The innovation process and corporate ventures Week 4 (INN001, 5 p.)

1. The innovation process and corporate venturesWeek 4(INN001, 5 p.) Lecture on September 22nd and 23rd 2008 Emelie Stenborg

2. Locating R&D (6) • Physical location • Level of corporation/business units/divisions? • In home country/ low-cost countries/ advanced markets? • Funding • Corporation • Division

3. What influences the location of R&D (6) • Technologicl trajectory • Corporate strategy style • Maturity of technologies • Internal/external • Global/local

4. How much should it cost? (6) • R&D • Knowledge building – future • Strategic positioning – competence • Business investment – profit

5. What affects commercialisation? (7) • Technological maturity • Market maturity • Strategic marketing – establishing • Tactical marketing – differentiation

6. Figure 7.1 Technological and market maturity determine the marketing process ©2005 Joe Tidd, John Bessant and Keith Pavitt

7. Differentiation – customer needs, product improvement • High relative quality, good value, product differentiation/brand • Architectural - market leaders, new market segments • Identify similar customers, create for unmet needs • Technological - new applications in existing markets, • Identifying opportunities, replacing technology/product • Complex - co-evolvement of markets and technology • Lead users, long-term commitment, many lag years

8. Why do firms create alliances? (8) • Technological, market and organizational • Shared cost and risk, Economies of scale, time reduction, shared learning • Dangers • Information leakage, loss of control/ownership, conflict

9. Table 8.2 Forms of collaboration ©2005 Joe Tidd, John Bessant and Keith Pavitt

10. Two dimensions of technology accquisition • Characteristics of the technology: • Competitive significance, complexity, codifiability, credibility potential • Organization’s inheritance: • Corporate strategy, capabilities, firm’s culture, management comfort

11. 3 factors affect learning through alliance: • Intent – designing for learning as opposed to accessing resources • Transparency – the firms potential to learn • Receptivity – the firms actual capacity to learn

12. This week • The innovation process model in detail • Search • Select • Implement • Learn • The role of corporate ventures

13. Chapter 9 Managing the internal process

14. Figure 2.1 Simple representation of the innovation process ©2005 Joe Tidd, John Bessant and Keith Pavitt

15. Figure 9.8 The development funnel ©2005 Joe Tidd, John Bessant and Keith Pavitt

16. The need for routines to handle the different phases in the innovation management process ”Innovation management is essentially about building and embedding such routines within the organization – but it is also about reviewing, improving and on occasions replacing them with new and more appropriate ones to cope with what is a constantly changing environment. In other words, it is about building dynamic capability.” (Tidd et al., p. 348)

17. Management of change... • ’Production capacity’ – capital goods, knowledge and labour skills to produce • ’Technological (innovative) capabilities’ – skills, knowledge and institutions that make it possible to generate and manage change in technology (Bell & Pavitt 1997)

18. Table 2.4 Core abilities in managing innovation ©2005 Joe Tidd, John Bessant and Keith Pavitt

19. Table 2.4 Core abilities in managing innovation (continued) ©2005 Joe Tidd, John Bessant and Keith Pavitt

20. Search Scanning the environment (internal and external) for, and processing relevant signals about, threats and opportunities for change

21. ”Search space” • Exploring an environment made up of knowledge about technologies, markets, competitors, etc • Effective routines • Existing search space • Create new search space

22. Signals can be found through… • Technological and organizational change • In general (worldwide + all sectors) • Sector-specific developments • Developments within inter-organizational networks • Developments within the own firm • Market change • Political change • Cultural change

23. Tools for exploring search space • Defining the boundaries of the marketplace • Understanding market dynamics • Trendspotting • Monitoring technological trends • Marketing forecasting • Technological forecasting • Integrated future search • Learning from others • Involving stakeholders • Involving insiders • Mistakes management • Communication and connection

24. Where are the huge markets of tomorrow emerging? • Ex. 1: mobile phone industry (signals initially weak, but a combination of technological and cultural change has enabled it to become a massmarket) • Ex. 2: ”healthy food” industry (education and changing social attitudes have given rise to a huge market for the products of this industry, which was earlier very small)

25. Tomorrow’s market • As a result of change • Technical • Cultural • ”What we know” • Trends • Communication • Customers • Suppliers • Universities • Government • Internal • Competitors

26. Monitoring technological trends • Look i the periphery • Use the internet • Visit conferences, seminars, exhibitions • Building links to providers of knowledge • Suppliers • Universities • Associations • Informal network

27. Looking for ”tipping trends” A sudden change in public perception change how things are done. Discuss: Ex. 1: What about energy use? Could an increasing awareness of environmental pollution and global warming change how we look at and use energy resources?

