STRATEGY AND INNOVATION SUMMARY
CONTENTS
Chapter one: Introduction to technological innovation...................................................................................5
Chapter two: why and How innovation happens............................................................................................ 6
Creativity...............................................................................................................................................................6
Sources of innovativeness.....................................................................................................................................6
Employee innovation.........................................................................................................................................6
Research and development...............................................................................................................................6
Linkages with external entities..........................................................................................................................7
Universities and government-funded research................................................................................................7
Innovation in collaborative networks...................................................................................................................7
Chapter three: Types and patterns of innovation............................................................................................7
Different types of innovation................................................................................................................................7
Product innovation versus Process innovation.................................................................................................7
Radical innovation versus incremental innovation...........................................................................................7
Competence-enhancing versus competence-destroying innovation...............................................................8
architectural innovation versus component innovation...................................................................................8
Introducing the technology S-curve......................................................................................................................8
Technology cycles..................................................................................................................................................8
Fluid phase........................................................................................................................................................9
Specific phase....................................................................................................................................................9
Completing the circle........................................................................................................................................9
Chapter four: Who wins the market’s game?.................................................................................................. 9
WHy dominant designs are selected.....................................................................................................................9
Dimensions of technology value.........................................................................................................................10
Are such winner-take-all markets good for society?..........................................................................................10
Christensen 1996: The Failure of Leading Firms............................................................................................ 10
In a nutshell.........................................................................................................................................................10
Types of technological change............................................................................................................................11
Six steps to the disruptive technological innovation...........................................................................................12
Ofek 2010: Are You Ignoring Trends That Could Shake Up Your Business?.....................................................12
The three different strategies.............................................................................................................................12
#1: Infuse and Augment..................................................................................................................................12
#2: Combine and Transcend............................................................................................................................12
, #3: Counteract and Reaffirm...........................................................................................................................13
Which steps to take in order to incorporate trends effectively..........................................................................13
1: Identify the trend that matter.....................................................................................................................13
2: Conduct two separate explorations............................................................................................................13
3: Compare the results....................................................................................................................................13
4: Isolate potential strategies..........................................................................................................................13
Chapter eight: Collaboration strategies........................................................................................................ 13
Why would you go solo?.....................................................................................................................................13
Why would you cooperate?................................................................................................................................14
How can you cooperate?....................................................................................................................................14
Strategic alliance.............................................................................................................................................14
Joint ventures..................................................................................................................................................15
Licensing..........................................................................................................................................................15
Outsourcing.....................................................................................................................................................15
Collective research organizations...................................................................................................................15
How should you cooperate?................................................................................................................................16
Choosing and monitoring the right partner........................................................................................................16
Finding the right partner.................................................................................................................................16
Monitoring and governing your partner.........................................................................................................17
Chapter nine: protecting innovation............................................................................................................. 17
All the types of protection...................................................................................................................................17
Patents.............................................................................................................................................................17
Trademarks and servicemarks........................................................................................................................18
Copyrights........................................................................................................................................................18
Trade Secrets...................................................................................................................................................18
the use of protection mechanisms......................................................................................................................18
Its effectiveness...............................................................................................................................................18
Its advantages..................................................................................................................................................19
Weiblen 2015: How large corporations cooperate with start-ups..................................................................19
The traditional models of involving startups......................................................................................................19
Corporate venture capital...............................................................................................................................19
Corporate incubation......................................................................................................................................20
New models of engaging with startups..............................................................................................................20
Outside-in startup programs...........................................................................................................................20
Inside-out platform startup programs............................................................................................................21
What all of this means........................................................................................................................................21
To equity or not to equity...............................................................................................................................21
Standardization...............................................................................................................................................21
The major challenges......................................................................................................................................21
Lichtenthaler 2011: Open innovation........................................................................................................... 23
What is open innovation?...................................................................................................................................23
, How does innovation work?................................................................................................................................23
Looking at the process of open innovation at each level....................................................................................23
The firm level...................................................................................................................................................23
THe (single innovation) project level..............................................................................................................23
The individual level..........................................................................................................................................24
Bridging levels.................................................................................................................................................24
Management implications..................................................................................................................................24
Wang 2016: How CSR research changed....................................................................................................... 24
