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Summary - Class notes - Innovation Management in Multinationals
1456095600 Introduction to innovation management
What do R.D. Ireland & J.W. Webb (2007) mean with 'Strategic Entrepreneurship'?They discuss strategic entrepreneurship as the means through which firms simultaneously exploit their current competitive advantages while exploring for future opportunities to achieve continuous innovation.
What are the challenges of strategic entrepreneurship according to R.D. Ireland & J.W. Webb (2007)?* Although exploration contributes to strategic flexibility, often it doesn't appeal stakeholders and employees, due to the uncertain outcomes and the 'unknown'.
* Transaction from exploration to exploitation takes difficult operational, structural and cultural changes.
Describe the view of an expanded view of strategic entrepreneurship, according to R.D. Ireland & J.W. Webb (2007), by dissecting each part and putting them together.
Strategy: firm’s long-term development decisions
Designing the firm’s scope
Managing the firm’s resources
Exploitation: developing competitive advantages & advantage-seeking behaviours
Creating organizational units
Exploration: opportunity-seeking behaviours
Strategic entrepreneurship: a value-creating intersection between strategy and entrepreneurship
Balancing exploration and exploitation
Balancing resources between exploration and exploitation
Continuous streams of innovation
What does effective strategic entrepreneurship result in, according to R.D. Ireland & J.W. Webb (2007)?Effective SE results in efficient (process and structural innovations as the firm wisely uses its resources) and effective newness (product innovation as a result of satisfying market expectations).
What are the exploration activities according to R.D. Ireland & J.W. Webb (2007)?Positioning in one or more market spaces (outcome). Acquire new, diverse knowledge and integrate with existing knowledge (learning process).
* Knowledge breadth: seeking diverse from external sources to add to internal knowledge
* Knowledge depth: increase its store of both internal and external knowledge in focal areas
What are the operational mechanisms for exploration according to R.D. Ireland & J.W. Webb (2007)?* Mergers and acquisitions (M & A) to increase knowledge diversity
* Corporate Venture Capital programs (sharing risks and investments with more firms)
* SA's: Alliances allow firms to tap more external resources than possible with M&A's, but less than with CVC prorams.
What are the structural mechanisms for exploration, according to R.D. Ireland & J.W. Webb (2007)?*Decentralized authority: provides autonomy to individuals and allows the firm to effectively pursue a larger number of opportunities
* Semi-standardized procedures and semi-formalized processes: efficient use of resources when exploring.
Both mechanisms balance the efficiency and effectiveness of a company.
What are the cultural mechanisms for exploration, according to R.D. Ireland & J.W. Webb (2007)?The link between exploration and exploitation highlights the need for an organizational culture valuing experimentation, the acceptance of uncertainty, and a tolerance of failure.
What are the activities for exploitation, according to R.D. Ireland & J.W. Webb (2007)?During periods of relative calm or stability, firms concentrate on incrementally extending their knowledge base as the source of exploiting current advantages to address new market demands. Exploitation differs from exploration due to the heightened certainty regarding market trends and the shorter duration between market introductions of successive innovations. Exploitation rests on knowledge of a proven innovation, making it possible for firms to be aware of present needs and demands. Companies that are able to meet these market opportunities early with high-quality products and services enjoy competitive advantage by being able to gain market share and by forming entry barriers.
What are the operational mechanisms for exploitation, according to R.D. Ireland & J.W. Webb (2007)?* Internal development: The intimate knowledge held by employees involved with exploitation activities is often sufficient to lead the firm's incremental innovation.
* SA's: Alliances enable firms to expand their knowledge and resources to accurately and quickly target global opportunities
*M&A: M&A's allow firms to gain full control over valuable distribution channels and establish economies-of-scale and -scope
What are the structural mechanisms for exploitation, according to R.D. Ireland & J.W. Webb (2007) ?* Centralized authority: defines a clear locus of control, facilitating the focus and quick decision necessary for exploitation succes.
* Standardized/formalized: Routines should focus on one or two competencies, as opposed to exploiting numerous capabilities, which may slow the firm's activities.
What are the cultural mechanisms for exploitation, according to R.D. Ireland & J.W. Webb (2007) ?* Certainty: in exploitation, outcomes are much more certain as compared to exploitation
* Short-term goals: the duration between incremental innovation is much less than for radical innovations. The ability to meet short-term milestones determines a firm's exploitation success.
* Commitment to focus: research consistently shows that early moving firms outperform late movers. This success depends on employees' willingness to focus on their exploitation activities and allowing others in the firm to explore novel initiatives.
