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59 Cards in this Set
- Front
- Back
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Innovation Strategy (definition) |
1) defines the role of innovation 2) sets the direction for innovation activity 3) guides decisions on how resources are to be used to meet the business’ objectives of innovation, creating value and competitive success |
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Why is Innovation Strategy needed? |
It is needed as a roadmap for guiding and shaping change and making sure that the limited supply of resources is used wisely |
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Why should innovation strategy feature in a firm’s corporate strategy? |
the strategy for managing innovation is more meaningful and relevant, in the context of a well-formulated business strategy |
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How should innovation strategy feature in a firm’s corporate strategy? |
• It should feature with the aim of accumulating firm-specific knowledge which is an essential feature of competitive success • decisions about innovation and technology can be linked directly to business goals |
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What factors influence the ability of a firm to develop and create value through innovation? |
• the national system of innovation • its power and market position • the capability and processes • its ability to to identify and exploit external sources of innovation |
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What are the 3 elements of the strategic management model? |
• strategic analysis • strategic implementation • strategic choice |
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Explain Strategic Analysis (element of the Strategic Management) |
Understanding the: • internal| competencies, assets and capabilities of the organisation • external| the environment it operate in • goals + expectations| ‘...of the people’ |
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Explain Strategic Choice (element of the Strategic Management) |
This covers the broad choices that the organisation makes about its activities |
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Explain Strategic Implementation (element of the Strategic Management) |
the resources, organisation and management processes that must be put together to implement the strategy |
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The two most influential schools of thought on strategy thinking |
Ansoff (1965) - Rationalist Mintzberg (1987) - Incrementalist |
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what style is the rationalist approach mimic? |
Military style |
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What are the 3 stages of the ‘Rationalist’ strategy approach? |
1) Appraise/Evaluate 2) Determine 3) Act |
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Explain the stages of the Rationalist Strategy approach |
1. Evaluate = describe, understand and analyse environment 2. Determine = determine the course of action in light of analysis 3) Action = carry out the decided course of action |
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What tool is used to help at stage 1 of the Rationalist Strategy? |
SWOT Analysis |
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Limitations of the Rationalist Strategy approach |
• a focus on competitors, not customers • ‘enemy’ focus results in strategies around establishing monopoly power, at the expense of targeting a profitable niche market and committing to customer needs • difficult to identify internal strengths + weaknesses • the environment is complex and fast-changing - hard to predict the future • managers often disagree on a firm’s strengths and weaknesses (due to imperfect knowledge) • strategic objectives do not match internal capabilities |
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Explain the reasoning behind the Incrementalist Strategy approach |
• accepts and embraces imperfect knowledge and the limited ability to predict the present and future • hence, the Firm must be ready to adapt its strategy in light of new information and understanding (which it must consciously seek out) |
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Explain the imperfect knowledge of the firm |
Incremental strategies recognise a firm’s imperfect knowledge concerning: • its environment • its own strengths and weaknesses • the rate and direction of future change |
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Explain the Incrementalist Strategy approach procedure |
1) take deliberate steps to objective 2) measure + evaluate the effects of the steps (changes) 3) adjust the objective (if necessary) and decide on the next step (change) |
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Demonstrate the Incrementalist Strategy approach with a ‘symptom’ |
symptom >> diagnosis >> treatment >> diagnosis >> adjust treatment >> cure |
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Demonstrate the Incrementalist Strategy approach with a ‘design’ |
design >> develop >> test >> adjust design >> retest >> operate |
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Why do we choose the ‘incrementalist strategy approach’ |
Under conditions of complexity and continuous change, the incrementalist approach is more efficient |
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Characteristics of ‘Incrementalist Strategy’ |
• Author: Mintzberg (1987) • resource/capabilities based • bottom-up • inside-out • variation and selection • cumulative • dynamic/learning |
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Characteristics of ‘Rationalist Strategy’ |
• author: Ansoff (1965) • Rational/Planning • top-down • outside-in • choice • ahistorical • static |
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What are the ‘Implications for Management’ |
1) practice of corporate strategy 2) process of strategy formation 3) successful management practice is never fully reproducible |
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Explain ‘practice of corporate strategy’ (Implications for Management) |
• corporate strategy should be constantly evolving i.e. learning organisation • how to cope more effectively with complexity and change |
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Explain ‘process of strategy formation’ (Implications for Management) |
• because of uncertainty, a range of future need to be explored • ensure broad participation and informal channels of communication • encourage using multiple sources of information and debate • be open to change strategies in light of new evidence |
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Explain ‘successful management practice is never fully reproducible’ (Implications for Management) |
• it is hard to identify all necessary ingredients of success • no two conditions are ever the same e.g. country, skills, sector etc. |
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Tools of strategic analysis |
• SWOT • PESTLE • Porter’s 5 Forces |
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Uses for SWOT analysis |
• understand competitive forces around the firm • anticipate change • adjust to cope with anticipated change • endure all component parts are co-ordinated |
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What are Porter’s 5 Forces? |
• threat of new entrants • bargaining power of buyers • threat of substitute products • bargaining power of suppliers • rivalry among existing competitors |
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What are the basic ideas behind Porter’s 5 Forces? |
• Porter saw these as key sources of competitive pressure within an industry • he saw these as superior to the ‘fleeting’ factors of: industry growth rates, govt. interventions and technological innovations • he viewed these factors (above) as temporary and the ‘five’ as permanent parts of an industry’s structure |
