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Intels prosperity Microprocessor Ciscos excellence Routers for internet

Pfizers research Cholesterolbursting

drug - Lipitor Wal-Mart excellenceTo locate in small

towns.

And many more. All these cases raise very interesting

questions on innovation and strategy.

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Why it is so difficult to innovate? Can anything be done to overcome these

difficulties?

How does a firm know which innovation is right to

exploit the market? Are some regions or nations are better

environments for innovation than others? Why?

Can a firm control its local environment through

innovation? Aren't competitors are also interested to explore

the same or similar innovations?

Should we use existing assets ( both physical and

human) to facilitate innovation ?

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Conduct Market

Research

External customers

Internal customers

Asses potential of

new technology

Do Continuous

ProcessImprovement

Apply Know-how

to product andProcesses

Plan theResearch, and

EngineeringPortfolio

Conduct

Research,

Development

and Engineering

Projects

SustainedStakeholderSatisfaction

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Nature of

Innovation Incremental

Radical

Life Cycle

Nature ofInnovation

IncrementalIncremental

Radical

Life C cle

Knowledge

CompetenciesAbility to design

Integrate diff

functions

Market new ideas

AssetsSize, patents, copy

rights, location, skill

HR, licenses, Sponsors

EnvironmentMicroMacro

Strategy

Structure

Systems

People

ProfitsLow cost or

differentiated

products/

services

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Profit

A firm makes profit from selling a product orservice when the revenues it receives fromthe product are greater than the cost of

offering it. Innovation

Innovation is the use of new technologicaland market knowledge to offer a new

product or service that customers will want. Itis invention + commercialization.

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The new knowledge can be technological or

market related.

Technological knowledge is knowledge ofcomponents, linkages between components,methods, processes and techniques that go into

a product or service.

Market knowledge is knowledge of distributionchannels, product application, customer

expectations, preferences, needs and wants.

Technical innovation is about improved

products, services or processes or completelynew ones.

Administrative innovation pertains to organisation

structure and administrative processes

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Market - pull is the advancement oftechnology oriented primarily toward aspecific market need, and onlysecondarily toward increased technical

performance. Technologypush is the advancement

of technology oriented primarily toward

increased technical performance, andonly secondarily towards specific marketneeds.

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Incremental Innovation: These innovationsrepresent minor improvements or changes

to the elements of an existing product ororganisational technologies.

Modular Innovation: These innovations

refer to significant changes in elements ofproducts, organisational practices andtechnologies without significant changesto the existing configuration of theelements

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Architectural Innovation: These

innovations use existing organisationalpractices and technologies butreconfigure them in new or differentways. Thus, their initiation requires an

organisational knowledge of how existingcomponents.

Radical Innovation: These innovation

represent revolutionary changes thatrequire clear departures from existingorganisational practices andtechnologies.

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Incremental InnovationProduct Technology:Microprocessors

Process Technology

ContinuousImprovement

Modular InnovationsProduct Technology:Digital Telephone

Process Technology

Quality Circles

Architectural InnovationProduct Technology:Paper Copiers

Process TechnologyJust in time inventories

Radical InnovationProduct Technology:VCR

Process TechnologyRobotics inmanufacturing

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New Product Low costImprovedattributes

New attributes

Competenciesand Assets

NewTechnological

Knowledge

New MarketKnowledge

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Static Models (Incremental Innovation &Radical Innovation)

Abernathy- Clark Model

HendersonClark Model Disruptive Technological Change Model

Innovative Value Chain Model

Dynamic Models

Utterback- Abernathy Dynamic Model

S Curve Model

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An innovation is said to be radical if the

technological knowledge required to exploit itis very different from existing knowledge,rendering existing knowledge obsolete. Suchinnovations are said to be competence

destroying. Refrigeratorsintegrate knowledge of

thermodynamics, coolants and electricmotors.

An innovation is said to be incremental whennew product builds on existing knowledge.Such innovations are called competenceenhancing.

