Intels prosperity Microprocessor

Ciscos excellence Routers for internet

Pfizers research Cholesterol bursting
drug - Lipitor
Wal-Mart excellence To locate in small
towns.
And many more.
All these cases raise very interesting
questions on innovation and strategy.
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 ?

Conduct Market
Research
External customers
Internal customers
Asses potential of
new technology

Do Continuous
Process
Improvement
Apply Know-how
to product and
Processes
Plan the
Research, and
Engineering
Portfolio
Conduct
Research,
Development
and Engineering
Projects
Sustained
Stakeholder
Satisfaction

Nature of
Innovation
Incremental
Radical
Life Cycle
Nature of
Innovation
Incremental
Incremental
Radical
Life Cycle
Knowledge
Competencies
Ability to design
Integrate diff
functions
Market new ideas
Assets
Size, patents, copy
rights, location, skill
HR, licenses, Sponsors
Environment
Micro
Macro
Strategy
Structure
Systems
People
Profits
Low cost or
differentiated
products/
services
Profit
A firm makes profit from selling a product or
service when the revenues it receives from
the product are greater than the cost of
offering it.
Innovation
Innovation is the use of new technological
and market knowledge to offer a new
product or service that customers will want. It
is invention + commercialization.



The new knowledge can be technological or
market related.
Technological knowledge is knowledge of
components, linkages between components,
methods, processes and techniques that go into
a product or service.
Market knowledge is knowledge of distribution
channels, product application, customer
expectations, preferences, needs and wants.
Technical innovation is about improved
products, services or processes or completely
new ones.
Administrative innovation pertains to organisation
structure and administrative processes
Market - pull is the advancement of
technology oriented primarily toward a
specific market need, and only
secondarily toward increased technical
performance.
Technology push is the advancement
of technology oriented primarily toward
increased technical performance, and
only secondarily towards specific market
needs.


Incremental


Architectural


Modular


Radical
Novel Existing
Minor
change
Novel
change
Incremental Innovation: These innovations
represent minor improvements or changes
to the elements of an existing product or
organisational technologies.
Modular Innovation: These innovations
refer to significant changes in elements of
products, organisational practices and
technologies without significant changes
to the existing configuration of the
elements
Architectural Innovation: These
innovations use existing organisational
practices and technologies but
reconfigure them in new or different
ways. Thus, their initiation requires an
organisational knowledge of how existing
components.
Radical Innovation: These innovation
represent revolutionary changes that
require clear departures from existing
organisational practices and
technologies.

Incremental Innovation
Product Technology:
Microprocessors

Process Technology
Continuous
Improvement
Modular Innovations
Product Technology:
Digital Telephone

Process Technology
Quality Circles
Architectural Innovation
Product Technology:
Paper Copiers

Process Technology
Just in time inventories


Radical Innovation
Product Technology:
VCR

Process Technology
Robotics in
manufacturing
New Product
Low cost
Improved
attributes
New attributes
Competencies
and Assets
New
Technological
Knowledge
New Market
Knowledge
Static Models (Incremental Innovation &
Radical Innovation)
Abernathy- Clark Model
Henderson Clark Model
Disruptive Technological Change Model
Innovative Value Chain Model
Dynamic Models
Utterback- Abernathy Dynamic Model
S Curve Model



An innovation is said to be radical if the
technological knowledge required to exploit it
is very different from existing knowledge,
rendering existing knowledge obsolete. Such
innovations are said to be competence
destroying.
Refrigerators integrate knowledge of
thermodynamics, coolants and electric
motors.
An innovation is said to be incremental when
new product builds on existing knowledge.
Such innovations are called competence
enhancing.
Microprocessors, diet colas

Innovation should have a composite
definition: a process whereby a new
idea is conceived and detailed in the
mind, developed into a physical entity
through detailed design, analysis,
experimentation, and production, and
then introduced to give a company a
competitive edge.
In simplest terms, however, innovation is
simple change for the better.
A means of generating innovation to achieve two
objectives that are implicit in any good business
strategy:
make best use of and/or improve what we have
today
determine what we will need tomorrow and how
we can best achieve it, to avoid the "Dinasaur
syndrome.
Innovative thinking has, as a prime goal, the object
of improving competitiveness through a perceived
positive differentiation from others in:
Design/Performance
Quality
Price
Uniqueness/Novelty

Almost all products follow a life-cycle
curve 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 of
business curve.
Continuing to come up with the right product for the market
takes a lot of innovation (plus a lot of perspiration!).
The right product is one that becomes available at
the right time (i.e., when the market needs it), and is
better 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


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 needs
a highly competent and motivated sales and marketing
team.



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 risk
analysis/reduction and IPR protection procedures.
To be competitive, an innovative idea
should result in a positive perceived
differentiation to improve
competitiveness.

