STRATEGY OF INNOVATION
MODULE 1 – INNOVATION STRATEGY
What is innovation --> Idea/invention + exploitation/capture
What has changed?
a. Acceleration of knowledge production (it is easier to reach more people/users)
b. Global distribution of knowledge production
c. Market expansion (markets are getting bigger)
d. Market fragmentation (markets become more segmented, e.g. Vegan products or types of
chips (infinite number of options)
e. Rise of active users
Innovating in the current moment --> more difficult, but more rewarding
Innovation strategy = a central, integrated and forward-looking gameplay of how to generate,
capture and deliver value
2 influences on the innovation strategy; business strategy and external forces
- How to create value = what new product/service/business propositions increase value for
customers?
- How to capture value = how can we make sure that the organization benefits from the
innovation?
Value creation is most important for the customer
E.g. the seatbelt (saved millions of lives), the rolling luggage (easier and more efficient manner of
travel)
--> value creation is not always a ground breaking innovation
, Auto pilot is radical
A car is not radical, but an electric car is
Capture value = "value-creating innovations attract imitators as quickly as they attract customers"
Myspace was defeated by Facebook
Patents = legal protection to sell that product
Secrecy = you only have the knowledge on the product/service/business model
Lead time = fastest on the market (first mover advantage, cheaper, etc.)
Complementary assets = apple accessories work best with the iPhone
,How to evaluate an innovation strategy (3F framework)
Future = is there a forward-looking plan
portfolio = do we have enough radical / incremental idea's
Fit = do we have the resources
READING - You need an innovation strategy (Pisano, 2015)
The problem with innovation improvement efforts is rooted in the lack of an innovation strategy
A strategy = a commitment to a set of coherent, mutually reinforcing policies or behaviors
aimed at achieving a specific competitive goal
A good strategy = promote alignment among diverse groups within an organization, clarify
objectives and priorities, and help focus efforts around them
Firms rarely articulate strategies to align their innovation efforts with their business
strategies
, An innovation system = a coherent set of interdependent processes and structures that
dictates how the company searches for novel problems and solutions, synthesizes ideas into
a business concept and product designs, and selects which projects get funded
o It involves trade-offs and requires complementary changes when adopting a specific
practice
o A company without an innovation strategy won't be able to make trade-off decisions
and choose all the elements of the innovation system
o It helps to design a system to match your specific competitive needs
The process of developing an innovation strategy should start with a clear understanding and
articulation of specific objectives related to helping the company achieve a sustainable competitive
advantage
It should answer the following questions
1. How will innovation create value for potential customers
Unless innovation induces potential customers to pay more, save money or
provide some larger societal benefit, it is not creating value. Innovation can create
value in many ways, such as make a product perform better, make it more
convenient to use, more reliable, more durable, etc. Choosing what kind of value
your innovation will create and stick to that is critical
2. How will the company capture a share of the value its innovations generate?
Value-creating innovations attract imitators as quickly as they attract customers.
Imitators can create price pressures that can reduce the value that the original
innovator captures. If the company required to deliver an innovation dominant
enough, they may have sufficient bargaining power to capture most of the value
from the innovation. Think about Microsoft. Therefore, it is important for
companies to think through wat complementary assets, capabilities, products or
services could prevent customers from defecting to rivals and keep their own
position in the ecosystem strong. One of the best ways to preserve bargaining
power in an ecosystem and blunt imitators is to continue to invest in the
innovation
3. What types of innovations will allow the company to create and capture value, and what
resources should each type receive?
When thinking about innovation opportunities, companies have a choice about how
much of their efforts to focus on technological innovation and how much to invest in
business model innovation.