Microprocessors, diet colas

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Innovation should have a compositedefinition: a process whereby a newidea is conceived and detailed in themind, developed into a physical entity

through detailed design, analysis,experimentation, and production, andthen introduced to give a company acompetitive edge.

In simplest terms, however, innovation issimple change for the better.

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A means of generating innovation to achieve twoobjectives that are implicit in any good businessstrategy:

make best use of and/or improve what we havetoday

determine what we will need tomorrow and howwe can best achieve it, to avoid the "Dinasaursyndrome.

Innovative thinking has, as a prime goal, the objectof improving competitiveness through a perceived

positive differentiation from others in: Design/Performance

Quality

Price

Uniqueness/Novelty

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Almost all products follow a life-cyclecurve having a characteristic shape:

Conclusion? - - If a company does not continue to introduce

new products periodically, or at least significant improvements

on existing products it will eventually be on a going out ofbusiness curve.

Continuing to come up with the right product for the market

takes a lot of innovation (plus a lot of perspiration!).

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The right product is one that becomes available atthe right time (i.e., when the market needs it), and isbetter and/or less expensive that its competition.

To have the right product, therefore, one must:

Predict a market need Envisage a product whose performance and

capability will meet that need

Develop the product to the appropriate time scale

and produce it. Sell the product at the right price

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To predict a market need, an organisation needs market

analysts

To envisage or imagine the right products for that an

organisation needs strategic thinkers and highly

competent systems engineers To develop and produce the product, one needs highly

competent R&D specialists and software/hardware

engineers

To sell the product at the right price, an organisation needsa highly competent and motivated sales and marketing

team.

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Overcome the entrenched objections to innovation:

Fear of Innovation because, as it is based on creativity, it has a chaotic connotation attached.

Waste of resources, dead-ends etc

Why leave our comfortable position?

We have always done it that way.

Establish an environment that encourages it Identified direction and (stretched) objectives

Knowledge of the needs of the customers

Broad knowledge of of the means to achieve change

Adequate budget availability

Incentives for people to take the risk

Management acceptance of failure

Empowerment of people to take part in the process

Cross fertilization within the organization

Establish an innovation promotion process including riskanalysis/reduction and IPR protection procedures.

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To be competitive, an innovative ideashould result in a positive perceived

differentiation to improvecompetitiveness.

As a few examples will show, however,not all innovation achieves this:

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Abernathy- Clark Model

Regular Revolutionary

Niche Architectural

Ma

rket

Technical

Preserved Destroyed

Preserved

Destroyed

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Focus on radical innovation

An innovation isregularif it conserves themanufacturers existing technological andmarket capabilities, niche if it conserves

technological capabilities but obsoletesmarket capabilities,revolutionary if itobsoletes technological capabilities butenhances market capabilities, andarchitectural if both technological andmarket capabilities become obsolete.

Eg: From x-rays to CT scan to MRI scan

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Incremental Architectural

Modular Radical

C

ompone

nt

Architectural

Enhanced

Destroyed

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Focus on incremental innovation.

If an innovation enhances both componentand architectural knowledge, it is incremental;

if it destroys both components and

architectural knowledge, it isradical. However,

if only architectural knowledge is destroyedand component knowledge enhanced , the

innovation is architectural, where component

knowledge is destroyed but architectural

knowledge enhanced, is called modularinnovation.

Eg: transistors radio ( transistors, audio

amplifiers and loud speakers) to portable radio

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Disruptive Technological

Change Model

Sustaining technologies tend to maintain a rate ofimprovement, thereby giving customers somethingmore or better in attributes that they already

values. Disruptive technology introduce a new package

very different from what the mainstream customerhistorically values, often being inferior along one or

two performance dimensions that are particularlyimportant to the customers. Here, a technology inits infancy, is likely to be inferior to an existing onethat it eventually displaces.

Proposed by Prof Clayton Christensen

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They create new markets by introducinga new kind of product or service.

The new product or service from the new

technology costs less than existingproducts or services from the oldtechnology.

Initially, the products performs worsethan existing customers value.

The technology should be difficult to

protect using patents

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A

BC

D

Perf

ormance

Year

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This model focuses on what theinnovation does to the competitivenessand capabilities of firms suppliers,

customers and complementaryinnovators.