What are the steps that firms need to take to balance exploration with exploitation, according to R.D. Ireland & J.W. Webb (2007) ?
* 1) Understanding the exploration/exploitation balance: the balance depends on the firm’s external environment (dynamic or stable), its resources and capabilities.
* 2) Identifying the optimal balance: analyse current and emerging trends in the technological, sociocultural, economic, political/legal, demographic and global arenas in which the firm competes (DESTEP). Analyse firm’s strengths and weaknesses to discern how external changes may lead to opportunities or threats (SWOT). If a firm’s weaknesses and threats outweigh its strengths and opportunities, it’s likely to enhance its exploratory actions.
* 3) Reintroducing the middle-level manager: flat is able to respond to changes, however a middle-level manager plays two vital roles. They bridge the gap between operational- and strategic-level managers. First, they are instrumental in how a firm’s strategy becomes operationalized, as well as in keeping top management teams apprised of opportunities that have been identified in lower organizational levels. Second, middle-level managers are ideally positioned for separating the operationally, structurally, and culturally different processes of exploration and exploitation.
According to S.D. Anthony (2012), new conditions have been created in which big companies stop shackling innovation and start unleashing it. Three trends are behind this shift, which ones?
* The increasing ease and decreasing cost of innovation mean that start-ups now face the same short-term pressures that have constrained innovation at large companies.
* Large companies, taking a page from start-up strategy, are embracing open innovation and less hierarchical management and are integrating entrepreneurial behaviours with their existing capabilities.
* Although innovation has historically been product- and service-oriented, it increasingly involves creating business models that tap big companies’ unique strengths.
What are the four era's of innovation, according to S.D. Anthony (2012)?
* First era of innovation: the lone inventor, till about 1915.
With the perfection of the assembly line, a century ago, the increasing complexity and cost of innovation pushed it out of individuals’ reach, driving more company-led efforts.
* Second era of innovation: A combination of longer-term perspectives and less stifling corporate bureaucracies meant that many organizations would happily tolerate experimental efforts. The heroes of the second era worked in corporate labs. Corporations evolved from innovation exploiters into innovation creators.
* Third era of innovation: in 1950-60 organizations became too hierarchical, which clashed with restless individuals. These rebels needed new forms of funding, hence the emergence of VC-backed start-up. These supported Apple, Microsoft, Facebook, Amazon, Google, etc.
Life became even harder for innovators in big companies as the capital markets’ expectations for short-term performance grew. The technologies birthed during this era and the globalization of world markets have dramatically accelerated the pace of change.
* Fourth era of innovation: Whereas the inventions that characterized the first three eras were typically (but not always) technological breakthroughs, fourth-era innovations are likely to involve business models.
What are the roles of corporate catalyst, according to S.D. Anthony (2012)?As companies have decentralized strategic and innovation activities, promoting agility, they have become increasingly hospitable to catalysts. Those mission-driven leaders who corral corporate resources that are outside their traditional span of control to address sprawling challenges. They form net- works or coalitions within and outside the company and are motivated by the desire to solve big, often global, problems.
What are the advantages for big companies, according to S.D. Anthony (2012)?
* Global infrastructure: physical products and face-to-face services require infrastructure.
* Strong brand reputation: The gatekeepers between an idea and an end user. in Medtronic’s case, hospital purchasing agents, government regulators, and influential doctors - often feel hesitant about products and services offered by new companies. A strong brand helps a large company sail past those gatekeepers.
* Partner relationships: Large companies can easily acquire bestofbreed partners to support an idea.
* Scientific knowledge: Dedicated teams of experts inside corporations produce difficulttoreplicate knowledge that is often protected by patents.
* Experience with regulators: Increased government intervention in markets presents roadblocks to start-ups that haven’t had to deal with officials in a number of sectors.
* Process excellence: as their operations grow, start-ups hit predictable speed bumps that big companies can avoid.
Read these examples of companies, from S.D. Anthony's (2012) article, regarding the changes for big companies.Unilever’s Water Purification
In 2010 it launched the Unilever Sustainable Living Plan, which aims to halve the greenhouse gas impact of the company’s products, source 100% of agricultural raw materials sustainably, and help more than a billion people improve their health and well-being. 100 scientists were needed to crack the problem. Jain enlisted a number of external parties to help bring the company’s innovation to market.
