of collaboration (8.2)
Patterns of collaboration (8.3)
Effect of technology and organization (8.4)
Managing alliances for learning (8.5)
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Why collaborate? (8.1)
To reduce cost of technological development
To reduce risk
To achieve economies of scale
To reduce time to market (TTM)
Consider
Transaction costs
Strategic implications
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Forms of collaboration (8.2)
Supplier relations and subcontracting
Depends on the supplier market and on objectives
Technology licensing
Speed of access rather than costs
Research consortia
Reduces risk, pooling scarce expertise, setting standards Strategic alliances
Create critical mass, gain new/complementary competencies, reachnew markets
Joint venture
Innovation networks
Open innovation
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Effect of Technology on Organization/
cooperation (8.4)
Competitive significance of technology
Complexity of the technology
Codifiability of the technology
Credibility potential Corporate strategy
Firm competencies
Company culture
Management comfort
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8.5 Alliances for learning
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IV: Managing the internal processes
(chpt 9)
Building dynamic capabilities through building routines-enabling management: Scanning routines (identification) Strategy making routines (selection) Resource provision , technology acquisition
Mobilizing the absorptive capacity
Implementation The PD funnel
Concurrent working/integrated design/learning before doing
Mass customization/modularized products
Process innovation routines
Learning routines
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The creation of options (variety) andreduction (selection) of alternatives
SearchCreateoptions
SelectReduce
alternativesimplement
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Examples of search processes (9.1)
What business are we in?
Understanding market dynamics
Trend spotting
Monitoring technological trends Market forecasting
Technological forecasting
Involving stakeholders (users, customers)
Involving insiders
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Selection/strategy (9.2)
The need for routines
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Knowledge acquisition (9.3)
Learning from internal organizations/activities
Learning from external organizations/acitivties
Absorptive capacity
Boundary spanning organizations Bridges over different cultures
NIH
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Enabling implementation (9.4)
Concurrent working
Integrated design
Modularization
Mass customization
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Scania - modularized
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IV: Learning through corporate
ventures (chpt 10)
Moving beyond the core competence (extending theprocesses, leaving the path):
Change withinthe existing organization (change management)
Acquirean organization which has what we want (fusions/
integration of foreign cultures are difficult)
Developa separate organization (going ambidextrous, corporate
venturing)
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Technology
Base Related Unrelated
Base
Related
Unrelated
Market
Internal
development
Corporate
venture
Joint venture
Joint ventureAcquisition
Cv
Cv
Id
Id
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Reasons for corporate ventures (10.2)
Exploit underutilized resources
Introduce pressure on internal suppliers
Divest non-core activities
Satisfy managers ambitions Spread risk and costs of PD
Grow the business
Learning
Diversify
Develop new competencies
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Structures of CV:s (10.4)
From direct integration
and integrated business teams
to new departments,
divisions and special business units
to independent business units
or even complete spin-offs
V: Building the innovative
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V: Building the innovative
organization (chpt 11)
Shared vision, leadership and will to innovate
The NIH phenomenon
The core rigidities phenomenon
Management committment
appropriate organization structure
Organicor mechanisticstructure (Burns & Stalker, 1961)
Woodward: batch, massorprocessorganization
Centralized - decentralized (= involving all)
Parallel working, concurrent engineering
Networks
key individuals
Enabling figures (enthusiasts, eldsjlar)
Critical experts (and gate keepers)
V: Building the innovative
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V: Building the innovative
organization (chpt 11), contd.
stretching training and development
high involvment in innovation
Kaizen - continuous improvement
TQM
Hawthorne effects
effective teamworking
Cross-functional/competence/cultural/departmental
creative climate
Flat structure, egalitarian
Open minded, pluralist
Incentive systems
V: Building the innovative
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V: Building the innovative
organization (chpt 11), contd. 2
external focus
extensive communication
Job- rotation
learning organization
Learning to learn
Innovation as a learning cycle
Beyond the boundaries Beyond the steady state
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The knowledge based firm - a circus or a camping area?
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V: Creating innovative new firms (chpt 12)
Sources of New Technology-based Firms (NTBF:s) The US tradition from Silicon Valley
ICT firms Biotech firms Entry barriers high - survival rate relatively high
University Incubators
The role of the university
The teachers exception (lrarundantaget), cf USA - Sweden The academic entrepreneur
Profile of an Technical Entrepreneur
The Business Plan
To attract external funding
A platform for understanding/communication
Growth and Performance of Innovative Small Firms
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VI:An integrative approach to
innovation management (chpt 13)
Key themes
Four clusters of behaviour
Strategy
Internal/external linkages
Effective enabling mechanisms
Supporting organizational context
Three P:s of dynamic capabilities
Position
Path
process
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Innovation as a management process(chpt 13:1)
StrategyEffective
implementationmechanisms
Supportiveorganizationalcontext
Effectiveexternallinkages
Phases in the innovation process
part II
part V
part IV
part III
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