Eg: Electric cars

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TECHNOLOGY

Value ChainCompetitiveAdvantage

ValueCreation

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Technology enables a firm to introducechange in its value chain.

Such changes provide the firm an opportunityto create competitive advantage.

Process technology innovations thatreconfigure value chain and value

assemblage lie at the heart of manyfundamental changes.

First order change: Focus on learning by doingincremental innovations with the existing value

chain configuration. Second order change: Focus on the

fundamental reconfiguration of value chainand value constellations ( grouping).

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Process innovation enable firms to introducechange in the value chain that affect the design

of work, organisational structure and process.

Process innovation may be either hardware or

software dominant.

Hardware dominant process innovation infuse a

higher level of technology in terms of equipment

or physical characteristics.

Software dominant process innovation may

require a firm to create not only new skills but

also new attitudes and mindsets among its

employees.

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Hardware Dominant(Upgrading of

Equipment)

Software Dominant

( Training Programs)

Hardware Dominant

( VoiceTransmission)

SoftwareDevelopment

( Job Design)

Hardware Dominant( InformationArchitecture)

Software Dominant

(Socio-technicalsystems)

Hardware Dominant

(Robotics)

Software Dominant

( Re-engineering)

Existing New

Existing

New

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Four modes of configuring value chain

and value constellation. Craft Production: First wave: Craftsmen or

artisans, Used their skills or know-how to turnraw materials into finished goods.

Mass production: Second wave: Partly inresponse to the demand for producinggoods on a larger scale and volume.Principles of mass production; Value Chain Configuration: Interchangeable parts,

specialized machines, focus on process, division oflabour, free flow

System of Management: Focus on low cost and lowprice, product standardization, degree of specialization,vertical integration, Operational efficiency.

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New Products

MassProductionProcesses

Low Cost,Quality

StandardizedProducts

StableDemand

Long ProductLife Cycle

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Firm Infrastructure

Technology DevelopmentHuman Resource Management

Inbound

Logistics

Operations

Outbound

Logistics

Marketing

& Sales

Procurement

Services

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Lean Production:

Team organisation

Training

Continuous improvement

Just-in-time manufacturing

Mass Customization:

Synthesis of craft production and massproduction

Flexible manufacturing systems

Computer Aided Design (CAD)

Computer Integrated Manufacturing ( CIM)Use of Information and TelecommunicationTechnologies

Use of Computerised Databases

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Firm Infrastructure

Technology DevelopmentHuman Resource Management

Inbound

Logistics

Operations

Outbound

Logistics

Marketing

& Sales

Procurement

Services

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Technology strategy is the revealedpattern in the technology choices of thefirms. The choices involve the commitmentof resources for the appropriate,maintenance, deployment andabandonment of technologicalcapabilities. These technology choices

determine the character and extent of thefirms principal capabilities and the set ofavailable product and process platforms.

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Strategic DiagnosisFormulation of

Technology Strategy ImplementationApproach

Execution

Technology

InventoryFirm Competitive

Position

Technology

Requirements

Appropriation of

TechnologyDeployment in

Products

Deployment in

Value Chain

Mode of

Implementation

Organisational

Strategies

IPR

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The kind of technologies that a firm

selects for acquisition development,deployment or disinvestment.

Technology strategies are not confined

with only high technology industries orfirms. Even a capacity or service drivenindustry or firm requires a technologystrategy.

Technology strategy embrace both thehardware and software elements.

Commitment to introduce strategy is

required.

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Objectives

Drivers

Environment Technological opportunity

Appropriability

Firm Technology development

Technology deployment

Decision Criteria

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Technology Leadership Strategy: Consists of

establishing and maintaining through bothtechnology development and deploymentand gaining competitive domain.

Niche Strategy: Consists of focusing on a

limited number of critical technologies to seekleadership.

Follower Strategy: This strategy is focussed ondeployment, avoiding the risk of basicresearch.

Technology Rationalization: Involvesmaintaining adequacy only in a select set oftechnologies.