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Markets Versus Hierarchies

Explore the concept of internal markets within corporations to allocate and attract resources for innovation. Analyze Shell's GameChanger as a potential internal market creator and discuss the six challenges faced in establishing such markets. Discover how markets for ideas, capital, and talent can foster radical innovation and explore different strategies for resource allocation and attraction.

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Markets Versus Hierarchies

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  1. Markets Versus Hierarchies • Hierarchies are for allocating resources (protect the core). • Markets are for attracting resources (transform the core). • How to create internal markets for ideas, capital, and • talent within the corporation? • Does Shell’s GameChanger qualify as an internal market • creator?

  2. GameChanger

  3. Six Tyrannies • Served Markets • Established Business Model • Current Strategy • Organization Structure • Financial Hurdles • Language

  4. Radical Innovation and Lines of Business • Innovation Within Existing Businesses • Innovation in the “White Spaces” Between a Firm’s Existing Businesses • Innovation Outside a Firm’s Current Strategic Context

  5. Market for Ideas • Change the risk (e.g., downsizing)/reward ratio (e.g., equity) • Increase exposure to more internal (or external) investors • Allow new voices to be heard. Not only the upper echelons. • New ideas are less likely to come from the top • Virgin’s Group’s “speak up”culture

  6. Market for Capital • Different financial screening criteria • Different attitudes about investment size • Different risk/rewards assessment (forgone versus lost • dollars) • Need alternate capital approval route (to custodians • of the current business model) • Create new businesses or business models?

  7. Market for Talent • Holding employees captive -- what encourages this? • Create an open market for talent -- Shell • Design career paths across business -- Disney • Create incentives and rewards for mobility, remove • migration barriers

  8. Resource Allocation Versus Attraction Resource Allocation Resource Attraction Incremental Innovation Radical Innovation Risk Averse Opportunity Focused

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