Two dimensions of innovation:
the degree to which it involves a change in technology
the degree to which it involves a change in business model
Four quadrants of innovation:
Routine innovation = builds a company's existing technological competences and fits with its
existing business model, and its customer base
Disruptive innovation = it requires a new business model but not necessarily a technological
breakthrough
Radical innovation = it requires a new technology, thus the opposite of disruptive innovation
MODULE 1 – INNOVATION STRATEGY
What is innovation --> Idea/invention + exploitation/capture
What has changed?
a. Acceleration of knowledge production (it is easier to reach more people/users)
b. Global distribution of knowledge production
c. Market expansion (markets are getting bigger)
d. Market fragmentation (markets become more segmented, e.g. Vegan products or types of
chips (infinite number of options)
e. Rise of active users
Innovating in the current moment --> more difficult, but more rewarding
Innovation strategy = a central, integrated and forward-looking gameplay of how to generate,
capture and deliver value
2 influences on the innovation strategy; business strategy and external forces
- How to create value = what new product/service/business propositions increase value for
customers?
- How to capture value = how can we make sure that the organization benefits from the
innovation?
Value creation is most important for the customer
E.g. the seatbelt (saved millions of lives), the rolling luggage (easier and more efficient manner of
travel)
--> value creation is not always a ground breaking innovation
, Auto pilot is radical
A car is not radical, but an electric car is
Capture value = "value-creating innovations attract imitators as quickly as they attract customers"
Myspace was defeated by Facebook
Patents = legal protection to sell that product
Secrecy = you only have the knowledge on the product/service/business model
Lead time = fastest on the market (first mover advantage, cheaper, etc.)
Complementary assets = apple accessories work best with the iPhone
,How to evaluate an innovation strategy (3F framework)
Future = is there a forward-looking plan
portfolio = do we have enough radical / incremental idea's
Fit = do we have the resources
READING - You need an innovation strategy (Pisano, 2015)
The problem with innovation improvement efforts is rooted in the lack of an innovation strategy
A strategy = a commitment to a set of coherent, mutually reinforcing policies or behaviors
aimed at achieving a specific competitive goal
A good strategy = promote alignment among diverse groups within an organization, clarify
objectives and priorities, and help focus efforts around them
Firms rarely articulate strategies to align their innovation efforts with their business
strategies
, An innovation system = a coherent set of interdependent processes and structures that
dictates how the company searches for novel problems and solutions, synthesizes ideas into
a business concept and product designs, and selects which projects get funded
o It involves trade-offs and requires complementary changes when adopting a specific
practice
o A company without an innovation strategy won't be able to make trade-off decisions
and choose all the elements of the innovation system
o It helps to design a system to match your specific competitive needs
The process of developing an innovation strategy should start with a clear understanding and
articulation of specific objectives related to helping the company achieve a sustainable competitive
advantage
It should answer the following questions
1. How will innovation create value for potential customers
Unless innovation induces potential customers to pay more, save money or
provide some larger societal benefit, it is not creating value. Innovation can create
value in many ways, such as make a product perform better, make it more
convenient to use, more reliable, more durable, etc. Choosing what kind of value
your innovation will create and stick to that is critical
2. How will the company capture a share of the value its innovations generate?
Value-creating innovations attract imitators as quickly as they attract customers.
Imitators can create price pressures that can reduce the value that the original
innovator captures. If the company required to deliver an innovation dominant
enough, they may have sufficient bargaining power to capture most of the value
from the innovation. Think about Microsoft. Therefore, it is important for
companies to think through wat complementary assets, capabilities, products or
services could prevent customers from defecting to rivals and keep their own
position in the ecosystem strong. One of the best ways to preserve bargaining
power in an ecosystem and blunt imitators is to continue to invest in the
innovation
3. What types of innovations will allow the company to create and capture value, and what
resources should each type receive?
When thinking about innovation opportunities, companies have a choice about how
much of their efforts to focus on technological innovation and how much to invest in
business model innovation.
Two dimensions of innovation:
the degree to which it involves a change in technology
the degree to which it involves a change in business model
Four quadrants of innovation:
Routine innovation = builds a company's existing technological competences and fits with its
existing business model, and its customer base
Disruptive innovation = it requires a new business model but not necessarily a technological
breakthrough
Radical innovation = it requires a new technology, thus the opposite of disruptive innovation
