LB5124

BUSINESS INNOVATION &

TECHNOLOGY MANAGEMENT

Lecture 5
How Do Businesses Network to Innovate?

LB5207 Managing Entrepreneurial Enterprises

Objectives of Lecture 5

• Define Innovation Networks

• Understand Network Approaches and
Dynamics
• Explore Approaches to Network Learning
• Understand Innovation Networks in the
Economy
• Appraise Barriers to Network Formation

LB5207 Managing Entrepreneurial Enterprises

Innovation Networks - Introduction

• A complex, interconnected group or system that

accomplishes particular tasks;

• Little agreement on constitution of networks;

some argue it is a ‘virtual organization’, others
view it as transitory; most see terms as ‘web’
and ‘clusters’ as vague and inclusive;

• Nature and configuration of networks can

impose constraints but also present
opportunities.
LB5207 Managing Entrepreneurial Enterprises
Why organizations collaborate

The Economist, 2014

MITSolan,, 2015
 Innovation
Networks – Why?

• Collective
Efficiency

• Collective
Learning

• Collective Risk
Taking

• Intersection of
Different LB5207 Managing Entrepreneurial Enterprises

Knowledge Sets
The Economist, 2014
Innovation Networks – A Systems View
(Birkinshaw et. al. 2007)

LB5207 Managing Entrepreneurial Enterprises

Learning Networks - Introduction

• Shared learning allows critical reflection;

• Different perspectives brings new concepts;

• Shared experimentation reduces costs;

• Shared experiences opens new lines of enquiry;

• Shared learning helps explicate ‘patterns’;

• Shared learning helps question assumptions;

LB5207 Managing Entrepreneurial Enterprises
Learning Network – From Data to Wisdom

LB5207 Managing Entrepreneurial Enterprises

Learning Network – From Data to Wisdom

• Data: no significance beyond its existence;

• Information: gives meaning to data via

relational connection;

• Knowledge: application of data and

information;

• Understanding: synthesize new knowledge;

• Wisdom: evaluate understanding.

LB5207 Managing Entrepreneurial Enterprises
 Class Exercise 1
Discuss your findings after reading Dittrich and Duysters’s
article
https://www.researchgate.net/publication/228365119_THE_ROLE_OF_INNOVATION_NETWORKS_IN_A_C
HANGING_COMPETITIVE_ENVIRONMENT_THE_CASE_OF_IBM

• What is the motive for organizations to engage innovation

networks? What do they want to gain from their alliance
partners?

• Discuss the strategy deployed by IBM by addressing the four

competitive dynamics aspects
a) Network Types: connected or unconnected?
b) System Attributes: compatible or incompatible technologies
c) Firm Strategies: shape standards in industry, or control
standards by protecting proprietary technology
d) Sources of Advantage: economies of scale or of scope
Learning Network – Exploitation Innovation

• Improve operational efficiencies; extend and

improve existing processes;

• Develop standardized operating procedures

for efficient task execution;

• Apply variance reducing strategies.

LB5207 Managing Entrepreneurial Enterprises

Learning Network – Exploration Innovation

• Solve problems; existing problems and

environmental uncertainties;

• Experiment and innovate; reassess current

approaches and develop new solutions;

• Apply variance seeking strategies.

LB5207 Managing Entrepreneurial Enterprises

Approaches to Networks & Innovation

LB5207 Managing Entrepreneurial Enterprises

Approaches to Networks & Innovation

• Zone 1: Firms with similar orientation on

tactical innovation issues;

• Zone 2: Firms working to explore and create

new product or process; exploratory;

• Zone 3: differentiated firms who add knowledge

to the organization or its supply chain context;

• Zone 4: as in Zone 3, but to the industry

context. LB5207 Managing Entrepreneurial Enterprises
 Class Exercise 2

Discuss your findings after reading Gary Pisano’s article

https://hbr.org/2015/06/you-need-an-innovation-strategy

• What are the types of innovations that will allow organizations

to create and capture value?

• What are the roles of leaders to create a capacity to innovate

with strategy?
Barriers to Network Formation

How to manage something that the firm does

not own or control?
• Define the network’s purpose;

• Key roles played by third parties (e.g. network

brokers)

How to see system level effects?

• How decisions get taken at the network level?

• Periodic review.
LB5207 Managing Entrepreneurial Enterprises
Barriers to Network Formation

How to build trust and shared risk taking?

• How conflicts are resolved effectively?

• How knowledge is created, captured, shared

and used across the network?

• How the risks and rewards are allocated across

members of the network?

• How the operations of the network are

integratedLB5207
andManaging
coordinated?
Entrepreneurial Enterprises
Barriers to Network Formation

How to avoid ‘free riders’ and information

‘spillovers’?
• How the membership of the network is defined
and maintained?

• How members are motivated to join or remain

within the network?

• Is there a shared perception of opportunity?

LB5207 Managing Entrepreneurial Enterprises