28. Anticipating the future • Structured techniques for forecasting • Market • Technological • Integretated future search

29. Learning and involving • Employees • Stakeholders • Capture their needs • Lead users/demanding customers • Competitors • Benchmarking • ”Mistakes” • User perspective – throughout the organisation

30. Select Deciding (on the basis of a strategic view of how the enterprise can best develop) which of these signals to respond to

31. Enabling strategy-making • Strategic analysis – what can we do? • Strategic choice – what will we do? • Strategic monitoring – making sure that we over time still do what we want to do

32. Routines to help strategic analysis • Close fit between innovation strategy and the overall business strategy • Estimate the actual capabilities of the firm • The role of intermediaries – consultants who can provide assistance in thinking through innovation strategy • Regional and national government support programmes • IRAP programme (Canada, Thailand and others) • MINT programme (EU) • TEKES counselling scheme (Finland) • Manufacturing Advisory Service (UK) • AMT programme (Ireland)

33. Strategy deployment • Communication and share the strategic analysis – enable people within the firm to understand and commit the framework • To have ’know-why’ and not only ’know-how’ • Especially important when it comes to implementing the idea of continuous improvements! • Often fails – no room for small innovations

34. Strategic choice • No organization can do everything • Portfolio should include on both radical and incremental options • Factors to consider • Risk vs. reward • Familiarity of market and technology • Ease of entry vs. Market attractiveness • Competitive position vs. Market attractiveness • Expected time to reach the market vs. Market attractiveness

35. Building coalitions • Involve different people at an early stage in strategy-making • Across functional boundaries • Suppliers of components and sub-systems • Interaction with regulatory frameworks (product standards, environmental controls, safety legislation, etc.)

36. Implementation • Acquiring the knowledge resources (for example, by creating something new through R&D, market research, etc., acquiring knowledge from elsewhere via technology transfer, strategic alliance, etc.). • Executing the project under conditions of uncertainty • Launching the innovation and managing the process of initial adoption • Sustaining adoption and use in the long term – or revisiting the original idea and modifying it – reinnovation.

37. Enabling effective knowledge acquisition • Generation of knowledge within the firm • Generation of knowledge outside the firm • Technology transfer from external sources • Technology transfer within the firm itself • Small firms and large firms need to make use of external knowledge

38. Table 9.2 Key abilities in technology transfer ©2005 Joe Tidd, John Bessant and Keith Pavitt

39. Developing absorptive capacity • Absorptive capacity – a firm’s ability to take on and make effective use of new knowledge • To use research results effectively, firms need to learn the basic skills of actually doing research! • (Cohen & Levinthal, 1990)

42. Implement • Increasing commitment of resources makes it difficult to change direction • When to stop a project that has been initiated but that seems to be a failure? • Stage model with different ”gates” • At each gate the project has to meet certain well defined criteria – if not it should be stopped

43. Figure 9.8 The development funnel ©2005 Joe Tidd, John Bessant and Keith Pavitt

44. Figure 9.9 Accelerating idea to market - the AIM process ©2005 Joe Tidd, John Bessant and Keith Pavitt

45. ©2005 Joe Tidd, John Bessant and Keith Pavitt

46. More ”good practice” • Up to 70% of a product’s cost is determined at the design stage • ’learning before doing’. • Interplay between designers, makers, sellers and users. • Concurrent working • Proper project structures • Support tools

47. Routines for launch • Customer testing • Test marketing • Developing a marketing strategy • Developing a marketing plan • Developing a support organization

48. Launching process innovation • Internal market • Countinuos cycles of adaption • Organizational development (OD) • Clear management strategy • Communication/open climate • Early involvment • Clear targets • Invest in training

49. Learn • Reflection • Conceptulize • Experimenation • Documentation of project

50. Chapter 10 Learning through corporate ventures