Changing Business through Strategic Innovation
Session 1: Types of innovation, developing an innovation strategy
- The fundamental purpose of strategy is to set the roadmap for companies to maintain
its competitive position. What set of actions should a company take in order to become
a viable competitor in its industry?
- Innovations are relevant, because they change the competitive landscape in many
industries all the time. As competitive dynamics change, strategies should evolve in
order to keep up with these developments. Otherwise, companies cannot remain
competitive and will go bust - e.g. Nokia and Polaroid.
- Value is defined as a utility for which customers are willing to pay (e.g. camera, phones,
education). The providers of products/services capture the value they create through
products and services.
- When new ways of value creation is appreciated by customers, then the value created
will be captured by the innovator. Competitors that are unable to keep up with new
innovations, will not be able to compete for much longer.
- Example: Cellphones vs. Smartphones
Smartphones disrupted the cellphone industry. Apple's iPhone enabled consumers to
be online on-demand. Before that, people needed a computer to access the internet.
Apple set new standards of what was expected for a cellphone. Because of that, firms
like Ericsson and Nokia, that could not respond to these innovations went down quickly.
Smartphones changed how value was created in the cellphone industry.
- Example: Digital Camera
Until digital cameras became common, a photograph meant an image on paper (a
physical substance). Now, a photo refers to a digital image. Of course we can print
those images, but when someone wants to show us a photo, we expect a digital image.
- Innovation changed the dynamics of industries by introducing new business models or
leveraging the state of technology or both:
• Disruptive innovation: new business model & existing technology (e.g. low-cost
airlines).
• Routine innovation: existing business model & existing technology (e.g. new 3D
animated Pixar movie).
• Architectural innovation: new business model & new technology (e.g. digital
camera).
• Radical innovation: existing business model & new technology (e.g. biotechnology).
Page 1 of 16
, Changing Business through Strategic Innovation
- Innovation strategy should enable a business to:
1. Create value through innovation
2. Capture a greater share of the value created
3. Simultaneously operate multiple business models
- Value creation through innovation → What type of innovation should we target?
Do we really need to invest in and utilise new technologies in new products?
• Yes, if the rate of technological change is high.
Do we need a new business model?
• Yes, if customer needs are not satisfactory met. A business model should address
customer needs.
What can innovation do if the market is not growing?
• New business models can help target non-consumers.
Should we bother with incremental innovation?
• When the rate of technological change is low, it allows capturing value in growing
markets.
• When the rate of technological change is high, it allows exploiting prior investments in
radical and architectural innovations (e.g. smartphones).
- Value creation through innovation when the market is growing:
- When the market is growing, the rate of technological change is high, and customer
needs are satisfactorily met, then radical innovations are relevant to remain
competitive.
Page 2 of 16
, Changing Business through Strategic Innovation
- When the market is growing, the rate of technological change is high, but customer
needs are not satisfactorily met, then architectural innovations is better to meet
consumer needs.
- When the market is growing, the rate of technological change is low, but customer
needs are satisfactorily met, then incremental innovations are relevant to remain
competitive.
- When the market is growing, the rate of technological change is low, and customer
needs are not satisfactorily met, then disruptive innovations are relevant to target non-
consumers.
- Value creation through innovation when the market is not growing:
- When the market is not growing, the rate of technological change is high, and customer
needs are satisfactorily met, then architectural innovations are relevant to target non-
customers.
- When the market is not growing, the rate of technological change is high, and customer
needs are not satisfactorily met, then architectural innovations are relevant to better
meet customer needs.
- When the market is not growing, the rate of technological change is low, and customer
needs are satisfactorily met, then disruptive innovations are relevant to remain
competitive.
- When the market is not growing, the rate of technological change is low, and customer
needs are not satisfactorily met, then disruptive innovations are relevant to target non-
customers.
Page 3 of 16
Session 1: Types of innovation, developing an innovation strategy
- The fundamental purpose of strategy is to set the roadmap for companies to maintain
its competitive position. What set of actions should a company take in order to become
a viable competitor in its industry?
- Innovations are relevant, because they change the competitive landscape in many
industries all the time. As competitive dynamics change, strategies should evolve in
order to keep up with these developments. Otherwise, companies cannot remain
competitive and will go bust - e.g. Nokia and Polaroid.
- Value is defined as a utility for which customers are willing to pay (e.g. camera, phones,
education). The providers of products/services capture the value they create through
products and services.
- When new ways of value creation is appreciated by customers, then the value created
will be captured by the innovator. Competitors that are unable to keep up with new
innovations, will not be able to compete for much longer.
- Example: Cellphones vs. Smartphones
Smartphones disrupted the cellphone industry. Apple's iPhone enabled consumers to
be online on-demand. Before that, people needed a computer to access the internet.
Apple set new standards of what was expected for a cellphone. Because of that, firms
like Ericsson and Nokia, that could not respond to these innovations went down quickly.
Smartphones changed how value was created in the cellphone industry.
- Example: Digital Camera
Until digital cameras became common, a photograph meant an image on paper (a
physical substance). Now, a photo refers to a digital image. Of course we can print
those images, but when someone wants to show us a photo, we expect a digital image.
- Innovation changed the dynamics of industries by introducing new business models or
leveraging the state of technology or both:
• Disruptive innovation: new business model & existing technology (e.g. low-cost
airlines).
• Routine innovation: existing business model & existing technology (e.g. new 3D
animated Pixar movie).
• Architectural innovation: new business model & new technology (e.g. digital
camera).
• Radical innovation: existing business model & new technology (e.g. biotechnology).
Page 1 of 16
, Changing Business through Strategic Innovation
- Innovation strategy should enable a business to:
1. Create value through innovation
2. Capture a greater share of the value created
3. Simultaneously operate multiple business models
- Value creation through innovation → What type of innovation should we target?
Do we really need to invest in and utilise new technologies in new products?
• Yes, if the rate of technological change is high.
Do we need a new business model?
• Yes, if customer needs are not satisfactory met. A business model should address
customer needs.
What can innovation do if the market is not growing?
• New business models can help target non-consumers.
Should we bother with incremental innovation?
• When the rate of technological change is low, it allows capturing value in growing
markets.
• When the rate of technological change is high, it allows exploiting prior investments in
radical and architectural innovations (e.g. smartphones).
- Value creation through innovation when the market is growing:
- When the market is growing, the rate of technological change is high, and customer
needs are satisfactorily met, then radical innovations are relevant to remain
competitive.
Page 2 of 16
, Changing Business through Strategic Innovation
- When the market is growing, the rate of technological change is high, but customer
needs are not satisfactorily met, then architectural innovations is better to meet
consumer needs.
- When the market is growing, the rate of technological change is low, but customer
needs are satisfactorily met, then incremental innovations are relevant to remain
competitive.
- When the market is growing, the rate of technological change is low, and customer
needs are not satisfactorily met, then disruptive innovations are relevant to target non-
consumers.
- Value creation through innovation when the market is not growing:
- When the market is not growing, the rate of technological change is high, and customer
needs are satisfactorily met, then architectural innovations are relevant to target non-
customers.
- When the market is not growing, the rate of technological change is high, and customer
needs are not satisfactorily met, then architectural innovations are relevant to better
meet customer needs.
- When the market is not growing, the rate of technological change is low, and customer
needs are satisfactorily met, then disruptive innovations are relevant to remain
competitive.
- When the market is not growing, the rate of technological change is low, and customer
needs are not satisfactorily met, then disruptive innovations are relevant to target non-
customers.
Page 3 of 16