Research trends in CSR research.........................................................................................................................25
Directions for future research.............................................................................................................................25
Van der Have 2016: Social innovation........................................................................................................... 25
Freeman 2002: Stakeholder theory.............................................................................................................. 26
Two definitions....................................................................................................................................................26
Why stakeholder theory is something libertarian..............................................................................................26
The instrumental thesis...................................................................................................................................26
The normative thesis.......................................................................................................................................27
Towards a definition of stakeholder theory........................................................................................................27
Boudreau 2012: platforms for software innovation......................................................................................27
How innovation is shaped on these platforms....................................................................................................27
Results.................................................................................................................................................................28
Teece 2010: Business model innovation....................................................................................................... 28
Part one: adding competitive strategic analysis.................................................................................................29
Part two: capturing innovation into your business model..................................................................................29
Part three: barriers against imitation.................................................................................................................30
The ending quotes...............................................................................................................................................30
Chapter eleven: Managing new product development process.....................................................................31
characteristics of a new product development process......................................................................................31
Maximizing fit with customer requirements...................................................................................................31
Minimizing development cycle time...............................................................................................................31
Controlling development costs.......................................................................................................................31
Sequential or parallel development................................................................................................................31
Project champions...........................................................................................................................................32
Involving consumers and suppliers in the process.........................................................................................32
Tools for improving new product development process.....................................................................................32
Stage-gate processes.......................................................................................................................................32
Quality function deployment..........................................................................................................................32
Design for manufacturing................................................................................................................................33
Failure modes and effects analysis..................................................................................................................33
, Computer-aided design...................................................................................................................................33
MEasuring new product development performance..........................................................................................33
Chapter twelve: New product development teams.......................................................................................33
Constructing teams.............................................................................................................................................33
Team size.........................................................................................................................................................33
Team composition...........................................................................................................................................33
Structuring teams................................................................................................................................................34
Managing teams.................................................................................................................................................35
Leadership.......................................................................................................................................................35
Administration.................................................................................................................................................35
Virtual teams...................................................................................................................................................35
Leonard-Barton 1992: Core capabilities........................................................................................................ 35
Interactions between the good and bad things..................................................................................................36
Effect on projects............................................................................................................................................36
Effect on core capabilities...............................................................................................................................36
Hoyer 2010: cocreation with the cosumer.................................................................................................... 36
COnsumer motivators.....................................................................................................................................37
Firm impediments to cocreation.....................................................................................................................37
Firm stimulators for cocreation.......................................................................................................................37
Cocreation in each step of the process...............................................................................................................37
The ideation phase..........................................................................................................................................37
The commercialization phase..........................................................................................................................37
The oucome phase..........................................................................................................................................38
Lecture 1: Why look at technological innovation.......................................................................................... 38
Diffusion..............................................................................................................................................................38
Determinants of diffusion...............................................................................................................................39
Lecture 2: dynamics of innovation................................................................................................................ 39
Determinants for innovations.............................................................................................................................39
How an industry evolves.....................................................................................................................................40
Why mature markets converge to a single dominant design.............................................................................41
Important notes on the tesla case......................................................................................................................42
Lecture 3: Innovation governance and protection.........................................................................................42
Governance structures and strategies................................................................................................................43
Property rights protection...................................................................................................................................44
Notes on the MP3 case.......................................................................................................................................44
Lecture 4: TOMTOM..................................................................................................................................... 44
,Lecture 5: What is the social responsibility of corporates?............................................................................44
The business of business: from invisible hand to CSR.........................................................................................44
Developments within CSR...................................................................................................................................45
Social innovation as a tool for CSR......................................................................................................................45
Lecture 6: Business model innovation.......................................................................................................... 45
Introducing the business model..........................................................................................................................45
What business models exist?..............................................................................................................................46
Pricing models.................................................................................................................................................46
Imitating business models...............................................................................................................................47
Platform business models...................................................................................................................................47
Characteristics of successful platforms...........................................................................................................48
Categories of platforms...................................................................................................................................48
Getting to a platform.......................................................................................................................................48
Platform revenue models................................................................................................................................48
Lecture 7: Guest product manager............................................................................................................... 49
CHAPTER ONE: INTRODUCTION TO TECHNOLOGICAL INNOVATION
This chapter is relatively approachable. There are a few essential parts though that are needed to understand
the rest of the book.