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What are the limitations of Porter’s 5 Forces? |
• underestimates the power of technological change to transform industrial structures - particularly in dynamic markets • overestimates the ability of managers to decide and implement strategies • underestimates the constraints on individual firms in choosing innovative strategies (to due Porter’s treatment of corporate technology and organisation) • focuses on competition from competitors. Doesn’t consider strategies like strategic alliances, electronic linking of information systems along a value chain, virtual enterprise-networks and others |
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Explain the problems in Porter’s framework concerning the implementation of strategy |
• specialised large organisations need to be able to learn + change in response to new (and often unseen) opportunities and threats. This takes time and needs conscious management • technological and organisational changes contradict Porter. The benefits of non-adversarial relations with suppliers and customers has become apparent |
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What are the results of opportunities always emerging from advances in knowledge? |
• firms and technologies do not always fit tidily into pre-ordained industrial structures • technological advances can increase opportunities for profitable innovations in ‘mature sectors’ e.g. tech innovations in banking • firms do not become stuck in the middle as Porter predicted |
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Main authors of Blue Ocean Innovation Strategy |
Chan Kim and Mauborgne (2005) |
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Blue Ocean Innovation Strategy (definition) |
= all potential markets yet to exist and must be created = created where a company creates value in reducing cost and offering new/more value |
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What is the difference between Blue and Red Ocean strategies concerning market space |
• Red: compete for existing market space • Blue: creates uncontested market space |
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What is the difference between Blue and Red Ocean strategies concerning competition |
• Red: beat the competition • Blue: Male the competition irrelevant |
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What is the difference between Blue and Red Ocean strategies concerning demand |
• Red: exploit existing demand • Blue: create and capture new demand |
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What is the difference between Blue and Red Ocean strategies concerning the value-cost trade off |
• Red: make the value-cost trade off • Blue: break the value-coat trade off |
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What is the difference between Blue and Red Ocean strategies concerning ‘generic strategy’ |
• Red: Pursue low-cost or differentiation • Blue: Pursue both low-cost + differentiation |
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Value Innovation (definition) |
= a focus on making the competition irrelevant by creating a leap in value for buyers and your company to open up new and uncontested market space |
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Value Innovation (definition- formula) |
= cost savings + buyer value • eliminate and reduce the factors an industry competes on (cost savings) • raising and creating the elements the industry has never offered |
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Innovation Leadership (definition) |
= where firms aims at being first to market, based on technological leadership = first mover |
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Requirements to be a ‘innovation leader’ |
• commitment to creativity, risk-taking • close links with new information sources • close links to customer responses and needs |
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Innovation Followership (definition) |
= where firm’s aim at being law to market, based on learning/imitating from the leader’s experiences |
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Requirements of ‘innovation followership’ |
• commitment to competitor analysis and intelligence, reverse engineering, learning + cost-cutting in manufacturing |
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Why chase/aim for ‘first mover advantage’? |
potentially rewarding because market pioneers enjoy advantages based on early market entry |
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Sources of First Mover Advantage |
Consumer-based entry barriers • in being first, consumers will favour it because they know it works • pioneer has influence over how consumer evaluate attributes and may become the ‘standard’ for the product category • pioneer may be able to lock-in consumers by creating high switching costs |
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Advantages of being a First Mover |
• pioneer reputation • capture market share • early learning curve benefits • definition of standards • establish entry barriers (e.g. patents) • dominate supply and distribution chains • earn ‘monopoly’ profits |
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Disadvantages of being a First Mover |
• free-rider effect: competitors copy technology with lower costs • technological discontinuities: late entrant uses superior technology to produce a better product • shifts in consumer tastes: late entrant adopt a new positioning before pioneers • incumbent inertia: pioneer is deterred from making the investments needed to remain market leader |
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Why might firms be better off entering late? |
If late entrants can leapfrog pioneers with: • superior technology • better product quality • better customer service • better brand image |
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Strategies of ‘followers’ |
1) based on competencies outside R&D and new product e.g. superior distribution, better customer service 2) focus on major new product development projects as to compete with pioneer |
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Do blue ocean strategies = high growth? |
Not necessarily |
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What do ‘Blue Ocean’ and ‘First Mover’ have in common? |
Both strategies focus on the creation of new markets through differentiation, and claim that monopoly profits flow from this |
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Why choose to be a follower/‘fast second’? |
• First mover is too risky, whereas some see ‘fast second’ to be optimum |
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What is Buisson and Silberzah (2010) argument? |
• research 24 innovation cases • found neither first mover or blue ocean strategies to be superior • argue market domination is achieved by using four breakthroughs (together or separately) |
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What are the ‘4 Breakthroughs’? (Buisson and Silberzah, 2010) |
• technological - new tech that end up dominating the incumbent • business model - creating value in a new way by exploiting business opportunities • design - new design without major change (related to interface between customer and product) • process - a new way of doing things |
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Summarise the work of Lindica et al. (2012) |
• Blue Ocean Strategies do not equal high growth • high growth comes from being the first to develop + exploit the market E.g. Amazon did not create bookselling but were the first truly develop and exploit the market • significant factors of high growth: value or business model innovation |
