Chp 2: Innovation Management: Strategic Decisions Flashcards
Strategic challenges in
innovation management
- In which area should we
innovate?
Ansoff Matrix
“Ten Types of Innovation“- Framework - Degree of the innovation
orientation?
Pioneer- vs. Follower
Strategy
Miles/Snow-Typology - How can the company learn
from the environment?
Exploitation vs.
ExplorationConcept
Planning vs. Improvising
The ansoff matrix 1957: Product market strategies for business growth alternatives
- Market penetration
Description: This strategy involves selling more of the existing products or services to the current market. It aims to increase market share and revenue within the same market segment. - Market development
Description: Market development involves introducing existing products or services to new markets. This strategy seeks to reach new customer segments or expand geographically. - Product development
Description: This strategy focuses on developing and introducing new products or services to the existing market. The goal is to meet the evolving needs of current customers. - Diversivication
Description: Diversification is the most radical strategy and involves both developing new products and entering new markets. This can be a high-risk, high-reward approach.
Where is there a strong focus in innovations?
Product performance based innovations
Pioneer Strategy
Company strives
to be the first firm to introduce a new
product to the market
Follower Strategy
Company enters the market at a
later date, after a competitor has launched the new product (category)
Pioneer- versus Follower-Strategy:
Advantages and Disadvantages
Pioneer advantages
(disadvantages for the follower):
Temporary monopoly allowing premium
price strategy
Establishment of barriers to market entry
Cost advantages due to economies of
scale or experience curve effects
Control of scarce resources (physical input
factors, patents, distribution channels)
Establishment of switching barriers at the
customer side (e.g., by setting industry
standards)
Image/preference creation
Profits from patents/licenses
Pioneer disadvantages:
(advantages for the follower)
Uncertainty with respect to development of demand
Pressure to appeal to latent needs
Extensive resources needed for
market development
Low imitation costs (“free-riding”) for the
follower
How can a company learn from the environment?
- Exploration
- Exploitation
Exploration
includes things captured by terms
such as search, variation, risk taking,
experimentation, play, flexibility,
discovery”
− Learning something completely new
− Development of new technologies
− Trial and error and openness are
key elements
− No pre-defined process
− Double Loop Learning
Exploitation
includes such things as refinement,
choice, production, efficiency, selection,
implementation, execution“
− Learning something in a familiar
environment
− Refinement of existing technologies
− Often related to market segmentation
and product differentiation
− Pre-defined learning process
− Single Loop Learning
Single loop learning (Exploitation)
making adjustments to correct a mistake or a problem. It is focused on doing the things right. Causality might be observed but typically is not addressed.
Double loop learning (Exploration)
identifying and understanding causality and then taking action to fix the problem before it happens
Goal towards ambidexterous organization in relation to Exploration and Exploitation?
In summary, an ambidextrous organization is one that can effectively balance the need for exploration and exploitation, allowing it to adapt to changing conditions, innovate, and maintain efficiency. Achieving ambidexterity is a strategic challenge that requires a combination of organizational structure, culture, leadership support, and effective management practices.
Improvisation as “Just-in-time Strategy”
the degree to which composition and execution converge in time
Market Driven Approach
market structure - market behavior - market driven - drives or shapes markets
The Market-Driving Approach, as articulated by George P. Jaworski, Ajay K. Kohli, and Ajith Kumar Sahay, emphasizes the proactive role of organizations in shaping and influencing their markets rather than solely responding to market conditions. This approach goes beyond being market-driven (reacting to market changes) and advocates for organizations actively driving and creating changes in the market environment. The concept was introduced in their paper “Market-Driven Versus Driving Markets,” published in 2000.
Key features of the Market-Driving Approach include:
Proactive Innovation:
Organizations following the Market-Driving Approach actively seek opportunities to innovate and create new markets. They focus on identifying latent needs and unmet customer desires, leading to the development of products or services that customers might not have explicitly articulated.
Strategic Vision:
The approach involves having a strategic vision that guides the organization in shaping the market. Rather than reacting to competitors, organizations adopting this approach set the agenda and take the lead in defining the direction of the market.
Leadership in Value Creation:
Market-driving organizations aim to lead in value creation, often by introducing novel solutions or redefining existing problems. They are not content with incremental improvements but strive to offer groundbreaking products or services.
Customer Co-Creation:
The approach recognizes the importance of involving customers in the innovation process. Organizations actively engage with customers to co-create value, seeking input and feedback in the development of products and services.
Challenging the Status Quo:
Market-driving organizations challenge conventional industry norms and assumptions. They are willing to disrupt existing market structures and create new business models, often redefining how industries operate.
Anticipating Future Needs:
Instead of relying solely on current customer demands, organizations adopting the Market-Driving Approach anticipate future needs. This forward-thinking approach allows them to stay ahead of the curve and shape markets proactively.
Risk-Taking and Experimentation:
Embracing risk and experimentation is integral to the Market-Driving Approach. Organizations understand that not every innovative venture will succeed, but a willingness to take calculated risks is crucial for driving market change.
Long-Term Orientation:
This approach involves a long-term orientation, recognizing that the process of driving markets and creating significant impact may require sustained efforts over time.
In summary, the Market-Driving Approach encourages organizations to take an active, leadership role in shaping markets by proactively identifying opportunities, challenging the status quo, and creating value that goes beyond immediate customer expectations. It represents a strategic mindset that goes beyond mere adaptation to market conditions and emphasizes the organization’s role in driving and shaping its industry.
Approaches for changing market structure
- Construction - Inserting a new element into the industry’s value chain
- Deconstruction - Bypassing a player in the value chain
- Functional change:
− Modification of the role of the players in the market
