This summary includes all mandatory articles for the course Developing for Markets. The following articles are included:
1.1. A multi-dimensional framework of organizational innovation: a systematic review of the literature
Crossan & Apaydin
2010
1.2. The elements of value: measuring – and deli...
1.1. A multi-dimensional framework of organizational innovation: a systematic review of the
literature
Crossan & Apaydin
2010
Introduction
- Innovation capability is the most important determinant of firm performance.
- Innovation: production or adoption, assimilation, and exploitation of a value-added novelty
in economic and social spheres; renewal and enlargement of products, services, and
markets; development of new methods of production; and establishment of new
management systems. It is both a process and an outcome.
- Three framework components:
o Innovation leadership.
o Innovation as a process.
o Innovation as an outcome.
Results
Scoping out the theoretical field
- There is lack of a coherent and explicit theoretical base.
- Learning and knowledge theories seem to be quite prominent, but other management
theories appear to be underutilized.
Synthesis
General approach
- We adopt a sequential view for our framework whereby a set of determinants leads to our
phenomenon of interest: innovation.
Dimensions of innovation
- Two roles of innovation:
o Innovation as a process.
o Innovation as an outcome.
- Ten dimensions of innovation:
o Innovation as a process (how?):
Driver: resources / market opportunity.
Source: invention / adoption.
Locus: firm / network.
View / direction: top-down / bottom-up.
Level: individual / group / firm.
Nature: tacit / explicit.
o Innovation as an outcome (what?):
Form: product / service/ process / business model.
Magnitude: incremental / radical.
Referent: firm / market / industry.
Type: administrative / technical.
Nature: tacit / explicit.
- Product / service innovation: the novelty and meaningfulness of new products introduced
to the market in a timely fashion.
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, - Process innovation: the introduction of new production methods, new management
approaches, and new technology that can be used to improve production and management
processes.
- Business model innovation: how a company creates, sells, and delivers value to its
customers.
- Radical innovation: induces fundamental changes and a clear departure from existing
practices in the organization.
- Incremental innovation: a variation in existing routines and practices.
- Technical innovation: products, processes, and technologies used to produce products or
render services directly related to the basic work activity of an organization.
- Administrative innovation: indirectly related to the basic work activity, more directly related
to its managerial aspects.
Determinants of innovation
- Three theoretical lenses were selected to consolidate the findings:
o Upper echelon theory supports innovation leadership.
o Dynamic capabilities theory supports managerial levers.
o Process theory supports business processes.
- Innovation leadership: a meta-construct consolidating individual and group level variables.
- Upper echelon theory: leaders’ behaviors are a function of their values, experiences, and
personalities. Connects agent’s characteristics and behaviors with organizational outcomes.
Composition and characteristics of the top management team yield a stronger explanation
of organizational outcomes than a leader’s characteristics alone.
- Managerial levers: meta-construct consolidating firm-level variables supporting innovation.
Link individual or group determinants with organizational factors and provide the necessary
connection between leadership intentions and organizational results. Five types:
o Missions / goals / strategies: establish direction for the organization.
o Structures and systems: provide necessary support for innovation practices.
o Resource allocation: provide necessary support for innovation practices.
o Organizational learning and knowledge management tools: help maintain
innovation processes.
o Culture: help maintain innovation processes.
- Dynamic capabilities theory: different resource bases among firms provide the source of
variation for innovations. The firm’s task is to combine exploitation of the existing resources
while exploring new opportunities. As continuous changes in the environment and
competition may lead to creative destruction of the currently valuable resources, a firm
should also develop new and valuable resources and capabilities.
- Business processes: meta-construct consolidating process-level variables. A category of
concepts or organizational actions, such as rates of communications, work flows, decision-
making techniques, or methods for strategy creation. Five business processes:
o Initiation & decision-making: awareness and attitude towards new ideas.
o Portfolio management: making strategic, technological, and resource choices that
govern project selection and the future shape of the organization.
o Development & implementation: trials and production.
o Project management: concerned with the processes that turn the inputs into a
marketable innovation.
o Commercialization: making the innovative process or product a commercial success.
