Innovation, Organization and Entrepreneurship
Lecture 1 – 27 augustus
Lecture 2: Innovation environment – 28 augustus
Firm survival
Not many firms will be older than 40 years (0,1%). Examples: Nokia and Kodak didn’t renew
its products and so they lose market share.
Evolutionary lense (Darwin): neither strength nor intelligence guarantee survival. Only
adaptation + ability to innovate ensure the survival of companies.
Types of Innovations
Product innovation: assembled products (goods and
services).
Process innovation: non-assembled products
(technological – organizational) more efficient and
effective. For example: organizational process
innovation is the way you assemble a good.
Innovations are a communalization of an invention.
Not every change is an innovation. For example, a change in an organization from centralized
to decentralized is not an innovation.
Innovation is usually new. New to what and to who? It is context dependent (time and
place). Something can be an innovation for the organization or an innovation to the world.
Improvement vs renewal
Incremental/Improvement Radical/Renewal
Evolutionary; incremental Revolutionary: “jumps”
Leitmotiv: we can always improve (more of Leitmotiv: crisis – we have to change (first
the same; 1e order solutions) change, then improve; 2nd order)
Focus: management of operations Focus: management of opportunities
(efficiency and cost reduction) (resource leverage; NBD/NPD)
Dominant role of planning & control Focus on creativity & entrepreneurship
e.g.: total quality management, Six Sigma e.g.: internet, cars, airplanes
Consequences
Source of short-term financial revenue Source of long-term financial costs
No guarantee for long-term survival Necessary for long-term survival
In order to survive business needs to do both kinds of innovation.
Incremental innovation is the idea that we can always improve something. For example: cost
decution. Six Sigma focuses on reducing waist.
Radical innovation focusses on creating new things. Most likely emerge due to a crisis.
,Shift from radical to incremental product innovation is related to the development of a
dominant product design. Is accompanied by increased price competition and increased
emphasis on process innovation. A crisis creates a shift in an organization focus from
incremental to radical innovation.
Technological opportunities come from within → technological push → R&D → more radical
innovations. Example: invention of the car.
Voice of the consumer (source of incremental innovation comes from within) → market pull
→ marketing → more incremental innovations. Example: improved car.
Process
Improved Renewed
Product Improved Incremental innovation Process innovation
Renewed Product innovation Radical innovation
Artikel 1 – Abernathy & Utterback: Patterns of industrial innovation
The product life cycle/S-curve: highest return since the basis of the product was created.
The more time passes, the more competition there will be. Where a product is in the life
cycle says something about which type of innovation they use.
Technology push: performance is increasing faster. 1 invested
dollar creates more than 1 unit improvement.
Market pull: with every investment, the effect on
performance is smaller. No matter how much you are going
to invest, you reached the peak already. 1 invested dollar
creates less than 1 unit improvement.
Overtime the amount of money that you make will decrease.
Product innovation is more at the beginning maintain flexibility. If it is a new product, the
firm also doesn’t know a lot about it. So, they don’t
know what the ideal product is and therefore they need
to innovate. After some time, the product will not
change a lot, because the dominant design is founded.
Then there will be process innovation: lowering the
costs and create efficiency. This increases predictability
and makes goals clearer, which in turn justifies
investments company is matured and specialized.
,Different types of competition.
Fluid phase Transitional phase Specific phase
Innovation Functional product Product optimization Process optimization
emphasis… performance & variation (cost reduction)
Stimulated by… Technological Users and Cost pressure and
possibilities technological improving quality
possibilities
Type of innovation… Frequent product Large process Incremental process
changes changes (scaling up changes
production)
Process… General, flexible but More specialized, Highly efficient, but
inefficient less flexible but inflexible
more efficient
Size of Small-scale Medium-scale Large-scale
organization…
Organizational Informal, Project teams Formal, rules,
control… entrepreneurial structures
The structure of the organization also changes as it grows: it becomes more formal and has a
greater amount of autonomy and hierarchy.
What are the organizational implications?
Fluid phase (market-need are ill-defined) How do companies deal with the fluid phase?
Strong emphasis on: - New subdivisions
- Frequent redefinition of tasks - Project groups
- Limited hierarchy - Buying a small company
- High lateral communication - Strategic alliances
Organic structure
Adaptability (high environmental uncertainty)
Transactional phase selection of dominant design.
Specific phase (exploiting)
, Strong emphasis on:
- Stable tasks
- More hierarchy: coordination and control work
- Top-down communication (bureaucratic)
Mechanistic structure
Predictability (low environmental uncertainty and high predictability)
What are the organizational implications? From fluid to specific
Structure: from informal to formal and from organic to mechanistic
Organizational behavior: from flexible and responsive to rigid and predictable
Power: from entrepreneurs to managers
Orientation: from external to internal
Artikel 2 – Tushman & Anderson: Technological Discontinuities and Organizational
Environments
Technological discontinuities
Technology = those tool, devices, and knowledge that mediate between inputs and outputs
(process technology) and/or that create new products or services (product technology).
Technological change is a function of both variety and chance as well as structure and
patterns.
Technological discontinuities = major breakthrough, major improvement in product
performance.
A dominant design reflects the emergence of product-class standards and ends the period of
technological ferment. Technological developments focus on elaborating a widely accepted
product or process; the dominant design becomes a guidepost for further product or process
change. Once a dominant design emerges, technological progress is driven by numerous
incremental innovations.
The transition from VHS to DVD is competence enhancing because it still relied on the same
business model and it where still the same firms that where in that in industry.
The transition to video-on-demand is competence destroying, because it is another business
model. Existing knowledge becomes outdated.
