Innovation management
and strategy
Notes of the recordings
Complementary to your lecture notes
KU Leuven
,Lecture 1
Part 1: technology and innovation landscape (1-2 questions: 40%)
Part 2: how does it look at the level of the firm? (1 – 2 questions: 40%)
Part 3: operational issues specific for innovation management (1 question: 20%)
Required readings! You must understand the core message.
Innovation is a very broad field, with a lot of contributions.
Innovation is an engine behind wealth creation.
Solow: knowledge production function: one of the first to recognize that if you include technological
progress parameter, the explanatory power increases massively.
Silicon Valley: create a lot of value, also for the community they’re situated in
BlackBerry -> Apple: innovative new products boost the value of a company; other companies like
Stimorol (mature industry) and Danone: easily sell the product for a higher price.
At what level we look? Country-region-firm: if you’re successful, you will create value and wealth and
therefore it is such a big topic.
What is happening today? Where are we heading to?
- Windmills
- Electric cars
What about value (creation): economic performance
Baumol-paper and Schumpeter: waves of economic activity; what drives the economy to higher
levels of performance.
The engine behind wealth creation is innovation, why is behind that?
Schumpeter I: (heroic) entrepreneurs and imitators (mangers)
You are creating something, and it might have a destructive component: it requires serious
efforts, resistance, this complexity needs exceptional individuals.
There are so many good ideas; the scarce resource is the human capability is to translate an
idea into an economic reality.
Science and technology are not the business of the entrepreneur.
E.g., Ford, Edison, …
E.g., Bezos, Musk, …
Schumpeter II: the role of entrepreneurial wealth creation, also large firms can internalize (R&D
department) the function and can become drivers of value creation.
There are both very recognizable!
If we look at innovation, we will have to look at two types of actors:
1) Entrepreneurs: who might bring in new products and disrupt the existing state of affairs
2) Large companies: who have created power houses in terms of technology development and
innovation and use that to appropriate and create value in markets.
Is there role equal? Substitutes or complements? COMPLEMENTARY
Smaller entities/ entrepreneurs are often better equipped to introduce real novelty and more radical
innovations. RADICAL
Large firms are very strong in innovation which build further (incremental) and refining a certain
platform. INCREMENTAL = SUSTAINING INNOVATIONS
, Lecture 2
Why is innovation important? Who is behind this innovation? Entrepreneurs + established firms:
Baumol says they have a complementary role.
Abernathy & Utterback model
- Fluid: battle
- Transitional: a certain design meets the average preferences of the customer at a good price
- Specific
Different teams try to explore this innovation (cars): variety to meet the functional requirements
Tesla was not the first manufacturer to produce electrical cars.
Industry: how many firms are there? In the beginning, the number goes up: technical opportunities
attract entrepreneurs and compete on the new emerging market, but what happens once maturity
sets in? At a certain moment of time, the number of companies active in the industry goes down:
why? Competition amongst all the different product variations: safety, speed, functionality but also
the price: everyone competes for attention and market share DOMINANT DESIGN: than these
manufacturers gain in market share.
Economies of scale are very critical: if I make more volume of the product, my marginal cost goes
down; if these occur, they will be able to produce on a larger scale and will be able to product at a
lower cost.
But this does not mean that competition goes away, but they will compete with process innovations
(and not product innovations), and this favors big companies.
Bikes: there used to happen many accidents – people said, this is not safe! But in terms of mobility
this is a very good invention: legislation like woman cannot ride a bike because they wear skirts.
The dominant design of the bicycle solves many issues: how? Rubber air tires: complement the
architecture of the bike.
SCOT = Social Construction of Technology
Interpretative flexibility (fluid phase): every artefact introduces means something different for
different social groups and they raise their voice and have influence (relevant social groups)
Problems and conflicts: everywhere you see with the rise of new innovations, you will see issues.
NEVER FORGET closure is not permanent.
Also, when cars were introduced, they were welcomed as a green innovation: the main form of
transport was horse-powered vehicles, and these beasts had a huge impact on people’s health etc.
Technology push versus market pull -> stay close to the customer and listen to the customer and be
successful on innovation on the market.
Ford: “if I would have listened to the customer, they would have asked me for a faster horse”
Listening to your customer is critical to be successful.
High velocity times: Bart Van Looy disagrees because for the car and telephone it took almost a
century that 85% have this technology.
