LECTURE 1. INTRODUCTION
Firm Survival Rates - a Darwinian view
It is not about: being big (size), being strong (€€) and being smart (IQ).
It is about adaptation, being responsive to change.
Innovations:
Product life cycle / S-curve
1. Fluid phase
Strong emphasis on: frequent redefinition of tasks, limited hierarchy
and high lateral communication.
- organic structure = responsive, flexible, startups thrive.
- adaptability (high environmental uncertainty)
2. Specific phase
Strong emphasis on: stable tasks, more hierarchy: coordination
and control, and top-down communication.
- mechanistic structure
- it brings predictability (low environmental uncertainty)
From fluid to specific phase
• Structure: from informal to formal
• Organizational behavior: from flexible and responsive to rigid and predictable
• Power: from entrepreneurs to managers
• Orientation: from external to internal
Innovation discontinuities
The first transition (1 -2): competence enhancing
- Large improvements in price/performance
- Builds on existing knowledge
- New products or new processes
- Rich get richer, established players benefit
The second transition (2 -3): competence destroying
- Large improvements in price/performance
- Existing knowledge becomes obsolete
- Entirely different knowledge and competencies
- Rich get poor(er), new entrants benefit
,How can firms respond?
Dia 61 *
Which one is more important?
You need incremental to survive in the short term. But you also need renewal to guarantee long-
term success, it is essential for continuity on LT.
Sweet sport of optionality = there is a success, and most companies would stop. But for long-term
success you need to go further and put money towards renewal, disrupting yourself.
- doing left and right.
Why so difficult
Due to deeper organizational barriers (innovation killers):
1. Economic – sunk costs
- no motivation
2. Cognitive – no understanding
Makes firms become inward-looking, not-invented-here-syndrome (NIH)
Knowledge makes you wise in some ways, but can make you a blindfolded fool in others.
- Core capabilities ---> Core rigidities
- Competency traps = use of increasingly inferior resources
- Overvaluing of internal knowledge
- Dismissive attitude towards external resources / capabilities
- not open to new ways
- no ability
(note: non-interdisciplinary (divers) teams have a lack of knowledge, so cognitive).
3. Social / psychological
- fear, discomfort
- complacency (voldoening)
- no courage
, These barriers are very strong and always present, but we need them because they brings stability,
comfort, predictability, legitimacy in the eyes of investors etc.
Tutorial:
Why do companies use cashflows for innovations? It is (seems) easy, quick and comparable.
But it is not good… cashflows are more for the short-term. The radical innovation revenue is only
visible on the long-term and the expenses, in the beginning, are high.
What should you use?
Firm Survival Rates - a Darwinian view
It is not about: being big (size), being strong (€€) and being smart (IQ).
It is about adaptation, being responsive to change.
Innovations:
Product life cycle / S-curve
1. Fluid phase
Strong emphasis on: frequent redefinition of tasks, limited hierarchy
and high lateral communication.
- organic structure = responsive, flexible, startups thrive.
- adaptability (high environmental uncertainty)
2. Specific phase
Strong emphasis on: stable tasks, more hierarchy: coordination
and control, and top-down communication.
- mechanistic structure
- it brings predictability (low environmental uncertainty)
From fluid to specific phase
• Structure: from informal to formal
• Organizational behavior: from flexible and responsive to rigid and predictable
• Power: from entrepreneurs to managers
• Orientation: from external to internal
Innovation discontinuities
The first transition (1 -2): competence enhancing
- Large improvements in price/performance
- Builds on existing knowledge
- New products or new processes
- Rich get richer, established players benefit
The second transition (2 -3): competence destroying
- Large improvements in price/performance
- Existing knowledge becomes obsolete
- Entirely different knowledge and competencies
- Rich get poor(er), new entrants benefit
,How can firms respond?
Dia 61 *
Which one is more important?
You need incremental to survive in the short term. But you also need renewal to guarantee long-
term success, it is essential for continuity on LT.
Sweet sport of optionality = there is a success, and most companies would stop. But for long-term
success you need to go further and put money towards renewal, disrupting yourself.
- doing left and right.
Why so difficult
Due to deeper organizational barriers (innovation killers):
1. Economic – sunk costs
- no motivation
2. Cognitive – no understanding
Makes firms become inward-looking, not-invented-here-syndrome (NIH)
Knowledge makes you wise in some ways, but can make you a blindfolded fool in others.
- Core capabilities ---> Core rigidities
- Competency traps = use of increasingly inferior resources
- Overvaluing of internal knowledge
- Dismissive attitude towards external resources / capabilities
- not open to new ways
- no ability
(note: non-interdisciplinary (divers) teams have a lack of knowledge, so cognitive).
3. Social / psychological
- fear, discomfort
- complacency (voldoening)
- no courage
, These barriers are very strong and always present, but we need them because they brings stability,
comfort, predictability, legitimacy in the eyes of investors etc.
Tutorial:
Why do companies use cashflows for innovations? It is (seems) easy, quick and comparable.
But it is not good… cashflows are more for the short-term. The radical innovation revenue is only
visible on the long-term and the expenses, in the beginning, are high.
What should you use?