First of all, it is important to understand that technological innovation concerns the act of introduce a new
product, method or material for your commercial process. In any way, something in the entire process of
creating a commercial product changes. This is especially becomes important when you consider that due to
globalization, all markets are highly competitive and saturated with cheap products. Technological innovation
thus provides your firm with the necessary competitive advantages.
Second, it is vital to get that such an innovation also brings with it some externalities (benefits or costs to non-
related others). These benefits and costs are thus always implicit with the innovations you make.
Third, technological innovation needs to be managed. In practice this means that there are multiple steps that
need to be taken when something is being innovated. These steps broadly boil down to:
1. Understanding the industry dynamics of technological
innovation within a firm. You should always be aware of
where the innovation in your company comes from and
how this works in relation to your market’s ecosystem.
2. Formulating and understanding your firm’s techological
innovation strategy to make sure that the technological
innovation is well managed and has potential in the future.
3. Being able to successfully implement your strategy within
your company and dealing with all the dynamics put
forward by such implementation.
,You can see how this is forwarded by the author to the right. See for example that there are some important
dynamics as well. While the understanding of the dynamics of innovation is given, there is a feedback loop from
the implementation towards the formulation of the strategy!
CHAPTER TWO: WHY AND HOW INNOVATION HAPPENS
Most people consider innovation to happen at the
individual or firm level. A person invents something, or an
R&D department designs a wholly new product. We
however tend to underestimate the vitality of links
between different actors in an ecosystem. These links
provide the primary source of innovation for companies
often!
CREATIVITY
Everything starts with an idea, which is preceded by creativity. Such a creative idea should be both novel as it
should be useful. Of course, individuals can be creative and there are certain traits that are closely linked to
creative behaviour (such as self-efficacy and risk-taking). However, we are more interested at creativity at the
organisational level.
Organizational creativity is of course still dependent on individual creativity. The organizational creativity
however also encompasses all the necessary structures and social ecosystems that are at work within a firm
and allow for the fostering of such creativity. The easiest way of spurring organisational creativity is by doing
some good old-fashioned idea collection via e.g. an idea box. It is effective and inexpensive so it’s good. It
however does not end there…
SOURCES OF INNOVATIVENESS
EMPLOYEE INNOVATION
Within firms, innovation often happens with those employees that have an intrinsic motivation to solve a
problem. Most innovation will of course be on the basis of market demands, but those employee innovations
that succeed usually result into significant successes. Especially in new or still emerging markets,
user/employee innovation has proven to be quintessential to gain competitive advantage or even establish the
market itself.
RESEARCH AND DEVELOPMENT
Obvious of course, but R&D is still the leading source of innovation within a firm. The name of these
departments is twofold. On one hand it performs research, which we can split up into:
Basic research: research with no specific commercial purpose, mainly aimed at exploring a market
This is also referred to as a science-push model: information from the research results into a market
Applied research: research with a specific commercial benefit
This is also referred to as a demand-pull model: research and innovation is driven by market
demand.
On the other hand, the department develops which basically means that the department applies the
knowledge they gathered from their research to the commercial process.
,LINKAGES WITH EXTERNAL ENTITIES
A firm can cooperate with customers, suppliers and even competitors to source innovation. This will be mostly
discussed in chapter eight, but it is important to know that this occurs. Most firms consider their users a vital
source of information for innovation. Moreover, do firms work together, even when they are competitors,
because some ‘basic’ innovations that cannot create competitive advantage are then produced cheaper. It is up
to every firm to determine the balance between external and internal sources of innovation.
UNIVERSITIES AND GOVERNMENT-FUNDED RESEARCH
Lots of gibberish here, but most vital is it to understand that there are instances funded by the government to
spur innovation and cooperation between firms. A lot of firms actually acknowledge that these so-called
incubators (which sponsor start-ups) and technology-transfer offices (subsidized cooperation) have been
essential to the innovation of new products.