As a few examples will show, however,
not all innovation achieves this:
Abernathy- Clark Model
Regular Revolutionary
Niche Architectural
M
a
r
k
e
t
Technical
Preserved Destroyed
Preserved
Destroyed
Focus on radical innovation
An innovation is regular if it conserves the
manufacturers existing technological and
market capabilities, niche if it conserves
technological capabilities but obsoletes
market capabilities, revolutionary if it
obsoletes technological capabilities but
enhances market capabilities, and
architectural if both technological and
market capabilities become obsolete.
Eg: From x-rays to CT scan to MRI scan
Incremental Architectural
Modular Radical
C
o
m
p
o
n
e
n
t
Architectural
Enhanced
Destroyed
Focus on incremental innovation.
If an innovation enhances both component
and architectural knowledge, it is incremental;
if it destroys both components and
architectural knowledge, it is radical. However,
if only architectural knowledge is destroyed
and component knowledge enhanced , the
innovation is architectural, where component
knowledge is destroyed but architectural
knowledge enhanced, is called modular
innovation.
Eg: transistors radio ( transistors, audio
amplifiers and loud speakers) to portable radio
Disruptive Technological
Change Model
Sustaining technologies tend to maintain a rate of
improvement, thereby giving customers something
more or better in attributes that they already
values.
Disruptive technology introduce a new package
very different from what the mainstream customer
historically values, often being inferior along one or
two performance dimensions that are particularly
important to the customers. Here, a technology in
its infancy, is likely to be inferior to an existing one
that it eventually displaces.
Proposed by Prof Clayton Christensen
They create new markets by introducing
a new kind of product or service.
The new product or service from the new
technology costs less than existing
products or services from the old
technology.
Initially, the products performs worse
than existing customers value.
The technology should be difficult to
protect using patents
A
B
C
D
P
e
r
f
o
r
m
a
n
c
e
Year
This model focuses on what the
innovation does to the competitiveness
and capabilities of firms suppliers,
customers and complementary
innovators.
Eg: Electric cars
TECHNOLOGY
Value Chain
Competitive
Advantage
Value
Creation
Technology enables a firm to introduce
change in its value chain.
Such changes provide the firm an opportunity
to create competitive advantage.
Process technology innovations that
reconfigure value chain and value
assemblage lie at the heart of many
fundamental changes.
First order change: Focus on learning by doing
incremental innovations with the existing value
chain configuration.
Second order change: Focus on the
fundamental reconfiguration of value chain
and value constellations ( grouping).




Process innovation enable firms to introduce
change 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.

Hardware Dominant
(Upgrading of
Equipment)

Software Dominant
( Training Programs)
Hardware Dominant
( Voice
Transmission)

Software
Development
( Job Design)
Hardware Dominant
( Information
Architecture)

Software Dominant
(Socio-technical
systems)
Hardware Dominant
(Robotics)

Software Dominant
( Re-engineering)
Existing New
Existing
New
Four modes of configuring value chain
and value constellation.
Craft Production: First wave: Craftsmen or
artisans, Used their skills or know-how to turn
raw materials into finished goods.
Mass production: Second wave: Partly in
response to the demand for producing
goods on a larger scale and volume.
Principles of mass production;
Value Chain Configuration: Interchangeable parts,
specialized machines, focus on process, division of
labour, free flow
System of Management: Focus on low cost and low
price, product standardization, degree of specialization,
vertical integration, Operational efficiency.
New Products
Mass
Production
Processes
Low Cost,
Quality
Standardized
Products
Stable
Demand
Long Product
Life Cycle
Firm Infrastructure
Technology Development
Human Resource Management
Inbound
Logistics
Operations

Outbound
Logistics
Marketing
& Sales
Procurement
Services
Lean Production:
Team organisation
Training
Continuous improvement
Just-in-time manufacturing
Mass Customization:
Synthesis of craft production and mass
production
Flexible manufacturing systems
Computer Aided Design (CAD)
Computer Integrated Manufacturing ( CIM)
Use of Information and Telecommunication
Technologies
Use of Computerised Databases

Firm Infrastructure
Technology Development
Human Resource Management
Inbound
Logistics
Operations

Outbound
Logistics
Marketing
& Sales
Procurement
Services
Technology strategy is the revealed
pattern in the technology choices of the
firms. The choices involve the commitment
of resources for the appropriate,
maintenance, deployment and
abandonment of technological
capabilities. These technology choices
determine the character and extent of the
firms principal capabilities and the set of
available product and process platforms.
Strategic Diagnosis
Formulation of
Technology Strategy

Implementation
Approach
Execution
Technology
Inventory
Firm Competitive
Position
Technology
Requirements
Appropriation of
Technology
Deployment in
Products
Deployment in
Value Chain
Mode of
Implementation
Organisational
Strategies
IPR
The kind of technologies that a firm
selects for acquisition development,
deployment or disinvestment.
Technology strategies are not confined
with only high technology industries or
firms. Even a capacity or service driven
industry or firm requires a technology
strategy.
Technology strategy embrace both the
hardware and software elements.
Commitment to introduce strategy is
required.
Objectives
Drivers
Environment
Technological opportunity
Appropriability
Firm
Technology development
Technology deployment
Decision Criteria




Technology Leadership Strategy: Consists of
establishing and maintaining through both
technology development and deployment
and gaining competitive domain.
Niche Strategy: Consists of focusing on a
limited number of critical technologies to seek
leadership.
Follower Strategy: This strategy is focussed on
deployment, avoiding the risk of basic
research.
Technology Rationalization: Involves
maintaining adequacy only in a select set of
technologies.