- Organizational process theory: how organizational processes transform inputs into outputs.
- See image in article.
Discussion
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,Innovation and firm performance
- Linking innovation outcomes with performance is critical in addressing whether and how
innovation creates value.
- Understanding how innovation capability delivers innovation outcomes and ultimately firm
performance is paramount to managing firm innovation.
Innovation and entrepreneurship
- Entrepreneurship and innovation are intrinsically related as both involve the processes of
discovery, evaluation, and exploitation of opportunities (entrepreneurship) and novelty
(innovation).
Towards a multi-level approach
- A promising way of combining micro and macro levels of theorizing might be an application
of a recently emerged practice-based view (PBV), which could combine the individual, firm,
contextual, and process variables prevalent in the literature.
- Practice-based view (PBV): considers the activities that organizational actors conduct (micro
level), their consequences for organizational outcomes (macro level), and the feedback loop
from contextual and organizational variables back to the actors.
- Three elements of innovation can be isolated:
o Practice: the theories that can guide this activity, such as shared routines of
behavior, norms, and procedures that can be altered according to the activity in
which they are used.
o Praxis: actual activities or theories-in-use that constitute the fabric of innovation.
o Practitioners: those who actually perform praxis and affect innovation.
1.2. The elements of value: measuring – and delivering – what consumers really want
Almquist, Senior & Bloch
2016
- When customers evaluate a product or service, they weigh its perceived value against the
asking price.
- What consumers truly value can be difficult to pin down and psychologically complicated.
- The amount and nature of value always lie in the eye of the beholder.
- The elements of value pyramid is a heuristic model, in which the most powerful forms of
value live at the top. To be able to deliver on those higher-order elements, a company must
provide at least some of the functional elements required by a particular product category.
- Four levels in the pyramid:
o Functional.
o Emotional.
o Life changing.
o Social impact.
- See image in article.
Growing revenue
- Hypothesis 1: companies that perform well on multiple elements of value would have more
loyal customers than the rest confirmed.
- Hypothesis 2: companies doing well on multiple elements would grow revenue at a faster
rate than others confirmed.
Patterns of value
- Three patterns of value creation:
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, o Some elements do matter more than others.
Quality affects customer advocacy more than any other element; must be at
a certain minimum level.
o Consumers perceive digital firms as offering more value.
o Brick-and-mortar businesses can still win on certain elements.
Putting the elements to work
- Companies can improve on the elements that form their core value, which will help set them
apart from the competition and meet their customers’ needs better.
- Companies can add elements to expand their value proposition without overhauling their
products or services.
- Companies can refine their product designs to deliver more elements.
- Companies can use the elements to identify where customers perceive strengths and
weaknesses.
- The broadest commercial potential of the elements of value model currently lies in
developing new types of value to provide.
- It’s not always obvious which elements to add.
Getting started
- Companies can establish a discipline around improving value in some key areas:
o New product development: stimulate ideas for new products and for elements to
add to existing products.
o Pricing: higher prices change the consumer value equation. When raising prices,
firms should consider the addition of value elements.
o Customer segmentation: analyze what each customer group values and then
develop products and services that deliver those elements.
Consumer’s automotive preferences change during evaluation
- Consumer preferences change by self-reflection during the buying process.
- If consumers’ preferences change after thinking deeply about their preferences, products
designed based on preferences stated prior to self-reflection may not reflect consumers’
true preferences.
- True preferences: preferences consumers use to make decisions after a serious evaluation
of the products that are available on the market.
- A commonly used method, where consumers are asked to articulate their preferences, is
sensitive to self-reflection.
- More structured methods themselves induce self-reflection.
Related theories from consumer psychology
- Four major tenets of modern consumer behavior theory:
o Consumers construct their decision rules / preferences based on the choice context.
o Experts’ decision rules are different and more accurate than novices’ decision rules.
o Consumers, when faced with a choice among many products or based on many
features, simplify their decision process with:
Two-step consider-then-choose processes.
Simplified decision rules.
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