INNOVATION IN COLLABORATIVE NETWORKS
The parts from above already show that there is an increasing attention to collaborating. These increasing
collaborations result in the formation of clusters. These clusters, which can take on any geographical size, are
characterized by having mutual suppliers, proximity to each other and a high level of knowledge-exchange
between all firms. This exchange of knowledge (complex and tacit) is vital to the clusters and it is up to the firm
to find the right balance of knowledge exchange. Exchange too little and you may miss out on major
innovations; exchange too much and you may lose your competitive advantage. Being within such a cluster
thus has major benefits to your business as you can also profit from knowledge spill over (through patents for
example). There are even opportunities for people to become ‘knowledge brokers’ and be central to the
exchange of knowledge.
CHAPTER THREE: TYPES AND PATTERNS OF INNOVATION
DIFFERENT TYPES OF INNOVATION
Context Either… , or…
Where does the innovation happen? Process innovation Product innovation
How novel is the innovation? Incremental innovation Radical innovation
What is done with existing Competence-enhancing Competence-destroying
knowledge? innovation innovation
Where in the product is innovated? Component innovation Architectural innovation
PRODUCT INNOVATION VERSUS PROCESS INNOVATION
This is as obvious as it sounds. On one hand you can innovate the actual output of a company and on the other
hand you can innovate in the way it is actually realized. It is however not dichotomous or something. No, rather
these two go hand in hand. Most of the times you will first have to innovate in the process to actually be able
to innovate in the product. That is why the term ‘innovation’ is also used interchangeably with both the
product and the process rather than that it is mentioned every time what it’s for.
RADICAL INNOVATION VERSUS INCREMENTAL INNOVATION
, Both of these are on the outer rim of a spectrum that shows how much novelty there is to an innovation, or
how much it represents a departure from existing practices. Sometimes it is not only about just the novelty, but
also about the risk that is involved with the novelty. Introducing radically new products maybe risky which
would make it even ‘more radical’ in this scale. Novelty and risk are of course relative. What may be radical to a
developing country, maybe natural to a developed country for instance. Moreover, does this radicality change
over time. A first-mover is of course more prone to radical innovation than a follower.
COMPETENCE-ENHANCING VERSUS COMPETENCE-DESTROYING INNOVATION
Within a firm there is a solid base of knowledge. This knowledge, which this dichotomy considers the
competence of a firm, can of course be innovated in. On one hand, you can build on the existing pool of
knowledge which thus is competence-enhancing. On the other hand, you can innovate in a completely new
domain for which there is no knowledge or you can even innovate in such a way that pre-existing knowledge
becomes obsolete. This is thus competence destroying.
ARCHITECTURAL INNOVATION VERSUS COMPONENT INNOVATION
This is a tad more complex but still fairly approachable. A product, such as your phone, consists out of many
different components. These components again consist out of smaller components and so on. An innovation
can improve the component (component innovation) or the way components interact (architectural
innovation).
INTRODUCING THE TECHNOLOGY S-CURVE
To spur the performance of your product, you will need to put
in some effort. Interestingly, the amount of effort spent on
boosting performance and the actual return is following a
similar patter across all technological innovations.
In the beginning, you have to take some time to find where
your effort is put to its best use. However, after some time you
have found where this is and your performance increase starts
taking of for real. At a given point however, these points start
becoming saturated and it becomes harder and harder for you
to find that place which allows you to increase the performance of your product: decreasing marginal returns
kick in. Time in this case also has the same effect on the product performance as increasing effort. Generally
speaking however, you plot performance against effort.
What happens often, is that the point of saturation is not even achieved.
Rather, other technologies render your current one obsolete. You suffer from
discontinuous technology. Think for example about the digital camera
rendering all analogue cameras obsolete, even though it uses radically
different technology. The s-curves thus follow each other up as seen to the
right. It is worth mentioning that the s-curve is sometimes used as a sort of
strategic prescription, but we should be very careful with that because every
product may follow a different path. Moreover don’t we know whether we will be discontinued or how our
technology reacts to increased effort!
TECHNOLOGY CYCLES