Lecture 1 – 27 augustus
Lecture 2: Innovation environment – 28 augustus
Firm survival
Not many firms will be older than 40 years (0,1%). Examples: Nokia and Kodak didn’t renew
its products and so they lose market share.
Evolutionary lense (Darwin): neither strength nor intelligence guarantee survival. Only
adaptation + ability to innovate ensure the survival of companies.
Types of Innovations
Product innovation: assembled products (goods and
services).
Process innovation: non-assembled products
(technological – organizational) more efficient and
effective. For example: organizational process
innovation is the way you assemble a good.
Innovations are a communalization of an invention.
Not every change is an innovation. For example, a change in an organization from centralized
to decentralized is not an innovation.
Innovation is usually new. New to what and to who? It is context dependent (time and
place). Something can be an innovation for the organization or an innovation to the world.
Improvement vs renewal
Incremental/Improvement Radical/Renewal
Evolutionary; incremental Revolutionary: “jumps”
Leitmotiv: we can always improve (more of Leitmotiv: crisis – we have to change (first
the same; 1e order solutions) change, then improve; 2nd order)
Focus: management of operations Focus: management of opportunities
(efficiency and cost reduction) (resource leverage; NBD/NPD)
Dominant role of planning & control Focus on creativity & entrepreneurship
e.g.: total quality management, Six Sigma e.g.: internet, cars, airplanes
Consequences
Source of short-term financial revenue Source of long-term financial costs
No guarantee for long-term survival Necessary for long-term survival
In order to survive business needs to do both kinds of innovation.
Incremental innovation is the idea that we can always improve something. For example: cost
decution. Six Sigma focuses on reducing waist.
Radical innovation focusses on creating new things. Most likely emerge due to a crisis.
,Shift from radical to incremental product innovation is related to the development of a
dominant product design. Is accompanied by increased price competition and increased
emphasis on process innovation. A crisis creates a shift in an organization focus from
incremental to radical innovation.
Technological opportunities come from within → technological push → R&D → more radical
innovations. Example: invention of the car.
Voice of the consumer (source of incremental innovation comes from within) → market pull
→ marketing → more incremental innovations. Example: improved car.
Process
Improved Renewed
Product Improved Incremental innovation Process innovation
Renewed Product innovation Radical innovation
Artikel 1 – Abernathy & Utterback: Patterns of industrial innovation
The product life cycle/S-curve: highest return since the basis of the product was created.
The more time passes, the more competition there will be. Where a product is in the life
cycle says something about which type of innovation they use.
Technology push: performance is increasing faster. 1 invested
dollar creates more than 1 unit improvement.
Market pull: with every investment, the effect on
performance is smaller. No matter how much you are going
to invest, you reached the peak already. 1 invested dollar
creates less than 1 unit improvement.
Overtime the amount of money that you make will decrease.
Product innovation is more at the beginning maintain flexibility. If it is a new product, the
firm also doesn’t know a lot about it. So, they don’t
know what the ideal product is and therefore they need
to innovate. After some time, the product will not
change a lot, because the dominant design is founded.
Then there will be process innovation: lowering the
costs and create efficiency. This increases predictability
and makes goals clearer, which in turn justifies
investments company is matured and specialized.
,Different types of competition.
Fluid phase Transitional phase Specific phase
Innovation Functional product Product optimization Process optimization
emphasis… performance & variation (cost reduction)
Stimulated by… Technological Users and Cost pressure and
possibilities technological improving quality
possibilities
Type of innovation… Frequent product Large process Incremental process
changes changes (scaling up changes
production)
Process… General, flexible but More specialized, Highly efficient, but
inefficient less flexible but inflexible
more efficient
Size of Small-scale Medium-scale Large-scale
organization…
Organizational Informal, Project teams Formal, rules,
control… entrepreneurial structures
The structure of the organization also changes as it grows: it becomes more formal and has a
greater amount of autonomy and hierarchy.
What are the organizational implications?
Fluid phase (market-need are ill-defined) How do companies deal with the fluid phase?
Strong emphasis on: - New subdivisions
- Frequent redefinition of tasks - Project groups
- Limited hierarchy - Buying a small company
- High lateral communication - Strategic alliances
Organic structure
Adaptability (high environmental uncertainty)
Transactional phase selection of dominant design.
Specific phase (exploiting)
, Strong emphasis on:
- Stable tasks
- More hierarchy: coordination and control work
- Top-down communication (bureaucratic)
Mechanistic structure
Predictability (low environmental uncertainty and high predictability)
What are the organizational implications? From fluid to specific
Structure: from informal to formal and from organic to mechanistic
Organizational behavior: from flexible and responsive to rigid and predictable
Power: from entrepreneurs to managers
Orientation: from external to internal
Artikel 2 – Tushman & Anderson: Technological Discontinuities and Organizational
Environments
Technological discontinuities
Technology = those tool, devices, and knowledge that mediate between inputs and outputs
(process technology) and/or that create new products or services (product technology).
Technological change is a function of both variety and chance as well as structure and
patterns.
Technological discontinuities = major breakthrough, major improvement in product
performance.
A dominant design reflects the emergence of product-class standards and ends the period of
technological ferment. Technological developments focus on elaborating a widely accepted
product or process; the dominant design becomes a guidepost for further product or process
change. Once a dominant design emerges, technological progress is driven by numerous
incremental innovations.
The transition from VHS to DVD is competence enhancing because it still relied on the same
business model and it where still the same firms that where in that in industry.
The transition to video-on-demand is competence destroying, because it is another business
model. Existing knowledge becomes outdated.
