Innovation, organization and entrepreneurship
Lecture 2 The innovation environment
What explains firm survival rates?
- using an evolutionary lense:
- Darwin was right
- ‘neither strength nor intelligence guarantees survival’
only adaptation can do that.
What separates successful firms?
- ability to innovate
Three levels: macro, interfirm and firm
Different types of innovations:
Improvement vs revenue
improvement/ incremental renewal/ radical
- evolutionary; incremental - revolutionary: ‘jumps’
- ‘leitmotiv’ = we can always improve - leitmotiv = crises - we have to
- focus: management of operations change
- dominant role of planning & control - focus on creativity &
entrepreneurship
Consequences of incremental vs radical innovations
improvement/ incremental renewal/ radical
- source of short-term financial - source of long-term financial costs
revenue - necessary for long-term survival
- no guarantee for long-term survival
,An evolutionary pattern of innovation (abernathy & utterback 1978)
Product life cycle S-curve
opmerking: revenues (Y) en time (X) heeft dezelfde grafiek als grafiek 1 met product
performance
Fluid phase
- innovation emphasis: functional product performance
- stimulated by: technological possibilities
- type of innovation: frequent possibilities
- process: general, flexible but inefficient
- size of organization: small-scale
- organizational control: informal, entrepreneurial
extra information:
strong information on:
- frequent redefinition of tasks
- limited hierarchy
- high lateral communication → organic structure → adaptability (high environmental
uncertainty)
Transitional phase
- innovation emphasis: product variation & optimization
- stimulated by: users & technological possibilities
- type of innovation: large process changes
, - process: more specialized, less flexible but more efficient
- size of organization: medium scale
- organizational control: project teams
Specific phase
- innovation emphasis: process optimization (cost reduction)
- stimulated by: cost pressure & improving quality
- type of innovation: incremental process changes
- process: highly efficient but inflexible
- size of organization: large-scale
- organizational control: formal, rules, structures
extra information:
strong emphasis on:
- stable tasks
- more hierarchy; coordination & control
- top-down communication → mechanistic structure → predictability (low
environmental uncertainty)
Changes from fluid to specific phase
- structure: fluid → specific
- organizational behavior: flexible and responsive → rigid and predictable
- power: entrepreneurs → managers
- orientation: external → internal
Technological discontinuities Tushman and Anderson (1986)
, Competence enhancing:
- large improvements in price/performance
- builds on existing knowledge
- new products or new processes
→ ‘rich get richer’; established players benefit
Competence destroying:
- large improvements in price/performance
- existing knowledge becomes obsolete
- entirely different knowledge & competencies
→ ‘rich get poorer’; new entrants benefit
Lecture 2 The innovation environment
What explains firm survival rates?
- using an evolutionary lense:
- Darwin was right
- ‘neither strength nor intelligence guarantees survival’
only adaptation can do that.
What separates successful firms?
- ability to innovate
Three levels: macro, interfirm and firm
Different types of innovations:
Improvement vs revenue
improvement/ incremental renewal/ radical
- evolutionary; incremental - revolutionary: ‘jumps’
- ‘leitmotiv’ = we can always improve - leitmotiv = crises - we have to
- focus: management of operations change
- dominant role of planning & control - focus on creativity &
entrepreneurship
Consequences of incremental vs radical innovations
improvement/ incremental renewal/ radical
- source of short-term financial - source of long-term financial costs
revenue - necessary for long-term survival
- no guarantee for long-term survival
,An evolutionary pattern of innovation (abernathy & utterback 1978)
Product life cycle S-curve
opmerking: revenues (Y) en time (X) heeft dezelfde grafiek als grafiek 1 met product
performance
Fluid phase
- innovation emphasis: functional product performance
- stimulated by: technological possibilities
- type of innovation: frequent possibilities
- process: general, flexible but inefficient
- size of organization: small-scale
- organizational control: informal, entrepreneurial
extra information:
strong information on:
- frequent redefinition of tasks
- limited hierarchy
- high lateral communication → organic structure → adaptability (high environmental
uncertainty)
Transitional phase
- innovation emphasis: product variation & optimization
- stimulated by: users & technological possibilities
- type of innovation: large process changes
, - process: more specialized, less flexible but more efficient
- size of organization: medium scale
- organizational control: project teams
Specific phase
- innovation emphasis: process optimization (cost reduction)
- stimulated by: cost pressure & improving quality
- type of innovation: incremental process changes
- process: highly efficient but inflexible
- size of organization: large-scale
- organizational control: formal, rules, structures
extra information:
strong emphasis on:
- stable tasks
- more hierarchy; coordination & control
- top-down communication → mechanistic structure → predictability (low
environmental uncertainty)
Changes from fluid to specific phase
- structure: fluid → specific
- organizational behavior: flexible and responsive → rigid and predictable
- power: entrepreneurs → managers
- orientation: external → internal
Technological discontinuities Tushman and Anderson (1986)
, Competence enhancing:
- large improvements in price/performance
- builds on existing knowledge
- new products or new processes
→ ‘rich get richer’; established players benefit
Competence destroying:
- large improvements in price/performance
- existing knowledge becomes obsolete
- entirely different knowledge & competencies
→ ‘rich get poorer’; new entrants benefit