Syrgenta’s Productive Farming
Syngenta recently introduced a range of efforts aimed at smallholding farmers. Improving the productivity of the 500 million small farms across the world. Education and lowering prices were needed. Mass-market media—including programs that farmers could listen to on their mobile phones—broadened the program’s reach.
IBM’s Smarter Cities
IBM went on to complete Smarter Cities projects in Rio de Janeiro, Berlin, Beijing, Dublin, Singapore, and New York. In Chicago its network enabled an- other company to build an app that monitors all the city’s snowploughs during a storm and tells drivers which streets are clear at any moment. It reduced greenhouse gas emissions by 17% and traffic delays by more than 50%.
What is S.D. Anthony (2012) recommending to get ready for the new fourth era of innovation?Not all corporate environments are conducive to fourth-era innovation. Companies need to embrace open innovation, approach innovation systematically, simplify and decentralize decision-making mechanisms, and be learning-focused and failure-tolerant. And the way to motivate creative people is to give them autonomy, provide opportunities to develop mastery, and instill a sense of purpose in their work. The fourth era is already shifting the roles that innovation players have traditionally held and creating new ones:
* Venture capitalists: who were the enablers of the third era, must consider how their model has to change if they are to remain relevant.
* Young innovators: set on improving the world should recognize that working for a large company isn’t “selling out”—it can maximize their impact.
* Corporate leaders: must critically examine the degree to which their companies’ environments are hospitable to the work of catalysts
* Employees: who find their innovation environment inhospitable should consider whether another company would provide more-fertile ground for catalytic work.
* Catalysts: who have just started their efforts should grit their teeth, because the work will not be easy. Asked to give advice to fellow catalysts, Unilever’s Yuri Jain advises having purpose and persistence.
What was the goal of Baragheh, Rowley & Sambrook's (2009) paper?As a concept that is owned and discussed by many business disciplines, “innovation” has many different definitions that align with the dominant paradigm of the respective disciplines. Building on these diverse definitions, this paper proposes a general and integrative definition of organizational “innovation” that encompasses the different perspectives on, and aspects of, innovation, and captures its essence.
What are the different attributes of innovation, that have been defined in Baragheh, Rowley & Sambrook's (2009) paper?
* Nature of innovation: refers to the form of innovation as in something new or improved (new, change, improve)
* Type of innovation: kind of innovation as in the type of output or the result of innovation (product, service, process, technical)
* Aim of innovation: overall result that the organizations want to achieve through innovation (success, economy, superiority, differentiation, advantage, value)
* Social context: any social entity, system or group of people involved in the innovation process or environmental factors affecting it (org, firm, customer, group, unit, developer, employee, workforce, external environment)
* Means of innovation: necessary resources (technical, creative, financial) needed for the innovation (idea, invention, technology, market, creativity)
* Stages of innovation: all steps taken during an innovation process, which usually start from idea generation and end with commercialization (adoption, development, creation, implementation, commercialization)
What is the overal definition of innovation according to Baragheh, Rowley & Sambrook's (2009) paper?Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace.
Though the current definition of innovation, it can change over time.
What is innovation? (powerpoint)“Innovation is the process by which an idea or invention is translated into a good or service for which people will pay, or something that results from this process”
The process of innovation frequently requires the development of new competences or the new combination of existing competences
Innovation = invention + commercialization
What different types of innovations do you have (powerpoint)?Product innovation: new product or service
Process innovation: new production or delivery process
Marketing innovation: new marketing method
Organizational innovation: new organizational processes or procedures
What are some misconceptions about innovation? (powerpoint)“A good product sellsitself”
“Innovation is only for large companies”
“Innovation is only for small companies”
“Innovation is only for large companies”
“The innovation process cannot be managed”
What are four factors that drive innovation? (powerpoint)
1.decreasing product life cycles
2.increasing global trade
3.rapid distribution of information and education
4.reduced cost of entry into markets and industries
What happens if you stop investing in new products? (powerpoint)
•first, 7 yearsdecrease in profits
•then, a complete fall in profits
Companies that went back to product development after those 7 years, with 3 times as much effort as beforeneeded app. 25 years to regaintheiroriginalprofit level
Read these facts about creating new products (powerpoint)Booz, Allen, Hamilton (1982)
–28% of the growth in 700 companies derives from products that were introduced in the last 5 years
Marketing Science Institute (1990)
–25% of current sales derives from products that were introduced in the last 3 years
50% of the products in the store today were not there 5 years ago
–in the car industry 4 times as many models are required just to maintain market share
Each year, about 250,000 products are launched globally. Of which, 85%-95% fail...
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